Premiums and policy fees increased $50.4 million or 12.2% in 1996 over 1995. The coinsurance by the Acquisitions Division of three blocks of policies in the first and fourth quarters of 1996 resulted in a $19.2 million
On October 7, 1996, Protective announced that it would make voluntary refunds to certain of its cancer insurance policyholders and would reduce premium rates charged to such policyholders until certain conditions are met. The estimated refunds reduced the Group Division's premiums and policy fees, as noted above.
Pretax earnings from the Acquisitions Division increased $3.2 million in 1996 as compared to 1995. Earnings from the Acquisitions Division are normally expected to decline over time (due to the lapsing of policies resulting from deaths of insureds or terminations of coverage) unless new acquisitions are made. The Division's most recent acquisitions resulted in a $4.7 million increase in pretax earnings.
ENTITIES INCLUDED The consolidated financial statements include the accounts, after intercompany eliminations, of Protective Life Insurance Company and its wholly-owned subsidiaries including Wisconsin National Life Insurance Company ("Wisconsin National") and American Foundation Life Insurance Company ("American Foundation"). Protective is a wholly-owned subsidiary of Protective Life Corporation ("PLC"), an insurance holding company.
At December 31, 1996, Protective estimates the fair value of its guaranteed investment contracts to be $2,462.0 million using discounted cash flows. The surrender value of Protective's annuities which approximates fair value was $1,322.3 million.
At December 31, 1996 and 1995, Protective's problem mortgage loans and foreclosed properties totaled $23.7 million and $26.1 million, respectively. Protective's mortgage loans are collateralized by real estate, any assessment of impairment is based upon the estimated fair value of the real estate. Based on Protective's evaluation of its mortgage loan portfolio, Protective does not expect any material losses on its mortgage loans.
Protective leases furnished office space and computers to affiliates. Lease revenues were $3.7 million in 1996, $3.1 million in 1995, and $2.8 million in 1994. Protective purchases data processing, legal, investment and management services from affiliates. The costs of such services were $50.4 million, $38.1 million, and $29.8 million in 1996, 1995, and 1994, respectively. Commissions paid to affiliated marketing organizations of $7.4 million, $10.9 million, and $10.1 million in 1996, 1995, and 1994, respectively, were included in deferred policy acquisition costs.
Certain corporations with which PLC's directors were affiliated paid Protective premiums and policy fees for various types of group insurance. Such premiums and policy fees amounted to $31.2 million, $21.2 million, and $21.1 million in 1996, 1995, and 1994, respectively. Protective and/or PLC paid commissions, interest, and service fees to these same corporations totaling $5.0 million, $5.3 million, and $4.9 million, in 1996, 1995, and 1994, respectively.
During 1995 Protective entered into a reinsurance agreement whereby all of Protective's new credit insurance sales are being ceded to a reinsurer. Included in the preceding paragraph are credit life and credit accident and health insurance premiums of $47.7 million and $55.3 million respectively, and reserves totaling $135.8 million which were ceded during 1996. Also included are credit life and credit accident and health insurance premiums of $68.2 million and $57.6 million, respectively, and reserves totaling $100.8 million which were ceded during 1995.