felanders/preprocessed huggingface dataset:
legal and political factors such as legislative initiatives and public opinion;
As of December 31, 2011 and December 31, 2010, all of our securities are in good standing and not impaired, except as noted above.
The decrease in prepaid reinsurance premiums was $2.7 million in 2011, compared with a $2.1 million decrease in 2010. The increased charge to written premium is associated with the timing of our reinsurance payments measured against the term of the underlying reinsurance policies.
Assurance MGA, a wholly owned subsidiary of the Company, acts as Federated National’s exclusive managing general agent in Florida and is also licensed as a managing general agent in the States of Alabama, Arkansas, Georgia, Illinois, Louisiana, North Carolina, Mississippi, Missouri, New York, Nevada, South Carolina, Texas and Virginia. Assurance MGA has contracted with several unaffiliated insurance companies to sell commercial general liability, workers compensation, personal umbrella and inland marine insurance through Assurance MGA’s existing network of agents.
In December 2011, the FASB issued ASU No. 2011-11: Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities, which requires new disclosure requirements mandating that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. This ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of this ASU will not have a material impact on our financial condition, results of operations or cash flows.
We have exhausted the reinsurance coverage available for Hurricane Wilma and if any claims exceed this coverage amount, it could adversely impact our business, results of operations and/or financial condition.
Florida's personal injury protection insurance statute contains provisions that favor claimants, causing us to experience a higher frequency of claims than might otherwise be the case if we operated only outside of Florida.
To retain our certificate of authority, the Florida Insurance Code (the "Code") requires Federated National to maintain capital and surplus equal to the greater of 10% of its’ liabilities or a statutory minimum capital and surplus as defined in the Code. Federated National is required to have a minimum capital surplus of $5.0 million.
American Vehicle’s statutory capital and surplus was $21.9 million as of December 31, 2010. American Vehicle’s statutory net income (loss) was approximately $1.6 million and ($1.1) million for 2010 and 2009, respectively. American Vehicle’s statutory non-admitted assets were approximately $5.6 million as of December 31, 2010.
Included in Separate Account liabilities is $586,233,752 and $259,556,863 at December 31, 1995 and 1994, respectively, relating to annuity contracts for which the contractholder is guaranteed a fixed rate of return. Separate Account assets of $588,835,051 and $269,488,557 at December 31, 1995 and 1994, respectively, consisting of long term bonds, short term securities, transfers due from general account and cash are in support of these annuity contracts, as pursuant to state regulation.
Certain operating costs (including personnel, rental of office space, furniture, and equipment) and investment expenses have been charged to the Company at cost by American Skandia Information Services and Technology Corporation, an affiliated company; and likewise, the Company has charged operating costs to American Skandia Investment Services, Incorporated, an affiliated company. Income received for these items was $396,573, $248,799 and $146,134 for the years ended December 31, 1995, 1994 and 1993, respectively. The total cost to the Company for these items was $12,687,337, $8,524,840 and $3,537,566 for the years ended December 31, 1995, 1994 and 1993, respectively. Amounts receivable from affiliates under this arrangement were $857,156 and $317,285 as of December 31, 1995 and 1994, respectively. Amounts payable to affiliates under this arrangement were $304,525 and $261,552 as of December 31, 1995 and 1994, respectively.
See “Risk Factors” for a discussion of risks that could materially affect the Company’s business, results of operations or financial condition, or cause the Company’s actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the Company.
For the variable and universal life policies a significant portion of our gross profits are derived from mortality margins. As a result, our estimates of future gross profits are significantly influenced by our mortality assumptions. Our mortality assumptions represent our expected claims experience over the life of these policies and are developed based on Company experience. We review and update our mortality assumptions annually. Updates to our mortality assumptions in future periods could have a significant adverse or favorable effect on the results of our operations.
An increase or decrease in our effective tax rate by one percent, would have resulted in a decline or increase in consolidated income from continuing operations in 2008 of $3.1 million.
Prudential Funding, LLC, or Prudential Funding, a wholly owned subsidiary of Prudential Insurance, serves as an additional source of financing to meet the working capital needs.
You should read the following discussion together with "Selected Historical Financial Data" and our financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under "Risk Factors” and elsewhere in this Annual Report.
As of April 30, 2010, the Company’s Chief Executive Officer, Alan P. Donenfeld, as a beneficial owner for securities held by Paragon Capital LP, holds warrants that are exercisable into 1,450,000 common shares of the Company as adjusted for the reverse stock split effective April 27, 2011. The $145,000 paid by Paragon Capital LP for the right to exercise these warrants is reflected in the additional paid in capital on the Company’s balance sheet.
As of April 30, 2010, if Mr. Donenfeld and Paragon Capital LP exercised the warrants that have been granted, they would be required to pay $775,000, except for a cashless exercise right, as adjusted for the reverse stock split effective April 27, 2011.
During the year ended April 30, 2010, the Company issued warrants to purchase 900,000 shares of the Company’s common stock at a weighted average exercise price of $0.50. Paragon Capital LP paid $90,000 to purchase these warrants.
The following is a schedule of the activity relating to the Company's warrants as adjusted for the reverse stock split effective April 27, 2011:
Income taxes. In 2009, the Company recorded income tax expense of $6,007 thousand compared to an income tax benefit of $87,497 thousand in 2008. The increase in tax expense in 2009 as compared to 2008 was primarily driven by the increase in earnings before taxes over the prior year.
We also manage credit risk through industry and issuer diversification and asset allocation. Maximum exposure to an issuer or derivatives counterparty is defined by quality ratings, with higher quality issuers having larger exposure limits. We have an overall limit on below investment grade rated issuer exposure. In addition to monitoring counterparty exposures under current market conditions, exposures are monitored on the basis of a hypothetical “stressed” market environment involving a specific combination of declines in stock market prices and interest rates and a spike in implied option activity.
We maintain life reinsurance programs designed to protect against large or unusual losses in our life insurance business. Due to the downgrade of Scottish Re in February 2009, we are closely monitoring its financial situation and will periodically assess the recoverability of the reinsurance recoverable. As of December 31, 2009, Scottish Re was current on all its obligations to the Company. Based on our review of its financial statements, reputation in the reinsurance marketplace and other relevant information, we believe that we have no material exposure to uncollectible life reinsurance.
As discussed in the table below, in the fiscal years ended March 31, 1996 and 1997, the premium credit programs in the aggregate accounted for approximately $14.1 million and $16.6 million, respectively, in credits.
Due to the expiration of the TennCare contract and the impending expiration of the Medicare contract, our board of directors and management have been engaged in a review of a variety of long-term strategic alternatives with the objective of pursuing a strategic alternative that satisfies three primary objectives: providing significant revenues; providing immediate positive EBITDA; and having long-term growth opportunities. During this review, all feasible options are being considered, including pursuing a joint venture or other strategic partnership, completing a strategic acquisition or merger, or liquidating our assets. Further, it is important to note that the exploration of strategic options includes all industries that satisfy the three primary objectives, not solely the healthcare industry.
$15.5 million for the fiscal year ended June 30, 2007. The decrease in fixed administrative fees is principally due to a decrease in members.
Medical expenses for MA-SNP (beginning January 1, 2007) were $9.6 million during the fiscal year ended June 30, 2008, an increase of $8.7 million from $0.9 million during the fiscal year ended June 30, 2007. Medical expenses generally consist of claim payments, pharmacy costs, and IBNR. The IBNR was primarily based on medical cost estimates from historical data provided by CMS and emerging medical claims experience together with current factors using accepted actuarial methods. The medical loss ratio was 87.8% for the fiscal year ended June 30, 2008.
The Company’s wholly owned subsidiary, UAHC-TN, had a required minimum net worth requirement using statutory accounting practices of $7.2 million at June 30, 2009. UAHC-TN had excess statutory net worth of approximately $1.3 million at June 30, 2009. The net worth and depository requirement was in effect through the contract expiration date of June 30, 2009. At such time, UAHC-TN, must continue to maintain a depository requirements of at least $2.4 million as statutory reserves for its ongoing Medicare operations.
Property owned Amount % of Total -------------- ------ ---------- Home Office $ 2,432,325 19%
The overall investment yields for 1997, 1996 and 1995, are 6.70%, 6.88% and 6.37% respectively. Since 1995, investment yield improved due to the fixed maturity investments. Cash generated from the sales of universal life insurance products, has been invested primarily in our fixed maturity portfolio.
At December 31, 1998, each of the insurance subsidiaries has a Ratio that is in excess of 4, which is 400% of the authorized control level; accordingly the insurance subsidiaries meet the RBC requirements.
It is not practicable to estimate the fair value of policy loans as they have no stated maturity and their rates are set at a fixed spread to related policy liability rates. Policy loans are carried at the aggregate unpaid principal balances in the consolidated balance sheets, and earn interest at rates ranging from 4% to 8%. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances.
Our net income attributable to Everest Re Group was $977.9 million, $1,199.2 million and $1,259.4 million in 2015, 2014 and 2013, respectively. The changes were primarily driven by the financial component fluctuations described above, as well as the impact of net income attributable to noncontrolling interests.
At December 31, 2015, Everest International Credit Facility had £165.0 million outstanding letters of credit.
Consolidation. In February 2015, the FASB issued ASU 2015-02, authoritative guidance regarding consolidation of reporting entities. The new guidance focuses on the required evaluation of whether certain legal entities should be consolidated. This guidance is effective for annual and interim reporting periods beginning after December 15, 2015. The Company has chosen not to early adopt and will implement this guidance as of January 1, 2016. The Company is still evaluating the impact of the implementation of this guidance but does not anticipate that it will have a significant impact on its financial statements.
Interest Rate Risk. Our $17.7 billion investment portfolio, at December 31, 2015, is principally comprised of fixed maturity securities, which are generally subject to interest rate risk and some foreign currency exchange rate risk, and some equity securities, which are subject to price fluctuations and some foreign exchange rate risk. The overall economic impact of the foreign exchange risks on the investment portfolio is partially mitigated by changes in the dollar value of foreign currency denominated liabilities and their associated income statement impact.
Underwriting, Acquisition, and Insurance Expenses. Underwriting, acquisition, and insurance expenses increased by 18.4% to $41.0 million for the year ended December 31, 1996 from $34.6 million for the year ended December 31, 1995. The expense growth was primarily attributable to increased acquisition costs, resulting from a change in the mix of business written; additions to staff, related to new business; and new facilities for the operating companies. Also, in 1996, the Company expensed an additional $1.4 million of deferred acquisition costs.
Weighted Average Shares Outstanding. Average shares outstanding were 6.7 million in 1996, compared with 7.6 million in 1995, reflecting the effect of the purchase by the Company of 1.5 million shares of the Company's Common Stock in September of 1995.
In 1998, the $407.0 million of B.A.T Capital Corporation notes receivable was settled. Using the $650.0 million of proceeds received from the redemption of the certificates of contribution mentioned above, and the settlement of the $407.0 million B.A.T notes receivable, the Company issued $1,057.0 million of notes receivable to BAFS in September 1998 (see Note T).
- Redemption of a $165,000,000 certificate of contribution, issued on June 27, 1996, bearing interest at 8.95% annually.
During 1997, Farmers Life began selling an equity-indexed annuity product. At the end of its seven year term, this product credits interest to the annuity participant at a rate based on a specified portion of the change in the value of the S&P 500, subject to a guaranteed annual minimum return. In order to hedge the interest liability generated on the annuities as the index rises, Farmers Life purchases call options on the S&P 500. Farmers Life considers such S&P 500 call options to be held as a hedge. As of December 31, 1998 and 1997, Farmers Life had S&P 500 call options with contract values of $40,229,000 and $13,180,000, respectively, and carrying values of $14,817,000 and $3,299,000, respectively.
Investments $ 823,666,000 Deferred policy acquisition costs and Value of Life Business Acquired 181,196,000 Life insurance policy liabilities (690,426,000)
Premium revenues are recognized based on the estimated premiums earned net of projected rebates because the Company is able to reasonably estimate the ultimate premiums of these contracts. The Company also records premium revenues from capitation arrangements at its OptumHealth businesses.
The Company’s pharmacy care services businesses contract with pharmaceutical manufacturers, some of which provide rebates based on use of the manufacturers’ products by its affiliated and non-affiliated clients. The Company accrues rebates as they are earned by its clients on a monthly basis based on the terms of the applicable contracts, historical data and current estimates. The pharmacy care services businesses bill these rebates to the manufacturers on a monthly or quarterly basis depending on the contractual terms and record rebates attributable to affiliated clients as a reduction to medical costs. The Company generally receives rebates from two to five months after billing. As of December 31, 2017 and 2016, total pharmaceutical manufacturer rebates receivable included in other receivables in the Consolidated Balance Sheets amounted to $3.8 billion and $3.3 billion, respectively.
For the year ended December 31, 2017, the Company’s regulated subsidiaries paid their parent companies dividends of $3.7 billion, including $1.1 billion of extraordinary dividends. For the year ended December 31, 2016, the Company’s regulated subsidiaries paid their parent companies dividends of $3.9 billion, including $3.3 billion of extraordinary dividends.
The Company offers a 401(k) plan for its employees. Compensation expense related to this plan was not material for 2017, 2016 and 2015.
portfolio. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC. The Company disclaims any obligation to update forward-looking information.
PRETAX INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE totaled $33.3 million in 2004, compared with $29.0 million in 2003 and $15.8 million in 2002. The increase in 2004 compared to 2003 was primarily due to growth in average invested assets from the sales of annuity products and effective management of interest crediting rates in response to the lower investment yields available in a declining interest rate environment, partially offset by higher DAC amortization and net realized investment losses. The increase in 2003 compared to 2002 was primarily due to decreased net realized investment losses.
Impairment writedowns include $0.8 million, $3.1 million and $9.5 million of provisions principally applied to bonds in 2004, 2003 and 2002, respectively. Impairment writedowns represent 0.02%, 0.15% and 0.66% of average invested assets in the respective periods. For the five years ended December 31, 2004, impairment writedowns as a percentage of average invested assets have ranged from 0.02% to 1.23% and have averaged 0.65%. Such writedowns are based upon estimates of the fair value of invested assets and recorded when declines in the value of such assets are considered to be other than temporary. Actual realization will be dependent upon future events.
Guaranteed minimum death benefits (“GMDB”) are issued on a majority of the Company’s variable annuity products. GMDB provides that, upon the death of a contract holder, the contract holder’s beneficiary will receive the greater of (1) the contract holder’s account value, or (2) a guaranteed minimum death benefit that varies by product and election by the contract holder. The Company bears the risk that death claims following a decline in the debt and equity markets may exceed contract holder account balances and that the fees collected under the contract are insufficient to cover the costs of the benefit to be provided. On January 1, 2004, the Company recorded
In 2004, the pretax realized loss incurred with respect to the sale of fixed-rate securities in the Bond Portfolio was $4.2 million. The aggregate fair value of securities sold was $165.0 million, which was approximately 97% of amortized cost. The average period of time that securities sold at a loss during 2004 were trading continuously at a price below amortized cost was approximately 15 months.
In July 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts.” (For further discussion see Note 2 of Notes to Financial Statements.)
HAHC is a property and casualty insurance holding company incorporated in Delaware in 2005. In May 2006 we began selling property and casualty insurance products in Texas through our subsidiary, Homeowners of America Insurance Company. Through the use of highly automated underwriting tools, we currently offer homeowners, dwelling fire and extended coverage, tenant and condominium owners policies in Texas only, within market segments which have proven to have long term profitability. Using internet-enabled applications, our products are offered to the public through independent insurance agents.
The accompanying consolidated financial statements include the accounts of Homeowners of America Holding Corporation and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Changes in deferred policy acquisition costs for the years ended December 31, 2013 and 2012 are as follows:
On March 14, 2014, the Company completed placement of its 2014-2015 catastrophe reinsurance program with third party reinsurers, effective April 1, 2014. Coverage was extended to $110 million in excess of $4 million in the new treaty year.
The Account, through N/S Associates, owns an interest in an existing enclosed super regional shopping center in Milwaukee, Wisconsin, known as Northridge Mall. The mall shops and four adjacent department stores comprising the shopping center contain approximately 1,053,000 square feet of gross leasable area, of which N/S Associates owns approximately 399,000 square feet of mall shops (approximately 388,000 square feet ) and storage space (approximately 11,000 square feet). The remaining 654,000 square feet of gross leasable area are occupied by four department stores, three of which own their own stores and a portion of the parking area. The fourth department store leases its space from an unaffiliated third party.
Monmouth Associates entered into an agreement whereby the land underlying the mall is leased back to the Borrower/Lessee under a long-term ground lease. The long-term ground lease, which has a term of 75 years, provides for monthly base rent aggregating $780,000 per annum for the first two lease years, $1,040,000 per annum for the third lease year, and $650,000 per annum for each lease year thereafter. The long-term ground lease also provides for contingent rent, payable quarterly out of the excess, if any, of substantially all of the gross receipts from the shopping center received by the Borrower/Lessee over certain base amounts, equal to the sum of (x) a specified annual amount (commencing in the fourth lease year at $390,000 per annum and increasing in the sixth lease year to $520,000 per annum), increased until paid at the "applicable rate" of interest payable under the first leasehold mortgage loan described below (such amount as so increased herein called the "rent shortfall amount"), plus (y) 15 percent of the balance of such excess gross receipts remaining after deducting the aggregate amount paid at such time of the rent shortfall amount under the long-term ground lease and the "interest shortfall amount" under the first leasehold mortgage loan as described below.
A description of the venture agreements are contained in Note 4 of Notes to Financial Statements of the Account for the year ended December 31, 1994. Such note is incorporated herein by reference.
Jeffrey R. Rosenthal, 44, Chief Financial Officer and Managing Director -- Corporate of JMB, is an officer of various JMB affiliates and a partner of various Associate Partnerships. Mr. Rosenthal has been associated with JMB since December 1987. He is a Certified Public Accountant.
(C) Represents amortization of deferred policy acquisition costs due to non-core realized gains or losses being included in product margins adjusted for income taxes on such amounts.
The contribution to the operating income of the Company from the Closed Block is reported as a single line item in the income statement. Accordingly, premiums, product charges, investment income, realized gains (losses) on investments, policyowner benefits and dividends attributable to the Closed Block, less certain minor expenses including amortization of deferred policy acquisition costs, are shown as a net number under the caption "Contribution from the Closed Block". This results in material reductions in the respective line items in the income statement while having no effect on net income. The expenses associated with the administration of the policies included in the Closed Block and the renewal commissions on these policies are not charged against the Contribution from the Closed Block, but rather are grouped with underwriting, acquisition and insurance expenses. Also, all assets allocated to the Closed Block are grouped together and shown as a separate item titled "Closed Block Assets". Likewise, all liabilities attributable to the Closed Block are combined and disclosed as the "Closed Block Liabilities".
Annuity product charges increased by $1.0 million in 1999 to $27.8 million compared to $26.8 million in 1998 and $1.7 million in 1997. Increased surrender charges and expense loads on deferred annuities primarily contributed to the increase in 1999 while the increase in 1998 was primarily due to the acquisitions of Delta
All other income primarily consists of structured finance fees from affordable housing programs.
All other adjusted pre-tax operating losses increased $2.4 million in 1999 and decreased $1.2 million in 1998. The changes from year to year primarily related to the changes in expenses discussed previously.
We expect that earned premiums could be adversely impacted by a weakened economy leading to a slowdown in new sales and reduced retention of insureds. Additionally, a number of states have issued bulletins that either encourage or require premium leniency such as extension of grace periods or moratoriums on cancellation of policies for non-payment. The Company does not expect a significant reduction or delay in payments and continues to monitor state required actions as they develop.
Insurance premiums are established before the amount of losses and loss adjustment expenses, or the extent to which inflation may affect such losses and expenses, are known. Consequently, in establishing its premiums, the Company attempts to anticipate the potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by the Company. Inflation also affects the rate of investment return on the Company’s investment portfolio with a corresponding effect on investment income. To date, inflation has not had a material effect on the Company’s results of operations in any of the periods presented.
Sales of available-for-sale securities in 2020 and 2019 were primarily a result of improving the overall risk versus return profile of the portfolio. In addition, the Company sold its interest in a certain limited liability company held as other invested assets to a third-party. The transaction closed prior to December 31, 2020. The Company recorded gross realized gains on this sale of $6.9 million and proceeds of $12.7 million which settled after year end.
In 2014, the Company acquired $7,500 of the Junior Subordinated Debentures.
Additional information regarding the Company’s real estate operating leases is as follows:
The following table presents maturities and present value of the Company’s lease liabilities:
Board of Directors: Ch. Simon, Chairman. E. Hllriimann, Deputy-Chairman. Hans Suizer Max Huber E. Welti t Felix Calender 0. J. Ahegg G. Bachmann
In Life Insurance war-time difficulties and the preceding economic uncertainty paralyzed production and led to an increase in surrenders. The volume of sums insured and of premiums was again greatly affected by depreciation in various currencies. Thanks to the excellent mortality experience the result was, however, not inferior to that of the previous year.
Life DepL. Premiums for Retrocession Commission, less Retrocession Surrenders, less Retrocession Losses paid, less Retrocession Annuities paid, less Retrocession Premium Reserve, less Retrocession Annuity Fund, less Retrocession Reserve for Unsettled Claims, less Retrocession Expenses of Management Taxes Depreciation of Investments : . Balance
Assets. Shareholders' Liability 34,800,000 — Real Estate s. 8,400,000.— Mortgages 25,951,681. 80 Government and other Securities 200,725,469. 65 Life and other funds deposited with ceding Companies n 412,716,413. 37 Bank Balances 38,313,709.30 Cash in hand 32,050. - 686,139,324 12 Due by other Companies 69,075,179 61 Sundry Debtors 280,000 — Accrued Interest 2,612,944 59
Included in losses and loss adjustment expenses for 2013 was $24.6 million in catastrophe losses primarily attributable to storm activity in the U.S. and Germany and flooding in Europe and Canada. Offsetting these 2013 accident year losses was $33.6 million in net favorable loss reserve development on prior accident years, primarily within our general liability lines of business.
In determining appropriate reserve levels for the year ended December 31, 2015, we maintained the same general processes and disciplines that were used to set reserves at prior reporting dates. No significant changes in methodologies were made to estimate the reserves since the last reporting date; however, at each reporting date we reassess the actuarial estimate of the reserve for loss and loss adjustment expenses and record our best estimate. Consistent with prior reserve valuations, as claims data becomes more mature for prior accident years, actuarial estimates were refined to weigh certain actuarial methods more heavily in order to respond to any emerging trends in the paid and reported loss data. While prior accident years’ net reserves for losses and loss adjustment expenses for some lines of business have developed favorably in recent years, this does not imply that more recent accident years’ reserves also will develop favorably; pricing, reinsurance costs, legal environment, general economic conditions including changes in inflation and many other factors impact our ultimate loss estimates.
(3) Excludes the unrealized gains on available for sale securities which is reported in accumulated other comprehensive income as a separate component of stockholders' equity.
Other expenses. Other expenses increased to $123.3 million in 1998 from $100.5 million in 1997, an increase of $22.8 million or 23%. The increase is primarily due to the costs associated with the operations of the Credit Services Division and Educational Finance Group.
Revenue for the SEA Division increased to $610.1 million for the year ended in 1998 from $538.3 million in 1997, an increase of 13%. The increase in revenues is the result of an increase in the proportion of direct business compared to coinsured business. New sales in 1998 were lower than 1997 as a result of fewer PPO products being sold. Profit margins on newly introduced PPO products are proving to be substantially improved.
Special Risk. Operating income for Special Risk Division increased to $8.0 million in 1997 from $1.2 million in 1996. The major operations of this Division were acquired during the second and third quarter of 1997. In 1997, the Company purchased a block of special risk coverages with annualized premiums approximating $50.0 million net of reinsurance. Net
Many proposals have been introduced in Congress and various state legislatures to reform the present health care system. Some of these proposals are specifically directed at the small group health care market, which could affect the Company's health insurance business. At the state level, a number of states have passed or are considering legislation that would limit the differentials in rates that carriers could charge between new business and renewal business and with respect to similar demographic groups. Legislation also has been adopted or is being considered that would make health insurance available to all small groups by requiring coverage of all employees and their dependents, by limiting the applicability of pre-existing conditions exclusions, by requiring carriers to offer a basic plan exempt from certain mandated benefits as well as a standard plan and by establishing a mechanism to spread the risk of high risk employees to all small group carriers.
Investment accounting policies. The Company has classified its entire fixed maturity portfolio as "available for sale" which requires the portfolio to be carried at fair value with the resulting unrealized gains or losses, net of applicable income taxes and minority interests, reported in accumulated other comprehensive income as a separate component of stockholders' equity. As a result, fluctuations in interest rates will result in increases or decreases to the Company's stockholders' equity.
Other expenses associated with Insphere are related to employee compensation, costs associated with our field offices, depreciation and amortization, and other administrative expenses. Other expenses also reflect the significant amount of development to build-out technology to support multiple carriers and enhance the Insphere distribution channel by equipping our agents with efficient technology to cross-sell products. Other expenses have decreased from prior year as a result of both cost cutting initiatives and a reduction in costs associated with the development of Insphere.
This group incurred a loss of $78,000, income of $15,000 and a loss of $2.3 million in 2011, 2010 and 2009, respectively. The loss in 2009 primarily relates to certain additional costs incurred with our decision to exit the Life Insurance Division business.
Historically, our primary source of cash on a consolidated basis has been premium revenue from policies issued. The primary uses of cash on a consolidated basis have been for the payment for benefits, claims and commissions under those policies, as well as operating expenses, primarily employee compensation and benefits.
The required minimum aggregate statutory capital and surplus of our principal domestic insurance subsidiaries were as follows at December 31, 2011:
Health insurance policies issued by the Company are considered long-duration contracts. The contract provisions generally cannot be changed or canceled during the contract period; however, the Company may adjust premiums for health policies issued within prescribed guidelines and with the approval of state insurance regulatory authorities. Insurance premiums for health policies are recognized as earned over the premium payment periods of the policies. Benefits and expenses are matched with premiums so as to result in recognition of income over the term of the contract. This matching is accomplished by means of the provision for future policyholder benefits and expenses and the deferral and amortization of acquisition costs.
(b) Impact due to change in estimated loss ratio for the most recent three month.
The Company generally invests in securities with fixed maturities with the objective of providing reasonable returns while limiting liquidity and credit risk. As a result, its investment portfolio consists primarily of government and governmental agency securities and high-quality marketable corporate securities which are rated at investment grade levels. At December 31, 1996, the Company held rated, or better-than-investment grade, fixed income debt securities with a carrying amount of $ 685.3 million, constituting 100.0% of the Company's fixed maturity investments.
The Company is a holding company, receiving cash principally through sales of equities, borrowings, and dividends from its subsidiaries, certain of which are subject to dividend restrictions described in Note I of the Notes to the Consolidated Financial Statements. The ability of insurance and reinsurance companies to underwrite insurance and reinsurance is based on maintaining liquidity and capital resources sufficient to pay claims and expenses as they become due. The primary sources of liquidity for the Company's subsidiaries are funds generated from insurance and reinsurance premiums, investment income, commission and fee income, capital contributions from the Company and proceeds from sales and maturities of portfolio investments. The principal expenditures are for payment of losses and LAE, underwriting and other operating expenses, commissions, and dividends to shareholders and policyholders.
During 1996, the Company expended $1.2 million in connection with the construction of an addition to its home office building. The Company plans to occupy the addition in 1997 and will expend approximately $11.3 million to complete the facility.
Liquidity . With assets of $15 and liabilities of $105,423, we are not liquid. The only event reasonably likely to increase our liquidity would be a reverse merger with a going-concern, private company, an event we are pursuing but have not yet identified. We have no unused sources of liquid assets and have to rely on our officers and directors to provide the ongoing expenses of searching for a reverse merger candidate.
The Company's commitment to high-quality investments in debt securities is also reflected by the portfolio average rating of "Aa," which is high quality. Allocation of investments in debt securities classified in accordance with the highest rating by a nationally recognized statistical rating organization as of December 31, 1995, is provided below. If securities were not rated by one of these organizations, the equivalent classification as assigned by the National Association of Insurance Commissioners was used.
Realized Gains and Losses on Investments: The Company recorded realized losses totaling $2.4 million in 1995 compared to realized gains of $1.6 million and $3.2 million in 1994 and 1993, respectively. The losses in 1995 were primarily from sales of investments in debt securities, the majority of which were from the Company's remaining investments in principal exchange rate linked securities. The Company made the decision to realize these losses to obtain tax benefits related to the losses which were scheduled to expire on December 31, 1995. The gains and losses in 1995, 1994, and 1993 are net of write-downs on real estate and mortgage loans totaling $882,000, $625,000, and $3,360,000, respectively. The 1993 gains are also net of write-downs for permanent impairments on investments in debt securities totaling $6,329,000.
During the year ended December 31, 1999 and 1998, net investment income earned was $333,462 and $377,218, respectively. Realized net losses and gains for the years ended December 31, 1999 and 1998 were $129,101 and $(437,565), respectively. CCS wrote down its investment in certain equity securities during the 4th quarter of 1998 as management determined the decline in value to be other than temporary. As a result, CCS recorded a loss of $580,360 in 1998, which was offset by net capital gains of $142,795.
During the year ended December 31, 1998, operating expenses and taxes, licenses and fees (excluding income taxes) increased to $4,313,278 from $3,903,476 in 1997. The increase of $409,802 or 10% is a result of increased salary expense including bonuses, payroll taxes and employee benefits of $180,161, general office expenses of $22,797 and increased taxes, licenses and fees of $206,844. The increase in salary and related expenses is the cost of additional personnel consistent with the Company growth while the increase in taxes, licenses and fees expenses is attributed to increased premiums written.
The following table represents the development of the liability for unpaid losses and LAE, net of reinsurance, for 1992 through 1999 (in thousands).
excess of the cost of the options purchased to fund the index-based component of the policyholder's return and amounts credited as a result of minimum guarantees.
Land O' Lakes is a national, farmer-owned food and agricultural cooperative. We determined that an other than temporary impairment charge was not necessary for the following reasons: (i) Land O' Lakes operates in a cyclical industry and had successfully managed through previous cyclical lows; (ii) we calculated that Land O' Lakes had an EBITDA to interest coverage of 4.49 times for bank debt and 4.42 times for bond debt and determined that Land O' Lakes had adequate liquidity; (iii) Land O' Lakes was in the process of improving its balance sheet and had decreased long-term debt to capital from 53.9% to 50.8% and (iv) further improvements were expected in the future.
Ford Motor Co. was determined to be an improving credit, however we decided to reduce our position in this security to $10 million by selling a portion of these securities with a par value of $5 million at a loss of $0.4 million.
projections of sufficient taxable income of our life subsidiaries, and the adoption of plans and policies related to our net (non-life) operating loss carryforwards, we have not recorded a valuation allowance against these assets.
For information related to our coinsurance agreement, see note 5 to our audited consolidated financial statements.
December 31, 2002 compared to $3,682.7 million at December 31, 2001, while the weighted average yield earned on average invested assets was 6.43%, 6.91% and 7.08% for 2003, 2002 and 2001, respectively.
The composition of our investment portfolio is summarized in the table below:
Revenue from program payments received, and related direct expenses, are deferred to the extent that they are applicable to future periods or to any refund guarantee we offer. HealthExtras has committed to minimum premium volumes with respect to the insurance features of its programs supplied by others. In the event that there were insufficient members to utilize the minimum premium commitment, the differential would be expensed by the Company without any related revenue. The Company believes that current enrollment trends will allow the minimum future commitments at December 31, 2003 to be fully utilized by current enrollment levels.
Revenue decreases in the supplemental benefits segment were a function of the initial phase of contractual changes in the economic terms of our marketing arrangements. While net membership levels were largely unchanged from 2001 to 2002, our marketing partners incurred the direct marketing costs for new members added commencing in the fourth quarter of 2002 and we recognized lower revenue levels accordingly. The reduction in revenues of approximately $5.2 million in 2002 was largely offset by lower marketing expenses in our own selling, general and administrative expenses.
Selling, General and Administrative. From 2001 to 2002, selling, general and administrative expenses remained consistent; $35.5 million in 2002 compared to $38.5 million in 2001. This decrease, as discussed above, was primarily a result of changing our marketing arrangements in October 2002. The offsetting increase in selling, general and administrative expenses was primarily associated with Catalyst’s operations, personnel costs and other expenses being consolidated for the full calendar year.
Goodwill is subject to a periodic impairment assessment, by applying a fair value based test, requiring judgments concerning the value of the Company’s PBM segment. The Company has concluded that no impairment of goodwill exists at December 31, 2003.
• we lose relationships with one or more key pharmaceutical manufacturers;
Many companies compete for acquisition opportunities in the PBM industry. Most of our competitors are companies that have significantly greater financial and management resources than we do. This may reduce the likelihood that we will be successful in completing acquisitions necessary to the future success of our business.
Involuntary automobile insurance business increased the Company's calendar year loss and LAE ratio by approximately 3.4 and .7 percentage points for the years ended December 31, 1997 and 1996, respectively. The combined ratio on involuntary automobile business was greater than the combined ratio on voluntary automobile business.
Voluntary commercial lines direct premiums written for 1996 were $55,467,000, a decrease of 3% from $57,304,000 in 1995. This decrease resulted primarily from a 10% decrease in commercial lines policies in force at December 31, 1996, partially offset by a 15% increase in average premium per policy outstanding at December 31, 1996 compared to December 31, 1995.
The Company recorded an income tax benefit in 1996 and 1995. The benefits recorded were larger than that calculated using the statutory federal income tax rate due to tax exempt bond income.
The markets we target are generally complex, have a relatively limited number of competitors and, we believe, offer attractive profit opportunities.
The fair market value of the fixed maturity securities in our portfolio and the investment income from these securities fluctuate depending on general economic and market conditions. The fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates, while net investment income realized by us from future investments in fixed maturity securities will generally increase or decease with interest rates. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at time of investment as a result of interest rate fluctuations. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities, commercial mortgage obligations and bonds in our investment portfolio are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates, and we may be required to reinvest those funds in lower interest-bearing investments.
Net income before cumulative effect of change in accounting principle for the year ended December 31, 2002 was $260 million. When we adopted FAS 142 in 2002, we recognized a cumulative effect of change in accounting principle which resulted in an expense of $1,261 million in 2002 as compared to zero recognized in 2003.
Net earned premiums and other considerations increased by $222 million, or 11%, from $2,009 million for the year ended December 31, 2003, to $2,231 million for the year ended December 31, 2004. Net earned premium growth in individual health insurance business was attributable to continued sales which partially reflect the success of the HSAs that were introduced on January 1, 2004, and premium rate increases. Net earned premium growth in our small employer group health insurance business was attributable to premium rate increases partially offset by decreases in membership.
Selling, underwriting and general expenses increased by $11 million, or 3%, from $422 million for the year ended December 31, 2002, to $433 million for the year ended December 31, 2003. The expense ratio increased from 32.3% in 2002, to 33.1% in 2003, primarily due to a $6.2 million writedown of previously capitalized software related to our new administration system.
Total benefits, losses and expenses increased by $20 million, or 3%, from $668 million for the year ended December 31, 2003 to $688 million for the year ended December 31, 2004.
Reinsurance recoverables decreased by $244 million, or 6%, from December 31, 2003 to December 31, 2004 and by $273 million, or 6%, from December 31, 2002 to December 31, 2003. We have used reinsurance to exit certain businesses, such as the dispositions of FFG and LTC. The reinsurance recoverables relating to these dispositions amounted to $2,389 million, $2,410 million, and $2,255 million at December 31, 2004, December 31, 2003 and 2002, respectively.