Diluted earnings per common share: Continuing operations $1.48 $2.23 $1.61 $1.39 $1.45 Discontinued operations - - - - (0.08) Extraordinary items - (0.02) (0.03) (0.14) - Change in accounting principle (0.11) - - - - Net income $1.37 $2.21 $1.58 $1.25 $1.37
Annuity Contracts Substantially all of AAG's fixed rate annuity contracts permit AAG to change crediting rates (subject to minimum interest rate guarantees of 3% to 4% per annum) enabling management to react to changes in market interest rates and maintain an adequate spread. Projected payments in each of the next five years and for all years thereafter on AAG's fixed annuity liabilities at December 31 are as follows (dollars in millions):
The following table summarizes AAG's life, accident and health premiums and benefits as shown in the Consolidated Income Statement (in millions).
Provision for Realignment Expenses In the fourth quarter of 1999, AAG recorded a charge for estimated expenses related to realignment within the Company's operating units. The charge is primarily the result of the Company's decision to replace a number of its current computer operating systems with a single system. The charge also includes various expenses associated with the elimination in 1999 of redundant positions.
Equity in Net Earnings of Affiliate Equity in net earnings of affiliate represents AAG's proportionate share of the results of Chiquita Brands International. Chiquita reported net income (loss) from continuing operations before unusual items of ($49 million) in 1999, $55 million in 1998 and $0.3 million in 1997. Chiquita reported net income (loss) before extraordinary items of ($58 million) in 1999, ($18 million) in 1998 and $0.3 million in 1997. Included in AAG's equity in Chiquita's 1998 and 1997 earnings are gains attributable to Chiquita's issuance of common stock.
Accounting Year Standard Subject of Standard Implemented SFAS #130 Comprehensive Income 1998 SFAS #131 Segment Information 1998 SOP 98-5 Start-Up Costs 1999 SFAS #133 Derivatives 2001
Cash Flows from Financing Activities: Fixed annuity receipts 446.4 480.6 493.7 Annuity surrenders, benefits and withdrawals (706.8) (690.4) (607.2) Additions to notes payable 71.1 150.0 114.0 Reductions of notes payable (0.8) (156.1) (94.9) Issuance of trust preferred securities - - 149.3 Issuance of Common Stock 0.6 0.4 - Retirement of Common Stock (5.2) (14.9) (1.1) Retirement of Preferred Stock - - (47.0) Repurchase of trust preferred securities (5.5) - - Cash dividends paid (4.2) (4.3) (5.3) (204.4) (234.7) 1.5
Investment in Affiliate AAG's investments in equity securities of companies that are 20% to 50% owned by AFG and its subsidiaries are generally carried at cost, adjusted for a proportionate share of their undistributed earnings or losses. Changes in AAG's equity in its affiliate caused by issuances of the affiliate's stock are recognized in earnings when such issuances are not part of a broader reorganization.
Derivatives The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," during the second quarter of 1998. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including derivative instruments that are embedded in other contracts, and for hedging activities and must be implemented no later than January 1, 2001. SFAS No. 133 requires the recognition of all derivatives (both assets and liabilities) in the statement of financial position at fair value. Changes in fair value of derivative instruments are included in current income or as a component of comprehensive income (outside current income) depending on the type of derivative. Implementation of SFAS No. 133 is not expected to have a material effect on AAG's financial position or results of operations.
Unamortized insurance acquisition costs consisted of the following at December 31, (in millions): 1999 1998 Deferred policy acquisition costs $435.7 $320.1 Present value of future profits acquired 115.1 59.9 Unearned revenues (144.6) (132.6) $406.2 $247.4
No compensation cost has been recognized for stock option grants. Had compensation cost been determined for stock option awards based on the fair values at grant dates consistent with the method prescribed by SFAS No. 123, AAG's net income (in millions) and earnings per share would have been lower by the following amounts: 1999 1998 1997 Net earnings ($ 3.3) ($ 3.5) ($ 4.0) Earnings per share ($0.07) ($0.09) ($0.09)
Pretax income from operations $ 42.4 $111.2 $ 91.7 Net income from operations 33.8 99.9 72.7 Net income 34.6 35.6 73.6
Quarterly results necessarily rely heavily on estimates. These estimates and certain other factors, such as the seasonal nature of the Company's affiliate and certain other operations and the discretionary sales of assets, cause the quarterly results not to be necessarily indicative of results for longer periods of time. The following table represents quarterly results of operations for the years ended December 31, 1999 and 1998 (in millions, except per share data).
December 31, Assets: 1999 1998 Investments: Fixed maturities - at market (amortized cost - $17.0 and $68.7) $ 14.6 $ 67.6 Equity securities - at market (cost - $2.1 and $1.9) 2.1 1.9 Cash and short-term investments 1.1 3.6 Investment in affiliate 21.3 24.8 Investment in subsidiaries (a) 420.2 512.0 Note receivable from AAG Holding 94.8 115.0 Other assets 33.1 16.5 $587.2 $741.4 Liabilities and Capital: Accounts payable, accrued expenses and other liabilities $ 26.9 $ 22.3 Payables to affiliates 32.4 29.2 Notes payable 2.2 1.2 Stockholders' equity (b) 525.7 688.7 $587.2 $741.4