Loss and loss adjustment expenses ....... 74.4% 75.7% 76.8% Policy acquisition and other insurance expenses .............................. 26.8 27.3 30.2 ----- ----- ----- Total before policyholders' dividends.. 101.2 103.0 107.0 Policyholders' dividends ................ 2.0 2.4 2.4 ----- ----- ----- Total after policyholders' dividends .. 103.2% 105.4% 109.4% ===== ===== =====
The ratio of loss and loss adjustment expenses to premiums earned (the "loss ratio") was 74.4%, 75.7% and 76.8% in 1993, 1992 and 1991, respectively. The improvement in the 1993 loss ratio was attributable to a decrease in the loss ratio for the Regional Operations segment offset by higher levels of initial reserving in the Reinsurance/Special Programs segment. The improvement in the 1992 loss ratio was primarily attributable to a decrease in adverse development of prior years' losses. Lower assignments from the National Council on Compensation Insurance ("NCCI") improved the operating results for 1992 as compared to 1991 by $6,042,000 and had a favorable impact on the loss ratio of .9 percentage points. The decreases in adverse development and NCCI assignments in 1992 were offset by establishing initial loss reserves at higher levels and by an increase of .6 percentage points from losses stemming from Hurricanes Andrew and Iniki. The inclusion of Guaranty National Companies' loss experience for 1991 had the effect of lowering the loss ratio by 3.0 percentage points. The 1991 loss ratio also included a provision (the "cumulative loss provision") of $25,000,000, or 3.6 percentage points, recorded at year end 1991 in response to the Company's internal actuarial analysis, and to an independent actuarial review commissioned by the Connecticut Insurance Department in connection with a regular statutory examination of the Company's insurance subsidiaries.
Compliance with the system of internal controls is continuously maintained and monitored by management. The internal audit staff of the Company evaluates and reports on the adequacy of and adherence to these controls, policies and procedures. In addition, as part of its audit of the consolidated financial statements, Deloitte & Touche, the independent auditors for the Company, perform a review and evaluation of the system of internal controls to the extent they consider necessary to express an opinion on the consolidated financial statements. Recommendations concerning the system of internal controls are provided by both the internal auditors and Deloitte & Touche, and management takes actions which are believed to be appropriate responses to these recommendations.
Proceeds from sales of investments in fixed maturities were $90,720,000 in 1993, $189,282,000 in 1992, and $535,975,000 during 1991. Realized investment gains (losses) on fixed maturities during 1993, 1992 and 1991 include gross gains of $10,817,000, $10,273,000 and $18,287,000, gross losses realized from sales of $4,155,000, $4,908,000 and $11,362,000 and $2,147,000, $2,133,000 and $7,770,000, respectively, of loss provisions recorded for other than temporary impairment in the value of investments. The Company had $226,000 and $1,666,000 of fixed maturity investments for which it was not accruing income for the years ended December 31, 1993 and 1992, respectively.
On January 8, 1991, the California Insurance Department issued rate regulation proposals regarding the California proposition. On October 16, 1991, the California Insurance Commissioner issued notices of premium refunds to 14 insurers. In February 1993, the California State Court invalidated the regulations with respect to one insurance company that received notice of a premium refund. The decision is currently on appeal to the California Supreme Court. None of the Company's insurance subsidiaries were among the companies that received the refund notices.
The weighted average common shares outstanding for purposes of computing earnings per share amounted to 14,598,000, 10,914,000 and 9,964,000 shares for 1993, 1992 and 1991, respectively. Dividends on preferred stock were deducted from earnings to compute primary earnings per common share. The $2.125 Preferred Stock and, for 1992 and 1991, the $1.90 Preferred Stock are assumed to be converted for the full year, if dilutive, for the purpose of computing fully-diluted earnings per common share. The weighted average common shares, on a fully-diluted basis, amounted to 14,655,000, 14,474,000 and 14,086,000 shares for 1993, 1992 and 1991, respectively.