The Company leases all space used in conducting its operations. The Company shares home office space and other facilities with affiliates in a building owned by Nationwide Mutual Insurance Company. The Company also leases various other branch offices. The terms of these leases are not material to the consolidated financial statements.
* Management of the Company has elected not to retroactively restate 1990 financial data for the capital contribution of the outstanding capital shares of West Coast Life Insurance Company, National Casualty Company and Nationwide Financial Services, Inc. from Nationwide Corporation during 1993.
Traditional life insurance premiums continued a declining trend, which began in 1991 as a result of the reduction in sales of single premium policies.
Realized losses on investments were $16 million in 1994 compared to realized gains on investments of $114 million in 1993 and realized losses of $19 million in 1992. A significant portion of the realized gains reported in 1993 are attributable to the Company selling substantially all of its non-affiliated equity securities to Nationwide Mutual Insurance Company to improve its risk-based capital ratio. The Company recognized a gain of $123 million of this sale of equity securities to Nationwide Mutual Insurance Company. Net realized losses on mortgage loans on real estate, real estate and limited partnerships were $11 million, $36 million and $42 million in 1994, 1993 and 1992, respectively.
Benefits and expenses: Total benefits and expenses increased $51 million (3%) to $1,773 million in 1994. In 1993, total benefits and expenses decreased $81 million (4.5%) to $1,722 million from $1,803 million in 1992. In 1994, benefits and claims incurred increased $42.9 million due to increases for accident and health insurance policies and group annuity contracts, which were offset by an $18.4 million decrease in benefits for single premium policies which is consistent with the decrease in premiums discussed above. In 1993, benefits and claims incurred decreased $82.8 million due to National Casualty Company ceding all of its premiums to Nationwide Mutual Insurance Company effective January 1, 1993, the conversion of the health insurance plan for Nationwide Insurance Enterprise employees from an indemnity plan to an administrative services only basis, West Coast Life Insurance Company exiting the credit life and accident and health lines and a decrease in benefits for single premium policies.
Amortization of deferred policy acquisition costs decreased $7.4 million to $94.7 million in 1994 from $102.1 million in 1993 ($99.2 million in 1992). The decrease is primarily attributed to deferred policy acquisition cost write-offs in 1993 and 1992. There were no significant deferred policy acquisition cost write-offs in 1994. In 1993, $18.6 million of individual accident and health insurance deferred policy acquisition costs were written-off due to National Casualty Company ceding all inforce business to Nationwide Mutual Insurance Company. Also in 1993, the group annuity line wrote-off $11 million of deferred policy acquisition costs when a significant contract was canceled. In 1992, West Coast Life Insurance Company ceded essentially all of its credit life and credit accident and health insurance business and wrote-off $34 million of deferred policy acquisition costs. This transaction is further described in note 12 to the consolidated financial statements. Excluding the effects of deferred policy acquisition cost write-offs, amortization of deferred policy acquisition costs increased in 1994 from 1993 due to increased amortization for individual and group annuity products due to the growth described above.
Effects of accounting standards to be adopted: The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan, which was amended by Statement of Financial Accounting Standards No. 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures. These statements are not expected to have a material impact on the consolidated financial statements and are discussed in more detail in note 2(b) of the consolidated financial statements.
The Company does not invest in swaps, forwards, futures, option contracts or other financial instruments with similar characteristics, and there are no plans to invest in such instruments.
Each insurance company's state of domicile imposes minimum risk-based capital requirements that were developed by the National Association of Insurance Commissioners (NAIC). Risk-based capital evaluates the adequacy of an insurer's statutory capital and surplus in relation to the risks inherent in the insurer's business related to asset quality, asset and liability matching, mortality and morbidity, and other business factors. Regulatory compliance is determined based on a ratio of a company's regulatory total adjusted capital, as defined by the NAIC, to its authorized control level risk-based capital, as defined by the NAIC. Companies with a ratio below 200% (or below 250% with negative trends) are required to take corrective action steps. As of December 31, 1994, Nationwide Life Insurance Company's risk-based capital ratio was 758%. All insurance subsidiaries of Nationwide Life Insurance Company exceed the minimum risk-based capital requirements.
Liquidity: The Company's operations have historically provided substantial positive cash flow. The significant growth in new business and the resulting increase in investments have provided the Company with sufficient cash resources to meet all current obligations for policyholder benefits, withdrawals, surrenders and policy loans. As a member of the Nationwide Insurance Enterprise, the Company also has quick access to available capital infusions and to several billion dollars of liquid and readily marketable invested assets in the event of extreme unexpected withdrawals. The Company also participates in intercompany repurchase agreements with affiliates to satisfy short-term cash needs. Transactions under the agreements were not material in 1994 and 1993.
To mitigate the risks that actual withdrawals may exceed anticipated amounts or that rising interest rates may cause a decline in the value of the Company's fixed maturity investments, the Company imposes market value adjustments or surrender charges on the majority of its products and offers products where the investment risk is transferred to the contract holder. As of December 31, 1994, only 10% of the Company's annuity contracts were subject to withdrawal without a surrender charge or market value adjustment. In addition, liabilities related to separate accounts, where the investment risk is transferred to the policyholder, comprise 42% of policyholder-related liabilities as of December 31, 1994, compared to 38% as of December 31, 1993.
As described in note 13 to the consolidated financial statements, Nationwide Life Insurance Company and its insurance subsidiaries are limited by law in the amount of dividends they can pay. That condition poses no liquidity concerns to the Company due to Nationwide Life Insurance Company's significant cash flow from operations and extensive holdings of liquid investments. In addition, the Company had $120 million confirmed but unused bank lines of credit as of December 31, 1994, which support a $100 million commercial paper borrowing authorization. During 1993, the Company temporarily increased available bank lines of credit to $365 million and borrowed $125 million. In addition, $175 million of short-term securities were issued as repurchase agreements. All amounts were repaid in 1993, with interest totaling $1.6 million. See note 15 to the consolidated financial statements.