Universal Life and Investment Annuity Contract Revenues: These revenues are from the Company's non-traditional products which are universal life and investment annuities. Revenues from these types of products consist of policy charges for the cost of insurance, policy administration fees and surrender charges assessed during the period. These revenues increased from $56.5 million in 1992 to $67.8 million in 1993 and declined somewhat to $64.7 million in 1994. More specifically, cost of insurance, policy administration fees and other related revenues have steadily increased each year due to continued sales of non-traditional products which continue to increase the Company's policies in force. Although surrender charge revenues were relatively comparable for 1992 and 1994, these revenues were significantly higher in 1993 due to increased policy surrenders. This accounts for the majority of the significant increase in universal life and investment annuity contract revenues in 1993.
Cumulative Effect of Change in Accounting for Income Taxes: In February, 1992, the FASB issued SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires a change from the deferred method of accounting for income taxes of Accounting Principles Board Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The FASB issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," in May, 1993. In October, 1994, the FASB also issued SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures," which amends SFAS No. 114. These statements address the accounting by creditors for impairment of certain loans and related financial statement disclosures. The statements are applicable to all creditors and to all loans, uncollateralized as well as collateralized, with certain exceptions and also apply to all loans that are restructured in a troubled debt restructuring involving a modification of terms. The statements require that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent.
There is currently some public pressure for insurance companies to publish their RBC ratios or levels. However, the legality of publishing such information is uncertain. The American Institute of Certified Public Accountants (AICPA) recently released an exposure draft of a Statement of Position (SOP) which included requirements that insurance companies disclose certain information about their RBC levels. This requirement was deleted from the final SOP version due to questions raised about the legality of such disclosures. Instead, the AICPA has decided to consider a separate SOP at a later date on RBC disclosures, after the legal issues are resolved. Due to these unanswered legal issues, the Company has chosen not to publish its RBC ratios or levels. However, the Company's current statutory capital and surplus is significantly in excess of the threshold RBC requirements.