felanders/preprocessed huggingface dataset:
Included in net earnings for the year ended December 31, 2011 was $2.9 million ($4.5 million pre-tax) of unfavorable development on prior accident year loss and LAE reserves. This compares to $48.0 million ($73.9 million pre-tax) of favorable development for 2010. The following table displays combined ratio results by accident year developed through December 31, 2011.
The September 30, 2011 test results indicated that the fair value of our goodwill exceeded our carrying value and therefore no
Level 1 securities are U.S. Treasury securities, an exchange-traded fund and equity securities held in a rabbi trust. Level 2 securities are comprised of securities whose fair value was determined using observable market inputs. Level 3 securities are comprised of (i) securities for which there is no active or inactive market for similar instruments, (ii) securities whose fair value is determined based on unobservable inputs and (iii) securities that nationally recognized statistical rating organizations do not rate.
Summarized information for our investment portfolio at December 31, 2011 follows (in thousands):
Hathaway and 0.2% are insured with XL Group. The following table presents the underlying ratings, represented by the lower
The $2.1 million investment with a South Korean issuer or guarantor is an investment in that government's sovereign debt. All
During 2010, personal auto insurance gross written premium in our Focus States grew 14.7% when compared with 2009, with growth in all states excluding Nevada. The increase in gross written premium is primarily a result of growth in California, Florida and Texas.
Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations -------------
Expenses, commissions and state taxes increased $43 million, or 50.0%, to $129 million in 1998 from $86 million in 1997. We attribute this increase primarily to increased commissions and other acquisition expenses associated with the production of new business.
For the year ended December 31, 1997, we had net income of $8 million, as compared with net income of $2 million in 1996. We attribute this $6 million increase primarily to increased sales of universal and other life products and a reduction in addition to policyholders' reserves and funds. This was partially offset by increased commissions, increased expenses associated with management services provided by MassMutual and increased federal income taxes attributable to taxable income in excess of book income.
Effective March 1, 1996, we modified our underwriting agreements with our brokers such that we will pay all future commissions relating to variable annuity contracts and in return, we will retain rights to all future contract fees and charges related to these contracts. Prior to the contract modification, our brokers paid variable annuity commissions in exchange for the rights to future contract fees and charges related to these contracts. We expect the future revenue on these contracts to exceed acquisition costs.
We have audited the accompanying statutory statements of financial position of C.M. Life Insurance Company as of December 31, 1998 and 1997, and the related statutory statements of income and changes in shareholder's equity, and of cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
Bonds are valued in accordance with rules established by the NAIC. Generally, bonds are valued at amortized cost.
Other invested assets include investments in affiliated mutual funds and preferred stocks and are valued in accordance with rules established by the NAIC. Generally, investments in mutual funds are valued at fair value and preferred stocks in good standing at cost.
December 31, 1998 ----------------- Gross Gross Estimated Carrying Unrealized Unrealized Fair Value Gains Losses Value -------- ---------- ---------- --------- (In Millions)
Subsidiaries of MassMutual Holding Trust II ------------------------------------------- CM Advantage, Inc. CM International, Inc. CM Property Management, Inc. HYP Management, Inc. MMHC Investments, Inc. MML Realty Management Urban Properties, Inc. MassMutual Benefits Management, Inc.
We review the carrying value of our property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment includes current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, there was no impairment for property and equipment during fiscal 2014, 2013 and 2012.
We believe our existing working capital and future cash flows from operating activities will allow us to fund our current operations through fiscal 2015. Our recurring operations are not currently generating sufficient cash to support operations. To fund our short and long-term operations and to pay dividends, we have liquidated much of our investment portfolio, including most of our investments in policies and our investments in securities. We have monetized our investment in the life settlement trust by assigning our current rights to future income. During the fourth quarter of fiscal 2014 we received a Federal income tax refund of $3,507,242, which aided our cash available. Except for our cash and cash equivalents, we have few sources of additional liquidity. As a result, we may not be able to continue to pay dividends at the historical rate and may reduce or eliminate dividends to conserve working capital until we can realize improved operating results.
Adoption of market initiatives to eliminate sources of unprofitable business, whether derived from specific markets or coverages or originated by agents with identifiable unprofitable business;
Gross premiums written in 2008 decreased 2% as compared to 2007. We believe the primary reasons for the decrease to be the result of rate increases, selective reduction in the agency force and the effects of the slowing economy. The following table presents gross premiums written by region:
Cash overdraft increased primarily due to the Company maintaining less cash in the bank accounts and instead investing those funds in Short-term investments
• Historical information used to prepare a priori expected loss ratios; historical information regarding claims frequency
During 2008, we continued to diversify further. We also expanded into various other driver classes, namely into the internationally licensed segment. Expanding into different geographical segments meant writing more business in jurisdictions with different judicial systems and negligence laws, including areas that may be more susceptible to insurance fraud. These changes can affect development patterns, so that historical patterns may not be reflective of future patterns. We attempted to take these changes into consideration in our estimate of reserves by the selection of loss development factors, including extending tail factors to older accident periods, and use of actuarial judgment.
These estimates were set forth in a detailed presentation to the Audit Committee of the Board of Directors, together with underlying statistical information on which the estimates are based. The Audit Committee met each quarter with management and engaged in a detailed discussion regarding the reserve selections and underlying statistical data.
In June 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position EITF 03-6-1 (“FSP EITF 03-6-1”), entitled “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008 and addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method described in Statement of Financial Accounting Standards (“SFAS”) No. 128, entitled “Earnings per Share.” The requirements of FSP EITF 03-6-1 will not materially impact the Company’s determination of earnings per share.
Year Ended December 31, 2001 2002 2003 Insurance operations Loss & loss adjustment expense ratio 62.1% 57.1% 60.2% Expense ratio 40.8 44.2 36.6 Combined ratio 102.9% 101.3% 96.8%
These variable costs, when applied to real estate revenue, produced gross margins of 14% in 2003, 15% in 2002, and 18% in 2001. The gross margin is higher in 2002 and 2001 due to more closings of boat slips, which produce a higher margin. The fixed costs are lower in 2001 because we began closing units in September 2001. Prior to that date, most of the fixed costs were capitalized, and after that date all general and administrative costs were expensed as incurred.
Deferred Income Taxes. We are required to establish a valuation allowance for the portion of any deferred tax asset, that we believe will not be realized. The majority of our deferred tax assets associated with the Harbour Village project should be realized within the next two years, given current estimates of completion for the project. The majority of our deferred tax assets associated with our premium writings should be realized within a 12 month period, the standard policy term of our writings. Given the historical loss position of American Safety RRG, it has established a 100% valuation allowance on its deferred tax assets. Except for the deferred tax assets associated with American Safety RRG described above, we believe it is more likely than not that we will realize the full benefit of our deferred tax assets described herein; therefore no additional valuation allowance has been established.
Interest credited includes interest credited to contract holder account balances. Interest crediting rates associated with funds invested in the general account of LNC’s insurance subsidiaries during 2016 through 2018 ranged from 1% to 10%.
In July 2013, we formed a new limited liability company, Lincoln Financial Limited Liability Company I (“LFLLCI”), and we became the sole equity owner of LFLLCI through our capital contribution. The activities of LFLLCI relate solely to our captive reinsurance subsidiary, the Lincoln Reinsurance Company of Vermont V (“LRCVV”), and are primarily to acquire, hold and issue notes with LRCVV as well as pay and collect interest on the notes. LFLLCI holds a surplus note issued by LRCVV that had an outstanding principal balance of $600 million as of December 31, 2018. LFLLCI issued a long-term note to LRCVV that has a principal balance that moves concurrently with any variability in the face amount of the surplus note LFLLCI received from LRCVV. We concluded that LFLLCI is a VIE and that LNC is the primary beneficiary as we have the power to direct the most significant activities affecting the performance of LFLLCI.
There were no gains or losses for consolidated VIEs recognized on our Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017.
During 2018, 2017 and 2016, we recorded credit losses on securities for which an OTTI was not previously recognized as we determined the cash flows expected to be collected would not be sufficient to recover the entire amortized cost basis of the debt security. The credit losses we recorded on securities for which an OTTI was not previously recognized were attributable primarily to one or a combination of the following reasons:
All other incurred is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A negative number implies a favorable result where claim resolutions were more favorable than assumed. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the long-term life of the block of claims. It will vary from actual experience in any one period, both favorably and unfavorably.
source of expense volatility related to these plans. For the years ended December 31, 2018, 2017 and 2016, expenses for these plans were $4 million, $35 million and $33 million, respectively. For further discussion of total return swaps related to our deferred compensation plans, see Note 6.
Fourth quarter 2017 results include a goodwill impairment charge and the impacts of remeasuring our existing deferred tax balances for the impact of the Tax Act as disclosed elsewhere herein.
Given the Company's current level of surplus, under its underwriting guidelines, the maximum net retention on any one claim or occurrence for property and casualty treaty risks will generally be $10.0 million.
The Company has elected to continue to account for its stock-based compensation under Accounting Principles Board Opinion ("APB") No. 25 "Accounting for Stock Issued to Employees" and related interpretations under APB No. 25. The Company does not recognize any compensation expense for its grants of employee stock options because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant. In addition, under APB No. 25, the Company does not recognize -29 -
The following selected consolidated financial data as of and for each of the five years in the period ended December 31, 1997 have been derived from the audited Consolidated Financial Statements of the Company. The following data 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 herein.
The primary sources of cash for the Company are premium revenues from policies issued or coinsured, investment income and fees and other income. The primary uses of cash are payments for benefits, claims and commissions under those policies and operating expenses. Net cash provided from operations totaled approximately $153.2 million in 1997, $125.5 million in 1996, and $86.8 million in 1995. The Company's insurance subsidiaries invest a substantial portion of these funds, pending payment of their pro rata share of future benefits and claims.
Investment accounting policies. The Company has classified its entire fixed maturity portfolio as "available for sale" which requires the portfolio to be carried at fair value with the resulting unrealized gains or losses, net of applicable income taxes and minority interests, reported as a separate component of stockholders' equity. As a result, fluctuations in interest rates will result in increases or decreases to the Company's stockholders' equity.
Included in the fixed maturity portfolio is a concentration of mortgage-backed securities such as collateralized mortgage obligations and mortgage-backed pass-throughs. To limit its credit risk, the Company invests in mortgage-backed securities which are rated investment grade by the public rating agencies. Also, 21% of the mortgage-backed securities are backed by U.S. Government agencies. The Company's mortgage-backed securities portfolio is a conservatively structured portfolio that is concentrated in the less volatile tranches, in the form of planned amortization classes, sequential payment and commercial mortgage-backed securities. The objectives are to minimize prepayment risk during periods of declining interest rates and minimize duration extension risk during periods of rising interest rates. The Company has approximately 1% invested in the more volatile tranches.
Our audited consolidated financial statements as of December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005 and 2004 are incorporated elsewhere in this Annual Report on Form 10-K.
In 2005, we contributed a total of $24.9 million into our insurance company subsidiaries, net of dividends received, of which $6.8 million, $5.6 million, $7.5 million and $5.0 million was contributed to North Pointe Insurance, North Pointe Casualty, Home Pointe Insurance and Midfield, respectively. These contributions were funded from initial public offering proceeds, holding company funds and new debt.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
retention and recruiting of independent agents and the potential loss of key personnel;
In light of these risks, uncertainties and assumptions, any forward-looking events discussed in this Annual Report on Form 10-K may not occur. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of their respective dates.
Ceded premiums written for 2006 were $36.9 million as compared to $25.0 million in 2005, an increase of $11.9 million, or 47.6%. Of the $11.9 million increase in ceded premiums written, approximately $10.5 million was attributable to our crop fronting program in which we ceded 98.0% of our gross premiums and 100.0% of the losses. We wrote our first crop policies in the first quarter of 2006. Offsetting the increase in the crop fronting program were smaller decreases, primarily resulting from policy cancellations in our Florida small business line.
Net premiums are earned over the life of a policy and differ from net premiums written, which are recognized on the effective date of the policy.
The decrease in the loss and loss adjustment expenses was primarily attributable to a decrease in hurricane losses. For the year ended December 31, 2006, we incurred $746,000 of unfavorable development in our reserves for 2005 hurricanes of which $629,000 and $117,000 was attributable to our commercial and personal lines, respectively. Four hurricanes struck Florida, Texas and the U.S. Gulf coast which increased our overall 2005 loss ratio by 15.1 percentage points, from 35.7% to 50.8%. We did not have any development in 2006 on reserves in our commercial lines segment related to 2004 hurricanes.
Our insurance and non-insurance operating subsidiaries’ principal sources of funds are insurance premiums, investment income, proceeds from the maturity and sale of invested assets and installment fees. These funds are primarily used to pay claims, commissions, employee compensation, taxes and other operating expenses, and to service debt, purchase investments and pay dividends to us.
transactions were recorded as additional written and earned premium, losses incurred, loss reserves and receivables, all in the same amount. There were no gains or losses recorded on the transactions.
letters of credit, ceded balances payable and other balances held), at December 31, 2002, and the reinsurers' rating from the indicated rating agency:
Cash flow provided by operations was $108.5 million, $41.3 million and $20.1 million for 2002, 2001, and 2000, respectively. The increases in the 2002 and 2001 operating cash flows were primarily due to the increases in net written premium. Operating cash flow was used primarily to acquire additional investment assets and to reduce debt.
c. The legal entity undertakes additional activities or acquires additional assets, beyond those that were anticipated at the later of the inception of the entity or the latest reconsideration event, that increase the entity's expected losses.
In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805), to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of ASU 2010-29 did not have a material effect on the Company’s consolidated financial statements.
As of June 30, 2012 and 2011, the Company had no allowance for doubtful accounts.
The related parties listed below loaned money to the Company for working capital. Due to related parties consisted of the following as of June 30, 2012 and 2011:
AHFL was a LLC incorporated under the laws of British Virgin Islands on April 30, 2012. On July 4, 2012, a meeting of the Board of Director of AHFL approved AHFL to:
· Enter into a loan agreement with Taipei Fubon Commercial Bank to obtain up to NT$180,000,000 ($6,138,000)
(e) CUIS acquired 100% of AHFL ( see details in footnote 16) resulting in bargain purchase gain of $5.4 million and non-controlling interest in Law Enterprise and subsidiaries
The mortgage loan portfolio at December 31, 1996, which aggregated $53.7 million, consisted of residential mortgages of $1.2 million and commercial mortgages of $52.5 million (with no concentration in any particular industry), all of which were first mortgages on properties. There were no non-performing mortgage loans in the portfolio at December 31, 1996.
The amortized cost of high yield bonds included in debt securities available-for-sale was $14.8 million with a market value of $15.0 million, which represented 1.5% of invested assets.
The Company maintains a stock purchase plan under which its employees and directors and those of its subsidiaries can purchase shares of its common stock in the open market through an unaffiliated plan administrator. Pursuant to the plan, 328,534 shares had been purchased as of December 31, 1996. During the years ended December 31, 1996 and 1995, 29,331 shares and 29,512 shares, respectively, were purchased pursuant to the plan. This plan provides for monthly payroll and directors' fees purchases up to $1,500, with the employer making a monthly percentage contribution for the account of each participant, based upon their purchases, as follows: (a) 25% of amounts from $5 through $25, (b) 20% of amounts in excess of $25 through $50, and (c) 15% of amounts in excess of $50 through $1,500.
Insurance revenues, total income, and pre-tax operating earnings, reconciled to net earnings, for the three years ended December 31, 1996 for each industry segment, Ordinary, Group and Credit, were as follows:
Most of these factors are outside the Company's control and, accordingly, management cannot predict when or if they will change or cease to affect sales volumes and revenues. In 1995, management responded to these events by developing an expanded choice of alternative investment programs for potential bank clients and intensifying its marketing efforts for new client acquisition. In addition, management reduced operating expenses to bring them in line with revenue. See explanation of reduction in expenses in the "Management's Discussion and Analysis of Financial Condition and Results of Operation--Results of Operations--1995 Compared to 1994 and 1994 Compared to 1993--Restructuring". In January 1996, the Company announced an exclusive marketing arrangement with USBA. See description of the USBA marketing agreement in Item 1 "Description of Business--Principal Markets and Methods of Distribution".
The Company recognizes and records commission revenue when a sale has been consummated. Annuity and insurance sales are deemed to be consummated when proof of premium payment, the completed application and supporting documentation have been received in the Company's distribution/service center. Mutual fund
During the third quarter of 1995 the Company signed an agreement to terminate its Florida operations. As part of the termination agreement, the Florida based financial institution exercised its rights to purchase certain future asset-based revenues from the Company. The Company recorded a net gain of $3,914,350 from the sale. See discussion of Barnett Bank, Inc. at Note 5 and 10.
During the years ended December 31, 1995, 1994 and 1993, the following client financial institutions individually accounted for 10% or more of the Company's total revenues:
As described in Note 12, effective February 1, 1996, the Company reduced its level of service provided to First Tennessee Bank from a fully-managed alternative investments program to an administrative support program.
Losses and loss expenses incurred for prior years during 1996 and 1995 are not attributable to any single event or group of related events, but the development of losses at a higher rate than the expected loss emergence pattern.
Under this plan, directors may also make an irrevocable election preceding the beginning of each fiscal year, to defer cash compensation that would otherwise be payable as his or her annual retainer in increments of $5,000. The deferred payments are credited in the form of shares calculated by dividing 110% of the deferred payment by the market value of the Company's stock at the beginning of the fiscal year. Each anniversary thereafter, 20% of these shares are distributed. Shares issued under the plan totalled 3,048, 4,048 and 3,372 in 1997, 1996 and 1995, respectively.
Effective June 1995, the Insurance Act Amendment 1995 was enacted. As a result, X.L. was classified as a Class 4 insurer which increases its minimum solvency requirements. One such requirement only allows the payment of dividends in any one financial year in excess of 25% of the prior year's statutory capital and surplus if the insurer's directors attest that such dividends will not cause the insurer to fail to meet its relevant margins. X.L., being a heavily capitalized company, was not affected by this change. X.L. could legally have paid dividends in the amount of approximately $1.5 billion, 1.1 billion and $930 million at November 30, 1997, 1996 and 1995, respectively. XLGRe was classified as a Class 4 reinsurer upon its incorporation.
Our Personal Lines business unit is located at 6500 Pinecrest, Suite 100, Plano, Texas. The suite is located in a one story office building and contains 23,941 square feet of space. The rent is currently $28,330 per month pursuant to a lease that expires January 31, 2016. Our Personal Lines business unit also maintains a branch office in an executive suite located at 8785 SW 165th Avenue, Suite 200, Miami, Florida. The monthly rent is $1,200 per month pursuant to a lease which expires May 31, 2012.
AHIC, HIC, HSIC and HNIC have entered into a pooling arrangement pursuant to which AHIC retains 33% of the total net premiums written by any of them, HIC retains 28% of our total net premiums written by any of them, HSIC retains 28% of our total net premiums written by any of them and HNIC retains 11% of our total premiums written by any of them. Neither HCM nor TBIC is a party to the intercompany pooling arrangement.
Comparison of Years ended December 31, 2010 and December 31, 2009
Consolidated Statements of Earnings Years Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows Years ended December 31, 2000, 1999 and 1998
The Company has two classes of common stock; the Common Stock and the Class A Stock, each without par value. The rights of the Common Stock and the Class A Stock are identical, except with respect to voting rights. Holders of the Class A Stock are entitled to one-tenth vote per share in relation to the Common Stock, holders of which are entitled to one vote per share.
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share ("EPS") computations for the years ended December 31, 2000, 1999 and 1998:
As a result of the acquisition of Nationwide Provident (see note 3 to the consolidated financial statements included in the F pages of this report) and the application of purchase accounting, the Company reports an intangible asset representing VOBA.
Amortization of VOBA occurs with interest over the anticipated lives of the major lines of business (ranging from 13 to 30 years) in relation to estimated gross profits, gross margins or premiums, as appropriate. If estimated gross profits, gross margins or premiums differ from expectations, the amortization of VOBA is adjusted on a retrospective or prospective basis, as appropriate. The VOBA asset related to investment products and universal life insurance products is also adjusted for the impact of net unrealized gains and losses on securities available-for-sale had such gains and losses been realized and allocated to the product lines. As described in note 2(b) to the consolidated financial statements included in the F pages of this report, each year, the recoverability of VOBA is evaluated and if the evaluation indicates that the existing insurance liabilities, together with the present value of future net cash flows from the blocks of business acquired, is insufficient to recover VOBA, the difference is charged to expense as accelerated amortization of VOBA.
The additional interest expense in 2002 reflects the November 2001 and June 2002 senior note offerings, partially offset by lower utilization of commercial paper borrowings.
The decrease in return on average allocated capital in 2002 is a result of lower earnings on individual variable annuities, primarily due to the accelerated DAC amortization charge resulting from depressed equity markets. Excluding the $328.3 million of accelerated DAC amortization, return on average allocated capital in 2002 was 10.0%. The lower returns in 2002 and 2001 were driven by lower earnings from variable annuities due to the depressed equity markets and additional allocated capital to support growth in fixed annuities during 2002 and 2001.
The Company leases office space from NMIC and certain of its subsidiaries. For the years ended December 31, 2002, 2001 and 2000, the Company made lease payments to NMIC and its subsidiaries of $20.8 million, $18.7 million and $14.3 million, respectively.
In December 1995, the Company reclassified all of its fixed maturity securities previously classified as held-to-maturity to available-for-sale, as permitted by the FASB's Special Report, "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities." This one-time reclassification increased shareholders' equity by $511,000, net of deferred federal income taxes, as of December 31, 1995. Accordingly, all fixed maturity securities are classified as available-for-sale and are carried at fair value as of December 31, 1996 and 1995.
All significant intercompany transactions and balances have been eliminated in consolidation.
The reserve for extended reporting period claims coverage is recorded during the term of the original claims-made policy, utilizing the pure-premium approach, in amounts adequate to pay for estimated future claims reported subsequent to current policyholders' death, disability or retirement. Changes in this reserve are charged or credited to income.
Effective July 5, 1995, the Company purchased 254,823 shares of its common stock (approximately 7.9% of its then-issued and outstanding shares) from Physicians Insurance Company of Ohio for $4,331,991 ($17 per share), plus $53,000 for advisory and finder fees. These shares, net of 131,579 shares sold in December 1995 (see note 4), were held as treasury stock available for resale at December 31, 1995.
Professionals Insurance Company Management Group (Professionals Group) is an insurance holding company incorporated under Michigan law on January 31, 1996. Accordingly, condensed financial information for Professionals Group is only being presented from the period January 31, 1996 (date of inception) through December 31, 1996. Professionals Group owns all of the issued and outstanding common stock of PICOM Insurance Company, a stock insurance company incorporated under Michigan law.
Information management revenues increased 49%, or $2,612,000, from fiscal 1996 to fiscal 1997 (from $5,368,000 to $7,980,000) and increased 57%, or $1,948,000 from fiscal 1995 to fiscal 1996 (from $3,420,000 to $5,368,000). In fiscal 1997, fiscal 1996 and fiscal 1995, revenue of $7,577,000, $4,910,000, and $2,628,000, respectively, was related to QualityFIRST(R) software and system licensing revenues. The balance of revenue in the three years was from communication and consulting services.
Administration: Administration expenses increased 9% from fiscal 1996 to fiscal 1997 (from $5,232,000 to $5,682,000), and increased 9% from fiscal 1995 to fiscal 1996 (from $4,811,000 to $5,232,000), but decreased as a percentage of revenues from 10% to 9% in fiscal 1997. The increase in administration expenses in fiscal 1996 and 1997 was due to the expense of additional staff, and other expenses, including salaries, bad debts, training programs and insurance. Bad debt expense was $127,000, $242,000, and $333,000 in fiscal 1997, fiscal 1996 and fiscal 1995, respectively.
HRM also used approximately $2,277,000 and $2,056,000 in fiscal 1997 and fiscal 1996, respectively, to repay principal on notes payable and capital leases (net of proceeds from notes payable). The Company borrowed $1,275,000 and $1,500,000 in fiscal 1997 and fiscal 1996, respectively. The Company received cash proceeds of $775,000 and $1,157,000 in fiscal 1997 and fiscal 1996, respectively, from stock option exercises for common stock by current or former employees and directors, and $2,500,000 from the sale of 200,000 shares of unregistered common stock.
Investment securities: Fair values of fixed maturities and equity securities are obtained from independent pricing services which generally use quoted market prices, where available. For securities for which quoted market prices are not available and for securities which independent pricing services are unable to price, fair values are obtained from the Company's outside portfolio managers, who obtain them from broker/dealers or estimate them using analytic pricing methods. These pricing methods determine fair values by discounting expected future cash flows using current market rates applicable to the yield, credit quality and maturity of comparable quoted securities. The fair values resulting from the application of these methods are affected by the assumptions used, including the discount rate and estimates of future cash flows. Such derived fair value estimates may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlements of the instruments.
Loans payable: The carrying value of loans payable approximates their fair value, as these loans have variable rate interest terms.
Capital Securities: The carrying value of capital securities approximates their fair value.
subsidiaries may not, without prior regulatory approval, transfer cash dividends, loans or advances in any twelve month period in excess of the greater of the prior year's statutory operating income or 10% of capital and surplus at the preceding year end. Additionally, under Connecticut law, no dividend in an amount exceeding LRCA's earned surplus may be transferred to TexasRe without prior regulatory approval. Approval has been received from the Connecticut Department of Insurance to define earned surplus for this purpose to include amounts of paid in surplus in excess of $125,000. At December 31, 1998, net assets of TexasRe totaling $113,130 are not available for transfer to Life Re Corporation in 1999 except with prior approval of state regulatory authorities. Dividends paid to Life Re Corporation by TexasRe were $0 in 1998, $16,314 in 1997 and $12,087 in 1996.
The condensed parent company financial statements should be read in conjunction with the consolidated financial statements of Life Re Corporation and Subsidiaries included elsewhere herein.
Basic earnings per share of common stock for the year ended December 31, 1999 is computed using the weighted average number of common shares outstanding during the year of 13,497,110. Diluted earnings per share of common stock for the year ended December 31, 1999 is computed using the weighted average number of common shares outstanding during the year of 13,534,052. Basic and diluted earnings per share for the years ended December 31, 1998 and prior gives effect to the issuance of approximately 12,025,000 shares of Common Stock to Distributees in the Company's reorganization consummated on August 4, 1999.
LOSS AND LOSS ADJUSTMENT EXPENSES (LAE). Losses and LAE increased $104.2 million, or 59.6%, to $279.2 million in 2000 from $175.0 million in 1999. Losses and LAE were net of ceded losses and LAE of $44.2 million in 2000 and $96.1 million in 1999. The ratio of net losses and LAE to net premiums earned increased to 151.7% in 2000 from 93.1% in 1999. This significant increase in loss and loss adjustment expense is principally attributable to loss reserve strengthening that resulted from a loss and LAE study conducted by the Company at June 30, 2000. The reserve study was undertaken as a result of management's concern with changes in emerging loss and LAE data in a very difficult market environment. The increase in loss and loss adjustment expense reserves resulted from three primary factors: increased loss severity combined with a lengthened loss development period on the New Jersey physician book; greater than expected loss frequency and severity on the Pennsylvania physician and institutional book; and greater than anticipated loss frequency and, particularly, severity in the Company's book of physician and institutional business outside of New Jersey and Pennsylvania. During 2000, gross loss and LAE reserves held on prior accident years were increased by $47.2 million, ceded loss and LAE reserves held on prior accident years were reduced by $4.1 million, and ceded premiums earned associated with the adjustments to ceded loss and LAE reserves were increased by $18.8 million. During 1999, gross loss and LAE reserves held on prior accident years were increased by $16.5 million, ceded loss and LAE reserves held on prior accident years were increased by $30.5 million, and ceded premiums earned associated with the adjustments to ceded loss and LAE reserves were increased by $10.6 million.
REALIZED INVESTMENT GAINS AND LOSSES Net realized investment losses were $6.8 million in 1999 compared to net realized investment gains of $36.4 million in 1998. In 1999, the net losses were primarily due to sales of fixed maturity investments to reposition the investment portfolio in an increasing market yield portfolio. In 1998 the net gains were primarily composed of $38.4 million on the disposition of the Company's equity portfolio, partially offset by a $14.0 million loss realized on the expiration of an equity collar position on July 13, 1998. The remaining net realized gains in 1998 of $12.0 million resulted from sale of fixed maturity investments in a generally falling market yield environment.
The Company also leases approximately 2,000 square feet of storage space from the President of the Company in a personally owned warehouse at terms as favorable as those available from unaffiliated third parties.
We currently lease office space at Strathvale House building at 90 North Church Street, Georgetown, Grand Cayman. We believe that the Strathvale House office is suitable and sufficient for us to conduct our operations for the foreseeable future.
General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2015 increased $300 thousand, or 27%, to $1.4 million, from $1.1 million for the year ended December 31, 2014. The increase is due primarily to the fact that, following our initial public offering, we saw a significant and continual increase in our general and administrative expenses, because of an increase in business activities and operations associated with being a public entity.
Entering 1998, Seibels Bruce set several strategic objectives: to win the contract to be a servicing carrier for the SCAAIP, a joint underwriting association structure that will survive the SC Facility; to grow the Company's business in the voluntary market; and to seek out acquisition candidates to expand the Company's operations into other geographic areas. Currently, Seibels Bruce is the only company in South Carolina with servicing contracts in the SC Facility, the SCAAIP contract awarded in September 1998 and active in the voluntary auto market.
The flood segment produced income of $24 and experienced some severance and accounting reengineering costs totaling $108. Without these adjustments, the flood segment would have had income of $134.
North Carolina and South Carolina insurance laws and regulations require a domestic insurer to report any action authorizing distributions to shareholders and material payments from subsidiaries and affiliates at least 30 days prior to distribution or payment except in limited circumstances. Additionally, those laws and regulations provide the Department of Insurance with the right to disapprove and prohibit distributions meeting the definition of an "Extraordinary Dividend" under the statutes and regulations.
Commission and service income is predominately derived from servicing carrier and certain managing general agent activities. The commission income related to producing and underwriting the business is recognized in the period in which the business is written. Service income related to claims processing is recognized on an accrual basis as earned.
(2) Estimates of incurred-but-not-reported losses based upon past experience and current circumstances.
The South Carolina Insurance Holding Company Regulatory Act provides that, without prior approval of the Director of Insurance of the State of South Carolina, dividends within any 12-month period may not exceed the greater of (i) 10% of a domestic insurer's surplus as regarding policyholders as shown in the insurer's most recent annual statement or (ii) a domestic insurer's net income, not including realized capital gains or losses as shown in the insurer's most recent annual statement. Furthermore, dividends may only be paid out of positive earned surplus unless approved by the Director. As of December 31, 1998. SCIC had negative earned surplus.
The amounts of premiums pertaining to catastrophe reinsurance that were ceded from earned premium during 1998 and 1996 were $0.4 million and $0.2 million respectively. The Company carried no catastrophe reinsurance in 1997.
During the year ended March 31, 1996, the Company's operating loss was $10.4 million, as compared to operating income of $1.2 million during the year ended March 31, 1995. The decrease in operating income was primarily attributable to the $7.3 million increase in the credit loss provision combined with a $3.3 million increase in general and administration expenses and a $1.0 million decrease in net revenues.
The Company's primary source of capital has been sales of equity and debt securities, including the Company's initial equity offering in July 1990, which resulted in net proceeds of approximately $7.6 million, and a September 1991 sale of Debentures which resulted in net proceeds of $51.4 million. As a result of prior year Debenture prepayments without penalty, the outstanding principal balance of Debentures was $22.1 million at March 31, 1997. No additional amounts were prepaid during the fiscal year ended March 31, 1997. Annual interest payments were made in accordance with the terms of the Indenture in September 1992, 1993, 1994 and 1995, but the September 1996 payments were not paid due to the Offer. See Item 1 above (Business; Exchange Offer) and Note 3 to Financial Statements (Convertible Subordinate Debentures).
The responses to this Item are submitted in a separate section of this Annual Report on Form 10- K. See Index to Consolidated Financial Statements on page.
We estimate the annual premiums to be paid by our policyholders when we issue the policies and record those amounts on our balance sheet as premiums receivable. We conduct premium audits on all of our voluntary business policyholders annually, upon the expiration of each policy, including when the policy is renewed. The purpose of these audits is to verify that policyholders have accurately reported their payroll expenses and employee job classifications, and therefore have paid us the premium required under the terms of the policies. The difference between the estimated premium and the audited premium is referred to as “earned but unbilled” premium, or EBUB premium. EBUB premium can be higher or lower than the estimated premium. EBUB premium is subject to significant variability and can either increase or decrease earned premium based upon several factors, including changes in premium growth, industry mix and economic conditions. Due to the timing of audits and other adjustments, actual EBUB premium is generally not determined for several months after the expiration of the policy.
Gross Premiums Written. Gross premiums written for 2008 were $307.8 million, compared to $327.8 million for 2007, a decrease of 6.1%. The decrease was attributable to a $7.5 million decrease in annual premiums on voluntary policies written during the period, a $9.3 million decrease in premiums resulting from payroll audits and related premium adjustments and a $3.2 million decrease in direct assigned risk premiums.
Net Investment Income. Net investment income for 2008 was $31.0 million, compared to $30.2 million for 2007, an increase of 2.6%. The change was attributable to a 9.2% increase in our average invested assets, including cash and cash equivalents, from a monthly average of $712.5 million for 2007 to a monthly average of $778.4 million for 2008. Offsetting this growth was a decrease in pre-tax investment yield on our investment portfolio, to 4.0% per annum during 2008 from 4.2% per annum 2007.
The table below provides information with respect to our long-term debt and contractual commitments as of December 31, 2008.
The Company applies the two-class method to compute basic earnings per share (“EPS”). This method calculates earnings per share for each class of common stock and participating security. Income available to common shareholders is allocated to common shares and participating securities to the extent that each security
The Company is authorized to issue 50,000,000 shares of common stock, par value $0.01 per share. At December 31, 2008, there were 18,856,602 shares of common stock issued and outstanding.
Deferred taxes Deferred income taxes are generally recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes. A valuation allowance is recorded to reduce a deferred tax asset to that portion that is expected to more likely than not be realized.
Reserves for contingencies A contingency is an existing condition that involves a degree of uncertainty that will ultimately be resolved upon the occurrence of future events. Under U.S. GAAP, reserves for contingencies are required to be established when the future event is probable and its impact can be reasonably estimated. An example is the establishment of a reserve for losses in connection with an unresolved legal matter. The initial reserve reflects management's best estimate of the probable cost of ultimate resolution of the matter and is revised accordingly as facts and circumstances change and, ultimately, when the matter is brought to closure. In situations in which the Company is to be indemnified by SICL, there will be no financial impact on the Consolidated Statements of Operations and Comprehensive Income. See Note 11 to the Consolidated Financial Statements for a further discussion of indemnification agreements.