SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
FORM 10-Q/A
Amendment #1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF l934
For the period ended:September 30, 2000
Commission file number:0-2047
CAPITOL TRANSAMERICA CORPORATION (CTC)
(Exact name of registrant as specified in its charter)
A Wisconsin Corporation
(State or other jurisdiction of incorporation or organization)
39-1052658
(I.R.S. Employer Identification Number)
4610 University Avenue | |
Madison, Wisconsin | 53705-0900 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code:(608) 231-4450 Securities registered pursuant to Section 12 (g) of the Act: COMMON STOCK, $1.00 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 l934 during 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 requirements for the past 90 days. YESX NO Based on the closing average of the high (11 7/8) and low price (11 1/2), the aggregate market value of voting stock held by non-affiliates of the registrant as of September 30, 2000 was approximately $129,172,576. Indicate the number of shares of each of the issuer's class of common stock, as of the latest practicable date: At September 30, 2000 |
Issued: | 11,558,166 |
Outstanding: | 11,052,199 |
Total Pages: 18
|
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Part I
Financial Information | Page |
Consolidated Financial Statements | 3 - 7 |
Notes to Consolidated Financial Statements | 8 - 10 |
Management's Discussion and Analysis of Financial Condition and Results of Operations | 11 - 13 |
Condensed Statutory Financial Statements of Insurance Subsidiaries | 14 |
Part II
Other Information | |
Other Disclosures | 16 |
Officers and Directors | 17 |
Signatures | 18 |
2 |
CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED BALANCE SHEETS | |||||||||||||
| September 30, 2000 | December 31, 1999 | September 30, 1999 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||||||
Investments: | |||||||||||||
Available-for-sale investment securities, at fair value | |||||||||||||
U.S. Government bonds (amortized cost $35,283, $39,428 and $40,796, respectively) | $ | 36,817 | $ | 41,624 | $ | 43,558 | |||||||
State, municipal and political subdivision bonds (amortized cost $79,613,133, $78,855,846 and $77,683,184, respectively) | $ | 83,463,540 | $ | 82,075,148 | $ | 81,875,444 | |||||||
Corporate bonds and notes (amortized cost $1,102,199, $1,123,983 and $876,194, respectively) | 1,075,358 | 1,093,715 | 849,020 | ||||||||||
Equity securities: | |||||||||||||
Common stock (cost $123,861,536, $125,913,872 and $124,591,142, respectively) | 119,542,064 | 116,656,582 | 119,873,972 | ||||||||||
Nonredeemable preferred stock (cost $6,008,950, $5,725,500 and $5,975,500, respectively) | 5,247,359 | 5,695,567 | 6,153,673 | ||||||||||
Investment real estate, at cost, net of depreciation | 10,943,776 | 10,540,426 | 10,326,864 | ||||||||||
Short-term investments, at cost which approximates fair value | 3,139,868 | 1,982,122 | 1,553,764 | ||||||||||
Total investments | 223,448,782 | 218,085,184 | 220,676,295 | ||||||||||
Cash | 1,469,541 | 1,080,435 | 858,085 | ||||||||||
Accrued investment income | 1,934,712 | 1,927,901 | 1,917,218 | ||||||||||
Receivable from brokers for sales of | |||||||||||||
doubtful accounts of $530,000 for each period) | 19,719,340 | 14,892,647 | 16,843,834 | ||||||||||
Balances due from reinsurers | 3,472,137 | 71,755 | 155,328 | ||||||||||
Funds held by ceding reinsurers | 40,000 | 40,000 | 35,756 | ||||||||||
Federal income taxes recoverable | 27,885 | 686,240 | 1,071,876 | ||||||||||
State income taxes recoverable | 14,427 | - | - | ||||||||||
Deferred income taxes | 2,425,751 | 4,153,393 | 1,721,476 | ||||||||||
Deferred insurance acquisition costs | 14,306,963 | 12,644,189 | 13,785,484 | ||||||||||
Prepaid reinsurance premiums | 1,679,606 | 1,287,627 | 1,151,179 | ||||||||||
Due from securities brokers | 5,638,921 | 639,136 | 3,435,821 | ||||||||||
Other assets | 2,959,744 | 2,114,074 | 2,373,758 | ||||||||||
TOTAL ASSETS | $ | 277,137,809 | $ | 257,622,581 | $ | 264,026,110 | |||||||
3 |
CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED BALANCE SHEETS | ||||||||||||
| September 30, 2000 | December 31, 1999 | September 30, 1999 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
LIABILITIES | ||||||||||||
Policy liabilities and accruals: | ||||||||||||
Reserve for losses | $ | 53,345,849 | $ | 53,575,780 | $ | 52,981,090 | ||||||
Reserve for loss adjustment expenses | 23,447,613 | 23,680,412 | 24,636,275 | |||||||||
Unearned premiums | 46,348,561 | 39,454,257 | 40,912,754 | |||||||||
Total Policy Liabilities and Accruals | 123,142,023 | 116,710,449 | 118,530,119 | |||||||||
Accounts payable | 3,715,309 | 3,950,898 | 4,063,395 | |||||||||
Claim drafts outstanding | 3,560,375 | 1,854,701 | 3,550,135 | |||||||||
Due to securities brokers | 908,712 | - | 903,677 | |||||||||
Balances due to reinsurers | 1,418,708 | 1,541,460 | 1,318,840 | |||||||||
Accrued premium taxes | 573,524 | 338,863 | 271,889 | |||||||||
Total Other Liabilities | 10,176,628 | 7,685,922 | 10,107,936 | |||||||||
Total Liabilities | 133,318,651 | 124,396,371 | 128,638,055 | |||||||||
SHAREHOLDERS' INVESTMENT | ||||||||||||
Common stock ($1.00 par value, authorized 15,000,000 shares, | ||||||||||||
issued 11,558,166, 11,538,970 and 11,536,015 shares respectively) | 11,558,166 | 11,538,970 | 11,536,015 | |||||||||
Paid-in surplus | 22,727,877 | 22,594,538 | 22,570,682 | |||||||||
Accumulated other comprehensive loss (net of deferred tax | ||||||||||||
benefit of ($439,587), ($2,133,595) and ($129,901), respectively) | (816,376 | ) | (3,962,398 | ) | (241,248 | ) | ||||||
Retained earnings | 113,634,940 | 103,577,193 | 102,018,165 | |||||||||
Shareholders' investment before treasury stock | 147,104,607 | 133,748,303 | 135,883,614 | |||||||||
Treasury stock (505,967, 271,071 and 268,146 shares, respectively, at cost) | (3,285,449 | ) | (522,093 | ) | (495,559 | ) | ||||||
Total Shareholders' Investment | 143,819,158 | 133,226,210 | 135,388,055 | |||||||||
Total Liabilities and Shareholders' Investment | $ | 277,137,809 | $ | 257,622,581 | $ | 264,026,110 | ||||||
Book Value Per Share | $ | 13.01 | $ | 11.82 | $ | 12.02 | ||||||
Shares Outstanding | 11,052,199 | 11,267,899 | 11,267,869 | |||||||||
4 |
CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| For the Nine Months Ended September 30, | For the Three Months Ended September 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2000 | 1999 | 2000 | 1999 | |||||||||||
REVENUES | |||||||||||||||
Premiums earned | $ | 64,832,530 | $ | 62,485,746 | $ | 22,751,882 | $ | 20,969,513 | |||||||
Net investment income | 6,800,513 | 6,738,773 | 2,298,110 | 2,299,894 | |||||||||||
Realized investment gains | 7,275,290 | 7,796,106 | 3,296,312 | 2,535,863 | |||||||||||
Other revenues | 253,434 | 181,010 | 96,021 | 51,940 | |||||||||||
Total Revenues | 79,161,767 | 77,201,635 | 28,442,325 | 25,857,210 | |||||||||||
LOSSES INCURRED AND EXPENSES | |||||||||||||||
Losses incurred | 29,794,673 | 25,412,081 | 12,667,179 | 9,721,718 | |||||||||||
Loss adjustment expenses incurred | 7,945,275 | 7,747,385 | 3,026,527 | 3,649,534 | |||||||||||
Underwriting, acquisition and insurance expenses | 24,544,624 | 22,487,587 | 8,102,761 | 7,425,510 | |||||||||||
(Increase)/Decrease in deferred insurance acquisition costs | (1,662,774 | ) | (260,707 | ) | (246,845 | ) | 329,556 | ||||||||
Other expenses | 1,077,524 | 1,005,284 | 371,816 | 334,568 | |||||||||||
Total Losses Incurred and Expenses | 61,699,322 | 56,391,630 | 23,921,438 | 21,460,886 | |||||||||||
Income from operations before income taxes | 17,462,445 | 20,810,005 | 4,520,887 | 4,396,324 | |||||||||||
Income tax expense (benefit) | |||||||||||||||
Current | 5,032,432 | 6,555,699 | 1,240,703 | 1,597,051 | |||||||||||
Deferred | 33,632 | (110,574 | ) | (43,567 | ) | (308,160 | ) | ||||||||
5,066,064 | 6,445,125 | 1,197,136 | 1,288,891 | ||||||||||||
Net Income | $ | 12,396,381 | $ | 14,364,880 | $ | 3,323,751 | $ | 3,107,433 | |||||||
INCOME PER SHARE- BASIC | $ | 1.11 | $ | 1.28 | $ | 0.30 | $ | 0.28 | |||||||
Weighted Average Number of Shares Outstanding- Basic | 11,177,654 | 11,241,710 | 11,177,654 | 11,241,710 | |||||||||||
INCOME PER SHARE- DILUTED | $ | 1.11 | $ | 1.27 | $ | 0.30 | $ | 0.28 | |||||||
Weighted Average Number of Shares Outstanding- Diluted | $ | 11,211,427 | $ | 11,271,876 | $ | 11,211,427 | $ | 11,271,876 | |||||||
5 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||||||||
| ||||||||||||||||||||||
| Common Stock (Par Value $1.00) | Paid-In Surplus | Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1, 1998 | $ | 11,502,520 | $ | 21,832,206 | $ | - | $ | 32,676,572 | $ | 73,732,118 | $ | (401,275 | ) | |||||||||
Comprehensive income | ||||||||||||||||||||||
Net income | - | - | 19,423,913 | - | 19,423,913 | - | ||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||
Unrealized depreciation on available-for-sale securities, net of deferred taxes | - | - | (6,078,237 | ) | - | - | - | |||||||||||||||
Less: reclassification adjustment, net of tax of $4,619,349, for gain included in net income | - | - | (8,578,790 | ) | - | - | - | |||||||||||||||
Other comprehensive loss | - | - | (14,657,027 | ) | (14,657,027 | ) | - | - | ||||||||||||||
Comprehensive income | - | - | 4,766,886 | - | - | - | ||||||||||||||||
Stock options exercised | 26,856 | 142,409 | - | - | - | (18,952 | ) | |||||||||||||||
Purchases and sales of treasury stock, net | - | 271,751 | - | - | - | (75,332 | ) | |||||||||||||||
Cash dividends declared | - | - | - | - | (3,139,786 | ) | - | |||||||||||||||
Balance, December 31, 1998 | 11,529,376 | 22,246,366 | - | 18,019,545 | 90,016,245 | (495,559 | ) | |||||||||||||||
Comprehensive income | ||||||||||||||||||||||
Net income | - | - | 16,712,463 | - | 16,712,463 | - | ||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||
Unrealized depreciation on available-for-sale securities, net of deferred taxes | - | - | (16,662,277 | ) | - | - | - | |||||||||||||||
Less: reclassification adjustment, net of tax of $2,864,435, for gain included in net income | - | - | (5,319,666 | ) | - | - | - | |||||||||||||||
Other comprehensive loss | - | - | (21,981,943 | ) | (21,981,943 | ) | - | - | ||||||||||||||
Comprehensive loss | - | - | (5,269,480 | ) | - | - | - | |||||||||||||||
Stock options exercised | 9,594 | 57,748 | - | - | - | (26,534 | ) | |||||||||||||||
Purchases and sales of treasury stock, net | - | 290,424 | - | - | - | - | ||||||||||||||||
Cash dividends declared | - | - | - | - | (3,151,515 | ) | - | |||||||||||||||
Balance, December 31, 1999 | $ | 11,538,970 | $ | 22,594,538 | $ | - | $ | (3,962,398 | ) | $ | 103,577,193 | $ | (522,093 | ) | ||||||||
Comprehensive income | ||||||||||||||||||||||
Net income | - | - | 12,396,381 | - | 12,396,381 | - | ||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||
Unrealized depreciation on available-for-sale securities, net of deferred taxes | - | - | 7,874,961 | - | - | - | ||||||||||||||||
Less: reclassification adjustment, net of tax of $2,546,352, for gain included in net income | - | - | (4,728,939 | ) | - | - | - | |||||||||||||||
Other comprehensive loss | - | - | 3,146,022 | 3,146,022 | - | - | ||||||||||||||||
Comprehensive income | - | - | 15,542,403 | - | - | - | ||||||||||||||||
Stock options exercised | 19,196 | 133,339 | - | - | - | (76,250 | ) | |||||||||||||||
Purchases and sales of treasury stock, net | - | 271,751 | - | - | - | (2,687,106 | ) | |||||||||||||||
Cash dividends declared | - | - | - | - | (2,338,634 | ) | - | |||||||||||||||
Balance, September 30, 2000 | $ | 11,558,166 | $ | 22,727,877 | $ | - | $ | (816,376 | ) | $ | 113,634,940 | $ | (3,285,449 | ) | ||||||||
6 |
CAPITOL TRANSAMERICA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
| September 30, 2000 | December 31, 1999 | September 30, 1999 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows provided by (used for) operating activities: | |||||||||||||||
Net Income | $ | 12,396,381 | $ | 16,712,463 | $ | 14,364,880 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation | 897,412 | 1,161,702 | 815,254 | ||||||||||||
Realized investment gains | (7,275,290 | ) | (8,184,101 | ) | (7,796,106 | ) | |||||||||
Change in: | |||||||||||||||
Deferred insurance acquisition costs | (1,662,774 | ) | 880,588 | (260,707 | ) | ||||||||||
Unearned premiums | 6,894,304 | (2,087,175 | ) | (628,678 | ) | ||||||||||
Allowance for doubtful accounts receivable from agents | - | 30,000 | 30,000 | ) | |||||||||||
Accrued investment income | (6,811 | ) | (248,903 | ) | (238,220 | ) | |||||||||
Receivables from agents, insureds and others | (4,826,693 | ) | 2,294,999 | 343,812 | |||||||||||
Balances due to/from reinsurers | 230,148 | 317,498 | 271,121 | ||||||||||||
Reinsurance recoverable on paid and unpaid losses | (3,753,282 | ) | 1,026,426 | 766,610 | |||||||||||
Funds held by ceding reinsurers | - | (4,244 | ) | - | |||||||||||
Income taxes payable/recoverable | 643,928 | (635,702 | ) | (1,021,338 | ) | ||||||||||
Deferred income taxes | 33,634 | (538,796 | ) | (110,575 | ) | ||||||||||
Due to/from securities brokers | (4,091,073 | ) | 763,512 | (1,129,496 | ) | ||||||||||
Prepaid reinsurance premiums | (391,979 | ) | (560,553 | ) | (424,105 | ) | |||||||||
Other assets | (683,062 | ) | (332,788 | ) | (612,445 | ) | |||||||||
Reserve for losses and loss adjustment expenses | (462,730 | ) | (1,247,858 | ) | (886,685 | ) | |||||||||
Accounts payable | 1,470,085 | (371,947 | ) | 1,435,984 | |||||||||||
Accrued premium taxes | 234,661 | 101,692 | 34,718 | ||||||||||||
Net cash provided by (used for) operating activities | (353,141 | ) | 9,076,813 | 4,954,024 | |||||||||||
Cash flows provided by (used for) investing activities: | |||||||||||||||
Proceeds from sales of available-for-sale investments | 17,600,356 | 29,718,246 | 27,319,608 | ||||||||||||
Purchases of available-for-sale investments | (14,617,489 | ) | (44,377,254 | ) | (36,970,188 | ) | |||||||||
Maturities of available-for-sale investments | 3,447,617 | 8,690,009 | 6,555,425 | ||||||||||||
Purchase of depreciable assets | (738,782 | ) | (751,534 | ) | (513,217 | ) | |||||||||
Net cash provided by (used for) investing activities | 5,691,702 | (6,720,533 | ) | (3,608,372 | ) | ||||||||||
Cash flows provided by (used for) financing activities: | |||||||||||||||
Cash dividends paid | (2,338,634 | ) | (3,151,515 | ) | (2,362,960 | ) | |||||||||
Stock options exercised | 76,285 | 40,808 | 40,531 | ||||||||||||
Net (cost of) proceeds from (purchase) sale of treasury stock | (2,687,106 | ) | 290,424 | 290,424 | |||||||||||
Net cash used for financing activities | (4,949,455 | ) | (2,820,283 | ) | (2,032,005 | ) | |||||||||
Net increase (decrease) in cash | 389,106 | (464,003 | ) | (686,353 | ) | ||||||||||
Cash, beginning of period | 1,080,435 | 1,544,438 | 1,544,438 | ||||||||||||
Cash, end of period | $ | 1,469,541 | $ | 1,080,435 | $ | 858,085 | |||||||||
Cash paid during the year for: | |||||||||||||||
Income taxes | $ | 4,380,677 | $ | 8,611,726 | $ | 8,377,064 |
7 |
CAPITOL TRANSAMERICA CORPORATION
(1)Basis of Presentation Although the Company believes the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 1999 annual report on Form 10-K. (2)Income Per Share |
Sept. 30, | Dec. 31, | Sept. 30, | |
2000 | 1999 | 1999 | |
Numerator: | |||
Consolidated net income | $ 12,396,381 | $ 16,712,463 | $ 14,364,880 |
Denominator: | |||
Denominator for basic EPS - weighted average shares | 11,177,654 | 11,252,358 | 11,241,710 |
Effect of dilutive securities - employee stock options | 33,773 | 44,931 | 30,166 |
Denominator for diluted EPS - weighted average shares | 11,211,427 | 11,297,289 | 11,271,876 |
(3)Comprehensive Income (Loss) (4)Income Taxes (5)Common Stock Options |
8 |
(6)Dividends 2000 On May 30, 2000, a cash dividend of $.07 per share was declared to shareholders of record June 16, 2000 and paid June 28, 2000 in the amount of $775,865. On February 18, 2000, a cash dividend of $.07 per share was declared to shareholders of record March 10, 2000 and paid March 23, 2000 in the amount of $788,776. 1999 On July 23, 1999, a cash dividend of $.07 per share was declared to shareholders of record September 10, 1999 and paid September 24, 1999 in the amount of $788,751. On May 13, 1999, a cash dividend of $.07 per share was declared to shareholders of record June 11, 1999 and paid June 25, 1999 in the amount of $788,708. On February 26, 1999, a cash dividend of $.07 per share was declared to shareholders of record March 12, 1999 and paid March 26, 1999 in the amount of $785,999. (7)Investments Investment real estate is carried at cost net of accumulated depreciation of $1,488,842, $1,173,643 and $1,047,699 as of September 30, 2000, December 31, 1999 and September 30, 1999, respectively. The real estate is depreciated over the estimated useful life of the asset. Cost of investments sold is determined under the specific identification method. (8)Contingent Liabilities |
9 |
(9)Industry Segment Disclosures The Company has three business segments, which are segregated based on the types of products and services provided. The segments are (1) property and casualty, (2) fidelity and surety, and (3) discontinued reinsurance assumed operations. These segments constitute 100% of the operations of the Company. Data for each segment as required for interim reporting follows: |
September 30, 2000 | December 31, 1999 | September 30, 1999 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Total Revenues: | ||||||||||||
Property & Casualty | $ | 54,632,636 | $ | 69,183,120 | $ | 52,407,467 | ||||||
Fidelity & Surety | 15,760,898 | 19,587,513 | 14,994,117 | |||||||||
Reinsurance Assumed | 658,877 | 727,895 | 599,351 | |||||||||
Totals: | $ | 71,052,411 | $ | 89,498,528 | $ | 68,000,935 | ||||||
Before-tax Profit (Loss): | ||||||||||||
Property & Casualty | $ | 5,065,563 | $ | 16,939,311 | $ | 9,470,258 | ||||||
Fidelity & Surety | 1,585,773 | (2,840,387 | ) | 1,863,266 | ||||||||
Reinsurance Assumed | 1,495,625 | 292,609 | 342,693 | |||||||||
Totals: | $ | 8,146,961 | $ | 14,391,533 | $ | 11,676,217 | ||||||
Reconciliation to Consolidated GAAP: | ||||||||||||
Capital and Surplus | 7,885,316 | 9,466,745 | 7,842,507 | |||||||||
Inter-company adjustments | 1,430,168 | 52,419 | 1,291,281 | |||||||||
Consolidated net income before tax: | $ | 17,462,445 | $ | 23,910,697 | $ | 20,810,005 |
There has been no material change in the allocation of assets among the segments, and there has been no change in the method of measurement for the results of the segment operations. |
10 |
Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW 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 down side of the cycle is characterized by inadequate rates, underwriting losses and, as a result, higher combined ratios. The adequacy of premium rates is affected primarily by the severity and frequency 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 industry, the trend of increasing price competition has continued as has the number of significant natural disasters. This combination has resulted in a considerable reduction in underwriting profitability for the industry as a whole. Adequate premium rates continue to be of concern to the Company and the property-casualty insurance industry as a whole. Management feels strongly that rate regulators have been slow to adjust rates in response to increased claim costs from the factors noted above. This, when combined with increased competition in the Company's' niche market, has presented an unprecedented challenge to management. The Company has responded to this challenge with increased marketing efforts as well as the addition of innovative programs and alliances that should position the Company for continued expansion and profitability. OPERATING RESULTS For the nine months ended September 30, 2000, gross premiums written totaled $76,777,047 compared to $65,473,654 for the same period last year. Net premiums followed suit, increasing from $61,432,962 in the first nine months of 1999 to $71,344,856 during 2000, an increase of 16.1%. Premiums earned are recognized as net revenues after a reduction for reinsurance ceded and after establishment of the provision for a pro-rata unearned portion of premiums written. Net premiums earned totaled $64,832,531 for the first nine months of 2000 compared to $82,841,104 for the year 1999 and $62,485,746 for the first nine months of 1999. The unearned premium reserve was $46,348,561, $39,454,257 and $40,912,754 at the end of each period. |
September 30, 2000 | December 31, 1999 | September 30, 1999 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Gross Premiums Written | $ | 76,777,047 | $ | 86,002,801 | $ | 65,473,654 | ||||
Reinsurance Ceded | 5,442,191 | 5,809,425 | 4,040,692 | |||||||
Net Premiums Written | $ | 71,344,856 | $ | 80,193,376 | $ | 61,432,962 | ||||
Net Premiums Earned | $ | 64,832,531 | $ | 82,841,104 | $ | 62,485,746 | ||||
Net Unearned Premium Reserve | $ | 46,348,561 | $ | 39,454,257 | $ | 40,912,754 | ||||
11 |
The Company's underwriting results can be measured by reference to the combined loss and expense ratios. The following table includes the operating results of the Company's 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 stated as a ratio of net premiums written. The combined ratios were as follows: |
September 30, 2000 | December 31, 1999 | September 30, 1999 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Insurance Operating Ratios (Statutory Basis): | ||||||||||
Losses & Loss Adjustment Expenses | 58.4% | 54.9% | 53.3% | |||||||
Underwriting Expenses | 35.1% | 37.0% | 37.5% | |||||||
Combined Ratio | 93.5% | 91.9% | 90.8% | |||||||
The Company's combined ratio consistently compares very favorably to the industry average, as indicated by the following chart: |
Year-to-date 2000 | Year-end 1999 | Year-end 1998 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Combined Ratio | ||||||||||
Company | 93.5% | 91.9% | 95.0% | |||||||
Industry Average * | 108.3% | 110.5% | 107.4% |
* The industry number for YTD 2000 is the ratio for commercial carriers as of June 30, 2000. REINSURANCE NET INVESTMENT INCOME AND REALIZED GAINS Interest and Dividend Income: Interest on fixed maturities is recorded as income when earned and is adjusted for any amortization of purchase premium or accretion of discount. Dividends on equity securities are recorded as income on ex-dividend dates. |
September 30, 2000 | December 31, 1999 | September 30, 1999 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Investments: | ||||||||||
Invested Assets | $ | 223,448,782 | $ | 218,085,184 | $ | 220,676,295 | ||||
Net Investment Income | 6,800,513 | 9,136,244 | 6,738,773 | |||||||
Percent of Return to Average Carrying Value | 4.0% | 4.2% | 4.2% | |||||||
Realized Gains | 7,275,290 | 8,184,101 | 7,796,106 | |||||||
Change in Unrealized Gains | $ | 3,146,022 | $ | (21,981,943 | ) | $ | (18,260,793 | ) |
The net unrealized gain of $3,146,022 for the first nine months of 2000 consisted of a $412,017 unrealized gain on fixed maturities and a $2,734,005 unrealized gain on the Company's equity portfolio. Management has begun to increase its tax-free bond holdings and de-emphasize the equity portfolio, but is optimistic that the recent downturn in the value of its equity investments is temporary and that the current market conditions provide an even greater opportunity to invest and build shareholder value over the long term. This appears to be coming to fruition, as evidenced by the current year's increase (decrease) in unrealized gains (losses). Net investment income in the nine months of 2000 increased $61,740 over the same period last year, an increase of 0.9%. The Company holds a larger percentage of equity investments than is typical for the property-casualty industry, which leads to a comparatively low rate of return on invested assets. |
12 |
INCOME TAXES LOSS RESERVES LIQUIDITY AND CAPITAL RESOURCES YEAR 2000 The Company expensed approximately $90,000 during 1999 in connection with remediating its systems. The Company is not aware of any material problems resulting from year 2000 issues, either with our products, our internal systems or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its agents and vendors throughout the year 2000 to ensure that any latent year 2000 matters that may arise are addressed promptly. SAFE HARBOR STATEMENT |
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INSURANCE SUBSIDIARY FINANCIAL STATEMENTS Statutory Basis as Reported to State Regulatory Authorities September 30, 2000, December 31, 1999 and September 30, 1999 | ||||||||||||
CAPITOL INDEMNITY CORPORATION Balance Sheets | September 30, 2000 | December 31, 1999 | September 30, 1999 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||
Cash and Invested Assets | $ | 211,845,785 | $ | 204,375,352 | $ | 205,922,046 | ||||||
Other Assets | 32,294,910 | 16,790,134 | 21,481,632 | |||||||||
| ||||||||||||
Total Assets | $ | 244,140,695 | $ | 221,165,486 | $ | 227,403,678 | ||||||
| ||||||||||||
LIABILITIES | ||||||||||||
Reserves for Losses and Loss Expenses | $ | 76,253,944 | $ | 77,044,646 | $ | 77,294,600 | ||||||
Unearned Premiums | 44,668,955 | 38,166,630 | 39,761,575 | |||||||||
Other Liabilities | 17,162,732 | 14,383,974 | 18,413,287 | |||||||||
| ||||||||||||
Total Liabilities | 138,085,631 | 129,595,250 | 135,469,462 | |||||||||
| ||||||||||||
SURPLUS AS REGARDS POLICYHOLDERS | ||||||||||||
Shareholder's Equity | 106,055,064 | 91,570,236 | 91,934,216 | |||||||||
| ||||||||||||
Total Liabilities and Capital | $ | 244,140,695 | $ | 221,165,486 | $ | 227,403,678 | ||||||
| ||||||||||||
Statements of Income | ||||||||||||
Premiums Earned | $ | 64,832,531 | $ | 82,841,104 | $ | 62,485,746 | ||||||
Underwriting Deductions | 62,984,073 | 75,368,177 | 56,535,507 | |||||||||
| ||||||||||||
Net Underwriting Gain | 1,848,458 | 7,472,927 | 5,950,239 | |||||||||
| ||||||||||||
Investment Income Including Sales | 13,851,823 | 15,876,984 | 13,178,590 | |||||||||
Other Income | 253,374 | 247,184 | 179,106 | |||||||||
Dividends to Policyholders | 400,688 | 363,074 | 283,352 | |||||||||
Income Tax Expense | 4,679,263 | 6,927,999 | 5,808,103 | |||||||||
| ||||||||||||
Net Income | $ | 10,873,704 | $ | 16,306,022 | $ | 13,216,480 | ||||||
| ||||||||||||
CAPITOL SPECIALTY INSURANCE CORPORATION | ||||||||||||
Balance Sheets | ||||||||||||
ASSETS | ||||||||||||
Cash and Invested Assets | $ | 4,409,431 | $ | 4,648,359 | $ | 4,687,587 | ||||||
Other Assets | 184,411 | 224,846 | 239,990 | |||||||||
| ||||||||||||
Total Assets | $ | 4,593,842 | $ | 4,873,205 | $ | 4,927,577 | ||||||
| ||||||||||||
LIABILITIES | ||||||||||||
Liabilities other than for Insurance Obligations | $ | 7,713 | $ | 7,711 | $ | 7,710 | ||||||
| ||||||||||||
Total Liabilities | 7,713 | 7,711 | 7,710 | |||||||||
| ||||||||||||
SURPLUS AS REGARDS POLICYHOLDERS | ||||||||||||
Shareholder's Equity | 4,586,129 | 4,865,494 | 4,919,867 | |||||||||
| ||||||||||||
Total Liabilities and Capital | $ | 4,593,842 | $ | 4,873,205 | $ | 4,927,577 | ||||||
| ||||||||||||
Statements of Income | ||||||||||||
Underwriting Deductions | $ | 5,028 | $ | 6,659 | $ | 6,189 | ||||||
| ||||||||||||
Net Underwriting (Loss) Gain | (5,028 | ) | (6,659 | ) | (6,189 | ) | ||||||
| ||||||||||||
Investment Income Including Sales | 190,045 | 950,853 | 884,191 | |||||||||
Income Tax Expense | 17,868 | 255,061 | 250,674 | |||||||||
| ||||||||||||
Net Income | $ | 167,149 | $ | 689,133 | $ | 627,328 | ||||||
|
14 |
PART II
15 |
Other Disclosures
Item 1. | Legal Proceedings |
Reference is made to footnote number 8 "Contingent Liabilities" on page 9 of this report. | |
Item 2. | Changes in Securities and Use of Proceeds |
NONE | |
Item 3. | Defaults Upon Senior Securities |
NONE | |
Item 4. | Submission of Matters to a Vote of Security Holders |
Reference is made to the Notice of Annual Meeting of Shareholders and Proxy Statement for the Annual Meeting of Shareholders which was held May 15, 2000, both of which are dated April 7, 2000 and previously filed with the Securities and Exchange Commission and are incorporated herein as an exhibit by reference. | |
Item 5. | Other Information |
NONE | |
Item 6. | Exhibits and Reports on Form 8-K |
NONE |
16 |
CAPITOL TRANSAMERICA CORPORATION
Subsidiaries
Capitol Indemnity Corporation
Capitol Specialty Insurance Corporation
Capitol Facilities Corporation
Board of Directors | |
Paul J. Breitnauer Vice President & Treasurer Capitol Transamerica Corporation Madison, Wisconsin | Michael J. Larson Principal Southwestern Financial Services Madison, Wisconsin |
Larry Burcalow Owner and President Yahara Materials, Inc. Middleton, Wisconsin | Reinhart H. Postweiler Retired, formerly with Flad Affiliated Corporation Madison, Wisconsin |
George A. Fait Chairman of the Board & President Capitol Transamerica Corporation Madison, Wisconsin | Kenneth P. Urso Owner and Operator Urso and Associates, LLC Madison, Wisconsin |
Officers | |
George A. Fait Chairman of the Board & President | Virgiline M. Schulte Secretary |
Paul J. Breitnauer Vice President & Treasurer | Jane F. Endres Assistant Secretary |
17 |
SIGNATURES | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | |||
CAPITOL TRANSAMERICA CORPORATION | |||
Date: November 6, 2000 | | /s/ George A. Fait George A. Fait Chairman of the Board and President | |
Date: November 6, 2000 | | /s/ Paul J. Breitnauer Paul J. Breitnauer Vice President and Treasurer | |
18 |