December 31,(1) --------------- (Dollars in Millions) 2001 2000 1999 1998 1997 ------- ------- ------- ------- ------- At End of Year Total Investments ............ $70,986 $65,357 $45,506 $45,511 $42,475 Total Assets ................. 96,938 92,104 68,486 60,765 54,765 Policyholder Liabilities(2)... 75,450 72,287 52,841 45,740 42,345 Debt Outstanding ............. 2,941 3,003 1,741 2,028 1,337 Shareholder's Interest ....... 12,775 11,720 9,942 10,126 9,265 For the Year Then Ended Premiums ..................... 6,551 6,052 4,142 3,870 3,020 Total Revenues ............... 12,241 12,363 8,363 7,563 6,476 Income Before Cumulative Effect of Change in Accounting Principle(3) ..... 1,315 1,243 1,034 866 723 Net Income(3) ................ 1,300 1,243 1,059 866 723
The principal use of cash by the Company has been investing in assets to grow its business. These purchases of investments are related to the Company's asset/liability risk management policies and associated ongoing review of its investment portfolio positions which vary with market and economic conditions.
For the years ended December 31, 2001, 2000, and 1999 cash flows provided by (used in) operating and certain financing activities were $6,560 million, $(2,140) million, and $3,369 million, respectively. These amounts include net cash provided by financing activities relating to investment contract issuances accounted for as deposit liabilities under U. S. GAAP and redemptions of $2,667 million, $2,617 million, and $2,708 million, for the years ended December 31, 2001, 2000, and 1999, respectively.
Insurance liabilities and reserves differ for long and short duration insurance contracts. Measurement of long-duration insurance liabilities (such as term, whole life and long-term care insurance policies) is based on accepted actuarial techniques, which include required assumptions about mortality, lapse rates and future yield on related investments. Short duration contracts such as property and casualty policies are accounted for based on actuarial estimates of the amount of loss inherent in that period's claims, including losses for which claims have not been reported. Short duration contracts loss estimates rely on actuarial observations of ultimate loss experience for similar historical events. The Company's insurance liabilities, reserves and policyholder benefits totaled approximately $66 billion at year-end 2001. Management continually evaluates the potential changes in benefits and loss estimates, both positive and negative, and uses the results of these evaluations both to adjust recorded provisions and to adjust underwriting criteria and product offerings. Further information about insurance liabilities is provided in Notes 7 and 8 to the Consolidated Financial Statements.
Consolidated Statements of Shareholder's Interest (Dollar amounts in millions, except per share amounts)
GE Financial Assurance is an insurance holding company that, through its subsidiaries, sells a variety of insurance and investment-related products almost entirely in North America and Japan. The Company's operations are in three business segments: (i) Wealth Accumulation and Transfer, (ii) Mortgage Insurance, and (iii) Lifestyle Protection and Enhancement.
Certain of the Company's subsidiaries and certain policies and contracts offered by them are subject to regulation under the federal securities laws administered by the U.S. Securities and Exchange Commission and certain state securities laws. Certain of these products offer customers a guaranteed interest rate for a predetermined time period and subject customers to a market value adjustment on early
In March 2000, GE Edison, a subsidiary of the Company, acquired, by means of a comprehensive transfer ("the Transfer") in accordance with the Insurance Business Law of Japan ("IBL"), the insurance policies and related assets of Toho Mutual Life Insurance Company ("Toho"). GE Edison assumed $21.6 billion of policyholder liabilities, $0.3 billion of accounts payable and accrued expenses, and acquired $20.3 billion of cash, investments and other tangible assets. The $1.6 billion difference between acquired assets and assumed liabilities represents PVFP on the transferred insurance policies. In connection with the Transfer, the Company terminated reinsurance arrangements it had with Toho. Certain amounts in the Consolidated Statements of Income for the year ended December 31, 2000 reflect the impact of terminating such reinsurance arrangements. The termination of the reinsurance arrangements did not have a significant effect on net earnings for the year ended December 31, 2000.
During 2000, as part of its ongoing analysis of exposure to losses arising from mortgage loans, the Company recognized a $33 reduction in its allowance for losses.
During 2001, 2000 and 1999, the Company paid $24, $36 and $2, respectively, to GE Capital for certain computer services fees.
Insurance - credit life. Based on future cash flows, considering expected renewal premiums, claims, refunds and servicing costs, discounted at a current market rate.
Derivatives and Hedging. The Company's global activities routinely deal with fluctuations in interest rates, in currency exchange rates and other asset prices. The Company follows GE and GE Capital's strict policies to managing each of these risks, including prohibition on derivatives trading, derivatives market-making or other speculative activities. These policies require the use of derivative instruments in concert with other techniques to reduce or eliminate these risks.