BLH currently leases 300,000 square feet of executive office and administration space in a single facility in downtown Chicago under a 15-year lease agreement. BLH also leases approximately 100,000 square feet of warehouse space in a second Chicago facility under a 10-year lease agreement executed in 1993. BLH leases more than 200 sales offices totaling approximately 350,000 square feet. All of the sales office leases are short-term in length, with remaining lease terms ranging from one to five years.
Insurance policy income consists of premiums received on traditional life insurance products and policy fund and surrender charges assessed against investment type products. This account decreased in the last three years as a result of a decrease in sales of policies with mortality or morbidity risks, partially offset by an increase in surrender charges resulting from higher annuity policy withdrawals. Surrender charges assessed against annuity withdrawals were $9.8 million, $8.0 million and $9.4 million in 1995, 1994 and 1993, respectively, and annuity withdrawals were $359.5 million, $353.8 million and $245.0 million for the same periods, respectively. Increases in withdrawals were primarily due to the increased size of CCP's annuity portfolio and increased competition from higher yielding alternative investment products.
Interest expense on annuities and financial products increased 10 percent in 1995 over 1994 primarily due to: (i) an increase in the annuity business in force (1995 insurance liabilities increased by $88.7 million, or 2.1 percent, over 1994); and (ii) fluctuations in charges to the account related to investment income from separate account assets as described above under net investment income. Such amount decreased 14 percent in 1994 compared to 1993 primarily due to: (i) lower crediting rates; and (ii) fluctuations in charges to the account related to investment income for separate accounts assets. At December 31, 1995, 1994 and 1993, the weighted average crediting rate for the Company's annuity liabilities, excluding interest bonuses guaranteed for the first year of the annuity contract, was 5.5 percent, 5.7 percent and 6.0 percent, respectively.
Interest and other includes financing costs for debt on which Conseco is directly liable and the costs associated with the holding company operations.
Non-current mortgage loans were not significant at December 31, 1995. The Company had $2.4 million in realized losses on mortgage loans for the year ended December 31, 1995. At December 31, 1995, the Company had a loan loss reserve of $5.2 million. Approximately 40 percent, 9 percent and 7 percent of the mortgage loans were on properties located in California, Texas and Indiana, respectively. No other state comprised greater than 6 percent of the mortgage loan balance.
Common stock and additional paid-in capital decreased by $8.6 million as a result of share repurchases which reduced common stock and additional paid-in capital by $15.0 million, offset by: (i) .1 million shares of common stock issued pursuant to the Company's stock option plan for net proceeds of $.7 million and tax benefits of $.4 million; and (ii) additions to common stock and paid-in capital of $5.3 million relating to employee benefit plans.
A summary of maturity dates and amounts (dollars in millions) of the surplus debenture is shown below. Interest is payable quarterly generally at 2 percent above the prime rate (10.75 percent at December 31, 1995).
The Company believes that a number of life insurance companies will be available to be acquired in the next 10 years as a result of strategic restructuring and consolidation within the life industry. The Company may participate directly in such acquisitions, such as its planned merger with LPG, when the acquisition fits Conseco's strategic growth plan and can be achieved with a capital structure that results in both: (i) increased earnings per share and value to Conseco's shareholders; and (ii) favorable rating agency actions that facilitate profitable marketing activities by all Conseco companies.
BLH, a company formed by Partnership I to acquire Bankers Life, completed an IPO in March 1993. As a result of the IPO, Conseco owned 31 percent of BLH and no longer had unilateral control of BLH. However, after we acquired additional shares of BLH in September 1993, our ownership position in BLH increased to 56 percent. In June 1995, we purchased additional shares of BLH, increasing the Company's ownership of BLH to 82 percent (85 percent including the shares of BLH owned by CCP). Conseco's ownership of BLH increased to 88 percent at December 31, 1995, and 90.5 percent at March 5, 1996, as a result of share repurchases by BLH in the third and fourth quarters of 1995 and in 1996. The accounts of BLH are consolidated with Conseco's accounts for all periods in the accompanying consolidated financial statements.
When there are changes in conditions that cause us to transfer a fixed maturity investment to a different category (i.e., actively managed, trading or held to maturity), we transfer it to the new category at its fair value on the date of the transfer. We account for the security's unrealized gain or loss (such amounts were immaterial in 1995) as follows:
For traditional life insurance contracts, we recognize premiums as income when due or, for short duration contracts, over the period to which the premiums relate. We recognize benefits and expenses as a level percentage of earned premiums. We accomplish this by providing for future policy benefits and by amortizing deferred policy acquisition costs.
The proceeds from sales of fixed maturity investments were $5.8 billion, $1.9 billion and $6.5 billion in 1995, 1994 and 1993, respectively. Proceeds from the sales of trading account securities were $2.1 billion, $.9 billion and $10.0 billion in 1995, 1994 and 1993, respectively.
Effective April 1, 1994, BLH recaptured certain annuity business previously ceded to an unaffiliated company and retroceded to an affiliate of ICH. The excess of liabilities assumed of $390.2 million over assets acquired of $371.0 million was capitalized as a component of cost of policies purchased. Reserves related to these policies totaling $398.5 million were included in reinsurance receivables at December 31, 1993.
The IRS has completed its examination of the Company for years through 1992 and is currently conducting an examination for years 1993 through 1994. All amounts due determined by completed examinations have been either paid or accrued.
In 1995 and 1994, the Company repurchased approximately 4 million and 14 million shares of its common stock for $92.4 million and $360.2 million, respectively, in connection with its stock repurchase program.