The following table sets forth consolidated summarized income statement information for the years ended December 31, 2005, 2004 and 2003:
Consolidated results of operations have been impacted by the following events in 2005:
The expense ratio has been impacted by the different expense structure of AVIC. AVIC pays a commission to Vision, which is based on written premium, for underwriting and servicing the business written. In addition, the policy fees collected by AVIC, net of related premium taxes, are paid to Vision. These amounts, net of deferral and amortization, represent 1.5% of the expense ratio. The commission paid to Virginia Mutual under the quota share agreement represents 1.4% of the expense ratio. Also included in the expense ratio for 2005 is the 0.5% effect of the new policy administration system that went into production in the fourth quarter.
The following table sets forth summarized financial information for the Company’s life insurance subsidiary, Life, for the years ended December 31, 2005, 2004 and 2003:
Life’s premiums and policy charges increased $5.4 million, or 7.6%, for 2005, compared to an increase of $5.1 million, or 7.6% in 2004. Issued annualized new business premium increased by 1.9% to $13.6 million with a total volume of $2.9 billion of insurance being issued.
Accounts receivable are primarily comprised of premium installment plan receivables from policyholders and insurance carrier receivables.
Effective January 1, 2001, Fire and Alfa Specialty Insurance Corporation (Specialty), a subsidiary of Mutual, became participants in the Pooling Agreement.
The Company did not consider any decline in value to be an other than temporary impairment at December 31, 2005.
Based upon information presently available, management is unaware of any contingent liabilities arising from other threatened litigation that should be reserved or disclosed.
Unfunded Commitments: The Company periodically invests in affordable housing tax credit partnerships. At December 31, 2005, the Company had legal and binding commitments to fund partnerships of this type in the amount of approximately $23.5 million. These commitments are included in other liabilities in the consolidated balance sheet.
OFC Capital (OFC), a division of Financial, originated various leases to commercial businesses during its affiliation with the Company. At December 31, 2004, OFC was shown as assets classified as held for sale and was subsequently sold on December 31, 2005 (refer to Note 19-Business Combinations and Divestitures). OFC offered various products to its customers that included capital leases, operating leases, sales leasebacks, TRAC leases, municipal leases and conditional sales contracts. Generally, the range of leases extended from 24 months to 60 months with the average being 45 months in length and containing a purchase option at the end of the lease term.
The Company’s property casualty insurance subsidiaries, together with Mutual and its affiliates, participate in catastrophe and other reinsurance ceded arrangements to protect them from abnormal losses (refer to Note 2-Pooling Agreement). The Company’s subsidiaries and Mutual and its affiliates are also required to participate in certain assigned risk pools and associations by the states in which they operate.
The Company reported these net assets as held for sale under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets since the fourth quarter of 2004. No gain or loss has been recognized and no amounts of revenue and pretax profit or loss have been reported in discontinued operations during 2004 and 2005 due to the Company’s significant continuing involvement through its equity-method investment in MidCountry.
The following table presents the Company’s noncash investing and financing activities and required supplemental disclosures to the Statements of Cash Flows for the years ended December 31, 2005 2004, and 2003:
During the fourth quarter of 2005, the FASB also issued three other staff positions applicable at the time the Company adopts SFAS No. 123(R). They are FSP FAS 123(R)-2, Practical Accommodation to the Application of Grant Date As Defined in FASB Statement No. 123(R); FSP FAS 123(R)-3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards; and FSP FAS 123(R)-4, Classification of Options and Similar Instruments Issued As Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event. The Company does not anticipate that these staff positions will have a significant impact on its financial position or results of operations at the time SFAS No. 123(R) is adopted.