The amount of purchase price assigned to the fair value of policies acquired by the Company from third parties in an acquisition is capitalized and amortized over the estimated lives of the acquired policies. The unamortized amount is recorded on the Company's balance sheet as an asset referred to as the cost of business acquired. The Company's cost of business acquired asset was $122.0 million at December 31, 2002.
Life insurance operations. Income before income taxes in the Company's life insurance operations segment decreased $4.7 million, or 9.2%, to $46.3 million for the year ended December 31, 2002 from $51.0 million for the year ended December 31, 2001. The primary reason for the decrease in profits in 2002 was an increase in amortization expense from 2001 to 2002. Revisions to estimates of future gross profits resulted in adjustments to the Company's deferred policy acquisition costs and the cost of business acquired that decreased amortization expense by $3.5 million in 2002 and $21.5 million in 2001. The most significant revision to estimated gross profits in 2001 occurred as a result of changes in estimated policy revenues and policy benefits to reflect the impact of the settlement of litigation in which the Company was a defendant. Also during 2002, the Company recorded amortization expense, net of the amortization of the unearned policy revenue liability, of $3.7 million resulting from realized gains on bonds. Partially offsetting the increase in amortization expense in 2002 were lower increases in policy reserves and lower other policyholder benefits in 2002 compared to 2001 and a decrease in death benefits in 2002 compared to 2001. The increase in policy reserves and other policyholder benefits was $9.1 million lower in 2002 than in 2001, primarily associated with the same policies subject to the litigation settlement discussed above. Death benefits decreased $3.4 million in 2002 compared to 2001.
The net loss from reconciling items decreased $0.9 million, or 2.7%, to $31.8 million for the year ended December 31, 2002 from $32.6 million for the year ended December 31, 2001. The improvement from 2001 to 2002 resulted primarily from significant cost savings in 2002 resulting from the Company's decision in the third quarter of 2001 to cease operations of a subsidiary that provided administration for retirement and cafeteria plans to school districts and to relocate the Company's Austin operations to its Kansas City and Dallas locations. These savings were partially offset by realized investment losses of $7.3 million in 2002 compared to realized gains of $1.9 million in 2001.
Net investment income. Net investment income increased $1.9 million, or 0.9%, to $210.0 million for the year ended December 31, 2002 from $208.1 million for the year ended December 31, 2001. Net investment income for the years ended December 31, 2002 and 2001 was comprised of the following (in millions):
On December 31, 2001, the Company issued 1,350,000 shares of cumulative Series A Preferred Stock to FHC in exchange for an equal number of shares of FHC cumulative preferred stock. Americo authorized a total of 2,000,000 shares of Series A Preferred Stock, which ranks senior to Americo's common stock as to dividends and liquidation rights. Americo's preferred stock and the FHC preferred stock each have a par value of $1.00 per share and a stated value of $100 per share. Cumulative annual dividends on Americo's preferred stock of 3.38% plus the three-month LIBOR rate are payable quarterly, either in cash or in additional shares of preferred stock. Cumulative annual dividends on FHC's preferred stock of 3.11% plus the three-month LIBOR rate are payable quarterly, either in cash or in additional shares of FHC preferred stock. Americo is required to redeem any outstanding shares of its Series A Preferred Stock on December 31, 2016 for $100 per share plus any unpaid dividends.
o $225.8 million of cash and short-term investments, o $54.4 million of marketable equity securities, o $577.4 million of U.S. Treasury and government securities, mortgage-backed securities and asset-backed securities, and o $1,159.2 million of corporate bonds classified as available for sale.
SFAS No. 142 supersedes the previously-issued accounting guidance for goodwill and intangible assets. Under SFAS No. 142, goodwill and indefinite-lived intangible assets will no longer be amortized but will be reviewed for impairment. Intangible assets with finite lives will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. For all other goodwill and intangible assets, the amortization provisions were effective upon adoption of SFAS No. 142. The impairment provisions of SFAS No. 142 were effective upon adoption of the statement. Adoption of SFAS No. 142 was required as of the beginning of fiscal years beginning after December 15, 2001. The adoption of SFAS No. 142 did not have a significant effect on the Company's consolidated financial position or results of operations.