(1)The Corporation adopted Statement of Financial Accounting Standards No. 106, "EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS" in 1992. Adoption of this Standard was recognized as an accounting change. See Note 4 of Notes to Consolidated Financial Statements on pages 33 and 34..
(2)The Corporation adopted Statement of Financial Standards (SFAS) No. 115 "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES" as of January 1, 1994. Adoption of SFAS No. 115 resulted in a $26.3 million decrease in the carrying value of fixed maturities at December 31, 1994 and increased the carrying value $28.4 million and $51.7 million at December 31, 1996 and December 31, 1995, respectively. In accordance with SFAS No. 115, prior period financial statement balances were not restated. See Note 1 of Notes to Consolidated Financial Statements on pages 30 and 31.
In May 1993 the Financial Accounting Standards Boards (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective for fiscal years beginning after December 15, 1993. Under the new rules, debt securities that the Corporation has both the positive intent and ability to hold-to-maturity are carried at amortized cost. Debt securities that the Corporation does not have the positive intent or ability to hold-to-maturity and all marketable equity securities are classified as available-for-sale or trading and carried at fair value. Unrealized holding gains and losses on securities classified as available-for-sale are carried as a separate component of stockholders' equity. Unrealized holding gains and losses on securities classified as trading are reported in earnings. The Corporation adopted the provisions of SFAS No. 115 as of January 1, 1994 and placed its entire fixed maturity and equity securities portfolio in the available-for-sale classification. The Corporation believes it has the ability to hold all fixed income investments until maturity; however, securities may be sold to take advantage of investment opportunities generated by changing interest rates, prepayments or income tax considerations, as a part of the Corporation's asset/liability strategy, or for similar factors. Due to increasing interest rates during 1996, a $15.1 million net unrealized loss (net of deferred income tax benefit) on fixed maturities was charged against stockholders' equity at December 31, 1996. Declining interest rates during 1995 produced a $50.7 million net unrealized gain (net of deferred income taxes) which was credited to stockholders' equity at December 31, 1995.
Cash and investment assets for 1996 exceeded total liabilities by 47%. The Life Company continually matches the investment portfolio to the cash flow demands of the types of insurance being written and maintains adequate cash and short-term investments to meet cash requirements for policy loans and voluntary policy terminations, as well as investment commitments. Policy loans increased $0.5 million for 1996 and accounted for less than 5% of total cash and investment assets.
Effective December 31, 1993 the National Association of Insurance Commissioners adopted Risk-Based Capital (RBC) requirements for life/health insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks such as asset quality, mortality and morbidity, asset and liability
The information for this item is submitted in a separate section of this report. See page 22.