felanders/preprocessed huggingface dataset:
For the GMDB and GMIB features of our variable annuities, the reserves for these contracts are significantly influenced by the future rate of return assumptions. The following table provides a demonstration of the sensitivity of the reserves for GMDBs and GMIBs related to variable annuity contracts relative to our future rate of return assumptions by quantifying the adjustments to these reserves that would be required assuming both a 100 basis point increase and decrease in our future rate of return. The sensitivity includes an increase and decrease of 100 basis points to both the near-term future rate of return assumptions used over the next four years, and the long-term expected rate of return used thereafter. The information below is for illustrative purposes only and considers only the direct effect of changes in our future rate of return on operating results due to the
Separate account assets increased $19,515 million, from $80,887 million at December 31, 2012 to $100,402 million at December 31, 2013, primarily driven by market appreciation and positive net flows from variable annuity new business sales.
We also manage certain risks associated with our variable annuity products through arrangements with an affiliated captive reinsurance company. We reinsure variable annuity living benefit guarantees to an affiliated captive reinsurance company, Pruco Re. This enables Prudential Financial to aggregate these risks within Pruco Re and manage them more efficiently through a hedging program. Since Pruco Re is domiciled and subject to regulation in the State of Arizona, the Company is able to claim statutory reinsurance reserve credit for business ceded to Pruco Re without any need for Pruco Re to collateralize its obligations under the reinsurance arrangement. However, for business ceded to Pruco Re by PLNJ, Pruco Re must collateralize its obligations under the reinsurance arrangement in order for PLNJ to claim a reinsurance reserve credit for its business ceded. This requirement is satisfied by Pruco Re depositing assets into statutory reserve credit trusts.
Liquid assets include cash and cash equivalents, short-term investments and fixed maturities that are not designated as held-to-maturity and public equity securities. As of December 31, 2013 and 2012 the Company had liquid assets of $5,994 million and $6,676 million, respectively. The portion of liquid assets comprised of cash and cash equivalents and short-term investments was $323 million and $524 million as of December 31, 2013 and 2012, respectively. As of December 31, 2013, $5,265 million, or 93%, of the fixed maturity investments in company general account portfolios were rated high or highest quality based on NAIC or equivalent rating. The remaining $386 million, or 7%, of these fixed maturity investments were rated other than high or highest quality.
See pages 26 through 28 of Management’s Discussion and Analysis for a more extensive analysis of factors impacting the individual segment operating results between years.
The Company’s 2005 net income is $324,000 compared to a net income of $256,000 and $712,000 in 2004 and 2003, respectively. These results reflect the segment losses described above (including nonrecurring items) and net realized gains of $780,000, $2,868,000 and $1,978,000 in 2005, 2004 and 2003, respectively. The Company realized significant increases in realized capital gains in both 2004 and 2003 due to restructuring the investment portfolio to include a greater proportion of fixed maturity investments and fewer equity investments while taking advantage of an upturn in the equities market. After the restructuring, our equities portfolio did not present opportunities for similar levels of realized gains in 2005.
The increase in Broker Life premium during 2005 resulted primarily from the introduction of the new final expense product early in the year in an effort to strengthen the growth of this segment by better meeting the desires of our policyholders and agents.
The 6.0% decrease in Dental premium during 2005 resulted primarily from the non-renewal of a large group with an unsatisfactory claims loss ratio, and introducing more aggressive renewal underwriting. The result, as expected, was a decrease in premium and a decrease in the overall claims loss ratio from 72.2% in 2004 to 69.7 % in 2005. During recent years, new business production has become increasingly competitive as larger providers expand their marketing initiatives. However, the Company has historically maintained strong customer and agent loyalty by continuing to improve customer service, including sales and administrative support functions. In January 2005 the Company began expanding its capacity to administer more Dental business without increasing administration costs by replacing our group administration system with a current state of the art system. The new system was placed in service in January 2006 and the Company plans to add additional functionality features throughout 2006 (including a group website, preferred provider network, third party administration capability and auto adjudication of claims). The Company also employed a senior marketing executive and a regional sales representative to focus marketing efforts on the Dental segment.
The information contained under the heading "Results of Operations" in the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2000 is incorporated herein by reference.
Selected financial data for the five years ended December 31, 1995 are incorporated by reference from the Corporation's 1995 Annual Report to Shareholders, pages 42 and 43.
Underwriting results were highly profitable in 1995 compared with near breakeven results in 1994. Underwriting results were extremely unprofitable in 1993 due to the adverse effect of the $675 million charge. The combined loss and expense ratio, the common measure of underwriting profitability, was 96.8% in 1995 compared with 99.5% in 1994 and 114.8% in 1993. Excluding the effects of the $675 million charge and the $125 million return premium, the combined loss and expense ratio was 99.0% in 1993.
below November 1987 levels and would have required an additional 20 percent reduction in automobile rates by November 1989.
In May 1995, our property and casualty subsidiaries reached an agreement with the California Insurance Department to refund premiums, with interest, totaling $6.7 million related to business written during the rollback period. The agreement settles all rollback refund obligations of the property and casualty subsidiaries related to Proposition 103. A consumer group challenged the rollback settlement. In December 1995, an administrative law judge affirmed the rollback settlement. The California Insurance Commissioner has adopted the judge's decision and the period during which the Commissioner's action could be appealed has expired.
Insurance policies issued to PRPs were not intended to cover the clean-up costs of pollution and, in many cases, did not intend to cover the pollution itself. Pollution was not a recognized hazard at the time many of these policies were written. In more recent cases, however, policies specifically excluded such exposures.
Uncertainties also remain as to the Superfund law itself, which has generated far more litigation than it has brought about the cleanup of hazardous waste sites. Superfund's taxing authority expired on December 31, 1995. Notwithstanding continued pressure by the insurance industry and other interested parties to achieve a legislative solution to rewrite this law, the Superfund issue may not be addressed until after the 1996 elections. It is currently not possible to predict the direction that any reforms may take, when they may occur or the effect that any changes may have on the insurance industry. In addition, the Superfund law does not address non-Superfund toxic sites. For that reason, it does not cover all existing toxic waste exposures, such as those involving sites that are subject to state law only. Such sites could prove even more numerous and thus more costly than Superfund sites.
Due by other Companies Sundry debtors .... Accrued interest . . .
The financial statements of the Company and its consolidated subsidiaries, included on pages 31 through 57 of the Reliance Group Holdings 1997 Annual Report, which information is incorporated herein by reference, are listed in Item 14 below.
Management's discussion and analysis of financial condition and results of operations of Atlantic American Corporation and subsidiaries are set forth on pages 25 to 30 of the 1998 Annual Report to Shareholders and are incorporated herein by reference.
The consolidated financial statements of the Company and related notes are set forth on pages 10 to 24 of the 1998 Annual Report to Shareholders and are incorporated herein by reference.
Policy surrenders decreased 5.3% from $14,920,985 in 1999 to $14,124,514 in 2000. Surrenders were $14,481,335 in 1998. The relative stability in 2000, 1999 and 1998 is, in the opinion of management, the result of a campaign begun in mid-1997 to inform policyowners about the benefits of their policies.
Overall, the implementation of codification is expected to reduce the Company's surplus on a statutory accounting basis by approximately 3%.
Certain reclassifications have been made to the 2018 financial statement presentation to correspond to the current year’s format. Total assets, net assets, and changes in net assets resulting from operations are unchanged due to these reclassifications.
Most of our credit insurance business is written on a retrospective commission basis, which permits management to adjust commissions based on claims experience. Thus, any adjustment to prior years’ incurred claims in this line of business is partially offset by a change in contingent commissions, which is included in the selling, underwriting and general expenses line in our results of operations.
One of our subsidiaries, American Reliable Insurance Company (“ARIC”), participated in certain excess of loss reinsurance programs in the London market and, as a result, reinsured certain personal accident, ransom and kidnap insurance risks from 1995 to 1997. ARIC and a foreign affiliate ceded a portion of these risks to retrocessionaires. ARIC ceased reinsuring such business in 1997. However, certain risks continued beyond 1997 due to the nature of the reinsurance contracts written. ARIC and some of the other reinsurers involved in the programs are seeking to avoid certain treaties on various grounds, including material misrepresentation and non-disclosure by the ceding companies and intermediaries involved in the programs. Similarly, some of the retrocessionaires are seeking avoidance of certain treaties with ARIC and the other reinsurers and some reinsureds are seeking collection of disputed balances under some of the treaties. The disputes generally involve multiple layers of reinsurance, and allegations that the reinsurance programs involved interrelated claims “spirals” devised to disproportionately pass claims losses to higher-level reinsurance layers.
Acquisition costs relating to worksite group disability which typically has high front-end costs and are expected to remain in force for an extended period of time consist primarily of first year commissions to brokers and one time policy transfer fees and costs of issuing new certificates. These acquisition costs are front-end loaded, thus they are deferred and amortized over the estimated terms of the underlying contracts.
Realized investment gains amounted to approximately $20.0 million in fiscal 1996, as compared to approximately $17.2 million of gains in fiscal 1995 and gains of approximately $7.3 million in fiscal 1994. Realized investment gains for the years ended December 31, 1996 and 1995 were partially offset by realized investment losses of approximately $1.9 million and $6.0 million, respectively, attributable to writedowns of certain securities contained in the Company's investment portfolio. There can be no assurance that the Company's investment portfolio will yield comparable investment gains in future periods.
For 2016, we expect Assurant Specialty Property net income and net earned premiums to decrease compared with Twelve Months 2015 reflecting the ongoing normalization of lender-placed insurance business partially offset by increased efficiencies, including the implementation of new technology, and other expense savings initiatives. Contributions from multi-family housing and mortgage solutions businesses are expected to partially offset the decline. In addition, catastrophe losses may affect overall results.
Our results depend on the appropriateness of our product pricing, underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims, returns on and values of invested assets and our ability to manage our expenses. Factors affecting these items, including unemployment, difficult conditions in financial markets and the global economy, may have a material adverse effect on our results of operations or financial condition. For more information on these factors, see “Item 1A - Risk Factors.”
For preneed investment-type annuities, preneed life insurance policies with discretionary death benefit growth issued after January 1, 2009, universal life insurance policies and investment-type annuity contracts that are no longer offered, DAC is amortized in proportion to the present value of estimated gross profits from investment, mortality, expense margins and surrender charges over the estimated life of the policy or contract. Estimated gross profits include the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in AOCI. The assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities.
(1) The accident year combined ratio is the sum of the expense ratio and accident year loss ratio. The accident year loss ratio measures loss and LAE occurring in a particular year, regardless of when they are reported and does not take into consideration changes in estimates in loss reserves from prior accident years.
The reserves referenced in the above table related to our direct and assumed-directly managed business are established through transactions processed through our internal systems and related controls. Likewise assumed-MFH is assumed business related to our partial ownership of Midwest Financial Holdings where we have direct access to their paid and case reserve loss data. Accordingly, case reserves are established on a current basis, therefore there is no delay or lag in reporting of losses from a ceding company, and IBNR is determined utilizing various actuarial methods based upon historical data. Ultimate reserve estimates related to assumed business from residual markets are provided by individual states on a two quarter lag between the date of the evaluation and the receipt of the estimate from the National Council on Compensation Insurance (“NCCI”), and include an estimated reserve determined based upon internal actuarial methods for this lag. Relative to assumed business from other sources, we receive case and paid loss data within a forty-five day reporting period and develop our estimates for IBNR based on both current and historical data.
Our principal sources of funds are insurance premiums, investment income, proceeds from the maturity and sale of invested assets from our Insurance Company Subsidiaries, and risk management fees and agency commissions from our non-regulated subsidiaries. Funds are primarily used for the payment of claims, commissions, salaries and employee benefits, other operating expenses, shareholder dividends, share repurchases, capital expenditures, and debt service.
As of December 31, 2011, we have no off-balance sheet arrangements as defined in Item 303(a) (4) of Regulation S-K.
On September 5, 1996, the Company completed the acquisition of 100% of the outstanding share capital of Lloyd's New York Insurance Company which subsequently changed its name to Realm National Insurance Company ("Realm National"). The total purchase price of $8,986 comprised a cash payment to the former owners of $8,783 and legal and other costs associated with the acquisition of $203. Realm National formerly provided property, marine and agricultural coverages. In 1997, Realm National began writing insurance policies in connection with the Company's workers' compensation programs. In connection with the acquisition, the former owners and the Company entered into a reserve indemnity agreement to guarantee the outstanding loss reserves as of June 30, 1996. In 1997 this agreement was terminated for a total consideration paid to the seller by the Company of $175. Other operating expenses include $114 and $61 in 1996 and 1997, respectively in relation to the guarantee.
The Company received dividends from this affiliate of $0, $0, and $593 during 1995, 1996 and 1997, respectively.
On June 30, 1997, the Company increased its authorized share capital to 20,000,000 ordinary shares of par value $0.25 each and effected a four for one stock split whereby each of the Company's ordinary shares of par value $1.00 each was divided into four ordinary shares of par value $0.25 each.
The Unlock charge after-tax for the year ended December 31, 2016 was primarily due to the reduction of the fixed annuity DAC balance to zero, updates to the macro hedging program cost to reflect 2016 activity, and the effect of assumption updates for variable annuities, including to mortality. These impacts were partially offset by separate account returns being above our aggregated estimated returns during the period, largely due to an increase in equity markets, as well as the effect of reducing the assumption about expected future lapses of variable annuities.
The following table presents the Company’s investments in limited partnerships and other alternative investments which include hedge funds, real estate funds, and private equity and other funds. Since December 31, 2015, the Company has reduced the allocation to hedge funds. Real estate funds consist of investments primarily in real estate equity funds, including some funds with public market exposure, and real estate joint ventures. Private equity and other funds primarily consist of investments in funds whose assets typically consist of a diversified pool of investments in small to mid-sized non-public businesses with high growth potential as well as limited exposure to public markets.
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company, except for unfunded commitments to purchase investments in limited partnerships and other alternative investments, private placements, and mortgage loans of $645 as disclosed in Note 10 - Commitments and Contingencies of Notes to Consolidated Financial Statements.
Compensation and Employee Benefits Expenses. For 2004, the increase was primarily due to the effect of acquisitions, partially offset by a favorable variance in incentive compensation expense based on unfavorable operating results for the year. As a percentage of revenues, compensation and employee benefits expenses were 56.7% and 56.6% for 2004 and 2003, respectively.
issued from time to time upon the exercise of stock options and warrants, market conditions and other factors. During 2005 we purchased 328,826 shares of our common stock on the open market under the limited stock repurchase plan at an aggregate cost of $3.9 million.
On December 20, 2004, we announced that our Board of Directors authorized an expanded stock repurchase program that permits us to purchase our shares of common stock up to certain limits set forth within our credit facility. We had the capacity to purchase shares valued at up to $9.7 million and $11.0 million in 2005 and 2004, respectively. We did not purchase any shares in 2004. During 2005, we purchased 8,500 shares of our common stock on the open market under the expanded stock repurchase program at a total cost of $0.1 million.
SBI owns two office buildings in New York City, which total approximately 627,000 square feet. Most of SBI's other offices are located in leased premises, the leases for which expire at various times.
See "Five-Year Summary of Selected Financial Data" on page 32 of the Company's 1996 Annual Report to Stockholders (the "1996 Annual Report"), included as part of Exhibit 13 to this Form 10-K and incorporated herein by reference.
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 2010 such costs amounted to $249,478 or 32.4% of earned premium as compared with $152,964 or 23.5% in fiscal 2009. The increase of $96,514 in expenses is attributable to costs associated to the increase in gross premium written, while the increase as a percentage is attributable to reduced net premium earned after ceding of premium to reinsurers.
Loyal's Home Office building is located at 2800 Dauphin Street, Mobile, Alabama. This building contains approximately 89,000 square feet, of which approximately 62,000 square feet are utilized for Company purposes. The remainder of the building is leased to outside tenants. The book value of the property at December 31, 1994 is approximately $3.5 million.
Premium income improved in 1994 as compared to 1993 due principally to increased life insurance sales at Prairie. This increase is primarily applicable to the pre-need life insurance line of business, where Prairie has benefitted from expanded relationships with funeral directors. In addition, Loyal's cancer indemnity product sales improved over the prior year.
In addition to the cash flow necessary to fund benefit payments, the Company requires cash flows for operating and administrative expenses, which are normally funded from premium income. The level of expenses generally fluctuates in proportion to the amount of premium produced, and the Company's subsidiaries generate sufficient cash flow to meet such expenses. However, the Company's cash disbursements have from time to time exceeded its cash receipts, principally due to its former acquisitions program and commitments made in connection with the acquisitions. Funding of interest on debt incurred in connection with this program of acquisitions as well as the subsequent consolidation of operations, required an expenditure of approximately $3.6 million in 1994, $4.9 million in 1993, and $5.0 million in 1992.
The Company also paid a dividend of $0.2 billion to Pruco Life, which was ultimately distributed to Prudential Financial.
The allowance for losses includes a loan specific reserve for each impaired loan that has a specifically identified loss and a portfolio reserve for probable incurred but not specifically identified losses. For impaired commercial mortgage and other loans, the allowances for losses are determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or based upon the fair value of the collateral if the loan is collateral dependent. The portfolio reserves for probable incurred but not specifically identified losses in the commercial mortgage and agricultural loan portfolios consider the current credit composition of the portfolio based on an internal quality rating as described above. The portfolio reserves are determined using past loan experience, including historical credit migration, loss probability and loss severity factors by property type. These factors are reviewed and updated as appropriate.
Derivative Instruments - Derivatives are recorded at fair value either as assets within “Other invested assets”, or as liabilities within “Payables to parent and affiliates”, except for embedded derivatives which are recorded with the associated host contract. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, credit spreads, market volatility, expected returns, NPR, liquidity and other factors.
Policyholders’ account balances represent an accumulation of account deposits plus credited interest less withdrawals, expenses and mortality charges, if applicable. These policyholders’ account balances also include provisions for benefits under non-life contingent payout annuities. Interest crediting rates for interest-sensitive life contracts range from 0.9% to 4.5%. Interest crediting rates for individual annuities range from 0.0% to 4.9%. Interest crediting rates for guaranteed interest accounts range from 1% to 4.8%. Interest crediting rates range from 0.5% to 3.5% for other.
Includes cash flow hedges of $2 million, $(5) million and $5 million as of December 31, 2018, 2017 and 2016, respectively.
The following table below summarizes our health plan membership information by program and by state:
During the year ended December 31, 2008, we recognized a $14.6 million loss from other-than-temporary impairments of our cash equivalents and available-for-sale investments. Such other-than-temporary impairments primarily were as a result of investments in corporate debt from Lehman Brothers, money market funds from The Reserve and preferred stock from Fannie Mae and Freddie Mac. In September 2008, The Reserve announced its intention to liquidate its money market fund and froze all redemptions until an orderly liquidation process could be implemented. As a result, in the third quarter of 2008, we reclassified $372 million in estimated net asset value we had invested in The Reserve money market funds from cash equivalents to investments available-for-sale. As of December 31, 2008, we held $50.4 million in the Reserve Primary Institutional Fund and $69.2 million in the Reserve U.S. Government Fund. On January 16, 2009, The Reserve paid out in full the
Our total cash and cash equivalents as of December 31, 2009 and 2008 were $682.8 million and $668.2 million, respectively. The changes in cash and cash equivalents are summarized as follows:
On December 19, 2007, we entered into a five-year, non-interest bearing, $175 million amortizing financing facility with a non-U.S. lender and we entered into amendments to the financing facility on April 29, 2008 and November 10, 2008, which were administrative in nature. On March 9, 2009, we amended certain terms of the documentation relating to the financing facility to, among other things, (i) eliminate the requirement that we maintain certain minimum public debt ratings throughout the term of the financing facility and (ii) provide that the financing facility may be terminated at any time at the option of one of our wholly-owned subsidiaries or the non-U.S. lender. The proceeds from the financing facility were used for general corporate purposes.
On March 12, 2009, we entered into an interest rate swap agreement (2009 Swap) under which we pay an amount equal to 2.245% times a notional principal amount and in return we receive an amount equal to LIBOR times the same notional principal amount. The 2009 Swap is designed to reduce variability in our net income due to changes in variable interest rates.
generated by these subsidiaries to pay our obligations. The maximum amount of dividends that can be paid by our insurance company subsidiaries without prior approval of the applicable state insurance departments is subject to restrictions relating to statutory surplus, statutory income and unassigned surplus.
Approximately 39%, 37%, and 35% in 2009, 2008 and 2007, respectively, of our health plan services premium revenues were generated under Medicare and Medicaid/Medi-Cal contracts. These revenues are subject to audit and retroactive adjustment by the respective fiscal intermediaries. Laws and regulations governing these programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount.
Surplus Lines segment excluding commercial auto were up 4.5% compared to 2018. The change in gross written premiums was notable in several divisions as shown below:
The expense ratio of the Casualty Reinsurance segment declined from 34.1% for the year ended December 31, 2018 to 29.2% for the year ended December 31, 2019. The Casualty Reinsurance segment typically structures its reinsurance treaties with loss mitigation features including sliding scale ceding commissions. In 2019, net adverse reserve development on treaties with such features reduced our commissions by $7.1 million or 5.0 percentage points.
Of our total cash and invested assets of $2,200.3 million at December 31, 2019 (excluding restricted cash equivalents), $206.9 million represents the cash and cash equivalents portion of the portfolio. The majority of the portfolio, or $1,433.6 million, is comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities reported, net of applicable taxes, as a separate component of accumulated comprehensive income or loss. Also included in our investments are $260.9 million of bank loan participations, $80.7 million of equity securities, $156.9 million of short-term investments, and $61.2 million of other invested assets.
For the year ended December 31, 2019, the Company recognized net realized and unrealized investment losses of $2.9 million, including $8.9 million of net realized investment losses from an increase in our bank loan credit allowance, $1.1 million of net realized investment losses on the sale of bank loan securities, $6.3 million of gains for the change in the fair value of equity securities, and $1.4 million of net realized investment gains on the sale of fixed maturity securities.
The 2013 Facility contains certain financial and other covenants (including minimum net worth, maximum ratio of total adjusted debt outstanding to total capitalization, and financial strength ratings) with which the Company was in compliance at December 31, 2019.
Excluding one program which has quota share coverage for 89% of the first $1.0 million per occurrence and excess of loss coverage for $49.0 million in excess of $1.0 million per occurrence.
Excluding one program which has quota share coverage for 80% of the first $500,000 and excess of loss coverage for $39.5 million in excess of $500,000 per risk per occurrence.
On December 11, 1996, PXRE completed the Merger of TREX with and into PXRE, pursuant to which each share of common stock of TREX was converted into the right to receive 1.0575 shares of PXRE common stock. The Merger resulted from the realization by the management and Boards of Directors of both PXRE and TREX that conditions had become more competitive in the retrocessional reinsurance marketplace, and that the reinsurance markets, rating agencies and the capital markets are placing increased importance on the size and financial strength of reinsurance companies, which size and financial strength would be augmented by the Merger. Following the Merger, Transnational Reinsurance became a wholly-owned subsidiary of PXRE Reinsurance. The Merger has been accounted for using the purchase method of accounting; therefore net income of TREX (including Transnational Reinsurance) has been included in PXRE's consolidated results of operation from the date of acquisition.
PXRE maintains only minimal catastrophe retrocessional coverage. In view of the increased underwritings of catastrophe related reinsurance and the net exposure being retained by PXRE, the occurrence of one or more major catastrophes in any given period (such as Hurricanes Andrew and Iniki in 1992 and the Northridge Earthquake in 1994) could have a material adverse impact on PXRE's results of operations and financial condition and result in substantial liquidation of investments and outflows of cash as losses are paid.
Included in other operating expenses were foreign currency exchange gains of $143,000 for 1996 compared to gains of $196,000 for 1995.
In August 1993, PXRE completed a public offering of $75,000,000 principal amount of 9.75% Senior Notes due August 15, 2003. Interest is payable on the Senior Notes semi-annually. Interest expense, including amortization of debt offering costs, for 1996 in respect of the Senior Notes amounted to approximately $6,957,000. Interest expense associated with the Senior Notes will amount to approximately $6,559,000 for 1997. On and after August 15, 1998, the Senior Notes may be redeemed at the option of PXRE, in whole or in part, at redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest to the date fixed for redemption, of 103.656% at August 15, 1998, declining to 100% at August 15, 2001 and thereafter. The Indenture governing the Senior Notes contains covenants which, among other things, limit the ability of PXRE and its Restricted Subsidiaries (including PXRE Reinsurance): (a) to incur additional indebtedness (except for the incurrence of Permitted Indebtedness and the incurrence of other Indebtedness by PXRE in circumstances where no
The Company leases approximately 22,000 square feet in an office building located in Hatboro, Pennsylvania. The office building also houses Penn Independent and its subsidiaries. The Company leases the space from Mr. Irvin Saltzman, Chairman of the Board of Directors of the Company, pursuant to a lease agreement which expires on June 30, 2000, and provides for an annual rental payment of approximately $260,000, which amount is considered by the Company to be at fair market value.
In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. It also establishes specific conditions that must be met in order for a derivative to be recognized as a hedge of certain exposures. The Company has not yet completed its analysis to determine the impact of this statement on the Company's financial statements. SFAS 133 is effective for fiscal years beginning after June 15, 1999.
Total premiums and investment contract deposits received decreased to $5.8 billion in 2001, compared with $6.9 billion in 2000. The reduction is primarily due to lower variable annuity sales.
Net realized losses on investments were $650 million in 2001, compared to net realized losses of $17 million in 2000. The net loss for the year was comprised of a $143 million pretax net loss in the first quarter resulting primarily from the recognition of impairment losses and the sale of certain high-yield securities; a $227 million writedown in the second quarter to recognize the impact of higher default rate assumptions on certain structured investments; a $262 million writedown of lower-rated securities (most of which were sold during 2001) in the second quarter primarily in connection with the Company's decision to lower its risk profile by reducing the level of its high-yield fixed maturity investment portfolio, allocating holdings toward stronger credits, and reducing the concentration of exposure to individual companies and industry sectors; and $18 million of other net losses primarily related to the sale and write-down of investments.
Net realized loss on investments was $17 million in 2000, compared to a net realized gain of $27 million in 1999. The loss was primarily due to the loss on sales and writedowns of fixed maturity investments.
The Company primarily invests in fixed income securities over a broad range of maturities for the purpose of providing fixed annuity clients with a competitive rate of return on their investments while controlling risk, and to provide a dependable and targeted spread between the interest rate earned on investments and the interest rate credited to contractholders' accounts. The Company does not invest in securities to generate trading profits.
The liquidity requirements of the Company are met by funds provided by premiums, investment income, proceeds from sales of investments as well as maturities and periodic repayments of investment principal.
The increase in long-term interest rates during 1999, which was related to general economic conditions, had a negative effect upon the market value of the fixed maturities available for sale segment of the portfolio. As of December 31, 1999, the market value of the fixed maturities available for sale segment was $404.2 million, as compared to an amortized cost of $411.5 million, or an unrealized loss of $7.3 million. The net of tax effect of this decrease has been recorded as a decrease in shareholders' equity.
Management believes that its cash, cash equivalents and short term investments are sufficient to meet the needs of its business.
The fixed maturities available for sale portion of invested assets at December 31, 1999 was $404.2 million. The amortized cost of the fixed maturities available for sale segment as of December 31, 1999 was $411.5 million, representing a net unrealized loss of $7.3 million. This unrealized loss principally reflects changes in interest rates from the date the respective investments were purchased. To reduce the exposure to interest rate changes, portfolio investments are selected so that diversity, maturity and liquidity factors approximate the duration of associated policyholder liabilities.
Benefits and Expenses Policyholder benefits increased by $12.4 million compared to the prior year as a result of higher death benefits of $5.1 million and increases to reserves of $ 7.3 million. The death benefit increase consists of $4.0 million in higher death claims from our life insurance products due to the growth of the in-force business and large claims, especially a $10 million claim, which impacted the Company $2.5 million after reinsurance with Prudential Insurance. In addition, the minimum death benefit guarantee for annuities increased death benefits by $1.1 million. Reserves are higher by $7.3 million due to the increase in term insurance.
Partially offsetting these decreases was an increase in premiums of $10.6 million. Premiums increased from higher term insurance sales of the Term Essential and Term Elite products of $6.5 million and an increase in premiums related to extended term policy conversions. As an option in the event of a lapse, individual variable life insurance policies provide policyholders with additional extended term or reduced paid-up life insurance based on the amount that can be purchased with the remaining cash value of the contract (if the policyholder does not elect to receive the remaining cash value as a cash distribution). The application of the remaining cash value to purchase such coverage is recorded as premium revenue in the Statement of Operations. Future policy benefit reserves are also increased by the amount of these premiums. Net investment income increased $1.5 million mainly as a result of increased income from fixed maturities as the average portfolio balance was higher in the current year, somewhat offset by lower income on short-term investments due to lower interest rates.
Our principal cash flow sources are premiums and fund deposits, investment and fee income and investment maturities and sales. These cash inflows may be supplemented by financing activities either directly through asset-based financing or through borrowing from other Prudential Insurance affiliates. We actively use our balance sheet capacity for financing activities on a secured basis through securities lending and repurchase transactions to earn additional spread income.
W. R. Berkley and its subsidiaries own or lease office buildings or office space suitable to conduct their operations. At December 31, 2009, the Company had aggregate office space of 2,503,125 square feet, of which 934,141 were owned and 1,568,984 were leased.
The information required by this Item is included on page 28 of the Registrant's Annual Report to Shareholders for the year ended December 31, 1995, under the caption "Selected Financial Data" and is incorporated herein by reference.
The information required by this Item is included on pages 24-25 of the Registrant's Annual Report to Shareholders for the year ended December 31, 1995 under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Goodwill and Intangible Impairment. Assessing recoverability of the Company's goodwill and other intangibles (including deferred policy acquisition costs and value of insurance acquired) requires assumptions regarding estimated future cash flows and other factors (see Policy Liabilities below) to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not previously recorded. On January 1, 2002 the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and performed an evaluation for potential impairment. The Company concluded that no impairment adjustment was necessary for its goodwill or other intangible assets.
During 2002, the Company's investment in equity securities increased $53,000 on a cost basis and decreased $355,000 on a fair value basis, after decreasing $6,622,000 and $4,461,000 on a cost and fair value basis, respectively, during 2001. As of December 31, 2002 and 2001, there were $653,000 and $1,062,000 respectively, of unrealized gains on equity securities, compared to $1,099,000 of unrealized losses at December 31, 2000.
Company is evaluating opportunities for revising its product design and commission rates to counteract the softening in demand for its simplified issue and graded benefit life policies. The 4.1% Broker Life premium increase during 2001 is primarily attributable to receiving a full year of premium on the NAIL business compared to receiving six months of additional premium during 2000.
Mortgage Loans: The carrying amount of mortgage loans approximates their fair value. At December 31, 2001, the fair value of mortgage loans was $156,000. The Company held no mortgage loans at December 31, 2002.
For the year ended December 31, 1996, the Company realized a net gain on the sale of investments of $487,000 versus a net loss on the sale of investments of $14,000 for the same period in the prior year. The net loss on the sale of investments during 1995 primarily resulted from the Company's decision to reduce its investments in tax-exempt securities in the first quarter of 1995.
The 1996 effective tax rate of 28.1% differs from the federal tax rate of 34% primarily due to deductions for tax-exempt interest and dividends received. The 1995 effective tax rate of 106.4% reflects the recording of a deferred tax liability for the post-acquisition tax benefits of National Family utilized by the Company. National Family is currently in liquidation and has ceased all operations. IRS regulations ultimately require repayment of tax benefits generated by National Family and used by the Company, therefore, the Company provided for this liability in 1995.
The Company's revenues continue to be affected by an increasing proportion of revenue being derived from fixed payment, higher discount sources, including Medicare, Medicaid and managed care plans. In addition, insurance companies, government programs (other than Medicare) and employers purchasing health care services for their employees are also negotiating discounted amounts that they will pay health care providers rather than paying standard prices. The Company expects patient volumes from Medicare and Medicaid to continue to increase as a result of the general aging of the population and the expansion of state Medicaid programs. However, under the Balanced Budget Act, the Company's reimbursement from the Medicare and Medicaid programs was reduced in 1999 and 1998 and will be further reduced as some reductions in reimbursement levels are phased in over the next two to three years. The Company generally receives lower payments per patient under managed care plans than under traditional indemnity insurance plans. With an increasing proportion of services being reimbursed based upon prospective payment amounts regardless of the cost incurred, revenues, earnings and cash flows are being reduced. Admissions related to Medicare, Medicaid and managed care plan patients were 89.2% and 87.7% of total admissions for the years ended December 31, 1999 and 1998, respectively.
The Company recorded, during the third quarter of 1998, an impairment loss of approximately $1.3 million related to the write-off of intangibles and other long-lived assets of certain physician practices where the recorded asset values were not deemed to be fully recoverable based upon the operating results trends and projected future cash flows. These assets being held and used are now recorded at estimated fair value based upon discounted, estimated future cash flows.
Limits on Reimbursement and Health Care Reform Legislation May Reduce Profitability
The health care industry is subject to extensive federal, state and local laws and regulations relating to licensure, conduct of operations, ownership of facilities, addition of facilities and services, payment for services and prices for services that are extremely complex and for which, in many instances, the industry does not
- classification of the Board of Directors into three classes; and
The selected financial data set forth in the following table for each of the five years in the period ended December 31, 1999 have been derived from the audited consolidated financial statements of the Company.
Other revenues were $434,000 for 1999, an increase of $281,000 or 184% from $153,000 in 1998, primarily due to increased income from residual market facilities.
The Company generally designates newly acquired fixed maturity investments as available for sale and carries these investments at fair value. Unrealized gains and losses related to these investments are recorded as accumulated other comprehensive income within stockholders' equity. At December 31, 1999, the Company had recorded $1,188,000 of unrealized losses, net of tax, associated with its fixed maturity investments as accumulated other comprehensive loss. During 1999 the Company recorded $2,361,000 of unrealized losses, net of tax, related to its investment portfolio as a component of other comprehensive income.
variety of collateralized mortgage obligation ("CMO") products but has not invested in the derivative type of CMO products such as interest only, principal only or inverse floating rate securities. All of the Company's CMO investments have an active secondary market and their effect on the Company's liquidity does not differ from that of other fixed maturity investments. The Company does not own any other derivative financial instruments.