Unitrin’s Life and Health Insurance segment leases facilities with aggregate square footage of approximately 529,000 at 131 locations in 26 states. The latest expiration date of the existing leases is in November of 2019.
Other personal insurance incurred losses and LAE were $29.4 million for the year ended December 31, 2009, compared to $32.2 million for the same period in 2008. Other personal insurance Catastrophe losses and LAE (excluding loss and LAE reserve development) were $2.2 million for the year ended December 31, 2009, compared to $3.9 million in 2008. Favorable loss and LAE reserve development on other personal insurance was $2.1 for the year ended December 31, 2009, compared to unfavorable loss and LAE development of $1.3 million for the same period in 2008.
income tax rate differs from the federal statutory income tax rate due primarily to tax-exempt investment income and dividends received deductions. Tax-exempt investment income and dividends received deductions were $23.4 million for the year ended December 31, 2009, compared to $24.8 million for the same period in 2008.
Earned Premiums in the Life and Health Insurance segment decreased by $10.8 million for the year ended December 31, 2009, compared to the same period in 2008. Earned Premiums in the Life and Health Insurance segment for the year ended December 31, 2009 included earned premiums of $12.6 million in the first quarter of 2009 (consisting of $9.8 million from life insurance, $1.9 million from accident and health insurance and $0.9 million from property insurance) related to the Primesco acquisition with no corresponding amount in the first quarter of 2008.
Net Investment Income in the Life and Health Insurance segment decreased by $18.9 million for the year ended December 31, 2008, compared to the same period in 2007, due primarily to lower net investment income from Equity Method Limited Liability Investments, partially offset by $16.6 million of net investment income from Primesco since the date of the acquisition. The Life and Health Insurance segment reported net investment losses of $38.3 million from these Equity Method Limited Liability Investments for the year ended December 31, 2008, compared to net investment income of $1.5 million for the same period in 2007.
Interest, Loan Fees and Earned Discounts in the Fireside Bank segment decreased by $62.4 million for the year ended December 31, 2009, compared to the same period in 2008, due primarily to lower levels of Sales Contracts and Loans Receivable resulting from the suspension of lending activity in connection with the exit plan. Fireside Bank has no loans outstanding that are secured by real estate. Fireside Bank has not sold or securitized any portion of its loan portfolio.
Automobile Finance Revenues decreased by $17.9 million for the year ended December 31, 2008, compared the same period in 2007. Interest, Loan Fees and Earned Discounts in the Fireside Bank segment decreased by $13.8 million for the year ended December 31, 2008, compared to the same period in 2007, due to both lower average loans outstanding and lower average yield on the loans outstanding.
during 2008. Short-term investment income decreased by $10.7 million for the year ended December 31, 2009, compared to the same period in 2008, due primarily to substantially lower yields and, to a lesser extent, a lower level of short-term investments.
Net Investment Income decreased by $77.0 million for the year ended December 31, 2008, compared to the same period in 2007, due primarily to lower net investment income from Equity Method Limited Liability Investments, lower investment income on short-term investments and lower dividend income from investments in Northrop preferred and common stock and the Company’s equity investment in Information Resources, Inc. (“IRI”), partially offset by higher investment income related to the acquisitions of businesses. The Company reported net investment losses of $76.3 million from investments Equity Method Limited Liability Investments for the year ended December 31, 2008, compared to net investment income of $6.7 million for the same period in 2007. Investment income from Equity Method Limited Liability Investments decreased for the year ended December 31, 2008, compared to the same period in 2007, due primarily to the Company’s pro rata share of unrealized losses from investments recognized in operations by certain of the limited liability investment companies and limited partnerships. Dividend income from the Company’s investments in Northrop preferred and common stock decreased by $14.2 million for the year ended December 31, 2008, compared to the same period in 2007, due primarily to the conversion of the higher yielding Northrop preferred stock into Northrop common stock during 2008 and to a lesser extent the sales of the Northrop common stock throughout the year and the timing of the Northrop preferred stock ex-dividend dates in 2007. Dividend income for the year ended December 31, 2007 also included dividend income of $5.2 million from a special dividend on the Company’s equity investment in IRI. Short-term investment income decreased by $22.5 million for the year ended December 31, 2008, compared to the same period in 2007, due primarily to substantially lower yields and, to a lesser extent, a lower level of short-term investments. Unitrin invested the proceeds from the issuance of $360 million of its 6.00% senior notes due May 15, 2017 (the “6.00% Senior Notes”) in short-term investments until the principal of $200 million on its 5.75% senior notes due July 1, 2007 (the “5.75% Senior Notes”) was repaid. See Note 10, “Notes Payable,” to the Consolidated Financial Statements.
Cash available for investment activities in total is dependent on cash flow from Operating Activities and Financing Activities and the level of cash the Company elects to maintain. Net Cash Provided by Investing Activities was $287.6 million for the year ended December 31, 2009, compared to Net Cash Provided by Investing Activities of $356.2 million for the same period in 2008. Purchases of Fixed Maturities exceeded Sales of Fixed maturities by $157.0 million in 2009 and by $237.6 million in 2008. Automobile Loan Originations used $77.0 million of cash for the year ended December 31, 2009, compared to using $546.1 million of cash in the same period in 2008. The repayment of automobile loan receivables provided $431.9 million for the year ended December 31, 2009, compared to providing $571.4 million of cash in the same period in 2008. Cash received from dispositions of equity securities, net of cash paid to acquire equity securities was $104.9 million in the year ended December 31, 2009, compared to $593.8 million in the same period in 2008. In 2008, the Company sold equity securities to reduce its risk to further declines in the stock market. The Company used $190.0 million of cash to acquire a business in 2009, compared to $95.4 million used to acquire a business in 2008. The Company received proceeds of $68.8 million related to the disposition of its Unitrin Business Insurance operations in 2008. Net cash provided by dispositions of short-term investments was $222.2 million for the year ended December 31, 2009, compared to net cash provided by disposition of short-term investments of $132.3 million for the same period in 2008.
Changes to claims practices including, but not limited to, changes in the reporting and impact of large losses, timing of reported claims, adequacy of case reserves, implementation of new systems for handling claims, turnover of claims department staffs, timing and depth of the audit review of claims handling procedures;
In addition to the factors described above, other factors may also impact loss reserve development in future periods. These factors include governmental actions, including court decisions interpreting existing laws, regulations or policy provisions, developments related to insurance policy claims and coverage issues, adverse or favorable outcomes in pending claims litigation, the number and severity of insurance claims, the impact of inflation on insurance claims and the impact of residual market assessments. Although the Company’s actuaries do not make specific numerical assumptions about these factors, changes in these factors from past patterns will impact historical loss development factors and in turn future loss reserve development. Significant positive changes in one or more factors will lead to positive future loss reserve development, which could result in the
The following individual line items in the Consolidated Statement of Operations for the year ended December 31, 2009 were affected by the change in accounting principle:
The standard amends guidance with respect to the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The Company applied the standard to the acquisition of Direct Response (see Note 3, “Acquisitions of Businesses,” to the Consolidated Financial Statements).
Summary financial information included in Income from Discontinued Operations for the years ended December 31, 2009, 2008 and 2007 are presented below:
Reinsurance and indemnification recoverables on property and casualty insurance reserves were $77.4 million and $84.6 million at December 31, 2009 and 2008, respectively. These reinsurance recoverables are concentrated with several reinsurers, the vast majority of which are highly rated by one or more of the principal investor and/or insurance company rating agencies. While most of the reinsurance recoverables were unsecured at December 31, 2009 and 2008, the agreements with the reinsurers generally provide for some form of collateralization upon the occurrence of certain events. The largest reinsurance recoverable on property and casualty insurance is from General Security National Insurance Company (“GSNIC”), a subsidiary of SCOR and is unsecured. In 2002, the Company acquired two insurance companies from SCOR. Under the agreement governing the acquisition of these insurance companies, SCOR and/or GSNIC are responsible for all liabilities of these insurance companies incurred prior to the acquisition. Reinsurance recoverables at December 31, 2009 and 2008 included $30.3 million and $33.4 million, respectively, from GSNIC.
Interest Paid, including facility fees, for the years ended December 31, 2009, 2008 and 2007 was:
On July 9, 2007, Republic Companies purchased Southern States General Agency, a subsidiary of Unitrin, from the Company. Net Realized Gains on Sales of Investments for the year ended December 31, 2007 includes a pretax gain of $4.0 million for the year ended December 31, 2007 resulting from this sale.
The Company sponsors an other than pension postretirement employee benefit plan (“OPEB”) that provides medical, dental and/or life insurance benefits to approximately 800 retired and 500 active employees (“the OPEB Plan”). The Company generally is self-insured for the benefits under the OPEB Plan. The medical plan generally provides for a limited number of years of medical insurance benefits at retirement based on the participant’s attained age at retirement and number of years of service until specified dates and generally requires participant contributions, with most contributions adjusted annually.
The Company estimates that OPEB Expense for the year ended December 31, 2010 will include income of $1.4 million resulting from the amortization of the related accumulated actuarial gain included in Accumulated Other Comprehensive Income (Loss) at December 31, 2009.
The actuarial assumptions used to develop the components of the Pension Expense for the years ended December 31, 2009, 2008 and 2007 were:
Amortization of Deferred Policy Acquisition Costs by Operating Segment for the years ended December 31, 2009, 2008 and 2007 was:
The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2009 is summarized below: