ended December 31, 2001, unrealized gains on derivatives of $13,554,000 represent the change in fair value on call options used to fund the next-year income credit to the equity index annuities.
The adjustments for realized gains (losses) on investments and the impact of SFAS 133 are net of income taxes attributable to those items.
Interest expense on amounts due under repurchase agreements decreased 68% to $1,123,000 in 2001 and 6% to $3,267,000 in 2000 from $3,491,000 in 1999. These changes are principally attributable to a decrease in the average balances outstanding. See Note 7 of the Notes to the Consolidated Financial Statements included elsewhere in this report.
Amortization of deferred policy acquisition costs and value of insurance in force acquired increased 163% to $23,145,000 in 2001 and 19% to $8,806,000 in 2000 from $7,379,000 in 1999. These increases are primarily due to (i) the growth in our annuity business as discussed above; (ii) the introduction of multi-year rate guaranteed products with shorter expected lives; and (iii) an increase of $846,000 resulting from SFAS No. 133. See Note 1 of the Notes to Consolidated Financial Statements included elsewhere in this report.
Other operating costs and expenses increased 19% to $17,071,000 in 2001 and 18% to $14,370,000 in 2000 from $12,129,000 in 1999. These increases are principally attributable to increases in marketing expenses, employees and related salaries and costs of employment.
On October 18, 1996, we borrowed $10,000,000 from two banks under a variable rate revolving credit agreement. Proceeds from the borrowing were contributed to the capital and surplus of American Equity Life ($6,000,000) and used to refinance indebtedness we incurred to capitalize American Equity Life at the time of its formation ($4,000,000). During 1999, this line of credit was increased to permit maximum borrowings of $25,000,000, and we borrowed an additional $10,600,000, bringing our liability for notes payable to $20,600,000 at December 31, 1999. During 2000, the maximum borrowing level was increased to $50,000,000, and the Company borrowed an additional $23,400,000. We loaned the proceeds of the 1999 and 2000 borrowings to American Equity Investment Service Company (see discussion that follows under Liquidity of Parent Company). During 2001, we borrowed an additional $6,000,000 and contributed the proceeds to the capital and surplus of American Equity Life. Effective December 31, 2001, we exercised an option to convert the line of credit to a term loan to be paid in fifteen equal quarterly installments. Under this agreement, we are required to maintain minimum capital and surplus levels at American Equity Life and meet certain other financial and operating ratio requirements. We are also prohibited from incurring other indebtedness for borrowed money without obtaining a waiver from the lenders and from paying dividends on our capital stock in excess of 10% of our consolidated net income for the prior fiscal year (except that in 1999 we were permitted to make a dividend payment equal to 44% of our consolidated net income for 1998).
A portion of the 7,998,750 shares of Common Stock issued in 1997 at $5.33 per share were issued in a rights offering to existing stockholders and in connection therewith, certain of our officers and directors received management subscription rights to purchase one share of Common Stock for each share owned and one-half share of Common Stock for each stock option held on the offering date. An aggregate of 2,157,375 management subscription rights were issued to nine officers and directors at that time. The management subscription rights have an exercise price of $5.33 per share and expire on December 1, 2002. Farm Bureau Life Insurance Company purchased 4,687,500 shares of Common Stock in this offering and received a right of first refusal to maintain a 20% ownership interest in our capital stock.