TRH has performed a VaR analysis to estimate the maximum potential loss of fair value for financial instruments for each type of market risk. In this analysis, financial instrument assets include all
TRH calculated the VaR as of December 31, 1998. This calculation used the variance-covariance (delta-normal) methodology. The calculation also used daily historical interest and foreign currency exchange rates and equity prices in the two years ended December 31, 1998. The VaR model estimated the volatility of each of these rates and equity prices and the correlation among them. For interest rates, each country's yield curve was constructed using eleven separate points on this curve to model possible curve movements. Inter-country correlations were also used. The redemption experience of municipal and corporate fixed maturities as well as the use of financial modeling were employed in the analysis process. Thus, the VaR measured the sensitivity of the asset and the liability portfolios to each of the aforementioned market risk exposures. Each sensitivity was estimated separately to capture the market risk. The following table presents the VaR of each component of market risk as of December 31, 1998:
Additionally, the amendments expand existing disclosure requirements to include quantitative and qualitative discussions in Management's Discussion and Analysis of Financial Condition and Results of Operations (Management's Discussion) with respect to market risk inherent in market risk sensitive instruments such as equity and fixed maturity securities, as well as derivative instruments. These amendments are designed to provide additional information about market risk sensitive instruments which investors can use to better understand and evaluate market risk exposures of registrants. For TRH, these disclosures are included for 1998 in Management's Discussion which accompanies these financial statements and related notes.
TRH has taken the necessary steps to transact business in the Euro, has identified the significant issues and will be prepared with respect to the continued phase in of and ultimate redenomination to the Euro. Any costs associated with the adoption of the Euro are expensed as incurred and are not material to TRH's net income, financial position or cash flows.
This standard requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position.
In accordance with the standard, TRH adopted SFAS No. 130 in 1998. Comparable data from prior years are presented in conformity with the new standard.
(c) Income tax payments by TRH totaled $110,884,000, $48,744,000 and $39,939,000 in 1998, 1997 and 1996, respectively.
A summary of the status of the Company Plans as of December 31, 1998, 1997 and 1996 and changes during the years ended on those dates is presented below:
- ------------ * A significant portion of this product grouping includes more complex risks such as professional liability (other than medical malpractice), directors' and officers' liability, errors and omissions and environmental impairment liability.