Also on July 16, 2007, the Division issued a decision approving rules that will implement an assigned risk plan, the MAIP, to provide private passenger automobile insurance for those individuals unable to obtain insurance voluntarily, ultimately to replace CAR for private passenger automobiles. The MAIP will assign these individuals directly to an insurance company. Beginning on April 1, 2008, new and renewal business with ten or more SDIP points on their driving record, along with new business previously not insured in Massachusetts for the last twelve months, will be eligible for the MAIP. Based on this criterion, we estimate that approximately 6% of the market will be eligible to be placed in the MAIP from April 1, 2008 through March 31, 2009. All business will be eligible for the MAIP beginning on April 1, 2009; however, insurers may not non-renew risks that have had no SDIP points for the most recent three-year period (clean-in-three risks), with certain exceptions, through March 31, 2011.
In announcing the Division's decisions on July 16, 2007, the Commissioner stated that the effect of these two decisions will be to introduce "managed competition" to the Massachusetts private passenger automobile insurance market. The concurrent implementation of an assigned risk plan for the private passenger motor vehicle insurance residual market and institution of competitive rating for private passenger motor vehicle insurance require CAR to change some of its operations. On October 5, 2007, the Commissioner issued the final regulation governing "managed competition" that provides the framework for the transition from the current market, in which the Commissioner sets rates, to "managed competition" which is effective April 1, 2008. The final regulation provides guidance and sets forth requirements on a number of issues related to "managed competition," including rate filing requirements. The final regulation contains a list of prohibited factors, including a prohibition of the use of credit information in rating or underwriting. In her announcement of the final regulation, the Commissioner stated that she would review whether credit information should continue to be banned after the one-year transition period ending March 31, 2009. The Commissioner has issued a number of bulletins to date providing guidance on various issues including regulatory review standards, discounts, product form, endorsement, new business application standards and classification plan requirements.
Earnings declined $2,612, or 8.1%, over the previous year due to the previously mentioned revenue declines combined with an increased combined ratio. The increased combined ratio resulted from the same factors for the Company as a whole.
(1) Net of income taxes at an assumed rate of 35%.
Net accumulated other comprehensive income is a component of stockholders' equity and includes unrealized holding gains and losses, net of tax, on available-for-sale investment securities.
We have four reportable segments: (1) property and casualty insurance - Massachusetts; (2) property and casualty insurance - other than Massachusetts; (3) real estate and commercial lending; and, (4) corporate and other. Our property and casualty insurance operations are written through Commerce, Citation, Commerce West, American Commerce and State-Wide and are marketed to affinity groups, individuals, families and businesses through our relationships with professional independent insurance agencies. Our wholly-owned subsidiary, Bay Finance Company, Inc., services residential and commercial mortgages in Massachusetts and Connecticut. The corporate and other segment represents the remainder of our activities, including those of the parent company.
We are unable to predict with certainty the outcome of these future proceedings; however, based upon the information available to us as of the date of this report, we do not believe that the potential consequences of AAA Arizona's claims, if proven, would have a material adverse impact on our business, financial condition, liquidity or results of operations.
An unaudited summary of our 2007 and 2006 quarterly performance follows: