The following table sets forth fixed maturity investments at December 31, 1995, classified by rating categories (designated categories include securities with "+" or "-" ratings modifiers). The category assigned is the highest rating by Standard & Poor's or Moody's Investors Service or, as to $130.1 million fair value of fixed maturities not rated by such firms, the rating assigned by the NAIC. For the purposes of this table, NAIC Class 1 is included in the "A" rating; Class 2, "BBB"; and Class 3, "BB".
At December 31, 1995, the mortgage loan portfolio of the Company was diversified across 74 properties with an average loan size of approximately $.9 million. Approximately 99 percent of the mortgage loan balance relates to commercial properties including retail, multifamily residential, office, industrial, nursing home, restaurant and other properties. Less than 2 percent of the mortgage loan balance was noncurrent at December 31, 1995. There were no realized losses on mortgage loans during 1995. At December 31, 1995, the Company had a loan loss reserve of $1.4 million.
Primary earnings per common share is based on the weighted average number of common and common equivalent shares outstanding and net income applicable to common stock.
Investment borrowings: Due to the short-term nature of these borrowings (terms generally less than 30 days), estimated fair values are assumed to approximate the carrying amount reported in the consolidated balance sheet.
The following table sets forth the amortized cost and estimated fair value of fixed maturity securities at December 31, 1995, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties and because most mortgage-backed securities provide for periodic payments throughout their lives.
A liability of $30.1 million was established at the Acquisition date representing the consideration that would be payable to either the holder of the 1988 Series Preferred Stock or the Company's other former shareholders. The unused commitments under the Senior Credit Facility include $30.0 million available to be borrowed at a later date when needed for such payment. Prior to the Acquisition, the 1988 Series Preferred Stock was presented as issued and outstanding and was considered in the computation of primary and fully diluted earnings per share.
American Life and Casualty's surplus includes a surplus note held by American Life Holding with a balance of $50.0 million at December 31, 1995. Each payment of interest or principal on the surplus note requires the prior approval of the Iowa Insurance Division. The Iowa insurance law provides that payments of dividends on capital stock and interest and principal on surplus notes may be made only out of an insurer's earned surplus. At December 31, 1995, American Life and Casualty had earned surplus of $109.5 million.
A non-insurance subsidiary of the Company functions as a general agent for American Life and Casualty and its primary purpose is to pay commissions to American Life and Casualty's agents on annuity policies issued by American Life and Casualty pursuant to a general agency commission and servicing agreement between the non-insurance subsidiary and American Life and Casualty. This agreement initially benefits the statutory surplus of American Life and Casualty by extending the payment of first year commissions to the subsidiary on certain deferred annuity policies over a longer period of time. In subsequent periods, American Life and Casualty's statutory surplus is reduced through the payment of renewal commissions to the subsidiary equal to a specified percentage of the accumulated policyholder account values of certain deferred annuity policies issued by American Life and Casualty since 1990 remaining in force.