Cash Flow from Financing Activities. Cash used by financing activities, excluding the parent company, were $666.8 million, $492.3 million and $391.4 million for the years ended December 31, 2000, 1999 and 1998, respectively. During the year ended December 31, 2000, the Company's insurance subsidiaries transferred cash of $433.0 million associated with an indemnity coinsurance agreement with RGA. Dividends and surplus debenture payments during 2000 were the result of the sale of the Payroll Sales Division and a $55.0 million extraordinary dividend in connection with the Recapitalization Plan. Substantially all of the increases in dividends and surplus debenture payments during 1999 were the direct result of proceeds received by PLAIC from the disposition of Businesses Held for Sale. The cash outflow also reflects policyholder surrenders exceeding deposits by $34.5 million in 2000, $191.7 million in 1999 and $354.1 million in 1998. Cash outflows during 2000 also included payment of dividends and surplus debenture principal aggregating $199.3 million made to the parent company compared to $326.3 million in 1999 and $44.3 million in 1998.
Universal life and traditional life renewal premiums increased $29.3 million or 27.4% in 2000 and decreased $27.2 million or 20.3% for 1999. The 1999 premiums reflected negative premiums associated with the Security Life exchange or refund program. The exchange or refund program was instituted by Security Life on January 1, 1999 for policyholders of certain types of interest-sensitive insurance contracts and resulted in a refund of premiums of $23.0 million (see below). The refund program was completed at December 31, 1999. The decrease in universal life and traditional life premiums also reflects ratings downgrades and the impact of certain management actions instituted by Southwestern Life which resulted in the reduced renewal premiums in 2000 and may result in lower renewal premiums in subsequent years.
During 1999, policyholder benefits decreased 1.0% to $213.4 million compared with 1998. Death benefits decreased $6.9 million or 7.9% compared with 1998. Change in other benefits and future policy benefits increased 3.6% to $132.7 million in 1999. During 1999, future policy benefits were increased approximately $6.2 million as a result of the re-estimation of certain deficiency reserves on a block of Southwestern Life interest-sensitive business. Certain assumptions related to the expected future experience for lapses, premiums, mortality and interest were adjusted to reflect recent experience. In addition, management began implementing a plan that included contractually allowable increases to expense charges.
Net Investment Gains (Losses). The Company maintains an investment portfolio that focuses on maximizing investment income, without exposure to unwarranted interest rate and credit risk. The Company actively manages asset duration and liquidity risks. As a result of this strategy, the Company routinely sells positions in securities no longer meeting its criteria. The Company realized capital gains (losses) of ($12.9 million), ($502,000) and $14.1 million during 2000, 1999 and 1998, respectively. During 2000, the Company liquidated invested assets to provide the cash required to consummate the RGA reinsurance transaction and recognized $5.3 million in pre-tax capital losses. During 2000, the Company also recognized a permanent impairment of $5.4 million on fixed maturity issues in default and a loss of $673,000 on an investment in a limited partnership. The Company also liquidated securities available for sale in order to meet cash flow demands associated with policyholder surrenders that in the aggregate exceeded policyholder deposits by $34.5 million, $191.7 million and $354.1 million during 2000, 1999 and 1998, respectively.
realized an extraordinary charge of $1.7 million which represented the write-off of the deferred financing costs associated with the refinance of a SW Financial then-existing note that PennCorp assumed as a part of the acquisition of the SW Financial Controlling Interest.
10% of the Company's equity at December 31, 2000 consisted of an investment in Episode IV Loan Trust with carrying value and fair value of $25.0 million.
The Company and a number of its non-insurance subsidiaries file a consolidated federal income tax return. The life insurance subsidiaries file federal income tax returns with either PLAIC, or Pioneer Security (sold February 4, 2000), or Constitution (sold July 30, 1999) as the parent of the particular consolidated life insurance company tax group.
The Company and certain of its subsidiaries provide certain postretirement benefits to eligible retirees. The plans provide certain health care and life insurance benefits for retired employees. Employees meeting certain age and length of service requirements become eligible for these benefits. The Company closed new enrollments for the plan effective October 1, 2000. The Company's obligation for accrued postretirement benefits is unfunded. Following is an
The Company denied Schnoebelen's claims and vigorously defended the lawsuit. On July 20, 2000, a jury returned a verdict against United Life in the amount of approximately $1.125 million, composed of approximately $288,000 for past economic damages and approximately $838,000 for the net present value of future economic damages, upon which judgment was entered by the court. The Company has established a liability reserve of approximately $1.125 million for this judgment.
services, marketing, information technology and human resources) by a total of 52 employees. The 2000 Plan was substantially completed as of December 31, 2000. The Company incurred restructuring costs aggregating approximately $1.0 million for the year ended December 31, 2000 associated with such restructuring.
PennCorp incurred approximately $6.3 million of pre-tax period costs ("period costs") associated with the corporate restructuring for the year ended December 31, 1998. Such costs are included in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) as underwriting and other administrative expenses. The Company did not incur period costs during 2000 and 1999.