RATIOS AFC's debt to total capital ratio at the parent holding company level (excluding amounts due AFG) was approximately 12% and 8% at December 31, 2000 and 1999. Including amounts due AFG, the ratio was 31% at the end of 2000 and 27% at the end of 1999.
December 31, 2000 December 31, 1999 ------------------- -------------------- Principal Principal Cash Flows Rate Cash Flows Rate ---------- ---- ---------- ---- 2001 $ 494.2 8.46% 2000 $ 618.2 7.83% 2002 673.4 7.60 2001 622.6 8.69 2003 1,406.6 7.74 2002 848.4 8.14 2004 835.6 8.01 2003 1,267.6 7.65 2005 1,142.1 7.46 2004 999.2 7.73 Thereafter 5,737.0 7.41 Thereafter 5,871.0 7.50 --------- ---------
GAFRI's equity-indexed fixed annuities provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market index. GAFRI attempts to mitigate the risk in the equity-based component of these products through the purchase of call options on the appropriate index. GAFRI's strategy is
Fixed income investment funds are generally invested in securities with short-term and intermediate-term maturities with an objective of optimizing total return while allowing flexibility to react to changes in market conditions. At December 31, 2000, the average life of AFC's fixed maturities was about 6 years.
The Personal group's net written premiums for 1999 include $71 million in net premiums written by Worldwide since its acquisition in April. The decrease in written premiums reflects continuing strong price competition in the private passenger automobile market. The combined ratio for 1999 increased as loss and underwriting expenses declined at a slower rate than premiums.
START-UP MANUFACTURING BUSINESSES AFC's pretax operating earnings for 2000 include losses of $6.7 million from two start-up manufacturing businesses acquired in 2000 from their former owners. AFC sold the equity interests in these businesses in the fourth quarter of 2000 for a nominal cash consideration plus warrants to repurchase a significant ownership interest. Beginning in the fourth quarter of 2000, AFC's equity in the results of operations of these businesses is included in investee earnings. Loans outstanding to these businesses totaled $61.5 million at December 31, 2000. Because AFC retains the financial risk in these businesses, it will continue accounting for their operations on the equity method. The businesses are expected to reach "break-even" by the latter part of 2001.
In February 2001, the Financial Accounting Standards Board issued a proposal to eliminate the amortization of goodwill and require that goodwill be tested for impairment. Other operating and general expenses include goodwill amortization of $17.3 million in 2000, $14.4 million in 1999 and $12.2 million in 1998. The carrying value of AFC's goodwill at December 31, 2000, was $322 million. The proposal requires that an initial assessment for impairment be performed for all existing reporting units with goodwill within six months of adoption. Management has not determined the impact of such assessment.
[FN] (a) Not allocable to segments. (b) Revenues include sales of products and services as well as other income earned by the respective segments. (c) Represents primarily investment income. (d) Includes a charge of $214 million in 1998 related to asbestos and other environmental matters ("A&E"). (e) Includes holding company expenses.
Holding Companies Subsidiaries Total --------- ------------ ----- 2001 $ 1.7 $ 1.6 $ 3.3 2002 188.1 1.6 189.7 2003 - 1.7 1.7 2004 - 63.1 63.1 2005 - 10.0 10.0
TRUST ISSUED PREFERRED SECURITIES Wholly-owned subsidiary trusts of GAFRI have issued $225 million of preferred securities and, in turn, purchased a like amount of subordinated debt which provides interest and principal payments to fund the respective trusts' obligations. The preferred securities must be redeemed upon maturity or redemption of the subordinated debt. GAFRI effectively provides unconditional guarantees of its trusts' obligations.
O. INSURANCE Securities owned by insurance subsidiaries having a carrying value of about $900 million at December 31, 2000, were on deposit as required by regulatory authorities.
4 Instruments defining the rights of The rights of holders of security holders Registrant's Preferred Stock are defined in the Articles of Incorporation. Registrant has no outstanding debt issues exceeding 10% of the assets of Registrant and consolidated subsidiaries.