In assessing the performance of the Great-West Healthcare segment, management considers its profitability and the level of membership (the number of individuals covered under health contracts with employer customers) to be its primary points of focus. Increased membership is expected to improve the Company's ability to obtain healthcare provider network discounts, which will enable it to enhance pricing competitiveness and earnings.
Self-funded premium equivalents increased by $32 million, or 0.7%, during the year ended December 31, 2004 when compared to 2003. This increase was primarily due to an overall increase in membership during 2004.
Excluding customers associated with Canada Life, the Great-West Healthcare segment experienced a net increase of 3.8% or 186 group healthcare customers (employer groups) during 2004. There was an 8.9% increase in total healthcare membership from 1.856 million at the end of 2003 to 2.021 million at year-end 2004. Point of service ("POS") and HMO members decreased 6.5% from approximately 244,000 at December 31, 2003 to approximately 228,000 at December 31, 2004.
Total policyholder benefits increased by $125 million, or 13.3%, during the year ended December 31, 2004 excluding the one-time CLAC adjustment in the amount of $1.174 billion, mentioned above. The increase was primarily due to the inclusion of Canada Life activity for twelve months during 2004 compared to less than six months during 2003. Total policyholder benefits represent benefits on insurance and annuity products, interest paid or credited to policyholder and participant accounts, dividends paid, and change in actuarial reserves.
On August 31, 2003, the Company and The Canada Life Assurance Company ("CLAC"), a wholly owned subsidiary of Canada Life, entered into an indemnity reinsurance agreement pursuant to which the Company assumed 80% (45% coinsurance and 35% coinsurance with funds withheld) of certain United States life, health and annuity business of CLAC. As a result of the transaction, the Company recorded $1,426,362 in both premium income and increase in reserves.
The assessment of whether an other-than-temporary impairment has occurred is based upon management's case-by-case evaluation of the underlying reasons for the decline in fair value. Management considers a wide range of factors, as described below, regarding the security issuer and uses its best judgment in evaluating the cause of the decline in its estimated fair value and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations and future earnings potential of the issuer.
The remaining unrealized losses on the Company's investments in corporate debt securities in both categories are not concentrated in any one industry. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2005.
Policy loans accrue interest at variable rates with no fixed maturity dates; therefore, estimated fair value approximates carrying value.
Defined benefit pension and post-retirement medical plans - The Company has a noncontributory defined benefit pension plan covering substantially all of its employees that were hired before January 1, 1999. Pension benefits are based principally on an employee's years of service and compensation levels near retirement. The Company's policy for funding the defined benefit pension plans is to make annual contributions, which equal or exceed regulatory requirements.
Included in due from parent and affiliates at December 31, 2005 and 2004 is $13,661 and $38,789, respectively, of income taxes receivable from GWLA Financial related to the consolidated income tax return filed by the Company and certain subsidiaries. Included in the consolidated balance sheet at December 31, 2005 is $5,128 of income taxes receivable related to the separate federal income tax returns filed by certain subsidiaries and other state income tax receivables. Included in the consolidated balance sheet at December 31, 2004 is $33,337 of income tax liabilities related to the separate federal income tax returns filed by certain subsidiaries and other state income tax liabilities.