Gross premiums written in 1995 increased 2.4% to $87.2 million compared with $85.1 million in 1994. Total premium writings in 1995 benefitted from the 59.0% increase in non-municipal reinsurance writings and the 20.5% increase in specialty insurance writings, offset in part by a 18.0% decline in municipal reinsurance premiums.
The Company's effective tax rate was 25.9% for 1995 compared to 18.7% in 1994. The higher 1995 rate reflects the fact that income earned on tax-exempt assets represented a smaller portion of pretax income in 1995 than in 1994. The prior year's rate further reflects the benefit from capital losses.
Enhance Financial entered into the Credit Agreement with a major commercial bank providing for borrowing by Enhance Financial of up to $60.0 million (increased from $30 million in October 1996) to be used for general corporate purposes. The Credit Agreement provides for a revolving credit facility under which individual advances may be converted, at Enhance Financial's discretion, into a four-year term loan. The Company borrowed $3.0 million in 1994, an additional $12.0 million in 1995 and a further $27.5 million in 1996. The total outstanding at year-end 1996 was $42.6 million.
The amortized cost and estimated market value of fixed maturities at December 31, 1996 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Fixed maturities $46,102 $42,188 $37,914 Short-term investments and cash equivalents 3,184 4,131 2,226 Other 849 261 216 ------- ------- ------- Total investment income 50,135 46,580 40,356 Less investment expenses 2,013 2,421 2,131 ------- ------- ------- Net investment income $48,122 $44,159 $38,225 ======= ======= =======
Effective July 1, 1995, the Company acquired all of the outstanding shares of Litton Loan Servicing, Inc. ("LLSI"), a Houston-based loss mitigation residential mortgage servicer. The purchase price approximated the fair market value of the acquired assets and liabilities at the date of acquisition. In July, 1996, the Company and Mortgage Guaranty Insurance Corporation formed a joint venture company, Credit-Based Asset Servicing and Securitization LLC ("C-BASS"), which evaluates, accumulates, services and securitizes sub-performing and non-performing residential mortgages. The Company will contribute approximately $25 million in cash and other assets for its 48% interest in C-BASS. At December 31, 1996, the Company had contributed $15.8 million of its capital contribution to the C-BASS joint venture. Subsequent to year end, the Company contributed an additional $4.5 million. The investment in C-BASS is being accounted for on the equity basis of accounting. As part of the Company's capital contribution to the joint venture, LLSI will become part of C-BASS. Since Enhance Financial's current 100% ownership interest in LLSI is temporary, the Company has also accounted for this investment on the equity basis of accounting.
The Company principally insures and reinsures financial guaranties issued to support public and private borrowing arrangements, including commercial paper, bond financings, and similar transactions. Financial guaranties are conditional commitments which guaranty the performance of a customer to a third party.
STATE OF ISSUE In billions December 31, ------------------------ 1996 1995 --------- ---------
The following table sets forth the funding status of the plan and the accrued pension cost recognized in the Company's consolidated balance sheets:
In thousands Operating Years Ended December 31, Leases --------- 1997 $2,161 1998 2,147 1999 2,059 2000 754 ------ $7,121 ======