Principal properties owned by Standard Insurance Company (“Standard”) and used by the Company consist of two office buildings in downtown Portland, Oregon: the Standard Insurance Center, with approximately 460,000 square feet; and the Standard Plaza, with approximately 220,000 square feet. Both of our business segments use the facilities described above. The Company also owns 72,000 square feet of office space in Hillsboro, Oregon, which is used by StanCorp Mortgage Investors, LLC and our group
insurance claims operations. A second building with 72,000 square feet is under construction in Hillsboro and is expected to be completed in the first quarter of 2007. In addition, Standard leases 160,000 square feet of office space located in downtown Portland, Oregon, and 60,000 square feet of offsite storage. The Company leases 67 offices under commitments of varying terms to support its sales and regional processing offices throughout the United States, and added 21 leased offices related to the acquisition of Invesmart in July 2006. Management believes that the capacity and types of facilities are suitable and adequate. Management may evaluate additional square footage in 2007 to accommodate its increasing workforce. See Part II, Item 8, “Financial Statements and Supplementary Data-Notes to Consolidated Financial Statements.”
Significant factors that are likely to influence our 2007 financial results when compared to 2006 include:
Estimated premium growth in the range of 7% to 9%, a rate we expect will maintain our historical pattern of growth of at least 1% to 2% greater than what we estimate will be the industry growth rate,
An estimated annual group insurance benefit ratio in the range of 77.5% to 79.5%. Claims experience can fluctuate widely, particularly from quarter to quarter, and
Administrative fees for our Asset Management segment were $78.3 million, $40.6 million and $32.0 million for 2006, 2005 and 2004, respectively. Administrative fee growth was driven by growth in assets under administration. Assets under administration grew 191% for 2006 when compared to 2005, and 24.9% for 2005 when compared to 2004. The growth for 2006 resulted from adding $11 billion in assets under administration through the acquisition of Invesmart and $1 billion through sales to new customers, continued deposit growth, customer retention, equity market gains, and mortgages participated to other investors. The growth in assets under administration for 2005 was driven through sales to new customers, deposit growth, customer retention, equity market gains and mortgage participations to other investors. In addition to growth in administrative fees, the Asset Management segment had premium growth of 153% in 2005 compared to 2004 related to the sale of life contingent annuities. See “Business Segments.”
The following table sets forth benefits to policyholders, including interest credited, by segment for the years ended December 31:
The increase in benefits to policyholders, including interest credited, for the Insurance Services segment for 2006 compared to 2005 primarily resulted from business growth, as evidenced by premium growth, and comparatively less favorable claims experience in our group insurance product lines. By contrast, group insurance products had favorable claims experience overall for most of 2005. See “Business Segments-Insurance Services Segment-Benefits and Expenses-Benefits to Policyholders (including interest credited).”
The increase in benefits to policyholders, including interest credited, for 2005 compared to 2004 primarily resulted from business growth, as evidenced by premium growth, which was partially offset by comparatively favorable claims experience in our Insurance Services segment. As a result of our on-going assessment of recovery patterns for claims experience for group long term disability insurance, we released reserves, which decreased benefits to policyholders, totaling $9 million and $12 million for 2005 and 2004, respectively. There were no similar reserve releases for 2006. In addition, benefits to policyholders for 2004 included a $9 million premium deficiency reserve established during the first quarter of 2004 as a result of a pricing miscalculation on long term disability contracts with one large group insurance customer. There was no similar reserve established for 2006 or 2005.
Operating expenses increased 8.7% to $370.3 million for 2006 compared to 2005, and 14.1% to $340.6 million for 2005 compared to 2004. The increase in operating expenses for 2006 primarily was due to expenses related to the operations of Invesmart. Excluding expenses from the Invesmart operations, operating expense growth for 2006 was 2.7%. Operating expense growth is typically influenced by business growth as evidenced by premium and administrative fee growth. Premium and administrative fee growth for 2006 was 7.6% when compared to 2005.
We defer certain commissions, bonuses and operating expenses, which are considered acquisition costs. These costs are then amortized into expenses over a period not to exceed the life of the related policies. VOBA primarily represents the discounted future profits of business assumed through reinsurance agreements. VOBA is then amortized to achieve matching against future premiums or gross profits as appropriate. The Company’s other intangibles, are also subject to amortization which consist of customer lists and a marketing agreement. Customer lists were acquired with the purchase of Invesmart and the acquisition by StanCorp Investment Advisers, Inc. of three small investment advisory firms. The customer lists are amortized over 10 years. The marketing agreement with the Minnesota Life Insurance Company (“Minnesota Life”) is amortized up to 25 years. See “Critical Accounting Policies and Estimates-DAC, VOBA, Other Intangible Assets and Goodwill.” The net increase in DAC, VOBA and other intangibles for 2006 was $10.2 million greater than the net increase for 2005, and $8.6 million greater for 2005 compared to the net increase for 2004. The net increases for 2006 and 2005 were primarily due to increases in commissions and bonuses and operating expenses subject to deferral resulting from premium growth. Regarding the effect of the adoption of SOP 05-1, see Item 8, “Financial Statements and Supplementary Data-Notes to Consolidated Financial Statements-Note 1-Summary of Significant Accounting Policies-Accounting Pronouncements.”
which had been included in the Individual Insurance segment, was added to our Employee Benefits segment to combine our traditional insurance lines of business into the Insurance Services segment. The Insurance Services segment markets group and individual disability insurance, group life and accidental death and dismemberment (“AD&D”) insurance, and group dental insurance. We also combined our asset management and accumulation businesses, which had been reported in the Individual Insurance and Retirement Plans segments and Other, into the Asset Management segment. The Asset Management segment offers full-service 401(k) plans, 457 plans, defined benefit plans, money purchase pension plans, profit sharing plans, 403(b) plans and non-qualified deferred compensation products and services through an affiliated broker-dealer. This segment also offers investment management services, commercial mortgage loan origination and servicing, and individual fixed annuities. Beginning in the third quarter of 2006, this segment included Invesmart, a national retirement financial services company. Resources are allocated and performance is evaluated at the segment level. Prior period amounts have been reclassified to reflect our current segment alignment.
Measured as a percentage of total revenues, revenues for each of our segments for 2006 were 90.2% for Insurance Services and 9.5% for Asset Management.
Net capital gains and losses on investments, return on capital not allocated to the product segments, holding company expenses, interest on senior notes and adjustments made in consolidation are reflected in “Other.” Prior period amounts have been reclassified to reflect our current segment alignment.
compared to 2005 was due to a highly competitive sales environment and slower industry growth in general.
Persistency. Persistency for our group insurance products has historically exceeded industry averages, which we believe demonstrates our commitment to customer service and pricing discipline for new sales. Premium growth for 2006 was affected by terminations of a few large group contracts in the first quarter of 2006, but persistency remained strong at 88.1% for 2006, compared to 88.2% for 2005 and 85.6% for 2004. Persistency in our individual disability products remains favorable. A significant portion of our in force individual disability policies are non-cancelable.
Organic Growth. We continue to experience steady organic growth in our group insurance in force business due to employment and wage rate growth.
Net investment income for the Insurance Services segment increased 3.3% to $313.4 million for 2006 compared to 2005, and increased 0.3% to $303.3 million for 2005 compared to 2004. The growth in net investment income for both comparative periods was primarily due to growth in average invested assets due to premium growth, partially offset by a reduction in invested asset yields and commercial mortgage loan prepayments. See “Consolidated Results of Operations-Revenues-Net Investment Income.”
Three primary factors drive benefits to policyholders: premium growth (reserves are established in part based on premium levels), claims experience and the assumptions used to establish related reserves. The predominant factors affecting claims experience are claims incidence (number of claims) and claims severity (length of time a disability claim is paid and the size of the claim). The assumptions used to establish the related reserves reflect claims incidence and claims severity, as well as new investment interest rates and overall portfolio yield, as both affect the discount rate used to establish reserves.
of premiums) is utilized to provide a measurement of claims normalized for premium growth. The benefit ratio for our group insurance product lines for 2006 was 78.3%, compared to 75.8% for 2005. The increase in the benefit ratio for 2006 compared to 2005 was due to greater incidence and severity of group life claims in 2006 compared to 2005 and comparatively higher claims severity for early duration group long term disability insurance for 2006 compared to 2005. The benefit ratio for the group insurance product lines for 2004 was 77.4%.
Generally, we expect the individual disability benefit ratio to trend down over time to reflect the growth in the business outside of the large block of disability business assumed in 2000 from Minnesota Life, and the corresponding shift in revenues from net investment income to premiums. The decrease year to year in the expected benefit ratio does not necessarily indicate an increase in profitability; rather it reflects a change in the mix of revenues from the business. We expect the wide fluctuations in the benefit ratio for the business to continue, especially when measured on a quarterly basis.
The benefit ratio for our individual disability business was 79.4% for 2006 compared to 79.2% for 2005. Our claims experience for this product line for 2006 was favorable compared to 2005 partly as a result of continued growth in the business outside of the block of disability business assumed in 2000 from Minnesota Life. The favorable experience was offset by a $6 million increase in reserves to address a relatively new industry table for individual disability experience. Our block of business is relatively small and as a result, we view the new industry table as more credible for establishing reserve levels compared solely to our own experience. We will continue to monitor our developing experience in light of the availability of the new industry table and if necessary will adjust reserves accordingly. The benefit ratio for our individual disability business was 83.2% for 2004.
Operating expenses in the Insurance Services segment increased 2.7% to $291.8 million for 2006 compared to 2005, and 12.2% to $284.2 million for 2005 compared to 2004. Operating expenses as a percentage of premiums were 15.1%, 15.6% and 15.4% for 2006, 2005 and 2004, respectively. The decrease in the expense ratio for 2006 was primarily due to careful expense management, and decreased technology related spending in 2006 when compared to 2005. The increase in the expense ratio for 2005 resulted from our effort to leverage technology in our expense structure and support our continued focus on our customer service and product delivery platforms.
Revenues for the Asset Management segment increased 24.2% to $237.2 million for 2006 compared to 2005, and 12.4% to $191.0 million for 2005 compared to 2004. Revenues from the retirement plans business include plan administration fees, fees on separate account assets (equity investments) and other assets under administration and investment income on general account assets under
Premiums for the Asset Management segment are generated from life contingent annuities, which are primarily a single premium product. Premiums for the segment can vary significantly from quarter to quarter due to low sales volume of life contingent annuities and the varying size of single premiums. Premiums for the Asset Management segment were $7.6 million, $10.1 million and $4.0 million for 2006, 2005 and 2004, respectively.
Administrative fees for the Asset Management segment were $78.3 million, $40.6 million and $32.0 million for 2006, 2005 and 2004, respectively. Invesmart contributed administrative fees of $24.7 million for 2006. Administrative fees are primarily earned from assets under administration.
Assets under administration for this segment, including retirement plans, individual fixed annuities and outside managed commercial mortgage loans, were $19.02 billion at December 31, 2006, which was a $12.48 billion increase compared to December 31, 2005. Growth in assets under administration resulted from almost $11 billion added through the addition of Invesmart, as well as continued deposit growth and customer retention in our other retirement plans business. Excluding the assets under administration added through the addition of Invesmart, average assets under administration increased 23.2% for 2006 compared to 2005. Average assets under administration increased 25.2% for 2005 compared to 2004, primarily due to growth in our retirement plans business. The increase in retirement plan assets under administration for 2005 compared to 2004 was primarily due to strong sales, continued deposit growth and excellent customer retention.
Net investment income for the Asset Management segment increased 7.8% to $151.3 million for 2006 compared to 2005. The increase for the comparative periods was primarily due to a 14.9% increase in average retirement plan general account assets under administration, partially offset by lower yields on fixed maturity securities and commercial mortgage loans, a $1.6 million decrease in commercial mortgage loan prepayments and a $1.6 million decrease in commercial mortgage loan commitment fees.
Benefits to policyholders for the Asset Management segment represents current and future benefits on life contingent annuities, which vary significantly with life contingent annuity sales. Benefits to policyholders for the Asset Management segment decreased $3.4 million to $16.0 million for 2006 compared to 2005, and increased $6.6 million to $19.4 million for 2005 compared to 2004. Changes in the level of benefits to policyholders will approximate changes in premium levels because these annuities are primarily single premium life contingent annuity products with a significant portion of all premium payments established as a reserve.
In addition to our two segments, we report our holding company and corporate activity in “Other.” This category includes net capital gains and losses, return on capital not allocated to the product segments, holding company expenses, interest on senior notes and adjustments made in consolidation.
taxes of $5.4 million for 2005, and a loss before income taxes of $3.7 million for 2004. The increased loss before income taxes for 2006 compared to 2005 was primarily due to lower net investment income resulting from lower excess capital as a result of the purchase of Invesmart in 2006. Net investment income for 2006 was $14.2 million, compared to $21.6 million for 2005.
The Company manages interest rate risk, in part, through asset/liability analyses. According to presently accepted actuarial standards of practice, statutory reserves of Standard and related items at December 31, 2006 made adequate provision for the anticipated cash flows required to meet contractual obligations and related expenses.
The Company’s financial instruments are exposed to financial market volatility and potential disruptions in the market that may result in certain financial instruments becoming less valuable. Financial market volatility includes interest rate risk. The Company has analyzed the estimated loss in fair value of certain market sensitive financial assets held at December 31, 2006 and 2005, given a hypothetical 10% increase in interest rates, and related qualitative information on how the Company manages interest rate risk. The interest rate sensitivity analysis was based upon the Company’s fixed maturity securities and commercial mortgage loans held at December 31, 2006 and 2005. Interest rate sensitivity of the Company’s financial assets was measured assuming a parallel shift in interest rates. All security yields were increased by 10% of the year-end 10-year U.S. Government Treasury bond yield, or 0.47% and 0.44% for the 2006 and 2005 analyses, respectively. The change in fair value of each security was estimated as the change in the option adjusted value of each security. Option adjusted values were computed using the Company’s payment models and provisions for the effects of possible future changes in
Net cash provided by operations is net income adjusted for non-cash items and accruals and was $390.1 million, $407.1 million and $404.8 million for 2006, 2005 and 2004, respectively.
The insurance laws of the states of domicile and other states in which the insurance subsidiaries conduct business regulate the investment portfolios of the insurance subsidiaries. Relevant laws and regulations generally limit investments to bonds and other fixed maturity securities, mortgage loans, common and preferred stock and real estate. Decisions to acquire and dispose of investments are made in accordance with guidelines adopted and modified from time to time by the insurance subsidiaries’ boards of directors. Each investment transaction requires the approval of one or more members of senior investment staff, with increasingly higher approval authorities required for transactions that are more significant. Transactions are reported quarterly to the finance and operations committee of the board of directors
Net cash used in investing activities was $749.3 million, $664.9 million and $594.7 million for 2006, 2005 and 2004, respectively. In 2006, net cash used in investing activities included $81.7 million primarily related to StanCorp’s acquisition of Invesmart, a national retirement financial services company, and all of its subsidiaries.
Our target investment portfolio allocation is approximately 60% fixed maturity securities and 40% commercial mortgage loans. At December 31, 2006, our portfolio consisted of 58% fixed maturity securities and 41% commercial mortgage loans with the remainder in real estate. We anticipate that commercial mortgage loans will continue to represent approximately 40% of our investment portfolio in the future.
At December 31, 2006, our fixed maturity securities portfolio had gross unrealized capital gains of $87.1 million and gross unrealized capital losses of $60.8 million. Unrealized gains and losses primarily result from holding fixed maturity securities with interest rates higher or lower, respectively, than those currently available at the reporting date.
decrease in originations for 2006 reflected a more competitive origination market for commercial mortgage loan financing. The level of commercial mortgage loan originations in any year is influenced by market conditions as the Company responds to changes in interest rates, available spreads and borrower demand.
At December 31, 2006, StanCorp Mortgage Investors serviced $3.32 billion in commercial mortgage loans for subsidiaries of StanCorp and $1.41 billion for other institutional investors, compared to $3.10 billion serviced for subsidiaries of StanCorp and $1.14 billion for other institutional investors at December 31, 2005. In StanCorp’s internal portfolio, there are approximately 4,400 commercial mortgage loans. The average loan to value ratio for the overall portfolio was 56.4% at December 31, 2006, and the average loan size was approximately $0.8 million. The Company obtains personal recourse on most of its loans.
will retain the commitment fee and good faith deposit. Alternatively, if we terminate a commitment due to the disapproval of a commitment requirement, the commitment fee and good faith deposit may be refunded to the borrower, less an administrative fee.
Under the agreement, StanCorp is subject to customary covenants that take into consideration the impact of material transactions, changes to the business, compliance with legal requirements and financial performance. The two financial covenants are based on the Company’s leverage ratio (total debt to total capitalization) and consolidated net worth. The Facility is subject to performance pricing based upon the Company’s leverage ratio and includes interest based on a
Eurodollar margin, plus facility and utilization fees. At December 31, 2006, StanCorp was in compliance with all covenants under the Facility and had no outstanding balance on the Facility. StanCorp currently has no commitments for standby letters of credit, standby repurchase obligations or other related commercial commitments.
StanCorp filed a $1.0 billion shelf registration statement with the Securities and Exchange Commission, which became effective on July 23, 2002, and expires on December 1, 2008, registering common stock, preferred stock, debt securities and warrants. On September 25, 2002, we completed an initial public debt offering of $250 million of 6.875%, 10-year senior notes, pursuant to the shelf registration statement. The principal amount of the senior notes is payable at maturity and interest is payable semi-annually in April and October.
State insurance departments require insurance enterprises to maintain minimum levels of capital and surplus. Our target is generally to maintain capital at or above 275% of the company action level of Risk-based Capital (“RBC”) required by regulators (this equates to 550% of the authorized control level RBC required by our states of domicile). At December 31, 2006, statutory capital (adjusted to exclude asset valuation reserves) for our regulated insurance subsidiaries totaled $1.06 billion, or 304% of the company action level RBC (which equated to 607% of the authorized control level RBC by the National Association of Insurance Commissioners (“NAIC”) guidelines).
The levels of excess capital we generate vary inversely in relation to our levels of premium growth, primarily due to initial reserve requirements, certain regulatory capital requirements based on premiums and certain acquisition costs associated with policy issuance. At higher levels of premium growth, we generate less excess capital. At very high levels of premium growth, we could generate the need for capital infusions. At lower levels of premium growth, we generate more excess capital.
Statutory net gains from insurance operations before federal income taxes were $271.1 million, $314.0 million and $275.8 million for 2006, 2005 and 2004, respectively. Statutory capital (adjusted to exclude asset valuation reserves) for our insurance regulated subsidiaries totaled $1.06 billion at December 31, 2006 and 2005.
The Company’s investment portfolio includes fixed maturity securities and commercial mortgage loans. When the fair value of a fixed maturity security is below its amortized cost, and depending on the length of time the condition exists and the extent the fair value is below amortized cost, additional analysis is performed to determine whether an impairment exists. The analysis considers the financial condition and near-term prospects of the issuer, as well as the value of any security we may have in the investment. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the fixed maturity security may be different than previously estimated, which could have a material effect on our results of operations and financial condition. The commercial mortgage loan valuation allowance is based on the Company’s analysis of factors including changes in the size and composition of the loan portfolio, actual loan loss experience, economic conditions and individual loan analysis.
the amount of premiums that we will receive in the future;
the rate of return on assets we purchase with premiums received;
discount rates used to value expected future claim payments and premiums;
age and gender and, for individual policies, occupation class of the claimant;
year of issue for policy reserves or incurred date for claim reserves;
Deferred Acquisition Costs (“DAC”), Value of Business Acquired (“VOBA”), Other Intangible Assets and Goodwill
DAC, VOBA, other intangible assets and goodwill are considered intangible assets. These intangible assets are generally originated or acquired through the issuance of new business or the purchase of existing business, either by purchasing blocks of insurance policies from other insurers or by the outright purchase of other companies. The Company’s intangible assets are subject to impairment tests on an annual basis, or more frequently if circumstances indicate that carrying values may not be recoverable.
Certain costs related to obtaining new business and acquiring business through reinsurance agreements have been deferred and will be amortized to accomplish matching against related future premiums or gross profits, as appropriate. We normally defer certain acquisition related commissions and incentive payments, certain costs of policy issuance and underwriting, and certain printing costs. Assumptions used in developing DAC and amortization amounts each period include the amount of business in force, expected future persistency, withdrawals, interest rates and profitability. These assumptions are modified to reflect actual experience when appropriate. Additional amortization of DAC is charged to current earnings to the extent it is determined that future premiums or gross profits are not adequate to cover the remaining amounts deferred. DAC totaled $208.5 million and $165.8 million at December 31, 2006 and 2005, respectively.
At December 31, 2006, goodwill related to the acquisition of Invesmart was $33.5 million.
The provision for income taxes includes amounts currently payable and deferred amounts that result from temporary differences between financial reporting and tax bases of assets and liabilities as measured by current tax rates. Income
environmental liability exposure resulting from commercial mortgage loan and real estate investments;
the effect of changes in interest rates on reserves, policyholder funds, investment income and commercial mortgage loan prepayment fees;
the condition of the economy and expectations for interest rate changes;
availability, adequacy, and pricing of reinsurance and catastrophe reinsurance coverage and potential charges incurred;
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2006, 2005 and 2004
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of StanCorp Financial Group, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.
Standard, our largest subsidiary, underwrites group and individual disability insurance and annuity products, group life, AD&D, and dental insurance, and provides retirement plan products. Founded in 1906, Standard is domiciled in Oregon and licensed in all states except New York, and is licensed in the District of Columbia and the U.S. Territories of Guam and the Virgin Islands.
StanCorp Mortgage Investors originates and services fixed-rate commercial mortgage loans, generally between $250,000 and $5 million, for the investment portfolios of our insurance subsidiaries. It also generates additional fee income from the origination and servicing of commercial mortgage loans participated to institutional investors.
In July 2006, StanCorp acquired Invesmart, a national retirement financial services company. The business acquired services over 3,800 retirement plans with assets under administration of $11.05 billion at December 31, 2006. Invesmart provides retirement plan services, and investment advisory and management services. Effective January 1, 2007, the administration and operations for both our retirement plans annuity contracts and our trust products offered through Invesmart and through Standard will operate under the name Standard Retirement Services. In addition, Invesmart’s broker dealer and investment advisory functions were combined with StanCorp Equities and StanCorp Investment Advisers, respectively.
StanCorp Investment Advisers is a Securities and Exchange Commission (“SEC”) registered investment adviser providing performance analysis, fund selection support, model portfolios and other investment advisory and investment management services to our retirement plan clients, individual investors and subsidiaries of StanCorp.
Certain subsidiaries of StanCorp have interests in low-income housing investments. Individually, the interests in these subsidiaries do not represent a significant subsidiary pursuant to the definition in Financial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities,” nor do they meet the requirements for consolidation. The total equity investment in these interests was $21.1 million and $21.4 million at December 31, 2006 and 2005, respectively.
Our consolidated financial statements and certain disclosures made in this Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require us to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The estimates most susceptible to material changes due to significant judgment (the “critical accounting policies”) are those used in determining asset impairments, the reserves for future policy benefits and claims, deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), other intangible assets and goodwill, and the provision for income taxes. The results of these estimates are critical because they affect our profitability and may affect key indicators used to measure the Company’s performance. These estimates have a material effect on our results of operations and financial condition.
the other than temporarily impaired securities for further potential impairment on an on-going basis.
Fixed maturity securities are reviewed for potential permanent impairment if the market value of the security falls below 80% of its book value for six months or longer, or it is determined that the value will not recover. During the six month period, or as long as the holding is valued below 80% of its book value, the holding is watched for potential permanent impairment. At December 31, 2006, we held no issues that had market values below 80% of their book value.
Investment securities include fixed maturity securities. Fixed maturity securities are classified as available-for-sale and are carried at fair value on the consolidated balance sheets. This balance also includes derivative investments, which are carried at fair value. See “Note 7-Derivative Financial Instruments.” Valuation adjustments for fixed maturity securities are reported as net increases or decreases to other comprehensive income (loss), net of tax, on the consolidated statements of income and comprehensive income. Valuation adjustments for derivatives are reported as a component of net investment income.
Commercial mortgage loans are stated at amortized cost less a valuation allowance for potentially uncollectible amounts.
VOBA primarily represents the discounted future profits of business assumed through reinsurance agreements. VOBA is amortized in proportion to future premiums or expected future profitability as appropriate. If actual premiums or future profitability is inconsistent with our assumptions, we could be required to make adjustments to VOBA and related amortization. For the VOBA associated with the Minnesota Life Insurance Company (“Minnesota Life”) block of business reinsured, the amortization period is up to 30 years. The VOBA associated with the Teachers Insurance and Annuity Association of America (“TIAA”) block of business is comprised of two parts with differing amortization methods. The amortization periods are up to 10 years for VOBA that is amortized in proportion to premiums and up to 20 years for VOBA that is amortized in proportion to expected gross profits. The amount of VOBA stated at cost was $104.2 million for the years ending December 31, 2006, 2005 and 2004.
The Company’s other intangible assets are subject to amortization and consist of customer lists and a marketing agreement. Customer lists were acquired with the purchase of Invesmart and the acquisition by StanCorp Investment Advisers of three small investment advisory firms. They have a combined weighted-average remaining life of approximately 9.4 years. The marketing agreement accompanied the Minnesota Life transaction and provides access to Minnesota Life agents, some of whom now market Standard’s individual disability insurance products. The amortization period for the Minnesota Life marketing agreement is up to 25 years. The amount of other intangibles stated at cost was $21.9 million for the years ending December 31, 2006, 2005 and 2004.
The following table sets forth activity for DAC, VOBA, other intangible assets and goodwill:
During 2006, customer lists with a value of $28.6 million with a weighted-average amortization period of 10 years and goodwill totaling $33.5 million were acquired by the Company mainly in connection with the purchase of Invesmart. Goodwill resulted from the acquisition of Invesmart and relates to the Asset Management segment.
DAC, VOBA and other intangible assets amortization expense for 2006, 2005 and 2004 was $43.2 million, $35.1 million and $41.5 million, respectively.
The estimated net amortization of VOBA and other intangible assets, excluding DAC, for each of the next five years is as follows:
Regarding the effect of the adoption of Statement of Position (“SOP”) 05-01, see “-Accounting Pronouncements.”
The following table sets forth the major classifications of the Company’s property and equipment and accumulated depreciation at December 31:
Benefits and expenses are matched with recognized premiums to result in recognition of profits over the life of the contracts. The match is accomplished by recording a provision for future policy benefits and unpaid claims and claim adjustment expenses. For most of our product lines, we establish and carry as a liability actuarially determined reserves that are calculated to meet our obligations for future policy benefits and claims. These reserves do not represent an exact calculation of our future benefit liabilities, but are
persistency, which is the measurement of the percentage of premiums remaining in force from year to year.
The following table sets forth the adjustment to initially apply SFAS No. 158:
The following table sets forth the incremental effect of applying Statement of Financial Accounting Standards (“SFAS”) No. 158 on individual line items in the Consolidated Balance Sheets and Consolidated Statement of Changes in Equity at December 31, 2006:
On September 19, 2005, the American Institute of Certified Public Accountants issued SOP No. 05-01, Accounting by Insurance Enterprises for Deferred Acquisition Costs
In June 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 effective for fiscal years beginning after December 15, 2006. FIN 48 requires recognition in the financial statements of the measurement of uncertain tax positions taken or expected to be taken on a tax return. Under FIN 48, the tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained, based solely on its technical merits, with the taxing authority having full knowledge of all relevant information. The measurement of a
The following tables set forth select segment information at or for the years ended December 31:
Securities deposited for the benefit of policyholders in various states, in accordance with state regulations, amounted to $6.2 million and $6.4 million at December 31, 2006 and 2005, respectively.
Although the Company underwrites commercial mortgage loans throughout the United States, commercial mortgage loans in California represent a concentration of credit risk at 31% of our commercial mortgage loan portfolio at December 31, 2006 and 2005. Due to this concentration, we are exposed to potential losses resulting from the risk of an economic downturn in California as well as to certain catastrophes, such as earthquakes, that may affect the region. Although we diversify our commercial mortgage loan portfolio within California by both location and type of property in an effort to reduce earthquake exposure, such diversification may not eliminate the risk of such losses. We do not require earthquake insurance for properties on which we make commercial mortgage loans, but do consider the potential for earthquake loss based upon seismic surveys and structural information specific to each property when new loans are underwritten.
Commercial mortgage loans foreclosed and transferred to real estate were $1.8 million and $1.3 million for 2006 and 2005, respectively. There were no commercial mortgage loans foreclosed and transferred to real estate during 2004. At December 31, 2006 and 2005, we had commercial mortgage loans totaling $2.9 million and $0.3 million, respectively, that were more than sixty days delinquent and of these amounts, $1.2 and $0.3 million, respectively, were in the process of foreclosure. The following table sets forth commercial mortgage loan valuation and allowance provisions at December 31:
In the first quarter of 2006, the Company began marketing indexed annuities. These contracts permit the holder to elect an interest rate return or an indexed return, where interest credited to the contracts is based on the performance of the S&P 500 index, subject to an upper limit or cap. Policyholders may elect to rebalance between interest crediting options at renewal dates annually. At each renewal date, we have the opportunity to re-price the indexed component by changing the cap, subject to minimum guarantees. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, requires that we estimate the fair value of the index-based interest guarantees for the current period and for all future reset periods until contract maturity. Changes in the fair value are recorded as interest credited and represent an estimate of the cost of the options to be purchased in the future to hedge the guarantees, discounted back to the date of the balance sheet using current market indicators for future interest rates, option costs and actuarial estimates for policyholder lapse behavior.
The Company purchases S&P 500 Index options in conjunction with our sales of indexed annuities. These investments are highly correlated to the portfolio allocation decisions of our policyholders, such that we are economically hedged with respect to index-based interest rate guarantees for the current reset period. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities requires companies to recognize all derivative investments as assets in the balance sheet at fair value. The fair value of the Company’s derivative instruments of $3.0 million at December 31, 2006 is included in fixed maturity securities in the consolidated balance sheets. The increase in fair value associated with these investments for 2006 of $0.9 million is accounted for in the net investment income section of the income statement.
8. LIABILITY FOR UNPAID CLAIMS, CLAIMS ADJUSTMENT EXPENSES AND OTHER POLICYHOLDER FUNDS
Other policyholder funds at December 31, 2006, 2005 and 2004 included $1.29 billion, $ 1.14 billion and $954.9 million, respectively, of employer-sponsored defined contribution and benefit plans funds, and $988.3 million, $986.7 million and $938.4 million, respectively, of individual fixed annuity funds.
The following table sets forth the Company’s long-term debt at December 31:
StanCorp filed a $1.0 billion shelf registration statement with the SEC, which became effective on July 23, 2002 and expires on December 1, 2008, registering common stock, preferred stock, debt securities and warrants. On September 25, 2002, we completed an initial public debt offering of $250 million of 6.875%, 10-year senior notes, pursuant to the shelf registration statement. The principal amount of the senior notes is payable at maturity and interest is payable semi-annually in April and October.
The tax effect of temporary differences that gave rise to significant portions of the net deferred tax liability was as follows at December 31:
The Company is carrying forward net operating losses of $11.2 million that originated in StanCorp and The Standard Life Insurance Company of New York. The losses will be used in future years to offset taxable income from those entities to the degree allowed by the Internal Revenue Code. If
unutilized, $4.1 million would expire in 2024, $2.5 million would expire in 2025, $2.8 million would expire in 2026 and $1.8 million would expire in 2027. In addition, the Company is carrying forward a $57.7 million net operating loss from the acquisition of Invesmart. This carryforward is subject to Internal Revenue Service (“IRS”) limitations, which potentially reduce the annual amount that may be utilized. IRS regulations provide for the carryforward to be used ratably over the next 17 years.
Effective December 31, 2006, Standard adopted SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires the Company to recognize the overfunded or underfunded status of our benefit plans, measured as the difference between the plan assets at fair value and the projected benefit obligation, as an asset or liability and to measure the funded status of the plans as of the year-end balance sheet date.
The estimated net loss, prior service credit and transition asset for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2007 are $2.0 million, $0.3 million and $0.2 million, respectively.
A minimum pension liability adjustment is required when the actuarial present value of the projected benefit obligation exceeds plan assets. The plan assets of our plans exceed the projected benefit obligation. The following table summarizes the projected and accumulated benefit obligations and the fair value of assets for our plans at December 31:
Equity securities in the employee pension plan portfolio totaled $107.2 million and $90.1 million at December 31, 2006 and 2005, respectively. The plan held no StanCorp securities as plan assets at December 31, 2006 and 2005.
Substantially all eligible employees are covered by one of two qualified deferred compensation plans sponsored by Standard and Invesmart under which a portion of the employee contribution is matched. Employees not eligible for the employee pension plan are eligible for an additional non-elective employer contribution. Contributions to the plan for 2006, 2005 and 2004 were $6.6 million, $5.9 million and $5.2 million, respectively.
The funded or underfunded status of the postretirement benefit plan, reflected as an asset or liability, is measured as the difference between the fair value of plan assets and the projected benefit obligation. At December 31, 2006, a liability of $4.0 million was reflected on the balance sheet for this plan.
sets forth the amounts recognized in accumulated other comprehensive loss at December 31, 2006:
The estimated net gain and prior service credit for the postretirement benefit plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2007 are $0.1 million and $0.4 million, respectively.
The Company uses a December 31 measurement date for the postretirement benefit plan. The following table provides a reconciliation of the changes in the postretirement benefit plan’s accumulated benefit obligations, fair value of assets and the funded status for the years ended December 31:
The projected discounted cash flow obligation for the postretirement benefit plan was $29.9 million and $33.4 million at December 31, 2006 and 2005, respectively.
For the postretirement benefit plan, the assumed health care cost trend rates were assumed to increase as follows for the years ended December 31:
The following table sets forth the Company’s target and actual weighted-average asset allocations for the postretirement medical plan for the years ended December 31:
The 2002 Stock Incentive Plan authorized the board of directors to grant eligible employees and certain related parties incentive or non-statutory stock options and restricted stock. The maximum number of shares of common stock that may be issued under this plan is 2.9 million. At December 31, 2006, 1.8 million shares or options for shares have been issued under the 2002 plan.
The fair value of each option award under the share-based compensation plans was estimated using the Black-Scholes option pricing model as of the grant date using the assumptions noted in the following table. The Black-Scholes model uses the expected term as an input, with the calculated option value varying directly with the length of time until exercise. The Company bases its estimate of expected term on an analysis of the historical exercise experience of similar options granted to similar employee or director groups. The expected term given below represents the weighted-average expected term of options granted. Expected stock price volatility is based on volatility of the Company’s stock over the prior period equal in duration to the expected term. The dividend rate is the rate expected to be paid over the expected term, generally estimated to be equal to the rate for the year prior to the grant. The risk-free rate is the interest rate on a U.S. Treasury bond of a maturity closest to the expected term of the option.
The weighted-average grant-date fair value of options granted was $13.14, $10.73 and $9.98 during 2006, 2005 and 2004, respectively. The total intrinsic value of the options exercised was $6.8 million, $8.6 million and $9.7 million for the same periods, respectively. The amount received from the exercise of stock options was $5.2 million, $7.0 million and $9.1 million for 2006, 2005 and 2004, respectively. The related tax benefit derived from the tax deduction received by the Company for the difference between the stock price and the exercise price when the options were exercised was $2.4 million, $3.0 million and $3.4 million for 2006, 2005 and 2004, respectively.
Restricted stock grants are a part of the Company’s long-term compensation for certain senior officers. The Company grants both performance-based and retention-based restricted stock. Under the current plans, the Company had 0.5 million shares available for issuance as restricted stock at December 31, 2006.
On December 8, 2006, the Compensation and Organization Committee of the board of directors of StanCorp approved a revised form of long-term incentive award agreement to be used in connection with future grants of performance-based awards to executives. Under the new agreement, which will apply for the 2009 performance period, stock will be issued at the end of the performance period based on satisfaction of employment and financial performance conditions with a portion of the shares withheld to cover required tax withholding.
of the performance period, multiplied by the fair market value of StanCorp stock. For shares, the fair market value is measured at the grant date. For cash units, the value is measured as of the date of the financial statements.
A summary of the performance-based restricted stock activity and its characteristics are presented below:
There were 43,261, 40,494 and 154,800 performance-based shares or cash units granted during 2006, 2005 and 2004 respectively. The weighted-average grant-date fair value of both performance-based shares and cash units granted during 2006, 2005 and 2004 was $50.16, $40.41 and $32.69, respectively. The total value of performance-based shares vested and cash units paid was $2.8 million, $2.1 million and $4.4 million for 2006, 2005 and 2004, respectively.
Unvested performance-based shares and cash units at December 31, 2006, are scheduled to vest or be forfeited depending on the attainment of predetermined performance goals during 2007 and 2008. Assuming the target is achieved for each performance goal and valuing cash units at the price of StanCorp stock on December 31, 2006, $4.5 million in additional compensation cost would be recognized over this same time period. The compensation cost that will ultimately be recognized is dependent on the Company’s financial performance and the price of the Company’s stock on the vesting date. This future cost is expected to be recognized over a weighted-average period of 1.6 years based on the unrecognized cost for each award and the length of time until the vesting date.
Committee of the board of directors to certain senior officers. Participants vest with respect to the stock after completion of a specified period of employment, generally three or four years. The compensation cost of these awards is measured using the fair market value of the stock at the grant date and is amortized over the specified period of employment. There was $0.3 million of total unrecognized compensation cost related to unvested retention-based shares at December 31, 2006, which is expected to be recognized over a weighted-average period of 0.9 years.
The Company’s ESPP allows eligible employees to purchase StanCorp common stock at a 15% discount off the lesser of the fair market value of the stock on either the commencement date of each six-month offering period, or the end-of-the-period purchase date. Under the terms of the plan, each eligible employee may elect to have up to 10% of the employee’s gross total cash compensation for the period withheld to purchase StanCorp common stock. No employee may purchase StanCorp common stock having a fair market value in excess of $25,000 in any calendar year. Of the 2.0 million shares authorized for this plan, 0.9 million remain available at December 31, 2006.
The compensation cost for the ESPP is measured as the sum of the value of the 15% discount and the value of the embedded six-month option. The value of the discount is equal to 15% of the fair market value of the purchase price of the stock. The value of the embedded option is calculated using the Black-Scholes option pricing model using the assumptions noted in the following table. Expected stock price volatility is based on the volatility of StanCorp common stock over the six months preceding the offering period. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant.
increased our maximum retention limits for our group and individual disability and group life and AD&D contracts. Effective October 1, 2004, we increased our maximum retention limits per individual for group life and AD&D combined from $500,000 to $750,000. Our maximum retention for group disability insurance increased generally from $10,000 to $15,000 monthly benefit per individual. Our maximum retention increased generally from $3,500 to $5,000 monthly benefit per individual for individual disability policies with effective dates on or after October 1, 2004. On certain Minnesota Life business, we have a maximum retention of $6,000 monthly benefit per individual.
Standard participates in a reinsurance and third party administration arrangement with The Northwestern Mutual Life Insurance Company (“Northwestern Mutual”) under which Northwestern Mutual group long term and short term disability products are sold using Northwestern Mutual’s agency distribution system. Generally, Standard assumes 60% of the risk, and receives 60% of the premiums for the policies issued. If Standard were to become unable to meet its obligations, Northwestern Mutual would retain the reinsured liabilities. Therefore, in accordance with an agreement with Northwestern Mutual, Standard established a trust for the benefit of Northwestern Mutual with the market value of assets in the trust equal to Northwestern Mutual’s reinsurance receivable from Standard. The market value of assets required to be maintained in the trust at December 31, 2006, was $216.8 million. Premiums assumed by Standard for the Northwestern Mutual business accounted for 3% of the Company’s total premiums for each of the three years 2006, 2005 and 2004. In addition to assuming risk, Standard provides product design, pricing, underwriting, legal support, claims management and other administrative services under the arrangement.
During 2002, Standard formed a strategic marketing alliance with Ameritas Life Insurance Corp. (“Ameritas”) that offers Standard’s policyholders new and more flexible dental coverage options and access to Ameritas’ nationwide preferred provider organization panel of dentists. As part of this alliance, Standard and Ameritas entered into a reinsurance agreement that provides for 20% of the net dental premiums written by Standard and the risk associated with this premium, to be ceded to Ameritas.
In addition to product-specific reinsurance arrangements, we maintain reinsurance coverage for certain catastrophe losses related to group life and AD&D. In July 2006, we entered into a new catastrophe reinsurance agreement for catastrophe losses related to group life and AD&D. This agreement excludes nuclear, biological and chemical acts of terrorism. Through a combination of this agreement and our
participation in a catastrophe reinsurance pool discussed below, we have coverage of up to $320 million per event.
$781.1 million were from the reinsurance transaction with Protective Life Insurance Company (“Protective Life”) effective January 1, 2001. See “Note 15-Reinsurance of Blocks of Business.”
Effective October 1, 2000, Standard assumed through a reinsurance agreement, the individual disability insurance business of Minnesota Life. Standard paid a ceding commission of approximately $55 million and received approximately $500 million in assets and corresponding statutory liabilities. If Standard were to become unable to meet its obligations, Minnesota Life would retain the
reinsured liabilities. Therefore, in accordance with the agreement with Minnesota Life, Standard established a trust for the benefit of Minnesota Life with the market value of assets in the trust equal to Minnesota Life’s reinsurance receivable from Standard. The market value of assets required to be maintained in the trust is determined quarterly. The market value of assets required to be maintained in the trust at December 31, 2006, was $606.3 million. Accompanying the transaction was a national marketing agreement that provides access to Minnesota Life agents, some of whom now market Standard’s individual disability insurance products. We have signed a successor agreement to the national marketing agreement, which is effective through 2009.
Effective January 1, 2001, Standard ceded to Protective Life, through a reinsurance agreement, Standard’s individual life insurance product line. Standard received a ceding commission of approximately $90 million and transferred to Protective Life approximately $790 million in assets and corresponding statutory liabilities. If Protective Life were to become unable to meet its obligations, Standard would retain the reinsured liabilities. Therefore, the liabilities remain on Standard’s books and an equal amount is recorded as a recoverable from the reinsurer. In accordance with the agreement, Protective Life established a trust for the benefit of Standard with assets in the trust required to be equal to Standard’s reinsurance receivable from Protective Life. The amount of assets required to be maintained in the trust is determined quarterly.
DAC and amortization of DAC including VOBA and amortization of VOBA.
Statutory accounting practices differ in some respects from GAAP. The principal statutory practices which differ from GAAP are: a) bonds and commercial mortgage loans are reported principally at amortized cost; b) asset valuation and the interest maintenance reserve are provided as prescribed by the NAIC; c) certain assets designated as non-admitted, principally deferred tax assets, furniture, equipment, and unsecured receivables, are not recognized as assets, resulting in a charge to statutory surplus; d) annuity considerations with life contingencies, or purchase rate guarantees, are recognized as revenue when received; e) reserves for life and disability policies and contracts are reported net of ceded reinsurance and calculated based on statutory requirements, including required discount rates; f) commissions, including initial commissions and expense allowance paid for reinsurance assumed, and other policy acquisition expenses are expensed as incurred; g) initial commissions and expense allowance received for a block of reinsurance ceded net of taxes are reported as deferred gains in surplus and recognized as income in subsequent periods; h) federal income tax expense includes current income taxes defined as current year estimates of federal income taxes and tax contingencies for current and all prior years and amounts incurred or received during the year relating to prior periods, to the extent not previously provided; i) deferred tax assets, net of deferred tax liabilities, are included in the regulatory financial statements, but only those deferred tax assets that will be realized within one year are admitted assets; j) surplus notes are included in capital and surplus; and k) interest on surplus notes is not recorded as a liability nor an expense until approval for payment of such interest has been granted by the commissioner of the state of domicile.
During 2005 and 2006, Standard made distributions to StanCorp totaling $150.8 million and $147.0 million, respectively. In February 2007, Standard’s board of directors approved a dividend to StanCorp of $95 million, subject to the approval of the Director of the Oregon Department of Consumer and Business Services-Insurance Division.
State insurance departments require insurance enterprises to adhere to minimum Risk-based Capital (“RBC”) requirements promulgated by the NAIC. At December 31, 2006 and 2005, the insurance subsidiaries’ capital levels were significantly in excess of that which would require corrective action by the insurance subsidiaries or regulatory agencies. The authorized control level RBC was $175.3 million and $164.6 million at December 31, 2006 and 2005, respectively.
Effective December 31, 2006, the NAIC adopted changes to the RBC calculation that require insurance companies to undertake additional testing to determine the risk-based capital requirement for certain annuities and single payment life insurance. The change did not significantly impact the authorized control level RBC at December 31, 2006.
Under the agreement, StanCorp is subject to customary covenants that take into consideration the impact of material transactions, changes to the business, compliance with legal requirements and financial performance. The two financial covenants are based on the Company’s leverage ratio (total debt to total capitalization) and consolidated net worth. The Facility is subject to performance pricing based upon the Company’s leverage ratio and includes interest based on a Eurodollar margin, plus facility and utilization fees. At December 31, 2006, StanCorp was in compliance with all covenants under the Facility and had no outstanding balance on the Facility. StanCorp currently has no commitments for standby letters of credit, standby repurchase obligations or other related commercial commitments.
The Company leases certain buildings and equipment under non-cancelable operating leases that expire in various years through 2015, with renewal options for periods ranging from one to ten years. Future minimum payments under the leases are 2007, $14.6 million; 2008, $11.8 million; 2009, $8.6 million; 2010, $4.4 million and thereafter, $5.3 million. Total rent expense was $9.6 million, $12.5 million and $14.1 million for the years ended December 31, 2006, 2005 and 2004, respectively.
The Company’s financing obligations generally include debts, lease payment obligations and commitments to fund commercial mortgage loans. The remaining obligations reflect the long-term portion of other liabilities and the Company’s obligations under our insurance and annuity product contracts. The following table summarizes the Company’s contractual obligations as of December 31, 2006:
The Company’s long-term debt obligations consisted primarily of the $250 million 6.875%, 10-year senior notes.
In the normal course of business, the Company commits to fund commercial mortgage loans generally up to 90 days in advance. At December 31, 2006, the Company had outstanding commitments to fund commercial mortgage loans totaling $160.7 million, with fixed interest rates ranging from 6.0% to 7.5%. These commitments generally have fixed expiration dates. A small percentage of commitments expire due to the borrower’s failure to deliver the requirements of the commitment by the expiration date. In these cases, the Company will retain the commitment fee and good faith deposit. Alternatively, if we terminate a commitment due to our disapproval, the commitment fee and deposit will be refunded to the borrower, less an administrative fee.
represent an exact calculation of our future benefit liabilities, but are instead based on assumptions, which involve a number of factors, including mortality, morbidity, recovery, the consumer price index, reinsurance arrangements and other sources of income for people on claim. Assumptions may vary by age and gender and, for individual policies, occupation class of the claimant; time elapsed since disablement; and contract provisions and limitations. Certain of these factors could be materially affected by changes in social perceptions about work ethics, emerging medical perceptions and legal interpretations regarding physiological or psychological causes of disability, emerging or changing health issues and changes in industry regulation. Changes in one or more of these factors or if actual claims experience is materially inconsistent with our assumptions, could cause actual results to be materially different from the information presented in the table. Not included in the table is approximately $916.9 million in other reserve liabilities where the amount and timing of related payouts cannot be reasonably determined.
During 2006, the Company repurchased approximately 1.5 million shares of common stock at a total cost of $70.1 million for a volume weighted-average price of $46.16 per common share. Also during 2006, the Company acquired 3,076 shares of common stock from an executive officer to cover the executive officer’s tax liabilities resulting from the release of performance-based shares and retention-based shares at a total cost of $0.2 million for a volume weighted-average price of $52.38 per common share.
The following tables set forth select unaudited financial information by calendar quarter for the years indicated: