Principal properties owned by Standard Insurance Company (“Standard”) and used by the Company consist of two office buildings in downtown Portland, Oregon: the Standard Insurance Center, with approximately 457,000 square feet; and the Standard Plaza, with approximately 216,000 square feet. All three of our business segments use
For 2006, we are assuming a benefit ratio in our Employee Benefits business (benefits to policyholders and interest credited measured as a percentage of premiums) of 77% to 78%. Claims experience can fluctuate widely from quarter to quarter.
We defer certain policy acquisition-related commissions and incentive payments, certain costs of policy issuance and underwriting, and certain printing costs related to obtaining new business and acquiring business through reinsurance agreements. These costs are then amortized into expenses over a period not to exceed the life of the related policy. VOBA primarily represents the discounted future profits of business assumed through reinsurance agreements. VOBA is then amortized to achieve matching against future premiums or gross profits as appropriate. See “Critical Accounting Policies and Estimates-DAC and VOBA.” The net increase in DAC and VOBA for 2005 was $8.6 million greater than the net increase for 2004, and $3.1 million greater for 2004
The insurance laws of the states of domicile and other states in which the insurance subsidiaries conduct business regulate the investment portfolios of the insurance subsidiaries. Relevant laws and regulations generally limit investments to bonds and other fixed maturity securities, mortgage loans, common and preferred stock, and real estate. Decisions to acquire and dispose of investments are made in accordance with guidelines adopted and modified from time to time by the insurance subsidiaries’ boards of directors. Each investment transaction requires the approval of one or more members of senior investment staff, with increasingly higher approval authorities required for transactions that are more significant. Transactions are
reported quarterly to the finance and operations committee of the board of directors for Standard and to the audit committee of the board of directors for The Standard Life Insurance Company of New York.
The fair values of other policyholder funds that are investment-type contracts were estimated using discounted cash flows at the then-prevailing interest rates offered for similar contracts or as the amounts payable on demand less surrender charges at the balance sheet date. The fair value for long-term debt was based on quoted market prices.
Commercial mortgage loans foreclosed and transferred to real estate were $1.3 million for 2005. There were no commercial mortgage loans foreclosed and transferred to real estate during 2004. At December 31, 2005, we had commercial mortgage loans totaling $0.3 million that were more than sixty days delinquent and in the process of foreclosure. At December 31, 2004, we had commercial mortgage loans totaling $7.5 million that were more than sixty days delinquent and in the process of foreclosure, most of which were subsequently reinstated. The following table sets forth commercial mortgage loan valuation and allowance provisions at December 31:
Substantially all eligible employees are covered by qualified deferred compensation plans under which a portion of the employee contribution is matched. Employees hired after January 1, 2003, are eligible for an additional non-elective employer contribution. Non-elective employer contributions made to the existing deferred compensation plan are intended in lieu of participation in Standard’s defined benefit pension plan. Standard’s contributions to the plan for 2005, 2004 and 2003 were $5.9 million, $5.2 million and $3.1 million, respectively.
Other long-term liabilities reflected in the Company’s balance sheet at December 31, 2005, consisted of a $14.7 million tax reimbursement liability related to the block of life insurance business sold to Protective Life in 2001, $13.3 million in capital commitments related to our low income housing investments, $20.5 million in unfunded liabilities for non-qualified deferred compensation and supplemental retirement plans, an accrued liability of $11.1 million for postretirement benefits, and $0.8 million of accrued guarantee association payments.