- ---------------------------- (1) Includes cash and cash equivalents, marketable securities and notes receivable-affiliates. (2) On October 23, 2000, a $1,075,000,000 special dividend was paid to Allied Zurich Holdings Limited in connection with the Zurich capital structure unification in October 2000. (3) The ratio of debt to total capitalization has been determined by dividing the sum of total debt plus QUIPS by stockholders' equity plus QUIPS. (4) The ratio of earnings to fixed charges has been determined by dividing the sum of income before income taxes plus fixed charges by fixed charges. Fixed charges consist of interest, capitalized interest, dividends paid to QUIPS holders, amortization of QUIPS offering expenses and that portion of rent expenses deemed to be interest.
The Company's principal activities are the provision of management services to the P&C Group and the ownership and operation of the Insurance Subsidiaries. Revenues and expenses relating to these principal business activities are reflected in the Company's Consolidated Financial Statements prepared in accordance with GAAP, which differs from SAP, which the Insurance Subsidiaries are required to use for regulatory reporting purposes.
On March 7, 2000, the Exchanges acquired Foremost, a prominent writer of insurance for manufactured homes, recreational vehicles and other specialty lines. The Company provides management services in respect of this business and, as with its services to the P&C Group, receives compensation based on a percentage of gross premiums earned.
The Company provides reinsurance coverage to the P&C Group through its subsidiary, Farmers Re, which was formed and licensed to conduct business in December 1997. In January 1998, Farmers Re entered into a quota share reinsurance treaty with the P&C Group under which it reinsures a percentage of the auto physical damage business written by the P&C Group (see Note C).
Amortization of AIF Relationships and Goodwill. Purchase accounting entries related to the acquisition of the Company by B.A.T in December 1988 include both goodwill (capitalized at $2.4 billion) and the value of the AIF relationships of the P&C Group (capitalized at $1.7 billion). The amortization of these two items, which is being taken on a straight-line basis over forty years, reduced pretax income by approximately $102.8 million for both 2000 and 1999.
Merger Related Expenses. Expenses incurred by the Company as a result of the merger between B.A.T's financial services businesses and ZIC amounted to $0.2 million in 1999 (see Note E).
Provision for Income Taxes. Provision for income taxes increased from $325.3 million in 1999 to $348.1 million in 2000, an increase of $22.8 million, or 7.0%, as a result of an increase in pretax income between years.
investment income. Farmers Re's contribution to net income was $52.6 million and $37.7 million in 2000 and 1999, respectively.
Net Realized Gains. Net realized gains increased $15.6 million, or 64.5%, from $24.2 million in 1999 to $39.8 million in 2000 due primarily to an increase in gains realized on stock sales.
Total Operating Expenses. Total operating expenses increased from $508.0 million in 1999 to $545.0 million in 2000, an increase of $37 million, or 7.3%.
Policy Benefits. Policy benefits, which consist primarily of death and surrender benefits on life products, increased $4.0 million over 1999 to $141.8 million, due to higher mortality experience in the Farmers Flexible Universal Life ("FFUL") product line as well as growth in the volume of policies in-force in 2000.
Increase in Liability for Future Benefits. Increase in liability for future benefits expense increased from $52.2 million in 1999 to $76.3 million in 2000. This increase was primarily attributable to higher sales volumes related to structured settlements and growth in the volume of traditional life insurance in-force in 2000.
General Operating Expenses. General operating expenses increased from $160.2 million in 1999 to $164.0 million in 2000, an increase of increase of $3.8 million, or 2.4%.
Amortization of DAC and VOLBA. Amortization expense increased from $102.6 million in 1999 to $108.8 million in 2000, due to differences in the mix of business.
Operating Revenues. Operating revenues totaled $1,489.7 million in 1999, up $131.5 million, or 9.7%, from 1998. This growth was primarily attributable to higher volumes of gross premiums earned by the P&C Group, which grew $474.0 million, or 4.6%, to $10,804.9 million in 1999. The increase in gross premiums earned was driven by the P&C Group's assumption of MCC's personal lines business as well as the expansion of operations into twelve eastern states. Management fees earned on this assumed business totaled $50.7 million for the year ended December 31, 1999. Also contributing to the increase in operating revenues between years was the fact that, effective January 1999, management fee rates on all lines of business were increased 0.25% resulting in a $26.2 million increase in management fee revenues in 1999.
Total Expenses. Total expenses as a percentage of operating revenues decreased from 59.0% in 1998 to 56.0% in 1999, a decrease of 3.0 percentage points. This decrease was the result of the Company incurring $21.1 million of merger related expenses and writing-off $46.0 million of impaired assets in 1998.
Amortization of AIF Relationships and Goodwill. The amortization of these two items, reduced pretax income by approximately $102.8 million for both 1999 and 1998.
Net Realized Gains. Net realized gains increased from $62.4 million in 1998 to $75.3 million in 1999, an increase of $12.9 million, due primarily to gains recognized on sales of common stock. These common stock gains were realized within the context of FGI's overall equity investment strategy.
Dividends on Preferred Securities of Subsidiary Trusts. Dividend expense was $42.1 million in both 1998 and 1999.
Total Revenues. Total revenues increased from $660.6 million in 1998 to $752.2 million in 1999, an increase of $91.6 million, or 13.9%.
Net Investment Income. Net investment income increased $13.9 million, or 4.7%, over 1998, due to higher bond interest income as a result of a 9.7% growth in average invested assets.
Net Realized Gains/(Losses). Net realized gains/(losses) increased $37.7 million, from a $13.5 million loss in 1998 to a $24.2 million gain in 1999, due to higher gains realized on bond sales. The net realized loss in 1998 reflects a $26.0 million writedown of Russian bond holdings.
Life Policyholders' Benefits and Charges. Life policyholders' benefits and charges increased from $308.3 million in 1998 to $347.8 million in 1999, an increase of $39.5 million, or 12.8%.
Policy Benefits. Policy benefits increased $3.8 million over 1998 to $137.8 million, due to a 5.7% growth in the volume of total life insurance in-force and an increase in death benefits per thousand of insurance in-force.
Interest Credited to Policyholders. Interest credited to policyholders increased from $150.6 million in 1998 to $157.8 million in 1999, or 4.8%, reflecting growth in the universal life and annuity fund balances.
Net Commissions. Net commissions expense decreased $5.5 million between years from $18.9 million in 1998 to $13.5 million in 1999 due to higher reinsurance activity.
General and Administrative Expenses. General and administrative expenses increased $2.6 million to $44.1 million in 1999 due primarily to $1.6 million of expenses incurred in connection with the project to implement the new financial accounting and reporting system for the Company and the P&C Group.
Farmers Life Income. As a result of the foregoing, Farmers Life income increased from $130.6 million in 1998 to $158.2 million in 1999, an increase of $27.6 million, or 21.1%.
The principal sources of funds available to the Company are (i) the management fees that it receives for providing management services to the P&C Group, (ii) investment income and (iii) dividends from its subsidiaries. Historically, funds available from the first two of these sources have been sufficient to satisfy the liquidity needs of the Company, and the Company anticipates that such funds will continue to be adequate to satisfy such needs in the future. A portion of the net income of the Insurance Subsidiaries is available for payment as a dividend to the Company, subject to the approval of the state insurance departments in which the Insurance Subsidiaries are domiciled. As of December 31, 2000, an aggregate of $194.8 million was available for distribution as a dividend without such approval (see Note J). Additionally, as of December 31, 2000, the Company had available revolving credit facilities enabling it to borrow up to $500.0 million in the event such a need should arise (see Note V).
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedules listed in the Table of Contents at Item 14 are presented for the purpose of additional analysis and are not a required part of the basic financial statements. These schedules are the responsibility of the Company's management. Such schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements as a whole.
The accompanying consolidated financial statements of Farmers Group, Inc. ("FGI") and its subsidiaries (together "the Company") have been prepared in accordance with generally accepted accounting principles ("GAAP"). All material inter-company transactions have been eliminated. Certain amounts applicable to prior years have been reclassified to conform with the 2000 presentation. The preparation of the Company's financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
The Company is attorney-in-fact ("AIF") for three inter-insurance exchanges: Farmers Insurance Exchange, Fire Insurance Exchange and Truck Insurance Exchange (collectively the "Exchanges"), which operate in the property and casualty insurance industry. On March 7, 2000, the Exchanges acquired Foremost Corporation of America and its subsidiaries ("Foremost"), a prominent writer of insurance for manufactured homes, recreational vehicles and other specialty lines. Each policyholder of the Exchanges appoints the Company as the exclusive AIF to provide management services to the P&C Group. For such services, the Company earns management fees based on a percentage of gross premiums earned by the Exchanges, their respective subsidiaries, Farmers Texas County Mutual Insurance Company, Foremost County Mutual Insurance Company and Foremost Lloyds of Texas (collectively the "P&C Group"). The P&C Group is owned by the policyholders of the Exchanges, Farmers Texas County Mutual Insurance Company and Foremost County Mutual Insurance Company as well as the underwriters of Foremost Lloyds of Texas. Accordingly, the Company has no ownership interest in the P&C Group.
In December 1997, Farmers Reinsurance Company ("Farmers Re"), a wholly owned property and casualty insurance subsidiary of FGI, was formed and licensed to conduct business. In January 1998, Farmers Re entered into a quota share reinsurance treaty with the P&C Group under which it reinsures a percentage of the auto physical damage business written by the P&C Group. This agreement will remain in effect until terminated by either party.
References to the "Insurance Subsidiaries" within the consolidated financial statements are to Farmers Life and Farmers Re.
In 1998, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". This Statement establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts) and for hedging activities. SFAS No.133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at market value. Subsequently, in June 1999, the FASB released SFAS No. 137, "Deferral of the Effective Date of
Certain policy acquisition costs, principally first-year commissions and other expenses for policy underwriting and issuance (which are primarily related to and vary with the production of new business), are deferred and amortized proportionately over the estimated period during which the related premiums will be recognized as income, based on the same assumptions that are used for computing the liabilities for future policy benefits. Liabilities for future policy benefits are computed principally by means of a net level premium method reflecting estimated future investment yields, mortality, morbidity and withdrawals. Interest rate assumptions range from 2.25% to 8.75%, depending on the year of policy issue. Mortality is calculated principally on select and ultimate tables in common usage in the industry, modified for actual experience, and withdrawals are estimated based primarily on experience.
In March 2000, Farmers Re and the P&C Group commuted $106,444,000 of losses and loss adjustment expenses associated with the 1999 accident year. As a result, in May 2000, Farmers Re paid the P&C Group $106,444,000 of losses and loss adjustment expenses and $8,966,000 of accrued interest in settlement of this commutation. Similarly, in March 1999, Farmers Re and the P&C Group commuted $105,944,000 of losses and loss adjustment expenses associated with the 1998 accident year. In order to settle this commutation, in May 1999, Farmers Re paid the P&C Group $105,944,000 of losses and loss adjustment expenses and $8,205,000 of accrued interest.
As of December 31, 1999 and December 31, 1998, certain directors of the Company were partners in legal firms that received fees for legal services from the Company and the P&C Group. These fees totaled $8,492,000 and $6,544,000 in 1999 and 1998, respectively. As a result of a restructuring of the Company's Board of Directors in April 2000, all of the members of the Company's Board of Directors were employees of the Company as of December 31, 2000.
In addition, as of December 31, 2000, the Company held $302,000,000 of notes receivable from Zurich (UKISA) Limited, formerly known as British American Financial Services (UK and International), Ltd., ("UKISA"), a subsidiary of Zurich. The Company purchased $1,057,000,000 of notes from UKISA on September 3, 1998. Subsequently, on March 1, 2000, Eagle Star Life Assurance Company Limited ("Eagle Star"), also an affiliate of Zurich, assigned $175,000,000 of matured surplus notes of the P&C Group to the Company and, in return, the Company reduced the outstanding balance of the notes receivable from UKISA by $175,000,000. Additionally, on September 3, 2000, $25,000,000 of the notes receivable from UKISA, bearing interest at a coupon rate of 5.44% with an original maturity date of September 3, 2000, were renewed for medium-term notes with a 6.80% fixed interest rate maturing in September 2002.
Finally, on October 23, 2000, to help fund the payment of a $1,075,000,000 special dividend associated with the Zurich capital structure unification in October 2000, the Company sold $580,000,000 of notes receivable from UKISA to ZIC for par value. As a result, as of December 31, 2000, the Company held $302,000,000 of notes receivable from UKISA with the following amounts, maturity dates and coupon rates: $207,000,000 maturing in September 2001 at a coupon rate of 5.48% and $95,000,000 maturing in September 2002, $25,000,000 of which is at a coupon rate of 6.80% and $70,000,000 of which is at a coupon rate of 5.67%. Interest on the UKISA notes is paid semi-annually and, for the years ended December 31, 2000, 1999, and 1998, income earned on these notes totaled $45,425,000, $59,434,000 and $19,481,000, respectively.
On March 1, 2000, in connection with the assignment of the $175,000,000 of matured surplus notes of the P&C Group from Eagle Star (see Note F), the P&C Group issued $175,000,000 of new surplus notes to the Company. These notes bear interest at 8.50% annually and mature in March 2005.
Additionally, on March 7, 2000, to help fund the Exchanges' acquisition of Foremost, the Company purchased $370,000,000 of certificates of contribution of the P&C Group bearing interest at 7.85% annually. As of December 31, 2000, the Company continued to hold $23,330,000 of miscellaneous other certificates of contribution of the P&C Group, which bear interest at various rates, and a $119,000,000 surplus note of the P&C Group, which bears interest at 6.10% annually.
Conditions governing repayment of these amounts are outlined in the certificates of contribution and the surplus notes. Generally, repayment may be made only when the surplus balance of the issuer reaches a certain specified level, and then only after approval is granted by the issuer's governing Board and the appropriate state insurance regulatory department.
H. Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts Holding Solely Junior Subordinate Debentures
As of December 31, 2000 and 1999, a total of 20,000,000 shares of QUIPS were outstanding.
Expense under these plans was $59,491,000, $52,984,000 and $51,869,000 in 2000, 1999 and 1998, respectively.
Statutory capital and surplus of the Insurance Subsidiaries was $1,728,378,000 and $1,618,274,000 as of December 31, 2000 and 1999, respectively. Statutory net income was $187,712,000, $152,716,000 and $123,024,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
The Company follows the provisions of SFAS No. 115. This Statement addresses the accounting and reporting for investments in equity securities that have readily determinable market values and for all investments in debt securities. As of December 31, 2000 and 1999, the Company classified all investments in equity and debt securities as available-for-sale under SFAS No. 115 with the exception of $61.1 million in 2000 and $59.7 million in 1999 which relate to a grantor trust and are classified as trading securities under SFAS No. 115. The available-for-sale investments are reported on the balance sheet at market value, with unrealized gains and losses, net of tax, excluded from earnings and reported as a component of stockholders' equity. The investments classified as trading investments are reported on the "Other assets" line of the consolidated balance sheet at market value with both realized and unrealized gains and losses included in earnings, net of tax, in the year in which they occur. Real estate investments are accounted for on a depreciated cost basis. Real estate acquired in foreclosure and held for sale is carried at the lower of market value or depreciated cost less a valuation allowance. Marketable securities are carried at market. The Standard & Poor's 500 Composite Stock Price Index ("S&P 500") call options are carried at estimated fair value. Other investments, which consist primarily of certificates of contribution of the P&C Group, surplus notes of the P&C Group, policy loans and notes receivable from affiliates, which include UKISA notes and an OSDH note, are carried at the unpaid principal balances.
In compliance with a SEC staff announcement, the Company has recorded certain entries to the DAC and VOLBA line of the consolidated balance sheet in connection with SFAS No. 115. The SEC requires that companies record entries to those assets and liabilities that would have been adjusted had the unrealized investment gains or losses from securities classified as available-for-sale actually been realized, with corresponding credits or charges reported directly to stockholders' equity.
Realized gains and losses on sales, redemptions and write-downs of investments owned by the Company (excluding the Insurance Subsidiaries) are determined based on either the cost of the individual securities or the amortized cost of real estate. Net realized investment gains or losses for the years ended December 31 are:
The amortized cost, gross unrealized gains and losses, and estimated market values of investments in equity securities pertaining to non-redeemable preferred stocks and common stocks owned by the Insurance Subsidiaries in 2000 and 1999 are as follows:
Proceeds from sales of available-for-sale securities received by the Company were $2,052,734,000, $1,808,735,000 and $1,504,131,000 in 2000, 1999 and 1998, respectively. Gross gains of $174,940,000, $142,027,000 and $88,751,000 and gross losses of $54,563,000, $44,999,000 and $50,798,000 were realized on sales and write-downs during 2000, 1999 and 1998, respectively.
During 1997, Farmers Life began selling an equity-indexed annuity product. At the end of its seven year term, this product credits interest to the annuity participant at a rate based on a specified portion of the change in the value of the S&P 500, subject to a guaranteed annual minimum return. In order to hedge the interest liability generated on the annuities as the index rises, Farmers Life purchases call options on the S&P 500. Farmers Life considers such S&P 500 call options to be held as a hedge. As of December 31, 2000 and 1999, Farmers Life had S&P 500 call options with contract values of $94,535,000 and $65,229,000, respectively, and carrying values of $26,271,000 and $32,718,000, respectively.
The S&P 500 call options are carried at estimated fair value. Unrealized gains and losses resulting from changes in the estimated fair value of the call options are recorded as an adjustment to the interest credited to policyholders. In addition, realized gains and losses from maturity or termination of the call options are offset against the interest credited to policyholders during the period incurred. Premiums paid on call options are amortized to net investment income over the term of the contracts. There were no early terminations by annuity participants, or maturities or sales of the S&P 500 call options during 2000.
There are certain risks associated with the call options, primarily with respect to significant movements in the United States stock market and counterparty nonperformance. The Company believes that the counterparties
The following methods and assumptions were used to estimate the fair value of financial instruments as of December 31, 2000 and 1999:
Cash and cash equivalents and marketable securities. The carrying amounts of these items are a reasonable estimate of their fair values.
Grantor trust. The carrying amount related to the grantor trust is a reasonable estimate of its fair value.
Other investments. Other investments consist of miscellaneous notes and investments. The carrying amounts related to miscellaneous notes are a reasonable estimate of their fair values. The estimated fair values related to miscellaneous investments are based upon quoted market prices, current appraisals and independent pricing services.
Other assets. Other assets consist primarily of advances to agents, the fair value of which is determined by discounting the estimated future cash flows using credit quality, the average maturity of related advances, and the current rates at which similar loans would be made to borrowers by the Company.
The unrecognized net transition obligation of $15,732,000 in 2000 and $17,044,000 in 1999 represents the remaining transition obligation of the P&C Group.
The Company's share of the accrued postretirement benefit cost was approximately $57,758,000 in 2000 and $55,578,000 in 1999.
The weighted average interest rate used in the above benefit computations was 7.75% in 2000, 8.00% in 1999 and 6.75% in 1998. Beginning in 1998, the initial medical inflation rate was 6.50%, to be graded over a 1-year period to 6.00% and level thereafter, and contribution levels from retirees were the same as applicable medical cost increases where defined benefits exist. The weighted average rate of increase in future compensation levels used in determining the actuarial present value of the accumulated benefit obligation was 4.70% in 2000, 5.00% in 1999 and 4.50% in 1998.
Rental expense incurred by the Company was $33,568,000, $28,727,000 and $22,332,000 in 2000, 1999 and 1998, respectively.
The Company follows the provisions of SFAS No. 109, "Accounting for Income Taxes". Deferred tax assets and deferred tax liabilities are recorded to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and the corresponding bases used for financial statements.
In 1998, the Company used $650,000,000 of proceeds it received from the redemption of certificates of contribution of the P&C Group and $407,000,000 of proceeds it received from the settlement of notes receivable from B.A.T Capital Corporation, a subsidiary of B.A.T, to issue $1,057,000,000 of notes receivable to UKISA (see Note F). In addition, Farmers Life purchased a $119,000,000 surplus note of the P&C Group on September 8, 1998 (see Note G).
As of December 31, 2000 and 1999, the Company had a revolving credit agreement with certain financial institutions and had an aggregate borrowing facility of $500,000,000. The proceeds of the facility were available to the Company for general corporate purposes, including loans to the P&C Group. As of December 31, 2000 and 1999, facility fees were payable on the aggregate borrowing facility in the amount of 7 basis points per annum and were reimbursable to the Company by the P&C Group. In the case of a draw on the facility, the Company has the option to borrow at annual rates equal to the prime rate, the banks' certificate of deposit rate plus one percentage
point, the federal funds effective rate plus 1/2 of one percentage point or the London Interbank Offered Rate plus certain percentages. As of December 31, 2000 and 1999, the Company did not have any outstanding borrowings under the revolving credit agreement. Facility fees were $350,000 for each of the years ended December 31, 2000, 1999 and 1998, and were reimbursed by the P&C Group. The revolving credit agreement in effect as of December 31, 2000 expires on July 1, 2002.
Farmers Life has retention limits for automatic reinsurance ceded which set the maximum retention on new issues at $2,000,000 per life for the Farmers Flexible Universal Life policy; $1,500,000 per life for all Traditional policies except Farmers Yearly Renewable Term; and $800,000 per life for Farmers Yearly Renewable Term. The excess is reinsured with a third party reinsurer. In addition, beginning in January 2000, Farmers Life entered into a co-insurance agreement with a third party insurer to reinsure the Farmers Level Term 2000 5, 10 and 20 year products, which replaced the Farmers Premier 5, 10 and 20 year products. Premiums ceded under these agreements totaled $33,527,000 in 2000, $13,939,000 in 1999 and $3,728,000 in 1998. Life reinsurance receivables, which totaled $15,173,000 and $10,846,000 at December 31, 2000 and 1999, respectively, were included in the "Other assets" line in the Insurance Subsidiaries section of the Company's consolidated balance sheets.
The Company's principal services are the provision of management services to the P&C Group and the ownership and operation of the life and reinsurance subsidiaries. These activities are managed separately as each offers a unique set of services. As a result, the Company is comprised of the following three reportable operating segments as defined in SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information": the management services segment, the life insurance segment and the reinsurance segment.
As AIF, the management services segment is primarily responsible for providing management services to the P&C Group. Management fees earned from the P&C Group totaled $1,492,217,000, $1,402,107,000 and $1,271,763,000 for the years ended December 31, 2000, 1999 and 1998, respectively. The life insurance segment
provides individual life insurance products, including universal life, term life and whole life insurance and structured settlement and annuity products, as well as variable universal life and annuity products. Finally, the reinsurance segment provides reinsurance coverage to a percentage of the auto physical damage business written by the P&C Group.
(e) Amount includes PGAAP adjustments associated with the AIF relationships ($1,196.3 million) and goodwill ($1,681.2 million).
(d) Amount includes PGAAP adjustments associated with the amortization of the VOLBA asset and the reversal of amortization associated with the pre-1988 DAC asset. Included in this amount are adjustments totaling $21.3 million, increasing expense, due to unfavorable persistency experience on the pre- 1988 business.
(e) Amount includes PGAAP adjustments associated with the AIF relationships ($1,239.1 million) and goodwill ($1,741.3 million).
(a) Revenues for the insurance operating segments include net investment income and net realized gains/(losses).
(d) Amount includes PGAAP adjustments associated with the AIF relationships ($1,281.8 million) and goodwill ($1,801.3 million).
The holders of Class C Shares are entitled to 0.375 of a vote per share upon the election of directors and on all other matters upon which stockholders generally are entitled to vote. However, at no time shall the aggregate voting power of the Class C Shares be greater than 3.375% of the total voting power of the Company. Upon any dissolution, liquidation or winding up of the Company, after payment of the liabilities of the Company and the expenses of such dissolution, liquidation or winding up, the holders of Class C Shares will be entitled to receive in the aggregate out of the assets of the Company, before any payment or distribution is made to the holders of Class A Shares or Class B Shares, $1,125,000,000 in liquidation preference (the "Class C Liquidation Preference"). To the extent the amount available for distribution upon liquidation, dissolution or winding up exceeds the Class C Liquidation Preference, the holders of Class C Shares are entitled to receive 7.4503311% (as adjusted from time to time based upon the percentage of the Company's fair market value represented by the Class C Shares at the time of such adjustment) of the aggregate amount available for payment of distributions on liquidation with respect to the Company's common stock. Amounts payable on the Class C Shares in connection with the liquidation of the Company in excess of the Class C Liquidation Preference are payable on a pari passu basis with the holders of the Class A Shares and any other shares that rank junior to the Class C Shares with respect to payments upon liquidation.
Shares) during any relevant dividend period, (ii) the Partnerships have set apart or paid the full amount of cash remittances (the "RegCaPS Payments") payable to the holders of the regulatory capital preferred securities (the "RegCaPS") issued by the Partnerships during any RegCaPS Payments period, (iii) the six Zurich RegCaPS Funding LLCs (collectively, the "LLC") who hold the RegCaPS, have set apart or paid certain cash payments during any LLC payment period on the LLC preferred interests issued by each LLC, and (iv) such dividend does not cause the net worth of the Company to be less than $3 billion (as adjusted from time to time).