Investments, all of which are available for sale, are comprised of interest-bearing marketable securities and an investment in an international equity fund, and are carried at fair value based on quoted market prices and dealer quotes obtained from an external pricing service. Investments with original maturities of less than 90 days are classified as cash equivalents. Unrealized appreciation (depreciation) is included in other comprehensive income.
Premiums are written on the basis of quarterly cessions and earned relative to anticipated loss exposures. Acquisition costs, consisting of ceding commissions and excise taxes, are charged to expenses on the basis of premiums earned.
The Company incurred operating expenses during the year ended December 31, 2003 of $747,614 compared to $675,818 and $749,181 for the years ended December 31, 2002 and 2001, respectively. Such amounts do not include expenses reimbursed by MIC as noted below. The increase in operating expenses for the year ended December 31, 2003 compared to the year ended December 31, 2002 was primarily attributable to an increase in legal expenses resulting from non-recurring projects. The decrease in operating expenses for the year ended December 31, 2002 compared to the year ended December 31, 2001 was primarily attributable to a decrease in legal fees and a decrease in the costs associated with the Annual General Meeting of the Shareholders. MIC has agreed to reimburse the Company for certain costs relating to registering and issuing Shares if such costs cannot be allocated to the Subsidiary Capital Account for the Common Stock. For the year ended December 31, 2003, $141,229 of such costs were paid directly by MIC compared to $90,753 and $106,751 for the years ended December 31, 2002 and 2001, respectively. The increase in such costs for the year ended December 31, 2003 compared to the year ended December 31, 2002 is largely attributable to an increase in legal fees associated with stock registration and filings.
Net unrealized gains on investment securities held at December 31, 2003 were $2,172,276 compared to unrealized losses at December 31, 2002 of $1,157,908. This increase resulted primarily from a significant change in the unrealized position on the Company's equity portfolio, which was largely attributable to overall positive performance of the equity markets during 2003.
o to reimburse MIC for the Company's share of losses paid by MIC under the terms and provisions of the business retroceded under the Retrocession Agreements;
Year Ended ----------------------------------- 12/31/03 12/31/02 12/31/01 -------- -------- -------- Beginning balance in reserves for unpaid losses $3,650,641 $3,949,590 $4,754,710 ---------- ---------- --------- Add-provision for losses incurred related to: Current claim year...... 30,798,600 36,929,150 40,529,340 Prior claim years....... (1,429,368) (1,347,207) (1,304,766) ---------- ---------- --------- Total............ 29,369,232 35,581,943 39,224,574 ---------- ---------- --------- Deduct-paid losses attributable to: Current claim year...... 28,776,299 33,288,213 36,590,250 Prior claim years....... 2,078,702 2,592,679 3,439,444 ---------- ---------- --------- Total............ 30,855,001 35,880,892 40,029,694 Ending balance in reserves for unpaid losses......... $2,164,872 $3,650,641 3,949,590 ========== ========== =========
Statements of Changes in Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001 27
The cost and fair value of debt securities at December 31, 2003, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call the underlying security or prepayment obligations with or without call or prepayment penalties.