Management's Narrative Analysis of the Results of Operations In accordance with General Instruction I(2)(a), the Company includes the following analysis with the reduced disclosure format.
Realized investment gains in 2001 were approximately $1.1 million and realized investment losses were approximately $2.2 million.
Operating Income (Loss) and Income (Loss) Before Income Tax Year Ended December 31 ----------------------------------------------------
The Credit Products segment’s 2001 pretax earnings increased $0.4 million as compared to 2000 primarily due to an increase in sales momentum.
The Annuities segment’s 2001 pretax earnings decreased $1.5 million primarily due to an increase in policy benefits.
The Corporate and Other segment consists of net investment income and expenses not identified with the preceding business segments. Pretax earnings in 2001 increased $1.2 million over 2000, primarily due to increased net investment income on capital.
Management's current estimate of the effective income tax rate for 2002 is 33.9%.
Change in Accounting Principle On January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The adoption of SFAS No. 133 resulted in a cumulative after-tax charge to net income of approximately $0.3 million.
Percentage Year Ended Increase December 31 Amount (Decrease) ------------ ----------- ------------
Net income from continuing operations before cumulative effect of change in accounting principle in 2001 decreased 7.7%, compared to 2000, reflecting improved operating earnings in the Credit Products segment and the Corporate and Other segment, offset by lower operating earnings in the Acquisitions and Annuities segments, and lower realized investment gains.
Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999........................... 13
In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Protective Life and Annuity Insurance Company at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note A of the Notes to the Financial Statements, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”.
REVENUES Premiums and policy fees.............................................. $47,707,465 $47,876,379 $54,422,828 Reinsurance ceded..................................................... (18,621,035) (17,319,246) (20,042,501) ------------ ------------ ------------ Net of reinsurance ceded............................................ 29,086,430 30,557,133 34,380,327 Net investment income................................................. 33,876,409) 31,686,448 28,272,903 Realized investment gains (losses).................................... (1,113,538) 42,148 89,550 Other income (loss)................................................... 5,731 (6,551) 90,289 ------------ ------------ ------------ 61,855,032 62,279,178 62,833,069 ------------ ------------ ------------
ASSETS Investments: Fixed maturities, at market (amortized cost: 2001 - $442,583,178; 2000 - $428,392,599) $445,730,493 $418,756,679 Mortgage loans on real estate....................................................... 2,717,495 3,215,344 Other long term investments......................................................... 470,030 0 Policy loans........................................................................ 54,565,016 54,465,893 Short-term investments.............................................................. 12,000,000 4,000,000 ------------ ------------ Total investments............................................................... 515,483,034 480,437,916 Cash 4,284,257 1,165,410 Accrued investment income................................................................ 8,432,689 8,914,306 Accounts and premiums receivable, net of allowance for uncollectible amounts (2001 - $7,000; 2000 - $7,000).............................................. 7,888,382 1,952,449 Reinsurance receivables.................................................................. 20,642,570 23,136,896 Deferred policy acquisition costs........................................................ 118,997,438 128,228,360 Other assets............................................................................. 19,689 27,333 Assets related to separate accounts Variable annuity.................................................................... 9,001,016 9,037,035 ------------ ------------ $684,749,075 $652,899,705 ============ ============
LIABILITIES Policy liabilities and accruals: Future policy benefits and claims................................................... $458,568,381 $452,212,971 Unearned premiums................................................................... 7,767,028 8,154,233 ------------ ------------ 466,335,409 460,367,204 Annuity deposits......................................................................... 47,324,337 28,059,246 Other policyholders' funds............................................................... 5,874,932 5,794,289 Other liabilities........................................................................ 17,390,459 21,209,531 Deferred income taxes.................................................................... 17,077,829 9,063,941 Liabilities related to separate accounts Variable annuity.................................................................... 9,001,016 9,037,035 ------------ ------------ Total liabilities................................................................ 563,003,982 533,531,246 ============ ============
SHARE-OWNERS' EQUITY Preferred Stock, $1.00 par value, shares authorized, issued and outstanding: 2,000........................................... 2,000 2,000 Common Stock, $10.00 par value Shares authorized: 2001 and 2000 - 500,000 Shares issued and outstanding: 2001 and 2000 - 250,000............................... 2,500,000 2,500,000 Additional paid-in capital............................................................... 101,386,324 101,386,324 Retained earnings........................................................................ 15,468,517 18,748,333 Accumulated other comprehensive income Net unrealized gains (losses) on investments (net of income tax: 2001 - $1,285,982; 2000 - ($1,759,799))......................... 2,388,252 (3,268,198) ------------ ------------ Total share-owners' equity.......................................................... 121,745,093 119,368,459 ------------ ------------ $684,749,075 $652,899,705 ============ ============
Net Unrealized Additional Gains Total Preferred Common Paid-In Retained (Losses) On Share-Owners' Stock Stock Capital Earnings Investments Equity --------- ---------- ------------ ----------- ------------- ------------ Balance, December 31, 1998.............. $2,000 $2,500,000 $101,574,516 $18,353,492 $ 8,808,609 $131,238,617 Net income for 1999................... 9,401,173 9,401,173 Change in net unrealized gains/losses on investments (net of income tax: ($(10,820,527)).. (20,095,265) (20,095,265) Reclassification adjustment for amounts included in net income (net of income tax: ($31,342))....... (58,208) (58,208) Comprehensive loss for 1999........... ------------ Reduction in paid in capital.......... (10,752,300) ------------ Common dividends ($20 per share)...... (188,192) (188,192)
--------- ---------- ------------ ----------- ------------- ------------ Balance, December 31, 2000.............. 2,000 2,500,000 101,386,324 18,748,333 (3,268,198) 119,368,459 ------------ Net income for 2001................... 9,620,184 9,620,184 Change in net unrealized gains/losses on investments (net of income tax: $2,502,598)..... 4,647,682 4,647,682 Reclassification adjustment for amounts included in net income (net of income tax: $389,738)........ 723,800 723,800 Transition adjustment on derivative financial instruments (net of income tax: $153,444)....................... 284,968 284,968 ------------ Comprehensive income for 2001......... 15,276,634 ------------ Common dividends ($47.60 per share)... (11,900,000) (11,900,000) Preferred dividends ($500.00 per share) (1,000,000) (1,000,000) --------- ---------- ------------ ----------- ------------- ------------ Balance, December 31, 2001 $2,000 $2,500,000 $101,386,324 $15,468,517 $ 2,388,252 $121,745,093 ========= ========== ============ =========== ============= ============
CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................................. $ 9,620,184 $ 8,743,668 $ 9,401,173 Adjustments to reconcile net income to net cash provided by operating activities: 1,113,538 (42,148) (89,550) Realized investment losses (gains)...................................... 7,034,480 6,765,446 6,835,492 Amortization of deferred policy acquisition costs....................... (1,792,738) (2,593,858) (1,352,066) Capitalization of deferred policy acquisition costs..................... (1,625,000) 0 0 Gain on sale of discontinued operations................................. 5,121,553 4,605,444 3,656,012 Deferred income taxes................................................... 37,752,197 33,753,870 18,114,354 Interest credited to universal life and investment products............. (36,063,990) (37,777,093) (18,758,319) Policy fees assessed on universal life and investment products.......... (2,959,990) 4,751,257 (8,078,299) Change in accrued investment income and other receivables............... Change in policy liabilities and other policyholder funds of traditional life and health policies.............................................. 1,495,557 3,848,851 (12,255,924) Change in other liabilities............................................. (3,819,070) 2,871,472 10,396,783 Other (net)............................................................. (1,013,986) 432,557 14,237 -------------- ----------- ------------ Net cash provided by operating activities....................................... 14,862,735 25,359,466 7,883,893 ============== =========== ============
INCREASE (DECREASE) IN CASH..................................................... 3,118,847 (2,856,429) 4,021,839 CASH AT BEGINNING OF YEAR....................................................... 1,165,410 4,021,839 0 -------------- ----------- ------------ CASH AT END OF YEAR............................................................. $ 4,284,257 $ 1,165,410 $ 4,021,839 ============== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION There was no cash paid during any of the periods presented related to interest on indebtedness or income taxes.
RECENTLY ISSUED ACCOUNTING STANDARDS On January 1, 2001, the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 133, as amended by SFAS Nos. 137 and 138, requires the Company to record all derivative financial instruments, at fair value on the balance sheet. Changes in fair value of a derivative instrument are reported in net income or other comprehensive income, depending on the designated use of the derivative instrument. The adoption of SFAS No. 133 resulted in a cumulative after-tax charge to net income of $0.3 million and a cumulative after-tax increase to other comprehensive income of $0.3 million on January 1, 2001. Prospectively, the adoption of SFAS No. 133 may introduce volatility into the Company’s reported net income and other comprehensive income depending on future market conditions and the Company’s hedging activities.
In June 2001, the FASB issued SFAS Nos. 141, “Business Combinations”, and 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires that business combinations initiated after June 30, 2001, be accounted for using the purchase method. SFAS No. 142 revises the standards for accounting for acquired goodwill and other intangible assets. SFAS No. 142 is effective for fiscal years beginning December 15, 2001, and effective for any goodwill or intangible asset acquired after June 30, 2001. The Company does not expect the adoption of SFAS No. 142 to have a material effect on the Company’s financial position or results of operations.
In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 requires that companies record the fair value of a liability for an asset retirement obligation in the period in which the liability is incurred. The Statement is effective for fiscal years beginning after June 15, 2002. The Company does not expect the adoption of SFAS No. 143 to have a material effect on the Company’s financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 requires that the same accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, expands the use of discontinued operations accounting to include more types of transactions and changes the timing of when discontinued operations accounting is applied. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company does not expect the adoption of SFAS No. 144 to have a material effect on the Company’s financial position or results of operations.
INVESTMENTS The Company has classified all of its investments in fixed maturities and short-term investments as “available for sale.”
As prescribed by SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," certain investments are recorded at their market values with the resulting unrealized gains and losses reduced by a related adjustment to deferred policy acquisition costs, net of income tax, reported as a component of share-owners' equity. The market values of fixed maturities increase or decrease as interest rates fall or rise. Therefore, although the application of SFAS No. 115 does not affect the Company's operations, its reported share-owners' equity will fluctuate significantly as interest rates change.
The Company’s balance sheets at December 31, prepared on the basis of reporting investments at amortized cost rather than at market values, are as follows:
Total investments................................... $512,427,543 $490,073,836 Deferred policy acquisition costs................... 118,378,695 123,620,437 All other assets.................................... 50,268,603 44,233,429 ------------ ------------ $681,074,841 $657,927,702 ============ ============
Deferred income taxes............................... $ 15,791,847 $ 10,823,740 All other liabilities............................... 545,926,153 524,467,305 ------------ ------------ 561,718,000 535,291,045 Share-owners' equity................................ 119,356,841 122,636,657 ------------ ------------ $681,074,841 $657,927,702 ============ ============
DEFERRED POLICY ACQUISITION COSTS Commissions and other costs of acquiring traditional life and health insurance, credit insurance, universal life insurance, and investment products that vary with and are primarily related to the production of new business have been deferred. Traditional life and health insurance acquisition costs are being amortized over the premium-payment period of the related policies in proportion to the ratio of annual premium income to the present value of the total anticipated premium income. Credit insurance acquisition costs are being amortized in proportion to earned premium. Acquisition costs for universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization. Under SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments,” the Company makes certain assumptions regarding the mortality, persistency, expenses, and interest rates (equal to the rate used to compute liabilities for future policy benefits; currently 3.6% to 9.4%) it expects to experience in future periods. These assumptions are to be best estimates and are to be periodically updated whenever actual experience and/or expectations for the future change from that assumed. Additionally, relating to SFAS No. 115, these costs have been adjusted by an amount equal to the amortization that would have been recorded if unrealized gains or losses on investments associated with the Company’s universal life and investment products had been realized.
Traditional Life, Health, and Credit Insurance Products - Traditional life insurance products consist principally of those products with fixed and guaranteed premiums and benefits and include whole life insurance policies, term and term-like life insurance policies, limited-payment life insurance policies, and certain annuities with life contingencies. Life insurance and immediate annuity premiums are recognized as revenue when due. Health and credit insurance premiums are recognized as revenue over the terms of the policies. Benefits and expenses are associated with earned premiums so that profits are recognized over the life of the contracts. This is accomplished by means of the provision for liabilities for future policy benefits and the amortization of deferred policy acquisition costs.
Net balance beginning of year.......................... 5,418,046 4,632,922 3,595,595 ----------- ----------- -------------
Universal Life and Investment Products - Universal life and investment products include universal life insurance, deferred annuities, and annuities without life contingencies. Premiums and policy fees for universal life and investment products consist of policy fees that have been assessed against policy account balances for the costs of insurance, policy administration, and surrenders. Benefit reserves for universal life and investment products represent policy account balances before applicable surrender charges plus certain deferred policy initiation fees that are recognized in income over the term of the policies. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances and interest credited to policy account balances. Interest credit rates for universal life and investment products ranged from 3.6% to 9.4% in 2001.
INCOME TAXES The Company uses the asset and liability method of accounting for income taxes. Income tax provisions are generally based on income reported for financial statement purposes. Deferred federal income taxes arise from the recognition of temporary differences between the basis of assets and liabilities determined for financial reporting purposes and the basis determined for income tax purposes. Such temporary differences are principally related to the deferral of policy acquisition costs and the provision for future policy benefits and expenses.
DISCONTINUED OPERATIONS On December 31, 2001, PLC completed the sale to Fortis, Inc. of substantially all of its Dental Benefits Division (Dental Division), and discontinued certain other remaining Dental Division related operations, primarily other health insurance lines. These discontinued operations have been included in various operating subsidiaries of PLC, including the Company. The results of the operations of the Dental Division as related to the Company have been included herein as discontinued operations. PLC recorded an overall loss on the sale and discontinuance. The intercompany allocation of such loss resulted in the recognition of a net gain of $1,625,000 to the Company, reported herein as a gain on the sale of discontinued operations.
The operating results and charges related to the sale of the Dental division at December 31 are as follows:
Note B-- RECONCILIATION WITH STATUTORY REPORTING PRACTICES Financial statements prepared in conformity with accounting principles generally accepted in the United States of America differ in some respects from the statutory accounting practices prescribed or permitted by insurance regulatory authorities. The most significant differences are as follows: (a) acquisition costs of obtaining new business are deferred and amortized over the approximate life of the policies rather than charged to operations as incurred; (b) benefit liabilities are computed using a net level method and are based on realistic estimates of expected mortality, interest, and withdrawals as adjusted to provide for possible unfavorable deviation from such assumptions; (c) deferred income taxes are provided for temporary differences between financial and taxable earnings; (d) the Asset Valuation Reserve and Interest Maintenance Reserve are restored to share-owners’ equity; (e) agents’ debit balances and prepaid expenses are reported as assets rather than being charged directly to surplus (referred to as nonadmitted items); (f) certain items of interest income, such as mortgage and bond discounts, are amortized differently; and (g) bonds are recorded at their market values instead of amortized cost. The National Association of Insurance Commissioners (NAIC) has adopted the Codification of Statutory Accounting Principles (Codification). Codification changed statutory accounting rules in several areas and was effective January 1, 2001. The adoption of Codification did not have a material effect on the Company’s statutory capital.
Net Income Share Owners' Equity ---------------------------------------- ------------------------------------------ 2001 2000 1999 2001 2000 1999 ---- ---- ---- ---- ---- ----
Fixed maturities................................... $31,496,317 $28,808,155 $24,815,986 Mortgage loans..................................... 282,544 314,376 89,178 Investment real estate............................. 0 211,521 15,713 Policy loans....................................... 3,691,041 3,625,750 4,362,037 Other, principally short-term investments.......... 236,511 556,879 458,761 ----------- ------------ ----------- 35,706,413 33,516,681 29,741,675 Investment expenses................................ (1,830,004) (1,830,233) (1,468,772) ------------ ------------ ------------ $33,876,409 $31,686,448 $28,272,903 ============ ============ ============
2001 2000 1999 ---- ---- ---- Fixed maturities.................................. $(1,113,538) $ (70,176) $194,374 Mortgage loans and other investments.............. 112,324 (104,824) ------------- ----------- ----------- $(1,113,538) $ 42,148 $ 89,550 ============= =========== ===========
In 2001, gross gains on the sale of investments available for sale (fixed maturities and short-term investments) were approximately $1.1 million and gross losses were approximately $2.2 million. In 2000, gross gains were approximately $27,500 and gross losses were approximately $97,700. In 1999, gross gains were approximately $298,700 and gross losses were approximately $104,300. During 2001, the Company recorded other than temporary impairments in its investments of $1.9 million.
The amortized cost and estimated market values of the Company’s investments classified as available for sale at December 31 are as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Market 2001 Cost Gains Losses Values ---- -------------- -------------- ------------- ----------------
Fixed maturities: Bonds: Mortgage-backed securities.............. $ 6,655,797 $ 214,820 $ 0 $ 6,870,617 United States Government and authorities............................. 7,736,901 406,974 2,454 8,141,421 States, municipalities, and political subdivisions.................. 3,012,672 70,074 0 3,082,746 Public utilities........................ 64,825,621 1,228,963 1,229,425 64,825,159 All other corporate bonds............... 360,352,187 10,242,579 7,784,216 362,810,550 ------------- ------------- ------------ ------------- 442,583,178 12,163,410 9,016,095 445,730,493 Short-term investments........................... 12,000,000 0 0 12,000,000 ------------- ------------- ------------ ------------- $ 454,583,178 $ 12,163,410 $ 9,016,095 $ 457,730,493 ============= ============= ============ =============
Estimated Amortized Market Cost Values --------------- ---------------- ---- Due in one year or less.......................... $ 57,088,531 $ 55,695,866 Due after one year through five years............ 163,693,003 169,802,218 Due after five years through ten years........... 116,477,328 117,899,513 Due after ten years.............................. 105,324,316 102,332,896 ------------- ------------- $442,583,178 $445,730,493 ============= =============
Note D-- FEDERAL INCOME TAXES The Company’s effective income tax rate varied from the maximum federal income tax rate as follows:
2001 2000 1999 ---- ---- ---- Statutory federal income tax rate applied to pretax income....... 35.0% 35.0% 35.0% Tax-exempt interest.............................................. (0.2) Other adjustments................................................ (1.1) (0.5) (6.8) ------ ------ ----- Effective income tax rate........................................ 33.9% 34.5% 28.0%
Deferred income tax assets: Policy and policyholder liability reserves................... $ 21,462,070 $15,126,970 Unrealized (gain)loss on investments......................... (1,295,737) 1,528,259 ------------- ----------- 20,166,333 16,655,229 ------------- ----------- Deferred income tax liabilities: Deferred policy acquisition costs............................ 36,434,304 25,719,170 Other........................................................ 809,858 ------------ ------------ 37,244,162 25,719,170 ------------ ------------ Net deferred income tax liability............................ $ 17,077,829 $ 9,063,941 ============ ============
Note E-- COMMITMENTS AND CONTINGENT LIABILITIES Under insurance guaranty fund laws, in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. The Company does not believe such assessments will be materially different from amounts already provided for in the financial statements. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer’s own financial strength.
Note G-- PREFERRED STOCK The Company’s preferred stock pays, when and if declared, noncumulative participating dividends to the extent the Company’s statutory earnings for the immediately preceding year exceeded $1.0 million. In 2001, the Company paid $1.0 million of preferred dividends. No preferred dividends were paid in 2000 or 1999.
Receivables from and payables to related parties consisted of receivables from and payables to affiliates under control of PLC in the amount of a $4,883,460 payable at December 31, 2001 and a $1,666,742 payable at December 31, 2000. The Company routinely receives from or pays to affiliates under the control of PLC reimbursements for expenses incurred on one another’s behalf. Receivables and payables among affiliates are generally settled monthly.
Note I-- OPERATING SEGMENTS PLC, through its subsidiaries, operates several segments each having a strategic focus which can be grouped into three general product categories: life insurance, retirement savings and investment products, and specialty insurance products. An operating segment is generally distinguished by products and/or channels of distribution. A brief description of each division the Company operates in follows.
Life Insurance The Acquisitions segment focuses on acquiring, converting, and servicing policies acquired from other companies. The segment’s primary focus is on life insurance policies sold to individuals.
Specialty Insurance Products The Credit Products segment markets credit life and disability insurance products through banks, consumer finance companies and automobile dealers, and markets vehicle and recreational marine extended service contracts.
Corporate and Other The Company has an additional business segment herein referred to as Corporate and Other. The Corporate and Other segment primarily consists of net investment income and expenses not attributable to the segments above (including net investment income on unallocated capital).
---- Premiums and policy fees, net.... $25,209,340 $3,721,792 $ 155,298 $29,086,430 Net investment income............ 29,892,723 606,345 1,909,607 $1,467,734 33,876,409 Realized investment gains (losses) $(1,113,538) (1,113,538) Other income (loss).............. 244 5,487 5,731 ----------- ---------- ---------- ---------- ------------ ------------ Total revenues............. 55,102,307 4,328,137 2,070,392 1,467,734 (1,113,538) 61,855,032 ----------- ---------- ---------- ---------- ------------ ------------ Benefits and settlement expenses. 28,533,646 2,567,742 2,243,541 33,344,929 Amortization of deferred policy acquisition costs.......... 6,092,729 694,491 247,260 7,034,480 Other operating expenses......... 8,937,528 89,248 226,297 (63,778) 9,189,295 ----------- ---------- ---------- ---------- ------------ ------------ Total benefits and expenses 43,563,903 3,351,481 2,717,098 (63,778) 49,568,704 ----------- ---------- ---------- ---------- ------------ ------------ Income from continuing operations before income tax............ 11,538,404 976,656 (646,706) 1,531,512 (1,113,538) 12,286,328 Income tax expense............... 4,165,065 4,165,065 Discontinued operations ......... 1,783,889 1,783,889 Change in accounting principle... (284,968) (284,968) ------------ Net income....................... $ 9,620,184 ============
---- Premiums and policy fees, net.... $27,443,897 $2,997,130 $ 116,106 $30,557,133 Net investment income............ 29,275,899 628,572 1,416,117 $ 365,860 31,686,448 Realized investment gains........ $ 42,148 42,148 Other income (loss)............. (4,486) (2,065) (6,551) ----------- ---------- ---------- ---------- ------------ ------------ Total revenues............. 56,715,310 3,625,702 1,530,158 365,860 42,148 62,279,178 ----------- ---------- ---------- ---------- ------------ ------------ Benefits and settlement expenses. 29,247,353 2,250,237 1,267,445 32,765,035 Amortization of deferred policy acquisition costs.......... 5,871,420 714,278 179,748 6,765,446 Other operating expenses......... 9,991,067 57,601 (787,364) 60,409 9,321,713 ----------- ---------- ---------- ---------- ------------ ------------ Total benefits and expenses 45,109,840 3,022,116 659,829 60,409 48,852,194 ----------- ---------- ---------- ---------- ------------ ------------ Income from continuing operations before income tax............. 11,605,470 603,586 870,329 305,451 42,148 13,426,984 Income tax expense............... 4,632,310 4,632,310 Discontinued operations.......... (51,006) (51,006) ------------ Net income....................... $ 8,743,668 ============
---- Investments and other assets........ $453,999,198 $11,462,251 $25,799,102 $29,376,162 $4,034,632 $524,671,345 Deferred policy acquisition costs... 124,984,368 1,596,654 1,647,338 128,228,360 ------------ ----------- ----------- ----------- ---------- ------------ Total assets........................ $578,983,566 $13,058,905 $27,446,440 $29,376,162 $4,034,632 $652,899,705 ============ =========== =========== =========== ========== ============
The Company has reinsured approximately $4.9 billion, $5.3 billion, and $5.8 billion in face amount of life insurance risks with other insurers representing $17.6 million, $17.4 million, and $20.1 million of premium income for 2001, 2000, and 1999, respectively. The Company has also reinsured accident and health risks representing $0.1 million, $0.7 million, and $0.8 million of premium income for 2001, 2000, and 1999, respectively. In 2001 and 2000, policy and claim reserves relating to insurance ceded of $19.2 million and $21.2 million respectively are included in reinsurance receivables. Should any of the reinsurers be unable to meet its obligation at the time of the claim, obligation to pay such claim would remain with the Company. At December 31, 2001 and 2000, the Company had paid $1.5 million and $2.0 million, respectively, of ceded benefits which are recoverable from reinsurers.
Approximately 65% and 58% of the reinsurance receivable balances at December 31, 2001 and 2000, respectively, relate to one insurance company rated "A+" (Superior) by the A. M. Best Company, an independent rating organization.
---------------------------- ------------- ------------ ----------- ------------- ---------- ------------ ------------ ------------ ------------- COL. A COL. B COL. C COL. D COL. E COL. F COL. G COL. H COL. I COL. J ---------------------------- ------------- ------------ ----------- ------------- ---------- ------------ ------------ ------------ -------------
Year Ended December 31, 2001 Life Insurance Acquisitions............ $114,902,459 $457,126,255 $ 46,457 $ 1,924,344 $25,209,340 $29,892,723 $28,533,646 $6,092,729 $8,937,528 Specialty Insurance Products Credit Products......... 1,611,339 2,178,423 7,718,370 493,645 3,721,792 606,345 2,567,742 694,491 89,248 Retirement Savings and Investment Products Annuities............... 2,483,640 (1,233,215) 0 47,324,337 155,298 1,909,607 2,243,541 247,260 226,297 Corporate and Other....... 0 0 0 0 0 1,467,734 0 0 (63,778) Adjustments (2)........... 0 496,918 2,201 3,456,943 0 0 0 0 0 ------------ ------------ ---------- ----------- ----------- ----------- ----------- ---------- ---------- TOTAL............... $118,997,438 $458,568,381 $7,767,028 $53,199,269 $29,086,430 $33,876,409 $33,344,929 $7,034,480 $9,189,295 ============ ============ ========== =========== =========== =========== =========== ========== ==========
Year Ended December 31, 2000 Life Insurance Acquisitions............ $124,984,368 $447,949,295 $ 50,335 $ 4,925,125 $27,443,897 $29,275,899 $29,247,353 $5,871,420 $9,991,067 Specialty Insurance Products Credit Products......... 1,596,654 3,037,218 8,101,233 323,800 2,997,130 628,572 2,250,237 714,278 57,601 Retirement Savings and Investment Products Annuities............... 1,647,338 619,322 0 25,179,780 116,106 1,416,117 1,267,445 179,748 (787,364) Corporate and Other....... 0 0 0 0 0 365,860 0 0 60,409 Adjustments (2)........... 0 607,136 2,665 3,424,830 0 0 0 0 0 ------------ ------------ ---------- ----------- ----------- ----------- ----------- ---------- ----------- TOTAL............... $128,228,360 $452,212,971 $8,154,233 $33,853,535 $30,557,133 $31,686,448 $32,765,035 $6,765,446 $ 9,321,713 ============ ============ ========== =========== =========== =========== =========== ========== ===========
Year Ended December 31, 1999: Life Insurance Acquisitions............ $126,247,865 $440,688,572 $ 54,704 $ 4,730,918 $32,290,715 $27,604,825 $29,333,102 $6,334,661 $12,059,458 Specialty Insurance Products Credit Products......... 1,544,160 4,086,816 7,796,478 18,864 2,059,410 269,670 974,013 500,831 33,574 Retirement Savings and Investment Products Annuities............... 0 404,423 0 9,471,966 30,202 250,000 242,354 0 761,937 Corporate and Other....... 0 0 0 0 0 148,408 0 0 25,130 Adjustments (2)........... 0 105,162 1,242 3,441,818 0 0 0 0 0 ------------ ------------ ---------- ----------- ----------- ----------- ----------- ---------- ----------- TOTAL............... $127,792,025 $445,284,973 $7,852,424 $17,663,566 $34,380,327 $28,272,903 $30,549,469 $6,835,492 $12,880,099 ============ ============ ========== =========== =========== =========== =========== ========== ===========
Percentage Ceded to Assumed of Amount Gross Other from Other Net Assumed Amount Companies Companies Amount to Net ----------- ------------ ------------ ------------ ----------
Year Ended December 31, 2001: Life insurance in force(1) ..................... $ 337,079 $ 4,865,367 $ 6,087,816 $ 1,559,528 390.4% =========== ============ ============ ============ ======
Premiums and policy fees: Life insurance.................................. $6,006,689 $18,481,015 $39,585,878 $27,111,552 146.0% Accident and health insurance................... 2,106,881 140,020 8,017 1,974,878 0.4% ----------- ------------ ------------ ------------ TOTAL........................................ $8,113,570 $18,621,035 $39,593,895 $29,086,430 =========== ============ ============ ============
Premiums and policy fees: Life insurance.................................. $4,372,841 $17,244,402 $41,747,694 $28,876,133 144.6% Accident and health insurance................... 1,751,478 74,844 4,366 1,681,000 0.3% ----------- ------------ ------------ ------------ TOTAL........................................ $6,124,319 $17,319,246 $41,752,060 $30,557,133 =========== ============ ============ ============
Year Ended December 31,1999: Life insurance in force(1) ..................... $ 308,419 $ 5,833,675 $7,260,439 $ 1,735,183 418.4% =========== ============ ============ ============ ======