felanders/preprocessed huggingface dataset:
The information entitled "Revenues and Earnings" and "Financial Position" from page 15 of the Registrant's Annual Report for the year ended December 31, 1998, is attached as Exhibit 13 hereto and is incorporated herein by reference.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, the notes thereto, and other information appearing elsewhere in this Form 10-K.
Consulting fee revenue consists of fees charged for services we perform in advising our clients on their executive compensation programs and related consulting services, retirement, benefit, people strategy, compensation surveys, and fees from legislative and regulatory policy matters. These fees are generally based on a rate per hour arrangement or a fixed monthly fee and are earned when the service is rendered.
Total revenue for the year ended December 31, 2005 was $38.0 million compared to $35.7 million for the year ended December 31, 2004. First year revenue for the year ended December 31, 2005, was $2.6 million higher than the prior year due to growth in consulting fee revenue from several services. Renewal revenue for the year ended December 31, 2005 was $10.1 million compared to $10.4 million for the year ended December 31, 2004. Commission expense for the year ended December 31, 2005 was $4.9 million compared to $4.1 million. The increase in commission expense is a result of increased marketing bonuses on higher revenue. General and administrative expenses for the year ended December 31, 2005 were $27.5 million compared to $25.7 million for the year ended December 31, 2004. The increase is due to a $445 thousand write off of obsolete software, additional expenses from higher consultant headcount and costs associated with performance based bonuses.
The 10-year inforce revenues net of commission expense are $610.2 million as of December 31, 2005, as compared to $628.1 at December 31, 2004.
As of September 30, 1994 the Company had leases, in the aggregate, for approximately 760,000 square feet of office space for its corporate headquarters, executive offices, regional offices and subsidiary operations in California, Florida, Oklahoma, Oregon, Texas and Washington. Of this aggregate amount, the Company had leases for its corporate headquarters and executive offices of approximately 105,000 square feet in Cypress, California.
The Company's ability to expand is dependent, in part, on competitive premium pricing and its ability to secure cost-effective contracts with additional physicians or to ensure that existing physician groups expand their operations to accommodate the Company's new HMO membership. Achieving such objectives with physicians is becoming difficult due to increasing competition. In addition, the Company's profitability is dependent, in part, on its ability to maintain effective control over health care costs while providing members with quality care. Factors such as health care reform, utilization, new technologies, hospital costs, major epidemics, and numerous other external influences may affect the Company's operating results. Accordingly, past financial performance is not necessarily a reliable indicator of future performance, and investors should not use historical records to anticipate results or future period trends.
The increase in the commercial medical loss ratio was primarily attributable to increased hospital capitation and out-of-area emergency costs related to the Company's HMOs. The increase in hospital capitation reflected changes in the contractual relationship with providers. These increases were partially offset by lower inpatient hospital costs, lower prescription drug costs and higher premium revenue.
The decrease in the purchase of marketable securities by the Company is related to the prior year investment of $61 million of offering proceeds received in October 1992. The Company made capital expenditures of $29 million for the year ended September 30, 1994, primarily for computer equipment. These purchases were financed in part by borrowings under capital leases. The Company anticipates that the level of capital expenditures will increase in fiscal year 1995 to support the redesign of information systems.
c) Property, Plant and Equipment. Property, plant and equipment are recorded at cost; replacements and major improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Upon sale or retirement of property, plant and equipment, the costs and related accumulated depreciation are eliminated from the accounts. Any resulting gains and losses are included in the determination of net income.
The provision for income taxes for the years ended September 30, 1994, 1993 and 1992, consists of the following components:
In Fire insurance, despite a noticeable drop in U.S.A. busi­ ness as a result of a change in the basis of certain treaties, we achieved a slight over-all increase in premium. The underwriting profit again decreased. Several major losses on the Continent and in Great Britain, affecting primarily industrial risks, and also the hurricane "Donna" in the U.S.A. have had an adverse influence on the aggregate underwriting result. On the other hand, various overseas countries have produced good results, in particular Latin America and again, after several loss years, Canada. — The experience in Hail insurance during the year under review was favourable, even though Italy and Greece, as last year, were hit by severe losses. — Burglary closed with a profit, whilst the Miscellaneous branches (Machinery, Water Dam­ age, Plate Glass and Livestock) produced a deficit on ac­ count of the unfavourable experience in American Boiler and Machinery business.
Illustrations: 1 Thomson Building with the offices of the Canadian Reassurance Company, 425 University Avenue.
Cash in Hand Postal Bank Account Bank Balances Current-Account Balances from Reinsurances Assumed from Reinsurances Ceded
As a service organization, the Company's primary expenses are salaries and related employee benefits. These expenses increased approximately $6.9 million, or 65.3%, in 1998 from 1997 and increased approximately $2.3 million, or 27.4%, in 1997 from 1996. These increases resulted primarily from increases in the average number of full-time equivalent employees, which rose to 291 in 1998, from 184 in 1997, and 151 in 1996. These increases in the average number of employees are largely attributable to preparation for and accommodation of increases in sales of insurance products. Salaries and benefits also increased due to increases in bonuses which are tied to net income, to the addition of personnel at higher pay levels and to normal pay increases for existing employees.
Courier and postage expense increased approximately $222,000, or 46.3%, during 1998 from 1997 and $107,000, or 28.70%, from 1997 to 1996. The increases are due to an overall increase in the volume of business and the establishment of the east coast service center.
In connection with a merger in 1991 between the Company and LifeSurance Corporation, a wholly-owned insurance subsidiary of the Company with no current ongoing operations, 615,242 shares of Series B Common Stock (the "Redeemable Series B Stock"), no par value, were authorized and issued in exchange for all of the outstanding stock of LifeSurance Corporation. Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), the Redeemable Series B Stock is subject to redemption at the option of the holder in quantities of up to 10% per year, provided that the redemption is in accordance with applicable corporate law. All of the Series A Redeemable Common Stock and Series B Redeemable Common Stock are hereafter collectively referred to as the "Redeemable Common Stock."
In March, 1999, the Company entered into an agreement to purchase for $4.3 million the building which houses the office space currently leased.
We believe that this building is adequate for our current needs.
2004 2003 ---- ---- Accrued interest income $ 605,484 $ 680,017 Notes receivable 64,320 460,145 Unamortized loan costs 837,665 430,803 Compensating cash balances 156,070 200,430 Due from sale of discontinued operations (see note 24) 2,587,343 -- Other 572,060 568,261 ---------- ---------- Total $4,822,942 $2,339,656 ========== ==========
Fixed securities (508,299) (2,164,790) Equity securities (81,422) (103,334) ------------- ------------- Total realized losses (589,721) (2,268,124) ------------- -------------
Net cash generated from financing activities was $11.7 million for the year ended December 31, 2004. The source of cash from financing activities is primarily reflected by the receipt of $12.5 million from the issuance of additional 6% Senior Subordinated Notes and proceeds from exercised stock options totaling $3.0 million, offset by $1.9 million paid in dividends and $2.0 million used to reduce revolving credit outstanding.
Federated Premium's operations are funded by the Revolving Agreement with FlatIron Funding Company LLC ("FlatIron"). The Revolving Agreement is structured as a sale of contracts receivable under a sale and assignment agreement with WPAC (a wholly-owned subsidiary of FlatIron), which gives WPAC the right to sell or assign these contracts receivable. Federated Premium, which services these contracts, has recorded transactions under the Revolving Agreement as secured borrowings. During September 2004, we negotiated a new revolving loan agreement in which the maximum credit commitment available to us was reduced at our request to $2.0 million with built-in options to incrementally increase the maximum credit commitment up $4.0 million over the next three years. We believe that this available credit is sufficient based on our current operations.
We are involved in other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity.
Quarterly payment due date 2004 2003 - -------------------------- ------- ------- January 31, 54,014 -- April 30, 53,729 -- July 31, 49,965 -- October 31, 69,200 61,792 ------- ------- Total common stock issued 226,908 61,792 ======= =======
Global Preneed net income increased $18.1 million, or 46%, to $57.7 million for Twelve Months 2018 from $39.6 million for Twelve Months 2017. This increase was primarily due to the lower effective tax rate. Excluding the impact of a lower effective tax rate, segment net income increased due to higher investment income and the absence of $5.0 million in after-tax software impairment recorded in 2017.
For life insurance and annuity contracts acquired in 2000 and prior, interest and discount rates as well as mortality assumptions are based on statutory valuation requirements, which approximate the GAAP valuation requirements, with no explicit provision for lapses.
Rental expense for the Company's operations was approximately $46,271,000, $45,198,000 and $44,752,000 for 2015, 2014 and 2013, respectively. Future minimum lease payments, without provision for sublease income, are $42,470,000 in 2016, $39,443,000 in 2017 and $200,636,000 thereafter.
(2) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.
Company's investment funds. In 2014, realized gains included an $86 million gain from the sale of a commercial office building in London, England and a $39 million gain resulting from the initial public offering by the above public company.
The Company also attempts to maintain an appropriate relationship between the effective duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The effective duration of the investment portfolio was 3.3 years and 3.2 years at December 31, 2015 and 2014, respectively. The Company’s investment portfolio and investment-related assets as of December 31, 2015 were as follows:
Loans Receivable. Loans receivable, which are carried at amortized cost, had an amortized cost of $273 million and an aggregate fair value of $276 million at December 31, 2015. The amortized cost of loans receivable is net of a valuation allowance of $2 million as of December 31, 2015. Loans receivable include real estate loans of $200 million that are secured by commercial real estate located primarily in Arizona, Maryland, New York, and Tennessee. Real estate loans receivable generally earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) through August 2025. Loans receivable include commercial loans of $73 million that are secured by business assets. Commercial loans have fixed interest rates and varying maturities not exceeding 10 years.
Comprehensive income encompasses all changes in stockholders' equity (except those arising from transactions with stockholders) and includes net income, net unrealized holding gains or losses on available for sale securities, unrealized foreign currency translation adjustments and changes in unrecognized pension obligations.
At December 31, 2015 and 2014, investments in fixed maturity securities were as follows:
In this section, we review the consolidated financial condition of the Company at December 31, 2004, 2003 and 2002 and the consolidated results of operations for the periods ended December 31, 2004, 2003 and 2002. Please read this discussion in conjunction with the accompanying consolidated financial statements and notes.
The Company's financial condition strengthened during 2004 due to the increase in net income from operations.
Premium Reserve from 1918 Reserve for outstanding Losses from 1913 Net Premiums
outstanding Series B Preferred Shares elected to participate in the recapitalization
The Series A Preferred designation is entitled to receive cumulative dividends at the rate of 4.00% per annum and the Series B Preferred and Series C Preferred designations are entitled to receive cumulative dividends at the rate of 8.00% per annum, with the Series A, B and C Preferred designations having equal ranking and preference as to dividends, liquidation rights and priority to the Company's common stockholders. The accrued (but undeclared) dividends associated with the Series C Preferred exchange amounted to $2,295,624 and are included in the total amount exchanged for Series C Preferred Shares.
Insurance premium receivables are presented net of an estimated allowance for doubtful accounts, which is based on a periodic evaluation of the aging and collectability of premium receivables.
Premium revenue is recognized ratably over the term of the policy period and thus is relatively stable from period to period with fluctuations for comparable periods generally reflecting the overall growth or loss of business. Whereas, commission revenue, which is dependent on the timing of issuance or renewal of bonds, is expected to be somewhat more "seasonable" from quarter-to-quarter with fluctuations for comparable periods largely reflecting the overall growth or loss of business. Investment income is expected to remain relatively consistent from period to period, but can fluctuate based on interest rates, market conditions, growth or loss of business, and investment funds expended in the payment of claims.
Insurance policy acquisition costs represent charges to operations for underwriting, commissions and premium tax attributable to surety polices issued by FSC and are recognized ratably over the period in which premiums are earned. In fiscal 2012 such costs amounted to $311,385 or 32.55% of earned premium as compared with $313,223 or 34.38% in fiscal 2011. The slight decrease of $1,838 in expenses is attributable to costs associated to the decrease in gross premium written, while the decrease as a percentage is attributable to the decrease specifically in new gross premiums written, which pay a higher commission than renewal premiums.
The Company is a full-service dental benefits provider. Approximately 82% of revenues are generated from managed dental care plan subscriber premiums. In addition, DHMI generates approximately 13% of the Company's revenues from providing management services and support to dental practices. Reduced fee-for- service plans and third-party administrator services generate the balance of revenues.
Consistently applying the historical policy mentioned above did not result in the recognition of impairment which was inconsistent with the events that had occurred in the Company's business. Therefore, management concluded that its accounting policy pursuant to APB No. 17 for assessing recoverability of goodwill not identified with assets subject to an impairment loss should be changed from an undiscounted approach to a discounted approach as an estimate of fair value.
The total cost associated with the required modifications or upgrades to become Year 2000 compliant is not expected to be material to the Company's financial position. Costs associated with the Year 2000 Project are being expensed as incurred. Funding for the program is being provided through the Company's normal budget with no additional funding allocated to the Company's information technology (IT) department due to the Year 2000 issues. The total estimated cost of the Year 2000 Project is approximately $300,000. The total amount expended on the Project through December 31, 1998, was $100,000, which includes costs of a project manager, programmers, upgrading of personal computers and replacing or upgrading field office phone systems. As mentioned above, the Company believes its crucial systems and software are Year 2000 compliant. If during testing it is determined that there are significant Year 2000 issues in these crucial systems and software, then costs could exceed $300,000. Even though the costs of the Year 2000 Project can not be estimated with absolute certainty, the Company does not believe that the amount to be spent will be material to the Company's results of operations, liquidity or financial condition.
Modified Coinsurance. Modified coinsurance is similar to coinsurance except the ceding life company retains the reserves and the assets related to the reserves. Modified coinsurance is used primarily for products that develop cash values and allows the ceding life company to retain the associated assets for investment purposes.
Reinsured Policy Revenues. Reinsured policy revenues increased $2.7 million, or 24%, from $11.2 million for the year ended December 31, 2001 to $13.9 million for the same period in 2002. This increase was due to: (1) the conversion of certain Financial Freedom Builder variable universal life
Amortization of Deferred Acquisition Costs. Amortization of deferred acquisition costs decreased $72,000, or 2%, from $4.0 million for the year ended December 31, 2000 to $3.9 million for the same period in 2001. A majority of the decrease in the amortization of deferred acquisition costs resulted from the refinement of our methodology of recognizing earned premiums under the Zurich Life monthly renewable term agreement, which caused a $122,000 decrease. Offsetting this decrease was a net increase of $50,000, arising from the unlocking of historical realized experience and future experience assumptions.
Our second segment, reported as universal life-type, relates to all variable annuity policies and those variable universal life policies that are reinsured on a coinsurance and modified coinsurance basis. The products reinsured on a coinsurance and modified coinsurance basis are accounted for under SFAS No. 97 accounting principles and, as such, revenues therefrom are classified as reinsured policy revenues.
Notes to Consolidated Financial Statements for the years ended December 31, 2000, 2001, and 2002
The Trust encounters economic, legal, and longevity risk. The main components of economic risk potentially impacting the Trust are market risk, concentration of credit risk, and the increasing cost of insurance risk. The Trust’s market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could change and materially affect future financial statements. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the carrier’s deteriorating financial condition or otherwise. Another credit risk potentially impacting the Trust is the risk continuing fractional holders may default on their future premium obligations, increasing the Trust’s premium obligations. The increasing cost of insurance risk includes the carriers’ attempts to change a policy’s cost of insurance. While some cost of insurance increases are anticipated and taken into consideration in the Trusts forecasts, other cost of insurance increases are unilaterally imposed by the carrier. In the second quarter of 2018, one carrier increased the cost of insurance associated with its policies held by the Trust, representing about $188 million in face value, by approximately 45% over the prior cost of insurance. There is no additional impact in third and fourth quarters of 2018 or in the year 2019 from this carrier.
As of December 31, 2019, the Trust owns an interest in 2,896 policies of which 483 are life settlement policies and 2,413 are viaticals. As of December 31, 2018, the Trust owned an interest in 3,037 policies of which 548 are life settlement policies and 2,489 are viaticals (the “PHT Portfolio”). The PHT Portfolio’s aggregate face value is $1.1 billion as of December 31, 2019 of which $938.2 million is attributable to life settlements and $191.3 million is attributable to viaticals. The PHT Portfolio’s aggregate face value is $1.3 billion as of December 31, 2018 of which $1.1 billion is attributable to life settlements and $203.1 million is attributable to viaticals. The PHT Portfolio’s aggregate fair value is $172.2 million as of December 31, 2019 of which $168.7 million is attributable to life settlements and $3.5 million is attributable to viaticals. The PHT Portfolio’s aggregate fair value was $186.3 million as of December 31, 2018 of which $182.0 million was attributable to life settlements and $4.3 million was attributable to viaticals.
Premiums collected on universal life products are not reflected as revenues in the Company's consolidated statements of earnings in accordance with GAAP. Actual domestic universal life premiums are detailed below.
The fluctuation in reported contract interest amounts for fixed-indexed annuities is driven by sales levels, the level of the business in force and the positive or negative performance of equity markets on option values. The derivative gain (loss) information included in the net investment income discussion above is largely reflected in the amounts shown for contract interest for fixed-indexed annuities.Additionally, during 2011, the Company added $19.2 million of reserves to a closed block of annuity business with higher minimum guaranteed interest rates as a result of extending the assumed benefit period beyond that previously used. This amount is included in the all other annuities contract interest for 2011.
The Company's overall conservative investment philosophy is reflected in the allocation of its investments, which is detailed below as of December 31, 2013 and 2012. The Company emphasizes investment grade debt securities, with smaller holdings in mortgage loans and policy loans, and purchases index call options to support its fixed-index policyholder contract obligations.
In addition to diversification, an important aspect of the Company's investment approach is managing the credit quality of its investments in debt securities. Thorough credit analysis is performed on potential corporate investments including examination of a company's credit and industry outlook, financial ratios and trends, and event risks. This emphasis is reflected in the high average credit rating of the Company's debt securities portfolio with 98.0% held in investment grade securities. In the table below, investments in debt securities are classified according to credit ratings by Standard and Poor's ("S&P®"), or other nationally recognized statistical rating organizations if securities were not rated by S&P®.
The following table represents the mortgage loan allowance for the years ended December 31, 2013 and 2012:
The Company does not recognize interest income on loans past due ninety days or more. The Company had no mortgage loans past due six months or more at December 31, 2013 and 2012. There was no interest income not recognized in 2013, 2012 and 2011.
finance operations, offset partially by an increase in real estate owned ("REO") in the real estate lending operation. The decrease in non-accrual loans in the commercial finance lending operation is primarily due to one loan in the commercial finance portfolio classified as non-accrual at December 31, 1995 and subsequently charged-off in 1996.
The Company's operations rely on various computer-based information systems in the conduct of its businesses ("Systems"). Currently, some of these Systems will be unable to function properly after December 31, 1999 due to the inability of the affected Systems to recognize the year 2000. This problem exists for a substantial number of business enterprises, both domestically and internationally, and has been referred to as the "Year 2000" problem.
Reference is made to the "Five Year Summary of Selected Financial Highlights" on page 17 of the 2001 Annual Report to Shareholders, which is incorporated herein by reference.
Reference is made to the Consolidated Financial Statements on pages 47-51 and the accompanying Notes to Consolidated Financial Statements on pages 52-79 of the 2001 Annual Report to Shareholders which meet the requirements of Regulation S-X, and which include a summary of quarterly results of consolidated operations (see Note 22 of Notes to Consolidated Financial Statements--page 79), which is incorporated herein by reference.
. A $2,472,000 or 39% reduction in fees to financial institutions due to lower sales volume. The percentage decrease to financial institutions is slightly more than the decrease in production due to the fact that the fee rates on those clients with lower production volumes was greater than the fee rates on the remaining clients or clients who had an increase in production;
. A $284,000 or 34% reduction in salesperson's commissions also due to lower sales volume; and
oAs a result of the Tax Act, the Company recorded a deferred income tax expense of $9.4 million due to the re-measurement of deferred tax assets, liabilities and related valuation allowance.
oUnderwriting experience, as indicated by its U.S. GAAP Combined Ratios, for the Specialty Health segment are as follows for the years indicated (in thousands):
Corporate derives its funds principally from: (i) dividends from the Insurance Group; (ii) management fees from its subsidiaries; and (iii) investment income from Corporate liquidity. Regulatory constraints historically have not affected the Company's consolidated liquidity, although state insurance laws have provisions relating to the ability of the parent company to use cash generated by the Insurance Group. The Insurance Group declared and paid $18.0 million, $18.4 million and $10.6 million of cash dividends to Corporate in 2017, 2016 and 2015, respectively.
During June 1998, CRS was informed that its principal client (representing nearly 70% of CRS revenues) would not be renewing its contract in October 1998. This information combined with present operating losses incurred by CRS indicated that the net book value of the goodwill and intangibles related to the CRS operations, amounting to $1,935,000, was not recoverable and thus, was written-off. The Company also performed a review of other long-lived assets prior to the close of its results for the quarter ended June 30, 1998. The results of its review indicated that an impairment loss existed related to certain identifiable intangible contract values resulting from the acquisition of Social Security Disability Consultants and Disability Services, Inc. (collectively, "SSDC") in June 1997. The impairment loss primarily resulted from a significant decline in revenues realized under SSDC's Medicare coordination of benefits program. As it appeared that the decline in revenues would continue, intangibles in the amount of $2,150,000 were written off.
Depreciation and amortization expenses increased $548,000 (28%) from $1,955,000 in 1997 to $2,503,000 in 1998. The increase is mainly attributable to increased amortization on the goodwill acquired in the purchases of DRMS in September 1998 and of SSDC and PWS in June and July 1997, respectively.
On August 31, 1998, the Company entered into a revolving line of credit agreement (the "Credit Agreement") with Fleet National Bank ("Fleet"). Under the Credit Agreement, which was amended on December 31, 1998 and expires August 31, 2003, the Company may borrow up to specified amounts beginning at $17,000,000 at the prime base rate plus 0.50% or London Interbank Offered Rate ("LIBOR") plus 3.50%. The $17,000,000 credit availability is subject to mandatory commitment reductions each quarter in amounts ranging from $250,000 to $1,000,000. At December 31, 1998, the Company had outstanding borrowings of $16,500,000 under the Credit Agreement which were all tied to the prime base lending rate (7.75%) plus the applicable margin. The Credit Agreement is secured by substantially all of the Company's assets and requires the Company to meet certain financial covenants, including minimum ratios for interest, debt service and fixed charge coverage along with minimum net worth levels. Additionally, the Credit Agreement prohibits the payment of dividends by the Company without the Bank's written consent. The Company was in compliance with the financial covenants contained in the Credit Agreement at December 31, 1998.
We account for insurance policies that we write in accordance with Statement of Financial Accounting Standards (SFAS) No. 60, “Accounting and Reporting by Insurance Enterprises,” or SFAS 60. Premiums written are recognized as revenues and are earned ratably over the term of the related policy. Unearned premiums represent the portion of premiums written that are applicable to future insurance coverage provided by policies. AutoOne, one of our subsidiaries, which acts as a limited assigned distribution, or LAD, servicing carrier, enters into contractual arrangements with insurance companies to assume private passenger and commercial automobile assigned risk exposures in 22 states. AutoOne receives LAD and commercial limited assigned distribution, or CLAD, servicing fees from these other companies for assuming these risks. In addition, AutoOne chooses to write certain policies voluntarily by taking risks out of the New York Automobile Insurance Plan, or NYAIP. These policies generate takeout credits which can be sold for fees, which we refer to as take-out fees, to other carriers. These other carriers in turn can use such credits to reduce their obligations to write assigned risk business. AutoOne’s LAD and CLAD servicing and take-out fees are recorded as written premium when billed and are earned ratably over the term of the related policy to which the fee relates.
Fund American has mandatorily redeemable preferred stock. This instrument is classified as a liability and are carried at its historical carrying value. All dividends and accretion on Fund American’s mandatorily redeemable preferred stock have been recorded as interest expense. See Note 11. “Mandatorily Redeemable Preferred Stock” of the accompanying consolidated financial statements.
As a result of an actuarial review completed in the fourth quarter of 2005, we reallocated a portion of our IBNR reserves from some of our ongoing lines of business to run-off. This shifted $34.4 million of our IBNR reserves from specialty lines ($10.9 million), commercial lines ($11.5 million) and personal lines ($12.0 million) to our run-off. This adjustment had no impact on our 2005 combined ratio.
The following table summarizes our capital structure as of December 31, 2005 and 2006:
During 2004, we declared and paid dividends in cash of $228.9 million to FAEH.
In 2005, we experienced $99.0 million of unfavorable development on prior accident year loss reserves, primarily due to higher than anticipated defense costs and higher damages from liability assessments in general liability and multiple peril reserves in our run-off operations.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income of AMIC, and tax planning strategies in making this assessment. Management believes that although uncertainty exists regarding the future realization of deferred tax assets, the valuation allowance has been adjusted to account for the expected utilization of net operating losses against future taxable income. A liability for uncertain tax positions is recorded when it is more likely than not that a tax position will not be sustained upon examination by taxing authorities.
medical premiums written and assumed of $21,006,000 and a decrease in vision premiums assumed of $1,098,000. Premiums relating to group disability increased $490,000 due to higher DBL premiums assumed. For the year ended December 31, 2014, Independence American assumed 10% of IHC’s short-term medical business, 20% of IHC’s DBL business, 8% of certain of IHC’s LTD business, and approximately 27% of IHC’s medical stop-loss business. There were no significant changes to these percentages from the prior year. For the year ended December 31, 2014 and December 31, 2013, Independence American assumed approximately 10% and 12%, respectively, of certain of IHC’s group major medical business.
Net Investment Income. Net investment income increased $98,000 from 2013 to 2014 due to higher invested assets, offset by a decline in yield on those assets. The consolidated investment yields were 2.9% and 3.2% for the years ended December 31, 2014 and 2013, respectively.
A significant decrease in premiums and earnings due to exiting the medical stop-loss business as a result of the closing of the Risk Solutions Sale and Coinsurance Transaction.
At December 31, ----------------------------------------------- 1997 1996 1995 ------------ ------------ -------------- (In thousands, except share data)
Approximately $32.9 million, or 46%, of net premiums written in 1996 resulted from unearned premium portfolios and other non-recurring transactions. This amount included $11.9 million of specialty premiums written from contracts pursuant to which the Company reinsures a portion of one underlying policy for multiple years. Such premiums will be earned over the multiple periods as the exposures expire. In 1997, there were no significant unearned premium portfolios or other non-recurring transactions included in net premiums written.
Net cash flow from operating activities for the years ended December 31, 1997 and 1996 was approximately $49 million and $31 million, respectively, consisting principally of premiums received, investment income and net investment gains, offset by operating costs and expenses.
Management Services from Parent. Management services from Parent decreased 68.8% to $406,000 in 2002 from $1.3 million in 2001. This decrease was primarily related to reduced office lease expense under the new sublease agreement with Bankers Financial Corporation effective in December 2001, coupled with the Company’s effort to consolidate office space in mid-2002. Additionally, IT expenses were reduced as compared to the prior year for services previously provided by BIG.
Cost of Outsourcing Services. Cost of outsourcing services increased 11.1% to $41.9 million in 2001 from $37.7 million in 2000. As a percentage of outsourcing services revenues, cost of outsourcing services decreased to 73.4% in 2001 from 80.4% in 2000. The increase in the dollar amount of cost of outsourcing services was primarily attributable to an increase in revenue from the Company’s Colonial Claims subsidiary, which pays approximately 70% of each dollar of revenue received to independent adjusters who adjust claims on such subsidiary’s behalf. The increase also resulted from the addition of a new document imaging system and the opening of a new document output center in late 2000, with related new costs for equipment and services. The increase was partially offset by a decrease of $3.8 million in payroll costs due to two staff reductions completed in late 2000 and early 2001 and the reduction of the Company’s IT staff in June 2001, coupled with a decrease in contract labor/consulting costs of $779,000.
Consolidated loss reserves increased by $12.6 million to $31.3 million at December 31, 1997 from $18.7 million at December 31, 1996, primarily due to the ongoing maturation of the Company's book of business, which is at an early stage of development, and the growth of insurance in-force. See "-- Results of Consolidated Operations -- 1997 Compared to 1996." Consistent with industry practices, the Company does not establish loss reserves for future claims on insured loans which are not currently in default.
During the fourth quarter 2002, ML of New York introduced a new C-Share variable annuity product. This product differs from ML of New York’s existing C-Share product by offering investment options managed by different investment advisors and a fee structure that varies with asset size. Sales of the new variable annuity product were $0.5 million during the nine-week period ended December 31, 2002.
ML of New York’s effective federal income tax rate decreased to 16% for 2002 from 45% for 2001. The changes in the effective federal income tax rate during the respective periods are due to certain permanent adjustments recorded in 2002. Also, during 2002, ML of New York’s current and deferred tax components have been significantly impacted by fluctuations in tax reserves for guaranteed minimum death benefits. The reserve fluctuations have resulted in an increased current tax benefit and an increased deferred tax expense during 2002 as compared to 2001.
As mentioned previously, GWL&A provides all administrative services to the Company. GWL&A has a written plan that encompasses all computer hardware, software, networks, facilities (embedded systems) and telephone systems. The plan also includes provisions for identifying and verifying that major vendors and business partners are Y2K compliant. GWL&A is developing contingency plans to address the possibility of both internal and external failures as well. The plan calls for full Y2K compliance for core systems by June 30, 1999 and full Y2K compliance for all Company systems by October 31, 1999.
BALANCE SHEETS DECEMBER 31, 1998 AND 1997 [Dollars in thousands except for share information]
Policy and Contract Claims - Policy and contract claims include provisions for reported claims in process of settlement, valued in accordance with the terms of the related policies and contracts, as well as provisions for claims incurred and unreported based primarily on prior experience of the Company.
Fixed maturities owned at December 31, 1998 are summarized as follows:
Other comprehensive income at December 31, 1997 is summarized as follows:
Industry and regulatory guidelines suggest that the ratio of a property and casualty insurer's annual net premiums written to statutory policyholders' surplus should not exceed 3.0 to 1. Based on the combined surplus of all of the licensed insurance subsidiaries of $853.8 million at December 31, 1999, and net written premiums for the twelve months ended on that date of $1,206.2 million, the ratio of writings to surplus was approximately 1.4 to 1.
The terms of the loan agreements include certain affirmative and negative covenants, all of which are met by the Company at December 31, 1999.
During 1998, the NAIC approved the codification of statutory accounting practices. Codification will become effective for the year ended December 31, 2001. The Company has estimated that its total surplus, at December 31, 1999 would have increased by approximately$84 million if codified accounting rules, as currently stated, were effective. The primary items that would cause the increase are the elimination of excess of statutory reserves over statement reserves and the establishment of a net deferred tax asset.
1997. Under this statement all items required to be recognized under accounting standards as components of comprehensive income must be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company has adopted this accounting standard in 1998. Adopting the accounting standard has no impact on reported net income of the Company.
Equity Price Risk. Equity price risk results from changes in the level or volatility of equity prices which affect the value of equity securities. At December 31, 2000 and December 31, 1999, the Company had approximately 19% and 10% respectively of its portfolio invested in an international equity fund. As of December 31, 2000 and 1999, the net fair value asset exposure to equity price risk was approximately $17.1 million and $11.8 million, respectively, and the potential gain in fair value resulting from a hypothetical 10% increase in the underlying equity prices would be approximately $1.7 million and $1.2 million, respectively.
The following table sets forth an analysis of changes in the loss reserves for the years ended December 31, 2000, 1999 and 1998:
Net Income for the year 11,717 3,666,656 3,678,373 Dividends paid 0 (673,134) (673,134) Redemption of participating 0 51,189 51,189 stock ---------- ----------- -----------
UMC management is disappointed with the results produced by its sales and marketing department during the last two years. The primary factors which have caused UMC's poor sales performance are increased competition and poor sales management. To address these issues, UMC dismissed its Vice President of Sales and Marketing in February 2006, and hired a new Director of Sales and Marketing on March 30, 2006. UMC management is also evaluating several new service offerings, including medical debt purchasing, which are intended to generate revenue and restore profitability. In 2006, management will continue to focus on marketing traditional and new services to both existing and prospective customers. There can be no assurance that UMC will attain the same level of new sales in 2006 that it attained in 2005, or that the operating margin on new business sold in 2006 will be consistent with past performance.
The Company's billing and collection services revenue is recognized upon receipt by the customer of payment from a third party payor or guarantor of a patient's account and upon notification by the customer to the Company that such payment has been received, or upon receipt of such payment by UMC. Coding
During 2003, the Company applied and was approved for two $100,000 unsecured lines of credit, with two different banks. The first line was approved July 17, 2003, and carries an annual interest rate of prime plus 6 3/4 %. The outstanding balance on this line was $98,000 at December 31, 2005 and $99,000 at December 31, 2004. The second line of credit was approved July 30, 2003 and bears interest at an annual rate of prime plus 2%. The outstanding balance on this line was $99,000 at December 31, 2005 and $100,000 at December 31, 2004.
- was $13.7 million and $14.1 million for the years ended December 31, 2005 and 2004, respectively. Fee and other income consist primarily of separate account fees and similar charges, including mortality and expense ("M&E") charges earned on variable annuity balances. M&E charges, which are based on the market values of the assets in the separate accounts supporting the contracts, were $9.0 million and $8.6 million for the years ended December 31, 2005 and 2004, respectively. Variable product fees represented 1.37% and 1.42% of the average variable annuity separate account balances for the years ended December 31, 2005 and 2004, respectively. The increase in separate account income was due to an increase in average separate account assets. Average separate account assets were $657.5 million and $606.4 million for the years ended December 31, 2005 and 2004, respectively.
The Company has a comprehensive process in place to identify potential problem securities that could have an impairment that is other-than-temporary. At the end of each quarter, all securities with an unrealized loss are reviewed. An analysis is undertaken to determine whether this decline in market value is other-than-temporary. The Company's process focuses on issuer operating performance and overall industry and market conditions. Any deterioration in operating performance is assessed relative to the impact on issuer financial ratios, including leverage and coverage measures specific to an industry and relative to any investment covenants. Additionally, the Company's analysis assesses each issuer's ability to service its debts in a timely fashion, the length of time the security has been in an unrealized loss position, rating agency actions, and any other key developments. The Company has a Credit Committee that includes members from its investment, finance and actuarial functions. The Credit Committee meets and reviews the results of the Company's impairment analysis on a quarterly basis.
Net realized investment (losses) gains consisted of the following for the years ended December 31 (in 000's):
The fair values of cash and cash equivalents are estimated to be cost plus accrued interest. The fair values of short-term bonds are estimated to be amortized cost. The fair values of publicly traded fixed maturities are based upon market prices or dealer quotes. For privately placed fixed maturities, fair values are estimated by taking into account prices for publicly traded securities of similar credit risk, maturity, repayment and liquidity characteristics. The fair values of mortgage loans are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Policy loans are stated at unpaid principal balances, which approximate fair value. The estimated fair value of assets held in separate accounts is based on quoted market prices.
The "Management's Discussion and Analysis" section on pages 3 through 11 of Exhibit 13 representing pages 12 through 20 of the Company's annual report to security holders for the fiscal year ended December 31, 1999, is incorporated herein by reference.
The Financial Statements on pages 12 through 35 of Exhibit 13 representing pages 21 through 44 of the Company's annual report to security holders for the fiscal year ended December 31, 1999, are incorporated herein by reference.