The FDA has announced that it will contract with states to jointly enforce the FDA Regulations. State regulations narrower in scope and not inconsistent with the FDA Regulations may be exempt from the pre-emptive effect of the federal rules and be enforced concurrently.
Property and casualty investment income increased by $181.5 and $640.9 million, or 10.7% and 51.7%, as compared to 1995 and 1994, respectively. Investment income increased primarily due to the inclusion of the CIC portfolio for the full year of 1996, partially offset by slightly lower yields on the bond segment of the investment portfolio as compared to 1995. The bond segment of the investment portfolio yielded 6.8% in 1996 compared with 6.9% in 1995.
Revenues increased by $11.3 million, or 10.3%, and decreased by $30.7 million, or 20.3%, as compared to 1995 and 1994, respectively. Net income increased by $4.0 and $5.7 million, as compared to 1995 and 1994, respectively.
Investment gains of $696.8, $1,135.2 and $322.4 and losses of $149.2, $369.0 and $760.3 were realized on securities available for sale for the years ended December 31, 1996, 1995 and 1994, respectively. Investment gains in 1996 also include $2.7 of net unrealized losses on equity securities in the Company's trading portfolio.
The acquisition of CIC has been accounted for as a purchase, and CIC's operations are included in the Consolidated Financial Statements as of May 10, 1995.
If the average cost method of accounting had been used for tobacco inventories instead of the LIFO method, such inventories would have been $205.9 and $203.3 higher at December 31, 1996 and 1995, respectively.
The Company's hotels in some instances are constructed on leased land or are leased. Other leases cover office facilities, computer and transportation equipment. Rent expense amounted to $128.6, $118.9 and $78.1 for the years ended December 31, 1996, 1995 and 1994, respectively. It is expected, in the normal course of business, that leases which expire will be renewed or replaced by leases on other properties; therefore, it is believed that future minimum annual rental commitments will not be less than the amount of rental expense incurred in 1996. At December 31, 1996 future aggregate minimum rental payments approximated $668.6.
In October 1995 the Company's then wholly owned subsidiary, Diamond Offshore, sold 14.9 million shares of its common stock through an initial public offering at $24 per share. Diamond Offshore used the net proceeds of approximately $338.4 to fund the repayment of its intercompany debt as well as a dividend to the Company. As a result of the offering, the Company's ownership interest in Diamond Offshore declined to approximately 70% and the Company recorded a gain of approximately $192.9 ($125.4 after provision for deferred income taxes).
Tobacco Litigation - Lawsuits are being filed with increasing frequency against Lorillard and other manufacturers of tobacco products seeking damages for cancer and other health effects claimed to have resulted from an individual's use of cigarettes or exposure to tobacco smoke. Plaintiffs have asserted claims based on, among other things, theories of negligence, fraud, misrepresentation, strict liability, breach of warranty, enterprise liability, civil conspiracy, intentional infliction of harm, and failure to warn of the allegedly harmful and/or addictive nature of tobacco products.
New York City Health and Hospitals Corporation. Lorillard is a defendant in the case.
filed on November 28, 1995 in the U.S. District Court of Massachusetts. The case of Philip Morris Incorporated, et al. v. Morales, et al., was filed on November 28, 1995 in the District Court of Travis County, Texas. This action has been abated by the trial court pending resolution of State of Texas v. The American Tobacco Company, et al. The case of Philip Morris Incorporated, et al. v. Glendening, et al. was filed on January 22, 1996 in the Circuit Court of Talbot County, Maryland. The court has entered an order denying plaintiffs' motion for summary judgment and granting defendants' motion for summary judgment. The tobacco companies have noticed an appeal to the Maryland Court of Appeals. The case of Philip Morris Incorporated, et al. v. Blumenthal was filed on June 28, 1996 in U.S. District Court for the District of Connecticut. On December 23, 1996, the court granted a motion to dismiss filed by the defendant Attorney General. The plaintiff tobacco companies have filed a notice of appeal from the dismissal order to the United States Court of Appeals for the First Circuit. The case of Philip Morris Incorporated, et al. v. Graham, et al. was filed on July 15, 1996 in the District Court of Salt Lake County, Utah. The case of Philip Morris Incorporated, et al. v. Verniero, et al., was filed on August 20, 1996, in the Superior Court of Mercer County, New Jersey. The case subsequently was transferred to the Superior Court of Middlesex County, New Jersey. The case of Philip Morris Incorporated, et al. v. Bronster, was filed on August 28, 1996, in the United States District Court for the District of Hawaii. The case of Philip Morris Incorporated, et al. v. Botelho was filed on January 8, 1997, in the United States District Court for the District of Alaska.