In March 1996, Investors-NA agreed to lease approximately 152,000 square feet at Bridgepoint Office Square to Motorola, Inc. for use by the Power PC Alliance, composed of engineers from Motorola, IBM Corp. and Apple Computer Inc. The Alliance will occupy 100% of the second office building and approximately 43,000 square feet of the third office building, which Investors- NA began constructing in March 1996. The third building will contain approximately 81,000 rentable square feet and is projected to be finished in late 1996.
(Registrant and its Consolidated Subsidiaries) (In thousands, except per share data) 1995 1994 1993 1992 1991 Operating Revenues $63,407 $ 68,524 $ 74,023 $ 83,531 $ 49,417
Equity in net earnings of affiliate, net of tax 2,213 1,690 3,038 4,761 4,454
Cumulative effect of change in accounting principle of affiliate, net of tax benefit -0- -0- (1,159) -0- -0-
Common Stock and Common Stock Equivalents 1,108 1,106 1,111 1,113 1,080
Net Income per share $ 9.04 $ 9.00 $ 14.42 $ 12.21 $ 9.54
Long Term Obligations $ 67,989 $ 77,819 $ 89,178 $113,015 $118,184
For the year ended December 31, 1995, FIC's net income was $10,017,000 (or $9.04 per common share, as compared to $9,954,000 (or $9.00 per common share), for the year ended December 31, 1994 and $11,625,000 (or $10.46 per common share), before extraordinary items and cumulative effect of change in accounting principle of affiliate, for the year ended December 31, 1993.
The consolidated balance sheets at December 31, 1995 include Separate Account assets of Family Life in the amount of $8.5 million. The Separate Account is maintained by Family Life, which was acquired by FIC on June 12, 1991. Under the provisions of the purchase agreement between FIC and Merrill Lynch Insurance Group, Inc., certain life insurance companies affiliated with Merrill Lynch agreed to assume (on an assumption reinsurance basis) the variable annuity contracts related to such Separate Account assets. The transfer of these assets, in accordance with the provisions of the reinsurance agreement, is subject to certain regulatory approvals. The Company has not obtained a definitive date from Merrill Lynch as to when such regulatory approvals will be obtained, so as to enable Family Life to complete the transfer of Separate Account assets.
Prior to the acquisition of Family Life in June of 1991, FIC's primary involvement in the life insurance business was through its equity interest in ILCO. The Company's equity in the net earnings of ILCO, net of federal income tax, was $2,051,000 for the year 1995, as compared to $1,690,000 for the year 1994 and $3,038,000 in 1993. The increase in 1995, as compared to 1994, is primarily related to the increase in ILCO's net income, partially offset by the increase in the elimination from FIC's equity in ILCO's earnings of approximately 47% of the interest received by ILCO on the notes issued to subsidiaries of FIC. The Company's equity in the net income from operations of ILCO for the 1993 period was affected by the extraordinary item and change in accounting principle previously discussed. The Company's equity in ILCO's net earnings for the 1995 and 1994 periods was not affected by extraordinary items.
FIC currently owns 1,795,146 shares of ILCO's common stock, and holds options to acquire an additional 1,702,155 shares. The options were granted under an Option Agreement between FIC and ILCO which was entered into in March, 1986. In addition, Family Life currently owns 171,200 shares of ILCO common stock. As a result, FIC currently owns, directly and indirectly through Family Life, 1,966,346 shares (approximately 47%) of ILCO's common stock and holds options to acquire 1,702,155 shares. If all of FIC's rights under the Option Agreement were to be presently exercised, FIC's ownership would amount to approximately 62% of the issued and outstanding shares of ILCO's common stock.
ILCO's results for 1995 include the operations of Investors Life Insurance Company of Indiana (formerly known as Meridian Life Insurance Company) for the period from February 14, 1995 to December 31, 1995. Investors Life Insurance Company of Indiana ("Investors-IN") was purchased by ILCO and Investors Life Insurance Company of North America ("Investors-NA") for an adjusted purchase price of $17.1 million; the transaction was completed on February 14, 1995. The name change was completed in May, 1995.
The cash requirements of ILCO consist primarily of its service of the indebtedness created in connection with the 1988 acquisition of the Investors Life Companies and the 1995 acquisition of Investors-IN. As of December 31, 1994, the unpaid principal of ILCO's senior loan was $66.6 million. In connection with the acquisition of Investors-IN in February, 1995, ILCO borrowed an additional $15 million under its senior loan to help finance the purchase. On April 3, 1995, a principal payment in the amount of $13.2 million was made, which paid the senior loan until October 1, 1995. The senior loan had a principal balance at December 31, 1995 of $59.4 million.
ILCO's principal source of liquidity consists of the periodic payment of principal and interest to it by Investors-NA, pursuant to the terms of the two surplus debentures. The surplus debentures were originally issued by Standard Life Insurance Company and its terms were previously approved by the Mississippi Insurance Commissioner. One of the surplus debentures, in the original amount of $15 million, was issued in connection with the 1986 acquisition of Standard Life by ILCO; the other, in the original amount of $140 million was issued in connection with the 1988 acquisition by ILCO of the Investors Life Companies. Upon the merger of Standard Life into Investors-NA, the obligations of the surplus debentures were assumed by Investors-NA. As of December 31, 1995, the outstanding principal balance of the surplus debentures was $7.0 million and $62.3 million, respectively. Since Investors-NA is domiciled in the State of Washington, the Washington insurance law applies to the administration of the terms of the surplus debentures. Under the provisions of the surplus debentures and current law, no prior approval of the Washington Insurance Commissioner is required for Investors-NA to pay interest or principal on the surplus debentures; provided that, after giving effect to such payments, the statutory surplus of Investors-NA is in excess of $10 million (the "surplus floor"). However, Investors-NA has voluntarily agreed with the Washington Insurance Commissioner that it will provide at least five days advance notice of payments which it will make under the surplus debenture. As of December 31, 1995, the statutory capital and surplus of Investors-NA was $61.9 million, an amount substantially in excess of the surplus floor. The funds required by Investors-NA to meet its obligations to ILCO under the terms of the surplus debentures are generated from operating income generated from insurance and investment operations.
ILCO's ability to pay dividends to its shareholders is affected, in part, by receipt of dividends from its insurance subsidiaries. Under current Washington law, any proposed payment of a dividend or distribution by the Company's insurance subsidiaries which, together with dividends or distributions paid during the preceding twelve months, exceeds the greater of (i) 10% of statutory surplus as of the preceding December 31 or (ii) statutory net gain from operations for the preceding calendar year is called an "extraordinary dividend" and may not be paid until either it has been approved, or a waiting period shall have passed during which it has not been disapproved, by the insurance commissioner.
The Form 10-Ks of ILCO for the years ended December 31, 1995, 1994 and 1993, set forth the business operations and financial results of ILCO and its life insurance subsidiaries. Such 10-K reports of ILCO, including the discussion by ILCO's management under the caption "Management's Discussion and Analysis of Financial Conditions and Results of Operations" are incorporated herein by reference.
For the year ended December 31, 1995, FIC's income from operations, before federal income tax and equity in net earnings of affiliate, was $10,394,000 (on revenues of $63,408,000), as compared to $10,610,000 (on revenues of $68,524,000) for the year 1994. For the year 1993, income from operations, before federal income tax, equity in net earnings of affiliate and extraordinary items of affiliate was $11,560,000 on revenues of $74,023,000.
As of December 31, 1995, the Company's investment assets totaled $112.6 million, as compared to $107.1 million as of December 31, 1994. The increase is primarily attributable to unrealized capital gains in the fixed maturities for sale segment of the Company's total investments.
The Company plans to adopt SFAS No. 123 during 1996 by continuing to account for stock-based compensation under the intrinsic value method and disclosing the pro forma effects of the fair value method in the footnotes to the financial statements.
2. Consolidated Balance Sheets, as of December 31, 1995 and December 31, 1994.
3. Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993.