Principal properties owned by Standard Insurance Company (“Standard”) and used by the Company consist of two office buildings in downtown Portland, Oregon: the Standard Insurance Center, with approximately 460,000 square feet; and the Standard Plaza, with approximately 220,000 square feet. Both of our business segments use the facilities described above. The Company also owns two buildings with 72,000 square feet of office space each in Hillsboro, Oregon, which are used by StanCorp Mortgage Investors, LLC and our group insurance claims operations. In addition, Standard leases approximately 160,000 square feet of office space located in downtown Portland, Oregon, for home office and claims operations and 60,000 square feet of offsite storage. The Company leases 67 offices under commitments of varying terms to support its sales and regional processing offices throughout the United States. Management believes that the capacity and types of facilities are suitable and adequate. See Part II, Item 8, “Financial Statements and Supplementary Data-Notes to Consolidated Financial Statements-Note 1 Summary of Significant Accounting Policies-Property and equipment, net.”
We will diligently manage operating expenses in response to changing market conditions. One-time costs of $15 million to $20 million will be experienced in 2009 and will be associated with projects designed to enhance our operating efficiencies and reduce our annualized operating expenses by approximately $25 million per year beginning in the second half of 2009.
number of claims and severity measured as the length of time a disability claim is paid and the size of the claim. The assumptions used to establish the related reserves reflect expected incidence and severity, as well as new investment interest rates and overall portfolio yield, both of which affect the discount rate used to establish reserves. See “Critical Accounting Policies and Estimates-Reserves.”
In addition to the factors listed above, premiums for 2008 included $3.7 million received related to the termination of reinsurance on a small block of reinsured individual disability policies and claims. Offsetting the premiums received in this termination of reinsurance were $3.9 million in additional reserves assumed. The termination of these agreements was made primarily for the purpose of gaining administrative efficiencies.
The discount rate used for the fourth quarter of 2008 for newly established long term disability claim reserves increased to 5.75% from 5.25%, which had been in effect since the second quarter of 2008. The increase in the discount rate used for the fourth quarter reflected significantly higher new money rates during the quarter. The discount rate used in the fourth quarter of 2007 for newly established long term disability claim reserves was 5.35%, which decreased from 5.50% used during the first three quarters of 2007.
Revenues for the Asset Management segment increased 9.7% to $333.2 million for 2008 compared to 2007, and 28.0% to $303.6 million for 2007 compared to 2006. The increase in revenues for 2008 was primarily due to sales growth in our life-contingent individual fixed annuities business. Revenues in 2008 were also affected by increased contract administration fees in our investment advisory business and increased fee revenue related to the origination and servicing of commercial mortgage loans for third parties. Individual fixed annuity sales were $895.4 million in 2008, or 325.0% higher than in 2007 and reflected strong current demand, strong growth in our distribution channels and less competition from banks and alternative investments. Revenue growth for 2008 was partially offset by a decrease in revenues in the retirement plans business reflecting the impact of declining equity markets.
Administrative fees for the Asset Management segment include both asset-based and plan-based fees related to our retirement plans and investment advisory businesses and fees related to the origination and servicing of commercial mortgage loans. The primary driver for administrative fee revenue is the level of assets under administration, which is primarily driven by equity market performance. Administrative fees for the Asset Management segment were $118.3 million, $118.7 million and $78.3 million for 2008, 2007 and 2006, respectively. The slight administrative fee decline in 2008 was due to declining values of assets managed for retirement accounts and was a result of declining equity markets. This was offset by increased administrative fees from commercial mortgage loan servicing and our investment advisory business. Administrative fee revenue for 2008 also included the addition of DPA, Inc. a Portland based retirement plans business acquired in the third quarter of 2007, which added approximately $5.1 million and $2.6 million in administrative fees for 2008 and 2007, respectively.
Infrastructure and integration projects that were completed during 2008 are expected to help with operating expense efficiency in 2009.
Standard & Poor’s, Moody’s Investor Services, Inc. and A.M. Best Company also provide credit ratings on StanCorp’s Subordinated Debt. As of February 2009, ratings from these agencies were BBB, Baa2 and bbb-, respectively.
We adjusted the termination assumptions associated with a small block of group long term disability reported reserves in 2007 due to prolonged unfavorable reserve run-out experience for the block. This resulted in an increase in reserves of $16.8 million. There were no similar reserve increases in 2008 or 2006.
The value of any security interest we may have collateralized in the investment.
Administrative fee revenues for the Asset Management segment included fees charged to manage the fixed maturity securities and commercial mortgage loan portfolios for the Company’s insurance subsidiaries. These administrative fees were $12.9 million, $11.9 million and $10.1 million for 2008, 2007 and 2006, respectively.
The following table sets forth adjusted carrying value and estimated fair values of investment securities available-for-sale at December 31:
The mortgage loan valuation allowance was $6.8 million in 2008 and $3.0 million in 2007. The increase in the mortgage loan valuation allowance in 2008 was primarily due to increased delinquencies, requests for forbearance and loans in the process of foreclosure in our mortgage loan portfolio.