-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AAKHDdLOX9vTLYrJpfRzjLpRycjhACQRTS4dX7aK0qz73Xr75inmXRapjmM2ktp+ PSVpkZNgLya6w2w8KSi0XA== 0000017385-96-000012.txt : 19960403 0000017385-96-000012.hdr.sgml : 19960403 ACCESSION NUMBER: 0000017385-96-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960402 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITOL TRANSAMERICA CORP CENTRAL INDEX KEY: 0000017385 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 391052658 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02047 FILM NUMBER: 96543536 BUSINESS ADDRESS: STREET 1: P O BOX 5900 CITY: MADISON STATE: WI ZIP: 53705 BUSINESS PHONE: 6082314450 MAIL ADDRESS: STREET 1: P O BOX 5900 CITY: MADISON STATE: WI ZIP: 53705 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission file number: 0-2047 CAPITOL TRANSAMERICA CORPORATION A Wisconsin Corporation 39-1052658 4610 University Avenue Madison, Wisconsin 53705-0900 Registrant's telephone number, including area code (608) 231-4450 Securities registered pursuant to Section 12 (g) of the Act: COMMON STOCK, $1 PAR VALUE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 dur- ing the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing re- quirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K. { } Based on the closing average of the bid (20 3/4) and asked price (20 1/4), the aggregate market value of voting stock held by non-affiliates of the registrant as of February 23, 1996 was approximately $151,290,513. Indicate the number of shares of each of the issuer's class of common stock, as of the latest practicable date: At February 23, 1996 Common Stock, $1.00 Par Value Issued: 7,589,856 Outstanding: 7,380,025 DOCUMENTS INCORPORATED BY REFERENCE Schedule P of the Annual Statements of Capitol Indemnity Corporation and Capitol Specialty Insurance Corporation are incorporated by reference into Part I. Por- tions of the proxy statement for the annual shareholders meeting to be held April 29, 1996 are incorporated by reference into Part III. Total Pages: 37 Form 10-K (Annual Report) Capitol Transamerica Corporation Part I Item 1. Business (a) General Development of Business Capitol Transamerica Corporation (CTC) is a holding company with assets exceeding $175 million. CTC was formed in 1965 and owns 100% of Capitol Indemnity Corporation (CIC), Capitol Specialty Insurance Corporation (CSIC) and Capitol Facilities Corporation (CFC). Both CIC and CSIC are property and casualty insurance companies. The companies also write a complete port- folio of fidelity and surety bonds and specialty insurance coverages. CIC operates on an admitted basis in 31 states and on an excess/surplus lines basis in three states. Some of the specialty property and casualty coverages written are: Barber & Beauty Shops, Bowling Alleys, Contractors/Manufacturers, Day Care Centers, Deer Hunters Accident, Detective/Guard Agencies, Golf Courses, Nurses Pro- fessional, Resorts/Campgrounds, Restaurants, Special Events, Clubs, Sports- mans Accident, Tanning/Toning Salons and Taverns. Our full line of surety and fidelity bonds includes: Contractor's Perfor- mance and Payment Bonds, License/Permit Bonds, Fiduciary Bonds, Judicial Bonds and Commercial Fidelity Bonds. The results of operations have remained most favorable since 1986 with sub- stantial increases in premium volume, profitability and shareholders' investment. (b) Information about Industry Segments General: The subsidiaries of the Company, through licensed agents, are involved only in the business of underwriting property, casualty, fidelity and surety in- surance on selected risks. The Company conducts business with insurance agents located throughout the United States. As of December 31, 1995 and 1994, no amount due from agents located in any one state exceeded 15% of total balances; no industry segment other than insurance amounted to 10% or more of the Company's gross or net income and no agent had writings in ex- cess of 10% of the Company's gross premiums in 1995, 1994 or 1993. During 1995, 1994 and 1993, direct premiums written in Wisconsin accounted for approximately 21%, 24% and 30%, respectively, of the total direct premiums written by the Company. (c) Narrative Description of Business Competitive Conditions: Commercial property-casualty insurance is highly competitive in the areas of price, service and agent relationships. The large number of insurers transacting business at rates which are independently regulated by their respective insurance departments compete aggressively for desireable busi- ness. Because of limitations in capacity and other regulatory restrictions, companies the size of CIC are sometimes at a disadvantage when competing with larger insurance companies. CIC is required by the Insurance Commissioner of the State of Wisconsin to maintain a minimum compulsory surplus (surplus as regards policyholders) of 25% of net premiums written during the preceding twelve months. As of December 31, 1995, CIC reported $62.6 million surplus as regards policy- holders, approximately $45.7 million in excess of the required amount. In addition, CIC is required to report a minimum 60% loss and loss expense ratio for the most current three years on certain liability lines as well as a minimum 65% ratio on the workers compensation line. Based upon actual historical experience the ratios are substantially less than the require- ment and had the company not included the excess statutory reserves over statement reserves in reporting to regulatory authorities, surplus would have been $70.3 million at December 31, 1995. Importance and Effect of Licenses: Generally speaking, insurance companies must be licensed in the states in which the insurance is written. Forms and rates for each policy offered are filed with individual state insurance departments. Number of Persons Employed Capitol Transamerica Corporation and subsidiaries employ 144 people. Information as to Similar Products or Services: Gross premiums written, reinsurance ceded and net premiums written for the past five years are as follows:
1995 Gross Ceded Net Accident and Health $ 222,137 $ - $ 222,137 Burglary and Glass 52,045 - 52,045 Fidelity 1,355,259 66,854 1,288,405 Fire and Allied Lines 593,309 10,561 582,748 Inland Marine 76,325 3,208 73,117 Liability 10,575,070 430,641 10,144,429 Commercial Multiple Peril 41,254,997 1,451,561 39,803,436 Workers' Compensation 1,942,861 74,422 1,868,439 Surety 14,806,489 484,277 14,322,212 $70,878,492 $2,521,524 $68,356,968 1994 Gross Ceded Net Accident and Health $ 223,193 $ - $ 223,193 Burglary and Glass 50,646 - 50,646 Fidelity 1,059,233 90,495 968,738 Fire and Allied Lines 797,229 43,821 753,408 Inland Marine 98,927 3,524 95,408 Liability 9,309,300 307,242 9,002,058 Reinsurance 22,359 - 22,359 Commercial Multiple Peril 37,639,679 994,496 36,645,183 Workers' Compensation 1,623,361 57,099 1,566,262 Surety 7,740,415 415,724 7,324,691 $58,564,342 $1,912,401 $56,651,941 1993 Gross Ceded Net Accident and Health $ 152,602 $ - $ 152,602 Burglary and Glass 101,171 4,798 96,373 Fidelity 975,077 39,716 935,361 Fire and Allied Lines 745,596 52,386 693,210 Inland Marine 132,492 5,481 127,011 Liability 7,429,388 279,170 7,150,218 Reinsurance 3,131 - 3,131 Commercial Multiple Peril 30,932,976 1,710,817 29,222,159 Workers' Compensation 2,381,194 29,596 2,351,598 Surety 7,492,901 318,500 7,174,401 $50,346,528 $2,440,464 $47,906,064 Item 1(c). (continued) 1992 Gross Ceded Net Accident & Health $ 159,585 $ - $ 159,585 Burglary and Glass 121,820 - 121,820 Fidelity 1,011,367 49,355 962,012 Fire and Allied Line 867,898 42,980 824,918 Inland Marine 117,366 1,883 115,483 Liability 6,765,304 286,189 6,479,115 Commercial Multiple Peril 22,719,435 1,495,220 21,224,215 Workers' Compensation 826,875 6,006 820,869 Surety 6,627,173 337,628 6,289,545 $39,216,823 $2,219,261 $36,997,562 1991 Gross Ceded Net Accident & Health $ 157,429 $ - $ 157,429 Burglary and Glass 66,999 - 66,999 Fidelity 1,024,846 50,012 974,834 Fire and Allied Line 705,575 19,743 685,832 Inland Marine 114,242 6,984 107,258 Liability 6,288,747 215,669 6,073,078 Reinsurance 8,006 - 8,006 Commercial Multiple Peril 17,512,852 751,325 16,761,527 Surety 6,860,881 (216,405) 7,077,286 $32,739,577 $ 827,328 $31,912,249
(d) Copies of "Schedule P" of the Annual Statements filed with State Regulatory Authorities by CIC and CSIC are incorporated herein by reference and are available upon request. (e) Discussion Topics The following discussion topics, if applicable, have been included in Management's Discussion and Analysis of Financial Condition and Results of Operations and/or the Notes to Consolidated Financial Statements and the accompanying Schedules which appear elsewhere in this Annual Report. (1) Reinsurance transactions which have a material effect on earn- ings or reserves. (2) Significant reserving assumptions including any recent changes. (3) The nature of recent changes in the terms under which reinsur- ance is ceded to other insurers. (4) Changes in the mix of business, including but not limited to changes in the location of business, geographic mix and types of risks assumed. (5) Changes in payment patterns due to portfolio loss transfers, structured settlements and other transactions or circumstances. (6) Unusually large losses or gains. (f) Reconciliation of Loss and Loss Adjustment Expense Reserves:
1995 1994 1993 Balances as of January 1, $ 27,475,323 $ 19,319,449 $ 18,788,150 Less reinsurance recoverables (12,363) (38,049) (674,509) Net reserves 27,462,960 19,281,400 18,113,641 Incurred losses and loss adjustment expenses related to: Current year 27,224,006 21,287,960 16,948,813 Prior years: Direct losses 2,610,999 1,628,974 571,451 Direct loss adjustment expenses 2,810,145 3,704,484 2,011,913 Discontinued assumed reinsurance 1,454,313 914,636 1,117,562 Total prior years 6,875,457 6,248,094 3,700,926 Total incurred 34,099,463 27,536,054 20,649,739 Paid losses and loss adjustment expenses related to: Current year 10,632,490 9,527,420 9,858,088 Prior years 12,285,492 9,946,822 9,616,795 Total paid 22,917,982 19,474,242 19,474,883 Other adjustments, net (105,678) 119,748 (7,097) Net balance at December 31 38,538,763 27,462,960 19,281,400 Plus reinsurance recoverables 45,321 12,363 38,049 Balance at December 31, $ 38,584,084 $ 27,475,323 $ 19,319,449 (g) Loss Reserve Development Year ended: 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Reserves for losses and loss adjustment expense $ 12.2 $ 14.8 $ 15.3 $ 14.2 $ 14.1 $ 14.5 $ 18.1 $ 19.3 $ 27.5 $ 38.5 Re-estimated reserves: One year later 13.5 14.0 14.1 15.3 15.0 19.5 21.2 25.5 33.8 Two years later 13.9 13.3 15.5 16.1 18.3 21.3 23.8 31.2 - Three years later 13.4 14.6 16.1 18.3 19.9 22.7 28.3 - - Four years later 14.8 15.1 17.5 19.2 21.3 25.9 - - - Five years later 15.5 16.2 18.6 20.2 23.8 - - - - Six years later 16.6 17.4 19.6 21.8 - - - - - Seven years later 17.7 18.2 21.1 - - - - - - Eight years later 18.5 19.7 - - - - - - - Nine years later 19.9 - - - - - - - - Cumulative deficiency (7.7) (4.9) (5.8) (7.6) (9.7) (11.4) (10.2) (11.9) (6.3) Cumulative deficiency from discontinued reinsurance assumed operations (8.5) (7.6) (7.1) (6.5) (5.7) (4.5) (3.5) (2.4) (1.5) Cumulative redundancy (deficiency) from continuing operations 0.8 2.7 1.3 (1.1) (4.0) (6.9) (6.7) (9.5) (4.8) Cumulative amount of liability paid through: One year later 3.4 3.6 4.6 5.9 5.7 7.6 9.4 9.9 12.2 Two years later 5.6 5.9 8.0 8.7 10.1 12.7 14.1 17.2 - Three years later 7.0 8.3 9.9 12.0 13.4 15.4 18.9 - - Four years later 9.2 9.4 12.3 13.7 15.2 18.7 - - - Five years later 10.0 11.4 13.5 14.6 17.5 - - - - Six years later 11.9 12.3 14.2 15.9 - - - - - Seven years later 12.7 12.9 15.3 - - - - - - Eight years later 13.2 14.0 - - - - - - - Nine years later 14.3 - - - - - - - - This table does not present accident or policy year development data, which readers may be more accustomed to analyzing. Conditions and trends that have effected development of the liability in the past may not necessarily occur in the future. Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies based on this table. There are no specific provisions for the effects of inflation or other factors which may cause a future change in claim costs. The company withdrew from the reinsurance assumed business in 1976, however, the company is involved with treaties which cover certain risks which have had significant development industry-wide over the past several years. Due to the nature of the assumed business, ultimate losses may, and often do, vary from current estimates. See footnote 4(b) of the notes to the consolidated financial statements.
(h) Reconciliation of Statutory to Generally Accepted Accounting Principles (GAAP) reserves:
Balance, December 31, as reported to For the Year Ended December 31, Insurance Commissioner of the 1995 1994 1993 State of Wisconsin: - CIC $ 37,996,923 $ 26,829,156 $ 18,763,392 - CSIC - - 10,435 Funds withheld from reinsurers, reclassified to loss reserves on a GAAP basis 514,583 510,028 489,403 Reserve for return of disability premiums, reclassified to loss reserves on a GAAP basis 26,625 37,026 35,042 FAS No. 113 GAAP adjustment to gross up reserves for the effect of reinsurance 52,653 119,571 38,049 Other, net (6,700) (20,458) (16,872) Balance, December 31, on a GAAP basis $ 38,584,084 $ 27,475,323 $ 19,319,449
Item 2. Properties Capitol Transamerica Corporation leases premises in the Pyare Square building located at 4610 University Avenue, Madison, Wisconsin, 53705, as follows: Approximately 27,406 square feet occupying a portion of the 1st and 9th floors and all of the 11th, 12th, 13th and 14th floors. The term of the lease is from March 23, 1992 through September 30, 1994 with options to extend through September 30, 2000. The Company also leases approximately 2,000 square feet of storage space from the President of the Company in a personally owned warehouse at terms as favorable as those available from unaffiliated third parties. Item 3. Legal Proceedings Capitol Indemnity Corporation (CIC) is a defendant in certain lawsuits involving complaints which demand damages and recoveries for claims and losses allegedly related to risks insured by CIC. In the opinion of management, such lawsuits are routine in that they result from the ordi- nary course of business in the insurance industry. The reserves for losses and loss adjustment expenses include management's estimates of the probable ultimate cost of settling all claims involving lawsuits. Such estimates are continually reviewed and updated. The reserves for losses and loss adjustment expenses at December 31, 1995, are, in the opinion of management, adequate to absorb claims arising from those routine legal proceedings presently in prcess against the Company. Item 4. Submission of Matters to a Vote of Shareholders No matters were submitted to a vote of shareholders during the Company's fourth fiscal quarter ended December 31, 1995. Item 5. Market Information, Dividends and Other Information On February 23, 1996, the approximate number of registered shareholders was 2,500. CTC is publicly owned and traded on the National Over-the-Counter Market, symbol CATA. The market price of the stock (adjusted) during 1995 was a low of 13 7/8 and a high of 20 1/2 with 1,078,340 shares traded. Quarterly high and low quoted prices are obtained from the National Association of Securities Dealers. These quotations, adjusted for the December 28, 1995 ten percent stock dividend, are as follows:
1995 1994 Quarter High Low Dividends High Low Dividends First 16 1/8 13 7/8 $.08 16 5/8 13 3/8 $.19 Second 17 1/2 14 3/8 .09 17 1/4 14 1/2 .07 Third 17 3/4 16 3/8 .09 17 16 1/8 .07 Fourth 20 1/2 17 1/2 .19 16 3/8 13 7/8 .07 Year 20 1/2 13 7/8 $.45 17 1/4 13 3/8 $.40 For the period January 1 through February 23, 1996, the high ask price was 21 and the low bid price was 19 1/2. A regular cash dividend of $.10 per share was paid on March 28, 1996, to shareholders of record on March 11, 1996. Future dividend payments must be authorized by the Board of Directors and will be dependent on operating results, capital requirements and the financial condition of the Company.
Subsidiaries S.E.C. Form 10-K Capitol Indemnity Corporation Copies of the Company's Annual Capitol Specialty Insurance Corporation report filed with the SEC, in- Capitol Facilities Corporation cluding exhibits, are available by written request addressed to: Independent Public Accountants Paul J. Breitnauer Ernst & Young LLP Vice President & Treasurer Milwaukee, Wisconsin 4610 University Ave. Madison, Wisconsin 53705-0900 Transfer Agent and Registrar Annual Meeting Firstar Trust Co. The Company's Annual Meeting Milwaukee, Wisconsin will be held Monday, April 29, 1996, 3:00 PM at the Common stock Concourse Hotel 1 West Dayton Street Listed: OTC Madison, Wisconsin 53704 Quoted: NASD (CATA) Item 6. FIVE YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA:
1995 1994 1993 1992 1991 Gross Premiums Written $ 70,878,492 $ 58,564,342 $ 50,346,528 $ 39,216,823 $ 32,739,577 Net Premiums Written $ 68,356,968 $ 56,651,941 $ 47,906,064 $ 36,997,562 $ 31,912,249 Premiums Earned $ 63,865,500 $ 52,461,456 $ 43,456,430 $ 33,739,719 $ 30,313,866 Net Investment Income 6,635,123 5,359,606 5,001,715 4,715,339 4,374,995 Realized Investment Gains (Losses) 3,587,323 (106,188) 4,145,701 1,580,431 (390,442) Other Revenues 144,866 118,353 38,609 112,488 25,488 Total Revenues 74,232,812 57,833,227 52,642,455 40,147,977 34,323,907 Losses and Loss Adjustment Expenses Incurred 34,099,463 27,536,054 20,649,739 16,853,514 11,105,060 Underwriting and Other Expenses 21,497,664 17,883,570 15,963,957 12,204,252 11,011,435 Total Losses Incurred and Expenses 55,597,127 45,419,624 36,613,696 29,057,766 22,116,495 Income from Operations Before Income Taxes 18,635,685 12,413,603 16,028,759 11,090,211 12,207,412 Income Tax Expense 4,705,279 3,166,363 4,344,504 2,687,861 3,059,628 Consolidated Net Income $ 13,930,406 $ 9,247,240 $ 11,684,255 $ 8,402,350 $ 9,147,784 Weighted Average Number of Shares Outstanding 7,366,440 7,341,748 7,291,362 7,219,658 7,138,058 Income Per Share $ 1.89 $ 1.26 $ 1.60 $ 1.16 $ 1.28 Total Cash Dividends Per Share $ 0.45 $ 0.40 $ 0.34 $ 0.19 $ 0.14 Consolidated Net Income and Cash Dividends Stated as a Ratio to Beginning Shareholders' Equity 25.3% 18.6% 25.9% 21.4% 29.4% Year End Financial Position: Assets $175,630,578 $127,633,195 $117,346,301 $ 98,857,739 $ 79,602,840 Shareholders' Equity 92,653,880 67,979,174 65,648,667 54,637,662 45,765,237 Book Value Per Share $ 12.55 $ 9.24 $ 8.97 $ 7.54 $ 6.36 Shares Outstanding 7,378,774 7,354,955 7,319,325 7,245,968 7,192,128 Insurance Operating Ratios (Statutory Basis): Losses and Loss Adjustment Expenses to Net Premiums Earned 53.2% 52.3% 47.5% 50.2% 39.7% Underwriting Expenses to Net Premiums Written 32.8% 32.4% 32.2% 35.0% 33.2% Combined Ratio 86.0% 84.7% 79.7% 85.2% 72.9% A. M. BEST Rating A+ A+ A+ A+ A Superior Superior Superior Superior Excellent Prior years' information has been restated to reflect the December 28, 1995 ten percent stock dividend and the June 15, 1992 three-for-two stock split effected as a stock dividend.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Capitol Transamerica Corporation (the "Company") is an insurance holding company operating in 34 states which writes, through its subsidiaries, both property- casualty and fidelity-surety insurance. The property-casualty segment accounts for approximately 80% of the business written while the fidelity-surety segement accounts for approximately 20% of the Company's business. The underwriting cycles of the property-casualty insurance industry have been characterized by peak periods of adequate rates, underwriting profits and lower combined ratios, while the downward side of the cycle is characterized by in- adequate rates, underwriting losses and, as a result, higher combined ratios. The adequacy of premium rates is affected primarily by the severity and frequen- cy of claims which in turn are affected by natural disasters, regulatory measures and court decisions which continue to uphold the "deep pocket" theory in awarding against insurance companies. Unfortunately for the insurance indus- try, the trend of increasing price competition has continued as has the number of significant natural disasters. This combination has resulted in a consider- able reduction in underwriting profitability for the industry as a whole. Inflation also has a significant impact on the insurance industry in general, as well as on the Company. Inflation creates higher claim costs, which are then matched currently against premiums whose rating statistics were developed from data of previous years. In recent inflationary periods, this has led to inade- quate rate structures, since rate regulators are slow to grant rate adjustments at times when the overall economy is in an inflationary cycle. Studies have shown that premium rates trail the claim experience by a period of two years or more. Adequate premium rates continue to be of concern to the Company and the property-casualty insurance industry. OPERATING RESULTS As mentioned in the Overview, the property-casualty insurance industry is in a downward cycle. However, based on its operating results the Company is in a peak period as it continues to generate considerable underwriting profits. The Company's increase in premiums earned has been strictly due to volume increases resulting from new product lines, expansion of coverages and entry into new geographic territories. The Company's ability to maintain a steady combined ratio, typically 15 to 20 points below the industry average, is due to its basic philosophy of generating underwriting profits. When the industry's cycle reverses, the Company will be in an excellent position to take advantage of premium rate increases which will benefit the Company's overall profitability. Gross premiums written during 1995 were $70,878,492, compared with $8,564,342 in 1994 and $50,346,528 in 1993. Premiums earned are recognized as net revenues after reduction for reinsurance ceded and after establishment of the provision for the pro rata unearned portion of premiums written. Net premiums earned in 1995 totaled $63,865,500, compared with $52,461,456 and $43,456,430 in 1994 and 1993, respectively. The net unearn- ed premium reserve was $31,555,728, $26,794,249 and $23,327,682 at each year- end.
1995 1994 1993 Gross Premiums Written $70,878,492 $58,564,342 $50,346,528 Reinsurance Ceded 2,521,524 1,912,401 2,440,464 Net Premiums Written $68,356,968 $56,651,941 $47,906,064 Net Premiums Earned $63,865,500 $52,461,456 $43,456,430 Net Unearned Premium Reserve $31,555,728 $26,794,249 $23,327,682 The Company's underwriting results can be measured by reference to the combined loss and expense ratios. This tabulation includes the operating results of the two subsidiary insurance companies on a statutory basis. Losses and loss adjustment expenses are stated as a ratio of net premiums earned, while underwriting expenses are state as a ratio of net premiums written. The combined ratios were as follows: Insurance Operating Ratios (Statutory Basis): 1995 1994 1993 Losses and Loss Adjustme 53.2% 52.3% 47.5% Underwriting Expenses 32.8% 32.4% 32.2% Combined Ratios 86.0% 84.7% 79.7% The Company's combined loss and expense ratios compare very favorably with the industry average, which is projected to be more than 106% for the year 1995.
REINSURANCE The Company follows the customary practice of reinsuring with other companies, i.e., ceding a portion of its exposure on the policies it has written. This pro- gram of reinsurance permits the Company greater diversification of business and the ability to write larger policies while limiting the extent of its maximum net loss. It provides protection for the Company against unusually serious occurrences in which a number of claims could produce a large aggregate loss. Management continually monitors the Company's reinsurance program to obtain pro- tection that should be adequate to ensure the availability of funds for losses while maintaining future growth. NET INVESTMENT INCOME AND REALIZED GAINS In accordance with SFAS No. 115, the Company's fixed maturities and equity securities are classified as available-for-sale and are carried at fair value. The unrealized gains and losses, net of tax, are reported as a separate com- ponent of shareholders' investment. Interest and Dividend Income: Interest on fixed maturities is recorded as in- come when earned and is adjusted for any amortization of purchase premium or discount. Dividends on equity securities are recorded as income on ex-dividend dates.
Investments: 1995 1994 1993 Invested Assets $149,216,723 $104,785,146 $ 92,589,289 Net Investment Income 6,635,123 5,359,606 5,001,715 Percent of Return to Average Carrying Value 5.7% 5.6% 6.1% Realized Gains (Losses) 3,587,323 (106,188) 4,145,701 Change in Unrealized Gains(Losses) $ 21,085,956 $ (6,251,923) $ 2,538,850 The $21,100,000 increase in unrealized gains for 1995 was comprised of a $6,506,000 increase in fixed maturities and a $14,594,000 increase in equity securities. The Company not only gained back all the unrealized losses experienced in 1994, but had another $14,848,000 in additional appreciation. Net investment income in 1995 amounted to $6,635,123, compared with $5,359,606 and $5,001,715 in 1994 and 1993, respectively. Net unrealized gains (losses) were $20,090,891, ($995,065) and $5,256,858 at December 31, 1995, 1994 and 1993, respectively.
INCOME TAXES Income tax expense is based on income reported for financial statement purposes and tax laws and rates in effect for the years presented. Deferred federal in- come taxes arise from timing differences between the recognition of income de- termined for financial reporting purposes and income tax purposes. Such timing differences are related principally to the deferral of policy acquisition costs, the recognition of unearned premiums, and discounting the claims reserves for tax purposes. Deferred taxes are also provided on unrealized gains and losses. LOSS RESERVES Reserves for losses and loss adjustment expenses reflect the Company's best estimate of the liability for the ultimate cost of reported claims and incurred but not reported (IBNR) claims as of the end of each period. The estimates are based on past claim experience and consider current claim trends as well as social and economic conditions. The Company's reserves for losses and loss ad- justment expenses were $38,584,084 at December 31, 1995 compared with $27,475, 323 at December 31, 1994. This increase is a combination of giving consideration for the increase in premium volume, increased retention on all lines of coverages written and an increase in the IBNR reserves. Management continues to closely monitor the reserve development trends and projections as it attempts to stabilize the loss reserve development which has occurred in recent years. LIQUIDITY AND CAPITAL RESOURCES Liquidity refers to the Company's ability to meet obligations as they become due. The obligations and cash outflow of the Company include claim settlements, acquisition and administrative expenses, investment purchases and dividends to shareholders. In addition to satisfying obligations and cash outflow through premium collections, there is cash inflow obtained from interest and dividend income, maturities and sales of investments. Because cash inflow from premiums is received in advance of cash outflow required to settle claims, the Company accumulates funds which it invests pending liquidity requirements. Therefore, investments represent the majority (85.0% in 1995, 82.1% in 1994 and 78.9% in 1993) of the Company's assets. Cash outflow can be unpredictable for two reasons: first, a large portion of liabilities representing loss reserves have uncertainty regarding settlement dates; and second, there is potential for losses occurring either individually or in the aggregate. As a result, the Com- pany maintains adequate short-term investment programs necessary to ensure the availability of funds. The investment program is structured so that a forced sale liquidation of fixed maturities should not be necessary during the course of ordinary business involvement and activities. The Company has no material capital expenditure commitments. Item 8. Financial Statements and Supplementary Data Financial Statements The financial statements filed by CTC in connection with this Annual Report are consolidated financial statements which present all of the operations of the parent company and its subsidiaries. Capitol Transamerica Corporation Consolidated Financial Statements: Report of independent auditors. Consolidated balance sheets - December 31, 1995 and 1994. Consolidated statements of income - for each of the three years in the period ended December 31, 1995. Consolidated statements of shareholders' investment - for each of the three years in the period ended December 31, 1995. Consolidated statements of cash flows - for each of the three years in the period ended December 31, 1995. Notes to consolidated financial statements. Item 9. Disagreements of Accounting and Financial Disclosures None. Item 10. Directors and Executive Officers of CTC (a) Directors
Name (Age) Other Directorships, Business Expire at Date of Original Election Principal Occupation Experience and Miscellaneous Information Annual Mtg. in: Paul J. Breitnauer (56) Vice President and Treasurer of Mr. Breitnauer has been associated with 1996 1986 the Company; Senior Vice Presi- the insurance industry in various dent & Treasurer of CIC, CSIC capacities since 1963. and CFC, wholly-owned subsidi- aries of the Company. George A. Fait (69) Chairman of the Board and Mr. Fait is a director of Bank One and 1997 1960 President of the Company and its has been associated with the insur- wholly-owned subsidiaries; Di- ance industry in various capacities rector of Bank One. since 1950. Madison, Wisconsin Robert W. Goodwin (70) Retired, formerly with Dean Mr. Goodwin had been associated with Dean 1997 1982 Witter Reynolds, Inc. Witter Reynolds, Inc. in various capacities Palm Harbor, Florida 1970. Michael J. Larson (54) President, Bank One Madison. Mr. Larson has been associated with Bank 1998 1991 Madison, Wisconsin One in various capacities since 1965. Reinhart H. Postweiler(66)Retired, formerly with Flad Mr. Postweiler is a Director of Bank One. 1996 1977 Affiliated Corporation; Director He is a member of the Wisconsin Society of of Bank One. Professional Engineers and the National Society of Professional Engineers. Richard E. Tipple (70) Retired, formerly with the Uni- Mr. Tipple is a member of the Wisconsin 1998 1970 versity of Wisconsin Planning Society of Landscape Architects. Department. Madison, Wisconsin None of the above directors are related and there are no arrangements or understandings between directors since each is acting solely in their described capacity. There have been no events during the past five years which are material to the evaluation of the ability and integrity of any director of CTC.
Item 10. (continued) (b) Executive Officers: Chairman of the Board and President- George A. Fait (69 years of age) Elected in 1960. Chairman of the Board and President - CIC, CSIC and CFC, wholly-owned subsidiary companies. Vice President and Treasurer - Paul J. Breitnauer (56 years of age) Elected Treasurer in 1970 and Vice President in 1982. Senior Vice President and Treasurer - CIC, CSIC and CFC. Secretary - Virgiline M. Schulte (67 years of age) Elected in 1988. Secretary - CIC, CSIC and CFC. (c) Additional Executive Officers - CIC & CSIC - Wholly-Owned Subsidiary Insurance Companies: Vice President - P & C Claims Vice President - Personnel Robert F. Miller (57 years of age) Virgiline M. Schulte (67 years Elected in 1986. old) Elected in 1993. Vice President - Agency Vice President- Data Processing Joel G. Fait (37 years of age) Frank S. Zillner (34 years old) Elected in 1993. Elected in 1993. Vice President - Rating Corporate Counsel Gerald A. Olson (51 years of age) Peter E. Hans (41 years of age) Elected in 1993. Elected in 1991. Vice President - P & C Underwriting William B. Hutchison (41 years of age) Elected in 1993. (d) Disclosure of Delinquent Filers The section captioned "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Capitol Transamerica Corporation ("CTC") Proxy Statement dated March 29, 1996 is incorporated herein by reference. Item 11. Executive Compensation and Transactions The sections captioned "Compensation of Directors", "Report on Executive Compensation" and "Executive Compensation Committee Report" in the CTC Proxy Statement dated March 29, 1996 are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The sections captioned "Principal Shareholders", "Option/SAR Exercised in Last Fiscal Year" and "Compensation Plans" in the CTC Proxy Statement dated March 29, 1996 are incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The section captioned "Compensation Committee Interlocks and Insider Participation" and the three sections referenced in Item 11 above, all included in the CTC Proxy Statement dated March 29, 1996, are in- corporated herein by reference. George Fait and Virgiline Schulte are brother and sister; Joel Fait is George Fait's son and Frank Zillner is his son-in-law; none of the other officers are related and there are no arrangements or understandings between officers since each is acting solely in their described capacity. There have been no events during the past five years which are material to the evaluation or the ability and integrity of any executive officer of the Company or its subsidiaries. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1 and 2. Financial statements and financial statement schedules The following financial statements of Capitol Transamerica Corporation and Subsidiaries are included in Item 8. Report of independent auditors. Consolidated balance sheets - December 31, 1995 and 1994. Consolidated statements of income - for each of the three years in the period ended December 31, 1995. Consolidated statements of shareholders' investment - for each of the three years in the period ended December 31, 1995. Consolidated statements of cash flows - for each of the three years in the period ended December 31, 1995. Notes to consolidated financial statements. The following financial statement schedules of Capitol Transamerica Corporation and Subsidiaries are included in Item 14(d). Schedule I Summary of Investments Other than Investments in Related Parties Schedule II Condensed Financial Information of Registrant - Parent Company Schedule III Supplementary Insurance Information Schedule IV Reinsurance Schedule VI Supplemental Information Concerning Property-Casualty Insurance Operations All other schedules required by Article 7 of Regulation S-K are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) No Reports on Form 8-K were filed during the fourth quarter of the fiscal year ended December 31, 1995. (c) Exhibits None (d) Financial Statement Schedules Reference is made to the financial statement schedules above. SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CAPITOL TRANSAMERICA CORPORATION By By George A. Fait Paul J. Breitnauer Chairmant of the Board, Vice President, President and Director Treasurer and Director By By Virgiline M. Schulte Robert W. Goodwin Secretary Director By By Michael J. Larson Reinhart H. Postweiler Director Director By Richard E. Tipple Director March 25, 1996 RESPONSIBILITY FOR FINANCIAL REPORTING To The Shareholders and Board of Directors of Capitol Transamerica Corporation: The Company has prepared the consolidated financial statements, related notes, and other financial data appearing in this Annual Report. The statements were developed using generally accepted accounting principles and policies considered appropriate in the circumstances. They reflect, where applicable, management's best estimates and judgements. The financial data also includes disclusures and explanations which are relevant to an understanding of the financial affairs of the Company. To meet management's responsibility for financial reporting, internal control systems and procedures are designed to provide reasonable assurances as to the reliability of the financial records and compliance with corporate policy throughout the organization. Ernst & Young LLP, independent auditors, have audited the financial statements. To express an opinion thereon, they review and evaluate the Company's internal accounting controls and conduct such tests of the accounting records and other auditing procedures as they deem necessary. The Board of Directors oversees the Company's financial reporting through its Audit Committee, which regularly meets with management representatives and jointly with the independent auditors, to review accounting, auditing and financial reporting matters. A policy of busines ethics is communicated annually to the Company's directors, officers and respon- sible employees. The Company monitors compliance with the policy to help assure that operations are conducted in a responsible and professional manner with a committment to the highest standard of business conduct. Paul J. Breitnauer Vice President and Treasurer REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of Capitol Transamerica Corporation: We have audited the accompanying consolidated balance sheets of Capitol Trans- america Corporation (the "Company") as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders equity, and cash flows for the three years in the period ended December 31, 1995. Our audits also in- cluded the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing stan- dards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Capitol Transamerica Corporation at December 31, 1995 and 1994, and the consolidated re- sults of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. Milwaukee, Wisconsin Ernst & Young LLP February 23, 1996 CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED BALANCE SHEETS
1995 1994 Assets Investments (Notes (1)(b) and (2)): Available-for-sale investment securities, at fair value Fixed maturities (amortized cost $71,493,255 and $58,844,982 respectively) $ 78,669,841 $ 59,529,369 Equity securities: Common stock, (cost $50,412,460 and $32,295,835, respectively) 63,141,401 30,804,059 Nonredeemable preferred stock, (cost $3,868,836 and $3,052,524, respectively) 4,054,200 2,864,850 Investment real estate, at cost, net of depreciation 1,435,486 1,442,910 Short-term investments, at cost which approximate fair value (Note(2)(d) 1,915,795 10,143,960 Total Investments 149,216,723 104,785,146 Cash 602,775 1,253,320 Accrued investment income 1,718,254 1,366,123 Receivables from agents, insureds and others, less allowance for doubtful accounts of $320,000 and $262,260, respectively 11,874,125 9,344,224 Balances due from reinsurers 630,448 201,045 Funds held by ceding reinsurers 77,117 137,422 Reinsurance recoverable on unpaid losses 45,321 12,363 Reinsurance recoverable on paid losses 568,379 54,259 Deferred insurance acquisition costs (Note (1)(e)) 9,228,868 7,715,389 Prepaid reinsurance premiums 897,049 627,038 Due from securities brokers 215,165 - Income taxes receivable 110,091 481,711 Deferred income taxes - 1,211,241 Other assets 446,263 443,914 Total Assets $175,630,578 $127,633,195 The accompanying notes to the consolidated financial statements are an integral part of these financial statements. CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1994 1995 1994 Liabilities Policy Liabilities and Accruals (Notes (1)(d), (3) and (4)): Reserve for losses $ 25,679,644 $ 19,144,647 Reserve for loss adjustment expenses 12,904,440 8,330,676 Unearned premiums 31,555,728 26,794,249 Total Policy Liabilities and Accruals 70,139,812 54,269,572 Accounts payable 4,362,308 3,913,672 Dividends payable 745,009 - Due to securities brokers 370,123 300,000 Balances due to reinsurers 1,175,565 901,055 Accrued premium taxes 382,544 269,722 Deferred income taxes 5,801,337 - Total Other Liabilities 12,836,886 5,384,449 Total Liabilities 82,976,698 59,654,021 Commitments and contingent liabilities (Notes (4) and (8)) - - Shareholders' Investment (Notes (6) and (7)) Common stock, $1.00 par value, authorized 15,000,000 shares, issued 6,899,060 and 6,877,596, respectively 6,899,060 6,877,596 Common stock distributable, 689,545 shares at $1.00 par value 689,545 - Paid-in surplus 20,949,100 7,931,671 Net unrealized appreciation (depreciation) on securities carried at fair value net of deferred taxes of $6,830,903 & $338,322, respectively(Notes(1)(b) & (2) 13,259,988 (656,743) Retained earnings 51,177,894 54,157,275 Shareholders' investment before treasury stock 92,975,587 68,309,799 Treasury stock, 209,831 and 191,273 shares, respectively, at cost (321,707) (330,625) Total Shareholders' Investment 92,653,880 67,979,174 Total Liabilities and Shareholders' Investment $175,630,578 $127,633,195 The accompanying notes to the consolidated financial statements are an integral part of these financial statements. CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED STATEMENTS OF INCOME For The Years Ended December 31, 1995, 1994 and 1993 1995 1994 199 Revenues: Premiums earned (Note (1)(c)) $ 68,865,500 $ 52,461,456 $ 43,456,430 Net investment income (Note (2)(e)) 6,635,123 5,359,606 5,001,715 Realized investment gains (losses) (Notes (1)(b) and (2)) 3,587,323 (106,188) 4,145,701 Other revenues 144,866 118,353 38,609 Total Revenues 74,232,812 57,833,227 52,642,455 Losses and Expenses Incurred (Notes (1)(d), (3) and (4)): Losses incurred 24,620,433 18,985,162 15,622,055 Loss adjustment expenses incurred 9,479,030 8,550,892 5,027,684 Underwriting, acquisition and insurance expenses (Note(10)) 21,595,470 17,632,596 14,858,802 Increase in deferred insurance acquisition costs (1,513,479) (784,373) (458,347) Other expenses 1,415,673 1,035,347 1,563,502 Total Losses and Expenses Incurred 55,597,127 45,419,624 36,613,696 Income from operations before income taxes 18,635,685 12,413,603 16,028,759 Income tax expense (Note (5)) 4,705,279 3,166,363 4,344,504 Net Income $ 13,930,406 $ 9,247,240 $ 11,684,255 Income Per Share (Note (1)(g)) $ 1.89 $ 1.26 $ 1.60 Weighted average number of shares outstanding (Note (1)(g)) 7,366,440 7,341,748 7,291,362 The accompanying notes to the consolidated financial statements are an inte CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT For the Years Ended December 31, 1993, 1994 and 1995 Unrealized Common Appreciation Common Stock (Depreciation) Stock Distributable on Securities (Par Value) (Par Value Paid-In Carried at Retained Treasury $1.00) $1.00) Surplus Fair Value Earnings Stock Balance, January 1, 1993 $ 6,773,991 $ - $ 7,658,875 $ 1,801,147 $38,645,781 $(242,132) Net income - - - - 11,684,255 - Unrealized appreciation on available-for-sale securities, net of deferred - - - 1,668,379 - Stock options exercised 72,419 - 164,272 - - (96,937) Cash dividends - - - - (2,486,582) - Other, net - - - - 5,199 - Balance, December 31, 1993 6,846,410 - 7,823,147 3,469,526 47,848,653 (339,069) Net income - - - - 9,247,240 - Unrealized depreciation on available-for-sale securities, net of deferred taxes - - - (4,126,269) - - Stock options exercised 31,186 - 108,524 - - 8,444 Cash dividends - - - - (2,938,618) - Balance, December 31, 1994 6,877,596 - 7,931,671 (656,743) 54,157,275 (330,625) Net income - - - - 13,930,406 - Unrealized appreciation on available-for-sale securities, net of deferred taxes - - - 13,916,731 - - Stock options exercised 21,464 - 88,460 - - 8,918 Stock dividend - 689,545 12,928,969 - (13,618,514) - Cash dividends - - - - (3,291,273) - Balance, December 31, 1995 $ 6,899,060 $ 689,545 $20,949,100 $13,259,988 $51,177,894 $ (321,707) The accompanying notes to the consolidated financial statements are an integral part of these financial statements. CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS For the Years Ended December 31, 1995,1994 and 1993 1995 1994 1993 Cash flows provided by operating activities: Net Income $ 13,930,406 $ 9,247,240 $ 11,684,255 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 423,119 344,328 354,040 Realized investment (gains) losses (3,587,323) 106,188 (4,145,701) Change in: Deferred insurance acquisition costs (1,513,479) (784,373) (458,347) Unearned premiums 4,761,479 3,466,567 4,817,367 Allowance for doubtful accounts receivable from agents 65,785 60,000 55,500 Accrued investment income (352,131) (26,674) 18,597 Receivables from agents, insureds and others (2,595,686) (415,046) (1,604,203) Balances due to/from reinsurers (154,893) 55,481 (939,999) Reinsurance recoverable on paid land unpaid losses (547,078) 117,133 1,023,899 Funds held by ceding reinsurers 60,305 (2,829) (38,405) Income taxes payable/receivable 371,620 (2,000,010) 645,025 Deferred income taxes (156,647) (262,036) 1,687 Due to/from securities brokers (145,042) (2,651,078) (2,868,572) Prepaid reinsurance premiums (270,011) 601,845 (245,660) Other assets 294,732 504,974 12,509 Reserves for losses and loss adjustment expenses 11,108,761 8,155,874 531,299 Accounts payable 448,636 (239,443) 1,046,551 Accrued premium taxes 112,822 6,432 (32,542) Net cash provided by operating activities 22,255,375 21,586,729 9,857,300 Cash flows provided by (used for) investing activities: Proceeds from sales of available-for-sale investments 21,046,919 1,895,147 14,830,272 Purchases of available-for-sale investments (47,289,410) (26,596,166) (25,781,700) Maturities of available-for-sale investments 6,447,108 6,074,710 2,539,117 Maturities of held-to-maturity investments - - 2,088,750 Purchases of depreciable assets (683,115) (320,920) (408,862) Net cash used for investing activities (20,478,498) (18,947,229) (6,732,423) Cash flows provided by (used for) financing activities: Cash dividends paid (2,546,264) (2,938,618) (2,486,582) Stock options exercised 109,924 139,710 236,691 Net proceeds from sale (purchase) of treasury stock 8,918 8,444 (96,937) Net cash used for financing activities (2,427,422) (2,790,464) (2,346,828) Net (decrease) increase in cash (650,545) (150,964) 778,049 Cash, beginning of year 1,253,320 1,404,284 626,235 Cash, end of year $ 602,775 $ 1,253,320 $ 1,404,284 Cash paid during the year for: Income taxes $ 4,497,508 $ 5,427,361 $ 3,685,700 Interest - - 2,030 The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies Capitol Transamerica Corporation (the "Company") is an insurance holding company which writes, through its subsidiaries, commercial insurance coverages in 34 states. The property-casualty insurance coverages represent approximately 80% of the Company's premiums written while fidelity-surety coverages represent approximately 20% of the Company's premiums written. The Company's products are marketed through independent agents located through- out the United States. The consolidated financial statements are presented in accordance with generally accepted accounting principles. The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. (a) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Capitol Indemnity Corpora- tion ("CIC"), Capitol Specialty Insurance Corporation ("CSIC") and Capitol Facilities Corporation ("CFC"). All significant intercompany accounts and transactions have been eliminated in consolidation. (b) Investments The Company classifies all of its fixed maturities and equity securi- ties as available-for-sale. Accordingly, investments in fixed maturi- ties and equity securities are reported at fair value, with unrealized gains and losses reported in a separate component of shareholders' investment, net of tax effect. The cost of fixed maturities is adjust- ed for amortization of premiums and discounts to maturity. Fixed maturities and equity securities deemed to have declines in value that are other than temporary are written down through the statement of in- come to carrying values equal to their estimated fair values. Investment real estate is carried at cost net of accumulated deprecia- tion of $126,983 and $82,130 as of December 31, 1995 and December 31, 1994, respectively. Cost of investments sold is determined under the specific identifica- tion method. (c) Premiums Premiums are recognized as revenue on a pro rata basis over the term of the contracts. (d) Losses and Loss Adjustment Expenses Losses and loss adjustment expenses, less related reinsurance and sub- rogation recoverables, are provided for as claims are incurred. The reserves for losses and loss adjustment expenses include: (1) the accumulation of individual estimates for claims reported on direct business prior to the close of the accounting period; (2) estimates received from other insurers with respect to reinsurance assumed; (3) estimates for incurred but not reported claims based on past experi- ence modified for current trends; and (4) estimates of expenses for investigating and settling claims based on past experience. The lia- bilities recorded are based on estimates resulting from the continu- ing review process. Differences between estimates and ultimate pay- ments are reflected in expense for the period in which the estimates are changed. Management believes that the reserves for losses and loss adjustment expenses are adequate to meet obligations. (e) Deferred Insurance Acquisition Costs Insurance acquisition costs that vary with, and are directly related to, the production of premiums(principally commissions, premium taxes compensation and certain underwriting expenses) are deferred. Deferred insurance acquisition costs are amortized to expense as the related premiums are earned. (f) Income Taxes Deferred income taxes reflect the net tax effects of temporary dif- ferences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax reporting. (g) Income Per Share Net income per share is computed by dividing net income by the weight- ed average number of shares of stock outstanding during the year. Prior years' weighted average number of shares outstanding and income per share have been restated to reflect the December 28, 1995 ten percent stock dividend. (2)Investments (a) The amortized cost and estimated fair value of fixed maturities and equity securities are as follows:
Gross Gross Amortized Unrealized Unrealized Fair Type of investment Cost Gains Losses Value December 31, 1995 Fixed maturities: U.S. Government bonds $ 591,928 $ 9,643 $ - $ 601,571 State, municipal and political subdivision bonds 70,020,468 7,172,261 (70,652) 77,122,077 Corporate bonds and notes 880,859 91,144 (25,810) 946,193 Total fixed maturities $71,493,255 $ 7,273,048 (96,462) $78,669,841 Equity securities: Common stock $50,412,460 $15,320,343 $(2,591,402) $63,141,401 Non-redeemable preferred stock 3,868,836 246,779 (61,415) 4,054,200 Total equity securities $54,281,296 $15,567,122 $(2,652,817) $67,195,601 December 31, 1994 Fixed maturities: U.S. Government bonds $ 607,165 $ 1,838 $ (25,292) $ 583,711 State, municipal and political subdivision bonds 55,980,952 1,884,956 (1,118,062) 56,747,846 Corporate bonds and notes 2,256,865 38,930 (97,985) (2,197,810) Total fixed maturities $58,844,982 $ 1,925,724 $(1,241,339) $59,529,367 Equity securities: Common stock $32,295,835 $ 1,994,832 $(3,486,608) $30,804,059 Non-redeemable preferred stock 3,052,524 145,725 (333,399) 2,864,850 Total equity securities $35,348,359 $ 2,140,557 $(3,820,007) $33,668,909 (b) The amortized cost and estimated fair value of fixed maturities at December 31, 1995, by contractual maturity, is 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. Amortized Fair Cost Value Due in one year or less $ 1,110,320 $ 1,124,600 Due after one year through five years 2,729,313 2,836,314 Due after five years through 6,349,332 6,739,952 Due after ten years 61,304,290 67,968,975 Total $71,493,255 $78,669,841 (c) Realized gains (losses) and change in unrealized gains (losses) for the three years ended December 31, 1995, 1994 and 1993, are as follows: 1995 1994 1993 Realized gains (losses): Fixed maturities Gross gains $ 33,742 $ 60,214 $ 450,016 Gross losses (5,288) (8,395) (128,938) Equity securities Gross gains 3,558,869 147,621 3,673,106 Gross losses - (305,628) (9,025) Investment real estate (1) - - 160,539 Net realized gains (losses) $3,587,323 (106,188) $4,145,701 (1) During 1993 a portion of investment real estate was sold to an officer of the Company at an appraised value of $238,050 resulting in a realized gain of $160,539. Change in unrealized gains (losses): Fixed maturities $ 6,492,201 $(4,397,979) $ 5,082,364 Equity securities 14,593,755 (1,853,944) (2,543,514) Net change in unrealized gains (losses) 21,085,956 (6,251,923) 2,538,850 Effect of applicable deferred taxes (7,169,225) 2,125,654 (870,471) Net increase (decrease) in unrealized gains $13,916,731 $(4,126,269) 1,668,379 Following is a summary of total unrealized gains (losses) as of December 31, 1995, 1994 and 1993: 1995 1994 1993 Unrealized gains (losses): Fixed maturities Gross unrealized gains $ 7,273,048 $ 1,925,724 $ 5,082,364 Gross unrealized losses (96,462) 1,241,339 - Equity securities Gross unrealized gains 15,567,122 2,140,557 1,560,317 Gross unrealized losses (2,652,817) (3,820,007) (1,385,823) Gross unrealized gains (losses) 20,090,891 (995,065) 5,256,858 Effect of applicable deferred taxes (6,830,903) 338,322 (1,787,332) Net unrealized gains (losses) $13,259,988 $ (656,743) $ 3,469,526
(d) The amortized cost of securities on deposit with insurance regulators in accordance with statutory requirements was $3,382,912 on December 31, 1995 and $3,075,228 on December 31, 1994. In connection with the runoff of the reinsurance assumed operations, CIC has established a security trust fund agreement with a bank, consisting of cash and securities in the amount of $1,043,691 at December 31, 1995 and $684,600 at December 31, 1994. Additionally, CIC has deposited $42,000 at December 31, 1995 and $100,000 at December 31, 1994 in an account for the benefit of reinsurers and has included these funds in short-term investments in the accompanying balance sheets. (e) Following is a summary of investment income from each category of investments:
1995 1994 1993 Fixed maturities $ 4,539,757 $ 4,062,030 $ 4,009,737 Equity securities 1,851,937 1,085,584 831,288 Investment real estate 751,162 786,152 778,562 Short-term 224,813 112,455 90,819 Total investment income 7,367,669 6,046,221 5,710,406 Investment expenses - real estate 549,674 542,618 567,024 Other investment expenses 138,016 104,117 102,667 Depreciation on real estate 44,856 39,880 39,000 Net investment income $ 6,635,123 $ 5,359,606 $ 5,001,715
1995 1994 1993 Balance as of January 1, $27,475,323 $19,319,449 $18,788,150 Less reinsurance recoverables (12,363) (38,049) (674,509) Net reserves 27,462,960 19,281,400 18,113,641 Incurred losses and loss adjustment expenses related to: Current year 27,224,006 21,287,960 16,948,813 Prior years: Direct losses 2,610,999 1,628,974 571,451 Direct loss adjustment expenses 2,810,145 3,704,484 2,011,913 Discontinued assumed reinsurance 1,454,313 914,636 1,117,562 Total prior years 6,875,457 6,248,094 3,700,926 Total incurred 34,099,463 27,536,054 20,649,739 Paid losses and loss adjustment expenses related to: Current year 10,632,490 9,527,420 9,858,088 Prior years 12,285,492 9,946,822 9,616,795 Total paid 22,917,982 19,474,242 19,474,883 Other adjustments, net (105,678) 119,748 (7,097) Net balance at December 31, 38,538,763 27,462,960 19,281,400 Plus reinsurance recoverables 45,321 12,363 38,049 Balance at December 31, $38,584,084 $27,475,323 $19,319,449 As explained in Note (1)(d), differences between estimates and ultimate payments are reflected in expense for the period in which the estimates are changed. The Company continually reviews its reserves for losses and loss adjustment expenses and the related reinsurance recoverables. As a result of the variability in these estimates, reserves have differed from actual experience during 1995, 1994 and 1993. The estimates are based on past claim experience and consider current claim trends as well as social and economic conditions. Policies and procedures have been implemented which management believes will stabilize the reserve development. The Company continues to monitor factors that could affect future claim development. While the Company has recorded its current best estimate of its reserves for losses and loss adjustment expenses, it is reasonably possible these estimates, net of estimated reinsurance recoverables, may increase in the future. See Note 4(b) for discussion of assumed reinsurance.
(4) Reinsurance (a)Ceded The Company generally reinsures losses in excess of $500,000 with various other companies through reinsurance ceded contracts. During 1993, the Company reinsured losses in excess of $300,000. These arrangements pro- vide for greater diversification of business, allow the Company to con- trol exposure to potential losses arising from large risks, and provide additional capacity for growth. Reinsurance ceded contracts do not re- lieve the Company from its obligations to policyholders. The Company re- mains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the rein- surance agreements. To minimize its exposure to significant losses from reinsurer insolvencies, the Company evaluates the financial condition of its reinsurers. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. Net written and earned premiums and losses and loss adjustment expenses include reinsurance activity as follows:
Written Premiums 1995 1994 1993 Direct $70,878,492 $58,541,983 $50,343,397 Assumed - 22,359 3,131 Ceded (2,521,524) (1,912,401) (2,440,464) Net premiums written $68,356,968 $56,651,941 $47,906,064 Earned Premiums 1995 1994 1993 Direct $66,117,013 $55,075,416 $45,526,074 Assumed - 22,359 3,131 Ceded (2,251,513) (2,636,319) (2,072,775) Net premiums earned $63,865,500 $52,461,456 $43,456,430 Losses and Loss Adjustment Expenses 1995 1994 1993 Direct $33,320,640 $27,179,449 $20,249,420 Assumed - losses 1,355,570 828,195 736,987 Assumed - legal and audit 98,743 79,967 380,575 Ceded (675,490) (551,557) (717,243) Net losses and loss adjustment expenses $34,099,463 $27,536,054 $20,649,739
(b)Assumed CIC was involved in providing reinsurance coverage by assuming a portion of risks underwritten by other insurance companies and pools. Although CIC withdrew from the reinsurance business in 1976, its liability remains for losses on policies written during the period in which it participated as a reinsurer. The Company is involved with treaties which cover certain risks which have had significant development industry-wide over the past several years. The reinsurance assumed loss reserves are based on current information available from the ceding companies and are continually re- viewed for accuracy and reasonableness. The Company believes the assumed reserves of $5,562,269 and $5,176,849 at December 31, 1995 and 1994, re- spectively, which are included in the reserve for losses, are reasonable. However, due to the nature of the assumed business, ultimate losses may vary from current estimates. The Company has issued outstanding letters of credit relating to reinsurance assumed of $503,000 at December 31, 1995 and 1994. (5) Income Taxes (a)The Company and its subsidiaries file a consolidated federal income tax return and separate state franchise and premium tax returns as applicable. (b)The components of income tax expense for the years 1995, 1994 and 1993 are as follows:
1995 1994 1993 Current expense: Federal $ 4,393,537 $ 3,040,153 $ 3,952,017 State 468,388 388,246 519,312 Total current expense 4,861,925 3,428,399 4,471,329 Deferred expense(benefit): Deferred insurance acquisition costs 514,583 266,687 155,838 Unearned premiums (305,420) (305,565) (302,576) Discount on loss and loss adjustment (285,995) (162,179) 120,928 Unpaid commissions 23,551 (41,228) (23,027) Other (103,365) (19,751) (77,988) Total deferred benefit (156,646) (262,036) (126,825) Income tax expense $ 4,705,279 $ 3,166,363 $ 4,344,504 (c)A reconciliation of the effective income tax rate, as reflected in the consolidated statements of income, to the statutory federal income tax rate, is as follows: 1995 1994 1993 Statutory tax rate 34.0% 34.0% 34.0% Municipal bond income, net of proration -6.9% -9.1% -6.9% Dividend received exemption, net of proration -2.1% -1.8% -1.1% State income tax expense, net of federal tax benefit 1.6% 2.1% 2.1% Other, net -1.4% 0.3% -1.0% Effective income tax rate 25.2% 25.5% 27.1% (d)Significant components of the deferred tax liabilities and assets are as follows: December 31, December 31, 1995 1994 Deferred tax liabilities: Deferred insurance acquisition costs $ 3,137,815 $ 2,623,232 Net unrealized gains on investment securities 6,830,903 - Other 74,055 108,480 Total deferred tax liabilities 10,042,773 2,731,712 Deferred tax assets: Net unrealized losses on investment securities - 338,322 Unearned premium reserve discounting 2,084,790 1,779,370 Loss and loss adjustment expense reserve discounting 1,303,833 1,017,838 Unpaid commissions 544,411 567,963 Salvage and subrogation reserve discounting 182,602 133,292 Other 125,800 106,168 Total deferred tax assets 4,241,436 3,942,953 Net deferred tax (liability) asset $(5,801,337) $ 1,211,241
(6) Common Stock Options Options to purchase 159,262 and 105,795 shares of the Company's common stock were outstanding as of December 31, 1995 and 1994, respectively. Options are exercisable when granted and all options expire either five or ten years after the date of grant. Exercise prices ranged from $1.57 to $17.50 per share as of December 31, 1995. There were 71,600 options granted and 21,464 options exercised in 1995 and 12,500 options granted and 31,186 options exercised in 1994. (7) Statutory Reporting (a)The financial statements of the insurance subsidiaries have been prepared in accordance with generally accepted accounting principles, which differ in certain respects from accounting practices prescribed or permitted by insurance regulatory authorities (statutory basis). The statutory capital and surplus and net income of the insurance subsidiaries as reported to state regulatory authorities, were as follows:
Policyholders' Surplus As Of December 31, 1995 1994 1993 Capitol Indemnity Corporation $62,618,547 $40,651,963 $39,418,841 Capitol Specialty Insurance Corporation 5,907,094 5,348,768 4,330,407 Total $68,525,641 $46,000,731 $43,749,248 Net Income for the Year Ended December 31, 1995 1994 1993 Capitol Indemnity Corporation $11,762,554 $ 7,415,763 $10,212,541 Capitol Specialty Insurance Corporation 238,538 432,832 434,168 Total $12,001,092 $ 7,848,595 $10,646,709
(b)CIC is required by the Insurance Commissioner of the State of Wisconsin to maintain a minimum compulsory surplus (surplus as regards policyhold- ers) of 25% of net premiums written during the preceeding twelve months. As of December 31, 1995, the amount of compulsory surplus required to be maintained by CIC was approximately $16,923,000. (c)State insurance regulations limit the transfer of assets, including divi- dends, from insurance subsidiaries to the Company without regulatory approval. (8) Contingent Liabilities CIC is a defendant in certain lawsuits involving complaints which demand damages and recoveries for claims and losses allegedly related to risks in- sured by CIC. In the opinion of management, such lawsuits are routine in that they result from the ordinary course of business in the insurance in- dustry. The reserves for losses and loss adjustment expenses include manage- ment's estimates of the probable ultimate cost of settling all losses in- volving lawsuits. See Notes (1)(d), (3) and (4). (9) Employee Benefit Plans The Company has a defined contribution benefit plan (the Plan) in which all qualified employees are eligible to participate. The Plan incorporates a contributory feature under Section 401(k) of the Internal Revenue Code allowing employees to defer portions of their income through contributions to the Plan. The Company's annual contribution to the Plan is 150% of the first $1,500 of each participant's contribution during the plan year. The Company made contributions of $147,872, $130,708 and $104,142 in 1995, 1994 and 1993, respectively. The Company also has an Employee Stock Ownership Plan in which all quali- fied employees are eligible to participate. The plan provides for discre- tionary employer contributions of shares of Company stock or cash to pur- chase shares of Company stock. The Company made contributions of $89,000, $53,000 and $49,000 in 1995, 1994 and 1993, respectively. (10)Underwriting, Acquisition and Insurance Expenses A summary of underwriting, acquisition and insurance expenses incurred during the years ended December 31, 1995, 1994 and 1993 is as follows:
1995 1994 1993 Net commissions $14,791,800 $11,834,298 $ 9,687,827 Salaries and other compensation 2,800,112 2,363,548 2,137,277 Other expenses 4,003,558 3,434,750 3,033,698 Total costs 21,595,470 17,632,596 14,858,802 Increase in deferred insurance acquisition costs (1,513,479) (784,373) (458,347) Total underwriting, acquisition and insurance expenses $20,081,991 $16,848,223 $14,400,455 Substantially all insurance contracts written by CIC are for a term of one year or less and deferred insurance acquisition costs are amortized over the same term. The amount of deferred insurance costs amortized was $18,611,260, $15,262,076 and $13,547,478 in 1995, 1994 and 1993, respectively.
(11)Line of Credit The Company has a line of credit of $10,000,000. There were no borrowings under the line of credit in 1995. (12)Quarterly Results of Operations (Unaudited)
For the Year Ended December 31, 1995 First Second Third Fourth Total Revenues $15,476,378 $18,763,854 $18,131,047 $21,861,533 $74,232,812 Losses incurred and expenses 11,387,365 13,368,380 14,324,134 16,517,248 55,597,127 Net income 3,033,089 3,872,854 2,856,847 4,167,616 13,930,406 Net income per share $ 0.41 $ 0.53 $ 0.39 $ 0.56 $ 1.89 Dividends per share $ 0.08 $ 0.09 $ 0.09 $ 0.19 $ 0.45 For the Year Ended December 31, 1994 First Second Third Fourth Total Revenues $13,600,737 $14,256,857 $14,790,859 $15,184,774 $57,833,227 Losses incurred and expenses 10,028,004 10,808,252 11,131,651 13,451,717 45,419,624 Net income 2,628,947 2,562,761 2,602,508 1,453,024 9,247,240 Net income per share $ 0.36 $ 0.35 $ 0.35 $ 0.20 $ 1.26 Dividends per share $ 0.19 $ 0.07 $ 0.07 $ 0.07 $ 0.40 The 1994 information has been restated to reflect the December 28, 1995 ten percent stock dividend. SCHEDULE I CAPITOL TRANSAMERICA CORPORATION SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES As of December 31, 1995 (Consolidated)
Amount at Which Shown Fair in Balanc Type of Investment Cost Value Sheet Fixed maturity securities, available-for-sale: Bonds: United Stated Government and government agencies and authorities $ 591,928 $ 601,571 $ 601,571 State, municipalities, and political subdivisions 70,020,468 77,122,077 77,122,077 All other corporate bonds 880,859 946,193 946,193 Total 71,493,255 78,669,841 78,669,841 Equity securities, available-for-sale: Common stocks: Public utilities 2,065,855 1,874,908 1,874,908 Banks, trusts, and insurance companies 31,706,129 45,521,015 45,521,015 Industrial, miscellaneous, and all other 16,640,476 15,745,478 15,745,478 Nonredeemable preferred stocks 3,868,836 4,054,200 4,054,200 Total 54,281,296 67,195,601 67,195,601 Real estate, net of depreciation 1,435,486 1,435,486 Short-term investments 1,915,795 1,915,795 Total Investments $129,125,832 $149,216,723 SCHEDULE II CONDENSED FINANCIAL INFORMATION OF REGISTRANT CAPITOL TRANSAMERICA CORPORATION (Parent Company) CONDENSED BALANCE SHEETS December 31, Assets 1995 1994 Investments $ 7,070,097 $ 4,737,021 Cash 22,369 59 Accrued investment income 55,125 29,226 Investment in subsidiaries 86,053,978 62,530,244 Income taxes receivable 48,762 - Deferred income taxes - 80,149 Other assets 1,280,161 975,370 Total assets $94,530,492 $68,352,069 Liabilities and shareholders' equity Liabilities: Accounts payable $ 646,286 $ 321,761 Dividends payable 751,376 - Income taxes payable - 51,134 Deferred income taxes 478,950 - Total liabilities 1,876,612 372,895 Shareholders' equity: Common stock 7,588,605 6,877,596 Additional paid-in-capital 20,949,100 7,931,671 Unrealized appreciation (depreciation) on available-for- sale securities, net of deferred taxes 929,729 (155,583) Retained earnings (including undistributed earnings of subsidiaries of $81,151,740 and $57,648,006, respectively) 63,508,153 53,656,115 92,975,587 68,309,799 Less treasury stock, at cost (321,707) (330,625) Total shareholders' equity 92,653,880 67,979,174 Total liabilities and shareholders' equity $94,530,492 $68,352,069 December 31, STATEMENTS OF INCOME 1995 1994 1993 Dividends received from subsidiaries $ 3,000,000 $ 3,000,000 $ 3,000,000 Management fees received from subsidiaries 1,466,553 1,286,871 1,284,828 Investment income 253,103 272,250 240,444 Realized investment gains 18,255 7 463,721 Other income 24,138 15,300 - Total Income 4,762,049 4,574,428 4,988,993 Administrative expenses 1,449,273 1,068,378 1,597,102 Income tax expense 26,324 105,228 92,900 Total Expenses 1,475,597 1,173,606 1,690,002 Net income before equity in undistributed net income of subsidiaries 3,286,452 3,400,822 3,298,991 Equity in undistributed net income of subsidiaries, net of dividends paid 10,643,954 5,846,418 8,385,264 Net Income $13,930,406 $ 9,247,240 $11,684,255 The accompanying condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto of Capitol Transamerica Corporation. SCHEDULE II (continued) CAPITOL TRANSAMERICA CORPORATION (Parent Company) December 31, STATEMENTS OF CASH FLOWS 1995 1994 1993 Cash flows provided by operating activities: Net income $13,930,406 $ 9,247,240 $11,684,255 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 378,263 344,328 354,040 Realized investment gains (18,255) (7) (463,721) Change in: Equity in net income of subsidiaries (10,643,954) (5,846,418) (8,385,264) Other assets (74,752) 45,920 645,825 Other liabilities 273,391 (536,691) 440,328 Net cash provided by operating activitities 3,845,099 3,254,372 4,275,463 Cash flows provided by (used for) investing activities: Proceeds from investments sold/matured 1,070,493 524,254 1,216,956 Purchases of investments (1,740,750) (225,103) (2,514,965) Purchase of depreciable assets (683,115) (320,920) (408,862) Net cash used for investing activitities (1,353,372) (21,769) (1,706,871) Cash flows provided by (used for) financing activities: Cash dividends paid (2,568,259) (2,964,085) (2,508,287) Capital contribution to subsidiaries (20,000) (625,000) - Stock options exercised 109,924 139,710 236,691 Net proceeds from sale (purchase) of treasury stock 8,918 8,444 (96,937) Net cash used for financing activitities (2,469,417) (3,440,931) (2,368,533) Net increase (decrease) in cash 22,310 (208,328) 200,059 Cash, beginning of year 59 208,387 8,328 Cash, end of year $ 22,369 $ 59 $ 208,387 Cash paid during the year for: Income taxes $ 88,077 $ 39,181 $ - Interest - - 542 The accompanying condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto of Capitol Transamerica Corporation. SCHEDULE III CAPITOL TRANSAMERICA CORPORATION SUPPLEMENTARY INSURANCE INFORMATION December 31, Deferred Future Policy Policy Benefits, Losses, Other Acquisition Claims, and Unearned Policyholde Segment Costs Loss Expense Premiums Funds 1995: Property-casualty insurance $ 9,228,868 $38,584,084 $31,555,728 $ - 1994: Property-casualty insurance $ 7,715,389 $27,475,323 $26,794,249 $ - 1993: Property-casualty insurance $ 6,931,016 $19,319,449 $23,327,682 $ - Year ended December 31 Benefits, Amortization of Net Claims, Losses, Deferred Policy Other Premium Investment and Settlement Acquisition Operating Premiums Sement Revenue Income Expenses Costs Expenses Written 1995: Property-casualty insurance $63,865,500 $ 6,635,123 $34,099,463 $18,611,260 $ 1,415,673 $70,878,492 1994: Property-casualty insurance $52,461,456 $ 5,359,606 $27,536,054 $15,262,076 $ 1,035,347 $58,564,342 1993: Property-casualty insurance $43,456,430 $ 5,001,715 $20,649,739 $13,547,478 $ 1,563,502 $50,346,528 SCHEDULE IV CAPITOL TRANSAMERICA CORPORATION REINSURANCE For The Years Ended December 31, l995, l994 and l993 Assumed Percentage Gross Ceded to From of Amount Premiums Other Other Net Assumed Written Companies Companies Amount To Net December 31, 1995 Premiums Written: Accident and Health insurance $ 222,137 $ - $ - $ 222,137 - Property & casualty and fidelity & surety insurance 70,656,355 $ 2,521,524 $ - $68,134,831 - Total premiums written $70,878,492 $ 2,521,524 $ - $68,356,968 - December 31, 1994 Premiums Written: Accident and Health insurance $ 223,193 $ - $ - $ 223,193 - Property & casualty and fidelity & surety insurance 58,318,790 1,912,401 22,359 56,428,748 0.040% Total premiums written $58,541,983 $ 1,912,401 $ 22,359 $56,651,941 0.040% December 31, 1993 Premiums Written: Accident and Health insurance $ 152,602 $ - $ - $ 152,602 - Property & casualty and fidelity & surety insurance 50,190,795 2,440,464 3,131 47,753,462 0.007% Total premiums written $50,343,397 $ 2,440,464 $ 3,131 $47,902,933 - SCHEDULE VI CAPITOL TRANSAMERICA CORPORATION SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS December 31, l995 As of December 31, BALANCE SHEET DATA: 1995 1994 Deferred insurance acquisition costs $ 9,228,868 $ 7,715,389 Outstanding loss and loss adjustment expense reserves 35,584,084 27,475,323 Discount deducted from reserves - - Unearned premiums $31,555,728 $26,794,249 INCOME STATEMENT DATA: Year Ended 1995 1994 1993 Earned premiums $63,865,500 $52,461,456 $43,456,430 Net investment income 6,635,123 5,359,606 5,001,715 Incurred losses and loss adjustment expenses related to: Current year 27,244,006 21,287,960 16,948,813 Prior years 6,875,457 6,248,094 3,700,926 Amortization of deferred policy acquisition costs 18,611,260 15,262,076 13,547,478 Paid claims and claim adjustment expenses 22,917,982 19,474,242 19,474,883 Gross premiums written $70,878,492 $58,564,342 $50,346,528 [ARTICLE] 7
[PERIOD-TYPE] YEAR [FISCAL-YEAR-END] DEC-31-1995 [PERIOD-END] DEC-31-1995 [DEBT-HELD-FOR-SALE] 78669841 [DEBT-CARRYING-VALUE] [BLANK] [DEBT-MARKET-VALUE] [BLANK] [EQUITIES] 63141401 [MORTGAGE] [BLANK] [REAL-ESTATE] 1435486 [TOTAL-INVEST] 149216723 [CASH] 602775 [RECOVER-REINSURE] 568379 [DEFERRED-ACQUISITION] 9228868 [TOTAL-ASSETS] 175630578 [POLICY-LOSSES] 25679644 [UNEARNED-PREMIUMS] 31555728 [POLICY-OTHER] 12904440 [POLICY-HOLDER-FUNDS] [BLANK] [NOTES-PAYABLE] [BLANK] [PREFERRED-MANDATORY] [BLANK] [PREFERRED] [BLANK] [COMMON] 7588605 [OTHER-SE] 85386982 [TOTAL-LIABILITY-AND-EQUITY] 175630578 [PREMIUMS] 63865500 [INVESTMENT-INCOME] 6635123 [INVESTMENT-GAINS] 3587323 [OTHER-INCOME] 144866 [BENEFITS] 34099463 [UNDERWRITING-AMORTIZATION] 23108949 [UNDERWRITING-OTHER] 1415673 [INCOME-PRETAX] 18635685 [INCOME-TAX] 4705279 [INCOME-CONTINUING] 13930406 [DISCONTINUED] [BLANK] [EXTRAORDINARY] [BLANK] [CHANGES] [BLANK] [NET-INCOME] 13930406 [EPS-PRIMARY] 1.89 [EPS-DILUTED] 1.89 [RESERVE-OPEN] 27462960 [PROVISION-CURRENT] 27224006 [PROVISION-PRIOR] 6875457 [PAYMENTS-CURRENT] 10632490 [PAYMENTS-PRIOR] 12391170 [RESERVE-CLOSE] 38538763 [CUMULATIVE-DEFICIENCY] [BLANK]
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