The Company's Nashville subsidiary operates in Arkansas, Georgia, Indiana, Kentucky, Mississippi, Ohio, Tennessee and Virginia. All of its business is retained physical damage and liability coverage on nonstandard automobile. The Company has been working to reduce expenses and improve the loss ratio associated with this book of business.
Other operating costs and expenses for the year ended December 31, 1999 decreased $11.9 million or, 25.4%, to $34.9 million from $46.8 million for the year ended December 31, 1998. This decrease is due to significant one-time charges incurred and expensed in 1998, including $1.0 million associated with Year 2000 remediation and legal expenses; as well as, approximately $2.0 million in other unusual charges. In addition, cost control measures designed to reduce the Company's operating expense ratios were implemented in the third quarter of 1999.
In 1997, the Company began marketing and underwriting nonstandard automobile insurance on a risk-bearing basis. In the fourth quarter of 1997, the Company purchased The Innovative Company ("Innovative") and its subsidiaries Universal Insurance Company ("Universal") and Premium Budget Plan, Inc. ("PBP"). Universal is a nonstandard automobile insurance company domiciled in North Carolina. Universal receives commission and service income for a large portion of its business which it cedes to the North Carolina Reinsurance Facility ("NC Facility"). The NC Facility is a state sponsored plan for insuring North Carolina drivers outside of the voluntary market. PBP is a premium finance company incorporated in North Carolina. Only one month's operations of Innovative is included in the financial statements for 1997. On July 1, 1998, Innovative (the holding company only) was merged into the Company.
The net losses experienced in 1999 are primarily related to the Company's automobile business, which includes the Company's Nashville and North Carolina operations, South Carolina voluntary automobile operations, the SC Facility and the NC Facility. High loss and expense ratios in the Company's Nashville operation, coupled with an unsuccessful attempt to consolidate it with the Company's North Carolina operations, caused losses for both operations. Furthermore, significant growth and high loss ratios resulted in significant losses in the Company's South Carolina voluntary automobile business.
The Company routinely evaluates the collectibility of receivables and has established an allowance for uncollectable accounts for agents' balances and direct billed balances receivable, other receivables, and premium notes receivable in the amount of approximately $3,697 and $2,935 at December 31, 1999 and December 31, 1998, respectively.
NOTE 2 INVESTMENTS (CONTINUED) Investment income as of December 31 consists of the following:
NOTE 12 BENEFIT AND STOCK OPTION PLANS (CONTINUED) $10.00 per share or the book value at the date of exercise. These shares were registered effective March 17, 1997.
The Company currently has three plans under which stock options and incentive stock may be granted to employees, non-employee directors, consultants and active independent agents of the Company. Under the plans for employees and independent agents, stock options expire five (5) years from the date of grant. Under the plan for non-employee directors, the options expire ten (10) years from the date of grant. Each plan is administered by a committee appointed by the Board of Directors.
NOTE 12 BENEFIT AND STOCK OPTION PLANS (CONTINUED) the Company's net (loss) income and (loss) earnings per share would have been as indicated below (in thousands except per share amounts):
(g) The Company and its subsidiaries are party to various other lawsuits generally arising in the normal course of their insurance and ancillary businesses. The Company does not believe that the eventual outcome of such suits will have a material effect on the financial condition or results of operations of the Company.