Our home office consists of a 60-story landmark office tower and five other buildings located in Boston, Massachusetts. We occupy approximately 38.5% of the 3.2 million rentable square feet of space in these buildings. The balance of the space in these buildings is rented to commercial tenants. In addition, we lease office space throughout the United States as needed for our operations, including for our sales force. We believe that our current facilities are adequate for our current and expected needs. On March 14, 2003, the Company sold three of its Home Office complex properties to Beacon Capital Partners for $910.0 million. As part of the transaction, the Company also provided Beacon Capital Partners with a long-term sub-lease of the Company’s parking garage. The Company entered into a long-term lease of the space it now occupies in those buildings and plans on continuing to use them as its corporate headquarters.
The following table sets forth certain selected historical consolidated financial data. The selected income statement data for each of the years in the three year period ended December 31, 2002 and balance sheet data as of December 31, 2002 and 2001 have been derived from our consolidated financial statements and related notes included elsewhere in this Form 10-K and should be read in conjunction with those financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, also included elsewhere in this Form 10-K. The following selected income statement data for the years ended December 31, 1999 and 1998 and balance sheet data as of December 31, 2000, 1999, and 1998 have been derived from our consolidated financial statements not included herein. The following selected consolidated financial data has been prepared in accordance with GAAP, except the statutory data presented below which was prepared in accordance with applicable statutory accounting practices and was taken from our annual statements filed with insurance regulatory authorities. Certain reclassifications to prior periods have been made to conform to the current period presentations.
We evaluate segment performance and base management’s incentives on segment after-tax operating income. For a discussion of segment after-tax operating income see Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.
In December 2000, the American Institute of Certified Public Accountants (AICPA) issued SOP 00-3, “Accounting by Insurance Enterprises for Demutualizations and Formations of Mutual Insurance Holding Companies and Certain Long-Duration Participating Contracts.” The SOP, which was adopted with respect to accounting for demutualization expenses by the Company on December 31, 2000, requires that demutualization related expenses be classified as a single line item within income from continuing operations and should not be classified as an extraordinary item. On October 1, 2001, the Company adopted the remaining provisions of SOP 00-3 which required the reclassification of $9,710.0 million and $12,035.9 million of closed block assets and liabilities, respectively at December 31, 2000, and $1,467.7 million and $1,343.6 million of closed block revenues, and benefits and expenses, respectively, for the period from February 1, 2000 (date of demutualization) to December 31, 2000, all of which were reclassified to other existing asset, liability, revenue, and benefit and expense accounts. The required implementation of SOP 00-3 also resulted in a reduction of net income of $20.2 million (net of tax of $6.6 million) or $0.06 diluted earnings per common share for the period from February 1, 2000 to December 31, 2000 and $3.4 million (net of tax of $1.8) or $0.01 diluted earnings per common share for the nine months ended September 30, 2001. Previously reported net income included higher than expected closed block results primarily due to higher investment earning and better mortality and lapse experience, which upon the adoption of SOP 00-3, were excluded from net income and set up in the PDO liability. Finally, adoption also resulted in the recognition of a policyholder dividend obligation of $77.0 million at December 31, 2000, which represents cumulative actual closed block earnings in excess of expected periodic amounts calculated at the date of the demutualization. See Note 6 to the consolidated financial statements for a summary description of the closed block assets, liabilities, revenues and expenses.
Total benefits and expenses includes benefits to policyholders of $5,387.7 million, $5,904.7 million, $5,375.6 million, $5,368.5 million, and $4,152.0 million for the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively. Benefits to policyholders excludes amounts related to net realized investment and other gains credited to participating pension contractholders and policyholder dividend obligation of $(35.2) million, $25.3 million, $21.0 million, $35.3 million, and $79.1 million for the years ended December 31, 2002, 2001, 2000, 1999, and 1998 respectively.
Total benefits and expenses includes amortization of deferred policy acquisition costs of $350.2 million, $306.8 million, $242.0 million, $166.8 million, and $249.7 million, for the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively. Amortization of deferred policy acquisition costs excludes amounts related to net realized investment and other gains (losses) of $(34.6) million, $(26.4) million, $(9.3) million, $50.5 million, and $41.2 million for the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively.
This is unaudited pro forma information which gives effect to the Reorganization and Initial Public Offering (IPO) of the Company referred to in Note 1 to our consolidated financial statements. Because the Company did not have outstanding common stock prior to its IPO on February 1, 2000, the 1999 per share balances represent earnings per common share on a pro forma basis for the period January 1, 1999 through December 31, 1999 using 314.8 million outstanding common shares for the basic and diluted calculations. The 2000 earnings per common share balances represent earnings per common share on a pro forma basis for the period from January 1, 2000 through December 31, 2000 using 314.5 million and 316.2 million outstanding shares for the basic and diluted earnings per share calculations, respectively. Actual net income per common share for the period from February 1, 2000 through December 31, 2000 was $2.46 and $2.45 for the basic and diluted calculations, respectively, after restatement for implementation of SOP 00-3 (see note 1 above). No cumulative effect of accounting change occurred in 2000. Pro forma earnings per share for the periods prior to 1999 are not presented, as it would not be meaningful.
Balances prior to 2000 were formerly referred to as policyholders’ equity.
Management’s Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference to Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is included in Exhibit 13 to this Form 10-K.
The Company’s Financial Statements and Supplementary Data, which are included in Exhibit 13 to this Form 10-K, are incorporated herein by reference.