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