felanders/preprocessed huggingface dataset:
Unpaid loss and loss adjustment expenses comprised 30% of the Company’s total liabilities at December 31, 2015. This liability includes estimates for: 1) unpaid losses on claims reported prior to December 31, 2015, 2) future development on those reported claims, 3) unpaid ultimate losses on claims incurred prior to December 31, 2015 but not yet reported and 4) unpaid loss adjustment expenses for reported and unreported claims incurred prior to December 31, 2015. Quantification of loss estimates for each of these components involves a significant degree of judgment and estimates may vary, materially, from period to period. Estimated unpaid losses on reported claims are developed based on historical experience with similar claims by the Company. Development on reported claims, estimates of unpaid ultimate losses on claims incurred prior to December 31, 2015 but not yet reported, and estimates of unpaid loss adjustment expenses are developed based on the Company’s historical experience, using actuarial methods to assist in the analysis. The Company’s actuaries develop ranges of estimated development on reported and unreported claims as well as loss adjustment expenses using various methods, including the paid-loss development method, the reported-loss development method, the paid Bornhuetter-Ferguson method and the reported Bornhuetter-Ferguson method. Any single method used to estimate ultimate losses has inherent advantages and disadvantages due to the trends and changes affecting the business environment and the Company’s administrative policies. Further, external factors, such as legislative changes, medical cost inflation, and others may directly or indirectly impact the relative adequacy of liabilities for unpaid losses and loss adjustment expenses. The Company’s approach is to select an estimate of ultimate losses based on comparing results of a variety of reserving methods, as opposed to total reliance on any single method. Unpaid loss and loss adjustment expenses are reviewed periodically for significant lines of business, and when current results differ from the original assumptions used to develop such estimates, the amount of the Company’s recorded liability for unpaid loss and loss adjustment expenses is adjusted. In the event the Company’s actual reported losses in any period are materially in excess of the previously estimated amounts, such losses, to the extent reinsurance coverage does not exist, could have a material adverse effect on the Company’s results of operations.
During the years ended December 31, 2015 and 2014, the Company recorded other than temporary impairments related to the following investments.
The fair value is estimated based on the quoted market prices for similar issues and the current rates offered for debt having similar returns and remaining maturities.
Fixed maturities includes bonds, notes and certificates of deposit maturing after one year. Management determines the appropriate classification of bonds and notes at the time of purchase and reevaluates such designation as of each balance sheet date. These securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. All other bonds and notes are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of income taxes, reported as a separate component of shareholders equity. The amortized cost of fixed maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity. All certificates of deposits maturing after one year are deemed to be held to maturity. Equity securities (common and non-redeemable preferred stocks) held by the insurance subsidiaries are stated at fair value.
Investments, which are valued for financial statement purposes as described in Note 1, consist of the following at December 31, 1997:
At December 31, 1997, approximately 86% of the Company's investments in mortgage loans were secured by commercial real estate and the remaining mort- gage loans were secured by residential real estate. Approximately 78% of the loans involved properties located in Central Pennsylvania. Such investments consist principally of first mortgage liens on completed income-producing properties, primarily office buildings. Two mortgage loans exceeded 10% of shareholders equity at December 31, 1997 and one mortgage loan exceeded 10% of shareholders equity at December 31, 1996. The Company s mortgage loan valuation reserves at December 31, 1997 and 1996 were $50,000 and $100,000, respectively.
At December 31, 1997 and 1996, reinsurance recoverable for paid and unpaid benefits was $13.2 million and $17.5 million, respectively. Reinsurance recoverable is classified with Receivables.
At December 31, 1997, the Policyholders Surplus Account for one of the insurance subsidiaries exceeded the prescribed maximum by approximately $1.1 million, resulting in an additional tax liability of approximately $372,000, which has been included in the Company s 1997 financial statements. At December 31, 1997 the Policyholders' Surplus Accounts for the life insurance companies combined totaled approximately $439,000. Based on its current plans, the Company does not believe it is probable that it will incur any additional taxes with regard to its Policyholders Surplus Account.
The following selected financial data for each of the five years in the period ended December 31, 1996, are derived from the audited consolidated financial statements. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.
Concentrations of credit risk arise when a number of mortgage loan debtors have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Although the Company has a diversified mortgage loan portfolio consisting of residential and commercial loans and requires collateral on all real estate exposures, a substantial portion of its debtors' ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors do business. The Company has 91% of its mortgage loans in the state of Utah.
5) Bank Loans Payable and Line of Credit for Financing Mortgage Loans
The reconciliation of income tax attributable to continuing operations computed at the U.S. federal statutory rates is as follows:
Underwriting, acquisition and insurance expenses. Underwriting, acquisition and insurance expenses increased to $233.3 million in 1995 from $191.2 million in 1994, an increase of $42.1 million, or 22%. The increase was primarily due to the growth in premium volume and costs associated with the expanded operations of the Credit Services Division and the operations of businesses acquired by the HealthCare Solutions Division in 1995. As a percentage of revenues, these expenses remained relatively constant at 36.4% in 1995 compared to 36.6% in 1994, as the increased costs associated with Credit Services and HealthCare Solutions divisions were offset by the decrease in the health expense ratio to 33% in 1995 from 36% in 1994.
Underwriting, acquisition and insurance expenses. Underwriting, acquisition and insurance expenses increased to $191.2 million in 1994 from $173.0 million in 1993, an increase of $18.2 million, or 11%. The increase was primarily due to the growth in premium volume. As a percentage of revenues, these expenses decreased to 36.6% in 1994 from 38.3% in 1993 primarily due to a decrease in the health expense ratio to 36% in 1994 from 39% in 1993.
The Company had no outstanding balance on its revolving credit note with AEGON at December 31, 1995. The note bears interest at prime plus 0.875%. Subsequent to year end, the Company amended the note to increase the amount available on the revolving credit note to $12.0 million. Any amount outstanding will be due August 1, 2002.
Goodwill increased to $15.6 million at December 31, 1995 from $3.3 million at December 31, 1994. The increase was the result of two companies acquired in October 1995 related to the HealthCare Solutions Division. The goodwill associated with these acquisitions is being amortized straight-line over 15 years.
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, 42% 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 less than 1% invested in the more volatile tranches, such as inverse floaters, interest only and principal only type mortgage-backed securities.
Net investment income increased 19.1% to $228.5 million in 1997 from $191.9 million in 1996, reflecting the effect of investing the $376.4 million of cash flow from operating activities in 1997 and the increase in the Company's pre-tax yield on average cash and invested assets to 5.9% in 1997 from 5.6% in 1996.
INCOME TAXES. The Company had income tax expense, as adjusted, of $31.8 million in 1996 compared to $26.4 million in 1995, with the difference substantially attributable to the improvement in pre-tax income to $143.8 million in 1996 from $126.8 million in 1995.
SAFE HARBOR DISCLOSURE In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the "Act"), the Company sets forth below cautionary statements identifying important factors, among others, that in some cases have affected and that could cause its actual results to differ materially from those which might be projected, forecasted, or estimated in its forward-looking statements, as defined in the Act, made by or on behalf of the Company in press releases, written statements or documents filed with the Securities and Exchange Commission, or in its communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls.
At December 31, 1999, the $1.9 million of cash and cash equivalents-restricted consisted of amounts on deposit with various governmental agencies. The $12.9 million decrease in restricted cash and cash equivalents from December 31, 1998 to December 31, 1999 is the result of the release of the funds held in the Zenith escrow account.
The discussion that follows relates to the operations and operating philosophy of the Company's activities that existed prior to April 1, 1998 and includes the results for the year ended December 31, 1998 compared to 1997.
reinsurance agreements, subrogation from third parties, and state "second disability" funds, including the Florida Special Disability Trust Fund ("SDTF").
Year Ended December 31 ------------------------------ 1998 (a) 1997 -------------- -------------- Direct premiums earned $ 48.4 $328.2 Assumed premiums earned 0.1 18.8 Premiums ceded to reinsurers (22.7) (167.3) ------ ------ Net premiums earned $25.8 $179.7 ===== ======
Management's Discussion and Analysis of Financial Condition and Results of Operations - ------- -------------------------
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000 --------------------------------------------------------------------
claim and loss adjustment expense (LAE) liability of $500,000 was recorded at December 31, 2006 to cover any claims filed in 2007. When the extended deadline for filing of claims expired in the third quarter of 2007, SPFIC released approximately $425,000 of liabilities, which SPFIC determined were not payable under the contracts.
We are exposed to a variety of risks, including the current market conditions as well as the credit crisis and corresponding potential changes in the fair value of our investments. In the normal course of business, we employ established policies and procedures to manage our exposure to fluctuations in the current market and changes in the fair value of our investments. We have not experienced any impairments in the value of our securities due to the current credit crisis in world financial markets. We have no subprime or collateralized debt investments.
At our lead Life Insurance segment subsidiary, CICA, deferred acquisition cost assumptions had not been revised in several years. A new GAAP era was created for new issues beginning in 2006 to reflect the better mortality and persistency being experienced in the last few years.
In late 2007, the Company did not renew its $75 million line of credit. Management believes that if such borrowing capacity is needed in the future, the Company will be able to secure another line of credit.
The selected financial data has been derived from the consolidated financial statements of Chandler USA and its subsidiaries, which appear in Item 15(a). The consolidated balance sheets of Chandler USA and its subsidiaries and the related consolidated statements of operations, comprehensive income, shareholder's equity and cash flows for each of the five years in the period ended December 31, 2009 have been audited by HoganTaylor LLP, independent auditors, whose independent auditors' report expresses an unqualified opinion. Tullius Taylor Sartain & Sartain LLP merged with Hogan & Slovacek, P.C. to form HoganTaylor LLP effective January 7, 2009. The selected financial data should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and the consolidated financial statements of Chandler USA and the notes thereto appearing in Item 15(a).
Chandler USA uses an asset and liability approach for accounting for income taxes. Deferred income taxes are recognized for the tax consequences of temporary differences and carryforwards by applying enacted tax rates applicable to future years to differences between the financial statement amounts and the tax bases of existing assets and liabilities. A valuation allowance is established if it is more likely than not that some portion of the deferred tax asset will not be realized. The determination of whether a valuation allowance is appropriate requires the exercise of management judgment.
Merger costs. Net income for fiscal year 2001 reflected a pre-tax charge of $1.2 million ($926,000 after taxes, or $0.01 per share) relating to merger costs incurred in connection with the merger with FFI.
Net income for the year ended March 31, 2002 reflected a non-recurring charge of $1.8 million ($1.1 million after taxes, or $0.01 per diluted share) primarily representing a write-off of the human resources software previously utilized by Advance prior to the acquisition of PCS and severance costs for certain employees that were terminated or resigned following and as a result of the acquisition with PCS.
Effective April 1, 2001 we adopted SFAS 133 “Accounting for Derivative Instruments and Hedging Activities”, as amended by SFAS 137 and SFAS 138. In order to hedge variable rate interest payments made in conjunction with our debt we entered into interest rate protection agreements that have fixed the LIBOR rate as of November 7, 2000 at 6.60% for $400 million. The notional amount dropped to $300 million in October 2001 and drops to $200 million in October 2002. We have declared these agreements fair value hedges in accordance with SFAS 133, as amended and have recognized the fair value of these financial instruments in the condensed consolidated balance sheet effective April 1, 2001 upon adoption of SFAS 133. As a portion of the debt interest rates and underlying index of the interest rate protection agreements do not coincide, we test for hedge effectiveness using the hypothetical derivative method. The results of this test at March 31, 2002 indicate that the hedge is highly effective and any ineffectiveness is not significant to the results of operations. These instruments have been marked to market at March 31, 2002 with the adjustment recognized as a component of other comprehensive income in stockholders’ equity. The fair value of our interest rate swaps, a liability of $14.5 million at March 31, 2002, was based upon quoted market prices. Under SFAS 133, we have recorded a charge to other comprehensive income of $8.8 million, net of taxes, for the fiscal year ended March 31, 2002.
Changes in prices charged by manufacturers and wholesalers for pharmaceuticals we dispense affect our cost of revenues. Historically, we have been able to pass the effect of such price changes to our customers under the terms of our agreements. As a result, changes in pharmaceutical prices due to inflation have not adversely affected us.
The Company leases substantially all of its office facilities in various cities for its corporate and subsidiary operations. The Company considers these facilities to be adequate for its operating needs. See Note M to the Company’s Notes to Consolidated Financial Statements in this Annual Report on Form 10-K, which note is incorporated herein by reference.
(d) an incentive payment of $500 per calendar year (with no cap or limit) for each FTEE from the 51st and over employed in its Pampa operations center during each of the eight calendar years of the Agreement commencing with the year ending December 31, 2001. UMC recognized $5,875 in revenue from this incentive for 2001 and $13,250 for 2002.
At December 31, 2002, the Company's liquid assets, consisting of cash, totaled $52,000 compared to $4,000 at December 31, 2001. Working capital was $145,000 at December 31, 2002 compared to a deficit of ($24,000) at December 31, 2001. Working capital increased primarily due the net operating income for the year ended December 31, 2002 offset by capital investments in equipment and building improvements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Health Power, Inc., and Subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
CompManagement is party to employment agreements with certain employees. The agreements call for certain levels of commission expense to be paid by CompManagement to these individuals for selected contract revenue earned over a two-year period which ended in July 1996. Total commission expense paid in 1996 and 1995 in connection with these agreements was approximately $74,234 and $101,000, respectively.
Through June 30, 1995, the Company leased office space from an affiliate. Rental expense was approximately $577,756, $549,824 and $583,800, for 1996, 1995 and 1994, respectively, which includes $60,460 and $140,425 paid to affiliates for 1995 and 1994, respectively.
Additionally, during 1995, the Company purchased land and buildings that had previously been leased from an affiliate for $1,130,631.
Although finance revenues increased in 2001 as compared to 2000, pre-tax results declined primarily due to a larger provision for loan losses, changes in market values of interest rate swaps, higher interest paid on interest rate swaps, charges recorded in connection with the Company's decision to stop originating new subprime automobile loans and to consolidate all operations in Salt Lake City, and higher interest expense due to the increased customer banking deposits through September of 2001. In 2001, the banking and lending segment's provision for loan losses increased $13,000,000 as compared to the prior year. This increase primarily reflected higher net charge-offs, for which the Company believes a weaker economy and increased bankruptcies were contributing factors, and an increase in the rates used by the Company to establish the allowance for loan losses in recognition of its increased loss experience. Pre-tax results for the banking and lending segment for 2001 also included $7,100,000 of charges related to consolidating all operations in Salt Lake City.
Salaries expense in 2001 primarily reflects decreased expenses related to lower bonus expense.
With respect to employment practices liability cover, X.L. quota shares one third of the first $75 million to a U.S. insurer and cedes the remaining excess layer of $25 million to a Bermuda based insurer.
At December 31, 2019, accumulated other comprehensive income was increased by approximately $8.9 million as a result of unrealized gains on fixed maturity securities. At December 31, 2018, accumulated other comprehensive income was reduced by approximately $14.6 million as a result of unrealized losses on fixed maturity securities. The variance in the net unrealized gains and losses is the result of normal market fluctuations mainly related to changes in interest rates in the market place.
This document at times will refer to the Registrant’s largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll. Mr. Correll holds a majority ownership of First Southern Funding, LLC (“FSF”), a Kentucky corporation, and First Southern Bancorp, Inc. (“FSBI”), a financial services holding company. FSBI operates through its 100% owned subsidiary bank, First Southern National Bank (“FSNB”). Banking activities are conducted through multiple locations within south-central and western Kentucky. Mr. Correll is Chief Executive Officer and Chairman of the Board of Directors of UTG and is currently UTG’s largest shareholder through his ownership control of FSF, FSBI and affiliates. At December 31, 2019, Mr. Correll owns or controls directly and indirectly approximately 66% of UTG’s outstanding stock.
During 2019 and 2018, the maximum and minimum lending rates for mortgage loans were:
Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Consolidated Statements of Operations. During 2019 and 2018, the Company acquired $1,958,982 and $15,704,151 of investment real estate, respectively.
When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates utilized may vary due to differences in the blocks of business. The interest rate utilized in the amortization calculation of the remaining cost of insurance acquired is 12%. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.
In 2015, the Company recognized a gain as a result of the deconsolidation of an affiliate. In 2013, the Company recognized a gain on the acquisitions of EGI Insurance Services, Inc. and MLBA Mutual Insurance Company. The acquisitions were accounted for as bargain purchases.
The Company has established a $5.2 million valuation allowance against 100% of the net deferred tax assets for 2015 and a $6.9 million valuation allowance for 2014. As of December 31, 2015, the Company has net operating loss carryforwards for federal income tax purposes of $17.4 million, which expire in tax years 2019 through 2035. Of this amount, $15.2 million are limited in the amount that can be utilized in any one year and may expire before they are realized under Section 382 of the Internal Revenue Code. The Company has state net operating loss carryforwards of $7.8 million, which expire in tax years 2029 through 2035.
At December 31, 2015, each of our Insurance Company Subsidiaries was in excess of any minimum threshold at which corrective action would be required.
Losses and loss adjustment expenses were $2,186,728 in 1998 compared to $4,337,252 in 1997. The decreases in the losses and loss adjustment expenses are attributable to the decline in earned premiums from 1997 to 1998 and the release of approximately 1,150,000 of surety loss reserves which compares to a release of approximately $176,500 in 1997. The reserves released represent the release of reserves on older underwriting years which are no longer needed. Losses and loss adjustment expense reserves represent management's estimate of the ultimate cost of unpaid losses incurred for these periods relative to premiums earned.
Other income was $1,662,586 in 1997 compared to $926,289 in 1996. The increase in other income reflects earnings of $965,845 from the limited partnership investment in 1997.
A summary of property and equipment at December 31, 1998 and 1997 follows:
The stockholders have periodically approved the distribution of non-qualified stock options to certain officers and directors giving such individuals the right to purchase restricted shares of the Company's Common and Class A Stock. Transactions regarding these stock options are summarized below:
Costs of services provided, which consist primarily of claims and cancellation costs, increased by approximately $4,155,000, or 17%, to approximately $28,130,000 for the year ended October 31, 1999, as compared to approximately $23,975,000 for the year ended October 31, 1998. As a percentage of revenues, cost of services provided increased to 50% for the year ended October 31, 1999 as compared to 49% in the same period in 1998. Claims and cancellation costs are directly affected by the total number of unexpired contracts under administration, which has increased on a yearly basis.
either party provides written notice that no further extensions shall be granted. The employment agreement provides for total compensation as the sum of his annual salary, annual bonus and annual performance bonus (if any) for that fiscal year. The annual salary of $250,000 may be increased annually at the discretion of the Board of Directors. The annual bonus is calculated based on the earnings of the Company and is equal to the greater of $150,000 or 4 1/2% of the Company's earnings before interest and taxes for the fiscal year. The annual performance bonus may be granted each year at the discretion of the Board of Directors. In the event of Mr. Luby's death or the termination of his employment agreement the amount the Company paid for his split-dollar life insurance policies which are recorded as non-interest bearing loans and totaled approximately $374,000 and $312,000 as of October 31, 2000 and 1999, respectively, will be reimbursed to the Company.
The future aggregate minimum annual compensation required under these agreements is approximately $746,000.
Consolidated net earnings totaled $4.6 million, or $0.19 per share for fiscal 1994, an increase of $1.8 million (65%), or $0.07 per share. The increase in net earnings was attributable primarily to operating income improvement and lack of counterpart to prior year costs ($6.8 million pretax) associated with the aborted merger with Medco Containment Services Inc. (Note 12 to Notes to Consolidated Financial Statements) offset by shareholder settlement costs ($12.0 million pretax or $0.31 per share after tax) incurred in fiscal 1994. Excluding non-recurring merger and settlement costs in the current and prior fiscal years, net earnings would have been $12.5 million or $0.50 per share in fiscal 1994 compared with $6.8 million or $0.28 per share in fiscal 1993.
Diagnostek, Inc. and Consolidated Subsidiaries CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the years ended March 31, 1995, 1994, and 1993 (in thousands)
On October 29, 1993, Diagnostek acquired Perform Cost Management Services, Inc., ("Perform"), a processor of prescription drug claims and provider of prescription drug benefit management programs through the purchase of all outstanding voting, non-voting and preferred shares of Perform. The purchase price for all outstanding shares and shares issued under stock option agreements was approximately $19.8 million, including $1.0 million placed in escrow for a two-year period as the sellers' guarantee of specified representations and warranties. In addition, the Company purchased a note payable to an affiliate of the seller for $6.0 million and entered into a non-compete agreement with the sellers for $0.5 million. The acquisition was recorded using the purchase method of accounting with resulting goodwill of approximately $23.0 million which is being amortized over a period of 40 years.
The information required by this item is incorporated by reference to page 26 of the Company's 1996 Annual Report to Shareholders.
The information required by this item is incorporated by reference to pages 17 to 25 of the Company's 1996 Annual Report to Shareholders.
Net investment income increased, on a pre-tax basis, to $110 million from $93 million earned in 1993. The higher level of investment earnings is due to a full year of earnings of Signet Star and growth in investable assets, generated by cash flow from operations and the issuance of 7.375% Series A Cumulative Redeemable Preferred Stock. The higher level of interest expense resulted from the issuance of subsidiary debt in connection with the formation of Signet Star (see "Liquidity and Capital Resources").
Other operating costs and expenses increased by 27% to $286 million. This increase is due to the inclusion of a full year of operating results of Signet Star, a higher level of costs associated with the three new insurance operations and increased expenses in the alternative markets segment as a result of the acquisition of Key Risk Services, Inc. The consolidated expense ratio (underwriting expenses expressed as a percentage of premiums written) of the Company's insurance operations decreased to 30.8% in 1994 from 31.7% in 1993 due primarily to significant increases in the premium volume of Signet Star which has a lower expense ratio than our other insurance operations.
The Company has on file two "shelf" Registration Statements with the Securities and Exchange Commission with a combined remaining balance of $190 million in additional equity and/or debt securities. The securities may be offered from time-to-time as determined by funding requirements and market conditions.
The Company follows the customary industry practice of reinsuring a portion of its exposures, paying to reinsurers a part of the premiums received on the policies it writes. Reinsurance is purchased principally to reduce net liability on individual risks and to protect against catastrophic losses. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of the policies, it does make the assuming reinsurer liable to the insurer to the extent of the reinsurance ceded. The Company monitors the financial condition of its reinsurers and attempts to place its coverages only with substantial, financially sound carriers. The Company has established reserves for potentially uncollectible reinsurance.
W. R. Berkley Corporation and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 (Dollars in thousands)
Acquisition costs (primarily commissions and premium taxes) incurred in writing insurance and reinsurance business are deferred and amortized ratably over the terms of the related contracts. Deferred policy acquisition costs are limited to the amounts estimated to be recoverable from the applicable unearned premiums and the related anticipated investment income by giving effect to anticipated losses, loss adjustment expenses and expenses necessary to maintain the contracts in force.
The Company and its 80% or more owned subsidiaries file a consolidated Federal income tax return. In 1995 and prior years, Signet Star filed its own consolidated Federal income tax return.
Rent expense for operating leases has been lowered substantially. It was approximately $14,000 for the fiscal year ended March 31, 1998, compared to $179,000 for the fiscal year ended March 31, 1997, and $306,000 for the fiscal year ended March 31, 1996.
Although the Company was organized in May 1989, it did not begin its viatical settlements business until April 1991 when it acquired certain assets of Living Benefits, Inc. ("LBI"), including covenants not to compete from LBI's former owners. In April 1993, the Company acquired certain operating assets of American Life Resources Corporation (ALR Corp.), which was also engaged in the viatical settlements business; ALR Corp. retained the policies it had purchased before January 14, 1993. The Company generally ceased purchasing these Policies in September 1994, and by July 1995 had sold the majority of Policies still outstanding. Goodwill and intangibles related to these acquisitions were amortized over the remaining life of the Policies portfolio, extending through the fiscal year ended March 31, 1996, when they were fully amortized. The Company still holds a small residual portfolio of Policies.
The discount rate used to determine the fair value of the liabilities for our FIA and Stabilizer embedded derivatives and the MCG stand-alone derivative includes an adjustment to reflect the risk that these obligations will not be fulfilled (“nonperformance risk”). Our nonperformance risk adjustment is based on a blend of observable, similarly rated peer holding company credit default swap ("CDS") spreads, adjusted to reflect the credit quality of VRIAC, the issuer of the guarantee, as well as an adjustment to reflect the priority of policyholder claims.The impact of the nonperformance risk adjustment on the fair value of these liabilities was a reduction of approximately $26.0 million and $21.0 million as of December 31, 2015 and 2014, respectively.
The Company uses certain assumptions and estimates in determining the income taxes payable or refundable to/from Voya Financial, Inc. for the current year, the deferred income tax liabilities and assets for items recognized differently in its Consolidated Financial Statements from amounts shown on its income tax returns and the federal income tax expense. Determining these amounts requires analysis and interpretation of current tax laws and regulations, including the loss limitation rules associated with change in control. Management exercises considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments and estimates are reevaluated on a periodic basis. The Company will continue to evaluate as regulatory and business factors change.
Forwards: The Company uses forward contracts to hedge certain invested assets against movement in interest rates, particularly mortgage rates. The Company uses To-Be-Announced mortgage-backed securities as an economic hedge against rate movements. The Company utilizes forward contracts in non-qualifying hedging relationships.
Interest accrued at the following rates for VOBA: 5.5% to 7.0% during 2015 and 2014 and 1.0% to 7.0% during 2013.
Valuation allowances are provided when it is considered unlikely that deferred tax assets will be realized. As of December 31, 2015 and December 31, 2014, the Company had total valuation allowances of approximately $7.1 and $10.7, respectively. As of December 31, 2015 and December 31, 2014, $126.4 and $130.0, respectively, of these valuation allowances were allocated to continuing operations, and $(119.3), as of the end of each period, was allocated to Other comprehensive income related to realized and unrealized capital losses.
The costs allocated to the Company for its employees' participation in the Retirement Plan were $6.0, $6.2 and $6.5 for the years ended December 31, 2015, 2014 and 2013, respectively, and are included in Operating expenses in the Consolidated Statements of Operations.
With respect to the Company's servicing carrier activities for the South Carolina Reinsurance Facility, the South Carolina legislature passed a joint resolution in 1993 requiring that servicing carrier contracts, which previously had been awarded based on application, be put out for bid. The Company, through this bid process, was selected as one of three servicing carriers for the facility for a new five year contract period from October 1, 1994 to September 30, 1999. In response to the competitive aspect of this bid, the Company had to reduce its commission rates. While the Company did not retain the ongoing block of business that it was servicing, which was the largest of the three blocks, it was awarded the next largest. The premium volume on the previously held block was $82 million; the volume of the new block is estimated to be $64 million. This lower premium volume, in combination with lower servicing rates, resulted in approximately $2 million less commission earned in the fourth quarter of 1994 than in the preceding three quarters.
There have been no shareholder dividends declared during the last three years, and there is not a likelihood that any will be considered during 1995. Long-term debt outstanding has been reduced to an insignificant amount as a consequence of the debt forgiveness during 1993, and the exchange of debt for common shares during 1994.
Net income and shareholders' equity of the credit life insurance subsidiary as determined in accordance with statutory accounting practices are as follows:
For the direct retained and assumed reinsurance without LAE claim limits, the Company is only one of a group of insurers. Each member of the group participates in the handling and monitoring of the claim and the group selects one attorney to defend the case. Legal fees are prorated among the group based on each member's number of years of coverage. For assumed reinsurance with LAE limits, claims represent upper level excess policies assumed from the London market. As such, the primary insurers handle claim settlements and the Company pays its portion of the claim and LAE, up to its retention amounts, based on the settlement amounts determined by the primary insurers.
Proceeds from sales of investments in fixed maturities and related realized gains and losses were as follows:
The following is a summary of unaudited quarterly information for the years ended December 31, 1994 and 1993:
The extension of our field of operations and the con­ tinually growing demands for cover which are made of the professional reinsurer indicated that it would be des­ irable to augment our reserve funds. In the year under review we therefore again set aside suitable amounts and also made an allocation of Sw. frs. 5 million to the Fund for Extraordinary Losses, which thus attains the figure of Sw. frs. 30 million.
Fund for Extraordinary Losses Dividend Directors' Remuneration Capital Reserve Fund Special Reserve Fund Carry Forward
Involuntary automobile insurance business increased the Company's calendar year loss and LAE ratio by approximately 1.8 and 9.0 percentage points for the years ended December 31, 2003 and 2002, respectively. The combined ratio on involuntary automobile business was greater than the combined ratio on voluntary automobile business.
Net premiums written decreased $23,445,000 or 25% to $70,528,000 for 2002 from $93,973,000 for 2001, primarily due to the 28% decrease in direct premiums written. Net premiums earned for 2002 were $83,120,000, a decrease of $10,765,000 or 11%, from $93,885,000 in 2001. The decrease in net premiums earned resulted from the 25% decrease in net premiums written. The decrease in net premiums earned was smaller than the decrease in net premiums written since the Company's insurance policies generally earn over a twelve-month policy term.
The Company made no changes to the key assumptions used in evaluating the adequacy of its reserves for losses and LAE during 2002. A reasonable possibility exists in any year that relatively minor fluctuations in the estimate of reserves for losses and LAE may have a significant impact on the Company's net income. This is due primarily to the size of the Company's reserves for losses and LAE ($147,136,000 at December 31, 2002) relative to its net income.
Regulatory guidelines suggest that the ratio of a property and casualty insurer's annual net premiums written to its statutory surplus should not exceed 3 to 1. The Company has consistently followed a business strategy that would allow MNH to meet this 3 to 1 regulatory guideline. MNH's ratio of net premiums written to statutory surplus for 2003 was 1.1 to 1.
- SFAS No. 149 "Amendment of Statement on Derivative Instruments and Hedging Activities."
The Company's and MNH's business and day-to-day operations are closely aligned with those of Mutual. This is the result of a combination of factors. Mutual has had a historical ownership interest in the Company and MNH. Prior to November 1986 MNH was a wholly-owned subsidiary of Mutual. Following the Company's initial public offering in November 1986 and until a secondary stock offering in July 1993 the Company was a majority-owned subsidiary of Mutual. At December 31, 2003 Mutual owned 12.1% of the Company's common stock. Under the Services Agreement, Mutual provides the Company and MNH with all facilities and with personnel to operate their business. With the exception of the individual who serves as President of the Company and the Chief Operating Officer of MNH, the only other officers of the Company or MNH are employees of Mutual whose services are provided to, and paid for by, the Company and MNH through the Services Agreement. Also, the operation of MNH's insurance business, which offers substantially the same lines of insurance as Mutual through the same independent insurance agents, creates a very close relationship among the companies.
An increase or decrease in our effective tax rate by one percentage point would have resulted in a decrease or increase in our 2019 "Income tax expense (benefit)" of $0.3 million.
The effective tax rate is the ratio of “Income tax expense (benefit)” divided by “Income (loss) from operations before income taxes.” Our effective tax rate for fiscal years 2019, 2018 and 2017 was (10.2)%, (0.2)% and (20.3)%, respectively. For a detailed description of the nature of each significant reconciling item, see Note 10 to the Financial Statements. The increase in the effective tax rate from (20.3)% in 2017 to (0.2)% in 2018 was primarily driven by a decrease in non-taxable investment income as a result of the reduction in DRD benefit under the Tax Act of 2017. The decrease in the effective tax rate from (0.2)% in 2018 to (10.2)% in 2019 was primarily driven by the increase in DRD benefit in 2019.
Level 3 - Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value. The Company’s Level 3 assets and liabilities primarily include: certain private fixed maturities and equity securities, certain manually priced public fixed maturities, certain highly structured OTC derivative contracts and embedded derivatives resulting from reinsurance or certain products with guaranteed benefits.
Separate account assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate, hedge funds and a corporate owned life insurance fund, for which fair value is measured at NAV per share (or its equivalent). At December 31, 2019 and 2018, the fair value of such investments was $1,977 million and $1,734 million respectively.
Effective July 1, 2017, the Company entered into a yearly renewable term reinsurance agreement with Pruco Life for new business, primarily covering Universal Life policies. Under this agreement the majority of all mortality risk is ceded to Pruco Life. The Company also reinsures certain Corporate Owned Life Insurance (“COLI”) policies with Pruco Life. Through March 31, 2016, the Company reinsured Prudential Defined Income ("PDI") living benefit guarantees with Pruco Life. Effective April 1, 2016, the Company recaptured PDI living benefit guarantees from Pruco Life and reinsured them with Prudential Insurance. See Note 1 for additional information related to the Variable Annuities Recapture.
Positive amounts indicate gains/benefits reclassified out of AOCI. Negative amounts indicate losses/costs reclassified out of AOCI.
Item 2.04 There are no reportable disclosures relating to triggering events which have accelerated or increased a direct financial obligation or an obligation under an off balance sheet arrangement.
Mr. Spence has maintained licensure in the financial services industry since 2005. Prior to his service with the Firm, Mr. Spence was employed at the companies listed below in order of recentcy:
(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity because of violation of Federal or State securities laws or Federal commodities laws;
(3) There are no reportable disclosures to be made regarding (i)(A) an audit committee's review or discussion of audited financial statements.
*Year is for Fiscal Year November 1, 2008 October 31, 2009 and is made in response to Title 17 229.402(n)(2)(ii)
Client History Forms - are prepared by the writing agent and compiled through out the sales process to record client/agent conversations, policy changes and service requests.
(ii) There are no reportable disclosures to be made concerning acquired assets received from a promoter.