The selected consolidated financial data below should be read in conjunction with the consolidated financial statements and their accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations", which are included elsewhere in this Form 10-K.
Losses and loss adjustment expenses. Loss and LAE reserves are estimates of future payments for reported and unreported claims and related expenses of adjudicating claims with respect to insured events that have occurred. The change in these reserves from year to year is reflected as an increase or decrease to NCRIC's loss and loss adjustment expenses. Medical professional liability loss and LAE reserves are established based on an estimate of these future payments as reflected in NCRIC's past experience with similar cases and historical trends involving claim payment patterns. Other factors that modify past experience are also considered in setting reserves, including court decisions; economic conditions; current trends in losses; and inflation. Reserving for medical professional liability claims continues to be a complex and uncertain process, requiring the use of informed estimates and judgements. Although NCRIC intends to estimate conservatively its future payments relating to losses incurred, there can be no assurance that currently established reserves will prove adequate in light of subsequent actual experience.
Under terms of the contract based on the actual accumulated loss experience of the terminated program, NCRIC billed the hospital sponsor $1.3 million in 2000 and an additional $800,000 in January 2002. Based on the continuing development of loss experience, during the year ended December 31, 2001, $500,000 of gross premium earned has been accrued related to additional amounts due to NCRIC from the hospital sponsor.
Net investment income increased by $318,000, or 5%, for the year ended December 31, 2000 compared to the prior year reflecting an increase in yields, partially offset by a lower base of average invested assets. Net investment income for the year ended December 31, 2000 was $6.4 million compared to $6.1 million for the year ended December 31, 1999. Average invested assets, which include cash equivalents, decreased by $4.2 million, or 4%, to $101.6 million at December 31, 2000. Maturing investments were primarily reinvested in corporate and tax-exempt securities. The average effective yield was approximately 6.31% for the year ended December 31, 2000 and 5.74% for the year ended December 31, 1999. The tax equivalent yield was approximately 6.72% at December 31, 2000 and 6.18% at December 31, 1999. The change in investment yields is reflective of the market change in interest rates in 2000 compared to 1999.
NCRIC believes that all of its fixed maturity securities are readily marketable. Investment duration is closely monitored to provide adequate cash flow to meet operational and maturing liability needs. Asset and liability modeling, including sensitivity analyses and cash flow testing, are performed on a regular basis.
Interest rate changes expose NCRIC to a market risk on its investment portfolio. This market risk is the potential for financial losses due to the decrease in the value or price of an asset resulting from broad movements in prices, such as interest rates. In general, the market value of NCRIC's fixed maturity portfolio increases or decreases in an inverse relationship with fluctuation in interest rates. In addition, NCRIC's net investment income increases or decreases in a direct relationship with interest rate changes on monies re-invested from maturing securities and investments of positive cash flow from operating activities.
o NCRIC, Inc.'s concentration in a single line of business primarily in the District of Columbia;
Gross offering proceeds $ 10,360 Less offering expenses (1,998) -------- Net proceeds 8,362 Less: ESOP loan (1,036) Stock Award Plan loan (518) -------- Net proceeds, as adjusted $ 6,808 ========
Proceeds from bond maturities and redemptions of available for sale investments during the years ended December 31, 2001, 2000, and 1999, were $22.0 million, $10.5 million, and $66.1 million, respectively. Gross gains of $787,000, $16,000, and $260,000, and gross losses of $1,065,000, $21,000, and $331,000, were realized on bond redemptions and available for sale investments during years ended December 31, 2001, 2000, and 1999, respectively.
U. S Government and agencies $ 470 $ 811 $ 988 Corporate 3,144 2,252 1,424 Tax-exempt obligations 895 727 723 Asset and mortgage-backed securities 1,266 2,167 2,584 Equity securities 433 360 289 Short term investments 241 381 412 ------- ------- ------- Total investment income earned 6,449 6,698 6,420 Investment expenses (313) (291) (331) ------- ------- ------- Net investment income $ 6,136 $ 6,407 $ 6,089 ======= ======= =======
STOCKHOLDERS' EQUITY - GAAP BASIS $44,454 $41,449 $35,795 ======= ======= =======
Basic earnings per share of common stock $ 0.26 $ 0.09 $ 0.18 ($ 0.09) Diluted earnings per share of common stock $ 0.26 $ 0.09 $ 0.18 ($ 0.09)
Basic earnings per share of common stock $ 0.14 $ 0.27 $ 0.25 $ 0.24 Diluted earnings per share of common stock $ 0.14 $ 0.27 $ 0.25 $ 0.24
NCRIC GROUP, INC. AND SUBSIDIARIES (PARENT ONLY) SCHEDULE II CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEET AS OF DECEMBER 31, 2001 AND 2000 (IN THOUSANDS) - ------------------------------------------------------------------------- 2001 2000
Allowance for Doubtful Accounts $ 137 $ 238 $ - $ 350