Benefits and claims decreased by $626,000, or 12.2%, to $4,483,000 for fiscal year 2001 from $5,109,000 for the comparable period in 2000. The decrease was primarily due to a decrease in traditional life reserves.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Action (including Certain Costs Incurred in a Restructuring)" ("Issue 94-3"). The principal difference between SFAS No. 146 and Issue 94-3 is that SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, rather than at the date of an entity's commitment to an exit plan. SFAS No. 146 is effective for exit or disposal activities after December 31, 2002. Based upon a preliminary review, adoption of SFAS No. 146 would not have a material impact on the Company's financial condition or results of operations.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires certain guarantees to be recorded at fair value and also requires a guarantor to make new disclosures, even when the likelihood of making payments under the guarantee is remote. In general, the interpretation applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or an equity security of the guaranteed party. The recognition provisions of FIN 45 are effective on a prospective basis for guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002. Based upon a preliminary review, adoption of FIN 45 not have a material impact on the Company's financial condition or results of operations.
SOUTHERN SECURITY LIFE INSURANCE COMPANY Notes to Financial Statements December 31, 2002, 2001 and 2000
2002 2001 2000 Deferred policy acquisition costs at beginning of year $12,974,390 $13,211,413 $12,874,219 Policy acquisition costs deferred: Commissions 1,544,860 1,249,453 1,384,782 Underwriting & issue costs 242,162 269,070 398,622 Other 342,404 380,448 422,721 Change in unrealized appreciation (depreciation) 257,686 61,405 (71,611) ----------- ----------- ----------- 2,387,112 1,960,376 2,134,514 Amortization of deferred policy acquisition costs (1,969,967) (2,197,399) (1,797,320) ----------- ----------- ----------- Deferred policy acquisition Costs at end of year $13,391,535 $12,974,390 $13,211,413 =========== =========== ===========
Life insurance in-force aggregated approximately $1.5 billion and $1.6 billion at December 31, 2002, and 2001, respectively. Mortality and withdrawal assumptions are based upon the Company's experience and actuarial judgment with an allowance for possible unfavorable deviations from the expected experience.
A note payable to a related party consists of amounts due on demand to Security National Life Insurance Company. The note qualifies as shareholders' equity for statutory accounting purposes in accordance with Section 628.401 of the Florida Statutes. At December 31, 2002 and 2001, the note bears interest at 9.0% percent (payable monthly); principal repayment is contingent upon the Company maintaining statutory surplus in excess of $1,874,000 and obtaining approval in advance by the Florida Department of Insurance. Interest expense relating to the balance of the note payable to the related party during 2002, 2001, and 2000 aggregated $90,000, $97,000, and $105,000 respectively.
2002 2001 2000 Computed "expected" tax expense (benefit) $(28,158) $29,866 $67,444 Increase (reduction) in income taxes resulting from: Small life insurance company deduction 17,107 (7,162) (3,485) Changes in the valuation allowance for deferred tax assets, allocated to income tax expense -- (7,115) (27,338) State taxes, net of federal income tax benefit (1,203) 1,276 1,484 -------- ------- ------- $(12,254) $16,865 $38,105 ======== ======= =======
2002 2001 2000 Numerator for basic and diluted Earnings per share: Net income (loss) $(70,566) $70,976 $160,260 Denominator: Denominator for basic earnings per share weighted average shares 1,979,291 1,907,989 1,907,989