Salaries and Employee Benefits. Salaries and employee benefits increased from $373.2 million in 1999 to $406.3 million in 2000, an increase of $33.1 million, or 8.9%. This increase was due to $35.9 million
Net Investment Income. Net investment income increased from $117.5 million in 1999 to $127.1 million in 2000, an increase of $9.6 million, or 8.2%, due to higher investment yields.
Interest Credited to Policyholders. Interest credited to policyholders, which represents the amount credited to policyholder funds on deposit under universal life-type contracts and deferred annuities, increased from $157.8 million in 1999 to $162.9 million in 2000, or 3.2%, reflecting growth in the universal life fund balance.
Salaries and Employee Benefits. Salaries and employee benefits increased from $328.6 million in 1998 to $373.2 million in 1999, an increase of $44.6 million, or 13.6%. This increase was due in large part to $33.2 million of expenses incurred in connection with providing management services to the personal lines business previously managed by MCC.
of the purchase price ($662,778,000) was assigned to the "Value of Life Business Acquired" ("VOLBA"), which represented an actuarial determination of the expected profits from the business in force at the date of B.A.T's acquisition of the Company. The amount so assigned is being amortized over its actuarially determined useful life with the unamortized amount included in "Deferred Policy Acquisition Costs and Value of Life Business Acquired" in the accompanying consolidated balance sheets.
As of December 31, 1999, the Company had committed to a plan to sell one of its business service centers at a market price which was $1,789,000 lower than the carrying value of the property. In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ", the Company recognized an impairment loss of $1,789,000 which was reflected on the "General and administrative expenses" line in the "Management services to property and casualty insurance companies; and other" section of the Company's consolidated income statement for the year ended December 31, 1999. As of December 31, 2000, this business service center had not yet been sold.
Certificates of contribution and surplus notes of the P&C Group. The carrying amounts of these items are a reasonable estimate of their fair values.
The Company has entered into employment agreements with certain executives of the Company. Each agreement obligates the Company to compensate the executive should the executive's employment be terminated due to a qualifying event, as defined within the agreement. In the opinion of management, any payments made as a result of these agreements would not have a material adverse effect on the Company's consolidated results of operations or financial position.
The Company accounts for intersegment transactions as if they were to third parties and, as such, records the transactions at current market prices. There were no reportable intersegment revenues among the Company's three reportable operating segments for the years ended December 31, 2000, 1999 and 1998.
In connection with the private placement of an aggregate of $1,125,000,000 of securities by six Zurich RegCaPS Funding Trusts, the Company recapitalized its current capital structure. On February 9, 2001, ZGH, the owner of 500 Class A Shares, exchanged 50 Class A Shares for 50 shares of a new class of common stock, the Class C common stock, par value $1.00 per share (the "Class C Shares"). The Class C Shares were issued in six series (C-1 through C-6). Subsequently, ZGH contributed each respective series of the Class C Shares to one of six Zurich RegCaPS Funding Limited Partnerships (collectively, the "Partnerships"), which are controlled by Zurich Insurance Company (an affiliate of ZGH). As a result, upon completion of the recapitalization, 450 Class A Shares were owned by ZGH, 500 Class B Shares were owned by Allied Zurich Holdings Limited and 50 Class C Shares were owned by the Partnerships.