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For our fixed maturity investments classified as available for sale, the impact of changes in fair value is recorded as an unrealized gain or loss in “Accumulated other comprehensive income (loss), net of taxes,” a separate component of equity. In addition, investments classified as available for sale are subject to our impairment review to identify when a decline in value is other than temporary. Factors we consider in determining whether a decline in value is other than temporary include: the extent (generally if greater than 20%) and the duration (generally greater than six months) of the decline; the reasons for the decline in value (credit event or interest rate related); our ability and intent to hold the investment for a period of time that will allow for a recovery of value; and the financial condition and near-term prospects of the issuer. When it is determined that a decline in value is other than temporary, the carrying value of the security is reduced to its fair value, with a corresponding charge to earnings. This corresponding charge is referred to as an impairment and is reflected in “Realized investment (losses)/gains, net” in the statements of operations. The level of impairment losses can be expected to increase when economic conditions worsen and decrease when economic conditions improve.
On January 26, 2006, the Service officially closed the audit of Prudential Financial’s consolidated federal income tax returns for the 1997 to 2001 periods. As a result of certain favorable resolutions, the Company’s statement of operations for the year ended December 31, 2005 includes an income tax benefit of $3 million, reflecting a reduction in the Company’s liability for income taxes.
Structured settlement annuity contracts issued by the Company are long-term in nature and involve fixed guarantees relating to the amount and timing of benefit payments. In addition, single and flexible premium deferred annuity contracts issued by the Company are subject to discretionary withdrawal or surrender by the contractholder, subject to applicable surrender charges. In a low interest rate environment, funds from maturing investments, particularly those supporting long-term structured settlement annuity obligations, may be reinvested at substantially lower interest rates than those which prevailed when the funds were previously invested.
Fixed income securities include bonds and mortgage-backed and asset-backed securities. All fixed income securities are carried at fair value and may be sold prior to their contractual maturity ("available for sale"). The difference between amortized cost and fair value, net of deferred income taxes, certain deferred acquisition costs and reserves for life-contingent contract benefits, is reflected as a component of shareholder's equity. Provisions are recognized for declines in the value of fixed income securities that are other than temporary. Such writedowns are included in realized capital gains and losses.
If, subsequent to entering into a hedge transaction, the future becomes ineffective (including if the hedged item is sold or otherwise extinguished or the occurrence of a hedged anticipatory transaction is no longer probable), the Company terminates the derivative position. Gains and losses on these terminations are reported in realized capital gains and losses in the period they occur. The Company may also terminate
NOTES TO FINANCIAL STATEMENTS--(CONTINUED) ($ IN THOUSANDS) the derivatives as a result of other events or circumstances. Gains and losses on these terminations are either deferred and amortized over the remaining life of the hedged item or are reported in shareholder's equity, consistent with the accounting for the hedged item.
Pretax provisions for investment losses, principally relating to other than temporary declines in value on fixed income securities and valuation allowances on mortgage loans were $208, $2,448 and $627 in 1996, 1995 and 1994, respectively.
During 1999, commissions decreased to $12,234,053 from $12,501,426 in 1998. In 1997, commission expense was $11,918,192. The decrease reflects above-mentioned termination of business. Although group accident and health business produced by USLIC increased through March 1999, this business carries a relatively low commission. The majority of such amounts paid relates to first year commissions which were $7,938,818, $8,169,835, and $8,120,748 in 1999, 1998, and 1997, respectively. The increased proportion in new sales of accident and health and credit business contributed to the overall decline in first year commissions.
Compensation and employee benefits costs for 1998 were $98.5 million, an increase of $2.2 million or 2.3% from 1997. Increases include approximately $3.2 million related to purchase acquisitions, amounts related to revenue growth and $1.7 million in incentive compensation related to improved operating results offset by decreases of $4.5 million related to offices sold in 1998 and 1997. Compensation and employee benefits costs for 1997 were $96.2 million, an increase of $7.8 million or 8.9% from 1996. Increases include approximately $9.3 million related to purchase acquisitions and $1.7 million in incentive compensation related to improved operating results offset by decreases of $3.0 million related to offices sold in 1997 and 1996.
The purpose of this section is to discuss and analyze the Company's consolidated results of operations, financial condition and liquidity and capital resources. This analysis should be read in conjunction with the consolidated financial statements and related notes which appear elsewhere in this report. The Company reports financial results on a consolidated basis. The consolidated financial statements include the accounts of FCC and its subsidiaries at December 31, 1997.
The insurance regulatory framework continues to be scrutinized by various states, the federal government and the National Association of Insurance Commissioners ("NAIC"). The NAIC is an association whose membership consists of the insurance commissioners or their designees of the various states. The NAIC has no direct regulatory authority over insurance companies, however its primary purpose is to provide a more consistent method of regulation and reporting from state to state. This is accomplished through the issuance of model regulations, which can be adopted by individual states unmodified, modified to meet the state's own needs or requirements, or dismissed entirely.
The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards (SFAS) No. 128 entitled Earnings per share, which is effective for financial statements for fiscal years beginning after December 15, 1997. SFAS No. 128 specifies the computation, presentation, and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential common stock. The Statement's objective is to simplify the computation of earnings per share, and to make the U.S. standard for computing EPS more compatible with the EPS standards of other countries.
Excluding the investigation-related litigation and other resolution costs, our SG&A expense for the year ended December 31, 2010, decreased approximately $70.2 million, or 10.0% to $630.0 million from $700.2 million for the same period in the prior year. The reduction in SG&A expense was mainly due to the exit from our PFFS product and increased operating efficiencies, offset in part by increased costs for MA CCP marketing and infrastructure investments and severance costs associated with our organizational realignment implemented during 2010. The SG&A ratio was 16.6% for the year ended December 31, 2010 compared to 11.9% for the same period in the prior year. After excluding the investigation-related litigation and other resolution costs, our SG&A ratio for the year ended December 31, 2010 was 11.7% compared to 10.3% for the same period in the prior year. The increase in 2010 SG&A ratio was mainly due to a lower revenue base in 2010 resulting from the exit from our PFFS product and lower MA CCP marketing costs in 2009 due to the CMS marketing sanction.
In August 2010, we entered into an agreement and release with the carriers of our D&O liability insurance relating to coverage we sought for claims relating to the previously disclosed government investigations and related litigation. We agreed to accept immediate payment of $32.5 million, including $6.7 million received by us in prior years, in satisfaction of the $45.0 million face amount of the relevant D&O insurance policies and the carriers agreed to waive any rights they may have to challenge our coverage under the policies. The agreement and release did not include a $10.0 million face amount policy we maintain for non-indemnifiable securities claims by directors and officers during the same time period and such policy is not affected by the agreement and release. Accordingly, we recorded the $25.8 million of insurance proceeds as a reduction to SG&A expenses at the time the agreement was executed in 2010. No additional recoveries with respect to such matters are expected under our insurance policies and all expenses incurred by us in the future for these matters will not be further reimbursed by our insurance policies. We currently maintain directors’ and officers’ liability insurance in the amount of $125.0 million for other matters not addressed above.
Except for certain historical information contained herein, this Report contains certain statements that may be considered “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and such statements are subject to the safe harbor created by those sections. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of revenues, earnings, cash flows, capital expenditures, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning new services, or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statement of assumptions underlying any of the foregoing. Words such as “believe,” “may,” “could,” “expects,” “hopes,” “estimates,” “projects,” “intends,” “anticipates,” and “likely,” and variations of these words, or similar expressions, terms, or phrases, are intended to identify such forward-looking statements. Forward-looking statements are inherently subject to risks, assumptions, and uncertainties, many of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Item 1A. Risk Factors.”
Issuance of Class C Convertible Preferred Stock. At the closing of the Agreement, we issued 1,500,000 shares of newly created Class C Convertible Preferred Stock (“Class C Preferred Stock”) to Xenith for $1,500,000. The Class C Preferred Stock is convertible, at Xenith’s election, into approximately 72,900,000 shares of our voting common stock at approximately $0.02 per share, and ranks senior to the voting common stock on liquidation with a preference of $1.00 per share. Subject to the availability of funds, annual dividends of 8% of the Class C Preferred Stock liquidation preference are payable by us; if not paid the dividends accrue. Also, at any time after June 28, 2025 and subject to Nebraska law, Xenith may require us to redeem the Class C Preferred Stock at the liquidation preference (plus accrued dividends) or fair market value, whichever is greater. If the shares are not redeemed for any reason, an interest rate of 12% per year begins. Holders of Class C Preferred Stock voting as a separate class are entitled to elect five of eight members of our Board of Directors, with holders of voting common stock entitled to elect the other three directors; otherwise, the Class C Preferred Stock votes with the voting common stock as a single class on an “as converted” basis.
General and administrative expenses consist of salaries and benefits and related costs, including costs associated with our professional fees, rent and other general operating expenses consistent with operating as a public company.
Combined Ratio. We use the combined ratio to measure our underwriting performance. The combined ratio is the sum of the loss ratio and the expense ratio. If the combined ratio is at or above 100%, we are not underwriting profitably and may not be profitable. The combined ratio increased from 26.3% for the year ended December 31, 2015 to 91.3% for the year ended December 31, 2016. The increase in the combined ratio is due primarily to weather-related events affecting our book of business during the year ended December 31, 2016, partially offset by the impact of higher net premiums earned due to derecognition of loss experience refund payable mentioned above. There were no loss events during the year ended December 31, 2015.
Restricted Cash and Cash Equivalents. As of December 31, 2016, our restricted cash and cash equivalents decreased by $6.9 million, or 23%, to $23.4 million, from $30.3 million as of December 31, 2015. The decrease is due primarily to the use of collateral by cedant to pay for losses suffered from weather-related events during the year, in addition to collateral being returned on expiration of a number of insurance contracts, partially offset by collateral being placed for June 1, 2016 renewals.
Loss Experience Refund Payable. As of December 31, 2016, our loss experience refund payable decreased primarily by $8.4 million, or 85%, to $1.5 million, from $9.9 million at December 31, 2015. The decrease is due to the derecognition of loss experience refund payable under one reinsurance contract, under which significant losses were experienced during the year ended December 31, 2016, partially offset by the recognition of a pro-rated liability over the year ended December 31, 2016 because the absence of loss experience under certain reinsurance contracts obligates us to refund premium to the reinsurers.
Net cash provided by operating activities for the year ended December 31, 2016 totaled $416, which consisted primarily of cash received from net written premiums less cash disbursed for operating expenses. Net cash provided by investing activities of $6,869 was primarily due to the net sales of available for sale securities and collateral withdrawals from trust accounts. Net cash used in financing activities totaled $3,627 representing net cash dividend payments and cash used to repurchase ordinary shares under the Company’s share repurchase plan.
Life insurance and annuity are our mainstay segments, as they have been during our long history. We believe that the combination of predictable and decreasing mortality rates, positive cash flow generation for many years after policy issue and favorable persistency characteristics suggest a viable and profitable future for these lines of business. We use a wide variety of marketing channels and plan to expand our traditional distribution models with additional agents.
Gross catastrophe losses for the year ended December 31, 2015 were relatively flat compared to 2014. Average severity of catastrophe losses decreased by 20% in 2015 compared to 2014 and by 25% in 2014 compared to 2013.
The gross unrealized losses and fair value of the investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are shown below (in thousands):
Index to Financial Statements Note 18 - Pension and Postretirement Benefits - (Continued)
Regan Holding Corp. is a holding company whose three operating segments are Legacy Marketing Group, Legacy Financial Services and Imagent Online.
Imagent Online had a net loss of $961,000 in 2005 compared to a net loss of $515,000 in 2004. The increased losses were primarily due to higher selling, general and administrative expenses and depreciation expense. Selling, general and administrative expenses increased in 2005 mainly due to increased compensation and benefits expense resulting from increased headcount. Depreciation expense increased in 2005 primarily due to accelerating depreciation on certain capitalized software, which was replaced by a new version.
As of December 31, 2006, Legacy Marketing had marketing agreements with American National Insurance Company (“American National”), Investors Insurance Corporation (“Investors Insurance”), Transamerica Life Insurance and Annuity Company (“Transamerica”), Americom Life & Annuity Insurance Company (“Americom”), Washington National Insurance Company (“Washington National”) and John Hancock Variable Life Insurance Company (“John Hancock”) (collectively, the “carriers”). During 2002, Legacy Marketing terminated its marketing agreement with IL Annuity and Insurance Company (“IL Annuity”). The marketing agreements grant Legacy Marketing the exclusive right to market certain fixed annuity and life insurance products issued by the carriers (the “policies”). In addition, Legacy Marketing is responsible for appointing independent insurance producers, who contract with Legacy Marketing to sell policies, with the applicable carrier. For providing these services, the carriers pay Legacy Marketing commissions and marketing allowances.
As a result of performing the impairment tests required under SFAS 144, the Company was then required under the provisions of SFAS 142 to perform a goodwill impairment test using the revised cash flows forecast discounted at an appropriate cost of capital. The results of this test indicated that the Company’s goodwill was not recoverable. Accordingly, the Company recorded a goodwill impairment loss on the remaining goodwill balance of $679,000 during the second quarter of 2004.
The Company also sponsors a non-qualified tax deferred compensation plan, which is available to certain employees who, because of Internal Revenue Code limitations, are prohibited from contributing the maximum percentage of salary to the 401(k) Plan. Under this deferred compensation plan, certain employees may defer, on a pre-tax basis, a percentage of annual compensation, including bonuses. The Company typically matches 50% of each employee’s contributions up to a maximum of 6% of annual compensation, less amounts already matched under the 401(k) plan. The Company made matching contributions of $2,000, $0, and $23,000 during the years ended December 31, 2006, 2005, and 2004. As of December 31, 2006 and 2005, employee contributions and Company matching contributions, including cumulative investment gains, totaled $570,000 and $548,000.
The Company has classified its mutual fund investments as available-for-sale. Such investments are carried at market value and changes in unrealized gains and losses are reported as a component of shareholder's equity.
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's deferred tax balance as of December 31, 1996 and 1995, are as follows:
Other revenues decreased $1,386,000 from $4,023,000 in 2000 to $2,637,000 in 2001. Most of this decrease is due to the $1,716,000 recorded by Midwest Medical in 2000 for interest on federal tax refunds. Also contributing to the decrease is the elimination of finance charges on 2001 premium billings to Midwest Medical policyholders. Finance charges of $556,000 were included in other revenues for 2000. Offsetting these decreases were a $691,000 increase in Solutions' revenues primarily from technology consulting and a $479,000 increase in Services' revenues primarily from commission income earned on new accounts
Loss and loss adjustment expenses incurred are net of applicable reinsurance of $5,452,000, $5,315,000 and $5,204,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123." This Statement amends FASB Statement No. 123, "Accounting for Stock Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.
The Company anticipates a lengthy period of transition as it lessens its exposure to the insurance industry. During the transition process, the Company may consider the sale of additional subsidiaries associated with that business. The Company intends to redeploy capital no longer required by its insurance business, once it becomes available, to pursue other opportunities in the future that offer a better prospect for profitability. The Company believes that suitable capital redeployment opportunities should be available after the capital no longer required by its insurance business becomes available, but cannot predict the amount of capital that will ultimately be available for redeployment, the
Commissions are comprised of commission expenses (which vary with gross premiums written), offset by commission income, (which varies with ceded premium written). Commission expenses are paid to agents to produce the business for the Company. Commission income is received by the Company from reinsurers as compensation to the Company for business the Company cedes to the reinsurers. Commissions decreased in 2002 and in 2001 as a result of the decrease in gross premiums written discussed previously.
Unearned premiums decreased primarily because of the decrease in writings from the decision to discontinue writing commercial lines. This balance represents the portion of premiums written which are applicable to the unexpired terms of policies in force which will earn in future periods.
value because renewals are more profitable than first year business. The drive to add customers faster will result in more spending to promote our brand and to develop more claim adjusters and customer service representatives. These costs, along with expected losses on first year business, are likely to bring profit margins more in line with the Company's objective of achieving a 4% underwriting profit margin over the entire retention period of an insured. In 1996, the Core business units generated an underwriting profit margin of 8%, compared to 5% in 1995 and 7% in 1994.
The information set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Annual Report to Shareholders of Argonaut Group for the fiscal year ended December 31, 1999, is incorporated herein by reference. See Exhibit Index.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. In May 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No. 133", that amends SFAS No. 133 and defers the effective date to fiscal years beginning after June 15, 2000. Management of the Company does not believe the adoption of SFAS No. 133 will have a material impact on the Company's results of operations or financial position when adopted.
The Company regularly reviews each investment in its AFS fixed maturity and equity securities portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. Management makes this determination through a series of discussions with the Company’s portfolio managers and credit analysts, and information obtained
For the years ended December 31, 2010, 2009 and 2008 the Company recorded an OTTI in income of $0.6 million, $9.9 million and $8.3 million, respectively, net of value of business acquired amortization.
by the Company, with necessary revisions applied against amortization to date. The impact of these revisions on cumulative amortization is recorded as a charge or credit to current operations, commonly referred to as “unlocking”. It is reasonably possible that estimates of future gross profits could be reduced in the future, resulting in a material reduction in the carrying amount of the deferred sales inducement asset.
During 2010, 2009, and 2008, fixed contract owner deposits were $0.2 million, $1.9 million, and $0.2 million, respectively. During 2010, 2009, and 2008, fixed contract owner withdrawals were $114.8 million, $162.0 million, and $189.2 million, respectively.
On July 26, 2010, Fitch downgraded the Company’s insurance financial strength rating from AA to AA-. The rating outlook is stable.
5. Policy liabilities include future policy benefits and expenses, unearned premiums and claims and benefits payable.
Our property and warranty line of business includes exposure to asbestos, environmental and other general liability claims arising from our participation in various reinsurance pools from 1971 through 1985. This exposure arose from a contract that we discontinued writing many years ago. We carry case reserves, as recommended by the various pool managers, and IBNR reserves totaling $33,086 (before reinsurance) and $30,214 (net of reinsurance) at December 31, 2013. We believe the balance of case and IBNR reserves for these liabilities are adequate. However, any estimation of these liabilities is subject to greater than normal variation and uncertainty due to the general lack of sufficiently detailed data, reporting delays and absence of a generally accepted actuarial methodology for those exposures. There are significant unresolved industry legal issues, including such items as whether coverage exists and what constitutes a claim. In addition, the determination of ultimate damages and the final allocation of losses to financially responsible parties are highly uncertain. However, based on information currently available, and after consideration of the reserves reflected in the consolidated financial statements, we do not believe that changes in reserve estimates for these claims are likely to be material.
Other sources of liquidity at the holding company level include interest and principal payments made on a surplus debenture (the "Surplus Debenture") issued by RSLIC-Texas to the Company, dividends paid from insurance subsidiaries, primarily generated from operating cash flows and investments, and borrowings available under the Credit Agreement. At December 31, 1996, the unpaid principal balance of the Surplus Debenture, which is payable in quarterly installments through December 31, 1999, was $58.0 million. RSLIC-Texas generates less than 1% of the Company's premiums, policyholder fees and deposits; therefore, payments on the Surplus Debenture are generally funded by dividend payments made by RSLIC to RSLIC-Texas. These dividends are subject to regulatory restrictions and, in the absence of regulatory approval, are generally limited within any 12-month period, in the aggregate, to the greater of RSLIC's statutory net income for the preceding calendar year, or 10% of RSLIC's statutory surplus as of the preceding December 31, determined in accordance with state regulations. RSLIC will be permitted to make dividend payments of $23.2 million during 1997 without prior regulatory approval. SNCC's ability to pay dividends is subject to regulatory and certain other contractual restrictions and, in the absence of the requisite approvals, dividends are generally limited within any 12-month period, in the aggregate, to the lesser of 10% of SNCC's statutory surplus as of the preceding December 31, or SNCC's statutory net investment income for the preceding calendar year, determined in accordance with state regulations. SNCC will be permitted to make dividend payments totaling $14.0 million during 1997 without prior approval. Additional dividends may also be paid by RSLIC and SNCC with the requisite approvals. See "Business - Regulation." The Credit Agreement permits the Company to borrow up to $200.0 million at any one time. Of the unused portion of the facility, $54.0 million is restricted for use in connection with, among other things, acquisitions or the redemption of the SIG Senior Notes.
During 2018, all product lines have experienced increased competition and pressure on rates due to market conditions. However, both U.S. Operations and International Operations saw overall rate increases for year ended December 31, 2018. Consolidated earned premiums increased for the year ended December 31, 2018 as compared to the same period in 2017 due to increased gross and net written premiums during 2018.
Included in losses and loss adjustment expense for the year ended December 31, 2017 were $127.2 million in catastrophe losses resulting from Hurricanes Harvey, Irma and Maria, the California wildfires, other storm losses primarily in the United States and the Mexican earthquakes. Partially offsetting these catastrophe losses was $8.2 million of net favorable development on prior accident year loss reserves, which is presented in the table below. We also experienced higher than anticipated non-catastrophe current accident year property losses in 2017.
(1) Interest only on Junior Subordinated Debentures through 2037. Interest calculated based on the rate in effect at December 31, 2018. Principal due beginning May 2033.
Organization - First Great-West Life & Annuity Insurance Company (the Company) is a wholly-owned subsidiary of Great-West Life & Annuity Insurance Company (the Parent Corporation). The Company was incorporated as a stock life insurance company in the State of New York and was capitalized on April 4, 1997, through a $6,000 cash investment from the Parent Corporation for 2,000 shares of common stock. On December 29, 1997, the Company issued an additional 500 shares of common stock to the Parent Corporation for $500. The Company was licensed as an insurance company in the State of New York on May 28, 1997. The Company does business in New York through two business segments.
During the first quarter 2003, ML of New York discontinued manufacturing variable life insurance products. As a result, Merrill Lynch Life currently does not manufacture, market, or issue life insurance products.
Interest rates continued to trend upward and the yield curve flattened throughout 2005, at times becoming inverted. The U.S. Federal Reserve System’s Federal Open Market Committee raised the federal funds rate eight times during 2005 to 4.25%, up from 2.25%. The successive increases in short-term interest rates raised the medium-term interest rate to 4.36% at December 31, 2005 as compared to 3.16% at December 31, 2004. ML of New York defines medium term interest rates as the average interest rate on U.S. Treasury securities with terms of 1 to 5 years.
ML of New York believes that it will be able to fund the capital and surplus requirements of projected new business from current statutory earnings and existing statutory capital and surplus. If sales of new business significantly exceed projections, ML of New York may have to look to its parent and other affiliated companies to provide the capital or borrowings necessary to support its current marketing efforts. ML of New York’s future marketing efforts could be hampered should its parent and/or affiliates be unwilling to commit additional funding.
Cash 2,958 1,623 Accrued investment income 247 2,160 Receivables from subsidiaries* 14,348 27,324 Property and equipment, net 513 741 Other 19,880 8,571 --------- --------- $1,678,946 $1,404,059 ========= ========= LIABILITIES Accrued expenses and other liabilities $ 42,750 $ 69,690 Accrued income taxes (32,264) 10,816 Deferred income taxes 54,716 28,769 Debt: Notes payable to banks 114,000 Senior and Medium-Term Notes 303,810 119,685 Subsidiaries* 195,876 195,876 ------- ------- 564,888 538,836 SHARE-OWNERS' EQUITY ------- ------- Preferred Stock Junior Participating Cumulative Preferred Stock Common Stock 34,667 34,667 Additional paid-in capital 289,819 256,057 Treasury stock (12,812) (12,960) Stock Held in Trust (1,318) (621) Unallocated stock in Employee Stock Ownership Plan (3,686) (4,043) Retained earnings (including undistributed income of subsidiaries: 2000 - $922,405; 1999 - $814,940) 858,761 738,204 Accumulated other comprehensive income Net unrealized gains (losses) on investments (all from subsidiaries, net of income tax: 2000 - $(27,662); 1999 - $(78,659)) (51,373) (146,081) --------- -------
NOTE 1 - DEBT At December 31, 2000, the Company had no borrowings under its $125.0 million line of credit arrangements. $118.6 million of subordinated debentures due 2003, $75.0 million of Senior Notes due 2004, $49.9 million of Senior Notes due 2010, $44.2 million of Medium-Term Notes due 2011, $39.9 million of Senior Notes due 2015, $60.0 million of Senior Notes due 2016, $77.3 million of subordinated debentures due 2027, and $34.8 million of Senior Notes due 2030 were outstanding at December 31, 2000. The subordinated debentures were issued to affiliates in connection with the issuance by such affiliates of Trust Originated Preferred Securities (TOPrS) and FELINE PRIDES.
Fireside Thrift occupies 39 leased facilities with an aggregate square footage of approximately 155,000 in California, Arizona, Colorado, Oregon and Washington (including consumer finance branches and main office buildings). The latest expiration date of the existing leases is September 2008.
Summary of Operations - Fiscal years ended March 31, 1996, 1995 and 1994
The cost of evaluations for HBA services was 45.1% as a percentage of HBA revenues during Fiscal 1996 as compared to 37.7% as a percentage of revenues for Fiscal 1995. This increase is predominantly attributable to a change in the mix of HBA services being rendered. Provider discount network services, which are now contributing approximately 53% of HBA revenues, generally provide lower gross margins due to the cost of the
To monitor interest rate risk, GAFRI devotes extensive effort to evaluating the potential impact of changes in interest rates on cash flows and duration of assets and liabilities. Activities include the projection of business in force under many different interest rate scenarios, including non-parallel shifts in interest rates, to examine the impact of changes in both the level of interest rates and the shape of the yield curve. At least quarterly, GAFRI determines the duration of its assets and liabilities to help manage differences. A smaller difference in the duration of assets and liabilities indicates less exposure to the risk of changes in interest rates.
The decrease in cash and investments in 2005 reflects the dividends paid by GA-PR to GAFRI. The decrease in DPAC in 2005 reflects the reinsurance transaction prior to the sale.
In January 2006, GAFRI acquired, through a reinsurance transaction, the fixed annuity block written by Old Standard Life Insurance Company. See Note N to the Financial Statements. As part of the assets received in the reinsurance transaction, GAFRI also acquired the stock of Old West Annuity and Life Insurance Company. In total, the transaction resulted in an increase of approximately $280 million in both annuity benefits accumulated and cash and investments, including a payment (negative ceding commission) from the seller of approximately $9 million.
In 2006, GAFRI repurchased $68.5 million principal amount of its 6-7/8% Senior Notes for $70.8 million in cash. In connection with the repurchase, GAFRI paid an additional $2.0 million to effectively terminate the portion of the interest rate swap that covered the repurchased debt; the cost to terminate the portion of the swap is included in the loss on retirement of debt in the Consolidated Income Statement.
On January 25, 2007 GAFRI announced that it had called for redemption of all of its 8-7/8% trust preferred securities. The preferred securities will be redeemed on March 1, 2007 at a price of $1,055.74, which includes accrued and unpaid dividends of $11.34 per security. There are currently $75 million principal amount outstanding, including approximately $53 million owned by the Company and one of its subsidiaries. The Company expects to record a pre-tax charge of approximately $1 million on this transaction. The funds for this redemption will come from amounts borrowed under the Company's bank credit agreement.
In Michigan, the most common limits are $200,000 per claim/$600,000 aggregate; in Florida, $250,000 per claim/$750,000 aggregate; and in New Mexico, $200,000 per claim/$600,000 aggregate. The most common limit in other states is $1 million per claim, subject to a $3 million aggregate policy limit. In some states, we offer limits of insurance up to $11 million per claim, with up to an $11 million aggregate policy limit for all claims reported for each calendar year or other 12-month policy period. Higher limits and excess coverage can also be written in conjunction with special reinsurance arrangements.
Other income was $6.7 million in 1999, up $3.8 million from 1998. The 1999 amount includes $9.8 million of interest earned on a settlement with the Internal Revenue Service, less professional fees and other costs associated with the settlement of $3.9 million. Other income typically includes finance charge income from physician premium payment plans. Such income was offset by a higher level of receivable write-offs in 1999 versus 1998.
The historical statement of operations data and balance sheet data in the table below is derived from our audited financial statements, some of which are included elsewhere in this annual report. This data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the financial statements, related notes, and other financial information included elsewhere in this annual report. The historical results presented below are not necessarily indicative of the results to be expected for any future period.
During fiscal 2011, the Company has focused its primary efforts on the development and marketing of its surety business in West Virginia and Ohio, securing potential strategic relationships that will accelerate the progression of the Company's business plan and raising additional capital to increase the capital base of its insurance subsidiary, First Surety Corporation (FSC), to facilitate entry into other state markets.
Interest expense decreased from approximately $957,000 in fiscal 2010 to approximately $908,000 in fiscal 2011, due mainly to the expense of common shares issued attributable to the June 5, 2009 forbearance of the bridge loan holders and despite additional borrowings incurred in relation to the Company's efforts to raise additional capital financing and to provide financing of current operations.
In November 2009, as a means of alleviating obligations associated with the Company's Series B Preferred Stock, which by its terms matured at the end of 2010, management proposed a recapitalization to assist in stabilizing the financial position of the Company. The Board deemed it advisable to designate a Series C Preferred Stock, with 10,000 authorized shares. The Recapitalization consisted of the exchange of 6,804.936 Series B Shares for a combination of Series C Shares and Common Stock Shares. For each Series B Share, the participating holder received (i) one Series C Share and (ii) 2,000 shares of JFG Common Stock. The accumulated dividend rights and preferences associated with the Series B Shares transferred undiminished to the corresponding Series C Shares. This exchange amounted to $6,269,051 of carrying value of Series B stock being exchanged for Series C and Common Stock. 13,609,872 shares of Common Stock were issued to the Series C Stock holders at the rate of 2,000 Common shares for each exchanged Series B Stock, with the related cost associated with the Common issuance offsetting the Series C carrying value by $265,120. The shares were valued at approximately $.01948 per share based on the average quoted closing price of the Company's stock for the 20-day period proceeding the date of the transaction. Series C stock may be redeemed by the Company but does not have a fixed maturity date and is considered permanent equity. Holders of over 70% of the outstanding Series B Preferred Shares elected to participate in the recapitalization
Year Ended May 31, 2011 2010 ----------------- --------------- Accretion of discount $ 10,888 $ 273,369 Accrued dividends - mandatorily redeemable preferred stock 122,468 607,706 Accrued dividends - equity preferred stock 781,062 374,662 ----------------- --------------- $ 914,418 $ 1,255,737 ================= ===============
EXTRAORDINARY LOSS, NET OF TAX. In connection with the repayment of the bank lines of credit in 1997, the Company wrote off deferred financing costs totaling $0.7 million, net of tax.
Major categories of net investment income are as follows (in thousands):
MMI has authorized and unissued 5,000,000 shares of $20 par value Preferred Stock. Of such Preferred Stock, 300,000 shares have been designated as Series B Junior Participating Preferred Stock in connection with the Rights Plan described in the following paragraph.
the level of investment yield, including realized gains and losses, on our investment portfolio.
Net losses and loss adjustment expenses for 2010 were down substantially compared to 2009. Net losses and LAE are comprised of net settled claims, LAE, and the change in loss reserves. The loss and LAE reserve declined by 31.0% during 2010 compared to an increase in the loss and LAE reserve of 29.4% during 2009. A decline in the amount of new risk in default as well as reductions in the reserve assumptions for the expected frequency that defaults will become claims were the two main drivers of the 2010 decline in reserves when compared to 2009.
Net investment income declined in 2010 primarily due to a decline in the realized investment yield. Invested assets have been used as a source of cash to fund operating cash shortfalls. Average invested assets increased during the year due to the commutation of the two largest captive reinsurance agreements in the first quarter of 2010 and the receipt of approximately $188.7 million of aggregate trust assets. We expect average invested assets to decrease in 2011 as we anticipate a deficit in operating cash flow. Net realized investment gains during 2010 were primarily due to a partial portfolio repositioning designed to extend the average life of our investment portfolio. For further discussion, see “Investment Portfolio.”
Net cash received from premiums was $169.2 million during 2010 compared to $207.6 million in 2009. This decrease was due primarily to the overall decline in insurance in force as well as premium refunds related to rescission activity, which amounted to $60.5 million in 2010 and $46.1 million in 2009. The decrease in net cash received from premium was offset partially by a decline in premium ceded to captive reinsurers due to our ongoing run-off and commutations.
The insurance laws of the State of Illinois impose certain restrictions on dividends that an insurance subsidiary, such as Triad, can pay its parent company. The Corrective Orders prohibit the payment of dividends by Triad to TGI without prior approval from the Department, which is highly unlikely for the foreseeable future.
Mortgage Loans The Company's mortgage loan policy stipulates that the Company will loan no more than 80 percent of the value on residential loans and no more than 75 percent of the value on commercial loans. The Company grants loans only to employees (excluding officers and directors), agents, agent's relatives, employees of Gold Kist and current mortgagees.
Future Policy Benefits Future policy benefits on traditional individual life insurance policies are computed using a net level premium method based upon conservative assumptions as to investment yields, withdrawals, morbidity, and mortality. Future policy benefits on universal life insurance policies and annuities represent the contract's accumulated account value plus credited interest.
The Company participates in certain business assumed from federally sponsored group pools. Further, it is the Company's general policy to reinsure individual life insurance in excess of $100,000, group life insurance in excess of $50,000, major medical payments in excess of $35,000 annually per individual, accidental deaths, and certain disability income coverage. Amounts ceded under reinsurance agreements become liabilities of the Company should the reinsurers be unable to meet their obligations under the reinsurance agreements. The effect of reinsurance assumed and ceded on certain financial statement accounts is as follows:
These increases totaled $45.5 million and were offset by the decrease in premiums on the products terminated and not currently marketed by the Company as follows:
The change in deferred acquisition costs increased by $0.6 million for the year ended December 31, 1998 compared to 1997. The amount of acquisition costs capitalized increased $2.1 million from $6.7 million in 1997 to $8.8 million in 1998. The overall increase in capitalized costs is the result of the increase in new premium production in the year ended December 31, 1998 compared to 1997. The amortization of deferred acquisition costs increased $1.5 million from $3.8 million in 1997 to $5.3 million in 1998. This increase is the result of the increase in the asset balance. In the year ended December 31, 1998, the Company amortized $0.2 million of goodwill generated in the acquisitions of First National ($111,000) and American Exchange ($60,000) and $.2 million of present value of future profits generated in the acquisitions of American Exchange ($128,000) and Dallas General ($46,000).
Other operating costs and expenses increased $1.7 million in the year ended December 31, 1997 to $19.4 million, compared to $17.7 million in the prior year. The non-insurance companies expenses decreased $0.3 million to $2.6 million for the year ended December 31, 1997 as a result of the decrease in expenses incurred at WorldNet - Miami.
The Company estimates that its plan to resolve the Year 2000 issue will be completed by June 30, 1999, which is prior to any anticipated impact on its operating systems, and that the Year 2000 issue should not pose significant operational problems for its computer systems. However, if the Company's plan is not successfully implemented, the Year 2000 issue could have a material impact on the operations of the Company.