felanders/preprocessed huggingface dataset:
10. FAIR VALUE OF FINANCIAL STATEMENTS (CONTINUED): The major methods and assumptions used in estimating the fair values of financial instruments are as follows:
The fair values of short-term bonds are estimated to be the amortized cost. The fair values of long-term bonds which are publicly traded are based upon market prices or dealer quotes. For privately placed bonds, fair values are estimated by taking into account prices for publicly traded bonds of similar credit risk, maturity, repayment and liquidity characteristics.
Total operating revenues, which exclude net realized gains and losses on investments, increased to $3.00 billion in 2000 compared to $2.70 billion for 1999 and $2.45 billion for 1998. The growth in operating revenues over the past two years has primarily been driven by increases in policy charges and net investment income.
Amortization of DAC increased 40% to $238.7 million in 2000 compared to $170.9 million and $129.2 million in 1999 and 1998, respectively. The growth in DAC amortization is consistent with the overall growth in the individual annuity business and the increase in surrender activity.
The following table depicts the interest spread on average general account reserves in the Individual Annuity segment for each of the last three years.
Institutional Products segment deposits in 2000 of $6.33 billion offset by participant withdrawals and surrenders totaling $5.59 billion generated net flows from participant activity of $738.9 million. Net flows in 2000 are down from the $1.55 billion and $2.00 billion achieved in 1999 and 1998, respectively. Net case (terminations) acquisitions were ($1.32) billion in 2000, $810.8 million in 1999 and none in 1998. The increase in net terminations in 2000 reflects the increasingly competitive environment particularly in the public sector market.
The "Management's Discussion and Analysis" included in the Form 8-K Current Report dated February 26, 1998 is incorporated herein by reference.
The "Management's Responsibility for Financial Statements," "Independent Auditors' Report," Consolidated Balance Sheets, Consolidated Statements of Income, Shareholders' Equity, Comprehensive Income and Cash Flows, and Notes to Consolidated Financial Statements included in the Form 8-K Current Report dated Feb. 26, 1998 are incorporated herein by reference.
Exposure to individual losses in excess of $1 million is known as excess layer coverage. Excess layer premiums are recorded as current year reinsurance ceded costs. Under the excess layer treaties, prior to 2000 we ceded to our reinsurers over 90% of our exposure. Effective since January 1, 2000, we cede 100% of our risks and premiums related to these coverage layers.
Under terms of the contract based on the actual accumulated loss experience of the terminated program, we billed the hospital sponsor $1.3 million in 2000 and an additional $800,000 in January 2002. Based on the continuing development of loss experience, during the year ended December 31, 2001, $500,000 of gross premium earned has been accrued related to additional amounts due to us from the hospital sponsor.
YEAR ENDED DECEMBER 31, ----------------------------------- 2002 2001 2000 --------- ----------- --------- Plaintiff verdicts................... 5 5 5 Defense verdicts..................... 13 13 7 Mistrials or hung juries............. 4 2 2 --------- ----------- --------- Total trials......................... 22 20 14 ========= =========== =========
Each case represents claims against one or more policyholders relating to a single incident. Losses in the medical professional liability industry can take up to eight to ten years, or occasionally more, to fully resolve. Amounts are not due from the reinsurers until we pay a claim. We believe that all of our reinsurance recoverables are collectible. "See Business - Reinsurance" for a discussion on the reinsurance program.
I, R. Ray Pate, Jr., President and Chief Executive Officer, certify that:
The following table sets forth, for the periods and at the dates indicated, our selected consolidated financial data. The financial data were derived from our consolidated financial statements and should be read in conjunction with our audited consolidated financial statements, including the Notes thereto, beginning on page of this Report. See also
Title revenues. Our revenues from direct title operations increased 18.3% in 2005 and decreased 0.9% in 2004. Acquisitions added revenues of $37.3 million and $53.2 million in 2005 and 2004, respectively. The number of direct closings we handled increased 5.5% in 2005 and decreased 20.8% in 2004. The largest revenue increases in 2005 were in Texas, Florida, California and Arizona. The largest decreases in 2004 were in Texas, Colorado and Illinois, partially offset by increases in New York, Canada, California and Puerto Rico.
In our REI segment, employee costs increased 10.7% in 2005. These employee costs did not increase proportionately with the 19.7% increase in revenues due to an increase in revenues from Section 1031 property exchanges, which are less labor intensive than other REI services. In 2004 employee costs were comparable to 2003.
Historically, our operating cash flow has been sufficient to pay all title policy losses incurred. As reported in Note 4, the market value of our debt securities maturing in less than one year was $33.8 million at December 31, 2005. Combined with our annual cash flow from operations ($173.5 million in 2005), we do not expect future loss payments to create a liquidity problem for us. Beyond providing funds for losses, we manage the maturities of our investment portfolio to provide safety of capital, improve earnings and mitigate interest rate risks.
Interest expense for the year ended December 31, 2002 decreased to $5.6 million from $12.1 million during the same period in 2001. During 2001, we incurred higher interest rates on our credit facility that increased from prime plus 1.0% (10.50%) on January 1, 2001, to prime plus 6.0% (10.75%) through April 12, 2002, the date we restructured our credit facility. As a result of this restructuring, we reduced the debt balance owed to our Senior Lenders from $64.8 million at December 31, 2001 to $40.0 million at December 31, 2002. Our senior lenders currently charge interest at a rate of prime plus 1.0% (5.25% at December 31, 2002). The decrease resulting from the lower average principal balance and lower interest rates was partially offset by the bank charges and other financing costs incurred to restructure the credit facility, which are included in interest expense for the year ended December 31, 2002.
There is an intercreditor agreement between PVC Funding Partners and Wachovia Bank, National Association, dated March 7, 2003. The intercreditor agreement provides that, until the occurrence of a Board Shift Event, PVC Funding Partners has all of the rights of the original lenders under the restructured credit agreements, except that (1) PVC Funding Partners' rights to mandatory prepayments and other principal payments prior to the maturity date are subordinated to the original lenders' rights to those payments, and (2) PVC Funding Partners' notes
convertible preferred stockholders registration rights with respect to the shares of common stock that are issuable upon conversion.
A small number of customers account for a significant portion of our operative revenue.
Our payer customers generally can terminate our NPPN network access contracts for any reason on 90 days' notice. In 2002, we had a customer turnover rate of 3.1%, representing the loss of 23 customer contracts. In addition, the majority of our contracts contain payment terms that are based on a percentage of savings to the customer or on the number of covered employees. In 2002, we experienced a decline in percentage of savings revenue from existing customers due to a decrease in the amount of high dollar claims we received from these customers. Although 2002 revenue from new clients offset revenue lost from departing clients and from decreases in large claim submissions, the termination of additional customer contracts, or our inability to generate significant savings with respect to customer claims, could adversely affect our financial condition and results of operations.
We may be unable to adjust fixed expenses to compensate for operating revenue shortfalls.
Net income per share before cumulative effect of change in accounting principle of affiliate 9.04 9.00 15.46 12.21 9.54
The decline in long-term interest rates during 1995, which was related to general economic conditions, had a positive effect upon the market value of the fixed maturities available for sale segment of ILCO's investment portfolio. As of December 31, 1995, the market value of the fixed maturities available for sale segment was $483.6 million as compared to a carrying value of $463.7 million, or an unrealized gain $19.9 million. There is no assurance that this unrealized gain will be realized by ILCO in the future. Since FIC owns approximately 47% of the common stock of ILCO, such unrealized gains, net of tax, are reflected in FIC's equity interest in ILCO, and had the effect of increasing the reported value of such equity interest by approximately $15.8 million.
The lower amount of the Senior Loan reflects regular quarterly payments made during 1995, as well as a "sweep" payment in April, 1995, in the amount of $1.9 million (the latter payment being calculated in accordance with the provisions of the Senior Loan agreement).
(a) The decline in earned premiums during 2001 and 2002 is due primarily to a reinsurance agreement pursuant to which Infinity ceded 90% of the automobile physical damage business written by it as more fully discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Although Infinity had the ability to continue holding these investments, its intent to hold them changed due primarily to deterioration in the issuers' credit-worthiness, decisions to lessen exposure to a particular credit or industry, or decisions to modify asset allocation within the portfolio.
While losses on claims reported are generally determinable, the process of determining overall loss and LAE reserves is also highly dependent upon the use of estimates in the case of losses incurred or expected but not yet reported or developed. Actuarial procedures and projections are used to obtain "best estimates" which are then included in the overall results. These estimates are subject to changes in claim amounts and frequency and are periodically reviewed and adjusted as additional information becomes known. In accordance with industry practices, such adjustments are reflected in current year underwriting results. As a result, the ratio of loss and LAE expenses component of the combined ratio includes development of prior year reserves in addition to provision for losses and LAE occurring in the current year.
The foregoing description of the Merger Agreement and the merger is not complete and is qualified in its entirety by reference to the Merger Agreement, which is Exhibit 2.1 hereto and is incorporated herein by reference.
governing our 2.25% Senior Convertible Debentures Due 2023, that all outstanding debentures will be redeemed by Sierra on March 20, 2008 in accordance with the terms of the Indenture. Outstanding debentures may be converted into $4,756.70 in cash for each $1,000 principal amount of debentures so converted until March 19, 2008. As of March 7, 2008 $17.7 million principal amount of debentures were redeemed for $84.4 million.
The Company contracts with hospitals, physicians and other independent contracted providers of health care under capitated or discounted fee-for-service arrangements, including hospital per diems, to provide medical care services to enrollees. A provision for provider disputes is included in medical expenses and the medical claims payable balance and is based on a separate evaluation of each dispute. A liability is recorded for such loss contingencies when it is both probable that a loss will be incurred and that the amount of the loss can be reasonably estimated. Capitated providers are at risk for a portion of the cost of medical care services provided to the Company's enrollees in the relevant geographic areas; however, the Company is ultimately responsible for the provision of services to its enrollees should the capitated provider be unable to provide the contracted services. Also included in medical expenses are the operating expenses of the Company’s medical provider subsidiaries and certain claims-related administrative expenses.
Revolving Credit Facility - On March 3, 2003, the Company entered into a revolving credit facility. Effective June 26, 2006, the current facility was amended to extend the maturity from December 31, 2009 to June 26, 2011, increase the availability from $140.0 million to $250.0 million and reduce the drawn and undrawn fees. As of December 31, 2007, the incremental borrowing rate was LIBOR plus .60%. At December 31, 2007, the Company had no outstanding balance on this facility. At December 31, 2006, the Company had $75.0 million outstanding on this facility. In connection with the Company's merger with UnitedHealth Group, the facility was terminated on February 25, 2008.
(1) Does not include 540,000 shares that have vested but have not settled.
Net realized capital losses were $22.9 million in 2003, reflecting realized capital losses on the Company’s investments of $51.5 million, which included $16.4 million relating to write-downs in the value of securities deemed to be impaired on an other than temporary basis and $25.2 million related to the impairment on interest only strips in accordance with Emerging Issues Task Force No. 99-20, “Recognition of Interest Income and Impairment on Purchased and Beneficial Interests in Securitized Financial Assets” (“EITF 99-20”), partially offset by $28.6 million of realized capital gains, which included $12.5 million of realized capital gains on the interest only strips (see Note 1P of Notes to Consolidated Financial Statements), compared to net realized capital losses of $53.1 million in 2002. The net realized capital loss in 2002 reflected realized capital losses of $108.9 million, which included $79.7 million relating to write-downs in the value of securities, of which $25.7 million was for WorldCom, Inc., deemed to be impaired on an other than temporary basis, partially offset by $55.8 million of realized capital gains. The Company owned no interest only strips during 2002.
Litigation. As further described in Note 12 of the Notes to Consolidated Financial Statements, United Liberty is party to an outstanding lawsuit concerning payment of policyholder dividends. The Company is currently unable to determine whether an unfavorable outcome of this action is likely, and no provision has been recorded for an unfavorable outcome. Accordingly, if an unfavorable outcome occurs, a financial statement adjustment would be required.
Citizens Security owns the building in which the Company and its subsidiaries maintain their home offices. They occupy approximately 31% of the building with the balance leased to third-party tenants. Market conditions for this property are generally favorable. An updated appraisal obtained during 2002 indicates the market value of the property is approximately $2,700,000 higher than its carrying value.
Year Ended December 31 2003 2002 2001 ----------------------------- -------------- -------------- -------------- Home Service Life $ 7,288,004 $ 7,334,030 $ 7,152,242 Broker Life 3,514,873 3,621,053 3,812,841 Preneed Life 13,106,019 17,993,645 8,397,911 Dental 8,385,774 8,182,483 7,988,620 Other Health 1,291,808 1,347,939 1,392,762 ----------------------------- -------------- -------------- -------------- Total $ 33,586,478 $ 38,479,150 $ 28,744,376 ----------------------------- -------------- -------------- --------------
The Company generated approximately $6,069,000, $16,554,000 and $6,394,000 of cash flow from operations during 2003, 2002, and 2001, respectively. The 2003 and 2002 fluctuations are principally attributable to growth of Preneed Life premiums in 2002 and a decrease in Preneed Life premiums in 2003.
Insurance and General Expenses. Insurance and general expenses increased $24.4 million from $107.1 million in 1992 to $131.5 million in 1993. Included in 1993 are expenses of $6.9 million related to an individual health reinsurance transaction. See "Segment Information - Individual Health," below. Additionally, 1993 includes charges of $1.6 million related to re-engineering in the life insurance and annuities segment and $1.7 million for the combination of the individual health and employee benefits divisions. 1993 also includes move related costs, primarily due to the closing of the Company's previous headquarters.
The Company will carefully consider entering into additional, similar reinsurance transactions as they arise.
Realized Investment Losses. Realized investment losses decreased $15.0 million, or 76.5%, from $19.6 million in 1991 to $4.6 million in 1992. Results in 1992 included gains of $5.6 million on the sale of fixed maturity investments and losses on mortgage loans on real estate and real estate investments of $4.9 million and $3.6 million, respectively, combined with losses on equity securities of $1.7 million. Results in 1991 included a $10.0 million loss related to bonds backed by guaranteed investment contracts issued by Executive Life Insurance Company as well as losses on mortgages loans on real estate of $6.6 million and real estate investments of $3.2 million.
Pretax income for the group products segment declined 24.2% to $10.2 million in 1992 compared to $13.5 million in 1991. The decline was primarily due to a decline in premium revenues and an increase in the claims ratio for 1992.
In communicating its most recent rating, A.M. Best advised WNIC that, if current trends persist, further rating adjustments may be required. The Company believes that the trends referred to by A.M. Best are (i) a decline in WNIC's statutory capital and surplus and (ii) increased net statutory operating losses on certain health insurance products of WNIC as calculated using statutory accounting practices. WNIC's statutory operating income in recent years has been adversely affected by the payment of first year commissions on new sales of certain health insurance products and investments in infrastructure improvements. The Company believes that as renewal business increases as a percentage of total revenues, statutory operating income for these products will improve. For 1993, statutory net operating income improved to $19.9 million from $5.8 million in 1992, and net income improved to $11.0 million from $36 thousand in 1992. Statutory capital and surplus increased $9.2 million, or 5.1%, to $188.3 million in 1993 versus a decrease of $9.1 million, or 4.8%, in 1992.
Major categories of net investment income for the years ended December 31 are as follows:
2001 as compared to 90.2% for the prior year. Net losses and loss adjustment expenses incurred were $87.9 million and $68.1 million for the years ended December 31, 2001 and 2000, respectively. The domestic insurance companies/agencies reported higher losses in 2001 as a result of larger severity losses arising from higher net retention levels per loss in the aircraft line of business including WTC attack losses of approximately $6.6 million. The ultimate net liability resulting from the WTC attack may change from the amount provided currently depending upon revisions in gross loss estimates and the interpretation as to the number of occurrences as defined in the aircraft ceded reinsurance treaties. In addition, 2001 reflected charges for insolvent or financially impaired reinsurers, of $10.8 million as compared to $1.0 million in 2000.
Accumulated other comprehensive income decreased to $7.9 million as of December 31, 2001 from $10.9 million as of December 31, 2000. The change principally reflects decreases in the fair value of equity securities brought about by declines in the U.S. stock markets during 2001. Partially offsetting this decrease was the favorable impact of lower interest rates on the fair value of fixed maturities.
The Company's liquidity is not dependent on the use of off-balance sheet financing arrangements.
Impairment of investments, included in realized gains or losses, result from declines in the fair value of investments which are considered by management to be other than temporary. Management reviews investments for impairment based upon specific criteria that include the duration and extent of declines in fair value of the security below its cost or amortized cost. Approximately $4.4 million and $2.8 million were charged to results from operations in 2001 and 2000, respectively, resulting from fair value declines considered to be other than temporary. Gross unrealized gains and losses on fixed maturities amounted to approximately $5.3 million and $1.6 million, respectively, at December 31, 2001. Gross unrealized gains and losses on equity securities amounted to approximately $8.0 million and $.6 million, respectively, at December 31, 2001.
Actuarial judgment is required in selecting the patterns to apply to each segment of data being analyzed, and our views regarding current and future claim patterns are among the factors that enter into our establishment of the reserve for losses and LAE at each balance sheet date. When short-term averages or external rate bureau analyses indicate the claims patterns are changing from historical company or industry patterns, the new or forecasted information typically is factored into the methodologies. When new claims emergence or payment patterns have appeared in the actual data repeatedly over multiple evaluations, those new patterns are given greater weight in the selection process.
Net operating loss, a non-GAAP measure, for the year ended December 31, 2013 was ($117.9 million), or ($2.36) per diluted share, compared to net operating loss of ($28.4 million), or ($0.57) per diluted share in 2012. The 2013 net loss includes $5.6 million, or $0.11 per diluted share, of after-tax realized gains, compared to $40.2 million, or $0.80 per diluted share, in 2012.
Amortization expense increased $2.3 million to $7.3 million for the year ended December 31, 2011, from $5.0 million for the same period in 2012. The increase is due to the $1.8 million write off of an intangible asset related to the Public Entity Excess Liability program that we terminated in the fourth quarter of 2012.
The more recent accident years were impacted by increases of $7.9 million, $6.0 million, $2.8 million, and $3.5 million in accident years 2012, 2011, 2010, and 2009, respectively, reflecting greater than expected claim emergence in the excess and surplus lines division. After experiencing favorable development for prior accident years in calendar years 2009, 2010 and 2011, the liability lines of business in our excess and surplus lines division experienced unfavorable development in 2013, primarily in the recent accident years mentioned above. The older accident years in the excess and surplus lines business appear to be stable. The change in ultimate loss estimates for all other accident years was insignificant.
If the market value per share of our common stock exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on our net income per share and we will use the “treasury stock” method in calculating the dilutive effect on earnings per share.
We seek to manage the risk exposure of our Insurance Company Subsidiaries and our clients through the purchase of excess-of-loss and quota share reinsurance. Our reinsurance requirements are analyzed on both a specific program and line of business basis to determine the appropriate retention levels and reinsurance coverage limits. We secure this reinsurance based on the availability, cost, and benefits of various reinsurance alternatives.
As of December 31, 2013, we have no off-balance sheet arrangements as defined in Item 303(a) (4) of Regulation S-K.
Premiums, before reinsurance, in 1998 increased 1% to $264,868,186 from $262,161,343 in 1997. The group life and health segment accounted for 99% of the premiums in 1998 and 1997. The group certificates in
Commissions remained fairly level in 1997, $35,525,295 compared to $35,654,815 in 1996, primarily due to premiums remaining flat.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in this report, including the risks detailed under "Market Risk and Management Policies." The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimate made by management, as well as evaluating the overall financial statement presentation. We believe that out audits provide a reasonable basis for our opinion.
Investments in bonds and mandatory redeemable preferred stocks are designated at purchase as held-to-maturity or available-for-sale. Held-to-maturity investments are securities which management has the positive intent and ability to hold until maturity, and are reported at amortized cost. Available-for-sale investments are reported at fair value, with unrealized holding gains and losses reported as a separate component of shareholders' equity, net of deferred federal income taxes.
Effective February 17, 1999, CGIC entered into a reinsurance treaty with Hannover, whereby CGIC ceded 50% of its in force life, accident and health, and annuity policies to Hannover, and retained the remaining risk. The treaty provides an initial ceding allowance of $13,000,000, which will be accounted for as a deferred reinsurance gain.
The following table reflects the activity in the liability for other policy claims and benefits payable, including the claims adjustment expenses ("CAE"), net of reinsurance recoverables, as follows:
A summary of the Company's stock option activity, and the related information for the years ended December 31, 1998 is as follows:
The pre-tax investment yield on our investment portfolio was 2.5% per annum during the twelve months ended December 31, 2017 and 2016.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2018 expressed an unqualified opinion thereon.
In May 2014, the FASB issued ASU 2014-09 (Topic 606): Revenue from Contracts with Customers. The guidance revises the criteria for revenue recognition and requires that the revenue recognized reflect the transfer of promised goods or services to customers in an amount that represents the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for us in the first quarter of 2018. The Company has completed its review of revenue under this new guidance and concluded that the adoption of the new guidance will have no impact on the Company's reporting and disclosure of net premiums earned, net investment income or net realized gains and losses, as these items are not within the scope of this new guidance. The remaining revenue sources are immaterial and not impacted by the new standard.
Property and casualty insurance companies are subject to certain risk-based capital requirements, or RBC requirements, specified by the National Association of Insurance Commissioners. Under these requirements, a target minimum amount of capital and surplus maintained by a property/casualty insurance company is determined based on the various risk factors related to it. At December 31, 2017, the capital and surplus of AIIC and its subsidiaries exceeded the minimum RBC requirement.
The Company leases equipment and office space under noncancelable operating leases. At December 31, 2017, future minimum lease payments are as follows (in thousands):
The following table represents unaudited quarterly financial data for the years ended December 31, 2017 and 2016.
During 2002, NAICO experienced adverse loss development related to prior accident years totaling $15.8 million primarily in the standard property and casualty program including both liability lines and workers compensation. This adverse development is generally the result of ongoing analysis of recent loss development trends that reflect an increase in loss severity within the 1997-2000 accident years. The adverse loss development included approximately $2.0 million for provisions for potentially uncollectible reinsurance and deductibles.
General and administrative expenses from continuing operations were 5.5%, 6.7% and 8.5% of gross premiums earned in 2000, 2001 and 2002, respectively. General and administrative expenses included $297,000 for settlement of certain litigation, and $736,000 for a reserve for receivables related to certain derivative claims. Amortization of Chandler USA's state insurance licenses and goodwill was discontinued effective January 1, 2002 due to the implementation of Statement of Financial Accounting Standard No. 142. Amortization expense from continuing operations was $529,000 and $150,000 in 2000 and 2001, respectively, for these items. General and administrative expenses have historically not varied in direct proportion to Chandler USA's revenues. A portion of such expenses is allocated to policy acquisition costs (indirect underwriting expenses) and loss and loss adjustment expenses based on various factors, including employee counts, salaries, occupancy and specific identification. Because certain types of expenses are fixed in nature, the percentage of such expenses to revenues will vary depending on Chandler USA's revenues.
Reliance reinsured NAICO for certain workers compensation risks during 1998. At December 31, 2002, NAICO had reinsurance recoverables from Reliance for paid and unpaid losses of approximately $2.8 million. During October 2001, the Commonwealth of Pennsylvania placed Reliance in liquidation. At this time, NAICO is unable to determine the amount of its reinsurance recoverables from Reliance that will ultimately be collected and has fully reserved the carrying value of such amounts as of December 31, 2002.
Due to the strategic nature of these acquisitions and other transactions, the operations of the acquired entities, other than GE Edison are generally being absorbed within the overall operations of the Company as opposed to being operated on a stand-alone basis.
Net realized investment gains were $162 million in 2000, $165 million in 1999 and $116 million in 1998. These changes are related to the Company's asset/liability risk management policies and associated ongoing review of its investment portfolio positions which vary with market and economic conditions. They also include net realized gains as a result of securitization of certain financial assets.
For the years ended December 31, 2000, 1999, and 1998 cash flows from (used in) operating and certain financing activities were $(2,449) million, $3,180 million, and $2,117 million, respectively. These amounts include net cash provided by financing activities relating to investment contract issues and redemptions of $2,617 million, $2,708 million, and $(703) million for the years ended December 31, 2000, 1999, and 1998, respectively.
deferred policy acquisition costs and deferred federal income taxes, are reflected as unrealized appreciation or depreciation directly in shareholder's interest and, accordingly, have no effect on net income, but are shown as a separate component of accumulated non-owner changes in equity.
Page Independent Auditors' Report........................................... 52 Consolidated Balance Sheets............................................ 53 Consolidated Statements of Income...................................... 54 Consolidated Statements of Shareholder's Interest...................... 55 Consolidated Statements of Cash Flows.................................. 56 Notes to Consolidated Financial Statements............................. 57 Independent Auditors' Report on Financial Statement Schedules.......... 84 Schedule II, Condensed Financial Information (Parent Company).......... 85 Schedule III, Supplemental Insurance Information....................... 89
Minority interest primarily relates to certain ownership interests in GE Life and Annuity Assurance Company and Phoenix American Life Insurance Company. Prior to 2000, minority interest included certain ownership interests in GE Edison.
At December 31, 2000 and 1999, the Company's U.S. mortgage loan portfolio consisted of first mortgage loans on commercial real estate properties of 1,714 and 2,065, respectively. The loans, which are originated by the Company through a network of mortgage bankers, are made on completed, leased properties and generally have a maximum loan-to-value ratio of 75% at the date of origination.
Based on an analysis of the Company's tax position, management believes it is more likely than not that the results of future operations and implementation of tax planning strategies will generate sufficient taxable income enabling the Company to realize remaining deferred tax assets. Accordingly, no valuation allowance for deferred tax assets is deemed necessary.
The following discussion should be read in conjunction with the consolidated financial statements and the related notes thereto appearing elsewhere in this Form 10-K. The consolidated financial statements include the accounts and operations of SCPIE Holdings Inc. (SCPIE Holdings or the Company) and its wholly owned subsidiaries.
Net hospital medical malpractice premiums earned decreased to $2.1 million from $10.0 million in 2000. During 2001, the Company substantially reduced the number of hospitals insured, but at significantly increased premium rates. The Company expects a continued decline in earned premiums from hospitals in 2002 and continued erosion in the number of hospitals insured as it withdraws from the hospital market.
Losses and LAE-Assumed reinsurance losses and LAE [other than under fronting arrangements] were $84.2 million in 2001, or 106% of assumed premiums earned, compared to $23.3 million, or 86.0% of premiums earned, in 2000. Losses estimated from the September 11 terrorist attack amounted to $19.6 million (not including the $8.5 million premium charge discussed above), net of reinsurance.
The Company maintains a portion of its investment portfolio in high-quality, short-term securities to meet short-term operating liquidity requirements, including the payment of losses and LAE. Short-term investments totaled $85.0 million, or 11.9% of invested assets, at December 31, 2001. The Company believes that all of its short-term and fixed-maturity securities are readily marketable.
Chicago Trust leases about 60,000 square feet at 171 North Clark Street in Chicago, Illinois. Montag & Caldwell leases approximately 23,400 square feet in Atlanta, Georgia. CT of California leases approximately 8,400 square feet in San Diego, California. Blairlogie leases approximately 4,900 square feet in Edinburgh, Scotland.
The information required by this Item 6 is incorporated by reference from page 26 of Alleghany's Annual Report to Stockholders for the year 1999, filed as Exhibit 13 hereto.
The 1986 Tax Act contained provisions which significantly increased the federal income tax liabilities of property and casualty insurance companies, including First Central Insurance. Under the 1986 Tax Act, the reserve deduction for unpaid losses previously allowed to property and casualty insurance companies was modified in a manner which has resulted in increases in First Central Insurance's taxable income. Although First Central Insurance still is able to establish reserves for the estimated amount of losses incurred, the amount of such reserves must be discounted to reflect the present value of its liability to pay anticipated claims (using a discount rate of 100% of the average of the applicable federal mid-term rates). Furthermore, with respect to investments acquired after August 7, 1986, the 1986 Tax Act reduced the loss reserve deduction of property and casualty companies by 15% of any tax exempt interest income and the deductible portion of dividends received. The 1986 Tax Act also requires property and casualty companies to reduce their annual deduction for unearned premiums by 20% and requires the inclusion in income over a six-year period of 20% of their unearned premium reserve outstanding as of December 31, 1986.
Adjusted net income per share. Adjusted net income per share is computed by dividing adjusted net income by the total number of weighted-average diluted Class A and weighted-average Class B shares of our common stock for each period. We have included adjusted net income per share in this report because it is a key measure used by our management to understand and evaluate our core operating performance and trends and because we believe it is frequently used by analysts, investors and other interested parties in the evaluation of companies. Other companies may calculate this measure differently than we do. Adjusted net income per share has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for earnings per share as reported under GAAP.
Commission rates for our products are agreed to in advance with the relevant insurance carrier and vary by carrier and policy type. Under our carrier compensation arrangements, the commission rate schedule that is in effect on the policy effective date governs the commissions over the life of the policy. All amounts due to insurance carriers and discount benefit vendors are reported and paid to them according to the procedures provided for in the contractual agreements between the individual carrier or vendor and us.
dealers or agents to be designated at a future date. We intend to use the net proceeds from the sale of the securities for general corporate purposes, including potentially expanding existing businesses, acquiring businesses and investing in other business opportunities. At December 31, 2017 the Company had not sold any securities under this Registration Statement.
Cash provided by operating activities for the year ended December 31, 2017 of $41.9 million was primarily the result of consolidated net income, before noncontrolling interests, of $26.5 million. Adjustments to reconcile net income to net cash provided by operating activities consisted of $4.0 million of depreciation and amortization, $7.4 million of stock-based compensation, and a $14.0 million increase in deferred tax assets, of which $12.6 million was the result of the change in corporate tax rate due to the Tax Act. The primary drivers of the net change in operating liabilities were an increase in accounts payable, accrued expenses and other liabilities of $9.9 million, and decreases in income taxes payable of $1.3 million, and due to member of $12.4 million, $11.8 million of which related to the decreased corporate tax rate due to the Tax Act. This was offset by an increase in restricted cash of $3.0 million and an increase in advanced commissions of $2.5 million. The increase in advanced commissions was the result of increased sales by our third-party distributors, driven by continued demand for our affordable healthcare products.
The Company’s consolidated financial statements, as listed under Item 15, appear in a separate section of this Annual Report on Form 10-K beginning on page 50 and are incorporated herein by this reference. The financial statement schedule is included below under Item 15(a) (2).
Our investment income includes interest earned on our fixed income investments and income from funds withheld at interest under modified coinsurance agreements. Under GAAP, because our fixed income investments are held as available for sale, these securities are carried at fair value, and unrealized appreciation and depreciation on these securities is not included in investment income on our statements of income, but is included in comprehensive income as a separate component of shareholders' equity.
- the level of fees that we charge on our wealth management contracts; and
In addition, our profits can be affected by a number of factors that are not within our control. For example, movements in interest rates can affect the volume of business that we write, the income earned from our investments, the interest we credit on interest sensitive contracts, the level of surrender activity on contracts that we reinsure and the rate at which we amortize deferred acquisition costs. Other external factors that can affect profitability include mortality experience that varies from our assumed mortality and changes in regulation or tax laws which may affect the attractiveness of our products or the costs of doing business.
Earnings per share for the year ended December 31, 2001 increased 2% on a diluted basis to $1.02 from $1.00 in 2000, and increased 100% in 2000 from $0.50 in 1999. The increase in earnings per share was due to the increased earnings plus the repurchase of 2,529,700 shares in 1999, 432,500 shares in 2000 and 100,000 shares in 2001, offset in part by the increase in the dilutive effect of options and warrants.
(g) Represents the average number of days admitted patients stay in our hospitals. Average length of stay has declined as a result of the continuing pressures from managed care and other payors to restrict admissions and reduce the number of days that are covered by the payors for certain procedures and by technological and pharmaceutical improvements.
- our ability to acquire hospitals on favorable terms and to successfully complete budgeted capital improvements of our existing facilities;
In addition, the healthcare industry has recently experienced an increase in the cost of all insurance lines, especially professional and general liability insurance. We will mitigate a portion of these increases for fiscal 2002 by increasing our self-insured retention levels for professional and general liabilities. We currently have no information that would lead us to believe that this trend is only temporary in nature and thus there is no assurance that these costs will not have a material adverse affect on our future operating results.
(e) Represents the total number of patients admitted (in the facility for a period in excess of 23 hours) to our hospitals and used by management and investors as a general measure of inpatient volume.
The success of our recruiting efforts depends on several factors. In general, there is a shortage of specialty care physicians. We face intense competition in the recruitment of specialists because of the difficulty convincing these individuals of the benefits of practicing in a rural community. Physicians are concerned with the patient volume in rural hospitals and whether the volume will allow them to generate income comparable to that which they would generate in an urban setting. If the trend in the United States over the last several years to move out of cities and into more rural areas changes and the growth rate in the rural communities where our hospitals operate slows, then we could experience difficulty attracting physicians to practice in our communities.
Our ability to increase our indebtedness and become substantially leveraged may limit our ability to successfully run our business.
On March 28, 2002, HCA announced that it reached an understanding with CMS to resolve all Medicare cost report, home office cost statement, and appeal issues between HCA and CMS. The understanding provides that HCA would pay CMS $250 million with respect to these matters. The resolution is subject to approval by the Department of Justice and execution of a definitive written agreement.
•the remaining payment terms and the financial condition and near-term prospects of the issuer;
Interest expense on subordinated debentures decreased 19% to $15.8 million in 2009 and 14% to $19.4 million in 2008 from $22.5 million in 2007. These decreases were primarily due to decreases in the weighted average interest rates on the outstanding subordinated debentures which were 5.82%, 7.15% and 8.32% for 2009, 2008 and 2007, respectively. The weighted average interest rates have decreased because $149.0 million principal amount of the subordinated debentures have a floating rate of interest based upon the three month London Interbank Offered Rate plus an applicable margin. See Financial Condition-Liabilities.
At December 31, 2009 and 2008, the amortized cost and fair value of fixed maturity securities and equity securities that were in an unrealized loss position were as follows:
Overseas, an exception of some importance being Japan, where we suffered a loss in con­ sequence of the Hakodate conflagration. Our business in Canada showed a profit, following upon a series of unfavourable years. In Australia, we had a similar'experience, the im­ provement which set in some time ago being maintained. The United States witnessed a continuation of the chain of satisfactory results, but this has led to the problem of expenses becoming more pressing.
Adjusted Operating Income (Loss) and Adjusted Operating Income (Loss) Per Share
The expense ratio is the ratio, expressed as a percentage, of policy acquisition costs and operating expenses to net earned premiums and other income from underwriting operations. The 2018 ratios have been recast to reflect the new presentation. Refer to Note 17 ~ Segment Information for further details.
Insurance operations are subject to various leverage tests (e.g., premium-to-statutory surplus ratios), which are evaluated by regulators and rating agencies. As of December 31, 2020, on a trailing twelve-month statutory combined basis, the gross written and net written premium leverage ratios were 1.7 to 1.0 and 1.5 to 1.0, respectively.
The Progressive Corporation is a holding company and does not have any revenue producing operations of its own. It receives cash through borrowings, equity sales, subsidiary dividends and other transactions, and may use the proceeds to contribute to the capital of its insurance subsidiaries in order to support premium growth, to repurchase its Common Shares and other outstanding securities, to redeem debt and for other business purposes. In 1994, the Company sold $200.0 million of its 6.60% Notes due 2004. During 1994, the Company repurchased .1 million of its Serial Preferred Shares, Series A, at a cost of $2.3 million and 1.1 million of its Common Shares at a cost of $34.0 million.