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Home My WebLink AboutThe Citizen, 2001-03-07, Page 164,723 53,522 (23,037) (442,177) 2,640,843 88,292 (2,001,959) (11,663) (228,726) 28,319 (2,351) 40,000 18,032 58,005 (20,452) 357,471 (842,124) (92,419) 815,840 12,902 (88,358) 21,541 (1,124) (35,000) Investing activities Sale of investments Purchase of investments Acquisition of capital assets Investment in related companies Bank advances 2,889,258 (3,237,512) (10,813) (15,000) 360,846 3,031,908 (3,342,225) (43,055) (13,221) (353,372) Increase (decrease) in cash during the year Cash (deficiency), beginning of year Cash (deficiency), end of year (78,041) 322,356 78,041 (244,315) $ - $ 78,041 Notes to Financial Statements December 31, 2000 1. Summary of Significant Accounting Policies The company is incorporated under the laws of Ontario and is subject to the Ontario Insurance Act. It is licensed to write property, auto and liability insurance in Ontario. The company's products are marketed through independent agents and brokers located throughout Ontario. The company records its investments in debt securities at amortized cost with discounts and premiums being amortized to income using' the constant yield method over the period to maturity. Investments in common and preferred shares are carried at cost. Gains and losses on investments are included in investment income when realized and are calculated on the basis of average cost. Insurance premiums are included in income on a daily pro-rata basis over the life of the policies. Acquisition expenses related to unearned premiums, which expenses comprise commissions, premium taxes, association fees and certain identified business development costs, are deferred and amortized to income over the periods in which the premiums are earned The method followed in determining the deferred acquisition expenses limits the amount of deferral to its realizable value by giving consideration to claims and expenses expected to be incurred as the premiums are earned. Rates of depreciation applied to write-off the cost of property and equipment over their estimated lives are as follows: Nature of Business Long-term Investments Premiums Earned and Deferred Policy Acquisition Expenses Capital Assets Building 2.5%, straight line Automobile 20.0%, straight line Computer equipment 20.0%, straight line Equipment 20.0%, straight line Reinsurance Ceded Reinsurance premiums ceded and reinsurance recoveries on losses incurred are recorded as reductions of the respective income and expense accounts. Estimates of the amounts recoverable from the reinsurer on unpaid claims and adjustment expenses are recorded as accounts receivable. A contingent liability exists with respect to reinsurance ceded which could become a liability of the company in the event that the reinsurer might be unable to meet its obligations under the reinsurance agreements Income taxes Reserve for Unpaid Claims The company follows the tax allocation method in providing for income taxes. Timing differences between earnings and taxable income arise from differences between deferred policy acquisition expenses, unpaid claims, unearned premiums and investment income for tax and accounting purposes. The company is responsible for income taxes on the portion of its premiums that relate to non-farm business. The non-farm portion is 60% for 2000. Unpaid claims and related adjustment expenses are determined using cash-basis evaluations plus an amount for adverse development and are estimates of the ultimate cost of all insurance claims incurred to December 31, 2000. The provision for unpaid claims represents the amounts needed to provide for the estimated cost of settling claims related to insured events (both reported and unreported) that have occurred on or before each balance sheet date. All provisions are periodically evaluated in light of emerging claim experience and changing circumstances. The resulting changes in estimates of the ultimate claim liability are reflected in current operations. Continued on page 17 PAGE 16. THE CITIZEN, WEDNESDAY, MARCH 7, 2001. HOWICK MUTUAL INSURANCE COMPANY Financial Statement as of December 31, 2000 To the Policyholders of Statement of Cash Flows Howick Mutual Insurance Company We have audited the balance sheet of Howick Mutual Insurance Company as at December 31, 2000 and the statements of operations and unappropriated members'. surplus and cash flows for the year then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these financial statements present fairly, in all material respects, the financial position of the company as at December 31, 2000 and the results of its operations and the changes in its cash flows for the year then ended in accordance with generally accepted accounting principles. For the year ended December 31 Cash provided by (used in) Operating activities Net income for the year Adjustments to convert income to cash basis Amortization of bond discounts Amortization of capital assets Increase (decrease) in accounts payable Increase (decrease) in income taxes payable Increase (decrease) in provision for unpaid claims Increase (decrease) in unearned premiums Decrease (increase) in accounts receivable Decrease (increase) in deferred policy acquisition expense (Gain) loss on disposal of investments Investment write down Decrease (increase) in prepaid expenses Decrease (increase) in deferred income taxes 2000 1999 (210,606) $ 471,414 Chartered Accountants (64,820) 675,728 Wingham, Ontario January 24, 2001 Balance Sheet December 31 2000 1999 Assets Cash and short-term investments $ - $ 78,041 Accounts receivable (Note 2) 3,411,897 1,409,938 Income taxes recoverable 302,565 Prepaid expenses 9,183 6,832 Long-term investments (Note 3) 10,566,383 9,994,126 Deferred policy acquisition expenses 489,426 477,763 Capital assets (Note 4) 162,006 204,715 Investment in related companies (Note 3) 33,174 46,493 Deferred income taxes 80,000 120,000 $ 15,054,634 $ 12,337,908 111 , Liabilities Bank indebtedness $ 360,846 $ Accounts payable and accrued liabilities 100,907 123,944 Unpaid claims 4,285,550 1,644,707 Income taxes payable 139,612 Unearned premiums 2,880,972 2,792,680 7,628,275 4,700,943 Commitments (Note 10) Members' equity Reserves required (Note 7) 82,573 94,757 Unappropriated members' surplus 7,343,786 7,542,208 7,426,359 7,636,965 $ 15,054,634 $ 12,337,908 Statement of Operations and Unappropriated Members' Surplus For the year ended December 31 2000 1999 Revenue Gross prep iums written $ 5,759,339 $ 5,528,872 Less reinsurance premiums cost 886,345 848,477 Net premiums written 4,872,994 4,680,395 Decrease (increase) in provision for unearned premiums (101,234) 92,419 4,771,760 4,772,814 Service charges 53,025 43,823 4,824,785 4,816 637 Expenses Net claims incurred 4,512,394 3,114,782 Commissions 1,046,057 1,047,872 Salaries and directors' fees 362,077 360,413 Premium tax 17,450 20,421 Other expenses 297,464 304.761 6,235,442 4,848,249 Underwriting loss (1,410,657) (31,612) Investment income 1,031,800 587,909 Sundry - refund of premium from FMRP 103,023 99,313 Income (loss) before taxes (275,834) 655,610 Income taxes (Note 8) (65,228) 184,196 Net income (loss) for the year (210,606) 471,414 Unappropriated members' surplus Balance, beginning of year 7,542,208 7,064,625 7,331,602 7,536,039 Transfer from reserves required by Financial Services Commission 12,184 6,169 Balance, end of year $ 7,343,786 $ 7,542,208