Securities that are not classified as either fixed maturities or trading securities are reported as securities available for sale. These securities may be sold if market or other measurement factors change unexpectedly after the securities were acquired. For example, opportunities arise when factors change that allow the Company to improve the performance and credit quality of the investment portfolio by replacing an existing security with an alternative security while still maintaining an appropriate matching of expected maturities of assets and liabilities. Examples of such improvements are as follows: improving the yield earned on invested assets, improving the credit quality and performance or duration of the portfolio, and selling securities in advance of anticipated calls or other prepayments. Securities available for sale are reported in the Company's financial statements at the lower of aggregate cost or market value. Any unrealized gains or losses resulting from changes in the market value of the securities are reflected as a component of stockholders' equity.
value equal to or greater than the carrying value of the
At December 31, 1993, the fixed maturities portfolio totaled $1.79 billion or 70.1% of the Company's total invested assets. Securities available for sale were $39 million or 1.5% of total invested assets, while trading securities were $117 million or 4.6% of total invested assets at the same time period.
The Company maintains a diversified debt securities portfolio which consists of various types of fixed income securities including primarily U.S. government, public utilities, corporate and mortgage-backed securities. Investments in mortgage-backed securities include U.S. government and private issue mortgage-backed pass-through securities as well as collateralized mortgage obligations (CMOs). As of December 31, 1993 and 1992, the Company's debt securities portfolio consisted of the following mix of securities:
The Company had no long-term debt during 1993 or 1992. There are no present material commitments for capital expenditures in 1994, and the Company does not anticipate incurring any such commitments through the remainder of 1994.
position on the statutory reserving methodology for two-tier annuities. The Colorado Division of Insurance (the Division) issued a Notice in 1987 which defined the basis of reserving for two-tier annuities and utilized a single interest rate for all benefit streams. Based on the Colorado Notice and the uncertainty of the implementation of Actuarial Guideline GGG, the Company added $7,000,000 in 1992 and $6,000,000 in 1993 to its existing statutory annuity reserves. These additional reserves were agreed upon and approved by the Colorado Division of Insurance.
on a formula that takes into account the amount of risk each company faces on its products and investments. The RBC formula takes into consideration four major areas of risk which are: (i) asset risk which primarily focuses on the quality of investments; (ii) insurance risk which encompasses mortality and morbidity risk; (iii) interest rate risk which involves asset/liability matching issues, and (iv) other business risks. The Company has calculated its RBC level based on the new requirement and has determined that its capital and surplus is significantly in excess of the threshold requirements.