The Company leases approximately 6,100 square feet located at 2285 Executive Drive, Lexington, Kentucky. At December 31, 1999, the Company leased approximately 5,400 square feet pursuant to a lease agreement which would expire on March 31, 1999. In February of 1999, the Company extended the 5,400 square foot lease agreement until January 31, 2001. Additionally, in February of 1999 the Company entered into a lease agreement for an additional 700 square feet at the same location. The lease on this additional space expires on January 31, 2001. Annual rent expense for the year ended December 31, 1999 totaled $87,386.
Comparisons between periods related to the results of operations are for the years ended December 31 of the year specified. Net income during 1999 increased $6,081 over 1998 results based on the following income and expense transactions.
The primary source of revenue for the Company is life insurance premium income. First Alliance Insurance Company ("FAIC") began writing life insurance and annuities in November of 1995. Typical with most life insurance policies, a premium payment is required each year in order for the policyholder to receive the benefits set forth in the policy. Premium payments are classified as first year and renewal. Renewal premiums are any premium payment that is made after the first year the policy is in force. During 1999, premium income totaled $3,798,814. In 1998, premium income totaled $2,383,680. This increase of $1,415,134 can be attributed to the growth in the renewal premium base plus an increase in first year premium sales. Of the $3,798,814 of premium income in 1999, $1,886,288 represents first year premium, $1,543,799 represents renewal premiums and $368,727 represents single premiums on credit insurance. Premium income in 1998 was comprised of $1,375,270 of first year premium and $1,008,410. Total premium income for 1998 increased $1,104,001 over 1997 primarily due to a larger renewal premium base and first year premium sales.
Other income totaled $114,671 in 1999 which represents a $26,043 increase over 1998 results of $88,628. The Company provides accounting support to Mid-American Alliance Corporation and its subsidiary Mid American Century Life Insurance company and First American Capital Corporation and its subsidiary First Life America Corporation. Fees related to these accounting services were $95,531, $48,816 and $35,000 in 1999, 1998, and 1997 respectively.
The increase in life insurance policy reserves was $870,582 in 1999 and $731,958 in 1998. Life insurance reserves are established to provide for the payment of policyholder benefits. Factors such as premiums, interest, mortality and life expectancy are considered in the calculation of reserve factors developed by an actuary. Typically, these factors increase as a policy reaches another anniversary creating a larger reserve. During 1999, reserves were recorded on new insurance sales and reserves on existing policies increased. This accounted for the increase of $138,624 in 1999 as compared to 1998. During 1997, life insurance policy reserves increased $381,888.
During 1997, the Company granted stock options. Compensation expense was recorded based on the difference between the exercise price of the options and the fair market value of the stock on the date of grant. This compensation expense totaled $159,743 in 1997. There were no options granted during 1999 and 1998 and accordingly, no compensation cost related to stock options is recorded.
Income tax expense for 1999 totaled $254,540. Federal income taxes are calculated based on the earnings of FAIC. Certain items included in income reported for financial statements are not included in taxable income for the current year and recorded as deferred income taxes. Of the $254,540 deferred income taxes totaled $230,783 and taxes currently payable totaled $23,757. In 1998 total income tax expense was $265,102 of which $210,430 was deferred. In 1997 total income tax expense was $123,995 of which $109,102 was deferred.
Total assets in 1999 increased $3,461,163 from $15,233,025 in 1998 to $18,694,188. At December 31, 1999 and 1998, invested assets totaled $9,667,847 and $6,362,765, respectively. This increase of $3,305,082 is primarily the result of investing cash in available-for-sale securities and $905,098 of invested assets acquired in the purchase of BCLIC. Cash and cash
equivalents totaled $5,540,571 at December 31, 1999 which consisted of cash and money market mutual funds.