felanders/preprocessed huggingface dataset:
Premiums earned for the reinsurance segment decreased 2.4 percent to $21,576,000 in the first quarter of 2005 from $22,098,000 in the first quarter of 2004, primarily as a result of the loss of a significant account. Employers Mutual has not been able to retain several accounts in recent years due to its current "A-" (Excellent) A.M. Best rating. Employers Mutual is attempting to replace this business with new accounts and increased participation on existing accounts; however, no significant new accounts were added during the first quarter of 2005. Premium rate increases on excess-of- loss contracts remained relatively flat for January 2005 renewals, but there were some signs of softening during the first quarter. Premium rate levels continue to be considered adequate, as the rate increases implemented during the last several years were realized in conjunction with moderate declines in the related exposure base due to increased retention levels and coverage exclusions for terrorist activities. In addition, both excess-of-loss and pro-rata contracts have benefited from improved industry-wide rate levels at the primary company level. The estimate of earned but not reported premiums increased $400,000 during the first quarter of 2005, compared to a decrease of $790,000 in the first quarter of 2004.
The property and casualty insurance subsidiaries incurred $6,519,000 of commission expense in connection with the change in the pooling agreement. This commission expense is used to reimburse Employers Mutual for the expenses it incurred to generate the additional insurance business that was transferred to the Company on January 1, 2005. However, due to the fact that acquisition expenses, which include commissions, are deferred and amortized to expense as the related premiums are earned, all of the $6,519,000 of commission expense was capitalized as a deferred policy acquisition cost, and is being amortized to expense as the unearned premiums become earned. This provides a proper matching of acquisition expenses and premium income.
Prudential Financial and Prudential Funding, LLC, or Prudential Funding, a wholly-owned subsidiary of Prudential Insurance, borrow funds in the capital markets primarily through the direct issuance of commercial paper. The borrowings serve as an additional source of financing to meet our working capital needs. Prudential Funding operates under a support agreement with Prudential Insurance whereby Prudential Insurance has agreed to maintain Prudential Funding’s positive tangible net worth at all times.
Gross premiums earned in the surety bond program decreased 3% in 1998, increased 15% in 1999 and increased less than 1% in 2000. Approximately $1.3 million of the gross premiums earned in 2000 relates to a new program that is 100% reinsured by an unaffiliated reinsurer. Excluding this new program, gross premiums earned decreased $1.3 million in 2000. NAICO discontinued this new program effective January 1, 2001. The decrease in 2000 was due primarily to decreased written premium production in California. Net premiums earned in the surety bond program decreased 11% in 1998, increased 10% in 1999 and decreased 8% in 2000.
The percentage of losses and loss adjustment expenses to net premiums earned ("loss ratio") was 68.3%, 73.7% and 70.3% in 1998, 1999 and 2000, respectively. The rescission of the reinsurance treaties increased losses and loss adjustment expenses in 1999 by $17.0 million. Excluding the effect of the reinsurance rescission, the loss ratio was 70.9% in 1999. Weather-related losses (net of applicable reinsurance) from wind and hail were $1.4 million, $4.3 million and $2.9 million in 1998, 1999 and 2000, respectively, and increased the respective loss ratios by 2.0, 4.9 and 2.4 percentage points (excluding the effect of the reinsurance rescission in 1999). The 1999 year included $1.8 million in weather-related losses which resulted from the tornadoes, strong winds and hail that caused significant damage in Oklahoma on May 3, 1999. The decrease in weather-related losses in 2000 was largely offset by adverse loss experience in the group accident and health program and higher than normal losses in the Company's surety bond program.
Losses and loss adjustment expenses include a reduction in those expenses resulting from continued reassessment of reserves established in prior periods. In 2005, 2004, and 2003, losses and loss adjustment expenses included a reduction of $5.4 million, $6.0 million, and $5.4 million, respectively, as a result of favorable development (or redundancies) from reserve changes relating to prior periods. See “Business - Unpaid Losses and Loss Adjustment Expenses,” incorporated elsewhere within this Annual Report on Form 10-K.
The senior credit facility is collateralized by substantially all of our assets, including the stock of our non-insurance company subsidiaries (but excluding the stock of our insurance company subsidiaries).
The fluctuations in the expense ratio primarily related to profit commissions of $6.5 million in 2013, $5.1 million in 2012 and $13.5 million in 2011, recognized in conjunction with the favorable development in those years. The profit commissions, which offset the segment’s other expense, reduced the 2013, 2012 and 2011 expense ratio by 1.8, 1.3 and 3.3 percentage points, respectively. Excluding the impact of profit commissions, the 2013 expense ratio was higher than in 2012 and 2011 due to higher compensation expense and lower net earned premium in 2013.
This table summarizes our investments by type, substantially all of which are reported at fair value, at December 31, 2013 and 2012. The methodologies used to determine the fair value of our investments are described in Note 3, “Fair Value Measurements” to the Consolidated Financial Statements.
Factors Affecting Profit Margins and Pre-Tax Profits - The Company's profit margins are affected by several factors, including volume, policy amount and type of real estate activity. Volume is an important determinant of profitability because Lawyers Title, like any other title insurance company, has a significant level of fixed costs arising from personnel, occupancy costs and maintenance of title plants. Because a premium is based on the face amount of the policy, larger policies generate higher premiums although expenses of issuance do not necessarily increase in proportion to policy size. Profit margins are lower on refinancings than on sales due to premium discounts and higher cancellation rates generally experienced on refinancings. Cancellations affect profitability because costs are incurred both in opening and in processing orders.
Conversely, revenue fell for the full year of 1995 compared to 1994 as a result of interest rate pressures. Average mortgage rates stood at 9.2% at the beginning of 1995, fell gradually to 7.6% by the end of the first half of 1995, averaged 7.5% in the second half of the year and stood at 7.2% at year end. Interest rate related business volume reductions were offset in part by revenue from acquisitions of $68 million.
On July 23, 1996, Farm Family Holdings made an initial public offering of its common stock at a price of $16 per share. Farm Family Holdings received net proceeds of $41,453,000 for 2,786,000 shares sold in the initial public offering. In addition, Farm Family Holdings received $3,427,000 for 214,000 shares purchased by policyholders of Farm Family Mutual in a subscription offering. In addition, pursuant to the Plan, holders of Farm Family Mutual debt could elect to exchange their debt instruments for shares of common stock or cash. As a result, there were 17,000 common shares and $1,107,000 in cash exchanged for debt with an outstanding principal amount of $1,371,000.
amortization of the intangible assets for the value of broker/TPA relationships of the MGUs. These intangible assets were acquired as part of acquisitions made by the Company. Amortization expense for these intangible assets will decline over the useful lives of the assets.
Net cash provided by operating activities of continuing operations for the fiscal year ended December 31, 2005 was $8,928,000. Net cash flows benefited from premium volume and fees from MGUs, partially offset by higher than expected claims and losses.
The nature and quality of insurance company investments must comply with all applicable insurance statutes and regulations which have been promulgated primarily for the protection of policyholders. Of the aggregate carrying value of the Company's investment assets, approximately 92% was invested in investment grade fixed income securities, resale agreements, and cash and cash equivalents at December 31, 2005. Also at such date, 97% of the Company's fixed maturities were investment grade. These investments carry less default risk and, therefore, lower interest rates than other types of fixed maturity investments. At December 31, 2005, 3% of the carrying value of fixed maturities was invested in diversified non-investment grade fixed income securities. Investments in such securities have different risks than investment grade securities, including greater risk of loss upon default, and thinner trading markets. The Company does not have any non-performing fixed maturities.
Amounts recoverable or paid for under reinsurance contracts are included in total assets or total liabilities as due from reinsurers or due to reinsurers.
FASB Staff Position No. FAS 115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" (the "FSP"), was issued in November 2005 and addresses the determination of when an investment is considered impaired; whether the impairment is other than temporary; and how to measure an impairment loss. The FSP also addresses accounting considerations subsequent to the recognition of an other-than-
2017/2019 Treaty is a two-year treaty, quota share reinsurance rate was reduced to 10% effective July 1, 2018. See “Reinsurance” below for changes to our personal lines quota share treaties effective July 1, 2018 and 2017.
The table below lists the weighted average maturity and effective duration in years on our fixed-maturity securities as of December 31, 2018 and 2017:
During 2003, the Company purchased two new corporate aircraft, and received an option to sell its existing corporate aircraft, for an after tax net cash investment of approximately $22,000,000. The aggregate purchase price for the new aircraft is $80,000,000, of which $63,000,000 had been paid as of December 31, 2003, $12,000,000 is due in March 2004 and the balance is due during the third quarter of 2004. Purchase of the new aircraft enabled the Company to reduce its then estimated 2003 federal income tax liability by approximately $16,800,000. The option to sell its existing corporate aircraft was exercised in January 2004 for $38,700,000, although the full amount of the sales proceeds will not be received until the Company delivers the aircraft to the buyer during the third quarter of 2004. The Company expects to recognize a gain of approximately $11,600,000 when the aircraft are sold.
WilTel's mortgage debt (which is non-recourse to the Company) is comprised of two notes, one of which requires annual principal payments of approximately $1,000,000 per year until final maturity in 2010 (an aggregate of $74,300,000). The other note, with a balance due of $44,800,000 as of December 31, 2003, does not require any principal or interest payments until December 2006, when all principal and accrued but unpaid interest is due (an aggregate of $74,400,000).
Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in this Report, the words "estimates", "expects", "anticipates", "believes", "plans", "intends" and variations of such words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.
CONTINUED INSTABILITY AND UNCERTAINTY IN THE TELECOMMUNICATIONS INDUSTRY, associated with increased competition, aggressive pricing and overcapacity;
The following table sets forth selected consolidated financial information for the periods ended and as of the dates indicated. We derived the data as of December 31, 2007, 2006, 2005, 2004 and 2003, and for each of the five years in the period ended December 31, 2007, from our consolidated financial statements. These financial statements were audited by Deloitte & Touche LLP, an independent registered public accounting firm, through 2005, and by Beard Miller Company LLP, an independent registered public accounting firm, in 2006 and 2007.
The Company owns its principal executive office, which is the Humana Building, located at 500 West Main Street, Louisville, Kentucky 40202.
The Series A designation contains a conditional redemption feature providing for the redemption of the Series A shares at any time after the seventh (7th) anniversary of the Issue Date, provided that the principal no longer requires surety bonds issued by FSC. Furthermore, once redeemed, the principal will no longer be eligible to participate in partially collateralized bonding programs offered by FSC. Surety bonds currently being issued by FSC are primarily for coal mining and reclamation permits, which are long-term in nature and continually evolve whereby outstanding bonds are periodically released as properties are mined and reclaimed and new bonds issued for properties to be mined in the future. Accordingly, this source of financing was designed to be long-term by nature.
Revenue from the surety insurance segment, consisting of FSC and TSA, was $694,336 for fiscal 2008 as compared with $548,011 for fiscal 2007. Revenues attributable to the insurance segment are as follows:
Premiums and commissions $ 465,286 $ 358,055 Net investment income 225,461 189,956 Net realized investment gains 3,589 - ----------- --------------
OFF BALANCE SHEET ARRANGEMENTS - ------------------------------ The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
During 1999, net investment income increased $63,697 over 1998 results. This increase is primarily due to a larger investment base from FAIC's operations. Net investment income in 1998 and 1997 was $595,612 and $504,831, respectively.
Potomac’s pre-tax income was $1.0 million for the period from January 1, 2004 through November 23, 2004. As of January 1, 2004, Potomac ceased its participation in the Pool. As a result, net written premiums, net earned premiums, losses and underwriting expenses for the period from January 1, 2004 through November 23, 2004 were zero.
Gross written premiums increased by 22.4% to $1,172.3 million in 2009 from $957.9 million in 2008, primarily due to $103.9 million (40.0%) increase in U.S. treaty casualty volume, $84.6 million from the new crop hail quota share treaties, a $15.8 million (2.6%) increase in treaty property volume and a $10.5 million (12.0%) increase in facultative volume. Our treaty casualty premiums were higher as we wrote more quota share business as a replacement for business previously written on an excess of loss business. Net written premiums increased by 15.9% to $660.6 million in 2009 compared to $569.9 million in 2008, primarily due to the increase in gross written premiums combined with increased cessions under the affiliated quota share agreements. Premiums earned decreased by 1.3% to $676.4 million in 2009 compared to $685.1 million in 2008. The change in premiums earned relative to net written premiums is primarily the result of timing on proportional contracts where premiums are earned ratably over the coverage period whereas written premiums are recorded on the initiation of the coverage period.
Commission and brokerage expenses remained flat at $40.9 million for 2009 compared to 2008 despite the decline in earned premiums, primarily due to the mix in business, period over period. Segment other underwriting expenses were $8.7 million and $8.1 million for 2009 and 2008, respectively.
The effective income tax rate differs from the statutory federal tax rate of 35% for the year ended December 31, 2008 due primarily to state income taxes, tax-exempt investment income, and favorable outcome related to the prior year nondeductible class action lawsuit expenses.
The effective income tax rate differs from the statutory federal tax rate of 35% for the year ended December 31, 2007 due primarily to state income taxes, tax-exempt investment income, the establishment of a valuation allowance against certain deferred tax assets, and nondeductible class action lawsuit expenses. The effective income tax rate differs from the statutory tax rate of 35% for the year ended December 31, 2006 due primarily to state income taxes, tax-exempt investment income, and business divestitures.
We have a $700 million stock repurchase program authorized by our Board of Directors. Subject to Board approval, additional amounts are added to the repurchase program from time to time based on exercise proceeds and tax benefits the Company receives from the employee stock options. We repurchased 6,851,595 shares of our common stock during the year ended December 31, 2008, for aggregate consideration of approximately $242.8 million. We used net free cash available to fund the share repurchases. As of December 31, 2008, the remaining authorization under our stock repurchase program was $103.3 million and, since its inception, we had repurchased an aggregate of 36,623,347 shares of our common stock at an average price of $34.40 for aggregate consideration of approximately $1,259.8 million (which amount includes exercise proceeds and tax benefits the Company had received from the exercise of employee stock options).
As of September 30, 1995 the Company had leases, in the aggregate, for approximately 1,094,000 square feet of office space for its corporate headquarters, executive offices, regional offices and subsidiary operations in California, Florida, Oklahoma, Oregon, Texas and Washington. Of this aggregate amount, the Company leases approximately 105,000 square feet in Cypress, California for its corporate headquarters and executive offices.
Net interest income increased by approximately $9 million compared to the prior year primarily due to increased cash available for investment purposes at higher interest rates than 1994.
Government premiums rose $464 million to $1.6 billion for the year ended September 30, 1994 from $1.2 billion in 1993. Excluding the effects of acquisitions described above, enrollment gains predominantly in the Secure Horizons programs contributed 80 percent of the increase. Average premium rate increases of two percent accounted for nine percent of the increase. The remainder of the change was attributable to acquisitions.
Prior to the change in accounting principle, the sources of deferred tax items and the corresponding tax effects during the year ended September 30, 1993 were as follows:
Real estate holdings, net of accumulated depreciation of $3,565,000 and $3,254,000 at December 31, 1996 and 1995, respectively, represent approximately 4% of the total assets. The Company owns an office complex in Springfield, Illinois, which houses the primary insurance operations. The office buildings contain 57,000 square feet of office and warehouse space. The properties are carried at approximately $2,688,000. In addition, an insurance subsidiary owns a home office building in Huntington, West Virginia. The building has 15,000 square feet and is carried at $198,000. The facilities occupied by the Company are adequate relative to the Company's present operations.
The Company continues its review of strategic alternatives for maximizing shareholder value. Potential acquisitions will be evaluated based on their merits within its current line of business, as well as other fields. Management believes that the Company has sufficient cash resources and working capital to meet its capital resource requirements for the foreseeable future.
Earnings before income taxes increased $28 million or 31% in 1996, including a $6 million decrease in net realized gains on investments. Excluding net realized gains on investments, earnings before income taxes increased $34 million due to a full year's operating results from the Acquired Businesses and continued growth in worldwide life reinsurance business. Earnings before income taxes increased $50 million in 1995, principally related to the Acquired Businesses and a $19 million increase in net realized gains on investments.
The Company's ultimate claims and claim expenses costs on claims not yet settled is increased by the effects of inflation, and changes in the inflation rate therefore could become a significant factor in determining appropriate claims and claim expenses reserves, as well as reinsurance premium rates. Generally, the Company's methods used to estimate claims and claim expenses reserves and to calculate reinsurance premium rates take into account the anticipated effects of inflation in estimating the ultimate claims and claim expenses costs. The Company uses both insurance industry data and government economic indices in estimating the effects of inflation on reinsurance premium rates and claims and claim expenses reserves. However, until claims are ultimately settled, the full effect of inflation on the Company's results cannot be known.
Information under the caption "Management's Discussion and Analysis of Financial Condition & Results of Operations" in the Company's 1993 Annual Report is incorporated herein by reference.
Premium Reserve from 1948 Reserve for Unsettled Claims from 1948 Reserve for Extraordinary Losses Premiums, less cancellations
In 1996, the U.S. Congress enacted legislation to phase out the tax deductibility of interest on policy loans on COLI products. Since then, renewal premiums and deposits for COLI products have decreased to $83.1 million in 2001 from $84.1 million in 2000 and $128.5 million in 1999 and the Company expects this decline to continue. As a result of these legislative changes, the Company has shifted its emphasis in new sales from COLI to in the BOLI market. This product provides long-term benefits for bank employees and was not affected by the 1996 legislative changes. BOLI premiums and deposits were $547.9 million during 2001 compared to $581.9 million in 2000 and $436.3 million in 1999. The Company continues working closely with existing COLI customers to determine the options available to them and is confident that the effect of the legislative changes will not be material to the Company's operations.
During the fourth quarter of 2000, the Company transferred all securities classified as held-to-maturity into the available-for-sale category. See Item 8 (Financial Statements and Supplementary Data), Note 7 for further discussion related to this transfer.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of GWL&A Financial Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years ended December 31, 2001, in conformity with accounting principles general accepted in the United States of America.
Derivatives - The Company makes limited use of derivative financial instruments to manage interest rate, market, and foreign exchange risk associated with invested assets. Derivatives are not used for speculative purposes. The Company controls the credit risk of its financial contracts through credit approvals, limits, and monitoring procedures. As the Company generally enters into derivative transactions only with high quality institutions, no losses associated with non-performance on derivative financial instruments have occurred or are expected to occur. Derivative instruments typically used consist of interest rate swap agreements, interest rate floors and caps, foreign currency exchange contracts, options, and interest rate futures.
In February 1996, the Company called for redemption its 10% debentures maturing in 2018 ($75.0 principal amount) and its 5.75% convertible subordinated debentures maturing in 2002 ($110.0 principal amount); in April 1996, the Company called for redemption its 11.5% debentures maturing in 2015 ($30.0 principal amount); redemption of the debentures was effected with internally available funds, while the subordinated debentures were converted by their terms into approximately 6.4 million Old Republic common shares. As a result of these redemptions and conversions, the Company's debt declined by $215.0 while its common shareholders' equity account rose by $108.6. The early retirement of the debentures produced a net of tax charge of $4.4 (5 cents per share) that has been reflected as an extraordinary item in 1996. In December 1996, the Company redeemed all ($54.8) of its Series "H" cumulative preferred stock with available funds.
(k) Goodwill-The costs of certain purchased subsidiaries in excess of related book values (goodwill) at date of acquisition are being amortized against operations principally over 40 years using the straight-line method. Amortization of goodwill amounted to $4.6 in 1996, $3.2 in 1995 and $3.1 in 1994.
The financial statement schedules meeting the requirements of Regulation S-X are shown as Schedules I, II, III, IV and V.
The amortized cost and estimated market value of fixed maturities available for sale at December 31, 1996, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The Company's profitability depends principally on its ability and Prudential Insurance's ability to price and manage risk on insurance products, to attract and retain customer assets, and to manage expenses. Specific drivers of our profitability include:
Benefits increased by $27.9 million primarily from higher death claims on variable, universal life, and term life insurance policies due to the growth of the in force business. Included in this change is a decrease of $2.4 million for annuity guaranteed minimum death benefits from $33.8 million in 2002 to $31.4 million in 2003 due to favorable market performance during 2003.
In addition, the Company is in the process of constructing another Home Office building to be used by CFC and its subsidiaries. This building is identical and sits adjacent to the current Home Office building. The total cost of the building is expected to be approximately $60 million. As of December 31, 1998, the Company had paid $10.6 million of such costs.
On September 1, 2009, American Life was issued a certificate of authority to conduct life insurance business in the State of Nebraska. Initial capital and surplus contributed to American Life was approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. In 2012 and 2011, American Life generated approximately $4.0 million and $3.1 million in premium revenue, respectively, when combined with the operating results of Old Reliance Insurance Company, a company acquired by American Life in August 2011 as described later in this document.
Miscellaneous income: Miscellaneous income in the year ended December 31, 2012 was $103,175 compared to $223,711 in the year ended December 31, 2011. The decrease in miscellaneous income is attributable the gain of $182,200 taken on the fair value remeasurement of Security Capital during the third quarter of 2011 and offset by third-party administration fee income earned in 2012.
The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have time-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities.
Consolidated Balance Sheets..............................................32 Consolidated Statements of Income........................................34 Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income............................................... 35 Consolidated Statements of Cash Flows....................................36 Notes to Consolidated Financial Statements...............................37
Health services premiums and managed behavioral health fees are recognized as revenue in the period in which enrollees are entitled to care. Managed care consulting revenues are generally recognized when services are rendered.
At the Spin off date, certain of the options to purchase AMSG common stock held by the Company's employees were converted to Company stock options. AMSG options totaling 2,232,334 were converted into an equal amount of Company and AMSG options, including 1,000,000 options related to an acquisition. The options were converted at exercise prices that maintained the amount of unrealized stock appreciation that existed immediately prior to the Spin off date. The vesting dates and expiration periods of the options were not affected by the conversion.
"Other Operations" includes operations not directly related to the business segments, unallocated corporate items (i.e. corporate interest expense on corporate debt, amortization of goodwill and intangibles and unallocated overhead expenses) and intercompany eliminations. The Company evaluates segment performance based on profit or loss from operations before income taxes. Management has determined that it is impractical to prepare segment information for the year ended December 31, 1996. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
The reserves for certain living benefit features, including guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”), are accounted for as embedded derivatives, with fair values calculated as the present value of expected future benefit payments to contractholders less the present value of assessed rider fees attributable to the embedded derivative feature. This methodology could result in either a liability or contra-liability balance, given changing capital market conditions and various actuarial assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally-developed models with option pricing techniques. The models are based on a risk neutral valuation framework and
Allowances for doubtful accounts for the periods ended December 31, 2010 and December 31, 2009 were $ 5,722 and $ 5,722 respectively. This allowance is net of offsetting payables to insured clients, adjusting agents and related expenses.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Regan Holding Corp. and Subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
Cash and cash equivalents include cash on hand and in banks and short-term investments with an original maturity of 90 days or less. The carrying amount of cash and cash equivalents approximates market value.
In connection with a merger in 1991 between the Company and LifeSurance Corporation, a wholly-owned insurance subsidiary of the Company with no current ongoing operations, 615,242 shares of Series B Common Stock (the "Redeemable Series B Stock"), no par value, were authorized and issued in exchange for all of the outstanding stock of LifeSurance Corporation. Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), the Redeemable Series B Stock is subject to redemption at the option of the holder in quantities of up to 10% per year, provided that the redemption is in accordance with applicable corporate law.
(a) Physical Properties of the Company and Its Subsidiaries. The Company -------------------------------------------------------- leases it home office facilities in Montgomery, Alabama, from Mutual.
The Securities Valuation Office of the National Association of Insurance Commissioners ("NAIC") evaluates the fixed income securities investments of insurers for regulatory reporting purposes and assigns securities to one of six investment categories called "NAIC designations." The NAIC designations parallel the credit ratings of the Nationally Recognized Statistical Rating Organizations for marketable securities. NAIC designations 1 and 2 include securities considered investment grade (rated "Baa3" or higher by Moody's, or rate "BBB-" or higher by Standard and Poor's) by such rating organizations. NAIC designations 3 through 6 include securities considered below investment grade (rated "Ba1" or lower by Moody's, or rated "BB+" or lower by Standard and Poor's).
At December 31, 2001, substantially all of the Company's fixed income securities portfolio was rated investment grade, which is defined by the Company as a security having a NAIC rating of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa, or a comparable Company internal rating. The quality mix of the Company's fixed income securities portfolio at December 31, 2001 is presented in the following table:
The Company holds net reserves (including retrospective reserves ceded under the Rosemont Re treaty of $5.7 million) of $35.2 million as of December 31, 2007. The net reserves consist of the following (in thousands):
The Company believes that Occupational Accident reserves should be relatively stable at this point and the remaining reserves are based primarily on amounts currently reported to the Company by the ceding companies. As time passes, the ability of the underlying insureds to accurately reserve the large excess of loss type cases should improve. However, since the reporting of losses through the worldwide reinsurance market is often slow and is dependent upon the reporting by the ceding companies, the adequacy of these reserves has a potential for volatility and no assurances can be given that further adverse development will not occur. A 10% change in the reported losses would have resulted in a $3.5 million change in these reserves as of December 31, 2007.
The loss ratio (loss and LAE related to premium earned) for 2007 was 62.0% compared to loss ratios of 70.6% and 70.9% for 2006 and 2005 respectively. The 8.6 percentage point decrease in the ratio between 2007 and 2006, and the 0.3 percentage point decrease in the ratio between 2006 and 2005, primarily reflects the fact that the frequency of claims declined 0.8% and 4.6% during these respective periods. The improved frequency trend resulted in re-estimations of previous years’ loss and LAE reserves that had an estimated favorable impact of 6 percentage points on the calendar year loss ratio in 2007. These declines were partially offset by increases in the estimate of the average cost of claims.
Generally, the Company invests its cash flow from operations principally in taxable fixed-maturity securities. The Company’s current policy is to limit its investment in unaffiliated equity securities and mortgage loans to no more than 8.0% of the total market value of its investments. The market value of the Company’s portfolio of unaffiliated equity securities was $1.7 million at December 31, 2007 and $2.0 million at 2006. The Company plans to refocus its emphasis on fixed-maturity securities investments.
The exposure to sub-prime residential mortgage lending is through a single issue within the Company’s fixed income investment portfolio that contains securities collateralized by mortgages that have characteristics of sub-prime lending. This investment is in the form of a collateral mortgage obligation supported by sub-prime mortgage loans. The collective carrying value of this investment is approximately $.2 million, representing less than 1/10 of 1 percent of the Company’s total fixed income investments, and had a Standard & Poor’s credit rating of AAA. This security was not considered as other than temporarily impaired as of December 31, 2007. While the Company’s exposure to sub-prime securities is not significant to the total investment portfolio, if the residential mortgage market continues to decline and / or the decline expands beyond the U.S. sub-prime, such circumstances could ultimately have an impact on other securities held within the investment portfolio.
We use several approaches and actuarial techniques to project gross and net loss reserves. For property lines of business, we review our loss reserves considering the underlying claims. We use paid and incurred loss development as our primary methods for determining ultimate losses. Additionally, we consider expected loss ratios, pricing trends and any other variations in the business underwritten, including changes in underlying terms and conditions. Catastrophic claim liabilities and other large losses are inherently more volatile than attritional losses; therefore, we use other loss forecasting methodologies. For known catastrophic claims, we initially rely on industry estimates and information from third-party modeling software to determine our exposure. As catastrophic events mature, specific claim information we receive is used to refine our initial loss estimate. After approximately four to six months
HRM also used approximately $2,070,000 and $1,057,000 for the six months ended December 31, 1999 and 1998, respectively and $2,327,000 and $2,153,000 in fiscal 1999 and fiscal 1998, respectively, to repay principal on notes payable and capital leases. The Company borrowed $1,000,000 and $2,000,000 for the six months ended December 31, 1999 and 1998, respectively and $6,000,000 and $4,750,000 in fiscal 1999 and fiscal 1998, respectively. The Company received cash proceeds of $16,000 and $186,000 for the six months ended December 31, 1999 and 1998, respectively and $306,000 and $784,000 in fiscal 1999 and fiscal 1998, respectively, from stock option exercises for common stock by current or former employees and directors.
As of October 31, 1999, contingency plans had been completed for the Company's significant business processes. While at this point we do not anticipate experiencing any problems which would require the implementation of the Company's contingency plans, the contingency plans can and will be implemented if necessary.
Interest income decreased by $29,000 for the fiscal year 2001 as compared to fiscal 2000. The decrease is primarily due to lower cash and cash investments balances in 2001 as a result of cash being applied to funding operating losses. Interest expense decreased from $10,000 in the year ended December 31, 2000 to $6,000 in fiscal 2001.
In order to finance the acquisition of LongMiller, we entered into a $305 million gross securitization of a majority of the in-force revenues of LongMiller. The securitization is broken into four tranches, each rated by Standard & Poors. The tranches consist of the A-1 and A-2 class totaling approximately $167 million and each rated "AAA", the B-class tranch of $108 million rated "A" and the C-class tranch of $30 million rated "BBB". The weighed average interest cost over the 20-year life of the asset-backed notes is approximately seven percent. The securitized net in-force revenues, which are approximately $40.6 million in 2003, are used to pay interest and principal to the bondholders. Assuming the securitized notes amortize as expected, the securitization will provide residual cash flow to us of approximately five percent of the securitized in-force revenue in the initial years, and our total residual interest would equal approximately 28 percent of the total securitized in-force revenue over the expected life of the asset-backed notes. Such residual interest could be substantially less if the notes do not amortize as expected. The securitization is treated as debt, is included in the Banking Practice segment, and is non-recourse to Clark/Bardes, Inc.
As a result of the Enron bankruptcy, the Company has incurred losses, after-tax and reinsurance, amounting to $18.6 million. This unusual loss reflects all of the Company's exposures, including underwriting, credit and investment.
Net realized capital losses were $15.7 million in 2001, reflecting realized capital losses on the Company's investments of $45.5 million, which includes $3.1 million relating to write-downs in the value of securities deemed to be other than temporary, partially offset by $29.8 million of realized capital gains, compared to realized capital gains of $0.3 million in 2000. The net realized capital gains in 2000 reflected realized capital gains of $30.3 million, which were partially offset by $30.0 million of realized capital losses. The net realized capital losses for 2001 allowed the Company to recapture taxes paid on net realized capital gains in prior periods. The realized capital gains in 2001 and 2000 arose mainly from activity in the Company's equity portfolio. The realized capital losses in 2001 and 2000 arose mainly from activity in the Company's fixed maturity portfolios.
The Company cannot assure that it has or can maintain all required licenses and approvals or that its business fully complies with the wide variety of applicable laws and regulations or the relevant authority's interpretation of the laws and regulations. In addition, some regulatory authorities have relatively broad discretion to grant, renew or revoke licenses and approvals. If the Company does not have the requisite licenses and approvals or do not comply
The Company's Consolidated Financial Statements and Report of Independent Auditors are contained on pages 2-17 of The Liberty Corporation Annual Report to Shareholders and is filed as Exhibit 13 on pages 26-38 of this report and are incorporated in this Item 8 by reference. Quarterly Results of Operations are contained on pages 13-14 of The Liberty Corporation Annual Report to Shareholders and is included in Exhibit 13 on page 35 of this report and are incorporated in this Item 8 by reference.
Premium revenue: Premium revenue for the year ended December 31, 2016 was $5,948,978 compared to $4,143,344 in 2015, an increase of $1,805,634. This growth is attributable to both an increase in direct written premiums due to our organic growth efforts and an increase in assumed premiums from our reinsurance treaty with ULIC.
The amortized cost and fair value of debt securities as of December 31, 2016 and 2015, by contractual maturity, are shown below. Equity securities do not have stated maturity dates and therefore are not included in the following maturity summary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
For the remaining 6% of investments in inactive markets for which pricing from an independent pricing service is not considered, the Company uses a weighting of broker quotes and internal pricing models to determine the estimated fair values. The Company’s holdings in these financial instruments were immaterial to the overall investment portfolio as of December 31, 2008, representing only 1% of the estimated fair value of fixed maturity securities available-for-sale.
The Company has deferred certain costs of acquiring investment and universal life insurance products business, principally commissions, certain expenses of the policy issue and underwriting department, and certain variable sales expenses that relate to and vary with the production of new and renewal business. In addition, the Company defers sales inducements, such as interest credit bonuses and jumbo deposit bonuses. Investment products primarily consist of individual and group variable and fixed deferred annuities in the Individual Investments and Retirement Plans segments. Universal life insurance products include universal life insurance, variable universal life insurance, COLI, BOLI and other interest-sensitive life insurance policies in the Individual Protection segment. DAC is subject to recoverability testing in the year of policy issuance and loss recognition testing at the end of each reporting period.
We lease offices at approximately 473 locations. The average term for all such leases is approximately five years. The leases expire from 2002 to 2016. We believe we will not have any difficulty obtaining renewals of leases as they expire or, alternatively, leasing comparable property. The aggregate annual rental expense under all leases was approximately $37,181,000 in 2001.
We manage credit risk through industry and issuer diversification. Maximum exposure to an issuer is defined by quality ratings, with higher quality issuers having larger exposure limits. Our investment approach has been to create a high level of industry diversification. The top five industry holdings as of December 31, 2007 in our debt securities portfolio are banking (6.8%), diversified financial services (6.7%), insurance (3.3%), REITs (2.7%) and broker dealers (2.5%).
We maintain life reinsurance programs designed to protect against large or unusual losses in our life insurance business. Based on our review of their financial statements, reputations in the reinsurance marketplace and other relevant information, we believe that these reinsurers are financially sound and, therefore, that we have no material exposure to uncollectible life reinsurance.
Engineering reinsurance again developed rapidly during the year under review. Costs in this branch are high and due to the, in part, large covers, especially for big infra­ structure projects in developing countries, this line is un­ balanced. It produced an underwriting profit.
The Surety, Credit and Fidelity lines, with a rising premium income, yielded a smaller profit than in the previous year. Again the disappointing result from US business is respon­ sible for this development. As mentioned in last year's annual report, a cautious reserving policy has to be pur­ sued owing to the dependence of this branch on the eco­ nomic trends.
This development had the following effects on the balancesheet position which once more was obtained by applying the "cost or market" method; the depreciation required on fixed-interest investments exceeded that of last year. At the same time, the amounts needed for depreciation on shares showed a sudden increase so that there was an ex­ ceptional depreciation requirement which was only ab­ sorbed to a minor extent by realized capital gains and to a major extent by the book profit resulting from the transfer of Permanent Holdings to the New Holding Ltd. — The hidden surplus on the quoted securities decreased by Sw. frs. 97 million to Sw. frs. 181 million, following an increase of Sw. frs. 10 million in the previous year.
Investments For the following comparisons too, those items which could produce a duplication of figures have been eliminated. The business year of the New Holding, Ltd. and of the Subsidiary Companies Overseas corresponds to the calen­ dar year.