felanders/preprocessed huggingface dataset:
Net earned premiums for 2004 increased $10.7 million, or 28.7%, over 2003. The increase during 2004 reflects increased earned premiums from new business written in the fourth quarter of 2003 and continuing in 2004. American Southern increased its business writings in the general liability and surety lines of business beginning in the second half of 2003 and, as indicated in the table above, such trends continued in 2004.
While the impairments did not impact the carrying value of the investments, they resulted in realized losses of $0.5 million in 2004, $1.2 million in 2003, and $0.2 million in 2002. Management continually evaluates the Company’s investment portfolio and, as needed, will make adjustments for impairments and/or will divest investments. (See Note 2 of Notes to Consolidated Financial Statements.)
Net cash provided by operating activities totaled $6.0 million in 2004, $13.9 million in 2003, and $13.8 million in 2002. The decrease in operating cash flows during 2004 was primarily attributable to the collection of $7.6 million from a reinsurance contract termination that occurred in 2003 and did not reoccur during 2004. Also, the Company paid $1.2 million in federal income tax deposits in 2004 compared to $0.5 million during 2003. Cash and short-term investments increased from $34.2 million at December 31, 2003 to $41.0 million at December 31, 2004 primarily due to proceeds from the sale of equity securities. Partially offsetting the increase in cash and short-term investments was $3.0 million used for debt reduction, $0.5 million used for the redemption of the Series C Preferred Stock, and $0.7 million used for treasury share purchases. Cash and short-term investments at December 31, 2004 of $41.0 million are believed to be sufficient to meet the Company’s near-term needs.
the date of grant. Pro forma net income (loss) and net income (loss) per common share were determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value of these options was estimated at the date of grant using an options pricing model, which requires the input of subjective assumptions, including the volatility of the stock price. If the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation, the Company’s net income (loss) and earnings (loss) per share would have been as follows:
A summary of the status of the Company’s stock options at December 31, 2004, 2003 and 2002, is as follows:
The Company leases approximately 65,489 square feet of office and covered garage space from an affiliated company. During the years ended December 31, 2004, 2003, and 2002, the Company paid $1,048, $1,000 and $987, respectively, under the leases.
Effective January 1, 2004, we commenced operations in Ohio through the acquisition of the Medicaid-related assets of Family Health Plan, Inc. (FHP) for a purchase price of $6.9 million. The results of operations of this entity are included in our consolidated financial statements beginning January 1, 2004.
Our financing activities provided cash of $45.7 million in 2005, $42.8 million in 2004 and $89.4 million in 2003. During 2005 and 2004, our financing activities primarily related to proceeds from borrowings under our
(1) Includes $4,500 pre-tax expense related to the settlement with Aurora Health Care, Inc. and $2,540 pre-tax expense related to our start up costs in Georgia.
Other income. During 2002, we received $262 thousand in rental income from a tenant. During 2001, we received $191 thousand of life insurance proceeds as the result of the death of one of our employees, and rental income from a tenant of $256 thousand.
Total first year commission revenue increased 15.0% to $64.2 million and total revenue increased 26.3% to $116.0 million for the year ended December 31, 2002, compared to the prior year. These increases reflect significant sales growth in the community bank market, and include only limited contribution from the large bank market, which has been more adversely affected by the low interest rate environment. Approximately $14 million of the increase to renewal revenue is attributable to the acquisition of LongMiller which was completed November 26, 2002. Commission expense for the year ended December 31, 2002, was $45.3 million, or 39.1% of revenue, compared to $33.4 million or 36.3% of revenue in the same period in 2001. Commission expense as a percentage of revenue increased due to the mix of business between independent and employee consultants. General and administrative expenses for the year ended December 31, 2002 were $30.8 million, or 26.6% of revenue, compared to $25.5 million or 27.7% of revenue for the comparable period in 2001, due to the acquisitions of Hilgenberg and LongMiller, and investments in staffing of sales consultants and support staff to service increased sales volumes.
Federal Policy Group was acquired on February 25, 2002. Federal Policy Group is a consulting practice representing Fortune 500 companies, trade associations, and other businesses before Congress, the Treasury Department, and other federal agencies on
The Career Agency segment includes only business which is new to the Company as a result of the acquisition of Pennsylvania Life and PennCorp Canada.
Consolidated net income after Federal income taxes increased by $7.2 million to $9.8 million ($0.34 per share) in 1999, compared to $2.6 million ($0.20) in 1998. Operating income before income tax increased by $12.2 million to $16.1 million in 1999 compared to $3.9 million in 1998.
REVENUES. Total revenues for the Special Markets segment decreased approximately $2.7 million to approximately $29.3 million for the year ended December 31, 1998, compared to total revenues of approximately $32.0 million in the prior year.
Dividend payments by insurance companies are limited by, or subject to the approval of the insurance regulatory authorities of each insurance company's state of domicile. Such dividend requirements and approval processes vary significantly from state to state. The maximum amount of dividends which can be paid to American Exchange from Pennsylvania Life without the prior approval of the Pennsylvania Department of Insurance is restricted to the greater of 10% of the Pennsylvania Life's surplus as regards policyholders as of the preceding December 31 or the net gain from operations during the preceding year, but such dividends can be paid only out of unassigned surplus. As part of its approval of the Penn Union Acquisition, the Pennsylvania Insurance Department approved a quasi reorganization of Pennsylvania Life's surplus in which its previously negative unassigned surplus was reset to zero. Thus, future earnings of the company would be available for dividends without prior approval, subject to the restrictions noted above.
Rental expense for the Company’s operations was approximately $29,936,000, $28,067,000 and $23,802,000 for 2010, 2009 and 2008, respectively. Future minimum lease payments (without provision for sublease income) are $31,265,000 in 2011, $27,749,000 in 2012 and $94,143,000 thereafter.
Other expenses include expenditures for holding company and subsidiary operations which are not directly related to the issuance of medical professional liability insurance or practice management and related operations, including insurance brokerage, insurance agency and physician services, as well as costs associated with unrelated one-time events like the reorganization.
Authorized Control Level Risk-based Capital Total Adjusted Capital ------------------ ---------------------- NCRIC CML NCRIC CML ------ ------ ------- ------- (in millions)
Other factors not currently anticipated by management may also materially and adversely affect NCRIC Group's results of operations.
The Company has issued policies on both an occurrence and a claims-made basis. However, subsequent to June 1, 1986, substantially all policies were issued on the claims-made basis. Occurrence-basis policies provide coverage to the policyholder for losses incurred during the policy year regardless of when the related claims are reported. Claims-made basis policies provide coverage to the policyholder for covered claims reported during the current policy year provided the related losses were incurred while claims-made basis policies were in effect.
Property and Equipment - Fixed assets are recorded at cost and reported as a component of other assets. Depreciation is recorded using the straight-line method over estimated useful lives ranging from three to five years for computer software and equipment and furniture and fixtures and ten years for leasehold improvements. The balances of fixed assets at December 31, 2000 and 1999 of $1,542,000 and $1,219,000, respectively, are net of accumulated depreciation of $1,477,000 and $1,066,000.
The acquired companies achieved the earnings target for 2000. The resulting contingent purchase payment of $1,550,000 is due to be paid on March 31, 2001. This payment has been added to the balance of goodwill and accrued as a liability as of December 31, 2000.
Issued in initial public offering 1,480 Issued to NCRIC Holdings 2,220 ----- 3,700
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
Addition to policyholder reserves, funds and separate accounts decreased $1.1 million to $210.3 million in 1996 from $211.4 million in 1995. Reserve decreases due to the release of reserves upon death withdrawal or surrender of contracts was largely offset by increases in reserves due to strong sales of life and annuity products.
Mortgage loans at December 31, 1997 were $101.6 million, representing an increase of $67.8 million, or 200.6%, from $33.8 million at December 31, 1996. This is principally due to additional investments in mortgage loans and additional mortgages purchased. See "Investments" for discussion of investment reserves.
At December 31, 1997, C.M. Life had $1,060.6 million of invested assets in its general investment account. The portfolio of invested assets is managed to support product liabilities in light of yield, liquidity and diversification considerations. The general investment account portfolio does not include C.M. Life's separate account investment assets.
The following table sets forth by industry category the carrying value and percent of total of the bond portfolio, including short-term securities, as of December 31, 1997.
C.M. Life reviews all bonds on a regular basis utilizing the following criteria: (i) material declines in revenues or margins, (ii) significant uncertainty regarding the issuer's industry, (iii) debt service coverage or cash flow ratios that fall below industry-specific thresholds, (iv) violation of financial covenants, (v) trading of public securities at a substantial discount due to specific credit concerns and (vi) other subjective factors that relate to the issuer. The bond portfolio is actively reviewed to estimate the likelihood and amount of financial defaults or write-downs in the portfolio and to make timely decisions as to the potential sale or re-negotiation of terms of specific investments.
The carrying values of NAIC Category 5 and 6 bonds, as of the indicated dates, were as follows:
For purposes of the Statutory Statement of Cash Flows, the Company considers all highly liquid short-term investments purchased with a maturity of twelve months or less to be cash and short-term investments.
Subsidiaries of MassMutual Holding Trust I ------------------------------------------ Antares Leveraged Capital Corporation - 98.5% Charter Oak Capital Management, Inc. - 80.0% Cornerstone Real Estate Advisors, Inc. DLB Acquisition Corporation - 84.8% Oppenheimer Acquisition Corporation - 88.55%
As described in Note 1 to the financial statements, the Company prepared these financial statements using statutory accounting practices of the National Association of Insurance Commissioners and the accounting practices prescribed or permitted by the Department of Insurance of the State of Connecticut ("statutory accounting principles"), which practices differ from generally accepted accounting principles. The effects on the financial statements of the variances between the statutory basis of accounting and generally accepted accounting principles, although not reasonably determinable at this time, are presumed to be material.
The updated guidance is effective for reporting periods beginning after December 15, 2015. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
On March 26, 2014, TLIC issued two notes payable totaling $4,076,473. The first note payable totaling $3,009,265 was collateralized (including assignment of the tenant leases) by three properties, located in Indiana, Oklahoma and Texas, purchased for a total of $4,940,647 in December 2013 and February 2014.
Likewise, if a change occurs in the Company’s intent to sell temporarily impaired securities prior to maturity or recovery in value, or if it becomes more likely than not that the Company will be required to sell such securities prior to recovery in value or maturity, a future impairment charge could result.
Management has evaluated all events subsequent to December 31, 2015 through the date that these financial statements have been issued.
Net unrealized gains included in other comprehensive income for investments classified as available-for-sale, net of the effect of deferred income taxes and deferred acquisition costs assuming that the appreciation had been realized as of December 31, 2015 and 2014 are summarized as follows:
The amortized cost and fair value of fixed maturity available-for-sale securities as of December 31, 2015, by contractual maturity, are summarized as follows:
The carrying amounts reported for these liabilities approximate their fair value. These notes payable were issued on March 26, 2014 and repaid on March 11, 2015. The refinancing of those liabilities would have resulted in notes payable yielding approximately the carrying amount as shown in the December 31, 2014 consolidated statement of financial position.
Reinsurance assumed and ceded amounts for TLIC and FBLIC for 2015 and 2014 are summarized as follows:
On May 13, 2015, FBLIC filed a Counterclaim against Doyle Nimmo seeking indemnity and seeking damages for breach of fiduciary duty in the event FBLIC is liable under Plaintiffs’ underlying claims. In addition, on April 29, 2015, TLIC filed a lawsuit against Doyle Nimmo and Michael Teel alleging that they were liable for violations of federal and state securities laws for failing to disclose information relating to the Decreasing Term to 95 policies. This lawsuit is currently pending in the District Court for the Western District of Missouri (hereinafter the “Federal Lawsuit”). No claims have been made against TLIC in the Federal Lawsuit.
The pretax and the related income tax components of the amounts reclassified from the Company’s accumulated other comprehensive income (loss) to the Company’s consolidated statement of operations for the years ended December 31, 2015 and 2014 are summarized as follows:
These items appear within net realized investment gains and loss on other-than-temporary impairments in the consolidated statements of operations.
We believe that long-term growth in fully diluted adjusted book value per share is the most relevant measure of our financial performance because it provides management and investors a yardstick by which to monitor the shareholder value generated. In addition, fully diluted adjusted book value per share may be useful to our investors, shareholders and other interested parties to form a basis of comparison with other companies within the property and casualty reinsurance industry.
One way that management evaluates the Company’s underwriting performance is through the measurement of net underwriting income (loss). We do not use premiums written as a measure of performance. Net underwriting income (loss) is a performance measure used by management as it measures the underlying fundamentals of the Company’s underwriting operations. Management believes that the use of net underwriting income (loss) enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that this measure follows industry practice and, therefore, allows the users of financial information to compare the Company’s performance with its industry peer group.
For the year ended December 31, 2017, the total net losses incurred on frequency contracts increased by $78.9 million, or 22.0%, compared to the same period in 2016. The losses incurred on frequency contracts for the year ended December 31, 2017 included $8.5 million of catastrophe losses incurred on quota share contracts due to hurricanes Harvey, Irma and Maria and the Mexican earthquakes. Some of our frequency contracts have limited exposure to losses from natural catastrophe events. In addition, the increase in losses incurred on frequency contracts was partially related to adverse loss development of $30.1 million on prior year frequency contracts as well as an increase in premiums earned during the year ended December 31, 2017. During the latter half of 2017 we strengthened reserves across numerous lines of business, including but not limited to: professional liability, medical stop loss, multi-line casualty, and multi-line specialty. The strengthening of reserves in these classes was driven by our view of the industry wide loss ratio performance of these segments and by additional reporting from clients.
At December 31, 2017, reinsurance balances payable were $144.1 million, compared to $41.4 million as of December 31, 2016, an increase of $102.6 million, or 247.8%. The increase in reinsurance balances payable was primarily attributable to premiums payable on new retroceded contracts and to a lesser extent, to deposit liabilities on a new contract that was deposit accounted.
During the year ended December 31, 2017, the loss and loss adjustment expenses recoverable increased by $26.8 million to $29.5 million. The increase was partially as a result of retroceded quota share agreements relating to private passenger automobile entered into during 2017, and partially relating to recovery of catastrophe losses from the retroceded catastrophe excess of loss contracts.
In conjunction with the Vanliner acquisition, we recorded a gain on bargain purchase of $7.5 million during the year ended December 31, 2010. The fair value of the net assets acquired of $124.2 million was in excess of the total purchase consideration of $116.7 million, due to the recognition of certain intangible assets under purchase accounting, an adjustment to record the acquired loss and allocated loss adjustment expense reserves at fair value, as well as recording management’s best estimate of the contingent consideration associated with the balance sheet guaranty.
2012 compared to 2011. For the year ended December 31, 2012, interest expense increased $0.3 million compared to the same period in 2011, primarily due to a $0.3 million increase in interest accrued related to contractual amounts payable to UniGroup under the balance sheet guaranty.
We recorded unfavorable prior year loss development of $4.3 million and $1.5 million in 2012 in 2011, respectively. We recorded favorable prior year loss development of $3.3 million in 2010. Economic conditions over the last couple of years have led to longer duration of claims resulting in higher claim severity. Due to the long-tail nature of this business it is difficult to predict ultimate liabilities until a higher percentage of claims have been paid and the ultimate impact of these decisions can be estimated with more precision. Management continues to review the frequency, severity, and loss and LAE ratios implied by the indications from the standard tests while considering the uncertainties of future costs in determining the appropriate reserve level.
As discussed in Note 1 to the consolidated financial statements, effective January 1, 2012, the Company retrospectively changed its method of accounting for deferred policy acquisition costs.
Policy acquisition costs, principally commissions, premium taxes and assessments, directly related to the production of new business, are deferred and amortized over the period in which the related premiums are earned. Policy acquisition costs are limited based upon recoverability without any consideration for anticipated investment income and are charged to operations ratably over the terms of the related policies. The Company accelerates the amortization of these costs for premium deficiencies. The amount of deferred policy acquisition costs amortized during the years ended December 31, 2012, 2011 and 2010 were $79.4 million, $78.7 million and $58.9 million, respectively. There were no premium deficiencies for the years ended December 31, 2012, 2011 or 2010.
The Company also establishes reserves for non-insurance claims related lawsuits, regulatory actions, and other contingencies when the Company believes a loss is probable and is able to estimate its potential exposure. For loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of
For the Company’s California automobile lines of business, total reserves are comprised of the following:
At December 31, 2013, there were 28,029 BI claims reported for the 2013 accident year and the Company estimates that these are expected to ultimately grow by approximately 5%. The Company believes that while actual development in recent years has ranged between approximately 2% to 5%, it is reasonable to expect that the range could be as great as between 0% and 10%. Actual development may be more or less than the expected range. The following table presents the effect on loss development based on different claim count within the broader possible range at December 31, 2013:
instrument provides a source of transparency for products that are otherwise not actively quoted. For a further discussion, see Note 3 of Notes to Consolidated Financial Statements.
million and $9.2 million in gains due to changes in the fair value of the Company’s fixed maturity and equity security portfolio, respectively, as a result of applying the fair value accounting option.
Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period Ended December 31, 2013
The Insurance Companies, as primary insurers, are required to pay losses to the extent reinsurers are unable to discharge their obligations under the reinsurance agreements.
The Company recognizes tax benefits related to positions taken, or expected to be taken, on a tax return only if, “more-likely-than-not” the positions are sustainable. Once this threshold has been met, the Company's measurement of its expected tax benefits is recognized in its financial statements.
Service revenue from non-MAMSI affiliated entities earned by the Company's home health care subsidiaries contributed $21.0 million in revenue in 1997 as compared to $20.5 million in 1996. This increase is the result of increasing business volume for these subsidiaries, particularly in the home infusion area, which is largely offset by an increasing relative percentage of business conducted for MAMSI HMO and indemnity members which is eliminated in consolidation. Revenue from life and short-term disability products contributed $5.3 million in 1997 as compared to $3.2 million in 1996.
Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995............................... 29
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995............................... 31
Mid Atlantic Medical Services, Inc. Consolidated Statements of Changes in Stockholders' Equity
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mid Atlantic Medical Services, Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
In December 2000, AFC borrowed $155 million under its credit agreement with AFG to make capital contributions to its property and casualty operations.
Summarized information for the unrealized gains and losses recorded in AFC's balance sheet at December 31, 2002, is shown in the following table (dollars in millions). Approximately $170 million of "Fixed maturities" and $21 million of "Other stocks" had no unrealized gains or losses at December 31, 2002.
For certain lines of business and products where the credibility of the range of loss projections is less certain (primarily many of the various specialty businesses listed above), management believes that it is prudent and appropriate to use conservative assumptions until such time as the data, experience and projections have more credibility, as evidenced by data volume, consistency and maturity of the data. While this practice mitigates the risk of adverse development on this business, it does not eliminate it.
As shown in Note N under "Insurance Reserves," AFC's property and casualty operations recorded loss development of $171 million in 2002 and $163 million in 2001 related to prior accident years. Major areas of adverse development were as follows (in millions):
2002 2001 ---- ---- Asbestos $ 49 $108 Executive liability 26 26 Other liability 21 * Personal lines 15 * Other discontinued specialty businesses 41 32 Other 19 (3) ---- ---- $171 $163 ==== ====
"Other liability" development was the result of an unexpected shift of the judicial climate in some previously relatively conservative states. Verdicts, judgments, and settlements have increased and reserves were adjusted accordingly.
PERSONAL The Personal group's gross written premiums for 2002 decreased about 5% compared to 2001 due primarily to intentional reductions in new business volume in certain non-core markets and through the direct channel, partially offset by the effect of continuing rate increases and volume growth in target markets. Rate increases implemented in 2002 were approximately 10%.
ANNUITY BENEFITS For GAAP financial reporting purposes, annuity receipts are accounted for as interest-bearing deposits ("annuity benefits accumulated") rather than as revenues. Under these contracts, policyholders' funds are credited with interest on a tax-deferred basis until withdrawn by the policyholder. Annuity benefits reflect
2002 2001 2000 ---- ---- ---- Interest of AFG (parent) and noncontrolling shareholders in earnings of subsidiaries $19,136 $14,879 $ 6,092 Accrued distributions by subsidiaries on preferred securities, net of tax 8,424 11,075 11,959 ------- ------- -------
FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents (in millions) the carrying value and estimated fair value of AFC's financial instruments at December 31.
AMERICAN FINANCIAL CORPORATION AND SUBSIDIARIES SCHEDULE V - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS THREE YEARS ENDED DECEMBER 31, 2002 (IN MILLIONS)
The following selected consolidated financial data should be read together with the consolidated financial statements of Canopius Bermuda and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data in this section is not intended to replace the consolidated financial statements of Canopius Bermuda and the accompanying notes.
Claims IBNR may often not be apparent to the insured until many years after the event giving rise to the claims has happened. Classes of business where the IBNR proportion of the total reserve is high will typically display greater variations between initial estimates and final outcomes because of the greater degree of difficulty of estimating these reserves.
The Company did not have an aggregate investment with a single counterparty in excess of 10 percent of total investments at December 31, 2012 or December 31, 2011.
Where possible, the cedants adopt multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims. A component of these estimation techniques is usually the estimation of reported claims not yet paid. In estimating the cost of these, the cedants consider the claim circumstances as reported, information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous periods.
(1) Also excludes the $1,046,000 gain from the sale of real estate in 1997.
maturity investments. At December 31, 1998, approximately 2.4% of the carrying value of fixed maturities was invested in diversified non-investment grade fixed income securities (investments in such securities have different risks than investment grade securities, including greater risk of loss upon default, and thinner trading markets). Less than .1% of the Company's total investments were in real estate and mortgage loans. The Company has no non-performing fixed maturities.
The dates of expected completion and the costs of the Company's Year 2000 remediation efforts are based on management's estimates, which were derived utilizing assumptions of future events, including the availability of certain resources, third party remediation plans and other factors. There can be no guarantee that these expectations will be achieved; if the actual timing and costs for the Company's Year 2000 compliance program differ materially from those anticipated, the Company's financial results and financial condition could be significantly affected. Additionally, despite testing by the Company, the Company's systems may contain undetected errors or defects associated with Year 2000 date functions. The inability of the Company to correctly identify significant Year 2000 issues for remediation or to complete its Year 2000 remediation and testing efforts prior to respective critical dates, as well as the failure of third parties (with whom the Company has an important relationship) to identify, remediate and test their own Year 2000
Equity in net loss of unconsolidated affiliate. The equity in net loss of unconsolidated affiliate in 1999 represents the Company's share of the net loss of Montlake. The Company is accounting for this investment using the equity method.
The Company operates in a single segment: the production, underwriting and servicing of workers' compensation and accident and health insurance.
period that includes the enactment date. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized.
The total tax benefit is different from the applicable Federal income tax rate of 34% for the reasons reflected in the following reconciliation:
In 1997, the Company adopted its 1997 Stock Incentive Plan, reserving 200,000 shares of common stock. Stock awards totaling 212 shares, 252 shares and 1,000 shares were granted in 2000, 1999 and 1998, respectively. At December 31, 2000, 108,286 shares of common stock were available for issuance under the 1997 plan.
Pursuant to the 1994 Plan, the Company granted 28,700 shares at $9.03 per share and 22,500 shares at $7.88 per share of restricted common stock in 1995 and 1996, respectively. The per share price for these awards was based on an annual independent appraisal. The restrictions lapsed pursuant to various vesting schedules. Holders of restricted stock are entitled to vote such shares and receive dividends, which are not subject to restrictions. As of December 31, 2000, all restrictions on the grants have lapsed; 200, 1,700 and 450 shares in 2000, 1999 and 1998, respectively, were forfeited based upon voluntary termination. No restricted stock was granted in the years ended December 31, 2000, 1999 and 1998.
In addition, in 1996, the Company issued options to purchase an aggregate of 316,000 shares of common stock to officers and directors of the Company outside the Plan. The options carry an exercise price of $9.50 per share. Also outstanding is an option to purchase an aggregate of 60,000 shares of common stock to an officer of the Company outside of the plan granted at $8.50 per share in 1994. The options were granted at fair value as determined by the Executive Compensation Committee of the Board of Directors. Such options have the same terms as options granted under the plans. Options to purchase 84,000 shares of common stock were immediately exercisable with the remaining options vesting over a period of three years. In 1999, options to purchase 10,500 shares at $9.50 per share were forfeited. In 1998, options to purchase 8,000 shares at $9.50 per share were exercised. Options to purchase 357,500 shares of common stock issued outside the plans remain outstanding as of December 31, 2000.
Approximate aggregate minimum rental commitments under operating leases at December 31, 2000 are as follows:
On August 31, 1994, the Company acquired American-Amicable Life Insurance Company of Texas ("AA Life") through American-Amicable Holding Corporation ("AAHC"). AA Life markets life insurance products to military and civilian employees at U.S. military installations throughout the world.
As part of the financing for the Integon Life acquisition, PennCorp issued Series B Preferred Stock with an initial value of $12.8 million, which accretes at 10.4% per annum until its maturity on June 30, 1997, and Series C Preferred Stock with an initial value (subject to offset) of $17.9 million, which accretes at 9.3% per annum until its maturity on June 30, 1998. The Series C Preferred Stock's estimated initial value for financial statement purposes was approximately $16.0 million. Preferred stock dividends accreted during 1996 and 1995, on the Series B and Series C Preferred Stock amounted to $2.9 million and $1.3 million, respectively. On March 14, 1997, the Company redeemed all the outstanding Series B Preferred Stock for $14.7 million, utilizing proceeds available under the bank credit facility.
Disintermediation risk. With the acquisition of UC Life and Integon Life, the Company significantly expanded its interest sensitive portfolio of products including universal life and accumulation products. The Company actively manages the difference in interest yields on assets backing interest sensitive liabilities and amounts credited to policyholder account balances so as to provide a margin or "spread". For the years ended December 31, 1996 and 1995, the Company had total interest sensitive liabilities aggregating $1,808.0 million and $702.1 million, respectively and obtained a spread on such liabilities of 2.1% and 1.9%, respectively. As part of the ongoing management of interest sensitive business, the Company annually undertakes "cash flow testing" sensitivities in which Management evaluates a range of interest rate scenarios under which credited interest rates and asset/liability durational matching may become mismatched. The Company believes that it has sufficient liquidity to withstand all reasonable scenarios established by Management.
The amortized cost and fair value of investments in fixed maturities held for investment as of December 31 were as follows:
On July 25, 1995, the Company issued 127,500 shares of 10% Series B Preferred Stock and 178,500 shares of 9% Series C Preferred Stock to fund a portion of the Integon Life purchase price. The Series B Preferred Stock and the Series C Preferred Stock are mandatorily redeemable on or before June 30, 1997 and June 30, 1998, respectively. The redemption price of the Series C Preferred Stock is subject to certain offsets related to the Integon Life stock purchase agreement. Dividends accrued and unpaid were $1,939 and $557 on the Series B Preferred Stock and $2,175 and $700 on the Series C Preferred Stock, respectively, as of December 31, 1996 and 1995.
It is anticipated that PennCorp common shareholders will vote on the above transactions in April 1997, and, subject to shareholder approval, the Company intends to consummate such transactions as expeditiously as possible.
Direct earned premium in the automobile segment declined 12.2% to $77,766,225 from $88,555,721 earned in 1997. This decline is due to lower direct premium writings the result of reduced market share resulting from rate increases, increased competition and processing backlogs the result of computer modification problems during the Year 2000 conversion process. Net earned premium (after reinsurance ceded premium of $45,426,237) in the automobile segment declined 21.9% to $32,339,988 from $41,448,497 reported in 1997 following the trend in direct business but also reflecting a 25% increase in the reinsurance cession rate which reduced net earned premium by $5,000,000.
Net investment income declined 14.1% the result of a 12.9% decrease in invested assets during the period and the reinvestment of maturities at lower interest rates. The decline in premium volume coupled with quicker claim settlement procedures, higher operating expenses, debt repayment requirements and computer system enhancements has resulted in reduced cash flow.
Net cash flow from operations was negative in 1998 as loss and loss adjustment expense payments and consolidated operating expense payments and debt payments exceeded premiums, fees and investment revenues. The Registrant put forth a concerted effort in 1997 and 1998 to settle outstanding claims, thereby reducing the number of claims outstanding in the minimum limits automobile personal injury protection line of business. This process accelerated loss payments contributing to the negative cash flow the Registrant experienced. The Registrant believes this practice will improve overall loss and loss expense experience by reducing ultimate loss settlement costs and litigation expenses. The Registrant's practice of maintaining a highly liquid investment portfolio allowed the Registrant to meet cash demands. The Registrant is optimistic that cash flow will improve as rate increases take effect, premium volume improves and the settlement of losses returns to a more normal pattern.
The Registrant has confirmed with its primary processing vendors that they have or will make the necessary software and hardware upgrades prior to the end of 1999.
The future policy benefit reserves related to term life products are determined as the present value of expected future benefits to or on behalf of policyholders less the present value of future net premiums, which are discussed more fully in Note 7 to the Consolidated Financial Statements. The expected future benefits are determined using assumptions as to mortality and lapse. Mortality assumptions are generally based on the Company’s historical experience or standard industry tables, as applicable; and our interest rate assumptions are based on current and expected net investment returns.
This dynamic lapse rate adjustment reduces the base lapse rate when the guaranteed amount is greater than the account value, as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. Mortality assumptions are generally based on standard industry tables, which we adjust based on our historical experience, and also incorporate a mortality improvement assumption. Over the last several years, the Company’s most significant assumption updates that have resulted in changes to our reserves for the GMDBs and GMIBs have been related to lapse experience and other contractholder behavior assumptions and revisions to expected
The following table reflects the impact on the amortization of DAC/DSI and on the GMDB/GMIB reserves of the mark-to-market of the reinsured liability for living benefit embedded derivatives and related hedge positions, and of changes in the estimated profitability of the business.
The warehouses experienced an unrealized loss of almost $184,000 during 1994. The Pomona property had the largest loss, $1,679,740 (9.4% of its year-end 1993 value). This change was due primarily to the increased cost of a planned roof replacement program and an acceleration in the timing of that work. The market values of the four Unit warehouses in which the Partnership owns a 50% interest at the end of 1994 increased $214,364 (3.9% of their December 31, 1993 value). This resulted from leasing the vacant space at one of the warehouses effective February 1995 as well the improved potential for higher rental rates on new and renewal leases on these properties.
The Partnership's office buildings declined approximately $1,400,000 (5.9% of their December 31, 1992 value) during 1993. The Morristown property experienced the larger decrease, approximately $850,000. This was due to continuing soft market conditions in the northern New Jersey office market and an expected increase in the cost of leasing and operating the property. The value of the Lisle office building decreased $600,000. This property is entirely leased to R.R. Donnelley through 1997. The decline in value is due to the expectation that rental rates on the property upon expiration of the current lease will be lower than the current rate.
its earnings potential from underwriting profits. During 2007 the Company added 3 new programs and had 11 active programs as of December 31, 2007. The Company’s focus on its specialty programs business line is on insurance programs that allow the Company to participate in underwriting profits, while also earning fee income as the policy issuer.
We introduced a partially funded product to complement our fully funded product. This product is used for entities that want to self insure a portion of their risk and combines a level of underwriting risk with a self insured component.
Specialty Programs. Net premiums earned increased 5.2% to $19.3 million for the year ended December 31, 2006 compared to $18.3 million for 2005. Net premiums earned increased primarily due to increased retention levels on selected programs thereby allowing the Company the opportunity to increase its earnings potential from underwriting profits. During 2006 the Company added 5 new programs and had 12 active programs as of December 31, 2006 compared to 9 at the end of 2005. The Company’s focus on its specialty programs business line is on insurance programs that allow the Company to participate in underwriting profits, while also earning fee income as the policy-issuer. See “Business-Our Products-Alternative Risk Transfer - Specialty Programs” in Part I for additional information on our programs.
The Company did not have any real estate income in 2006 compared to $3.0 million in 2005 when the final condominium units at Harbour Village were sold. See “Business-Harbour Village Development” and Note 3 to the Company’s consolidated financial statements for additional information regarding Harbour Village.
The following table displays the resulting range of potential deviation of the net carried reserves for each line of business (in thousands of dollars):
The Company leases office space in its Winston-Salem headquarters and its thirteen underwriting offices located throughout the country under leases expiring between 2005 and 2012 and which require annual lease payments of approximately $2.0 million in 2005. With respect to all facilities, the Company either has renewal options or believes it will be able to obtain lease renewals on satisfactory terms. The Company believes its existing properties are well utilized and are suitable and adequate for its present circumstances.
Approximately $176,000 was a write-down on common stock of a pharmaceutical company for which the value had fluctuated below 80% of amortized cost after the company had to cease sales of one of its major products due to alleged health risks. Rating agencies then reduced the credit ratings for this company. We sold this security in the fourth quarter following the write-down at an amount that approximated its carrying value after the write-down. The circumstances surrounding this impairment did not impact other securities in our portfolio.
Information regarding our directors and nominees for directors is included in our Proxy Statement for the 2005 Annual Meeting of Stockholders, and is hereby incorporated by reference.
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
All fixed maturity and equity securities are classified as “available-for-sale” and are carried at fair value. Unrealized gains and losses on available-for-sale securities, net of tax, are reported as a separate component of accumulated other comprehensive income.
The Company pays unconsolidated affiliated companies for management, investment, and other services. The total expense incurred for such items was $869,000, $711,000, and $670,000 in 2004, 2003, and 2002, respectively.
As of December 31, 2005, we leased approximately 60,000 square feet of space for our corporate office in Bethesda, Maryland. We also leased approximately 1,773,000 aggregate square feet for office space, subsidiary operations and customer service centers for the various markets where our health plans and other subsidiaries operate, of which approximately 4% is subleased. Our leases expire at various dates from 2006 through 2018. We also own eight buildings throughout the country with approximately 727,000 square feet, which is used for administrative services related to our health plan and other operations, of which less than one percent is subleased. We believe that our facilities are adequate for our operations.
(1) Results of Operations includes First Health since January 28, 2005, the date of acquisition.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Coventry Health Care, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2006 expressed an unqualified opinion thereon.
See Note G to consolidated financial statements for disclosure related to stock-based compensation.
The provision for income taxes consists of the following (in thousands):
• Federal Employees Health Benefits Program - a variety of managed care and administrative services available to federal employees and annuitants