The Company's operating subsidiaries rent or lease office space in the cities in which they are located. CCS and Qualex lease office space in Tampa, Florida from a company owned by Francis Williams, the Chairman of the Board of the Company, at a monthly rate of $12,123, pursuant to a lease that was executed June 1, 1999 and is effective through May 31, 2009. Effective March 1, 2001, the monthly rate will be $13,252 as a result of increased square footage.
Management considers the rented and leased office facilities of its subsidiaries adequate for the current and anticipated future level of operations.
Written direct and assumed premiums reached a record $16,168,734 during 2000. Overall written premiums, net of ceded premiums, increased by $2,160,885 or 21%. Earned premiums increased by $2,510,161 or 26% to $12,127,953 for 2000 compared to $9,617,792 for 1999. The increase in earned premiums resulted from CCS's continued growth in the direct surety bond market.
Other revenue consists primarily of commissions earned by subsidiary agencies and fee revenue earned by a subsidiary claims consulting group. For the year ended December 31, 2000, other revenues increased by $307,249 or 22%, which is attributable to increased business by the Company's claim consulting subsidiary.
During the year ended December 31, 2000, operating expenses and taxes, licenses and fees (excluding income taxes) increased to $5,288,520 from $4,766,101 in 1999. The increase of $522,419 or 11% is a result of increased salary expense including bonuses, payroll taxes and employee benefits of $617,066 and a decrease in general office expenses of $94,647. The increase in salary and consulting expenses is attributable to the cost of additional personnel and results from the Company's growth.
Other revenue consists primarily of commissions earned by subsidiary agencies and fee revenue earned by a subsidiary claims consulting group. For the year ended December 31, 1999, other revenues decreased by $162,145 or 11% which is attributable to the transfer of direct writings by subsidiary agencies for other carriers in 1998 to CCS in 1999.
During the year ended December 31, 1999 the net amortization of deferred policy acquisitions costs increased to $2,895,834 from $2,252,195 for the year ended December 31, 1998. The increase is attributed to the increase in earned premiums.
The capacity of a surety company to underwrite insurance and reinsurance is based on maintaining liquidity and capital resources sufficient to pay claims and expenses as they become due. Based on standards established by the National Association of Insurance Commissioners (NAIC) and promulgated by the Florida Department of Insurance, the Company is permitted to write net premiums up to an amount equal to three times its statutory surplus, or approximately $16,324,000 at December 31, 2000. Statutory guidelines impose an additional limitation on increasing net written premiums to no more than 33% of prior year's net written premiums. Under these guidelines, the Company could increase net written premiums by approximately $4,177,000.
Net cash provided by (used in) operating activities was $214,494, $1,965,077 and $(193,734) for the years ended December 31, 2000, 1999 and 1998, respectively. In 2000, the cash provided by operating activities was primarily attributed to a increase in policy liabilities and accruals. In 1999, the cash provided by operating activities was primarily attributable to increases in net income and accrued policy liabilities on claims and reinsurance. In 1998, the decrease in cash provided by operating activities is primarily attributed to an increase in receivables of $1,422,588 and income taxes recoverable of $120,000.
Net cash (used in) provided by financing activities was $(204,262), $(33,308) and $1,182,237 for the years ended December 31, 2000, 1999 and 1998, respectively. Financing activities consist primarily of purchases of treasury stock, long-term and short-term borrowings and repayment on borrowings during 2000, 1999 and 1998.
The differences between the December 31, 2000 liability for losses and LAE reported in the accompanying consolidated financial statements in accordance with generally accepted accounting principles ("GAAP") and that reported in the annual statement filed with the state insurance departments in accordance with statutory accounting practices ("SAP") are as follows:
Liability for losses and LAE on a SAP basis (which is net of reinsurance recoverables on unpaid losses and LAE) ............. $3,334,749 Reinsurance recoverables on unpaid losses and LAE ................. 1,850,877 ---------- Liability for losses and LAE, as reported in the accompanying GAAP basis consolidated financial statements ................... $5,185,626 ==========
The following table represents the development of the liability for unpaid losses and LAE, net of reinsurance, for 1993 through 2000 (in thousands).