Kansas City Life markets its individual insurance products, including traditional, interest sensitive and variable products through a nationwide sales force of independent general agents and third-party marketing arrangements. Kansas City Life also markets group insurance products, which include life, dental, vision and disability products through a nationwide sales force of independent general agents, group brokers and third-party marketing arrangements. Kansas City Life operates in 48 states and the District of Columbia.
Sunset Life’s individual insurance products include traditional and interest sensitive products. Sunset Life’s marketing, administrative and accounting operations have been integrated with Kansas City Life’s to improve efficiency and effectiveness. Sunset Life continues as a life insurance company with its current block of business, but without new sales. Sunset Life operates in 43 states and the District of Columbia.
In 2006 the Company entered into a Master General Agent and Marketing Agreement with American Republic Insurance Company (American Republic) under which American Republic agents market Kansas City Life’s insurance products. For segment reporting purposes, sales under this agreement are reflected in the Individual Insurance segment.
Reinsurance is one of the tools that the Company uses to accomplish its business objectives. A variety of reinsurance vehicles are currently in use, including individual and bulk arrangements on both coinsurance and mortality/morbidity only basis. Reinsurance supports a multitude of corporate objectives, including managing statutory capital, reducing volatility and surplus strain. At the customer level, reinsurance increases the
Deferred acquisition costs (DAC), principally agent commissions and other selling, selection and issue costs, which vary with and are directly related to the production of new business, are capitalized as incurred. These deferred costs are then amortized in proportion to future premium revenues or the expected future profits of the business, depending upon the type of product.
A 10% increase in expected surrender rates for all future years would result in a reduction in DAC and VOBA, and an increase in current period amortization expense of $2.3 million.
A 10 basis point reduction in future interest rate spreads would result in a reduction in DAC and VOBA, and an increase in current period amortization expense of $3.9 million.
The Company’s principal investments are in fixed maturity securities, mortgage loans and real estate; all of which are exposed to three primary sources of investment risk: credit, interest rate and liquidity. The fixed maturity securities, which are all classified as available for sale, are carried at their fair value in the Company’s balance sheet, with unrealized gains or losses recorded in accumulated other comprehensive loss net. The unrealized gains or losses are also recorded net of the adjustment to policyholder account balances to reflect what would have been earned had those gains been realized and the proceeds reinvested. The Company’s fair value of fixed maturity and equity securities are derived from external pricing sources, brokers, and internal matrices. Approximately 94% of these investments are from external pricing services while 6% are derived from brokers and internal matrices. The investment portfolio is monitored regularly to ensure that investments which may be other than temporarily impaired are identified in a timely fashion and properly valued, and that impairments are charged against earnings as realized investment losses. The valuation of the investment portfolio involves a variety of assumptions and estimates, especially for investments that are not actively traded. Fair values are obtained from a variety of external sources.
At the end of each quarter, all securities are reviewed to determine whether impairments should be recorded. This quarterly process includes an assessment of the credit quality of each investment in the entire securities portfolio. Additional reporting and review procedures are conducted for those securities where fair value is less than 90% of amortized cost. Further, detailed analysis is performed for each issue or issues having experienced a formal restructuring or where the security has experienced material deterioration in fair value.
The Company considers relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary. Relevant facts and circumstances considered include (1) the current fair value of the security as compared to cost, (2) the length of time the fair value has been below cost, (3) the financial position of the issuer, including the current and future impact of any specific events, and (4) the Company’s ability and intent to hold the
Deferred income taxes are recorded on the differences between the tax bases of assets and liabilities and the amounts at which they are reported in the consolidated financial statements. Recorded amounts are adjusted to reflect changes in income tax rates and other tax law provisions as they become enacted. Deferred income tax assets are subject to ongoing evaluation of whether such assets will be realized. The ultimate realization of deferred income tax assets generally depends on generating future taxable income during the periods in which temporary differences become deductible and the reversal of deferred tax liabilities. A valuation allowance against deferred income tax assets may be required if future taxable income is not expected. The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. The Company did not change the liability for unrecognized tax benefits as of January 1, 2007 as a result of implementing Interpretation 48. The total amount of unrecognized tax benefits, if recognized, that would impact the effective tax rate was $0.8 million as of December 31, 2007.
The Company measures sales in terms of new premiums and deposits. Premiums are included in insurance revenues in the Consolidated Statements of Income, while deposits are shown as a Financing Activity in the Consolidated Statements of Cash Flows. The first set of tables below reconciles premiums included in insurance revenues and provides detail by new and renewal business. New premiums are also detailed by product. The second set of tables reconciles deposits with the Consolidated Statements of Cash Flows and provides detail by new and renewal deposits. New deposits are also detailed by product.
In 2007, the Company experienced a 1% increase in new individual life premiums, a 13% increase in new immediate annuity sales and a 49% increase in new group life premiums. The decline in 2006 largely resulted from 41% decline in new immediate annuity sales, and a 23% decrease in new group life insurance premiums. Consolidated renewal premiums declined 1% in 2007 compared to a 1% increase in 2006. The Company terminated a group accident and health product line at year-end 2006, which impacts year-to-year comparisons. The termination of this product line resulted in a $1.5 million reduction in new premiums in 2007. Excluding the premiums for this product line from both
Total new deposits increased 8% in 2007 after declining 26% in 2006. The improvement in 2007 was largely the result of a 37% increase in new variable annuity deposits and a 7% increase in new universal life insurance deposits. The increase in the sale of universal life products positively reflects the Company’s increased emphasis on the sale of life insurance products. The increased sales of variable annuity products continue to reflect customer interest in the equity markets. Comparatively for 2006, new variable annuity deposits decreased 14% while new universal life insurance deposits increased 1%.
Renewal deposits declined 2% in 2007 and 11% in 2006. The decline in 2007 primarily resulted from a $5.1 million or 25% decrease in fixed deferred annuities that was partially offset by a $4.6 million or 44% increase in variable annuity deposits. The decline in 2006 was primarily due to a $10.9 million or 35% decline in fixed deferred annuity deposits and a $2.5 million or 19% decline in variable annuity deposits.
Insurance revenues are affected by the level of new sales, the type of products sold, and the persistency of policies, all of which may be influenced by economic conditions, as well as competitive forces. Consumers continue to desire a broad portfolio of products with safety and competitive return objectives, which the Company strives to provide. The Company offers a broad range of products, including variable insurance products, which allow policyholders to participate in both the equity and fixed income markets. Interest sensitive and traditional insurance products combine safety of principal with competitive interest returns.
Reinsurance ceded declined $0.2 million to $55.0 million in 2007 from $55.2 million in 2006. In 2005, reinsurance ceded was $55.8 million. The Company uses reinsurance as a means to mitigate its risks and to reduce the earnings volatility from claims.
Net investment income decreased 3% in 2007 but increased 1% in 2006 from 2005. Net investment income was $190.4 million in 2007, compared with $196.3 million in 2006 and $194.6 million in 2005. The decrease in net investment income in 2007 resulted, in part, from reduced investment assets. Total investments declined $128.0 million at December 31, 2007 from the prior year. This included a decline of $50.6 million in 2007 due to the sale of Generations Bank. In addition, real estate assets declined $13.5 million during 2007, as the Company sold several real estate properties. Finally, investments in mortgage loans decreased $21.9 million, as normal amortization and prepayments in the portfolio outpaced new loan production. Investment expenses increased $0.6 million in 2007, primarily resulting from reduced real estate accruals in the prior year. The increase in net investment income in 2006 resulted from reduced investment expenses, primarily due to lower real estate expenses. Negatively affecting net investment income in 2006, total invested assets declined versus the prior year but were offset by a slight increase in investment yields. In 2005, investment expenses increased due to increased real estate expenses.
Net investment income was largely composed of interest and dividends on fixed maturity securities, equity securities and short-term investments. Net investment income also includes income from mortgage loans, real estate and policy loans. Investment income is stated net of investment expenses. Investment income on securities related activity declined $2.6 million or 2% in 2007 compared with 2006. This same activity declined less than $0.6 million or 1% in 2006 compared with 2005. Income from fixed maturity securities decreased 3% in 2007 and 1% in 2006. Partially offsetting the decline in investment income for fixed maturity securities, income from short-term investments almost doubled during 2007 compared to a 21% increase in 2006. This was due to improved short-term yields in both periods. In addition, there was increased purchase activity in 2007.
Investments in mortgage loans decreased $21.9 million during 2007. The sale of Generations Bank resulted in a decrease in mortgage loans of $18.3 million. Consequently, investment income from mortgage loans decreased $0.5 million or 2% for the year. Despite a $13.4 million increase in mortgage loan assets in 2006, mortgage loan investment income declined $1.1 million or 3%. The reduced income in 2006 reflected a decline in available yields on new mortgages and the impact of the prepayment of loans with rates higher than those of new loans.
The Company closely monitors its investments in securities classified as subprime. Subprime securities include all bonds or portion of bonds where the underlying collateral is made up of home equity loans or first mortgage loans to borrowers whose credit scores at the time of origination were lower than the level recognized in the market at prime. The Company’s classification of subprime does not include Alt-A or jumbo loans, unless the collateral otherwise meets the preceding definition. At December 31, 2007, the Company had investments with subprime residential mortgage exposure of $39.1 million and a related $1.8 million unrealized loss. This exposure amounted to 1% of the Company’s invested assets and all such assets are valued based on external pricing sources. Concerns arose during the second half of 2007 regarding subprime mortgage loan defaults. Market dislocations have exacerbated this issue as some sources of liquidity for mortgage lenders, such as asset-backed commercial paper, have contracted dramatically. Demand for investments securitized by home loans has also fallen significantly, making it more difficult for mortgage loan originators to sell their loans profitably. Home prices continue to fall, which hinders potential sales and loan refinancings that might otherwise avert defaults. These issues have largely been centered around increasing delinquencies and default rates by subprime borrowers. Many investors have shunned securities backed by home loans, regardless of the actual quality of the underlying assets, sending market values for this entire class of securities downward.
Real estate investments decreased $13.5 million in 2007 compared with 2006 due to property sales during the year. Accordingly, investment income on real estate decreased 21% in 2007. Real estate investments increased $28.9 million in 2006 compared with 2005, but many of these new investments were development properties where the income stream was less than those of mature properties. As such, investment income from real estate investments declined 5% in 2006 compared with 2005.
The Company offers policy loans as a benefit to its policyholders, and loans are secured by the cash value of the policy. Investment income from policy loans declined by $0.5 million in both 2007 and 2006. These declines were directly related to reduced balances of loans outstanding.
The Company realized investment gains and losses from several other sources. Many securities purchased by the Company contain call provisions, which allow the issuer to redeem the securities at a particular price. Depending upon the terms of the call provision and price at which the security was purchased, a gain or loss may be realized. Sales and calls of investments in securities resulted in net realized gains of $0.5 million in 2007 and $2.9 million in 2006 and a realized loss of $1.6 million in 2005. Other sources of realized investment gains and losses include write-downs of investment securities, changes in the Company’s valuation reserve for potential future losses in the commercial mortgage portfolio and other miscellaneous investment gains and losses.
Real estate investments were $96.0 million at December 31, 2007 and $109.5 million at December 31, 2006. Real estate investments consist principally of office buildings and industrial warehouses that are both in use and under development, and investments in multi-family and single-family residential properties, including affordable housing. The Company also invests in unimproved land for future development. Properties have been acquired through individual purchases, build-to-suit and speculative development. The Company generally maintains its ownership interest in these properties on a direct and joint venture basis with the long-term intention of earning positive cash flow and income by leasing the properties, along with the expectation of realizing capital appreciation upon sale. The Company periodically sells certain real estate assets when management believes that the market and timing are perceived to be advantageous.
The Company reviews and analyzes its securities on an ongoing basis to determine whether impairments exist that are other-than-temporary. Based upon these analyses, specific security values are written down to fair value through earnings as a realized investment loss if the security's value is considered to be an other-than-temporary impairment.
Kansas City Life Insurance Company (the Company) is a Missouri domiciled stock life insurance company which, with its subsidiaries, is licensed to sell insurance products in 49 states and the District of Columbia. The Company offers a diversified portfolio of individual insurance, annuity and group products through three life insurance companies: Kansas City Life Insurance Company (Kansas City Life) the parent company, and wholly owned subsidiaries Sunset Life Insurance Company of America (Sunset Life) and Old American Insurance Company (Old American).
Certain amounts in prior years have been reclassified to conform with the current year presentation. Upon the adoption of SFAS 158, the Company recorded the related $4.1 million (net of tax) adjustment as a component of other comprehensive loss for the year ended December 31, 2006. The Company has since determined that this adjustment should have been presented as an adjustment of the ending balance of accumulated other comprehensive loss. The accompanying Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2006 and Note 12 - Comprehensive Income have been modified to reflect this presentation.
In 2006, the Company entered into a Master General Agent and Marketing Agreement with American Republic Insurance Company (American Republic) under which American Republic agents market Kansas City Life’s insurance products. Sales under this agreement are reflected in the Individual Insurance segment.
Deferred acquisition costs (DAC), principally agent commissions and other selling, selection and issue costs, which vary with and are directly related to the production of new business, are capitalized as incurred. These deferred costs are then amortized in proportion to future premium revenues or the expected future profits of the business, depending upon the type of product. Profit expectations are based upon assumptions of future interest spreads, mortality margins, expense margins and policy and premium persistency experience. These assumptions involve judgment and are compared to actual experience on an ongoing basis. If it is determined that the assumptions related to the profit expectations for interest sensitive and variable insurance products should be revised, the impact of the change is reported in the current period’s income as an unlocking adjustment. The DAC unlocking adjustment was $3.4 million for the year ended 2007 (2006 - $0.7 million; 2005 - $2.2 million) which reduced the amortization of DAC. During the fourth quarter of 2006, the Old American segment reduced its amortization of DAC by $1.2 million. This adjustment, which is a correction of an understatement of the capitalization of DAC in prior periods, was not material to 2006 or any prior period financial statements.
Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than actually expected. Mortality assumptions are based on Company experience expressed as a percentage of standard mortality tables. The 2001 VBT and the 1975-1980 Select and Ultimate Basic Table serve as the basis for mortality assumptions.
Liabilities for future policy benefits of immediate annuities and supplementary contracts with life contingencies are also computed by a net level premium method, based upon estimates at the time of issue for investment yields and mortality.
Deferred income tax assets are subject to ongoing evaluation of whether such assets will be realized. The ultimate realization of deferred income tax assets depends on generating future taxable income during the periods in which temporary differences become deductible. If future taxable income is not expected, a valuation allowance against deferred income tax assets may be required.
In September 2005, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (AcSEC) issued Statement of Position 05-1 (SOP 05-1), “Accounting by Insurance Enterprises for
In June 2006, the FASB issued Interpretation 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 applies to all uncertain tax positions accounted for under SFAS 109 “Accounting for Income Taxes”. FIN 48 addresses whether tax positions taken or to be taken on tax returns should be reflected in the financial statements before they are resolved with the appropriate taxing authority. Previous statements provided no specific guidance related to such positions. FIN 48 was adopted on January 1, 2007, with no material impact to the consolidated financial statements.
In August 2006, the Securities and Exchange Commission (SEC) adopted SEC Release No. 33-8732A, “Executive Compensation and Related Person Disclosure” which amends the disclosure requirements for executive and director compensation, related person transactions, director independence and other corporate governance matters and security ownership of officers and directors. The release expands the currently required tabular disclosures and adds a narrative Compensation Discussion & Analysis (CD&A) which must describe the Company’s compensation policies and decisions. The amendments in the release apply to disclosures included in proxy and information statements, periodic and current reports, as well as other filings under the Securities Exchange Act of 1934 and to registration statements under the Exchange Act and the Securities Act of 1933. For financial statement purposes, this release is effective for years ending on or after December 15, 2006. The Company has adopted this release and includes the required disclosures in the appropriate filings.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (SFAS 158). SFAS 158 requires calendar year-end companies with publicly traded equity securities that sponsor postretirement benefit plans to fully recognize, as an asset or liability, the funded status of the benefit plans as of December 31, 2006. The funded status is to be measured as the difference between the fair value of the plan assets and the projected benefit obligation at year-end. The Company adopted this statement as of December 31, 2006. See Note 7 - Pensions and Other Postretirement Benefits in the Notes to Consolidated Financial Statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of SFAS No. 115.” SFAS 159 permits an entity to measure certain financial assets and liabilities at fair value. Under SFAS 159, entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis, with a few exceptions, as long as it is applied to the instrument in its entirety. Once adopted, the fair value option election is irrevocable, unless a new election date occurs. This statement became effective for years beginning after November 15, 2007. The Company adopted SFAS 159 on January 1, 2008 with no material impact to the consolidated financial statements.
All other Standards and Interpretations of those Standards issued during 2007 did not relate to accounting policies and procedures pertinent to the Company at this time.
The following table provides unrealized gains (losses) on the Company’s investments in securities, at December 31.
The Company considers relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary. Relevant facts and circumstances considered include (1) the current fair value of the security as compared to cost, (2) the length of time the fair value has been below cost, (3) the financial position of the issuer, including the current and future impact of any specific events, and (4) the Company’s ability and intent to hold the security to maturity or until it recovers in value. To the extent the Company determines that a security is deemed to be other than temporarily impaired, the difference between amortized cost and fair value would be charged to income as a realized investment loss, resulting in a permanent reduction to the cost basis of the underlying investment.
Securities with unrealized losses for less than twelve consecutive months included 132 issues with a carrying value of $434,182 and unrealized losses of $14,592. Of this portfolio, 93.5% were investment grade (rated AAA through BBB-) at December 31, 2007, with associated unrealized losses of $12,134. The unrealized losses on these securities were primarily due to changes in market interest rates and credit spreads since the securities were acquired.
Fixed maturities with a fair value to amortized cost ratio less than 80% for six consecutive months or longer are considered potentially distressed securities and are subject to rigorous ongoing review. As of December 31, 2007, there were six issues with a fair value to amortized cost ratio of less than 80% for less than six months. These securities had a carrying value of $13,935 and unrealized losses of $5,350. Additionally, the Company has a perpetual preferred security in this category with a carrying value of $764 and unrealized loss of $270. Based on the Company’s ability and intent to hold the investments for a reasonable period of time sufficient for recovery of fair value, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2007.
The table below provides sales of investment securities available for sale, excluding maturities and calls, for the year ended December 31. Realized gains and losses on the sale of investments are determined on the basis of specific security identification.
The following table provides the distribution of maturities for fixed maturity investment securities available for sale as of December 31, 2007. Expected maturities may differ from these contractual maturities since borrowers may have the right to call or prepay obligations.
Most of the Company’s mortgage loans are secured by commercial real estate and are carried net of a valuation reserve of $3,410 (2006 - $3,600). The valuation reserve for mortgage loans is maintained at a level believed adequate by management to absorb estimated credit losses. Management’s periodic evaluation and assessment of the adequacy of the valuation reserve is based on known and inherent risks in the portfolio, historical and industry data, current economic conditions and other relevant factors. No mortgage loans were foreclosed upon and transferred to real estate investments during the past two years. Also, there was one delinquent mortgage loan at December 31, 2007 (2006 - none). The Company does not hold mortgage loans of any borrower that exceeds 5% of stockholders’ equity.
The following table provides geographic and property type diversification of the mortgage portfolio at December 31.
The Company had commitments to originate mortgage loans of $1.7 million at December 31, 2007. These commitments expire in 2008.
The Company had commitments to purchase real estate investments of $6.3 million at December 31, 2007. These commitments expire in 2008.
As a member of the FHLB with a capital investment of $9.2 million, the Company has the ability to borrow on a collateralized basis from the FHLB. The Company earned a 3.33% average rate on the capital investment in the FHLB for 2007.
Federal income taxes paid this year were $14,572 (2006 - $8,121; 2005 - $6,054).
The Company and/or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. In general, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years before 2004. The Company is not currently under examination by the Internal Revenue Service.
result of implementing Interpretation 48. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
The total amount of unrecognized tax benefits, if recognized, that would impact the effective tax rate was $0.8 million as of December 31, 2007.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2007, 2006, and 2005, the Company recognized expense of approximately $0.3 million, ($0.6) million, and $0.6 million in interest and penalties, respectively. The Company had approximately $0.8 million and $0.5 million for the payment of interest and penalties accrued at December 31, 2007 and 2006, respectively.
The Kansas City Life Pension Plan was amended and restated effective January 1, 1998 as the Kansas City Life Cash Balance Pension Plan. Plan benefits are based on a cash balance account consisting of credits to the account based upon an employee’s years of service, compensation and interest credits on account balances calculated using the greater of the average 30-year Treasury bond rate for November of each year or 5.5%. The benefits expected to be paid in each year from 2008 through 2012 are $8,700, $11,200, $9,100, $11,700, and $12,300, respectively. The aggregate benefits expected to be paid in the five years from 2013 through 2017 are $62,300. The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2007 and include estimated future employee service. The 2008 contribution for the plan cannot be reasonably estimated at this time. The asset allocation of the fair value of pension plan assets at December 31 was:
The postretirement medical plans for the employees, full-time agents, and their dependents are contributory with contributions adjusted annually. The benefits expected to be paid in each year from 2008 through 2012 are $990, $1,050, $1,120, $1,190, and $1,200, respectively. The aggregate benefits expected to be paid in the five years from 2013 through 2017 are $7,120. The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2007. The 2008 contribution for the plan is estimated to be $990. The Company pays these medical costs as they become due and the plan incorporates cost-sharing features.
Non-contributory defined contribution retirement plans for general agents and eligible sales agents provide supplemental payments based upon earned agency first year individual life and annuity commissions. Contributions to these plans were $78 (2006 - $98; 2005 - $106). Non-contributory deferred compensation plans for eligible agents based upon earned first year commissions are also offered. Contributions to these plans were $400 (2006 - $300; 2005 - $503).
Savings plans for eligible employees and agents match employee and agent contributions up to 6% of salary and 2.5% of agents’ prior year paid commissions, respectively. Contributions to the plan were $1,167 (2006 - $1,683; 2005 - $1,468). The Company may contribute an additional profit sharing amount up to 4% of salary for eligible employees, depending upon corporate profits. The Company made no profit sharing contribution in 2007 or in the prior two years.
For measurement purposes a 11.5% annual increase in the per capita cost of covered health care benefits was assumed to decrease gradually to 6% in 2018 and thereafter.
Information about the outstanding three-year intervals as of December 31, 2007, were as follows:
The Company has three reportable business segments, which are defined based on the nature of the products and services offered: Individual Insurance, Group Insurance and Old American. The Individual Insurance segment consists of individual insurance products for both Kansas City Life and Sunset Life. The Individual Insurance segment is marketed through a nationwide sales force of independent general agents. The Group Insurance segment consists of sales of group life, dental, vision and disability products. This segment is marketed through a nationwide sales force of independent general agents, group brokers and third-party marketing arrangements. Old American consists of individual insurance products designed primarily as final expense products. These products are marketed through a nationwide general agency sales force with exclusive territories, using direct response marketing to supply agents with leads.
Sunset Life entered into a yearly renewable term reinsurance agreement January 1, 2002, whereby it ceded 80% of its retained mortality risk on traditional and universal life policies. As of December 31, 2007, the insurance in force ceded approximates $2.0 billion (2006 - $2.1 billion) and premiums totaled $8.9 million.
Reinsurance receivables were $162.3 million at year end 2007, consisting of reserves ceded of $149.5 million and claims ceded of $12.8 million.
Fair values for the Company's insurance contracts other than investment contracts were not required to be disclosed. However, the fair values of liabilities under all insurance contracts were taken into consideration in the Company's overall management of interest rate risk.
Following are the carrying amounts and fair values of financial instruments as of December 31.
All other information required by this Schedule is shown in Note 11-Reinsurance in the Consolidated Financial Statements.
All other information required by this Schedule is shown in Note 11-Reinsurance
We have audited the accompanying consolidated balance sheets of Kansas City Life Insurance Company and subsidiaries (the Company) as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2007. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedules I-V. We also have audited the Company’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these consolidated financial statements and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting (Item 9A). Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules, and an opinion on the Company's internal control over financial reporting based on our audits.