The Company had a net income (loss) of $ 1,260,223, $ (275,617) and $ (6,396,490) in 2005, 2004 and 2003 respectively. The net income in 2005 was mainly attributable to the gain from the sale of the common stock of BNL during the second quarter of 2005. Significant one-time charges and accruals to operating expenses relating to a legal settlement, combined with an additional write-off of cost of insurance acquired and lower interest rates during 2003 as previously described, were the primary differences in the 2004 to 2003 results. The Company continues to monitor and adjust those items within its control.
Fixed Maturities Rating % of Portfolio 2005 2004 Investment Grade AAA 79% 82% AA 1% 1% A 15% 13% BBB 5% 4% Below investment grade 0% 0% 100% 100% ========== ==========
Deferred policy acquisition costs decreased 16% in 2005 compared to 2004. Deferred policy acquisition costs, which vary with, and are primarily related to producing new business, are referred to as DAC. DAC consists primarily of commissions and certain costs of policy issuance and underwriting, net of fees charged to the policy in excess of ultimate fees charged. To the extent these costs are recoverable from future profits, the Company defers these costs and amortizes them with interest in relation to the present value of expected gross profits from the contracts, discounted using the interest rate credited by the policy. The Company had $ 5,000 in policy acquisition costs deferred, $ 8,000 in interest accretion and $ 283,899 in amortization in 2005, and had $ 5,000 in policy acquisition costs deferred, $ 10,000 in interest accretion and $ 447,380 in amortization in 2004.
Benefits, claims and settlement expenses: Life 17,589,143 18,942,272 22,175,842 Reinsurance benefits and claims (1,716,499) (2,268,869) (3,194,541) Annuity 1,064,808 1,111,998 1,122,707 Dividends to policyholders 938,891 980,306 966,668 Commissions and amortization of deferred policy acquisition costs (14,267) 309,776 311,939 Amortization of cost of insurance acquired 2,193,085 1,869,135 6,695,328 Operating expenses 5,516,566 5,312,747 7,566,780 Interest expense 0 77,453 162,179 --------------- ---------------- ---------------- 25,571,727 26,334,818 35,806,902 --------------- ---------------- ----------------
2006 $ 3,426,000 $ 6,277,000 $ 2,851,000 2007 3,012,000 5,859,000 2,847,000 2008 2,597,000 5,133,000 2,536,000 2009 2,226,000 4,364,000 2,138,000 2010 218,000 401,000 183,000
P. TREASURY SHARES - The Company holds 303,442 and 227,709 shares of common stock as treasury shares with a cost basis of $ 2,196,987 and $ 1,675,097 at December 31, 2005 and 2004, respectively.
December 31, ---------------------------------------------------------- 2005 2004 2003 --------------- ---------------- ---------------- Fixed maturities and fixed maturities held for sale $ 6,661,648 $ 7,060,761 $ 8,418,969 Equity securities 771,379 657,609 456,361 Mortgage loans 2,033,007 1,209,358 1,522,700 Real estate 7,473,698 5,335,530 2,832,171 Policy loans 860,240 918,562 949,770 Short-term investments 3,699 80,241 11,161 Cash 171,926 111,986 137,478 --------------- ---------------- ---------------- Total consolidated investment income 17,975,597 15,374,047 14,328,610 Investment expenses (6,924,371) (4,953,161) (4,058,110) --------------- ---------------- ---------------- Consolidated net investment income $ 11,051,226 $ 10,420,886 $ 10,270,500 =============== ================ ================
2005 2004 ------------------------------------------------------------------------- Estimated Estimated Carrying Fair Carrying Fair Assets Amount Value Amount Value -------------- -------------- --------------- --------------- Fixed maturities $ 7,513,064 $ 7,500,291 $ 11,973,415 $ 12,097,788 Fixed maturities held for sale 125,075,626 125,075,626 148,193,887 148,193,887 Equity securities 24,574,259 24,574,259 24,399,172 24,399,172 Securities of affiliate 4,000,000 4,000,000 4,000,000 4,000,000 Mortgage loans on real estate 36,781,293 36,358,308 20,722,415 20,816,955 Policy loans 12,644,838 12,644,838 12,844,748 12,844,748 Short-term investments 42,116 42,116 39,489 39,489
The Company does not have any short-duration reinsurance contracts. The effect of the Company's long-duration reinsurance contracts on premiums earned in 2005, 2004 and 2003 was as follows:
In the normal course of business the Company is involved from time to time in various legal actions and other state and federal proceedings. There were no proceedings pending or threatened as of December 31, 2005.
On June 1, 2005, UG was extended a $ 3,300,000 line of credit from the FNBT. The LOC is for a one-year term from the date of issue. The interest rate on the LOC is variable and indexed to be the lowest of the U.S. prime rates as published in the Wall Street Journal, with any interest rate adjustments to be made monthly. During 2005, UG had borrowings from the LOC of $ 1,500,000 and repayments of $ 1,500,000. At December 31, 2005, the Company had no outstanding borrowings attributable to this LOC.
In 2005, 2004 and 2003, the Company established a deferred tax liability of $ 2,970,111, $ 3,555,787 and $ 803,095, respectively, for the unrealized gains based on the applicable United States statutory rate of 35%.