The Company occupies office space leased from an affiliate, American Skandia Information Services and Technology Corporation, and believes that the current facilities are satisfactory for its near term needs. The Company also entered into a lease for office space in Westminster, Colorado, effective January 1, 2001.
Revenues: Annuity and life insurance charges and fees* $424,578 $289,989 $186,211 $121,158 $69,780 Fee income 130,610 83,243 50,839 27,593 16,420 Net investment income 11,656 10,441 11,130 8,181 1,586 Premium income and other revenues 4,778 3,688 1,360 1,082 265
Benefits and Expenses: Annuity and life insurance benefits $751 $612 $558 $2,033 $613 Change in annuity and life insurance policy reserves 45,018 3,078 1,053 37 635 Cost of minimum death benefit reinsurance - 2,945 5,144 4,545 2,867 Return credited to contractowners 9,046 -1,639 -8,930 -2,018 673 Underwriting, acquisition and other insurance expenses 335,213 206,350 167,790 90,496 49,887 Interest expense 85,998 69,502 41,004 24,895 10,791
* On annuity and life insurance sales of $8,216,167, $6,862,968, $4,159,662, $3,697,990, and $2,795,114 during the years ended December 31, 2000, 1999, 1998, 1997, and 1996, respectively, with contractowner assets under management of $29,751,822, $29,396,693, $17,854,761, $12,119,191, and $7,764,891 as of December 31, 2000, 1999, 1998, 1997 and 1996, respectively.
Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the notes thereto and Item 6, Selected Financial Data.
Net realized investment losses totaled $688,000 in 2000, compared to gains of $578,000 in 1999 and $99,000 in 1998. The change from 1999 to 2000 is primarily due to realized losses on sales of securities in the fixed maturity portfolio. These losses were partially offset by realized gains on sales of fixed maturities and mutual funds. The increase in realized gains in 1999 compared to 1998 is due to higher gains on sales of mutual fund investments.
Underwriting, acquisition and other insurance expenses $ 335,213 $206,350 $167,790 ========= ======== ========
Underwriting, acquisition and other insurance expenses increased 62% and 23% in 2000 and 1999, respectively. Increased commissions and purchase credits reflect the increase in sales in both 2000 and 1999. Significant investments in new product development and internet-based technology contributed to general operating expense increases in both 2000 and 1999. The amortization of acquisition costs increased substantially in 2000 compared to 1999 as the associated costs from record sales in late 1999 and early 2000 were recognized in accordance with accounting principles generally accepted in the United States profit and expense recognition models.
The Company's liquidity requirement was met by cash from insurance operations, investment activities, borrowings from ASI and the securitization transactions with ASI.
o During 2000 and 1999, the Company received $69,000,000 and $34,800,000, respectively, from ASI to support the capital needs and anticipated growth in business of its U.S. operations. In addition, the Company received $2,450,000 and $1,690,000 from ASI in 2000 and 1999, respectively, to support its investment in Skandia Vida.
o Funds received from new securitization transactions amounted to $476,288,000 in 2000 and $265,710,000 in 1999 (see Note 8 to the consolidated financial statements).
o During 2000 and 1999, the Company extended its reinsurance agreements. The Company also entered into an agreement with SICL in 2000. The reinsurance agreements are modified coinsurance arrangements where the reinsurer shares in the experience of a specific book of business.
The Company believes that it is well positioned to retain and enhance its position as a leading provider of financial products for long-term savings and retirement purposes as well as to address the economic impact of premature death, estate and business planning concerns and supplemental retirement needs. The Company continues to focus on offering innovative long-term savings and income products and providing superior customer service in order to gain market share and improve profitability in an increasingly competitive market.