Management expects to continue to emphasize growth in the Company's individual life insurance segment. However, as a result of the further downgrade in Southwestern Life's claims paying ratings in early 1995, Southwestern Life's ability to maintain or increase the levels of new sales of life insurance products in 1995 is at present uncertain. A decline in sales, combined with continuing high levels of surrenders of existing life insurance policies (as
Preferred dividend requirements totaled $13.7 million in 1994, $28.8 million in 1993 and $30.8 million in 1992. In January of 1995, SLC's Board of Directors announced the indefinite suspension of the payment of preferred stock dividends; however, these dividends are cumulative and, accordingly, the Company is now in arrears on its preferred dividends. See Note 10 of Notes to Financial Statements.
- Available for sale securities, representing securities that may be sold prior to maturity due to changes that might occur in market interest rate risks, changes in the security's prepayment risk, management of the Company's income tax position, the Company's general liquidity needs, increases in loan demand, the need to increase regulatory capital, changes in foreign currency risk, or similar factors. Available for sale securities are carried at fair value.
The present value of future profits on business in force of acquired subsidiaries represents the portion of the cost to acquire such subsidiaries that is allocated to the value of the right to receive future cash flows from insurance contracts existing at the dates of acquisitions. Such value is the actuarially determined present value of the future cash flows from the acquired policies, based on projections of future premium collection, mortality, morbidity, surrenders, operating expenses, investment yields, and other factors. The account is amortized with interest over the estimated remaining life of the acquired policies.
Participating life insurance policies represent approximately 1% of the total individual life insurance in force at December 31, 1994 and 1993, respectively. The amount of dividends to be paid is determined annually by the boards of directors of the life insurance subsidiaries. A portion of the earnings of the Company is allocated to the participating policyholders and included in other policyholder funds.
On March 24, 1995, the Company entered into a letter of intent to sell to an unaffiliated third party its wholly-owned subsidiary Constitution Life Insurance Company (Constitution) for $1.86 million cash plus Constitution's adjusted capital and surplus. The transaction is subject to, among other conditions, completion of a definitive agreement
The following summary sets forth the maturities and sinking fund requirements of notes payable during each of the five years following December 31, 1994 (in thousands):
Through June 1993, FMI had leased office space under a ten-year lease in a building owned by Messrs. Shaw and Rice. Effective March 30, 1990, FMI had sublet substantially all of the office space to a former subsidiary which was sold as of that date.
Activity in the liability for claims and benefits payable for the years ended December 31, 1994, 1993 and 1992 is summarized as follows (1992 excludes amounts for Bankers and Certified, which were sold in November 1992):
The provision (credit) for income taxes is included in the statements of earnings as follows:
Based on the current financial condition of the Company and the uncertainties regarding SLC's ability to utilize its available loss carryforwards and other temporary differences, SLC increased its valuation allowance for deferred income tax assets in the 1994 fourth quarter by $20,116,000. Further, based on the tentative resolution of certain issues relative to an IRS audit for the tax years 1986 through 1989, the Company increased its liability for income tax settlements by $7,981,000 and reflected other adjustments to its income tax liabilities totaling $2,269,000. These adjustments, totaling $30,366,000, or $0.64 per common share, were included in the Company's 1994 fourth quarter income tax provision (see Note 13).
Cash payments (receipts) for interest expense and income taxes were as follows: