The Company's overall conservative investment philosophy is reflected in the allocation of its investments, which is detailed below as of December 31, 2000 and 1999. The Company emphasizes investment grade debt securities, with smaller holdings in mortgage loans and policy loans.
Earnings for 1999 were significantly higher than 2000 and 1998 earnings, as 1999 includes additional income totaling $5,513,000, net of taxes, from the resolution of pending litigation relating to a former general agency. Additionally, the Company recorded realized gains on investments, net of taxes, totaling $2,912,000 for 1999 compared to gains of $1,550,000 for 1998 and losses of $12,508,000 for 2000. The gains in 1999 were primarily from sales and calls of investments in debt securities and a sale of investment real estate.
Universal life insurance contract interest has remained relatively constant at $10.2 million, $9.8 million, and $10.0 million in 2000, 1999, and 1998, respectively. This is consistent with the relative slow growth and stable size of this block of business along with minimal adjustments of policy credited rates.
The Company's international life insurance operations focus is on foreign nationals in upper socioeconomic classes with substantial financial resources. Insurance sales are primarily from countries in Central and South America, the Caribbean, and the Pacific Rim. Issuing policies to residents in numerous countries in these different regions provides diversification that helps to minimize large fluctuations in sales that can occur due to various economic, political, and competitive pressures that may occur from one country to another. Products issued in the international market include both universal life and traditional life insurance products. The Company minimizes exposure to foreign currency risks, as almost all foreign policies require payment of premiums and claims in United States dollars. Sales production from the international market is from independent contractor broker-agents, many of whom have been submitting policy applications to National Western for 20 or more years.
A comparative detail of premiums and contract revenues is provided below:
Although sales were lower in 2000 and 1999, equity-indexed annuities are a significant portion of the Company's total annuity production. The Company's equity-indexed annuities are flexible premium deferred annuities which combine the features associated with traditional fixed annuities, with the option to have interest rates that are linked in part to an equity index, the S&P 500 Index. These annuities are long-term contracts designed as planning vehicles for retirement security. These annuities are attractive to customers, as they have guaranteed minimum interest rates, coupled with the potential for significantly higher returns based on an equity index component. Also, because the Company does not offer variable products or mutual funds, these products provide a key equity-based alternative to the Company's existing fixed annuity products. In conjunction with the sale of these annuities, the Company uses an investment hedging program to offset the potential higher returns that could be paid on these products. Specifically, the Company purchases index options from highly rated banks and brokerage firms. These index options act as hedges to match closely the returns based on the S&P 500 Index which may be paid to policyholders.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information contained herein or in other written or oral statements made by or on behalf of National Western Life Insurance Company or its subsidiaries are or may be viewed as forward-looking. Although the Company has used appropriate care in developing any such information, forward-looking information involves risks and uncertainties that could significantly impact actual results. These risks and uncertainties include, but are not limited to, matters described in the Company's SEC filings such as exposure to market risks, anticipated cash flows or operating performance, future capital needs, and statutory or regulatory related issues. However, National Western, as a matter of policy, does not make any specific projections as to future earnings, nor does it endorse any projections regarding future performance that may be made by others. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments. Also, the Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future developments, or otherwise.