- In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This Statement addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The Company does not expect the adoption of this Statement to have a material impact on its consolidated financial statements.
Buildings and Equipment Expenses. Buildings and equipment expenses decreased from $104.0 million in 2000 to $102.8 million in 2001, a decrease of $1.2 million, or 1.2%, due to savings generated by renegotiated lease contracts. This decrease was largely offset by an increase in expenses incurred in connection with providing management services to the business assumed from Foremost.
Dividends on Preferred Securities of Subsidiary Trusts. Dividend expense related to the $500.0 million of QUIPS issued in 1995 was $42.1 million in each of the years ended December 31, 2001 and 2000.
Total Operating Expenses. Total operating expenses increased from $545.0 million in 2000 to $610.8 million in 2001, an increase of $65.8 million, or 12.1%.
Life Net Commissions. Life net commissions expense decreased $4.8 million from $3.9 million in 2000 to ($0.9) million in 2001, due to a 48.4% growth in reinsurance activity.
Certain policy acquisition costs, principally first-year commissions and other expenses for policy underwriting and issuance (which are primarily related to and vary with the production of new business), are deferred and amortized proportionately over the estimated period during which the related premiums will be recognized as income, based on the same assumptions that are used for computing the liabilities for future policy benefits. Liabilities for future policy benefits are computed principally by means of a net level premium method reflecting estimated future investment yields, mortality, morbidity and withdrawals. Interest rate assumptions range from 2.25% to 8.50%, depending on the year of policy issue. Mortality is calculated principally on select and ultimate tables in common usage in the industry, modified for actual experience, and withdrawals are estimated based primarily on experience.
5.44% with an original maturity date of September 3, 2000, were renewed for medium-term notes with a 6.80% fixed interest rate maturing in September 2002.
Impairment losses on investments owned by the Insurance Subsidiaries are determined based on the market value of those investments on the date of impairment. Impairment losses on investments for the years ended December 31 are:
Notes receivable-affiliates. The fair values are estimated by discounting the future cash flows using the current rates at which similar loans would be made by the Company to borrowers for the same remaining maturities.
The table below reconciles the provision for income taxes computed at the U.S. statutory income tax rate of 35% to the Company's provision for income taxes:
(c) Amount includes PGAAP adjustments associated with the amortization of the AIF relationships ($42.7 million) and goodwill ($60.0 million).