Business Overview. Ascent Assurance, Inc. ("Ascent"), adopted its corporate name on March 24, 1999, the date its predecessor, Westbridge Capital Corp. ("Westbridge") emerged from Chapter 11 reorganization proceedings. For additional information regarding the reorganization and adoption of fresh start accounting, see Notes 2 and 14 to the Consolidated Financial Statements included at Item 8. References herein to the "Company" shall mean for all periods on or prior to March 31, 1999, Westbridge and its subsidiaries, and for all periods on or after the close of business on March 31, 1999, Ascent and its subsidiaries.
The Company reinsures its risks under its major medical policies on an excess of loss basis so that its net payments on any one life insured under the policy are limited for any one calendar year to $125,000. Risks under its Medicare Supplement policies are not reinsured. The Company's risks under its Accidental Death policies are one hundred percent (100%) reinsured. Under its life insurance reinsurance agreement, FLICA and NFL retains fifty percent (50%) of the coverage amount of each of its life insurance policies in force up to a maximum of $65,000. NFL reinsures, through an excess of loss reinsurance treaty, a closed block of annually renewable term life insurance policies. NFL's retention limit is $25,000 per year. In accordance with industry practice, the reinsurance arrangements in force with respect to these policies are terminable by either party with respect to claims incurred after the termination and expiration dates.
Ascent Assurance, Inc. ("Ascent"), a Delaware company incorporated in 1982, is an insurance holding company engaged in the development, marketing, underwriting and administration of medical expense and supplemental health insurance products, primarily to self-employed individuals and small business owners. Ascent adopted its corporate name on March 24, 1999, the date its predecessor, Westbridge Capital Corp. ("Westbridge"), emerged from Chapter 11 reorganization proceedings (see Note 14). References herein to the "Company" shall mean for all periods on or prior to March 31, 1999, Westbridge and its subsidiaries, and for all periods on or after the close of business on March 31, 1999, Ascent and its subsidiaries.
Three Months Ended Westbridge Capital Corp. March 31, 1999 -------------- Basic: Income available to common shareholders $ 208 ============== Weighted average shares outstanding 7,032 ============== Basic earnings per share $ 0.03 ==============
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Important factors known to management that could cause actual results to differ materially from those contemplated by estimates include, but are not limited to:
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 will be effective for financial statements issued for fiscal years beginning after June 15, 2002. An entity shall recognize the cumulative effect of adoption of SFAS No. 143 as a change in accounting principle. The Company does not expect the adoption of the statement to materially impact the Company's results of operations and financial position.
Estimated Amortized Market Cost Value ---- ----- (in thousands) Due in one year or less $ 5,846 $ 5,909 Due after one year through five years 26,972 27,451 Due after five years through ten years 24,005 24,165 Due after ten years 22,898 21,961 Mortgage-backed securities 10,754 10,731 ----------- ----------- $ 90,475 $ 90,217 =========== ===========
Net Deferred Tax Asset Before Valuation allowance $ 17,841 $ 18,263 Less Valuation Allowance (17,841) (18,263) ----------- ----------- Net Deferred Tax Asset $ - $ - =========== ===========
At both December 31, 2001 and 2000, NFL had approximately $7.8 million in its shareholders surplus account from which it could make distributions to the Company without incurring any federal tax liability. The amount of dividends which may be paid by NFL to the Company is limited by statutory regulations.
The Insurance Subsidiaries are precluded from paying dividends during 2001 without prior approval of the Texas Insurance Commissioner as the companies' earned surplus is negative. On September 30, 2000, NFL transferred its 100% ownership of FLICA to Ascent through an extraordinary dividend approved by the Texas Department of Insurance. Generally, all states require insurance companies to maintain statutory capital and surplus that is reasonable in relation to their existing liabilities and adequate to their financial needs. The Texas Department of Insurance also maintains discretionary powers relative to the declaration and payment of dividends based upon an insurance company's financial position. Due to recent statutory losses incurred by the Insurance Subsidiaries, the Company does not expect to receive any dividends from the Insurance Subsidiaries for the foreseeable future.
Under Florida Statutes Section 624.4095, Florida licensed insurance companies' ratio of actual or projected annual written premiums to current or projected surplus as regards to policyholders ("the premium writing ratio") may not exceed specified levels for gross and net written premiums as defined by the statute. If a company exceeds the premium writing ratio, the Florida Department of Insurance shall suspend the company's certificate of authority in Florida or establish by order maximum gross or net annual premiums to be written by the company consistent with maintaining the ratios specified. At December 31, 2001, the premium writing ratio for FLICA, which currently underwrites insurance policies in Florida, met the limit mandated by Florida law.
(1) Increase in losses for the fourth quarter of 2000 due to adverse claims experience for major medical products and recognition of premium deficiency (see Note 8).
ASCENT ASSURANCE, INC. (PARENT COMPANY) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Cash Flows From Investing Activities: Proceeds from sale of investments 2,455 Net change in short-term investments (1,403) Capital contributions to subsidiaries (400) ------------ Net Cash Provided by Investing Activities 652 ------------