ESG Re and its subsidiaries lease office space in Bermuda, Dublin, Hamburg, London, Lisbon, Toronto, Miami, Hong Kong, Singapore, Taiwan, Sydney and Bangkok and own an office located in the former Soviet State of Georgia. The owned property is currently valued at $290,000. The Company believes its space is adequate to meet its current and expected needs.
The Company reported a net loss of $61.8 million for the year 2000, compared to a net loss of $42.0 million for 1999. Included in the results were net losses of $5.2 million and $12.8 million for the years ended December 31, 2000 and 1999 respectively, from discontinued operations. The net loss from continuing operations was $56.6 million for 2000 and $29.2 million for 1999.
Gross premium written from Credit business has declined by 85% in 1999. One three year contract in Latin America written in 1998 at $8 million was cancelled by the ceding company after twelve months with a resultant decrease in written premium of $5.3 million in 1999. Excluding the impact of
As of December 31, 2000, total investments and cash were $212.2 million, compared to $221.5 million at December 31, 1999. All fixed maturity securities in the Company's investment portfolio are classified as available for sale and are carried at fair value.
In 2001, the Company will continue to follow its investment policy and guidelines while seeking to improve long-term value by continuing to invest in selected strategic investments in accordance with its current commitments. A strategic investment is defined as an investment in a reinsurance-related enterprise, ceding company or distribution channel that is expected to generate or secure additional profitable business for the Company. To date, ESG has invested $2.0 million and acquired an 85% ownership interest in IMEDI L International, a provider of general insurance products, based in Tbilisi, Georgia. This Company is consolidated within the Company's operating results. Additionally, equity investments and loans totaling $17.7 million were extended primarily to other companies or associations with whom ESG has operating relationships.
Shareholders' equity as of December 31, 2000 was $113.6 million, compared to $176.8 million at December 31, 1999. The major factor causing the reduction in shareholders' equity in the 12-month period was the Company's net operating losses. Book value per common share declined to $9.64 as of December 31, 2000 from $15.24 as of December 31, 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company believes that it does not currently enter into any transactions that are covered by this statement and therefore, the Company does not anticipate any significant change to its current financial reporting.
The reinsurance contracts entered into by the Company are primarily of short duration. Premiums written are recognized as earned over the coverage period in proportion to the amount of protection provided. Unearned premium reserves are established to cover the unexpired contract period.
Management fee revenue consists primarily of fees earned as compensation for underwriting and managing the reinsurance portfolio on behalf of the Company's co-reinsurers. These fees are estimated and recognized at the inception of the contracts with the co-reinsurers and amortized over the life of the contracts.
The Company and its subsidiaries have various lease obligations. Rental expenses are amortized on the straight-line basis over the term of the lease. Total rental expense was approximately $1,454 thousand, $931 thousand, and $398 thousand for the years ended December 31, 2000, 1999, and 1998, respectively. The Company has leased premises in Germany, Ireland, United Kingdom, Portugal, Hong Kong, Australia, Taiwan, Thailand, Singapore, United States and Canada.
Twenty percent of the Class B Warrants are available for vesting during each of the first five years following the closing date of the IPO, and will vest only if, for any 20 consecutive trading days during the one-year vesting period, the percentage change in the market price of the common shares since the closing date of the IPO exceeds the percentage change in the Wilshire 5000 Stock Price Index by at least 500 basis points. The Class B Warrants are exercisable for a period of 10 years from the date of vesting. The exercise price per Common Share is $20 and will be reduced by $1.50 on September 1, 2001. As of December 31, 2000 and 1999, 276,240 of the Class B Warrants are vested and are exercisable.
Under the Bermuda Insurance Act, 1978, amendments thereto and Related Regulations, ES Bermuda is required to maintain certain measures of solvency and liquidity. For the years ended December 31, 2000 and 1999, these requirements have been met. The statutory capital and surplus of ES Bermuda was $76.6 million and $131.0 million and the minimum required statutory capital and surplus was $8.5 million and $13.2 million as of December 31, 2000 and 1999, respectively. The minimum required level of liquid assets was $80.1 million and $81.4 million with actual liquid assets of $143.7 million and $138.5 million as of December 31, 2000 and 1999, respectively.