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Services Offered by Subsidiaries

FINANCE COMPANIES

AUTO FLEET LEASING, INC.

COMMERCIAL CREDIT CORPORATION AND AFFILIATES
COMMERCIAL CREDIT OF MARYLAND, INC.

COMMERCIAL CREDIT EQUIPMENT CORP.
COMMERCIAL LEASING CORPORATION
INTERNATIONAL REDISCOUNT CORP.

"Wholesale Financing"-Finance the current wholesale purchases by distributors and dealers from manufacturers of articles usually sold on the instalment plan, while carried in stock awaiting resale to customers.

"Instalment Financing"-Finance the retail sale of products sold on the instalment plan by manufacturers, distributors and dealers especially of automobiles, home appliances, television sets, heating equipment, mobile homes, agricultural equipment, boats and time and labor-saving machinery.

"Commercial Financing"-Purchase current open accounts receivable from manufacturers, wholesalers, mills and converters, on the "non-notification" plan of not giving notice to customers of the assignment of the invoices: (1) with limited liability

on credit losses; or (2) with full guarantee of the sellers. Concerns selling their receivables continue to pass their credits and make collections direct from their customers and receive 80% to 95% cash upon delivery of shipping evidence, balance when collected. Advances are also made on inventories, fixed assets, other security, and on open credit.

"Equipment Financing"-Finance the purchase of factory and other industrial equipment with the purchaser paying on an instalment basis.

"Lease Financing"-Finance the leasing of fleets of automobiles, trucks and mobile equipment for manufacturers, wholesalers and retailers in many and diverse lines of business.

"Rediscounting"--Discounts loans of consumer finance companies and other finance operations.

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The Year in Review

INSURANCE COMPANIES

Because the activities of our insurance companies are quite varied, they will be discussed individually. American Credit Indemnity Company, which writes credit insurance for business generally, had a most successful year, having written the largest dollar amount of premiums in its history. This fact, together with improved portfolio earnings, permitted larger net profits as compared to 1958, even though the losses in 1959 were greater.

With respect to Calvert Fire Insurance Company and related companies, which write physical damage insurance, principally on automobiles, tractors and other products financed by the finance subsidiaries, the year 1959 showed considerable improvement in results; written premiums increased from $19,102,819 in 1958 to $26,800,377 in 1959. The basic reasons for this increase are the additional activities of the finance subsidiaries in the automobile financing field and the writing of more insurance on the finance paper being purchased.

Calvert Fire Insurance Company prides itself in having a well-trained and seasoned staff of field men who are experienced in settling claims. Feeling that their talents could be extended, arrangements were made during the year for Calvert to carry the fire, theft and collision insurance on vehicles for an unrelated finance company. Also, at December 31, 1959, arrangements were concluded to purchase an insurance company operating in several jurisdictions which writes physical damage insurance on automobiles financed by other institutions. Whether

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writing coverage for persons who are customers of our finance operations. The personnel is being enlarged and during the growing period this expansion will be at the expense of immediate profits. Our wholly owned life insurance subsidiary— Cavalier Life Insurance Company-principally insures lives of those indebted to the finance subsidiaries and its policies, therefore, are of the short-term variety and the insurance premiums thereon have none of the accumulated savings features of ordinary life insurance. The Amendment to the Federal Income Tax law, enacted in 1959, materially affects its net income so that for the year 1961 it will be required to pay a normal income tax of 52% on its underwriting profit. This will have an adverse affect on profits going ahead. Another factor has been the decision by the Insurance Commissioners of several states to establish maximum rates that may be charged for credit life insurance, which are less than those currently being paid. The whole

subject of credit life insurance is undergoing a thorough study.

The Cavalier Life Insurance Company is carried as an investment on the consolidated balance sheet. On the balance sheet of insurance companies, which appears on the page following, it is shown both separately and combined with the other insurance companies. The securities portfolio of the insurance companies is carried at cost or amortized value. The market value of all securities at December 31 was $115,079,045. The reserve for fluctuations in security values at the same date was $1,813,677. No profit or loss on the sale of securities is reflected in current operations, such amounts being transferred to or from the reserve for security fluctuations, as the case may be. The combined net income from the investment portfolio, after the computation of the Federal Income Tax, payable thereon, amounted to $2,801,600 in 1959, compared with $2,280,499 in 1958.

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Bonds carried at $3 048 103 were on deposit as required by law and bonds carried by Cavalier Life Insurance Company at $8 118 805 are held in trust in connection with reinsurance arrangements.

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The Year in Review

MANUFACTURING COMPANIES

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in Canada; the other was adversely affected by a strike in its plant that lasted two months. Two other plants were closed for short periods due to labor disputes but, over-all, the results were extremely satisfactory. Certainly the wisdom of a diversification of products and industries in the manufacturing group was manifest in the year 1959. With respect to our inactive subsidiary, The Kilgore Manufacturing Company, which has been the subject of lawsuits mentioned in previous annual reports, we can advise that this litigation has been settled and the company has since been dissolved.

The year was saddened by the sudden death on July 22, 1959, of Roy Melchior, President of Agar Packing Company. Mr. John R. Bradley was elected President to succeed him. Mr. Bradley has over twenty-five years' experience in the packing industry, having been Vice President of Agar for the last six years.

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