Other Expenses. Other expenses totaled $9.1 million in 2009, an increase of $1.4 million, or 18.4%, from $7.7 million in 2008. Other expenses result primarily from the operations of PointSure, which continued to experience direct costs associated with the expansion of insurance products they offer, and PMCS.
As of December 31, 2010, we had no direct investments in any bond insurer, and the following bond insurers insured more than 10% of the municipal bond investments in our portfolio:
increased claim duration and its effect on treatment utilization and costs;
We have audited the accompanying consolidated balance sheets of SeaBright Holdings, Inc. and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
Deferred premiums receivable consist of the unbilled portion of total policy premiums. For a typical policy, the entire premium is recorded as deferred premium receivable at inception and is billed over the policy period according to the terms of the policy. Premiums receivable consist of amounts that have been billed to policyholders. The allowance for doubtful accounts, which represents the Company’s best estimate of the amount of uncollectible premium in the Company’s existing premiums receivable balance, is based on historical account write-offs and takes into consideration the current economic environment. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Management’s determination of the fair value of each reporting unit incorporates multiple inputs including discounted cash flow calculations and, as appropriate, the level of the Company’s own share price and assumptions that market participants would make in valuing the reporting unit. Other assumptions include levels of economic capital, future business growth, earnings projections, assets under management and the discount rate utilized.
Major categories of consolidated net investment income are summarized as follows for the years ended December 31, 2010, 2009, and 2008:
The tables below present balances of assets and liabilities measured at fair value on a recurring basis.
Direct premiums written totaled $262.0 million, $286.0 million, and $263.8 million for the years ended December 31, 2010, 2009 and 2008, respectively.
On May 26, 2004, SBIC issued in a private placement $12.0 million in subordinated floating rate Surplus Notes due in 2034. The note holder is ICONS, Ltd. and Wilmington Trust Company acts as Trustee. Interest, paid quarterly in arrears, is calculated at the beginning of the interest payment period using the 3-month LIBOR plus 400 basis points. The quarterly interest rate cannot exceed the initial interest rate by more than 10% per year, cannot exceed the corporate base (prime) rate by more than 2% and cannot exceed the highest rate permitted by New York law. The rate or amount of interest required to be paid in any quarter is also subject to limitations imposed by the Illinois Insurance Code. Interest amounts not paid as a result of these limitations become “Excess Interest,” which the Company may be required to pay in the future, subject to the same limitations and all other provisions of the Surplus Notes Indenture. To date, there has been no Excess Interest. The interest rate at December 31, 2010 was 4.3%. Interest and principal may be paid only upon the prior approval of the Illinois Department of Insurance. In the event of default, as defined, or failure to pay interest due to lack of Illinois Department of Insurance approval, the Company cannot pay dividends on its capital stock, is limited in its ability to redeem, purchase or acquire any of its capital stock and cannot make payments of interest or principal on any debt issued by the Company which ranks equal with or junior to the Surplus Notes. If an event of default occurs and is continuing, the principal and accrued interest can become immediately due and payable. Interest expense for the years ended December 31, 2010, 2009, and 2008 was $0.5 million, $0.6 million, and $0.9 million, respectively.
The Company leases certain office space for its headquarters and regional offices under agreements that are accounted for as operating leases. Lease expense totaled $3.5 million, $3.4 million and $2.9 million for the years ended December 31, 2010, 2009, and 2008, respectively. Total rent, including the effect of rent increases and concessions, is expensed on a straight-line basis over the respective lease terms.
The following table summarizes the amounts of goodwill related to previous acquisitions: