felanders/preprocessed huggingface dataset:
Policy acquisition expenses as a percentage of net premiums earned for the year ended December 31, 1999 were 19.7% as compared with 13.3% for the prior year. The increase in the ratio is due in large part to the two transactions involving assumptions of premiums in 1998. Absent such business, the ratio would have been approximately 19.7% for the year ended December 31 1998.
As of December 31, 1998, the company owned or leased the following facilities which the company considers material to its operations:
The following table sets forth premium revenue (in thousands) by product group for the years ended December 31, 1998, 1997, and 1996:
Excluding non-recurring relocation and restructuring charges, the company's self-funded segment experienced operating income of $18.9 million in 1998 as compared to operating income of $9.5 million for 1997. The improvement in 1998 operating income is partially the result of the continued positive performance of HealthLink, which added an additional $7.9 million to this segment's operating income in 1998 as compared to 1997. HealthLink's operating income is inclusive of $2.8 million and $3.1 million in 1998 and 1997, respectively, for amortization expenses related to goodwill and other intangible assets that were acquired through the company's HealthLink acquisition.
The projected cost of the Year 2000 program and the expected completion dates are based on management's best estimates and may be updated as additional information becomes available. These estimates were derived using numerous assumptions of future events, including the availability of certain resources and other factors. There can be no guarantee these estimates will be achieved, and actual results could differ materially from expected results.
The Company's principal business operations are conducted from two locations. The Company's executive offices consist of approximately 20,000 square feet located at 418 Sixth Avenue, Des Moines, Iowa. AmerUs Life's executive offices consist of approximately 125,000 square feet located at 611 Fifth Avenue, Des Moines, Iowa. The Company and AmerUs Life both lease their executive offices from AmerUs Properties, Inc., an affiliate.
Individual life and annuity premiums and product charges increased $9.0 million to $303.8 million, or 3.1%, from $294.8 million in 1995 and $21.3 million, or 7.5%, from $282.5 million in 1994. Insurance premiums increased $2.7 million to $246.8 million in 1996 compared to $244.1 million in 1995, and $237.9 million in 1994. Traditional life insurance premiums increased $9.3 million in 1996, nearly matching the $10.3 million increase experienced in 1995. While there have been modest decreases in new traditional life insurance production over the past two years, continued growth in renewal premiums has produced the increase in traditional life insurance premiums in both 1996 and 1995. Changes in the level of immediate annuity deposits and supplementary contract premiums have primarily been the result of fluctuations in immediate annuity sales. Other premiums have decreased significantly over the past two years primarily due to the Company's exit from several group life and long-term disability reinsurance pools in 1995 and the sale of the Company's remaining group life operation in 1996.
Income tax expense increased $2.6 million in 1996 to $43.8 million compared to $41.2 million in 1995, and $19.4 million in 1994. The increased 1996 income taxes were the result of the higher pre-tax income due primarily to the increased realized gains on investments and a $4.5 million provision for the equity add-on tax in the first half of 1996, partially offset by $2.7 million of low-income housing tax credits. The equity add-on tax is applicable only to mutual life insurance companies and the Company believes such tax will not be applicable to the Company after June 30, 1996 due to the Company's conversion into a stock company. The increased 1995 income taxes were the result of the higher pre-tax income discussed above. The effective income tax rate for 1996 was 37.2% compared to 37.3% in 1995, and 74.5% in 1994. In 1994, the Company as a mutual life
Realized gains on investments - The net gains reported in 2007 of $3.5 million consisted of gross gains of $5.4 million primarily from calls and sales of debt securities, (including a $3.7 million gain recorded on a previously impaired debt security), sale of real estate during the year, offset by gross losses of $1.9 million, which includes the impairments highlighted in the table below.
As previously described, derivatives are used to hedge the equity return component of the Company's fixed indexed annuity products with any gains or losses from the sale or expiration of the options, as well as period-to-period changes in fair values, reflected in net investment income. The increase in net investment income, excluding derivatives from 2005, is due to the increase in the overall size of the asset portfolio as a result of higher sales volume. Net investment income for 2006 included additional income from other income items as previously discussed.
The Company held net investments in mortgage loans totaling $99.0 million and $103.3 million at December 31, 2007 and 2006, respectively. The diversification of the portfolio by geographic region and by property type was as follows:
The Company's market risk liabilities, which include policy liabilities for annuity and supplemental contracts, are managed for interest rate risk through cash flow testing as previously described. As part of this cash flow testing, the Company has analyzed the potential impact on net earnings of a 100 basis point decrease and increases in increments of 100 basis points in the U.S. Treasury yield curve as of December 31, 2007. The potential impact on net earnings from these interest rate changes are summarized below.
LIQUIDITY AND CAPITAL RESOURCES The Company's management believes the following information may be useful in understanding the liquidity and capital resources of the Company.
As of April 30, 2014, the Company had assets equal to $1,990, comprised exclusively of cash. This compares with assets of $9,218, comprised exclusively of cash, as of April 30, 2013. The Company’s current liabilities as of April 30, 2014 totaled $120,333 comprised of $20,333 of accounts payable and $100,000 due to a related party. This compares with total liabilities of $93,861, comprised of $18,861 of accounts payable and $75,000 due to a related party, as of April 30, 2013. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Prevention Insurance.Com as of April 30, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Fees on life and annuity products. Prior to the impact of the deferred policy acquisition cost unlocking noted below, fees on our life and annuity products declined $6,813 thousand in 2011 compared to 2010. The decline in fees was primarily a result of lower surrenders and a decline in funds under management on universal life, variable universal life and variable annuity products. Offsetting these declines was an increase in non-asset based fees related to fixed indexed annuities. In addition, cost of insurance fees declined $7,824 thousand primarily related to lower net insurance in force in our universal life lines of business.
2010. This decrease in amortization was attributable to the unlocking of assumptions as a result of annual comprehensive reviews of assumptions in the third quarters of 2011 and 2010. The unlocking resulted in acceleration of amortization of $1,904 thousand in 2011, compared to $31,953 thousand in 2010. In 2010, the unlocking was primarily driven by increased lapses in portions of our universal life business which resulted in $23,486 thousand of additional amortization. In comparison, updates in assumptions related to cost of insurance, lapses and premium persistency resulted in additional amortization on universal life of $693 thousand in 2011. Excluding the impact of the unlocking, amortization decreased primarily related to universal life as a result of less favorable mortality experience.
$3.1 million. Pursuant to the terms of the Agreement, which was approved by the Illinois Department of Insurance on October 13, 1998 and the shareholders of Investors on January 26, 1999, Citizens issued one share of Citizens Class A Common stock for each 6.6836 shares of Investors common and preferred stock issued and outstanding. Citizens issued approximately 610,000 shares of its Class A Common stock to consummate the transaction.
Other claim expenses amounted to $1,020,410 in 1998, $848,093 in 1997 and $918,361 in 1996. These expenses are comprised of supplemental contract benefits, interest on policy funds and assorted other miscellaneous policy benefits.
Underwriting, acquisition and insurance expenses increased to $11,079,065 compared to $6,992,402 in 1997 and $9,500,973 in 1996. Approximately $2.5 million of the increase in 1998 relates to the inclusion of NSLIC and USLIC for the entire year. Additionally, because of the increased claims volume mentioned above, management was forced to significantly increase staff size and thus overhead on a temporary basis. Due to the consolidation of ALLIC's operations with CICA, management was able to achieve significant reductions in expenses through economies of scale which were reflected in the 1997 results.
Company personnel have been actively planning, identifying and resolving year 2000 issues for more than a year. These activities are expected to continue through the early part of 1999 with parallel testing and final remediation actions concluding within the second half of 1999.
The Company also invests in common and preferred stocks, all of which are classified as available-for-sale. Other long-term investments are primarily holdings in limited partnership funds investing in banks and insurance companies. Net unrealized appreciation on stocks and other long-term investments increased $38,859,000, or 58% in 1997 compared to 1996.
The loss frequency to date for 1998 has been down due to the mild winter throughout the Company's major exposure areas, giving the year a good start. However, the storm season is fast approaching and El Nino hasn't finished yet.
During the year the market value of your United Fire shares increased 25% while the Dow Jones Industrial Average increased 23% and the S&P 500 increased 31%. Over the past five years, United Fire & Casualty's stock has not been a bad proxy for the S&P 500, slightly outperforming it, with a total return including dividends of 169% or an annual equivalent of 22% while the index had a total return of 151% or an annual equivalent of 20%, once again demonstrating that insurance stocks can be a good investment for the long term investor.
For the fifth consecutive year, Ward Financial Group, an insurance consultant, named your Company one of the 50 outstanding property/casualty companies in the United States based on performance and security. This may become a boring story, but one which we never tire.
On traditional business, premiums are reported as earned when due, and benefits and expenses are associated with premium income so as to result in the recognition of profits over the lives of the related contracts. On universal life and annuity (nontraditional) business, income and expenses are reported as charged and credited to policyholder account balances through the use of the retrospective deposit method. This method results in the recognition of profits over the lives of the related contracts. These associations are accomplished by means of the provision for future policy benefits and the deferral and subsequent amortization of life policy acquisition costs.
The following table provides an analysis of losses and loss adjustment expenses ("LAE"), including a reconciliation of beginning and ending liability balances for 1997 and 1996.
The amount of dividends that may be paid to stockholders without prior approval by the State of Iowa Insurance Department is limited to the excess of statutory retained earnings over contributed surplus. Contributed surplus as of December 31, 1997, was $8,058,000. Based upon this restriction, the Company could make a maximum of $179,451,000 in dividend distributions to stockholders in 1998. Dividend payments by the insurance subsidiaries to the Company are subject to similar restrictions in the states in which they are domiciled. The Company received no dividends from its subsidiaries in 1997 or 1996.
Merger Related Expenses. Expenses incurred by the Company as a result of the merger between B.A.T's Financial Services Businesses and ZIC decreased from $21.1 million in 1998 to $0.2 million in 1999 (see Note E).
Buildings and improvements 10 to 45 years Furniture and equipment 5 to 10 years Data processing equipment and software 5 to 10 years
As of December 31, 1999 and 1998, a total of 20,000,000 shares of QUIPS were outstanding.
Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures. The estimated fair values are based on quoted market prices.
Based on current conditions and assumptions as to future events, Farmers Life expects to amortize the December 31, 1999 balance as follows: approximately 7.0% in 2000, 2001 and 2002 and 8.0% in 2003 and 2004. The discount rate used to determine the amortization rate of the VOLBA ranged from 12.5% to 7.5%.
(f) Amount includes the historical basis amortization associated with the DAC asset.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The acquisition of TLIC was accounted for as a purchase and, accordingly, the assets acquired (including the cost of insurance acquired) and the liabilities acquired were recorded at their fair values. The cost of insurance acquired is being amortized over the lives of the acquired policies in relation to the remaining present value of estimated gross profits from surrender charges and investment, mortality and expense margins expected to be realized from such policies. Amortization of $6,777,000, net of interest of $4,411,000 and an equity adjustment of $3,737,000 relating to SFAS 115, resulted in a December 31, 1994 balance of the cost of insurance acquired of $50,426,000. Amortization of $6,594,000, net of interest of $4,137,000 and an equity adjustment of $11,058,000 relating to SFAS 115, resulted in a December 31, 1995 balance of the cost of insurance acquired of $36,911,000. Amortization of $6,312,000, net of interest of $3,920,000 and an equity adjustment of $4,514,000 relating to SFAS 115, resulted in a December 31, 1996 balance of the cost of insurance acquired of $39,033,000. The interest rate used by TLIC for such calculations was 8.931% for universal life policies and 9.41% for all other business.
Holdings is involved in the life insurance business solely through its ownership of TLIC. The liabilities of TLIC are predominantly long-term in nature and, therefore, in order to match these liabilities with assets, TLIC has long-term fixed maturity investments such as bonds and mortgages. Most of the invested assets of TLIC are investment grade securities to provide ample protection for its policyholders. As of December 31, 1996, TLIC had $4,770,000 of securities rated below investment grade by the National Association of Insurance Commissioners, representing 0.1% of total invested assets. These consist of $3,646,000 of bonds rated BB, $400,000 rated B, $707,000 rated C and $17,000 of nonperforming bonds. The NAIC ratings reflect ratings by independent rating agencies for publicly traded securities.
METLIFE TEXAS HOLDINGS, INC. AND SUBSIDIARY ANNUAL REPORT ON FORM 10-K (Continued) - -------------------------------------------------------------
The contractual maturities of mortgage loan principal balances at December 31, 2002 are as follows:
Deferred Acquisition Costs ("DAC"): The Company is required to defer certain policy acquisition costs and amortize them over future periods. These costs include commissions and certain other expenses that vary with and are primarily associated with acquiring new business. The deferred costs are recorded as an asset commonly referred to as deferred policy acquisition costs. The DAC asset balance is subsequently charged to income over the lives of the underlying contracts in relation to the anticipated emergence of revenue or profits. Actual revenue or profits can vary from Company estimates resulting in increases or decreases in the rate of amortization. The Company regularly evaluates to determine if actual experience or other evidence suggests that earlier estimates should be revised. Assumptions considered significant include surrender and lapse rates, mortality, expense levels, investment performance, and estimated interest spread. Should the Company change its assumptions utilized to develop future revenues or profits (commonly referred to as "unlocking"), the Company would record a charge or credit to bring its DAC balance to the level it would have been using the new assumptions from the date of each policy.
In August and September 2005, Hurricanes Katrina and Rita struck the Louisiana coast, causing significant damage and disruption to the New Orleans area. Management estimates one third of Security Plan’s premium income was located in the affected area. Security Plan was not significantly impacted by death claims related to the storms (approximately $600,000); however, because of uncertainty regarding the collectability of future premiums from the area, we amortized approximately $2.3 million of cost of customer relationships acquired in the Security Plan acquisition during the third quarter of 2005 because of the decrease in collected premiums during the quarter. Ultimately,
Casualty claims increased 67.7% in 2005 and 40.9% in 2006 due to Hurricanes Katrina and Rita in 2005 and subsequent adverse development in 2006. Of the 2006 casualty claims, $2.9 million were due to Hurricane Katrina, while in 2005, $1.2 million were due to Hurricanes Katrina and Rita.
We have committed to the following contractual obligations as of December 31, 2006 with the payments due by the period indicated below:
paying period of the related policies in proportion to the ratio of the annual premium recognized to the total premium revenue anticipated, using the same assumptions as were used in computing liabilities for future policy benefits.
Fixed maturities consist primarily of bonds. Prior to December 31, 2006, fixed maturities that the Company had the ability and intent to hold to maturity were carried at amortized cost. Fixed maturities that may be sold prior to maturity to support the Company’s investment strategies are considered held as available-for-sale and carried at fair value as of the balance sheet date. Equity securities (including non-redeemable preferred stock) are considered available-for-sale and are reported at fair value.
To provide against the possibility that rapid growth of the Company's business may generate levels of risk in force that could not be supported solely by internally-generated capital, the Company entered into an excess loss agreement with Centre Re at the end of 1995, with coverage provided effective January 1, 1996, and cancelable by the Company for a fee beginning in 2000. The claims-paying ability of Centre Re is rated AA by S&P. This agreement provides
Non-cash equity compensation. Non-cash equity compensation includes the fair value of stock grants issued to our directors and Chief Executive Officer and amortization of stock options issued to our employees.
Net written premiums increased $2,561,000, or 18.6%, to $16,296,000 in 2011 from $13,735,000 in 2010. The increase in net written premiums resulted from an increase in direct written premiums in 2011 compared to direct written premiums in 2010. Net written premiums grew at a lower rate than direct written premiums (18.6% compared to 22.5%) due to a greater increase in premiums written in lines of business that are subject to quota share treaties compared to lines of business that are not subject to quota share treaties.
Commission expense was $6,231,000 in 2011 or 14.7% of direct written premiums. Commission expense was $5,057,000 in 2010 or 15.2% of direct written premiums. The increase of $1,174,000, or 23.2%, is due to the 22.5% increase in direct written premiums in 2011 as compared to 2010.
Interest expense for the year ended December 31, 1997 was $8,146,000 as compared to $3,990,000 in the prior year. Interest expense was primarily related to the non-prime automobile financing business and the debt outstanding under the Company's senior credit facilities ($67.9 million as of December 31, 1997), securitized notes ($14.1 million as of December 31, 1997) and subordinated and other debt ($11.2 million as of December 31, 1997). The increase in interest expense of $4,156,000 is directly related to the growth of the automobile receivables portfolio acquired and serviced by the Company.
anticipated level of repossessions and the poor performance of loans originated by specific independent automobile dealers.
Sales and Product Charges. Deposits we receive for annuities and funding agreements represent sales for accumulation products. As illustrated in the Deposits by Product table presented in “Item 1 Business - Accumulation Products Segments,” direct accumulation product sales increased 36% in 2002 compared to 2001 and 32% in 2001 as compared to 2000. Total annuity sales decreased 9% in 2002 compared to 2001 and increased 32% in 2001 compared to 2000. The 2002 decrease resulted from the deployment of capital to funding agreements which should provide a higher return on equity. The 2001 increase in annuity sales was primarily due to product repricing, increased marketing efforts and the acquisition of ILICO.
Restructuring costs relate to our consolidation of various functions in connection with a restructuring of our protection products and accumulation products operations and investment activities which began in the
ALIC and its joint venture partner are contingently liable in the event the joint venture, AVLIC, cannot meet its obligations. At December 31, 2002, AVLIC had statutory assets of $2,004 million, liabilities of $1,931 million and surplus of $73 million.
Prior to December, 1999, FIC owned several parcels of real estate in Jackson, Mississippi, adjacent to an office building which formerly served as the headquarters of Standard Life Insurance Company (the "Standard Life Building"). The Standard Life Building was owned by Investors-NA. This building is 68 years old and contains approximately 85,000 square feet (65,000 net rentable square feet) of office space. On December 29, 1999, Investors-NA donated the Standard Life Building to the Jackson Redevelopment Authority ("JRA"). Contemporaneously with the donation of the Standard Life Building, Investors-NA and FIC sold all of the adjacent parcels they owned to the JRA for a total sale price of $2,500,000.00, which has been allocated according to the respective ownership interests of Investors-NA (approximately 59.28%) and FIC (approximately 40.72%). The donation and sale was made pursuant to the terms of the Donation, Purchase and Sale Agreement dated July 17, 1998. Investors-NA intends to claim an income tax deduction on its upcoming tax return for the donation of the Standard Life Building, which has an appraised value at December 15, 1999 of approximately $3,050,000.00. The donation and sale transaction referenced above resulted in a net gain (GAAP basis) of $0.992 million for ILCO and $0.409 million for FIC (or a combined total of $1.401 million).
For the year ended December 31, 1999, FIC's income from operations, before federal income tax and equity in net earnings of affiliate, was $7,013,000 (on revenues of $47,313,000) as compared to $8,973,000 (on revenues of $53,607,000) for the year 1998 and $13,411,000 (on revenues of $63,343,000) in the year 1997.
Separate accounts related to variable annuities represent the market value of deposits invested in underlying investment funds on which GAFRI earns a fee. Investment funds are selected and may be changed only by the policyholder, who retains investment risk.
In May 2004, GAFRI acquired the fixed annuity block of business of National Health Insurance Company ("NHIC") (see Note N). At the date of acquisition, the block consisted of approximately 33,000 policies with GAAP reserves of approximately $720 million.
In June 2002, GAFRI acquired Manhattan National Life Insurance Company ("MNL") from a subsidiary of Conseco, Inc. for $48.5 million in cash. At the date of acquisition, MNL had more than 90,000 policies in force (primarily term life). GAFRI has reinsured 90% of the business in force.
approximately $600,000. Until May 2008, these securities pay interest quarterly at an annual rate of 7.35%, after which the interest rate will reset quarterly to an annual rate of Libor plus 4.1%. The proceeds from this transaction were used primarily to pay down bank debt.
Cash payments with respect to the preferred securities were $8.9 million, $13.7 million and $13.0 million in 2004, 2003 and 2002, respectively.
At December 31, 2004, GAFRI had a liability for EDAR of $104 million to cover the excess benefits above the lower-tier value. The net amount at risk associated with these benefits was approximately $478 million and the weighted average attained age of contract holders was 61 years old. During 2004, GAFRI expensed $15.6 million for excess death and annuitization benefits, which is included in "Annuity benefits" on the Consolidated Income Statement and paid $14.9 million associated with those benefits.
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Great American Financial Resources, Inc. has duly caused this Report to be signed on its behalf by the undersigned, duly authorized.
2000 catastrophe losses had an immaterial impact on current year results. In addition, as a result of net increases in estimates of losses occurring in prior years, net losses and loss adjustment expenses were increased by $14.4 million in 2000. In particular, significant adverse development was recorded in 2000 on losses occurring in 1998 and 1999 in fire and allied lines. These increases to incurred losses were partially offset by favorable development in 2000 on losses occurring primarily in 1994 through 1999 in the other liability line.
The following is a summary of unaudited quarterly financial data for each of the years ended December 31, 2000 and 1999. However, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary to present fairly the results of operations for such periods have been made.
The Company's current liquidity needs, in addition to funding lease commitments and other operating expenses, include principal and interest payments on outstanding borrowings under the Credit Agreements, the Senior Notes, the SIG Senior Notes and the Subordinated Notes and distributions on the Capital Securities. The maximum amount of borrowings available under the $150.0 million revolving credit facility will be reduced to the following amounts in October of each year: 2001 - $110.0 million and 2002 - $60.0 million. The Senior Notes mature in their entirety in October 2003 and are not subject to any sinking fund requirements nor are they redeemable prior to maturity. The SIG Senior Notes began maturing in $9.0 million annual installments in 1999 with a final maturity in May 2003 and have an outstanding principal balance of $27.0 million at December 31, 2000. The Subordinated Notes mature in their entirety in June 2003. The junior subordinated debentures underlying the Capital Securities are not redeemable prior to March 25, 2007. See Note E to the Consolidated Financial Statements. The Company from time to time engages in discussions with respect to acquiring blocks of business and insurance and financial services companies, any of which could, if consummated, be material to the Company's operations.
Sources of liquidity available to the Company on a parent company-only basis, including the undistributed earnings of its subsidiaries and additional borrowings available under the Credit Agreements, are expected to exceed the Company's current and long-term cash requirements.
In connection with, and because it desires to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding certain forward-looking statements in the above "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-K and in any other statement made by, or on behalf of, the Company, whether in future filings with the Securities and Exchange Commission or otherwise. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Some forward-looking statements may be identified by the use of terms such as "expects," "believes," "anticipates," "intends," "judgment" or other similar expressions. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic, competitive and other uncertainties and contingencies, many of which are beyond the Company's control and many of which, with respect to future business decisions, are subject to change. Examples of such uncertainties and contingencies include, among other important factors, those affecting the insurance industry generally, such as the economic and interest rate environment, federal and state legislative and regulatory developments, including but not limited to changes in
Madison National Life leases 28,028 square feet of space in Madison, Wisconsin as its corporate headquarters. Madison National Life also leases 6,504 square feet in Birmingham, Alabama for its military and government individual life and annuity division.
Interest credited to policyholder funds represents interest accrued or paid on interest-sensitive life policies and investment policies. Amounts charged to operations (including interest credited and benefit claims incurred in excess of related policyholder account balances) are reported as insurance benefits, claims and reserves-life and annuity. Credit rates for certain annuities and interest-sensitive life policies are adjusted periodically by the Company to reflect current market conditions, subject to contractually guaranteed minimum rates.
Total selling, general and administrative expenses increased $25.4 million in 2007 as compared to 2006. The increase is primarily due to (i) a $22.7 million increase in commission and administrative expenses associated with the operation of the Fully Insured segment, primarily due to (a) $6.3 from the acquisitions of CAM and AMC, (b) an overall increase in costs of $15.0 million due to the increase in business (reported as SGA expenses, previously described), and (c) a $1.4 million increase in amortization expenses as a result of the purchase accounting for recent acquisitions; and (ii) a $3.5 million increase in commissions and other general expenses in the Medical Stop-Loss segment due to higher volume.
At December 31, 1997, approximately $70.6 million (at fair value), or less than 3%, of Life Re's invested assets consisted of below investment grade securities. Life Re generally limits its investments in fixed
Life Re anticipates financing ordinary reinsurance and Administrative Reinsurance growth through (i) the proceeds from the Offerings, (ii) the availability of an additional $35 million under the 1995 credit agreement and (iii) internally generated funds.
EQUIPMENT Equipment is stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets.
The amortized cost and estimated market value of fixed maturities at December 31, 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.
Restrictions on ICO limit the amount of dividends paid during a twelve month period to an amount which does not exceed the greater of (i) 10 percent of ICO's statutory surplus at the end of the prior year or (ii) the net income of ICO for the prior year. In addition, ordinary dividends may only be paid from earned surplus, which equals ICO's unassigned funds as set forth in its most recent statutory annual statement, including net unrealized capital gains and losses. As of December 31, 1995, ICO's unassigned surplus was $69,053. ICO's ordinary dividends are restricted to a maximum $528,705 for 1996. ICO paid dividends of $375,706 in 1995.
Investment income increased 40.8% to $5.7 million in 1996 from $4.0 million in 1995, due to increased funds available for investment and increased yields on amounts invested. Funds available for investment increased to $89.8 million at December 31, 1996 from $68.5 million at December 31, 1995, due to increased net cash provided by operating activities, resulting primarily from (i) the difference in timing between the receipt of premiums and the payment of claim and claim settlement expenses and (ii) net cash provided by investment income. Investment yields increased to 6.2% in 1996 from 6.1% in 1995 due to higher interest rates on U.S. government securities purchased in 1996 from rates on U.S. government securities purchased in prior years.
Claim and claim settlement expenses increased to $39.1 million in 1996 from $28.1 million in 1995. As a percent of premiums earned, claim and claim settlement expenses increased to 62.0% in 1996 from 61.8% in 1995. These changes are due to the following:
Interest expense decreased to $777,000 in 1997 from $1.1 million in 1996 and $1.3 million in 1995 due to principal payments on the Senior Notes in December 1997, 1996 and 1995 and payments on the Series 1991A and 1991B Notes in December 1996 and 1995. The Series 1991A and 1991B Notes were paid in full in 1996.
The following table sets forth reserves on a net (after reinsurance) basis (000's):
RTW, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS)
Options to purchase 105,250 shares of common stock at prices ranging from $9.00 to $28.75 were outstanding during 1997 but were not included in the computation of diluted IPS because the options' exercise price was greater than the average market price of the common shares. These options were still outstanding at the end of 1997. Additionally, in January 1998, we granted options to purchase 150,000 shares of common stock at $7.00 under the 1994 Stock Plan.
Differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements that will result in taxable or deductible amounts in future years are called temporary differences. The tax effects of temporary differences that gave rise to net deferred tax asset balances, included within other assets, are as follows (000's):
discretionary and are based on contributions made by employees to the plan. Expense recognized under the plan for 1997, 1996 and 1995, was $94,000, $52,000 and $35,000, respectively.
Our loss and LAE reserves represent management’s best estimate of the amounts we expect to pay out in the future on account of all insured claims and incidents as of the end of the period. The liability comprises estimated case reserves on reported claims plus estimates of insured losses and LAE incurred but not yet reported (“IBNR”). IBNR primarily comprises provisions for LAE, losses under tail policies, and losses on covered extended reporting endorsements issued following the death, disability or retirement of claims-made insureds. Also implicit in loss and LAE reserves is a provision for case reserve development, which represents an estimate of the aggregate difference between our individually estimated case reserves and the amount for which they will ultimately be settled. Because FPIC consistently settles its cases for amounts that are less than their individually estimated case reserves, this provision serves to offset the other loss and LAE reserve components.
The amount of defense cost we will pay for each claim or group of claims; and
Effective January 1, 2002, we adopted Statement of Financial Accounting Standard No. (“FAS”) 142, Goodwill and Other Intangible Assets. Under FAS 142, goodwill and indefinite-lived intangible assets are no longer amortized through charges to income, but do continue to be subject to annual (or under certain circumstances more frequent) impairment testing based on estimated fair values.
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is determined to be probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
Finance charges associated with funds withheld under the Hannover Re net account quota share reinsurance agreement are included in OTHER EXPENSES and were $7.2 million, $4.5 million and $1.1 million for the years ended December 31, 2004, 2003 and 2002, respectively. Growth in these finance charges contributed to the increase in other expenses and is due to the growth in the amount of funds withheld for business ceded under this agreement through June 30, 2004. As discussed elsewhere, we exercised our option to terminate future cessions under the agreement effective July 1, 2004.
The incidence of respiratory conditions and influenza reported in the first quarter of 2000 was less than in the first quarter of 1999. This reduction, together with the contract amendment described above and other factors, contributed to the 4.2% improvement in our health benefits ratio in 2000 from 1999. We consider the provider contract amendment and the reduced incidence of respiratory conditions and influenza to be atypical.
Our investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets. As of December 31, 2001, our investment portfolio consisted primarily of fixed-income securities. The average maturity is under nine months. We utilize investment vehicles such as municipal bonds, commercial paper, U.S. government backed agencies, and U.S. Treasury instruments. The states in which we operate prescribe the types of instruments in which our subsidiaries may invest their cash. The average portfolio yield as of December 31, 2001 was approximately 2.47%.
We record premium revenue based on membership and premium information from each state. Premiums are due monthly and are recognized as revenue during the period in which we are obligated to provide service to members.
As a condition for licensure by various state governments to operate HMOs or MCOs, we are required to maintain certain funds on deposit with or under the control of the various departments of insurance. Accordingly, at December 31, 2001 and 2000, the amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value for these held-to-maturity securities are summarized as follows:
MERIDIAN INSURANCE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET as of December 31, 1999 and 1998
Meridian Security, Meridian Citizens Security, and Insurance Company of Ohio ("ICO," a wholly-owned subsidiary of the Company) are participants in a reinsurance pooling arrangement with Meridian Mutual and Meridian Citizens Mutual Insurance Company ("Meridian Citizens Mutual"), in which the underwriting income and expenses of each entity are shared. The participation percentages of the Company's insurance subsidiaries total 74 percent. See Note 6 - Related Party Transactions.
The amortized cost and estimated market values of investments in fixed maturity securities at December 31, 1999 and 1998, are as follows:
The reinsurance purchased includes contracts under which certain types of policies are automatically reinsured up to the contract limits ("treaty reinsurance") and contracts which provide reinsurance on an individual risk basis which require a specific agreement of the reinsurer as to limits of coverage provided ("facultative reinsurance"). Meridian Mutual, Meridian Security, Meridian Citizens Mutual, Meridian Citizens Security, and ICO were each named as insured parties under the treaty reinsurance contracts, and the coverage under those contracts applied to all risks written by each of the companies. Treaty coverage was purchased to cover property and liability exposures in excess of $200,000 and $400,000, respectively, up to the limits set forth in the individual treaty. (In 1998 and 1997, the exposures were $350,000 and $200,000, respectively.) Facultative reinsurance was purchased to cover exposures on both property and liability coverages from losses over and above the limits provided by the treaty reinsurance.
12.Earnings Per Share The following table reflects the reconciliation of the numerators and denominators of the Company's basic earnings per share and diluted earnings per share computations reported on the Consolidated Statement of Income for the years ended December 31, 1999, 1998 and 1997.
The Indiana, Ohio, and Minnesota Insurance Departments have adopted the Codification guidance, effective January 1, 2001. The Company has not yet estimated the potential effect of the Codification guidance on statutory surplus.
On December 15, 1999, the Board of Directors of Meridian Insurance Group, Inc. declared a ten percent stock dividend. Each shareholder of record as of December 27, 1999, received one additional share of the company's common stock for every ten shares held on that date. The ten percent stock dividend was distributed on January 11, 2000, with the Company issuing 721,872 shares. A similar ten percent stock dividend was also declared on December 9, 1998, for shareholders of record as of December 21, 1998. The dividend was distributed on January 6, 1999, with the Company issuing 658,493 shares. In both years, fractional shares were paid by the Company in cash. All share and prior per share amounts have been retroactively restated to give effect for the stock dividend.
In developing its investment strategy, the Company determines a level of cash and short-term investments which, when combined with expected cash flow, is estimated to be adequate to meet expected cash obligations. Historically, the excess of premiums collected over payments on claims, combined with cash income from investments, has provided the Company with short-term funds in excess of normal operating demands for cash. In 2001, however, the Company's operating activities used $1,549,000 of cash. In 2000, operating activities provided $6,564,000 of cash. This decrease in cash provided by operations was primarily the result of a $2,690,000 (3%) decrease in premiums collected and a $6,655,000 (10%) increase in loss and LAE payments. The Company's intention to continue to reduce direct premiums written in business segments where returns are unsatisfactory will likely result in future negative cash flows from operations. The Company believes that careful management of the relationship between assets and liabilities will minimize the likelihood that investment portfolio sales will be necessary to fund insurance operations and that the effect of any such sale on the Company's stockholders' equity will not be material. Further, the Company believes that the WTC event will not require any unplanned liquidation of its investment portfolio.
The consolidated financial statements required in response to this Item are submitted as part of Item 14 (a) of this report, and are incorporated in this item by reference.
Certain statements contained in this Report may be considered forward-looking, including statements about management expectations, strategic objectives, business prospects, anticipated financial performance, and other similar matters. These forward-looking statements are not statements of historical fact and represent only management’s beliefs regarding future events, which are inherently uncertain. There are a variety of factors, many of which are beyond Merrill Lynch Life’s control, which affect its operations, performance, business strategy, and results and could cause its actual results and experience to differ materially from the expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to, the factors listed in the Business Environment and Economic Environment sections listed below, as well as actions and initiatives taken by both current and potential competitors, general economic conditions, the effects of current, pending, and future legislation, regulation and regulatory actions, and the other risks and uncertainties detailed in Merrill Lynch Life’s Financial Statements and Notes to Financial Statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Merrill Lynch Life does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates the forward-looking statements are made. The reader should, however, consult any further disclosures Merrill Lynch Life may make in its Quarterly Reports on Form 10-Q.
The National Association of Insurance Commissioners utilizes the Risk Based Capital (“RBC”) adequacy monitoring system. The RBC calculates the amount of adjusted capital that a life insurance company should have based upon that company’s risk profile. As of December 31, 2003 and 2002, based on the RBC formula, Merrill Lynch Life’s total adjusted capital level was in excess of the minimum amount of capital required to avoid regulatory action.
Merrill Lynch Life has developed a comprehensive capital management plan that will continue to provide appropriate levels of capital for the risks Merrill Lynch Life assumes, but will allow Merrill Lynch Life to reduce its absolute level of surplus. In implementing this plan, Merrill Lynch Life paid cash dividends of $30.9 million to MLIG during 2002. No dividends were paid during 2003 or 2001. Merrill Lynch Life received a $50.0 million capital contribution from its parent during 2003.
Our selected paid and reported development patterns provide a benchmark against which the actual emerging loss experience can be monitored. Where possible, development patterns are selected based on historical loss emergence by origin year with appropriate allowance for changes in business mix, claims handling process, or ceded reinsurance that are likely to lead to a discernible difference between the rate of historical and future loss emergence. For product lines where the historical data is viewed to have low statistical credibility, the selected development patterns also reflect relevant industry benchmarks and/or experience from similar product lines written elsewhere within ACE. This most commonly occurs for relatively new product lines that have limited historical data or for high severity/low frequency portfolios where our historical experience exhibits considerable volatility and/or lacks credibility. The paid and reported loss development methods convert the selected loss emergence pattern to a set of multiplicative factors which are then applied to actual paid or reported losses to arrive at an estimate of ultimate losses for each period. Due to their multiplicative nature, the paid and reported loss development methods
Long-tail business describes lines of business for which specific losses may not be known/reported for some period and for which claims can take significant time to settle/close. This includes most casualty lines such as general liability, D&O, and workers’ compensation. There are many factors contributing to the uncertainty and volatility of long-tail business. Among these are:
that reduces the reinsurance recoverable asset and, in turn, shareholders’ equity. Changes in the provision for uncollectible reinsurance are reflected in net income.
The following table summarizes reinsurance recoverables and the provision for uncollectible reinsurance for each type of recoverable balance at December 31, 2011: