United Fire Group (UFCS) 2000年年度報告「NASDAQ」.pdf

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1、,.,.,.,.,.:.,:.,i1g:.-.1.SELEcTcL,.From the many annual reports Ive read over the years,oneof my favorite lines comes from a report of that quintessen-tial high-techfirm,the Hot Air BalloonCo.,“There are goodyears and there are bad years and this is one of those years!”The same could be said about t

2、he year 2000 for your Com-pany.lileearnings increasedonly two cents(14oopee!)ashare to$15,527,000,or$1.55 per share,operatingearningsincreased by 24 percent to$16,713,000.lileunderwritinglosses were down(your Companysstatutory combinedratiofor its property and casualty business declined3 points to10

3、6 percent),investmentresu!ts were disappointing.fl.ddespite the fact that earningsincreasedonly 1.0 percent,thebook value of your stock increasedby 9.0 percent fromDecember31,1999,to$25.65per share.Total revenues increased19 percent to$421,600,000.Premiums-earnedincreased22 percent to$333,000,000and

4、investmentincome increased15 percent to$87,000,000.Forthe first time in your Companys history,statutorygrosspremiums written includingannuity deposits exceeded halfa billion dollars.Total assets increased by$195)000,000to$1,662,000,000.The 3 point improvementin your Companysstatutorycombinedratio to

5、 106 percent,contraststo Bests estimated2.5 point deteriorationin the industrys overall experienceto110 percent.Net propertyand casualty premiumswrittenticreased28 percent to$325,000,000,and we showedgrowth in all the new states we entered as a result of theAmericanIndemnityacquisition.Our efforts t

6、o increase theproportionof our propertyand casualty businesscomingfrom our leading agents are beginningto bear fruit.In theyear 2000,36of our agents wrote over one rni.1.liondollars inpremiums,accounttigfor 18 percent of our properandcasualty business.Our annuity businesscontiriuesto grow.New annuit

7、ydeposits totaled$125,000,000.To support this growth,onNovember16 we contributed$15,000,000to the surplus ofUnited Life InsuranceCompany.Life insuranceassets nowtotal$972,000,000,and the statutoryreturn on averageinvested assets was 7.5 percent,about the same as last year.On Januafi23,2000,it hailed

8、 in New Orleans.Old timerstell us it hasnt hailed there in over 130 years,but when ithailed,it really hailed!T4hile the storm lasted less than10 minutes,it has taken over a year to handle all the claims.To date we have received approximately4,600 losses for“approximately$21,000,000,making this the s

9、econd mostexpensive storm in your companys history.(Our loss fromHurricane Andrew in 1992 was approximately$31,000,000.)Usually,in a storm of this nature,the totai iosses incurredpeaks within two or three months afier the loss occurs andthaelltar-to decrease tuhAeCmS are seed.ys oshas been like the

10、Energizer bunny.It just keeps going andgoing and going!A year after the loss occurred we were stillreceiving new claims.One of the reasons for this is that much of the dkmagewas concentratedin the French Quarter where,historically,the Lafayette has written a lot of business.Because of thehistoricalc

11、haracterof many of these buildingsand theunique materialsused,such as slate and copper for the roofs,maoy of these losses have proved very expensive to settle.During the second quarter we decided to significantlyreduce the assumed reinsurancebusiness.Your Companyhas been writing a book of reinsuranc

12、efor over 20 years,and.at December31,1999,it amountedto apprximately10 percent of our propertyand casualty business.In recentyears the experiencehas not been good,and while we believethat the market may be turning,we came to the conclusionthat we could not write a large efiough line to take advantag

13、eof the change.The consolidationthat has taken place in thebusiness in recent years has significantlyrestrictedtheopportunitiesaailable for the small participant14ilesome contractswere not renewed during the year,mostexpired on December31.As we reported to you last year,on August 10,1999,yourCompany

14、 acquired the AmericanIndemnity,a group of fourproperty/casualtycompaniesdoing business in Texas andthe southeasternUnited States.Ithen70u consider all thethings,that can go wrong with an acquisition(just look at-1-.-.This Annual Report on Form 1O-K contains forward-loohngstatementswithin the meanin

15、gof Section27A of theSecuritiesAct of 1933 and Section 21E of the.SecuritiesExchange Act of 1934,which are not historicalfacts,andinvolve risks and uncertaintiesthat could cause actualresults to differ matel-ially from those expectecl and pro-jected.Such risks and uncertaintiesinclude the following:

16、1)the Uncertaintiesof Lhe 10ss reserviug process;)theoccurrenceof catastrophicevents or other insured or rein-sured events with a frequencyor severity exceeding theCompanysestimates;3)the actual amountof new andrenewal business;4)the competitiveenvironmentin whichthe Companyoperates;5)developmentsin

17、 global financialmarkets that could affect the Companys investmentport-folio and financingplans;6)estimates of the.nancialstate-ment impactdue to regulatoryactions;7)uncertaintiesrelating to governmentand regulatory policies.!)legde;elope,n,;9),gingrates of,nflatjpn and oler eco-nomic conditions,dnd

18、 10)the”ifipacOf lergers andacquisitions,includingthe abdity to successfullyintegateacquired businessesand achieve cost savings.The words“believe;“anticipate“estimate;“expect;“intend,”or“wcontinue”and variationsthereof and similar eressionsidenti.forward-lookingstatements.Readers are,cautionednot to

19、 place undue relianceon these forward-lookingstate-ments,which speak only as of their dates.ThtCompanyundertakesno obligationto publicly update or revise anyforward-lookingstatements,whether as a result of newinformation,future events or otherwise.RESULTS OF OPEWTIONSFORTHEYEARENDEDDECEMBER31,2000,C

20、OMPAREDTO THE YEARENDEDDECEMBER31,1999For the twelve monthsended D$cember31,2000,netincome was$15,527,000o-r$1.55 per share,compasedto$15,384,000or$1.53 per share for 1999.A hailstormin NewOrleans occurringJanuary 23 contributed$3,829,000ofafter-tax net losses to the 2000 results.Operatingearnings(a

21、fter-tinnet income,excluding realized investmentgains(losses)and other income)improved in 2000 to$16,713,000or$1.67 per share(from$13,476,000or$1.34per share in the prior year),primarflyas a result ofincreased premiumrevenue and a reductionof operatingexpenses due to the consolidation,of certainComp

22、anyfunctions.However,realized investmentgains(losses)andother incomeof$(1,186,000)on an after-taxbasis,com-.pared to realized investmentgains and other incomeof$1,908,000in 1999 on an after-tax basis,weakened netincomefor the year ended December31,2000.In August 1999,the Company acquired AmericanInd

23、emnityFinancialCorporation(“AmericanIndemni”),a holding company that owns four property and casualtyinsurancecompanies.The year 2000 results presentedin theConsolidatedStatementsof Operationsand certain tablesand charts within this report include twelve monthsofre:;ults of operationsof AmericanIndem

24、nity.The 1999results include five months of results of operationsofAmericanIndemnity.Results presented for years prior to1999 have not been restated for the effect of the purchase.Propertyand casualty tisurancesegment,.For the year 2000,the property and casualty segment.recorded net incomeof$9,81000

25、0,comparedto netincomef.$6,062,000for 1999.Despitg,the New Orleans.hailstormcaiastpli;the C6iilpanysproperty and casualty-results improved in 2000 in several lines of business.Theloss ratio(net losses incurreddivided by net premiumsearned)decreased(showed improvement)in the followingareas:automobile

26、,other Iiabiiity,and workers compensa-tion.,In each of these lines of business,the 2000 10SSratio.was lower than in 1999.Improvementsin the Companysunderwritingfunctionand a decrease in the severity ofclaims has led to enhancedprofitabilityin these lines.Three lines of business deterioratedin 2000,w

27、hen com-pared to 1999:Fire and allied lines business was negatively impacted bythe New Orleans hailstorm,with a loss ratio of 62.0 percentin 2000,comparedto 52.5 percent in 1999.The fidelity and surety line of business had a loss ratio of11.8 percent in 2000,comparedto 2.1 percent in 1999.Despite th

28、is increase,the Companys results in the fidelityand surety line were considerablybetter than those tobe reported for the fidelity and surety industry.The esti-mated loss ratio for fidelity and surety for the industry is27.5 percent.The continuedgrowth of constructionpro-jects,coupled with shortages

29、in the constructionlabormarket,have contributedto increased losses in these lines,both for the Company and for the industry as a whole.The reinsuranceline of business has also deteriorated,ith a Ioss ratio of 162.2 percent in 2000,contparedto122.6 percentin 1999.The bulk of the business assumed,as p

30、roperty reinsurancewith the emphasis on catastropheI.Safecos problemswith its 1997 acquisitionof Americanante company that beIieves that when you call us,youreStates),the good news from Texas is that there is no news.entitled to get a red voice.If you dont,please let us know,We believe that one of t

31、he reasons the acquisitionofand well give you the managers home,phone number.AmericanIndemnityhas gone as well as it has(so far!)is,w%that early on we were able to get our own managementteam”commentaryon the past year in the insurancebusinessin place.Last Februarywe were able to hire Jim Mason,an.%o

32、dd be completewithout acknowledgingthe contribu-experiencedinsurancemanager with considerableTexas;tion to qrindustry made by my friend,Sad Steinberg.experience,to head up our operationin Galveston.ThenSteve Ross,one of our most experiencedclaim supervisors,volunteeredto transferfrom Lincolnto Galve

33、ston to headup our claims operationthere.The resdthas been a strongmanagementteam.Noy,after a year and a half,our businessin Texas%as staized,withabout$40,000,000in direct premiums.annually an:20:en.ts,wlh,.is about what.recipated.:-.*,.A:.k.e.when we made the deal.This shoddgive us a good base onwh

34、ich to build.Our expansioninto Texas has provided an exceIlentopportunityfor our Surety Department,which last yearwrote over a hau milliondollars in premiumsin Texas.In1999,the l;st year for which figures are avaiIable,the UnitedFire&Casualty Companyranked 32nd in premiumswrittenamong all surety wri

35、ters and is among the top jive corn-panics in five of the states in which we do business.Moreimportantly,the business has been very profitablein alcultenvironment.4/$In our lat-.,=,-?&,=.-“Kcfilally I only met him once.His company,the Reliance,had acquired a substantialblock of our stock from a Iocd

36、life insurancecompanyand so one day Saul,his Iitiebrother Bobby and two of his henchmenpaid me a visit.He intended to make meanoffer I couldnt refuse.I thinkthey,call what he had in mind,“green mail,”but I tookNcy,Reagansadvice and just said,“No!”.ihetime+y,werein my office,a stfetch lirnbusine.”.,w

37、as parked outside witlithemotor itinning“Atnoon I tookthem out to our local country cIub for lunch.The conversa-tion durkglunch was about everyone on Wafl Street whohad made over a mMon dollars that year.(That was backwhen a million”dollars a year was an awful lot of moneyandI was trgto figure out h

38、ow to pay for a$45,ooO house Ihad just purchased.)I picked up the check!Even though I paid for lunch and we suffered for yearsfrom guilt by association,I feel sorry for Saul.No onedeserves to be sued by his own mother!For the eighth consecutiveyear,the Ward FinancialGrouphas amed your Companyone of

39、the 50 outstandingprop-erty and casualty companiesin the United States,based onperfirmance and security.On May 17,your Board of Directorsvoted to increase theannual dividend on our stock to 72 cents per share.The Companysrealized nvestment gains(losses)and.other incomewas$(1,825,000)in 2000,compared

40、to$,936,()()in 1999.Losses recognizedon the sale of SeCU1-i-ties held by the AmericanIndemnitygroup of companies,and Tosecurity write-downswere the majorfactors in the2000 resdts.Includedas other income is interest of$z57,000and$632,000,respectively,related to a refund inconnectionwith a federal inc

41、ometax Revenue AgentReview for previous tax years.FederalincometaxesThe provisionfor Federal incometaxes for the year ended2000 and 1999 was$1,822,000and$1,834,000,respectively.Pre-taxincomewas very similar between the two years,asi,ere the componentsof Federl income ta expense.AtDecember31:2000,the

42、 Companyhas$29,709,000of netoperatingloss(“NOLS”)carryforwards,the utilizationofvhich is limited(pursuantto Section382 of the InternalRevenue Code)and was generated by the pur:hase ofAmericanIndernniCompanyin Augu$tz,1999.The NOLswill expire in various.ftiiureye+si;.bgiriingin zoo 1through2019.The C

43、ompanyhas recorded a net deferredtax liability of$12,245,000at December1,2000 and$7,430,000at December31,1999.The deferred taliabilityincreasedprimarilydue to net unrealizedappreciationonI,estmentsecurities.The Companyhas a valuation.allowhrtce of$11,370,000as of”December31,2000,relatedto AmericanIn

44、demnityNOLS.The valuationallowancerecordedon the Companysdeferred tax asset decreased$3,769,000,between years,due primarilyto the utilizationof NOL carrforwards.If the Companydeterminesthat thebenefitof the AmericanIndemnityNOLS can be realizedin the future,the related eductionin the deferred taxass

45、et Vallatinn flowance.wfl be Iecor(l ed as 3 reductj?nto goodwill.RESULTS OF OPERATIONSFOR THEYEARENDEDDECEMBER31,1999,COMPAREDTO THE YEARENDEDDECEMBER31,1998On August 1.0,1999,the Companyacquired AmericanIndemnityFinancialCorporation(“hericanIndemnity”)as a wholly owned subsidiaryfor approximately$

46、30,212,000in cash in exchange for 1,962,410shares ofcommonstock.Commonstockholdersof AmericanIndem-nity received approximately$14.35per share of commonstock at the closing of the transactionand deferred consid+erationof up to$1.00 to be paid per share in August 2001,subjectto adjustmentsrelating to

47、indemnities.hescrowaccount with a balanceof$1,990,000is included in theCompanysconsolidatedbalancesheets in other assets forpaymentof the deferred consideration.The transactionwas accountedfor using the purchasemethod of accounting.Lss reserve increases and the write-off of uncollectablebalances wer

48、e also made,which were notconsidered purchase accounting.These costs were recordedin operationsin 1999.Managementbelieves that all materialone-timeadjustments(other than purchase accounting)i,ereidentified and pl-operly reflected in 1999 operations.A schedule summarizingthe assets acquired and the l

49、iabili-ties assumed as of August 10,1999,as well as pro formaresults of operations,can be found in NTote15 of the NTotesto ConsolidatedFinancialStatements.Results presented in the ConsolidatedStatementsofOperationsand certain tables and charts within this reportinclude approximatelyfive months of re

50、sults of operationsof._rn.eric2nIndemmity in 1999 and 12 months of opel:ationof klericanIndemnityin 2000.A-mounts in years prior to-1999 have not been restated for the effect of the-purchase.Propertyand casualtyinsurancesegmentThe properfi;”and casualty segment reported an increase innet premiumsear

51、ned of$26,504,000or 12 percent in 1999;,hen comparedto 1998.Tile purchase of AmericanIndenitycontributed$19,413,000of the growth.Netprem.ilms earned in each line of business increased,withthe exceptionof workers compensation,which decreasedslightly betieenyears.With the purchase of AmericanIndemnity

52、,and the resulting expansioninto southernandsoutheasternstates in 1999,managementanticipatedthatproperty and casualty net premiumsearned would increaseinto 2000.The property and casualty segments largest expendituresare for losses and loss adjustmentexpenses.These costsincreased by$6,554,000in 1999,

53、or 4.0 percent.WithouttheA.-.:-C-.-:.mIICIlLdrlIndcilllll LYp“tirlae,losses and expenses wouldhave decreased by$8,032,000.Subsequentto the purchaseof AmericanIndemnity,the Companys managementreviewed and increasedthat subsidiarys direct case lossreserves by approximately$10,000,000.This measure wasn

54、ecessary to raise AmericanIndemnitysloss reserves to alevel that vasin accordancewith the reserving philosophyof the Company.The Company had exposure to 23 catastrophes,in both1999 and 1998.The catastrophesnegatively impactednetincome(net of tax)by$9,561,000or$.95 per share in 1999,and$19,188;000or$

55、1.85 per share in 1998.All but three lines of business showed improvementinthe loss ratio(lower loss ratios)in 1999,comparedto 1998.The three lines that deterioratedwere other liability,rein-surance and all other.Catastropheactivity negativelyimpacted the Companysreinsuranceline of business.Thel!OSS

56、 ratio for net assumed reinsurance,which constitutes.covers.In response to the tighter marginsin this particularline,the Companyhas decided to significantlyreduce itswritings in assumed reinsurancebusiness.A small portionof the businessexpired on July 1,2000,and the bulk of thebusiness expired on De

57、cember31,2000.ContractswilI berenewed with a very limited numberof brokers to continuewriting assumed reinsurancebusiness.The Company willcontinueto have exposure,primarilythe catastrophecovers,related to the assumed reinsurancecontractsthat were pre-viously written.Managementbelieves hatas of Decem

58、ber31,2000,the loss reserves establishedfor the assumed rein-surance business are adequate.The assumed reserves will beadjusted as additionalfacts becomeknown.Net premiums(direct plus assumed reinsurancelessceded reinsurance)written by the propertyand casualty,segment increasedby$70,838,000to$325,05

59、2,000between2000 and 1999,due to price increases,new and renewalbusiriess,.and twelve,onthsof business.fiom”nericanIndemnityCo-fipnyNtprentirnswrittenincreased inevery line of business,with the exceptionof reinsurance.The Iargest dollar growth in net premiumswritien wasreported in fire and allied li

60、nes,which increasedfrom$77,270,000in 1999 to$103,385,OOO in 2000.The largestpercentagegrowth was in other liability,with a 43 percentincrease in net premiumswritten,due in part to pricefirming in the commerciallines of business.Direct premiumswritten by the propertyand casualtysegment increased$77,4

61、05,000or 32 percentover 1999.Thestate of Iowa remainsthe segments largest volume state,with direct premiumsof$44,533,000.In 2000,Texasbecame our third state in terms of direct premiumvolumefor the propertyand casualty segment,with direct premi-ums of$40,596,000,comparedto$13,730,000in 1999.Managemen

62、texpects continuedgrowth hl propertyandcasualty premiumsfor 2001,due to price increases in theindustry and less fierce competition.Shotidindustrycondi-tions change,with falling prices and increased(competition(as has been the market situationfor the past few years):thegrowth that managementanticipat

63、esmay not cleveIop.To”measure underwritingprofitability,the property andcasualty industryuses the combinedratio,which is cdcu-Iated by dividing net losses and net loss adjustmentex-penses incurredby net premiumsearned,plus other under-writing expenses incurreddivided by net premiumswritten.Generally

64、if the combinedratio is below 100 percent,theCompanyexperiencesan underwritingprofiv if it is above100 percent an underwritingloss exists.In 2000,the seg-.ments GAAP combinedratio was 105.3 percent:comparedto 1.09.2 percent in 1999.The improvementresulted hornthe growth in premiums,a lower underwrit

65、ingexpenseratio,due in part to the consolidationof functions,and theclosing of southern branch offices of the AmericanIndem-nity group of companies.Catastrophes,includingthe New Orleans hailstorm,neg-atively affected the combinedratio,adding 8.0 percent tothe ratio in 2000 and 6.0 percent in 1999,an

66、d resulted inafter-tax net incurred losses and expenses of$15,778,000or$1.!57 per share in 2000,comparedto$9,561,000or$.95 pershare in 1999.Ltic insurancesegmentThe life insurancesegment reported net incomeof$5,717,000for the year ended 2000,comparedto$9,322,000fb,the year ended 1999.During the thir

67、d quarter of 2000,.wrte-&ow3,n Wq,fiedrnatuisecuritiescontributedsignificantlyto the segments realized investmentgain(losses)and other incomeof$(3,089,000),net of tax.Netpremiumsearned by the life segment(afier intercompanyeliminations)in 2000 totaled$26,094,000,comparedto$25,997,000in 1999.On a sra

68、tutory basis,annuity depositsincreawd to$165,181,000,comparedto$145,810,000in1999.GAAP reported premiumrevenue does not reflectannuity deposits.GAAP revenues for annuitiesconsist ofpolicy surrendercharges and investmentincomeearned.The life segments largest expenditureis interest creditedto annuitie

69、s and universal life policies.In 2000,two primaryfactors;growth in new and existing account balancesandhigher interest rates,contributedto the increase in interestcredited of$42,4 10,O(iO,which was a 31 percent increasefrom$32,286,000in 1999.InvestmentresdtsThe Company reported net investmentincomeo

70、f$86,867,000in 2000,Compared to$75,317,000in 1999,pri-marily as a result of growth in the Companys investmentportfolio.Over 90 percent of the Companys investmentincomeoriginatedin 2000 from interest on fixed-incomesecurities(the portfoliobalancegrew by$124,761,000).The remaininginvestmentrevenue was

71、 derived from divi-dends on equity securities,interest on other long-terminvestments,interest on poli loans and rent earned fromtenants in the Companys home office.The investmentyield(investmentincomedivided by average invested assets)was6.6 percent in 2000 and 6.5 percent in 1999.The decreases have

72、 been the resulof sales and prepaymentsof Ck40sin 2000 and 1999,which were subsequentlyreplaced with corporatebonds.MarketriskThe main objectivesin managingthe investmentportfoliosof the Companyand its subsidiariesare to maximizeafter-tax investmentincomeand toval investmentreturns.Invest-ment strat

73、egies are developed based on a numberof factors,includingestimateddurationof reserve liabilities,short andlong-termliquidityneeds,projectedtax status,general eco-nomic conditions,eected rates of inflationand regulatoryrequirements.Investmentdecisionsare managed based oninvestmentguidelinesapproved b

74、y Companymanagement.The Companysinvestmentportfobois subject to marketrisk arising from the potentialchange in the value of the var-ious securitiesheld within the portfolio.Market risk corn-prises many factors,such as interest rate risk,liquidity risk,foreign exchange risk,credit risk and equity pri

75、ce risk.The.C.ompapysprWary rnret risk.exposure is interest raterisk.Interest rate risk is the price sensitivityof a freed-income security or portfolioto changes in interest rates.TheCompany also has limitedexposure to equity price risk andforeign exchange risk.The active managementof market risk is

76、 integral to thethe target duration to achieve the required cash inflow basedon liquidity aid market risk factors.I)urationrelates primarilyto our life insurancesegmentbecause the long-termnature of its reserve liabilities increasesthe importanceof projectingestimated cash inflows over anextended ti

77、me frame.The Companys life segment had$634,551,000in deferred amuityliabilities that are speci-fically allocated to freed-incomesecurities.The managementof the life segment investmentsconcentratesprimarilyonmai:ching the duration of the investmentsto that of thedefirredannuity obligations.The durati

78、on for the invest-ment portfoliomust take into considerationinterest rate risk.This is done through the use of sensitivity analysis,whichmeasures the price sensitiviof the freed-incomesecuritiesto changes in interest rates.The alterative valuationsof theinvestment portfoliogiven the various hypothet

79、icalinterestrate changes utilized by the sensitivity analysis allow manage-ment to revalue the potential cash flow from the investmentportfoliounder varying market interest-ratescenarios.Qugiogqa enoe recalculatedat the differing levels of.Lprojectedcash riflo-Arnounts set forth in Table 1 detafl th

80、e material impact ofhypotheticalinterest rate changes on the fair value of certain.core fixed-incomeinvestmentsheld at December31,2000.,The sensitivity analysis measures the change in fair valuesCompanys operatins.The potentialchagesin-the value of.+arising from immediatechanges in seleced interest

81、rate see-,=the Companys investmentportfolio,due to the market iisk,.narios.Hypotheticalparallel shifts in the yield curve of plusfactors noted above,are analyzed within the overall contextor:minus 100 and 200 basis points(BP)were employed inthe simulations.Additionally,based upon the yield curveof a

82、sset and liability management.A techniqueused by theCompany to aid in the managementof its investmentandshifts,estimates of prepaymentspeeds for the mortgage-relat-ed prodlucts and likelko”od of call or put options behgexer-reserve portfoliosis the calculationof duration.Our actuaries.-cis;d were em

83、ployed in the simulations.According to hisestimate the payout pattern of our reserve liabilities to deter-analysis,at current levels of interest rates,the duration of themine their duration,which is the present value of the weight-investmentssupporting the deferred annuity liabilities is.39ed averag

84、e paymentsexpressed lr.years.44tarst d-ation isyears Ionger than heprojecteddlration of the liabilities.Ifthen establishedfor the Companys investmentportfoliosointerest rates increase by 100 basis points,this differencethat the estimatedcash inflows of the investmentportfolio“would be expected to na

85、rrov to.38 years.The selection of awill match the estimatedcash outflows of the reserve portfo-100-basis-pointincrease in interest rates should not be con-lio at any given point in time.The investmentmanager of thestrued as a predictionby the Companys managementofCompany then structuresthe investmen

86、tportfolioto meetfuture market events,but rather to illustrate the potentialimpact of an event.SensitivityAnalysis(In.Thousands).Interest Rate Risk.,.+ASSET-200 BP-100 BPBASE+100 BP+zOI)BpEstimated Fair lralue of Fixed Maturities$l,43,1i2-$l,:5;665$1,231,209$i,172,805$1,114,365-.-.-!The table belovd

87、etails the effect on fair value for a positive or negative 10 percent price change on the Companyscommon equityportfolio.(In Thousands).Equity Price Risk-s.ASSET-1OYOBase+1OYOCommon Stock“-$100019!B lll,i32“.:$122,i45-.business assumed fi-om other insurancecompanies,deterio-rated to 122.6 percentin

88、1999,from 95.9 pe;centin 1998.In 1999,the segmentsGAAP combinedratio was 109percent,comparedto 115 percent in 1998.The catastrophesdiscussed above added 6.0 percent to the combinedratio in1999 and 11 percent in 1998.LifeinsurancesegmentThe life insurancesegmentreported net incomeafter con-solidating

89、eliminationsof$9,322,000in 1999,comparedto$10,614,000in 1998.Investmentincome increasedby$7,069,000or 16 percentover 1998.The Iife segments largest expenditureis interest creditedto annuities and universal life policies.As new premiumsand etistingaccountbalancesincrease,the interest creditedto polic

90、ies wiU grow proportionately.The interest creditedto these two productsduring 1999 totaled$32,286,000,which was a 21 percentincreaseover 1998.Losses incurred,resulting primarilyfrom death claims,is,he se(:ond largest”cost”incurredby dle life insuance segment.Losses incurreddecreased slightly to$1 l,

91、647,000”fi1999,comparedto$12,299,000in 1998.InvestmentresdtsThe Company reportednet investmentincomeof$75,317,000in 1999,comparedto$67,928,000in 1998.More than 90 percentof the Companys investmentincomeoriginatesfrom intereston esecwities.Theremaininginvestmentrevenue is derived from dividends onequ

92、ity securities,intereston other long-terminvestments,interest on policy loans and rent earned from tmants in theCompanys home office.The investmentyield(investmentincomedivided by average invested assets)was 6.5 percentin 1999 and 1998.“Realized gains were$2,936,000in 1999,comparedto$22,796,000in 19

93、98.During the second quarter of 1998,theCompany took advantageof market conditionsand soldsome of its equity securities.The proceeds were used topurchase 625,000shares of its commonstock.The salesgenerated realized gains of$16,858,000,which contributedto the 1998 resdts.FINANCIALCONDITIONInvestments

94、The Company invests primarilyin fixed-incomeand equitysecurities with the objectiveof maximizingafter-tax invest-ment income,matchingassets to liabilities and maintainingliquidity.The Companymaintsits portfolioh compli-ance with Companyand state insurancedepartmentinvest-ment guidelines.At December3

95、1,2000,te Company heldinvestment grade securities(as defined by the National Asso-ciation of InsuranceCommissioners“NMC”SecmitiaValuation Office and having NAIC ratings of Class 1 or Class2)with a carrying value of$1,117,080,000,representing90 percent of total fixed maturity investments.Purchases of

96、fixed maturity investmentswith credit ratings below invest-ment grade are securities that the Company views as havingthe potential for upgrade in the fiture.The Company nlini-mijes its risk associated with below-investment-gradesecritiesby monitoringcredit risk of the issuers and byspreading the exp

97、osure among various issuers.l;ixed-incomesecurities that the Company has the abilityancl intent to hold to maturity are classtiedas held-to-matu-rity.The remainingfixed-incomesecurities and all of theCo,mpanysequity securities are classified as available-for-sale.The Company did not have trading sec

98、urities atDe(:ember 31,2000,oratDecember31,1999.At December31,2000,$283,431,000or 23 percent of.the fixed maturitypoitiofiowas cas:ified as held-to-maturity,compared to$311,152,000or 29 percent at December31,1999.The held-to-maturitysecurities are reported at amortized cost,whileavailable-for-salese

99、curities are reported at market value.Unrealized appreciation,net of tax of$37,051,000from theCompanys available-for-saleinvestmentsand other investedassets is reflected in a separate componentdf stockholdersequity.The increase in unrealized appreciationover 1999resulted from a general improvementin

100、 market prices.Effective January 1,1999,the Company reclassified a por-tion of its held-to-maturityinvestmentportfolio to avail-able-for-salein conjunctionwith the adoption ofStatement of Financial AccountingStandards(“SFAS”)No,133,“Accounting for Derivative Instrumentsand Hedg-ing Activities.”Gener

101、ally,reclassificationsare allowed only inrar;circumstances.However,given the new restrictionsthatSFlS No.133 has on hedatiginterest rate risk forheld-to-maturitysecurities,all companiesadopting SFASNo.133 were allowed to reassess their held-to-maturityport-folios without“tainting”the remainingsecuri

102、ties classified asheld-to-maturity.The reclassificationborn held-to-maturityto available-for-saleincreased the carrying value of avdable-for-sale&ed-incomesecurities by approximately$9,250,000,and increased other comprehensiveincome byapproximately$6,013,000,net of deferred income tes.At December31,

103、2000,the Companys fixed maturityportfolio included collatertiedmortgage obligations(CMO)of$101,596,000,or 8.0 percent of the fied-income portfolio,compared to$126,232,000,or 12 percent,as of December31;1999.StockholdersequityThe Companys stockholdersequity increasedfrom$237,793,000at December31,1999

104、,to$257,49,000at.December31,2000,an increase of 8.0 percent in 2000.Decreasesto equity included$7,134,000of declared divi-dends and$421,000due to the retirementof 24,265sharesof commonstock.Increasesto equity included net incomeof$15,527,000and net unrealizedappreciationof$11,664,000(net of tax).In

105、Februar,y 2000,the Companys Board of.Directorsauthorizedthe repurchaseof an additional100,000shares ofits commonstock throughopen market or privately nego-tiated transactions,which brought the total numberofshares altk.orized for repurchaseto 114,075.Dlring 2000,hecoATJPan.rm,.rh.ed7AQk,-the Company

106、sconsolidatedinvested assets included$58,290,000of short-terminvestments.In addition,theCompany maintainsa$20 millionbank line of credit.During 2000,the Companydid not utiJize the Iine ofcredit.During1999,the Company borrowedfunds againstthe line of credit,with a maximumoutsanding balance of$4,000,0

107、00.Under the terms of the agreement,interest onoutstandingnotes is payable at the lenders prevailing primerate,minus 1.0 percent.Interest expense in connectionwiththe line of credit borrowingwas$22,000in 1999.Manage-ment believes that tieCompanys liquid assets and net cashprovided by operationswill

108、enable it to meet any foreseeablecash requirements.ReationThe insuranceindustryis governed by the NAIC and indi-,idual state insurancedepartments.All of the insurancedepartmentsof the states in which the Companyis domi-ciled have adopted codificationof insuranceStatutoryAccountingPrincipleseffective

109、 January 1,2001.Previously,these principleswre prescribedin a variety of publications,as well as state laws,regulationsand general administrativerules.Subject to final interpretationby the NAIC and theindvidualstate insurancedepartments,the effect on thestatutory financialstatementsas of January1,20

110、01,is esti-mated to be an increase to stockholdersequity of approxi-mately$10,900,000.This change does not affect the accom-panying financialstatements,which are based on generallyaccepted accountingprinciples(“GAAP”).Pursuantto codi-fication rules,permittedstatutory accountingprctices maybe utilize

111、d,with approval from an insurers state of domicileinsurancedepartment.The Company does not use permit-ted practices tlat individuallyor in tleaggregate materiallyaffect statutory slurplus or risk-basedcapita!.rhe NAIC annually calculates a numberof financialratios to assist state in?uranceregulators

112、-inmonitoringthefinancialconditionof insurancecompanies.A“usual range”of results for each ratio is used as a benlmark.Departurefrom the usual range on.foyr or more of the ratios couldlead to inquiriesfrom individual state insurancecommis-sioners as to certain aspects of a companys business.Ameri-can

113、.Indemnityhad four ratios which were out of the“usualrange.”Two of the ratios,“change in net writings”and“change in surplus;resulted from a 100 percent reinsuranceqtuta share contractbetween AmericanIndemnityand the,sCo:mpany which was effective January 1,2000,for all newand renewal policies.This ar

114、rangementhad the effect ofdecreasing premiumwritings,thus resulting in a decrease innet writings(“change in net writings”)of 100 percent.Thequota share arrangementalso contributedto a substantialincrease in the statutolysurplus(change in surplus”)ofAmericanIndemnityCompany.The quota share agreementc

115、ontributedto the improved statutory financialcenditionofAmericanIndemnityCompany.To comply with NAIC and state insurancedepartments.solvency regulations,the Company is required to calculateaminimumcapital requirementbased on insurancerisk fat-tors.The risk-basedcapital resdtsare used to identificom-

116、panies that merit regtiatoryattentionor the initiationofregulatoryaction.At December31,2000,both the life seg-ment and the property and casualty segment had capital wellin(excessof the required levels.The Company is not aware ofany other current recommendationsby the NAIC or otherregulatory authorit

117、iesin the states in which the Companyconducts business that,if or when implemented,would havea material effect on the Companys liquidity,capitalresources or operations.To the extent that actual results differ from the assumptionsutilized,the Companysdurationand raie increase measurescould be signifi

118、cantlyimpacted.Additionally,the Companyscalculationassumes that the current relationshipbetweenshort-termand long-terminterest rates(the term structureof interest rates)will remainconstantover time.As a result,these calcdationsmay not mycapture the pactof non-parallel changes in the term structureof

119、 interest rates and/orlarge changes in interest rates.Foreign currencyexchange.rate;iskarises from the possi-bility that changes in foreign currencyexchange rates willaffect the fair value of financialinstruments.The Companyhas limited foreign currencyexchange rate risk in its trans-actions with for

120、eign reinsurers.This activity relates to thesettlementof amountsdue to or from foreign reinsurers inthe normalcourse of business.Managementconsiders thisrisk to be immaterialto the Companysoperations.Equity price risk is the potentialloss arising from changesin the fair value of equity securities.he

121、 Compansexpo-sure,to this risk relates-to jts.eqsecuritiesportfolioandcovered call options that have been written at various times.Covered call options have been writtenat various times togenerate additionalportfolioincome.The market risk asso-ciated with the Companyscovered call options is mini-miz

122、ed,as the covered call optionsare written on commonstocks that are held in the portfolioand that are“out of themoney”(written above the stocksmarket value at time ofcontract).If the market price of this underlyingcommonstock were to decline,it wotidbe unusual for the option tobe exercised since this

123、 exercise price wotidbe higher thanthe market price.At December31,2000,there were no opencovered call options.Other assetsCommissionsand other costs of underwritinginsurance,which vary with and are primarilyrelated to the productionof business,have been deferred and capitalizedto the extentrecoverab

124、le.The resultingasset is referred.to as deferredacquisitioncosts(DAC),and constitutesthe Companyssecond largest asset,after investments.The DAC asset isamortizedover the life of the insurancepolicies written,toattain a matchingof revenue to expenses.The Companyslife segment had an increasein deferre

125、d acquisitioncosts of$5,473,000,or 8,0 percent,to$75,014,000,due principallytoits growth in statutorypremiumvolume.Deferredacquisi-tion costs of the propertyand casualty segment increasedin2000 by$2,852,000,or 14 percent,to$23,385,000alsoattributableto an increasein premiumvolume.Accounts receivable

126、are amountsdue from propertyandcasualty insuranceagents and brokersfor premiumswritten,less commissionspaid.These receivablesincreasedby25 percent or$12,651,000,from$51,3g4,000to$63,955,000between 2000 and 1999.The increase in property and casu-alty writings accountedfor the growth in this asset.Ana

127、llowance for doubtful accountsof$1,173,000has beenestablished at December31,2000,comparedto$899,000atDecember31,1999.The Company did not experiencediffi-cdtiesin collectingbalances from its agents in 2000 or 1999.The Companys other assets are composed primarilyof accrued investmentincome,property an

128、d equipment(primarilyland and buildings),and reinsurancereceivables(amountsdue fi-om the Companys reinsurersfor lossesand expenses).LiabilitiesThe Companys largest liability is that of future policy bene-fits,which relates exclusively to the life segment,and isestablished to provide for the payment

129、of policy benefits thatare to be paid in the future.With respect to annuity andmost universal life products,the Company records a liability30s41,93418,33810,03727,564+6,863,113,7.229,69240,596”2,66211,6133,5754,4481.91.66.71.90.87.30.813.8.13.05.73.18.65.20.31.23.012.66.8.3.6,.1.1i.1215,6188.194,150

130、2)n7-Ju/9415,584444,501.13,131.9,4664,1163,608.,4s.7i.7S.1.6.S%.+:,4.92.11.9-.15,414S.o4400.2.-8,S564.6.=.$322278100.0%0$193,175100.0%.ORGANIZATION“United Fire”or“the Company”refers to United Fire&Casualty Companyor United Fire&Casualty Company andits consolidatedsubsidiaries,as the context requires

131、.TheCompanyis engaged in the businessof writing property,casualty and life insurance.The Company is an Iowa corpo-ration incorporatedin January1946.Its principalexecutiveoficeis located at 118 Second Avenue SE,P.O.Box 73909,Cedar Rapids,Iowa 52407-3909.Telephone319-399-5700.The Companys propertyand

132、casualty segment includesthe followingcompanies,all of which are wholly owned byUnited Fire:Addison InsuranceCompanyan Illinois prop-erty and casualty insureuLafayette InsuranceCompany,aLouisianapropertyand casualty insurer;and AmericanIndemnityFinancialCorporation,a Delaware holding com-,.pany.Addi

133、son InsuranceCompanyis,the sole o;rnerof Addi-son lns,uance AgenqL an,Illin”6is general agency.LafiyetteInsuranceCompanyis the sole owner of Insurante Brokers&Managers,Inc.,a Louisianageneral agency.AmericanIndemnityFinancialCorporationowns inexcess of 99.9 percentof AmericanIndemnityCompany,aTexas

134、propertyand casualty insurer.AmericanIndemnityCompanyhas three wholly owned subsidiaries:Texas Gen-eral IndemnityCompany,a Coloradoproperty and casualtyinsure AmericanFire and Indemnit y Company,a Texasproperty and casualty insurer;and AmericanComputingCompanya non-insurerutilized for inter-companye

135、quip-ment financing.United Fire Lloyds,a Texas property andcasualty insurer,is an affiIiate of and operationallyandfinanciallycontrolledby the Company.The Companys life insurancesegment subsidiary isUnited Life InsuranceCompany(“UnitedLife”),a whollyowned Iowa life insurancecompany.A table reflectin

136、gpremiums,operatingresults and assetsattributableto the Companyssegmentsis inc?.uded in Note11 of the Notes to ConsolidatedFinancialStatements.As ofDecember31,2000,the Companyand its subsidiariesemployed 737-timeemployees.MARKETINGThe Companymarketsits productsprincipallythrough thefollowingfive reg

137、ionallocations:1)Cedar Rapids,Iowa 118 Second Avenue SE,P.O.Box 73909,Cedar Rapids,IA 52407-3909(which also serves as the Companys home office)2)Westminster,Colorado 73o1 N.Federal,Suite302,P.O.Box 850,Westminster,CO 80030-49193)Lincoln,Nebraska 13140Street,Suite 500,P.O.Box 82540,Lincoln,NE 685014)

138、New Orleans,Louisiana 2626 Canal Street,P.O.Box 53265,New Orleans,LA 70153-32655)Galveston,Texas 2115Winnie,P.O.Box 1259,Galveston,TX 77550The Company is licensed as a property and casualtyinsurer in 40 states,primarilyin the Midwest,WestandSouth.Approximately2,124 independentagencies representthe C

139、ompany and its property and casualty subsidiaries.The life insurancesubsidiaryis licensed in 24 states,primar-ily Midwesternand Western,and is represented by approxi-mately 1,280 independentagencies.The regional offices of the Company are staffed withunderwriting,claims and marketingrepresentativesa

140、ndad,iistrativetechnicians,al of whom provide support.ald assistanc to-”theindependentagencies.Mso,homeoffice staff techniciansand specialists provide support to thesubsidiariesand regional offices,as well as to independentagencies.The Companyuses managementreports to nloni-tor subsidiary and region

141、al offices for overall resdtsandconformityto Company policy.The Company competesin the United States propertyand casualty insurancemarket with more than 3,500 otherhsurers.The industry is highly competitive,with insurerscompetingon the basis of service,price and coverage.Because the Company relies h

142、eavily on independentagen-cies,it utilizes a profit-sharingplan as an incentive to placehigh-qualityproperty and casualty business with the Com-pany.For 2000,property and casualty agencies will receiveprofit-sharingcommissionsof an estimated,767,000.To competein the service arena,the Company has ana

143、gency interface system for utilizationby its agency forceallowing on-lineapplicationand acceptanceof risksasys-tem which has greatly reduced processingtime for both theCompany and its agents.In addition,the Companys web-site allows for on-linequotes and billing inquiry.The life segment also operates

144、 in a highly competitiveindustry.The Companyencounterssignificantcompetitionin all lines of business from other life insurancecompaniesand horn other providersof financial services.The life seg-ment utilizes competitivecommissionrates tind other salesinducementsto atactand maintainits relationshipwi

145、thindependentagencies.The combinedratios in the following table,whch relate toproperty and casualty ksurance,;re the sum of the follow-in the loss ratio,calcdatedby dividing net losses incurredby net premiumsearned;the loss adjustmentexpense ratio,calctiatedby dividing net loss adjustmentexiensesinc

146、urredby net premiumsearnedand the underwritingexpense ratio,calculated by dividing underwritingexpenses incurred by netpremiums written.The ratios in the table have been preparedon both a statutory basis and a generally accepted accountingprinciples(“GAAP”j basis.Generally,if the combinedratio isbel

147、ow 100 percent,there is an underwritingprofit;if it isabove 100 percent,there is an underwritingloss.115110105110095,.90F,5onClu1996199719981999STATUTORYCOMBINEDKconlparl,IndustryoooRATIOS(Dollars inThousands)Statutory BasisGMPBasisYearsEnded December 3120001999199820001999199sNet prerniunswritjn-.:

148、-.$.“325,(3529“$254214$221:002“-$325,052$254,114$221,002hTetPremiums earned307,271247,054220,550307,271247,054220,550Lossesand loss adjustment eense ratio74.2yo75.6%81.9%73.6%75.19681.%Undervritingexpense ratio31.733.43931.734.134.0Combined ratio105.9%109.OVO114.8%105.3%109.2%115.2%Underwritingloss:

149、t(5.9)o(9.O)o(14.8)V0,?(5.3)%(9.2)%(15.2)%,.,:,!.,.,Life insurancesegmenttion in the event of disability and/or death.United Life alsoUnited Life undervrites and markets single-premiumwholeoffers an individualdisability income rider that is attachedlife insurance,term life and universal life insuran

150、ce,annu-to the ordinary life insuranceproducts.ities,credit life insuranceand individualdisability incomeTotal life insurancein force,before reinsurance,isproducts.ItiileUnited Lifes lead annuity product is a sin-$3,930,948,000asof December31,2000.Universal life insur-gle-premiumdeferredannuity,it a

151、lso offers flexible premi-ance represents47 pekcent of instirancein force at Decemberurnaruities.The credit life insrance busirless in”volvesthe31,2000,comparedto 49 percent at December31,1999.sale of credit life and credit accident and health products,The following table presents informationon Unit

152、ed Life netvorbgin conjunctionto satisthe need for debt protec-premiumsearned informationfor the last three years on aGA.AP basis.(Dollars inThousands)Years Ended December 3121DO()Percent of Total1999Percent of Total1998Percent of Total.Universallife$9,01634.3%$8,69633.3%$10,52441.6%Ordinary life(ot

153、her than uni:ersal)4,75318.15,19919.94,91719.4Accident and health5,34120.35,27120.24,39817.4Arrnuities2,4229.22,2648.71,6136.4Credit life4,53717.24,49317.23,69414.6Group accident and health2350.9.,1770.71490.6“Totalnet premiums earned$26,304100.OVO$26,100100.0%$5,95100.0%-.PRODUCTS.Propertyand casua

154、ltyinsurancesegmentThe Company writes both personal and commerciallines ofinsurance.Personal lines are composedmostly of automo-bile and homeowners,but also include recreationalvehicles,watercrti,dwelling fire and umbrellapolicies.The majorityof commercialinsuranceconsists of business packages,which

155、 include property,liability,inland marine,commercialautomobile,workers compensationand umbrella.TheCompany also writes fidety and surety bonds.Specialtypolil:ies written include the CommercialUni-Saver;Trade-Pro for contractors;Garag-Pro;Blanket Mortgage;andsome forms of Errors and Omissionsinsuranc

156、e.The following table sets forth statutory property andcasualty net premiumsearned,net losses incurred(exclud-ing net loss adjustmentexpenses)and the loss ratio(ratio ofnet losses incurredto net premiumsearned),by lines ofinsurancewritten,for the three years ended December31,2000,1999 and 1998.(Doll

157、ars inThoumnds)Yea:s Ended December 31200019991998Fire and alliedlines(1)Net premiums earned$96,894$76,557$69997Net losses incurred“60,07640,17651,418Loss ratio62.OVO52.5%73.5%Automobile.-.:vet premiums earned$85,323“$64,558$54,042Net losses incurred53,41244,82437,828Loss ratio62.6%69.4%70.OVOOther

158、liabilityNet premiums earned$57,720$38,922$31,804Net losses incurred18,66717,26612,400tLoss ratio32.3%44.40/039.OVOWorkers compensationNet premiums earned$25,858$20,524$20797Net losses incurred12,56715,11916,275Loss ratio48.6%73.7V078.3%Fidelity and suretyNet premiums earned$18087$18,129$17,669Net l

159、osses incurred2,1383871,748Loss ratio11.8%2.l%9.9%ReiustianceNet premiums earned$22,539$27,739$25,708Net losses incurred36,54734,00324,647Loss ratio162.2%122.6%95.9%Otier.-.Net premiums earned$850$625$533Net losses incurred712.668Loss ratio83.8%10.6%1.5V0Total property and casualtyNet premiums earne

160、d$307,271$247054$220,550Net losses incurred184,119151,841144,324Loss ratio59.9%61.5%65.4%(1)“Fireandallied lines”includes farmowners,homeowners,commercial mdtipleperilandfidandmarine.,.(Dollars inThousands)Years Ended December 312000“-Percent of Total.-1999“Percentof Total1998Percent of Total-.Fire

161、and aIIiedlines(1)$16,7766.419,7517.819,0008.6Reinsurance assumed24,:797.429,95011.sg,97913.1Other1,4830.51,0440.48000.4Aggregatedirect and assumed.-,.,=.-.,g-premiums written347,800106.9278,245109.5242,206109.6Reinsurance ceded22,748$270-100.0?6$221,002“-100.0?4“;(1)“Fireandallied lines”includes fa

162、rmokmers,homeoi,ners,commercial multiple perlandinland marine.Life insurancesegmentUnited Life reinsures a portionof its exposure and cedes toreinsurers a portionof the premiumreceived on the policiesreinsured.United Life inters tito refistirane-areernentstoreduce the net liability on individualrisk

163、s to predeterminedlimits.United Life retains$200,000per insured and reinsuresthe excess.The ceding of reinsurancedoes not legally discharge Unit-ed Life from primarlliabilityunder its policies.United Lifemust pay the.1OSS if the reinsurer fails to meet its obligation.The Company monitorsthe financia

164、lconditionof its rein-surers.At December31,2000and 1999,there are no uncol-lectable reinsurancebalances that would result in a materialimpact on the Companysfinancial statements.United Lifefollows GAAP and the industry practice of acccunting forinsurance Wittenand losses incurrednet of reinsurancece

165、ded.United Lies primary reinsurancecompaniesare ERCReinsuranceCompanyRGA ReinsuranceCompany andBusiness Mens AssuranceCompanyof America.These com-panies insure both life and disability risks.RESERVESPropertyand casualtytisurancesegmentApplicable insurancelaws require the Companys propertyand casualt

166、y segment to maintainreserves for losses and lossadjustmentexpenses with respect to both reported and unre-ported losses.The Companys property and casualty segment establishesreserves for reported losses one of two ways.For some classesof claims under$5,000,reserves are set based upon a sched-ule,de

167、terininedby averaging claims paid over a 13-monthperiod.All other reserves are establishedon an individualcase basis.These reserves are based upon policy provisions,accident facts,hjuryor damage exposure,trends in the legalsystem and other factos.The amount of resen!es,for,une-ported losses is deter

168、ilined for each line oilsurance byusing the probable numberand nature of losses arising hornoccurrenceson the basis of historicaland statistical informa-tion.Once reserves have been established,they are closelymonitoredand adjusted as needed.Loss reserves arestimatesat a given time of the ultimate.a

169、mount exTected to be paid on incurred losses.Estimates arebased on facts and circumstancesknown when the estimatesare:made.Reserves are not discounted for the time value ofmoney.The loss settlementperiod on insurance losses maybe many years,and as additionalfacts regarding individuallosses become he

170、wn,it often becomes necessary to refineand adjust the estimates of liability on a loss.Inflationisimplicitly provided for in the resewing finctionthroughreview of cost trends,historicalreserving results and projec-tions of future emnornicconditions.Reserves for loss adjustmentexpenses are intended t

171、ocover the actual cost of investigatinglosses and defendinglawsuits arising from losses.These reserves are continuouslyrevised based on historicalanalysis and managementsexpectations.Lde insurancesegmentU&ted Life?s reserves meet,or exceed,the minimumstatuto-ry Iowa InsuranceLaw requirements.These r

172、eserves aredeveloped and analyzed By independentconsulting actuaries.The reserves reflected h the Companys ConsolidatedFinan-cial Statementsare calculated in accordance with GM.Th:se reserves are determinedbased upon the CompanysInsolidatednet premiumswritten.The following table shows the statutory

173、consolidatednet premiumswritten and annuity deposits during the last three yearsby major category.(Dolt.rs inThousands)Years Ended December 312o100Percent of Total1999Percent of Total1998Percent of TotalFire and allied lines(1)$103,38520.0%$77,27018.l%$69,60618.5%Automobile89,92517.465,73015.454,902

174、14.6Other liability62,31312.143,43310.231,7388.4Workers compensation27,8555.421,7355.1203325.4Fidelity and surety19,3653.718,3954.317,8394.7Reinsurance21,2444.1269446.3260526.9Other property and casualty9650.27070.25330.1Life and accident and health2614275.127,2936.334,9619.5hnuitydeposits165,18132.

175、0145,81034.1119,71731.9$516,660100.OVO$427,317-Ioo.ovo$375680100.0%(1)“Pire andatlied tines”includes farmowners,homeolvners,commercial mrdtiple perilandirdand marine.,.,.REINSURANCEPropertyand casualtyinsurancesegmentThe Company has acted as a reinsurer,assuming both prop-erty and casualty reinsuran

176、cefrom other insuranceor rein-surance companies.The bfiof the business assumed isproperty reinsurancewith e emphasis on catastrophecov-ers.During the second quarter of 2000,the Conmpany decid-ed to significantlyreduce its writings of assumed reinsurancebusiness.A small portionof the business expired

177、 on July 1,2000,and the bulk of the business expired on December31,2000.Contractswill be renewed with a very limited numberof brokers to continuewriting assumed reinsurancebusiness.The Company will continueto have exposure related to theassumed reinsurancecontractsthat were previously written.The Co

178、mpany follows the industry practice of reinsuringaportionof its direct and assumed reinsurancecosureandcedes to reinsurersa portionof the premiumreceived.Reinsuranceis purchasedto reduce the net liability on indi-vidual risks to predeterminedlimits and to protect againstcatastrophiclosses such as hu

179、rricanesand tornadoes.Suchcatastropheprotectionis purchasedon both direct andassumed business.The Companyuses many reinsurers,bothdomesticand foreign.There are no concentrationsof creditrisk associated with reinsurance.PrincipalreinsurersincludeEmployersReinsuranceCorporation,AXA Reassurance,Contine

180、ntalCasualty Companyand Partner Re.msuranceCompanyof the U.S.-The tiisonisksretained by the Companys property“and casualty segment vary bylineof business,and risks inexcess of the retentionlimits are reinsured.For the propertylines of business,the retentionis$1,000,000.The foowing table presents the

181、 casualty business reten-tion levels.Accident YearsCasualty Retention1983andprior$225,000-1984through19865ao,ooo1987through1991soo,oao1992through1994750,0001995andlaterl,ooo,oao.The ceding of reiusurancedoes not legally discharge theCompany horn primary liability under its policies,and theCompany mu

182、st pay the loss if the reinsurer fails to meet itsobligation.The Company monitorsthe financial conditionofits r,tinsurers.At December31,2000 and 1999,there are noUncollectablereinsurancebalances that woddresult in amaterial impact on the Companys financial statements.Inaccordance with GAAP and indus

183、try practice,the Companyaccounts for insurance written and losses incurrednet ofreinsuranceceded.The table on the following page sets forth the statutoryaggregate direct and assumed premiums written,ceded rein-surance and net premiumswritten for the three years endedDecember31,2000,1999 and 1998.Ibe

184、st estimates of mortalityand morbidity,persistencyexpenses and investmentincome.Statutory reserves aredeterminedbased upon mortalityrates and interest ratesspecfiedby state law.INVESTMENTSThe Company must comply with state insurancelaws thatprescribe the kind,quality and concentrationof investmentst

185、hat may be made by insurancecompanies.The Companydeterminesthe mix of its investmentportfoliobased uponthese state laws,liquidity needs,tax positionand generalmarket conditions.The Company must also consider the,timing of when liability obligationsare due.Modificationsare made to the investment port

186、folioas the conditionslistedabove change.”Invested assets relating to the property andcasualty segment are invested to meet liquidity needs andmaximize after-tax returns with appropriate risk diversifica-tiol.Assets relating to the life insurancesegment are investedto meet liquidity needs,maximize t

187、he investmentreturn andachieve a matching of assets and liabilities.Substantially,allbond purchases in 2000 were taxable bonds rather thanmunicipal bonds,due to the more attractive yields offered bytaxable bonds.Investment results for the years indicated are summarizedin re following table.(Dollars

188、inThousands)YearsEnded December 31AverageInvestedAssets(1)hvestment Income,Net(2)AnnualizedYield on AverageInvestedAssets2000$1,316906$86,8676.6%19991,157,41475,3176.51998.,-.“1,040,00867,9286.5(1)Averageofatiountsatbeginning andendofyear.(2)Invwtment income afterdeduction ofinvestment expenses,butb

189、efore applicable income tax.CONSOLIDATEDBALANCESHEETSDecember 31,2000and 1999(Dollars inThousands Except Number ofShares.ASSETS20001999hvestrnents(Notes 2,3 and 4).FiedmaturitiesHeld-to-maturity,at amortized cost(market value$292,857 in 2000and$314,168 in 1999)$283,431$311,152Available-for-sale,at m

190、arket(amortized cost$952,949 in 2000and$800,467 in 1999)928,947768,307Equity securities,at maket(cost$30,667 in 2000 and$3S,755 in 1999)111,132109148Policy loans8,4378,645Other long-term investments,at market(cost$12,326 in 2000and$12,841 in 1999)12,86413,328Short-term investments58,29(I20,131$1,403

191、,101$1,230,711“Cashland Castl Eqti#aIeris9,749Accr-tied-SX1eLIrlcoiiie(Note 4)22,57si9,857Accounts Receivable,(net of alloante for doubtiul accountsof$1,173 in 2000 and$899 in 1999)63,95551,304Deferred Policy Acquisition Costs9839990,074Property and Equipment,primarily land and buildings,at cost,les

192、s accumulated depreciation of$27,I;2 in 2000 and.$25;912 in 199916,73216,S63Reinsurance Receivables(Note 6)41,48729,715Prepaid Reinsurance Premiums2,8463,019Intangibles6,459S,044Income Taxes ReceivatieOSote9)-IJE1,169Other Assets6,2797,211TOTAL ASSETS$1,662,494$1,467716LIABILITIES AND STOCKHOLDERS E

193、Q.TYLiabilitiesFuture policy benefits and losses,claims and settlement expenses(Notes 6 and 7)Property and casualty insurance$358,032$338,243Life insurance(Note 4)822,158701,350Unearned premiums165,212148472Accr-edexTerlses and oleiiabtides34,30322043Employee benefit obligations(Note 10)13,115,12,3S

194、5Deferred income taxes(Note 9)12,2457,430TOTAL LIABILITIES$1,405,065$1,229,923-.,STOCKHOLDERSEQUITYCommon stock,$3.33/,par value;authorized 20,000,000 shares(Note 13)10,035,819 shares issued and outstanding in 200010,060,084 shares issued and outstanding in 1999$33,453$33,534Additional paid-in capit

195、al69127,5Retained earnings(Note 8)172,346163,953Accumulated other comprehensive income,net of tax44,71833,054TOTAL STOCKHOLDERSE6TY$257,429$237,793“TOTAL LIABILITIESAND STOCKHOLDERSEQUITY$1,662,494$1,467,716me Notes toConsolidatedFinancial Statements areanintegral partofthese statements.,.CONSOLIDAT

196、EDSTATEMENTSOFOPERATIONSYearsEnded December 31,2000,1999and 1998(Iollars inThousands Except PerShare DataandNumber ofShares),.200019991998RevenuesNet premiums earned(Note 6)$333365$273,051$245,727Investment income,net(Note 2)86,86775,31767,928Realized investment gains(losses)and other income(Note 2)

197、(1825)2,93622,796“-Commission and uolicv fee income2,1721,9121815.$420,579$353,216$338,266Benefits,Losses and ExpensesLosses and settlement expenses$236,807$197,291$191,388Increase in liability for future policy benefits6,24i5,1573,707Arnortiza998$309,s70Income before ticome taxes$-7j349.$17,218$28,

198、396Federal income tixes(Note 9)1,822-1,8344,719Net ficome$-15,527$:15,384.$23,677.”-,-Earnings available to common shareholders(Note,fi)“$15,527$15,384$2677Weighted averagecommon shares outstanding(Note 13)10I,O47,24810,079,56310,393,930Basic and diluted earnings per common share(Note 13)$1.55$1.53$

199、2.28TheNot=”toConsolidatedFinancial Statements areanintegral Pti ofthesestatements.J.i.,-.,.,.,?CONSOLIDATEDSTATEMENTSOF STOCKHOLDERSEQUITYYears Ended December 31,2000,1999 and 1998(Dollars inThousands&ceptPerShare DataandNumber ofShares).;Accumulated Other*AdditionalComprehensieCommonPaid-InRetaine

200、dIncome,stockCapitalEarningsNet of TaxTotal,.Balances,December 31,1997$35,758$9,331$161,)906.$70,213$277,20Sd.Net incomeI.3,677Change in net unrealized23,677depreciation(,1)(10,918)(10,91s;Total comprehensieincome(Note 14)1,759=+Cash ditidenddeclared oncommon stock,$.67 per share(6,964)(6,964)Purcha

201、se and retirement of635,60 I shares of comrron stock(2,119)(1,404)(23,19s)-(6,71).,Balances,December Si,i 998$33:639-$-7,927$155,421,$59,295$5678.Transition adjustment for e.effect of a change in accounting.principle,net of tax(Note 1).6,0136,013Net income“.A,15,38415.384.-“Change in net unrealized.

202、depreciation(I)(32,254)(32,25+;_,Total comprehensireloss(Note 14)-(10,857)Cash ditidenddeclared oncommon stock,$.68 per share(6,S52)(6,852)Purchase and retirement of.?31,637 shares of common stock(105)_,(675)(7s0)_Balances,December 31,1999$33,534$7,252$163,953$33,054$237,793Net income.15,52715,527-+

203、Change in netunrealized appreciation(I).11,66411,664_ITotal comprehensie income(Note 14)”27,191-Cash diidenddeclared oncommon stock,$.71 per share(7,134)-(7,134)Purchase and retirement of.24,265 shares of common stock(81)(340)(421)Balances,December 31,2000“$33,453$6,912$172,346$44,718$257,429“-(1)Th

204、echange innetrmrealtied appreciation(depreciation)isnetofreclassificatic,nadjustmentsandincome t=es.(SeeNote14).,TheNotes toConsolidatedFinancial Statements areanintegral partofthese statements.CONSOLIDATEDSTATEMENTSOFCASHFLOWSYearsEnded December 31,2000,1999and 1998(Dollars inThousands).20001999199

205、8Cash Flows From Operating ActivitiesNet Income$15,527$15384$23,677Adjustments to reconcile net income to net cashprovided by operating activitiesNet bond discount accretion$(370)$88$(1,428)Depreciation and amortizationRealized net investment(gains)lossesChanges hAccrued investment incomeAccounts re

206、ceivableDeferred policy acquisition costsReinsurance receivablesPrepaid reinsurance premiumsIncome taxesreceivable/payable,Other assetsFuture,poiiq benefits and losses,claims adsettlement expenses.“Unearned premis!,Accrued expenses and other liabitis.-“-”Employee benefit obligationsDeferred income t

207、axesOther,net4,4522,082(2,721)(12,651)(8,325)(11,772)17351193225,96916,74012,260730(1,465)4713,078(2,303)(2,795)6,338(18,092)5,4933,1742,588(1,372)19,3003,275(14;214“-2572(1,293)13,231468(22,793)(1,971)(808)(7377)1,5201,141(7,064)3,044202588122-5491148609(1,034)Total aditisttnents$27.016$19.068Sf5.6

208、16),Net cash provided by operating activities,.,.,-$42:543“,$34:452$18,061Cash Flows From Invesg Activities,.Proceeds from saleof available-for-sale investments$68,963“$35,653$78471Proceeds from calI and maturity of held-to-maturity investments31,61435,398101,180Proceeds from call and maturity of av

209、ailable-for-sale investments68,03895,76231,084Proceeds from sale of other investments126,035102,25638,956Purchase of heId-to-matnrity investments(3,482)(1,682)(14,461)Purchase of available-for-sale investments(284,116)(295,670)(258,744)Purchase of other investments.(163,036)(86,856)(55,972)Proceeds

210、from sale of property and equipment1041,4693,009Purchase of property and equipment(3,485)(1,429)(2,120)Acquisition of property and casualty company net of cash acquired(22,249)Net cash used in investing activities$(159,365)$(137,348)$(78,597)Cash Flows,From Financing ActivitiesPolicyholders account

211、balancesDeposits to investment and universal-life-type contracts$218,951$189,715$158,491Withdrawals from investment and universal-life-type contracts(104,323)(69,432)(66,648)Purchase and retirement of common stock(421)(780)(26,721)Payment of cash dividends(7,134)(6,858)(6,964)Net cash providedby fin

212、ancing activities$107,073$112,645$58,158Net Increase(Decrease)in Cash and Cash Equivalents$(9,749)$9,749$(2,378)Cash and Cash Equivalents at Beginning of Year9,7492,378Cash and Cash Equivalents at End of Year$-$9,749$-TheNotes toConsolidatedFinancial Statements areanintegral partofthesestatements.,N

213、OTESTOCONSOLDATEDFINANCIALSTATEMENTSNOTE1.SIGNIFICANTACCOUNTINGPO LIIZIESNature of operations,principlesofconsolidationand basis of reportingThe Consolidated Financial Statements have been prepared onthe basis of generally accepted accounting principles(“GAAP”),which differ in some respects from tho

214、se followed in reports toinsurance regulatory authorities.United Fire&Casualty Company(the“Company”)and itsinsurance subsidiaries are engaged in the business of propertyand casualty insurance and life insurance.The accompanying Consolidated Financial Statementsinclude United F.re&-Casual Company and

215、 its wholly ownedsubsidiaries,United Life Insurance Company,LafayetteInsurance Company,Insurance Brokers&.Ma,nagers,Inc.,Addison Insurance Company,Addison Insurance Agency,UFCPremium.Finance Company,.kr-eiicn?ndemnity FinancialCorporation,American Indemnity Company,A_rn.erican Fireand Indemnity Comp

216、any,Texas General Indemnity Company,American Computing Company,and the affiliate United FireLloyds,which is financially and operationally controlled by theCompany.AUmaterial intercompany items havebeen elirninat-.,ed in consolidation.+.-.“?he prepratioil of fiiancial statetients in confoi-mfiyFith“G

217、AAP requires management to make estimates and assump-tions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of1ct.tf=m.e”tc.n+1.0.onnr+-.,-,-.,.,.+.-.,-.-”.cfi-p.p.cz.=.-.”-.L.y-.=-1.”=.“.AL“L,l.1*and expenses during the report

218、ing period.Actual results coulddiffer from those estimates.Certain amounts included in the Consolidated FinancialStatements for prior years have been reclassified to conformwith the 2000 financial statement presentation.Propertyand casualtysegmentPremiums are reflected in income on a daily pro rata

219、basis overthe terms of the respective policies.Unearned premium reservesare estabLishedfor the portion of premiums written applicableto fhe unexpired term of policies in force.Certain costs of undenvriting newbusiness,principallycommissions,premium taxes and variable underwriting”andpolicy issue exp

220、enses,havebeen deferred.Such costs are beingamortized as premium revenue is recognized.The method fol-lowed in computing deferred policy acquisition costs limits theamount of such deferred costs to their estimated realizablevalue,which gives effect to the premium to be earned,lossesand expenses,and

221、certain other costs expectecto be incurred asthe premium is earned.Unpaid losses and settlement expenses are based on esti-mates of reported and unreported claims ancl related settle-ment expenses.While management believes the reserve forclaims and settlement expenses is adequate,the reserve is con-

222、tinually reviewed and,as adjustments become necessary,theyare reflected in current operations.Changes in assumptionsused in estimating reserves could cause the reserves to changein the near term.Liie segment.On whole life and term insurance(traditional business),pre-miums are reported as earned vhen

223、due,and benefits andexpenses are associated with premium income so as to resultin the recognition of profits over the lives of the related con-tracts.On universal life and annuity(nontraditional)busi-ness,income and expenses are reported as charged and credit-ed to policyholder account balances thro

224、ugh the use of theretrospective deposit method.This method results in therecognition of profits over the!ives of the related contracts,which is accomplished by means of the provision for futurepolicy benefits and the deferral and subsequent amortizationof life policy acqlisition costs.The costs of a

225、cquiring new life business,principally commis-sions a?.dcertavariable ur.derwriir.g,agen-y and policy issueexpenes,havebeen deferred.TheseCOStSareegElcrzedto income over the premium paying period of the related tradi-tional policies in proportion to the ratio of the eected annualpremium revenue to t

226、he expected total premium revenue,andover the anticipated lives of.nontraditional policiesin propor-tion to the ratio of the expected annual gross margins to tlc.ee-ct?dtotil gross margins.The expeutedpremium revenueand gross margins are based upon the same mol-tality and withd-rawalassumptions used

227、 in determining future policy benefits.For nontraditional policies,changes in the amount or timing of-TrT.afi+a AG-A.-”0:-.,.:11-.-1.:-e.yeb.-u.vo.UL=UL.,LULLOULLL,Iadj-tmilttcJ tiie culIlula-tieamortization of these costs.The effect on the amortization of deferred poli acqti;sitioncosts for revisio

228、ns to estimated gross profits is reflected in earn-ings in the period such estimated gross profits are revised.Theeffect on the deferred policy acquisition costs that would resdtfrom realization of unrealized gains(losses)is recognized withan offset to accumulated other comprehensive income in theCo

229、nsolidated Statements of Stockholders Equity as of the bai-ance sheet date.As of December 31,2000,an adjustment todecrease deferred policy acquisition costs by$336,000was made with a corresponding decrease to accumulated othercomprehensive income.In 1999,the adjustment was to iwreasedeferred policy

230、acquisition costs by$12,808,000.Liabilities for future policy benefit$are computed by the netlevel premium method using interest assumptions rangingfrom 4.5 percent to 8.0 percent and withdrawal,mortality andmorbidity assumptions appropriate at the time the policieswere issued.Health reserves are st

231、ated at amounts determinedby estimates on individual cases and estimates of unreportedclaims based on past experience.Liabilities for universal-life-type arid investment contracts are stated at policyholderaccount values before surrender charges.Liabilities for tradi-tional immediate annuities are b

232、ased primarily upon statutoryreserves.Policy claim liabilities are determined using actuarial esti-mates.These estimates are based on historical information,along with certain assumptions about future events.Changes inassumptions for such things as medical costs,environmentalhazards and legal action

233、s,aswell as changes in actual experi-of the underlying asset.Any impairment of goodwiUwodd beence,codd cause these estimates to change in the near term.charged to operations in the period that the impairment,wasrecognized.The Company did not take m impairment write-Investmentsdown of goodwill or oth

234、er intangibles in 2000,1999or 1998.Investments in held-to-maturity fixed-income securities areAmortization exTense totaled$940,000,$620,000,andrecorded at amortized cost.The Company has the abiIity and$265,000 for the years ending December 31,2000,1999andintent to hold these investments until maturi

235、ty.Available-for-“1998,respectively.sale fixed-income securities,equity securities and other long-term investments are recorded at fair value.If an other-than-temporary impairment occurs in a security,the Companywrites the security down to the new value and recognizes a lossin current earnings.Polic

236、y loans and short-term investmentsare recorded at cost.Included in investments at December31,2000 and 1999,are securities on deposit with various reatoryauthorities,as required by law,with carrying values of$896,059,000 and$755,436,000,respectively.Realized gains or losses on disposition of investme

237、nts areincluded in the computation of net income.Cost of invest-ments sold is determined by the specific identification method.Changes in unrealized appreciation and depreciation,resultingfrom available-for-sale fixed-income securities,equity securi-ties,other long-term investments and certain life

238、deferred poli-cy acquisition costs,are reported as direct increases or decreases“in stockholders?quity,less applicable income taxes.Reinsnrance”,premiums earned and losses aid setfle.men!expens:are-“”reported net of reinsurance ceded and are accounted for on abasis consistent with those used in acco

239、unting for the originalpolicies issued and the terms of the reinsurance contracts.Cash and cash equivalentsFor,purposes of reportingcashflows,cash and cash equivalentsinclude cash and non-negotiable certificates of deposit withoriginal maturities three months or less.Negative cash balancesare includ

240、ed in accrued expenses and other liabilities.Incometaxespaid during 2000,1999 and 1998 were$2,088,000,$505,000 and$11,201,000,respectively.Through December 31,2000,tax and interest payments received in connection with thesettlement of a federal income tax Revenue Agent Review were$1,160,000 and$889,

241、000,respectively.There were no significantpayments of interest other than interest credited to policyhold-ersaccounts in 2000,1999 or 1998.Property,equipmentand depreciationProperty and equipment is carried at cost less accumdateddepreciation.Depreciation is computed primarily by thestraight-line me

242、thod over the estimated useful lives of theunderlying assets.Depreciation expense totaled$3,512,000,$2,458,000and$203,000 for the years ending December 31,2000,1999and1998,respectively.Amortizationof intangiblesIntangibles,including goodwill and agency relationships,arebeing amortized by the straigh

243、t-line method over periods of up”to 10 years.The carrying value of goodwiUand other intangi-bles is reviewedregularly for impairment in the recoverabilityDuring 2000,the Company reduced goodwill by$645,000as a result of an adjustment to the deferred tax assetvaluationallowance related to the acquisi

244、tion of American IndemnityFinancial Corporation.Refer to Note 9 for firther discussion.IncometaxesThe Company files a consolidated federal income tax return.Deferred tax assets and liabilities are determined at the end ofeach period,based on differences between the financial state-ment bases of asse

245、ts and liabilities and the tax bases of thosesame assetsand liabilities,using the currently enacted statutorytax rates.Deferred income tax expense is measured by thechange in the net deferred income tax asset or liabfity duringthe year.Conttigentliabilities“TheCompany,is”adefendant in legal actions

246、arising from nor-mal business.act.ities.Management,after consultation with.Iegal counsel,is of the opinion that anyliabiLityresulting from“theseactions will not have a material impact on the financialcondition and operating results of the Company.AccountingchangesIn June 1998,the Financial Accountin

247、g Standards Board(“FASB”)issued Statement of Financial Accounting Standards(“SAS”)No.133,“Accouningfor Derivative Instruments andHedging Activities.:In June 1999,SFASNo.133was amendedby SFAS No.137;“Accountingfor Derivative Instruments andHedgingActivities Deferral of the Effective Date of FASBNo.13

248、3 an amendment of FASB Statement No.133.”SFASNo.133 is now effective for all fiscal quarters of fiscal yearsbegintigafter June 15,2000.A company may also implementSFAS No.133 as of the beginning of any fiscal quarter afterissuance.SFAS No.133 cannot be applied retroactively.Thenew statt?mentrequires

249、 all derivatives(including certain deriva-tive instruments embedded in other contracts)to be recordedon the balance sheet as either an asset or a liability at fair valueand establishes special accounting for certain types of hedges.The Company has had limited involvement with derivativefinancial ins

250、truments,and does not engage in the derivativemarket for hedging purposes.Effective January 1,1999,theCompany early adopted SFASNo.133.As part of the imple-mentation of SFASNo.133,the Company was aJlowedtoreassessits held-to-maturity portfolio without“tainting”theremaining securities classified as h

251、eld-to-maturity.The impacton the CompanysConsolidated Financial Statements due tothe reclassification horn held-to-maturity to available-for-sale,effective January 1,1999,increased the carrying value of avail-able-for-sale fixed-income securities by approximately$9,250,000 and other comprehensive in

252、come by approximately$6,013,000,net of deferred income taxes.This is shown as a.change in accounting principle in the Consolidated Statementsof Stockholders Equity.There vasno other material effect,onthe Companys Consolidated Financial Statements.Refer toNote 3 for further discussion.In June 2000,th

253、e FASB issued SFAS No.13S,“AccountingforCertain Derivative Instruments and Certain Hedging Activitiesan amendment of FASB Statement No.133,”vhichvaseffective for all fiscal quarters beginning after June 15,2000,dueto the Companys early adoption of SFASNo.133.This state-ment amends the accounting and

254、 reporting standards of SFASNo.133 for certain derivative instruments and certain hedgingactivities.Because the Company has limited involvement vithderivative financial instruments,and does not engage in thederivative market for hedging purposes,the impact of adoptingSFAS No.138 did not have a mater

255、ial effect on the CompanysConsolidated Financial Statements.Effective January 1,2000,the Company adopted Statementof Position(“SOP”)9S-7,“Deposit Accounting:Accounting forInsurance and Reinsurance Contracts That Do Not TransferInsurance Risk.”The SOP provides guidance on accounting forinsurance and

256、reinsurance contracts that do not transfer insur-ance risk.M of the Companys reinsurance agreements are,.,.risk-transferring arrangements,accounted for according toSFASNo.113,“Accountingand Reporting for Reinsurance ofShort-Duration and Long-Duration Contracts.”The impact ofadopting SOP 98-7 had no

257、effect on the CompanysConsolidated Financial Statements.Effective December 31,2000,the Company adopted StaffAccounting Bulletifi(693540,811Total available-for-sale fixed maturities-$952,949$15,677.$39,679$928,947Equity securitiesCommon stocksPublic utilities$2644$6,626$-$9,270Banks,trust and insuran

258、ce companies8,99944,40911453294AUother common stocks18,65230,47591648,211Nonredeemable preferred stocks372116357Totalavailable-for-sale”equi securities“-”-$30,667$81,511$1,046$111,132Total available-for-sale$983,616$97,188$40,725$1,040,079,Other long-term investments$12,326$1,061$523$12,864Year Ende

259、d December 31,1999(Dollars h Thousands)Arn6rtizedGross Unrealized Gross UnrealizedPdir-Type of InvestmentcostAppreciationDepreciationTeHeld-to-maturity.,Ftied maturitiesBonds.United StatesGovernment,government agencies and authoritiesCollateralized mortgage obligations$1,385$-$581$11,804Mortgage-bac

260、ked securities9,475599310,071All others1,8042052,009States,municipalitii and political subdivisions177,5804,5211,279180,822Foreign3,0354472,99?Public utiIities19,473705g19s5Corporate bondsCollateralized mortgage obligations17,74720836417,591AUother corporate bonds69,65389495369,594Total held-to-matu

261、rity-$311;152$6,501$3,485$314,168-A.rn:lol.l-_$ar-e.au-”.-AU.Fixed maturitiesBonds.United StatesGovernment,government agencies.and authorities,.“*,.“,Cou3fzalized.m,grtgagt?obligations$30;32&.:-a,6.:-“$”730$9,602.Mortgage-backed securities14,899“_ 228214,619All others33,29079932,491States,municipali

262、ties and political subdivisions89,3357355,07884,992.Aflforeign bonds?s RQQ9n29.”,”,.A,”J&25,888,.Public utilities113,1423773,927109,592Corporate bondsCollateralized mortgage obligations66,1571,8001,45966498AIl other corporate bonds424,42098421,779403,625Total available-for-sale freedmaturities$800,4

263、67$3,926$36,086$768,307“Equity securities*Common stocksPublic utilities$8,639$7,758$.1,860$14,537Banks,trust and insurance companies1.2,48635,28146447,303Nother common stocks1.6,69630,412,60946,499hTonredeemablepreferred stocks934125809Total available-for-sale equity securities$-38,755$73,451$3,058$

264、109,148“-”-Total available-for-sale$839,222$77,377$39,144$877.455Other long-term investments$12,841$913$426$13,328The amortized cost and fair value of held-to-maturity andE:pected maturities milldiffer from contractual maturitiesavailable-for-sale freed maturities at December 31,2000,bybecause borro

265、versmay have the right to call or prepayobliga-contractual maturity,are shovnon the follovingpage.tions vithor vithoutcall or prepayment penalties.(Dollars inThousands)“Year Ended December 31,2000Held-to-maturityAvailable-for-salefiortizedCostFair ValueAmortized CostFair ValueDue in one year or less

266、$16,631$16,752$16,452$16,565Due after one year through fiveyears54,20255,617364,673357,036Due after fiveyears throu ten years67,26769,990320,496308,388Due after ten years109,615114,052177,980173,233Mortgage-backed securities7,8328,3381213Collateralized mortgage obligations27:8842810873,33673,712$283

267、431$292,857$952949$928,947Proceeds born sales of available-for-sale investments curinglosses of$10,987,000,$895,000and$385,000,respectively,were2000,1999and 1998 were$68,963,000,$35,653,000andrealizedon those sales in 2000,1999 and 1998.$78,471,000,respectively.Gross gains of$8,172,000,$2,920,000The

268、r(?were no sales of held-to-maturity securities duringand$23,208,000,respectively,were realized on those sales.Gross2000,1999 or 1998.A summary of realized investment gains(losses)resuking from sales,calls and maturities and net changes in unrealized investmentappreciation(depreciation),less applica

269、ble income taes,is as follows.,(Dollars inThousands).Years Ended December 31.200019991998Realizedinvstnient gqs(1OSS$S),.%,-.:.,.,:Fixed maturities$(4,366)$“577$(145)Equity securities1,8471,67822,448Other investments43748490$(2,082)$2,303$22,793Net changes in unrealized investment appreciation(depre

270、ciation)Available-for-sale fixed maturities,“equitysecurities and other long-term investments$18,281$(53,552)$(15,491)Deferred policy acquisition costs(336)13,181(726)Income taxes(6,281)14,1305,299$11,664$(26,241)$(10,918)Net changes in unrealized investment appreciation(depreciation),fed maturities

271、$14,568$(65,882)$2,318The net investment income for the years ended December 31,2000,1999and 1998 is composed of the following.(DollsinThousands)Years Ended December 31200019991998Investment incomeInterest on fixed maturities$82,493$70,134$63,748Dividends on equity securities3,3052,8992,571Interest

272、on other long-term investments2,3183,3322,867Interest on mortgage loans.105218Interest on policy loans654676666Other2,102”1,6881,232Total investment income$90,872$78,834$71,302Less investment expenses4,0053,5173,374Investment income,net$86,867$75,317$67,928-NOTE3,.DERIVATIVEINSTRUMENTSThe Company vr

273、itescoeredcaIl options on its equity portfo-contracts in accordance with SFAS No.133 and determinedIio to generate additional portfolio income and does not usethere is no material effect on the CompanysConsolidatedthese instruments for hedgtilg purposes.Covered call optionsFinancial Statements.As pa

274、rt of the implementation of SFASare recorded at fair value and.included in accuedexpenses andNo.133,the Company was allowedto reassess its held-to-matu-other liabilities.Any income or gains or losses,including therity portfolio without“taintin.:NOTE4.FAIRVALUEOFFINANCIALINSTRUMENTSThe Company estima

275、ted the fair value of its financial instru-ments based on reievant market information or by discountingestimated future CashficIIvsat estimated currelit maretdis-count rates appropriate to the particular assetor liability shown.In most cases,quoted market prices weieused in determin-ing the fair,alu

276、eof fiedmaturities,equity securities andshort-term investments.Itierequoted market prices wereunaiailable307768,307Equity securities111,132111,132109,148109,148Policy loans8,4378,4378,6458,645Other long-term investments12,86412,86413,32813,328Short-term investments5829058,29020,13120,131Other Assets

277、Accrued investment income22,57822,57819,85719,857_.Liabilities“-,.,.,.-7,.Policy reserves“”.,.=.Annuity(accumulations)$599,610$634,551$493,962$520,274Annuity(on-benefits)46583,2252,883309sStructured settlements8931,041795940Guaranteed investment contracts3,2513,2452,7412,761.;.!.,.:-.,-,.,*.NOTE5.SH

278、ORT-TERMBORROWINGSThe Company maintains a$20 million bank line of credit.of December 31,2000.During 1999,the CompnyborrowedDuring 2000,the Company did not borrow against&is avail-finds against the line of credit,with a mtimumoutstandingable line of cret.Under the terms of the agreement,interestbalan

279、ce of$4,000,000,and recorded interest expense ofon outstanding notes is payable at the lenders prevailing prime$22,000.There wasno loan balance outspendingas ofrate minus 1.0 percent.There is no loan balance.outstanding asDecember 31,1999.!NOTE6.REINSURANCEPropertyand casualtysegmentThe proper and c

280、asualty insurance companies cede portionsof their insurance business to other insurance companies onboth a pro rata and excess of loss basis.Insurance cededby theproperty and casualty insurance companies does not relievetheir prhlary liability as the originating irisurers.Written pre-miums ceded wer

281、e$22,748,000,$24,031,000and$21,204,000for the years ended December 31,2000,1999 and 1998,respec-tively.Earned premiums ceded were$27,765,000,$27,206,000and$22,349000 for the years ended December 31,2000,1999and 1998,respectively.The Company believes alI amounts arecollectable and realizable with reg

282、ard to reinsurance receivablesand prepaid reinsurance premiums,respectively.There are noconcentrations of credit risk associated with reinsurance.The property and casualty insurance companies also assumeportions of,&eir ipsurance,business fim.other insurance com-panies.Written premiums assumed for t

283、he years endedDecember 31,2000,1999and 1998 were$25,522,000,$33,372,000 and$33,751,000,respectively.Assumed premiumsearned for the years ended December 31,2000,1999 and 1998were.$31,658,000,$34,289,000and$33,571,000,respectively.The Companysreinsurance assumed from foreign insurancecompanies is acco

284、unted for using the periodic method,wherebypremiums are recognized as revenue over the policy term,andclaims,including an estimate of claims incurred but not report-ed,are recognized as they occur.The amount of reinsurancebusiness assumed from foreign insurance companies is notmaterial to the Compan

285、ysConsolidated Financial Statements.Life segmmentUnited Life follows the policy of reinsuring that portion of therisk in excessof$200,000 on the life of any individual.Policybenefit reserves and claims are stated after deduction of reservesand claims applicable to reinsurance ceded to othercompanies

286、;however,“UnitedLife is contingently liable for these amounts inthe event such companies are unable to paytheir portion of theclaims“mdis cop+dngently,Eable for ced.surance in force of$422,577,000 and$396,382,000 atecember31,2000and1999,respectively.Approximately 56 percent of ceded life insur-ance

287、in force has been ceded to two reinsurers.The Companybelieves al amounts are collectable with regard to reinsurancereceivables.NOTE7.LIABILITYFORpROPERTyANDCASUALTYLc)ssEsANDSETTLEMENTEXpENSESThe table on the following page provides an analysis of changesin losses and loss adjustment expenses(637$24

288、3,006Net liabili for losses and LAE at acquisition date51,661Provision for losses and LAE for claims occur-ingin the current year263,099lo,778Decrease in estimated losses and LAEfor claims occurring in prior years(36,931)(25,135),.$536,805$480,310.-.,.,.-.,.:Lossesand LAE payments for claims occurri

289、ng duringCurrent year$119,278$93646Prior years97,02176,027.,.-$216299$169,675,.-.Net liability for losses and LAE at end of year$320506$310,637Plus reinsurance receivables37,5262?,606.=.,.Gross liability for losses and LAE at end of year$358032$338,243,.k.,.-,.,.,.NOTE8.STATUTQ.RY.,P.O.RT!FJG,C.A.P!

290、TA.LREIQti!RcME,N,TS_ AbJ?.,DIVIDENDANDRETAINEDEARNINGSRESTRICTIONS,.-.,.Statutory stockholders surplus and net income at December31,2000,1999 and 1998 and for the yearsthen ended areas follows.(Dollars inThousands)Statutoiy Stoc&oldersSurplusS342$9990Life,accident and health53,0382,052The insurance

291、 industry is governed by the NAIC and indi;idudstate insurance depu-tments.All of the insurance departments ofthe statesin which the Company is domiciled have adopted cod-ification of insurance StatutoryAccountingPrinciples effectiveJanuary 1,2001.Previously,these principles were prescribed in avari

292、ety of publications,as well as state laws,regulations,andgeneral administrative rules.Subject to final interpretation bythe NAIC and the individual state insurance clepartments,theeffect on the statutory financial statements as of January 1,2001,is estimated to be an increase.to stockholders equi of

293、 approxi-mately$10,900,000.This change does not affect the accompany-ing financial statements,which are based on GAAP.Pursuant tocodification rules,permitted statutory accounting practices maybe utilized,with approval from an insurers state of domicileinsurance department.The Company does not use pe

294、rmittedpractices that individuallyor in the aggregatemateriallyaffectstatutory sulus or risk-based capital.Aspart of the NAIC and state insurance departments sol-,en reOWlations,fie Company is required to calculate a nlini-mum capital requirement based on insurance risk factors.Therisk-based capital

295、 results are usedby the NAIC and state insur-ance departments to identify companies that merit regulatoryattention or the initiation of regdatory action.At December 31,2000,both the life segment and the property and casualty com-panies had capital well in excess of their required levels.The State of

296、 Iowa Insurance Department governs theamount of dividends that maybe paid to stockholders withoutprior approval by the Insurance Department.Based on theserestrictions,the Company could make a maximum of$138,873,000 in dividend distributions to stockholders in 2000.ividendpayments by the insurance su

297、bsidiaries to theIn the fourth quarter of 2000,the Company contributed;ompany are subject to similar restrictions in the states in$15,000,0010in cash to United Life to support the growth of lifevhich they are domiciled.The Company received no ditidendsinsurance premiums and annuity deposits.kom its

298、subsidiaries in 2000 or 1999.NOTE9.FEDERALINCOMETAXES.Sederalincome tax expense is composed of the follotig.(Dollars inThousands)fears Ended December 31200019991998urrent$357$541$4,110Deferred1,4651,293609rotal$1,822“$1,834$4,719Areconciliation of income tax expense computed at the applicable federd

299、 tax rate of 35 percent in 2000,35 percent in 1999,and34 percent in 1998 to the amount recorded in the Consolidated Financial Statements is as follows.(Dollars inThousands)YearsEnded December 31.20001999.1998,.Computed expected rate.$6,072$6,026$9,655Reducti?n for tax-exempt municipal bond tereit in

300、come(4,572)-,(4,994)-(5,023)Redudon for noritkabledividend“&come(724)(631)(557)Other,net10461433644Federal income taxes,as provided$1;822$,1,834$4,719The significant components of the net deferred tax liability at December 31,2000 and 1999 areas follows.:“.,(Dollars inThousands)At December 312000199

301、9Deferred tax liabilitiesDeferred acquisition costs$26,802$24,039Net unrealized appreciation on investment securities24,02417,743Depreciation on assets1,5031,216Net bond discount accretion and premium amortization1,7351,177Other2,1703,151Gross deferredtax liability.,$56,234$47,326-“Deferred tax asse

302、tsFinancial statement reserves in excessof income tax reserves$22,696$22765Unearned premium adjustment10,3529,107Postretirement benefits other than pensions3,160Salvageand subrogation2,761956662Pension1,4211,685Alternativeminimum tax(AMT)credit carryforwards2,106Net operating loss carryforwards(NOL)

303、10,02014,641Other4,6483,414Gross deferred tax assets-$55,359$55035Valuation allowance(11,370)(15,139)Net deferredtax liability$12;245$7,430“The Company has tax net operating loss(“NOL”)carryfor-wardstotaling$29,709,218 as of December 31,2000.TheseNOL carryforwards were purchased by the Company when

304、itacquired American Indemnity.The NTOL carryforwards expireas follows 2001,$1,564,975;2002,$621,205;2003,$2,508,745;2004,”$1,246,728;()5;$1l,137;2006,$43,352;007,$13,450;008,$13,410;009,$,6(J4,77;()(),$989,347;2011,$5,516,449;2017,$6,882,190;2018,$4,1S0,254;2019,$1,406,699.The Company is required to

305、 establish a valuationallowance for any portion of the deferred tax asset that man-agement believes will not be realized.The Company has a valu-ation allowance of$11,370,000 for deferred tax assets primarilyrelating to American Indemnitys NOLS,which can only beused to offset future income of the pro

306、perty and casual seg-ment.If the Company determines that the benefit of theAmerican Indemnity NOLS can be realized in the future,therelated reduction in the deferred tax asset vuation lowance.wJ1 be recorded as a reduction to goodwill.The Company hasAMT credit carryfonvards of$2,106,000,which do not

307、 expire.Under prior federal income tax law,one-half of the ex$essofa life insurance companys income from operations over its t&-a.bleinvestment income was not ted,but was set aside in aspecial t=account designated as“Policyholders Surplus.”AtI)ecember 31,2000,the Company had approximately$2,121,000

308、of unted Policyholders Surplus”on which nopayment of federal income taxeswill be required unless it isclistributed as a dividend,or under other specified conditions.Ilarring the enactment of new tax legislation,the Companycloesnot believe that any significant portion of the account viilbe taxedin th

309、e near futurq therefore,no deferred tax liabilityhas been recognized relating to the Policyholders Surplus bal-ance.If the entire Policyholders Surplus balance became tax-able at the current federal rate,the tax would be approximately$742,000.-.NOTE!0.ENP!_QYEEBE NEF!TOBL!G,A.T!GEJSEffective Decembe

310、r 31,1999,the pension plans of the Companyand American Indemnity Ivere merged.The merged definedbenefit pension plan covers substantially all employees.Underthis plan,retirement benefits are primarily a function of thenumber of years of service and the Ie.velof compensation.Itis he Companys o;cto fu

311、nthis pla.on=-currentbasis tothe extent deductible under existing tax regtiations.TheCompany used December 31 as the date for measuring planassets and liabilities.Effective January 1,2000,the postretirement health careplans of the Company and American Indemnity were merged.This merger br,ughtall non

312、-retired American Indemnityemployees into the Companys plaw retired AmericanIndemnity employees verenot affected by this merger and WNretain their full benefits accrued under the American Indemnityplan.The merged defined benefit postretirement health careplan covers substantially atibenefit-efigibie

313、 employees.The planpaysstated percentages of most necessary medical and dentalexpenses incurred by retirees,after subtracting payments byMedicare or other providers and after the stated deductible hasbeen met.Participants become eligibIe foi tht benefits tictheyretire from the Company after reaching

314、 age 55 with 10 or moreyears of participation in the plan and 10 years of employmentwith the plan sponsor.The plan is contributory,with retireecontributions adjusted annually.Under the merged plan,the employment date of the non-retired American Indemnity employees is considered to beJanuary 1,2000,f

315、or purposes of determining eligibility for planbenefits.The effect of die merger was the termination of thefitureaccruaI of medical and dental benefits and the forfeitureof saidbenefits previously accrued for these employees underthe American Indemnity postretirement health care plan.Thechange“andel

316、imination of medical and dentalbenefits resdtedill a ne:ativeplan amendment of$253,000,which is considerednegativeorior serviecost that viii be amortized over a periodLof 11 years as a reduction to the net periodic postretirementbenefit cost recognized in earnings.In addition,these employeeswill not

317、 be eligible for postretirement life insurance aspre-viously accrued for under the American Indemni postredre-ment health care plan.The elimination of the accrued lifeilsurance benefiresulted in a curtaihnent gain of$1.03,000,which is reflected as a current gain in 2000 earnings,and anegativeplan am

318、endment of$391,000,which is considerednegative prior service cost that will be amortized to earningsover a period of 12 years.The retirees of American Indemnityretained their heaifh care and iife insurance benefits providedunder the American Indemnity postretirement health care plan,having reached a

319、ge 55 with 25 years of service,or age 60 with20 years of service,or age 65 with 15 years of service as ofDecember 3i,1999.The table on the following page provides a reconciliation ofthe changes in the plansbenefit obligations and fair value ofplan assets and a statement of the funded status for 2000

320、 and1999.The table includes the obligations and fair values acquiredin connection with the purchase of American Indemnity.Theamounts related to the acquisition are based on valuations as ofDecember 31,1999,which approximates the valuation had itbeen measured as of the acquisition date.(Doars inThous

321、ands)Pensiori benefitsOther benefitsAt December312000199920001999Reconciliationofbcn+t obligatiotzObligation at beginning of year.$23,618$23,277$9,18Service cost$7,9931,127921384365Interest cost1,8371,523596479Plan amendments(723)Actuarial(gain)loss1,316(3,214)(758)(1,907)Benefit payments and adjust

322、ments(1,472)(690)(285)101Acquisiion1,801Obligation at December 312,087_.$26,426$23,618$r8,332$9,11sReconciliatiotzoffair valueofplan assetsFair value of plan assets at beginning of year$19,857$17,296$-$-Actual return on plan assets(590)(147)Employer contributions1,303500203(101)Participant contribut

323、ionsBenefit payments and adjustments(1,472)(690)(2:)101Acquisition2,898Fair value of plan assets at December 31-“”$19,098$19,857$-$-FundedStatts1“.-.Funded status at December 31$(7,328)$(3,761)$(8,332)$(9,118)Unrecognized prior service cost.,840937102,832“Unrecognized(gtin)loss2,71-“.-(784)-L(1,188)

324、(491).-Accrued benefit cost“”$(3697)$(3,608j“$(9.418)$(8,777).,.,The foowing table provides the components of net periodic benefit cost for the plans for 2000,1999and 1998.(DOWSinThousands),.:.,PensionbenefitsOther benefitsYears Ended December 31200019991998200019991998PlalzcostsServicecost$1127$921

325、$935$384$365$424Interest cost1,8371,5231425596480523Expected return on plan assets590(1,407)(1,324)-Amort&ation of transition(asset)obligation(42)(48)-Amortization of prior service cost9797142173Amortization of net(gain)loss(2,22)-(;)468Effect of caihnent(103)-Net periodic benefit cost.$1,405$1,092$

326、1,085$925$991$1,188The unrecognized prior service cost and the actuarial loss areemployee service period untfi the date of fi.dleIigibiIi.being amortized on a straight-line basis over an averagepel-iodThe assumptions used in the measurement of the Companysof eightyears.This period represents the ave

327、rageremainingbenefit obligations are shon in the follovingtable.Pension benefitsOther benefitsIieighted-average assumptions as of December 312000.19992000“1999Discount rate7.50%7.50V07.50V0.509b.-EExpected return on plan assets8.25%.25yoNIAN/ARate of compensation increase4.00%4.00V0N/AN/A._.-For mea

328、surement purposes,an 8.25 percent pre-65 annual ratethat level thereafter.For dental claims,a 6.0 percent annual rateof increase in the per capita cost of coeredhealth care benefitsof increase as assumed for 2000,decreasing gradually to 4.Sras assumed for 2000.The rate vasassumed,to decrease gradu-p

329、ercent for 2004 and thereafter.ally each year to a rate of 5.25 percent for 2005 and remain atAsu.edheath care cost trend rates have a significant effectthat level thereafter.A 6.75 percent post-65 annual rate ofon the amounts reported for the health care plans.A 1.0 per-increase in the per capita c

330、ost of covered health care benefitscent change in assumed health care cost trend rates vouldha,eIA?S asslm.edfor2000.Tb.erateT.A:aS assumedtOdecreasey:adlJ-th.efoo.ving effects.ally each year to a rate of 5.25 percent in 2004 and remain at(Dollars inThousands)1 Percent Increase,-1 Percent DecreaseEf

331、fect 011total of service and interest cost compnents of”neperiodic postretirement health care benefit cost$177“$(140)Effect on the health care c.omponen:.of the accumulated.postretirew.ent benet abligatia“.,.-1)157(“949”).:The annual per capita contributions for the benefits providedto retired Ameri

332、can Indemnity employees are capped.As aresult,increases in the assumed health care cost trend rate tillhave no significant egfecton the accumulated postretirementbenefit obligation or on the net periodic postretirernent benefitcost as of December 31,2000.The Company has a profit-sharing plan in whic

333、hemployeesvhomeet service requirements are eligible to participate.Thealmountof the Cornpanj7sCorltrib-utionis discretioiiar-yand isdete-minedannually,but cannot exceed the amount deductiblefor federal income tax purposes.The Companys contributionto the plan for the years ended December31,2000,1999 and1998,is$793,000,$503,000 and$883,008,repectitiely.The Company also has an Employee Stock Ownershi