(G) Amounts reported prior to June 30, 1996 reflect policyowners' equity.
(G) Diluted adjusted operating income per common share for 1998 and 1997 is calculated using 33.70 million and 23.57 million shares, respectively. Diluted adjusted operating income per common share for 1996 and 1995 is calculated using 23.16 million shares.
Annuity net investment income increased to $430.8 million in 1998 compared to $147.9 million in 1997, and $120.4 million in 1996. Net investment income in 1998 and 1997 included $322.0 million and $30.2 million, respectively, from Delta and AmVestors. Excluding these acquisitions, net investment income decreased $8.9 million in 1998 primarily from reduced limited partnership income and lower reinvestment rates in 1998. The effective yield on average invested assets in 1998 was 6.70%.
The Company intends to rely primarily on dividends and interest income from its life insurance subsidiaries in order to make dividend payments to its shareholders. The payment of dividends by its life insurance subsidiaries is regulated under various state laws. Under Iowa law, AmerUs Life and Delta Life may pay dividends only from the earned surplus arising from their respective businesses and must receive the prior approval of the Iowa Insurance Commissioner to pay any dividend that would exceed certain statutory limitations. The current statute limits any dividend, together with dividends paid out within the preceding 12 months, to the greater of (i) 10% of the respective company's policyowners' surplus as of the preceding year end or (ii) the net gain from operations for the previous calendar year. Iowa law gives the Iowa Commissioner broad discretion to disapprove requests for dividends in excess of these limits. The payment of dividends by AmVestors' subsidiaries, American Investors Life Insurance Company, Inc. (American), and Financial Benefit Life Insurance Company (FBL) is regulated under Kansas law, which has statutory limitations similar to those in place in Iowa. Based on these limitations and 1998 results, the Company's subsidiaries could pay an estimated $9 million in additional dividends in 1999 without obtaining regulatory approval.
On October 23, 1997, the Company entered into a $250 million revolving credit facility with a syndicate of lenders (the "Bank Credit Facility") to be used to replace its then existing revolving credit facility, to finance the acquisition of Delta, to finance permitted mergers and acquisitions and for other general corporate purposes. The commitment under the credit facility was reduced from $250 million to $150 million in June 1998. As of December 31, 1998, there was no outstanding loan balance under the facility. The Bank Credit Facility provides for typical events of default and covenants with respect to the conduct of the business of the Company and its subsidiaries and requires the maintenance of various financial levels and ratios. Among other covenants, the Company (a) cannot have a leverage ratio greater than 0.35:1.0 or an interest coverage ratio less than 2.5:1.0, (b) is prohibited from paying cash dividends on its common stock in excess of an amount equal to 3% of its consolidated net worth as of the last day of the preceding fiscal year, and (c) must cause certain of its subsidiaries, including AmerUs Life and Delta Life, to maintain certain ratings from A.M. Best and certain levels of adjusted capital and surplus and risk-based capital.
Management anticipates that funds to meet its short-term and long-term capital expenditures, cash dividends to shareholders and operating cash needs will come from existing capital and internally generated funds. Management believes that the current level of cash and available-for-sale and short-term securities, combined with expected net cash inflows from operations, maturities of fixed maturity investments, principal payments on mortgage-backed securities
The Company's life insurance subsidiaries may also obtain liquidity through sales of investments. The Company's investment portfolio as of December 31, 1998 had a carrying value of $9.0 billion, including Closed Block investments.
The following table summarizes the composition of the fixed maturity securities by category as of December 31, 1998 and 1997:
classified as restructured. During 1998, the Company had one foreclosure of $0.5 million.
All entities with which the Company does business are part of the Business Partners component of the Year 2000 Project. The Company has completed an inventory of business partners, and has identified the significance of various partners to the Company's business. Correspondence has been initiated with business partners to ascertain their Year 2000 readiness, and risk/impact analysis of service or supply disruptions have been completed. Based upon the results of analysis, action and contingency plans are being developed for various business partners. This project is scheduled for completion in the second or third quarter of 1999.