Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1996 .................................41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ================================================================================
Years Ended December 31, ------------------------ (In millions) 1996 1995 1994 ====================================================== Written premium: Direct $1,274 $1,387 $1,401 Assumed 650 649 586 Ceded (395) (426) (366) - - ------------------------------------------------------ Net $1,529 $1,610 $1,621 - - ------------------------------------------------------ Earned premium: Direct $1,307 $1,377 $1,422 Assumed 632 629 549 Ceded (400) (388) (422) - - ------------------------------------------------------ Net $1,539 $1,618 $1,549 - - ------------------------------------------------------ Incurred losses and LAE: Gross $1,417 $1,443 $1,451 Ceded (279) (267) (286) - - ------------------------------------------------------ Net $1,138 $1,176 $1,165 ======================================================
LINE OF CREDIT. In December 1995, TIG established an unsecured revolving line of credit with maximum borrowings of $250 million. The full amount of the five year credit facility was available for general corporate purposes as of December 31, 1996.
CLASS A COMMON STOCK. In April 1993, TIG Holdings issued 224,600 shares of Class A common stock of which 81,191 had been canceled as of December 31, 1996. The Class A common stock is convertible into shares of common stock one year after issuance but not prior to the vesting of such shares in accordance with the terms of their issuance. Accordingly, as of December 31, 1996, the number of Class A common shares converted to common stock was 143,409 (see Note K - Incentive Compensation Plans). As of December 31, 1996, no Class A common stock is outstanding.
DIVERSIFIED SAVINGS PLAN. TIG Holdings, Inc. Diversified Savings Plan (the "DSP") is qualified under Section 401 (a) of the Internal Revenue Code ("IRC") and the trust established to hold the assets of the DSP is tax-exempt under Section 501 (a) of the IRC. The DSP is available to all salaried employees. Most employees who elect to participate may contribute up to 12% of their pre-tax salary, plus bonuses, commissions, and overtime pay ("Employee Compensation") for each calendar year. TIG Holdings administers the DSP and will make matching contributions to the DSP in an amount equal to 75% of the participant's contribution up to a maximum of 6% of Employee Compensation. Certain IRC required limitations may be imposed for participants who are treated as "highly compensated employees" for purposes of the IRC. Generally, an employee vests in the matching employer contributions based upon years of service. Prior to January 1, 1995,
Employees who were actively employed on April 27, 1993 received an initial allocation of 100 shares of TIG Holdings common stock in which they were immediately fully vested. Effective January 1, 1995, all active associates who did not previously receive the initial allocation of shares in 1993 are eligible for 100 shares of TIG Holdings, Inc. common stock upon attainment of six months of service. These shares are allocated to the associates' accounts as of the last day of the plan year.
At December 31, 1996, the statutory "risk-based" capital for each TIG insurance subsidiary was such that no action (company or regulatory) would be required.