Statements contained in this analysis and elsewhere in this document that are not based on historical information are forward-looking statements and are based on management's projections, estimates and assumptions. Management cautions readers regarding its forward-looking statements (see "Forward-Looking Statements").
Investment policy is determined by the Board of Directors of the Company and each of the Insurance Subsidiaries. The Company's current investment policy is to balance its portfolio between long-term and short-term investments so as to achieve long-term returns consistent with the preservation of capital and maintenance of adequate liquidity to meet the payment of the Company's policy benefits and claims. The current schedule of the Company's invested asset maturities corresponds with the Company's expectations regarding anticipated cash flow payments based on the Company's policy benefit and claim cycle, which the Company believes is medium term in nature. The Company invests primarily in fixed-income securities of the U.S. Government and its related agencies, investment grade fixed-income corporate securities and mortgage-backed securities. Also, up to 7% of the Company's fixed maturity securities may be invested in higher yielding, non-investment grade securities.
The following table indicates by rating the composition of the Company's fixed maturity securities portfolio, excluding short-term investments and certificates of deposit, at December 31, 1999:
Investment grade: U.S. Government and agencies $ 18,414 18.9 AAA 1,865 1.9 AA 10,277 10.5 A 35,823 36.7 BBB 29,732 30.5 Non-Investment grade: BB 1,133 1.2 B and below 319 .3 ----------- ---------- Total fixed maturity securities $ 97,563 100.0 =========== ==========
Net cash provided by (used for) investing activities for the years ended December 31, 1999, 1998 and 1997 totaled $6.4 million, $13.3 million and $(40.4) million, respectively. Net cash provided by investing activities in 1999 and 1998 was primarily used to fund the Company's operating and financing activities. Further, the significant cash outflow to acquire investments in 1997 was related to the investment of the net proceeds from the issuance of Westbridge's Convertible Notes.
To the Board of Directors and Stockholders of Ascent Assurance, Inc.
As more fully described in NOTE 7, in order to provide the Company with sufficient funds to make the cash distributions to the holders of the Allowed 11% Senior Notes under the Plan, the Company entered into a Stock Purchase Agreement with CSFB, a significant noteholder, pursuant to which CSFB, subject to the conditions contained therein, purchased all of the shares of the New Preferred Stock which were not otherwise distributed under the Plan.
* Cumulative annual dividend rate of $102.50 per share payable annually in arrears on the last day of January in each year by issuance of cash or additional shares of New Preferred Stock.
A summary of stock option activity for the year ended December 31, 1999 is as follows:
The weighted average option exercise price was $2.88 for options outstanding at December 31, 1999. The weighted average option exercise price was $2.85 and $2.85, respectively, for options granted and forfeited during 1999.
For the year ended December 31, 1997, the Company recognized an aggregate of $1.0 million in extraordinary losses, net of taxes. Of this amount, (i) $0.6 million resulted from the recognition of unamortized financing fees associated with the prepayment and refinancing of the Company's revolving credit facility with Fleet National Bank (See NOTE 5 - "Financing Activities"); and (ii) $0.4 million resulted from the termination and recapture of the block of reinsured policies referred to in NOTE 12 - "Reinsurance."
A reconciliation of capital and surplus net income (loss) as reported on a statutory basis by the Company's Insurance Subsidiaries to the Company's consolidated GAAP stockholders' equity (deficit) and net income (loss) is as follows:
Stockholders' Equity: Common stock 703 Capital in excess of par value 37,641 Accumulated other comprehensive income, net of tax 3,911 Deficit (104,335) ---------------------