(4) Includes the results of Pyramid Life since its acquisition on March 31, 2003,
We own ten insurance companies (collectively, the "Insurance Subsidiaries"): American Progressive Life & Health Insurance Company of New York ("American Progressive"), American Pioneer Life Insurance Company ("American Pioneer"), American Exchange Life Insurance Company ("American Exchange"), Constitution Life Insurance Company ("Constitution"), Marquette National Life Insurance Company ("Marquette"), Peninsular Life Insurance Company ("Peninsular"), Pennsylvania Life Insurance Company ("Pennsylvania Life"), Penncorp Life Insurance Company ("Penncorp Life (Canada)"), Pyramid Life Insurance Company ("Pyramid Life") and Union Bankers Insurance Company ("Union Bankers"). Collectively, our insurance company subsidiaries are licensed to sell life and accident and health insurance in all fifty states, the District of Columbia and all the provinces of Canada. In addition to our insurance company subsidiaries, we own a third party administrator, CHCS Services, Inc., that administers senior market business for more than 48 unaffiliated insurance companies, and also administers such business for our own companies. Pyramid Life was acquired on March 31, 2003 and its operating results prior to the date of acquisition are not included in Universal American's consolidated results of operations.
Our principal business segments are: Career Agency, Senior Market Brokerage and Administrative Services. We also report the activities of our holding company in a separate segment. Reclassifications have been made to conform prior year amounts to the current year presentation. A description of our segments follows:
ADMINISTRATIVE SERVICES -- CHCS Services, Inc. acts as a third party administrator and service provider for both affiliated and unaffiliated insurance companies, primarily with respect to senior market insurance products and non-insurance products. The services provided include policy underwriting and issuance, telephone and face-to-face verification, policyholder services, claims adjudication, case management, care assessment and referral to health care facilities.
Amortization of present value of future profits is based upon the pattern of the projected cash flows of the in-force business acquired, over periods ranging from ten to forty years. Other identified intangibles are amortized over their estimated lives. Prior to December 31, 2001, goodwill was amortized on a straight-line basis over periods ranging from twenty to thirty years. Subsequent to December 31,
2001, goodwill is no longer amortized; see "Adoption of New Accounting Pronouncements" below.
We regularly evaluate the amortized cost of our investments compared to the fair value of those investments. Impairments of securities generally are recognized when a decline in fair value below the amortized cost basis is considered to be other-than-temporary. Generally, we consider a decline in fair value to be other-than-temporary when the fair value of an individual security is below amortized cost for an extended period and we do not believe that recovery in fair value is probable. Impairment losses for certain mortgage and asset-backed securities are recognized when an adverse change in the amount or timing of estimated cash flows occurs, unless the adverse change is solely a result of changes in estimated market interest rates. The cost basis for securities determined to be impaired are reduced to their fair value, with the excess of the cost basis over the fair value recognized as a realized investment loss.
On August 1, 2003, we acquired 100% of the outstanding common stock of Ameriplus Preferred Care, Inc. ("Ameriplus"). Ameriplus is engaged in the business of creating and maintaining a network of hospitals for the purpose of providing discounts to our Medicare Select policyholders. Ameriplus' network is utilized in connection with Medicare Select policies written by subsidiaries of Universal American and can be offered to non-affiliated parties as well. Ameriplus receives network fees when premiums for these Medicare Select policies are collected.
As part of an effort to exit certain non-core lines of business, Transamerica approached the Company in 2002 to determine our interest in recapturing the two treaties. Under the terms of the recapture agreements, Transamerica transferred approximately $18 million in cash to American Pioneer to cover the statutory reserves recaptured by American Pioneer. No ceding allowance was paid by American Pioneer in the recapture and American Pioneer currently retains 100% of the risks on the $48 million of Medicare Supplement business. There was no gain or loss reported on these recapture agreements.
On March 31, 2003, we acquired all of the outstanding common stock of Pyramid Life. Pyramid Life specializes in selling health and life insurance products to the senior market, including Medicare Supplement and Select, long term care, life insurance, and annuities. With this acquisition we acquired a $120 million block of in-force business, as well as a career sales force that is skilled in selling senior market insurance products. Pyramid Life markets its products in 26 states through a career agency sales force of over 1,100 agents operating out of 32 Senior Solutions Sales Centers. During the full year 2003, Pyramid Life agents produced more than $27 million of annualized new sales. Following a transition period that took approximately ten months, the Pyramid Life business has been fully transitioned into our existing operations, where we will be able to take advantage of increased scale and efficiencies. Operating results generated by Pyramid Life prior to the date of acquisition are not included in our consolidated financial statements. Refer to Note 3 - Business Combinations in our consolidated financial statements included in this Form 10-K for additional information on the acquisition.
Prior to March 31, 2003, we had $38 million outstanding on our term loan credit facility. In connection with the acquisition of Pyramid Life (see Note 3 - Business Combinations in our consolidated financial statements included in this Form 10-K) on March 31, 2003, we entered into a new $80 million credit facility consisting of a $65 million term loan and a $15 million revolving loan facility. We used the proceeds from the new term loan to repay the balance outstanding on our existing term loan and fund the purchase of Pyramid Life. The early extinguishment of the existing debt resulted in the immediate amortization of the related capitalized loan origination fees, resulting in a pre-tax expense of approximately $1.8 million. A portion of the proceeds from Trust preferred issuances in May 2003 and October 2003 (see below) were used to reduce the balance of the term loan by $21.0 million during 2003. None of the revolving loan facility was drawn as of December 31, 2003 (Refer to Note 14 - Loan Agreements in our consolidated financial statements included in this Form 10-K).
During 2003, we issued $60.0 million of fixed and floating rate trust preferred securities through subsidiary trusts, which including the $15.0 million issued in December 2002, results in a total of $75 million of such securities outstanding. A portion of the proceeds was used to repay our existing debt and the balance was retained at the parent company for general corporate purposes (for more detailed information, see Note 15 - Trust Preferred Securities in our consolidated financial statements included in this Form 10-K).
In November 2002 we entered into an agreement with Nationwide Life Insurance Company ("Nationwide") to acquire, through a 100% quota share reinsurance agreement, Nationwide's individual Medicare Supplement policies. Approximately $22 million of annualized premium was in force at December 31, 2003.
Our overall effective tax rate was 35.2% for 2003 as compared to 31.6% for 2002. As noted below, 2002 results benefited from the release of a portion of a tax valuation reserve that added $0.03 per share. Excluding the release of the tax valuation allowance, the effective tax rate was 35.2% in 2002.
Our Career Agency segment results improved by $13.0 million, or 39%, to $46.5 million in 2003 compared to 2002, primarily as a result of the acquisition of Pyramid Life, as well as the strengthening of the Canadian dollar.
Administrative Services segment income improved by $3.4 million, or 44%, compared to 2002. This improvement is primarily a result of the growth in premiums managed and the scheduled reduction in the amortization of the present value of future profits ("PVFP").
Net income increased by $1.2 million to $30.1 million ($0.56 per share) in 2002, compared to $28.9 million ($0.57 per share) in 2001. The decease in the per share amounts results from to the 7.5% increase in the weighted shares outstanding in 2002 as a result of the equity offering in July, 2001.
Our overall effective tax rate was 31.6% for 2002 as compared to 33.2% in 2001. As a result of the increased profitability of our Career Agency and Senior Market Brokerage segments, valuation allowances on certain of the tax loss carryforwards were no longer considered necessary during both 2002 and 2001. The amount of the valuation allowance released through deferred income tax expense during 2002 was $1.6 million, or $0.03 per share, compared to $0.7 million, or $0.01, per share during 2001. Excluding the release of the tax valuation allowance, the effective tax rate on operating income was 35.2% in 2002, compared to 35.0% in 2001.
The decrease in the loss from our corporate segment is due primarily to the reduction in interest cost. This reduction was due to a combination of a declining balance of debt outstanding as a result of principal repayments and reductions in the weighted average interest rates for the year, compared to 2001.