RGA Argentina conducts business from approximately 800 square feet of office space in Buenos Aires, Argentina. The rental expenses paid by RGA Argentina under the lease during 2001 were approximately $28,000. The lease expires in December 2002.
Further discussion and analysis of the results for 2001 compared to 2000 and 1999 are presented by segment. Certain prior year amounts have been reclassified to conform to the current year presentation.
Asia Pacific reported income before income taxes of $3.0 million for 2001, an increase of $1.8 million compared to 2000, a result of improved persistency and an increase in premium volume during 2001. The decrease in Other International losses reported for 2000 was primarily due to favorable mortality results, additional premium volume, and a full year of experience from a large financial reinsurance transaction executed at the end of 1999 in the Asia Pacific sub-segment, offset, in part, by the sale of the Chilean operations in Latin America.
Policy acquisition costs and other insurance expenses as a percentage of net premiums represented 29.1%, 25.3%, and 20.0% for 2001, 2000, and 1999, respectively. The percentages fluctuate due to timing of client company reporting and variations in the mixture of business being reinsured. During 2001 and 2000, the Europe & South Africa segment experienced an increased amount of new business with higher allowances, particularly in the United Kingdom, compared to 1999. Other operating expenses were relatively flat for 2001 and increased 21.8% during 2000. As a percentage of premiums, other operating expenses decreased to 11.6% in 2001 and increased to 16.1% in 2000 from 12.3% in 1999. The Company believes that sustained growth in premiums should lessen the burden of start-up expenses and expansion costs over time.
Impairments in the value of securities held by the Company, considered to be other than temporary, are recorded as a reduction of the carrying value of the security, and a corresponding realized capital loss is recognized in the consolidated statements of income. The Company's policy is to recognize such impairment when the projected cash flows of these securities have been reduced on other than a temporary basis so that the realizable value is reduced to an amount less than the carrying value. In conjunction with its external investments manager, the Company evaluates factors such as the financial condition of the issuer, payment performance, market value, compliance with covenants, general market conditions, various other subjective factors, and the intent and ability to hold securities.
Revenues for interest-sensitive and investment-type products consist of investment income, policy charges for the cost of insurance, policy administration, and surrenders that have been assessed against policy account balances during the period. Interest-sensitive contract liabilities for these products represent policy account balances before applicable surrender charges. Deferred policy acquisition costs are recognized as expenses over the term of the policies. Policy benefits and claims that are
Included in net realized losses are other than temporary write-downs of fixed maturity securities of approximately $43.4 million, $10.1 million, and $15.4 million in 2001, 2000, and 1999, respectively. Approximately $36.3 million of the other than temporary write-downs in 2001 related to the Company's asset-backed securities portfolio. The Company incurred approximately $9.1 million in realized losses associated with the other than temporary write-down and sale of Enron securities. Additionally, the Company incurred approximately $27.0 million in realized capital losses when it liquidated substantially all of its Argentine-based investment securities. The Company reinvested the proceeds from these sales in U.S. dollar based securities in order to reduce its exposure to the volatile Argentine economy. Other losses during 2000 include $8.9 million in realized losses associated with the sale of subsidiaries. The recapture of the funding agreement business by General American led to the majority of the realized losses in 1999.
Note 14 FINANCIAL CONDITION AND NET INCOME ON A STATUTORY BASIS - SIGNIFICANT SUBSIDIARIES
Certain of the Company's debt agreements contain financial covenant restrictions related to, among others, liens, the issuance and disposition of stock of restricted subsidiaries, minimum requirements of consolidated net worth ranging from $600 million to $700 million, and minimum rating requirements. A material ongoing covenant default could require immediate payment of the amount due, including principal, under the various agreements. Additionally, the Company's debt agreements contain cross-default covenants, which would make outstanding borrowings immediately payable in the event of a material uncured covenant default under any of the agreements, including, but not limited to, non-payment of indebtedness when due for amounts greater than $10 million or $25 million depending on the agreement, bankruptcy proceedings, and any other