The Company’s consolidated financial statements and certain disclosures made in this Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company believes the estimates most susceptible to material changes (the “critical accounting policies”) are those used in determining the recognition of premiums, liabilities for future policy benefits and claims, deferred policy acquisition costs, and the provision for income taxes. Estimates related to critical accounting policies involve significant judgment. Changes in such estimates may affect amounts reported in future periods. Actual results could differ from those estimates and may have a material adverse effect on the Company’s business, financial position, results of operations, or cash flows.
Net realized investment gains or losses occur primarily as a result of disposition of the Company’s invested assets in the regular course of investment management. Net realized investment gains or losses for 2001, 2000, and 1999 included offsetting gains and losses from the sale of fixed maturity securities, commercial mortgage loans and real estate. Fixed maturity securities contributed net realized investment losses of $4.0 million, $6.3 million and $2.9 million in 2001, 2000 and 1999, respectively. Mortgage loan sales contributed net realized investment gains of $2.4 million, $1.2 million and $0.1 million in 2001, 2000 and 1999, respectively. Real estate contributed net realized investment gains of $1.6 million, $3.3 million and $3.2 million in 2001, 2000 and 1999, respectively. (See “-Liquidity and Capital Resources -Investing Cash Flows.”)
Premium growth for this segment is measured after adjusting for experience rated refunds, which are an adjustment of premiums on certain large employee benefit insurance contracts when claims experience has fluctuated from expected levels. Premiums for the Employee Benefits-Insurance segment increased 15.0% for 2001 compared to 2000, and 14.2% for 2000 compared to 1999, excluding experience rated refunds of $16.0 million, $22.9 million and $17.0 million for 2001, 2000 and 1999, respectively. The increases in premiums for both comparative periods primarily reflect the realization of the benefits of distribution expansion efforts during the past three years. Management believes the rate of premium growth in 2002 may be at a lower level than achieved in 2001 primarily due to economic uncertainties, including higher levels of national unemployment and caution on the part of employers when introducing new employee benefits.
The net increase in deferred policy acquisition costs was $3.6 million for 2001, compared to $5.9 million for 2000, and $3.0 million for 1999. The fluctuations in deferred acquisition costs primarily reflect fluctuations in sales and premium based compensation for the comparative periods, and relatively stable persistency for the business on which costs were previously deferred.
From time to time, StanCorp’s board of directors has authorized share repurchase programs. Share repurchases are to be effected in the open market or in negotiated transactions in compliance with the safe harbor provisions of Rule 10b-18 under regulations of the Securities Exchange Act of 1934. Execution of the share repurchase program is based upon management’s assessment of market conditions for its common stock and other potential growth opportunities. During 2001, the Company repurchased more than 1.9 million shares of its common stock at a total cost of $84.7 million, for a weighted-average price per share of $43.65. At December 31, 2001, 1.3 million shares are authorized for repurchase through September 30, 2002.
Income statement activity for acquisition costs, including deferred policy acquisition costs and value of business acquired, was as follows for the years ended December 31:
Effective January 1, 2001, The Company sold its individual life insurance business to Protective Life through a reinsurance transaction. Effective October 1, 2000, the Company acquired a substantial block of