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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Segment Results - Corporate
For the year ended December 31,
2000 1999 1998
(In thousands)
Net premiums and
policyholder fees:
Life and annuity . . . . . $ - $ - $ -
Accident & Health . . . . - - -
Net premiums . . . . . . . - - -
Net investment income . . . (941) (904) (570)
Other income . . . . . . . (17,865) (6,218) (6,322)
Total revenue . . . . . . (18,806) (7,122) (6,892)
Policyholder benefits . . . - - -
Interest credited
to policyholders . . . . . - - -
Change in deferred
acquisition costs . . . . - - -
Amortization of present
value of future profits
and goodwill . . . . . . . - - -
Commissions and
general expenses,
net of allowances . . . . (8,175) (696) (5,389)
Total benefits, claims
and other deductions . . . (8,175) (696) (5,389)
Segment operating loss . . $(10,631) $(6,426) $(1,503)
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The above results reflect the elimination of revenues and
expenses associated with services performed by the
Administrative Services segment for affiliates of $18.1 million,
$7.3 million and $6.5 million, respectively for 2000,
1999 and 1998 and the elimination of interest income and
expense on bonds issued by the Corporate segment to an
affiliate of $0.7 million, $0.7 million and $0.6 million,
respectively for 2000, 1999 and 1998.
The following table presents the primary components
comprising the segment's operating loss, exclusive of the
above noted eliminations:
For the year ended December 31,
2000 1999 1998
(In thousands)
Interest cost of
acquisition financing . . $ 7,097 $ 2,859 $ -
Amortization of
capitalized loan
origination fees . . . . 528 220 -
Interest expense on
bonds issued
to affiliate . . . . . . 703 672 603
Stock-based
compensation expense 757 921 -
Other parent
company expenses . . . . 1,844 1,789 1,036
Other (revenue)
expenses, net . . . . . . (298) (35) (136)
Segment
operating loss . . . . . $10,631 $ 6,426 $ 1,503
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Years ended December 31, 2000 and 1999
The increase in the interest cost and the amortization of capitalized
loan fees reflects the impact of a full year's costs compared
to five months in 1999. The stock-based compensation
expense decreased due to termination of options as the
result of employees leaving the company prior to vesting.
Years ended December 31, 1999 and 1998
The interest cost and the amortization of capitalized loan
fees related to the financing of the 1999 Acquisition on July
31, 1999. Accordingly, 1999 includes five months of these
costs. The Corporate segment incurred stock-based compensation
expenses of approximately $0.9 million related
to the issue of stock options and bonuses to employees and
members of management.
In January 2000, the Company announced that it had
approved a plan to consolidate the Raleigh location
acquired in the 1999 Acquisition into its locations in
Toronto (Canada), Pensacola (Florida) and Orlando
(Florida) in order to improve operating efficiencies and
capabilities. The plan to consolidate this location was
being formed at the date of the acquisition and was
approved by the Board of Directors. Accordingly, the
Company recorded an $11.1 million restructuring liability
in its accounting for the 1999 Acquisition. These restructuring
costs were accounted for under EITF No 95-3,
"Recognition of Liabilities in Connection with a Purchase
Business Combination" ("EITF 95-3").
As of December 31, 2000, the remaining liability consisted
of employee separation costs ($1.6 million), employee relocation
costs ($1.0 million) and other relocation and exit
costs ($0.4 million).
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