Benefits, claims and settlement expenses net of reinsurance benefits and claims, increased slightly in 2002 as compared to 2001 and decreased 12% in 2001 as compared to 2000. Fluctuations in death claim experience from year to year typically have a significant impact on variances in this line item. Direct (prior to reinsurance) death claims were approximately $1,812,000 greater in 2002 than in 2001 and approximately $1,636,000 less in 2001 than in 2000. There is no single event that caused the mortality variances. Policy claims vary from year to year and therefore, fluctuations in mortality are to be expected and are not considered unusual by management. Policy surrender benefits decreased approximately $2,000,000 during the year 2002 compared to the same period in 2001. As discussed above, stronger efforts have been made in policy retention through more personal contact with customers including telephone calls to discuss alternatives and reasons for a request to surrender their policy. The short-term impact of such fewer policy surrenders is negligible since a reserve for future policy benefits payable is held which is, at a minimum, equal to or even greater than the cash surrender value of a policy. The benefit of fewer policy surrenders is primarily received over a longer time period through the retention of the Company's asset base.
Both UG and APPL are Ohio domiciled insurance companies, which require five days prior notification to the insurance commissioner for the payment of an ordinary dividend. Ordinary dividends are defined as the greater of: a) prior year statutory earnings or b) 10% of statutory capital and surplus. At December 31, 2002 UG and APPL's total statutory shareholders' equity was $16,030,200, and $9,191,715, respectively. At December 31, 2002, UG and APPL's statutory gain from operations was $2,062,744, and $526,742, respectively. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. UG paid ordinary dividends of $800,000 to the former FCC in 2002, and $1,400,000 to UTG in 2002. APPL paid an ordinary dividend of $880,000 to UG in 2002.
Benefits, claims and settlement expenses: Life 20,393,044 19,614,470 23,440,711 Reinsurance benefits and claims (3,043,115) (2,349,102) (3,376,091) Annuity 1,151,973 1,244,663 1,210,783 Dividends to policyholders 984,346 1,015,055 1,003,954 Commissions and amortization of deferred policy acquisition costs 785,861 1,262,974 2,089,313 Amortization of cost of insurance acquired 1,515,450 1,572,920 1,592,812 Operating expenses 5,876,456 6,485,691 10,115,786 Interest expense 263,441 326,499 376,924 --------------- ---------------- ---------------- 27,927,456 29,173,170 36,454,192 --------------- ---------------- ----------------
Equity securities Banks, trust and insurance companies $ 1,209,756 $ 1,100,000 Industrial and miscellaneous 3,674,114 2,752,716 -------------- ------------- $ 4,883,870 $ 3,852,716 ============== =============
Fixed maturities held to maturity: U.S. Government and govt. Agencies and authorities $ 6,904,757 $ 280,101 $ (893) $ 7,183,965 States, municipalities and Political subdivisions 11,788,567 360,714 (119,497) 12,029,784 Collateralized mortgage Obligations 128,471 4,820 0 133,291 Public utilities 22,219,127 859,864 (70,947) 23,008,044 All other corporate bonds 33,964,473 1,410,244 (4,391) 35,370,326 -------------- ------------ -------------- ------------- Total $ 75,005,395 $ 2,915,743 $ (195,728) $ 77,725,410 ============== ============ ============== =============
Currently, the Company is utilizing reinsurance agreements with Business Mens' Assurance Company, ("BMA") and Swiss Re Life and Health America Incorporated ("SWISS RE"). BMA and SWISS RE currenty hold an "A" (Excellent), and "A++" (Superior) rating, respectively, from A.M. Best, an industry rating company. The reinsurance agreements were effective December 1, 1993, and cover all new business of the Company. The agreements are a yearly renewable term ("YRT") treaty where the Company cedes amounts above its retention limit of $100,000 with a minimum cession of $25,000.
On November 15, 2002, North Plaza acquired 229 acres of timberland from Millard V. Oakley, a director of UTG, for a total purchase price of $54,811. The land acquired was adjacent to land already owned by North Plaza. The purchase price was consistent with other recent similar land acquisitions made by North Plaza.
At December 31, 2002 and 2001, the Company had $2,995,275 and $4,400,670 in long-term debt outstanding, respectively. The debt is comprised of the following components:
This allowed UTG to acquire the remaining common shares (approximately 18%) of FCC that UTG did not own prior to the effective time of the merger.
Tax Before-Tax (Expense) Net of Tax 2002 Amount or Benefit Amount ---------------------------------------------- ---------------- ----------------- ---------------
Premiums and policy fees, net $ 4,276,861 $ 4,388,284 $ 3,725,823 $ 3,601,432 Net investment income 3,307,478 3,287,608 3,336,329 3,415,409 Total revenues 7,793,041 7,898,975 7,253,685 7,224,343 Policy benefits including dividends 4,835,106 4,609,999 5,110,590 4,930,553 Commissions and amortization of DAC and COI 688,618 578,688 501,283 532,722 Operating expenses 1,530,433 1,649,134 1,441,502 1,255,387 Operating income 666,674 999,760 129,080 447,074 Net income (loss) 477,034 722,679 327,499 (27,594) Basic earnings (loss) per share 0.14 0.21 (0.01) 0.09 Diluted earnings (loss) per share 0.14 0.21 (0.01) 0.09 -------------------- --------------------- --------------------- -------------------- 1st 2nd 3rd 4th --------------- --------------- --------------- ---------------