Because we have discontinued writing policies through other insurance companies as a managing general agency and now write those policies through our insurance company subsidiaries (or assume them through 100% quota share reinsurance), our commissions for selling and servicing policies on behalf of third-party insurance companies have decreased while premiums earned by insurance company subsidiaries have increased.
Loss before income taxes for the year ended June 30, 2005 was $1.6 million versus loss before income taxes of $9.2 million for the year ended June 30, 2004. For the year ended June 30, 2005, gains on sales of foreclosed real estate were $0.8 million, as compared to $4.1 million for the year ended June 30, 2004. Gains on sales of real estate represents proceeds received from the sale of foreclosed real estate in excess of carrying value, less selling costs.
Investment income increased as the increase in invested assets more than offset the reduction in yield. The weighted average investment yield for the portfolio was 3.84% at June 30, 2004 with a duration of 4.55 years. The yield for the comparable Lehman Brothers indices at June 30, 2004 was 3.72%.
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements made in the report, other than statements of historical fact, are forward-looking statements. You can identify these
Goodwill and other identifiable intangible assets are attributable to two reporting units: (1) the insurance operations purchased in the Company’s April 30, 2004 acquisition of USAuto and (ii) the fifteen retail locations purchased in the January 1, 2005 acquisition of a non-standard insurance agency in Texas. Goodwill and indefinite-life intangible assets are not amortized for financial statement purposes but are instead tested annually for impairment. The Company has chosen June 30 of each year as its annual impairment testing date for goodwill and other intangible assets. Included in other identifiable intangible assets is an amount related to the value of USAuto’s policy renewals at the date of acquisition which is being amortized over a 24-month period in proportion to anticipated policy expirations. The amount related to the value of Texas policy renewals is being amortized over a 7-month period. As of June 30, 2005, the Company tested goodwill and other intangible assets and as a result has recorded no impairment in connection with goodwill and other intangible assets since in management’s opinion, the estimated fair value of these reporting units exceeded their carrying value. For the years ended June 30, 2005 and 2004, $930 and $390, respectively, relating to the identifiable intangible assets was amortized against income. Amortization expense for the year ended June 30, 2006 will be $67.
dividing net income available to common shareholders by the weighted average number of such common shares and dilutive share equivalents. Dilutive share equivalents result from the assumed conversion of employee stock options and are calculated using the treasury stock method.
As a closing condition to the USAuto acquisition, the Company issued to each of two USAuto executives, options to purchase 100 shares of the Company’s common stock at an exercise price of $6.64 per share, which was equal to the fair market value at the time of grant. The options are subject to vesting, which is subject to acceleration upon certain events such as a change of control (as defined in their respective employment agreements), termination of employment by such executive for good reason (as defined in their respective employment agreements), by the Company without cause (as defined in their respective employment agreements) or due to death or disability. The options terminate upon the first to occur: (i) the tenth anniversary of the date of grant, (ii) 12 months following the date of an executive’s termination of employment by the Company for cause or (iii) 24 months following the date of an executive’s termination of services for any reason other than cause.