(1) Comparison of selected consolidated financial data in the table is significantly affected by the assumption through coinsurance of a block of life and annuity business from Woodmen Accident and Life Company effective September 1, 1997. We received $48,025 in cash in exchange for assuming $50,857 in insurance liabilities. For the years ended December 31, 1997 amounts related to the block of business acquired from Woodmen Accident and Life Company included premiums of approximately $58, investment income of approximately $1,227 for interest earned on the assets purchased with the cash received, benefits incurred of approximately $909 in interest paid on policyholder deposits and increase in future policy benefits.
(3) Comparison of selected consolidated financial data in the table also is affected by the assumption through coinsurance of a block of life and annuity business from FSLife effective on October 1, 1999. We received $30,032 in assets in exchange for assuming $27,701 in insurance liabilities. During 1999, we retroceded, through a coinsurance agreement, 50% of the life insurance assumed from the purchase of the block of business that we acquired from FSLife to Alabama Reassurance Company. As of December 31, 1999, invested and total assets included approximately $28,088 and policy liabilities included approximately $24,782 associated with the block of business that we acquired from FSLife.
(4) Comparison of selected consolidated financial data in the table is also affected by the assumption through coinsurance of a block of life and annuity business from World Insurance Company effective on April 1, 1998. We received $19,941 in assets in exchange for assuming $21,910 in insurance liabilities. During 1998, we retroceded, through a coinsurance agreement, 50% of the life insurance assumed from the purchase of the block of insurance acquired from World Insurance Company to Alabama Reassurance Company.
We are a holding company engaged in the ownership and operation of life insurance companies that principally issue insurance contracts to fund pre-need funeral contracts and of companies that are involved in the multimedia biographical business and the ownership and operation of funeral home and cemetery properties. The life insurance companies primarily write policies sold by our affiliate, National Prearranged Services, in connection with National Prearranged Services' sale of prearranged funeral contracts. As a result of the growth in the amount of pre-arranged funeral contracts sold by National Prearranged Services over the past three years, our revenues have increased significantly. Our growth also resulted, to a lesser extent, from the acquisition of blocks of life insurance and annuity policies in 1999, 1998, and 1997.
Our insurance subsidiaries are subject to a high degree of regulation from various state insurance administrators. Such regulation governs (among other things): investment policies; financial reporting; capital adequacy; terms of policies; and the ability of our subsidiaries to pay dividends and management fees to us. In addition, National Prearranged Services's activities in selling prearranged funeral contracts are highly regulated in the states in which National Prearranged Services does business. These regulatory aspects and future changes therein could materially affect our financial condition and results of operations. See "Business - Regulatory Factors."
Our strategy is to increase shareholder value by growing our insurance and cemetery business through: (i) selected acquisitions of life insurance companies and in-force life insurance policies and annuities, funeral homes and cemeteries; and (ii) increases in life insurance policies arising out of prearranged funeral contracts sold by National Prearranged Services. Our ability to acquire such companies, policies and properties will be dependent upon (among other things) our ability to identify, negotiate and complete transactions of favorable values, arrange necessary financing and integrate and manage the acquisitions after completion, including preserving customer relationships. There can be no assurance that we will successfully execute our strategy.
Premium income increased approximately $3.6 million, or 9%, in the year ended December 31, 1999 compared to 1998. The increase for 1999 reflected higher overall volume of policies in force and new policies issued compared to the previous year.
Benefits increased $3.0 million, or 9%, in the year ended December 31, 1999 compared to 1998. The increase in 1999 was due primarily to an increase in death claims.
Commissions increased approximately $66,000, or less than 1%, in the year ended December 31, 1999 compared to 1998. These changes were attributable to higher sales volumes, mix of policies sold and a reduction of commission rates on single pay policies.
The decrease in the change in deferred acquisition costs of approximately $871,000 from $4.3 million for the year ended December 31, 1998 to $3.5 million for the year ended December 31, 1999 was due to the release of deferred acquisition costs associated with death benefits and lower levels of capitalized costs due to the mix of new policies.
Premium income increased $3.3 million, or 9%, from $38.0 million in the year ended December 31, 1997 to $41.4 million in the year ended December 31, 1998 due to higher sales volumes. Substantially all premium income was derived from National Prearranged Services. The fact that premium income increased only 9%, while the face amount of insurance in-force increased 15.9 % reflected a shift in the relative proportions of policies sold from single pay to limited pay business.
Benefits increased $1.9 million, or 6%, from $31.2 million in the year ended December 31, 1997 to $33.1 million in the year ended December 31, 1998, due to increases in death benefits and surrender benefits in proportion to the increases in overall policies in-force, increases in future policy benefits due to higher levels of policies in-force, and interest credited to policyholder accounts for the business acquired from Woodmen Accident and Life Company and World Insurance Company. These increases were partially offset by decreases in future policy benefits due to the impact of the surrenders and deaths.
Taxes, licenses and fees increased $166,000, or 21%, from $782,000 in the year ended December 31, 1997 to $948,000 in the year ended December 31, 1998 due primarily to fees associated with the routine regulatory examination of our insurance company subsidiaries which commenced in March 1998, additional fees associated with the acquisition of World Service Life Insurance Company of America in 1998 as well as increased taxes due to an increase in collected premiums.
Assets with a fair value of approximately $6.2 million at December 31, 1999 were on deposit with various state regulatory authorities. Assets with a fair value of approximately $74.6 million at December 31, 1999 were restricted as to use from the purchase of the blocks of business from Woodmen Accident and Life Company, World Insurance Company, Funeral Security Life Insurance Company and other assumed business. See "Business -- Regulatory Factors."
Our cash requirements for 2000 and in the future will depend upon mortality experience, acquisitions, timing of expansion plans and capital expenditures. Our insurance subsidiaries generally generate sufficient cash receipts from premium collections and investment income to satisfy our obligations. We believe that the diversity of the investment portfolio of our insurance subsidiaries provides sufficient liquidity to meet our operating cash requirements. We believe that anticipated revenue from operations should be adequate for the working capital requirements of our existing businesses over the next twelve months.
Capital projects at new cemetery properties for mausoleum/funeral home combination buildings and other saleable inventory features are expected to be funded through use of cash generated from pre-construct sales and/or debt financing and should require little or no additional capital investment. Certain other improvements would be funded through working capital.
On October 15, 1999, we completed the acquisition of all the outstanding shares of Funeral Security Life Insurance Company for $5 million. The purchase was funded from existing working capital. On October 28, 1999, we sold our insurance subsidiary, New Life Insurance Company, for approximately $5 million.
Changes in our consolidated balance sheet between December 31, 1999 and December 31, 1998, reflect growth through operations, changes in the fair value of actively managed fixed maturity and equity securities, changes in the investment portfolio mix and the purchase of the block of business from Funeral Security Life Insurance Company.
Total cash and investments increased approximately $16.9 million from $133.8 million at December 31, 1998 to $150.7 million at December 31, 1999, primarily due to investment assets acquired with the purchase of the block of business from Funeral Security Life Insurance Company of $30 million offset by changes in the fair value of fixed maturity and equity securities. During 1999 there was an increase in policyholder loans to related parties of $5.5 million. Due to the low risk nature of these policy loans and their contract interest rates, we believe they afford comparable risk-adjusted returns to alternative categories of invested assets. The policy loans are fully secured by the nonforfeiture values of the policies so that, in the event of default, we would not be adversely affected, except with respect to the future loss of revenues on the policies cancelled. Note receivable from affiliate represents a note receivable in the amount of $4,000,000 from Forever Network, Inc. Principal and interest at prime (8.5% at December 31, 1999) plus 1% is due quarterly beginning March 31, 2000. On March 9, 2000, Forever Network, Inc. was acquired by us.
Receivables from related parties increased approximately $700,000 from $1.5 million at December 31, 1998 to $2.2 million at December 31, 1999, due primarily to receivables for commission adjustments due from National Prearranged Services.
Cost of policies acquired increased approximately $500,000 from $3.8 million at December 31, 1998 to $4.3 million at December 31, 1999, due to the acquisition of the block of business from Funeral Security Life Insurance Company offset by the amortization of costs.
Goodwill decreased approximately $800,000 from $1.4 million at December 31, 1998 to $612,000 at December 31, 1999, due to the sale of New Life Insurance Company.
Future policy benefits increased approximately $20.5 million from $126.0 million at December 31, 1998 to $105.5 million at December 31, 1999. This increase was due to an increase in the amount of new policies issued and the acquisition of the block of business from Funeral Security Life Insurance Company.
Policyholder deposits increased approximately $10.3 million from $47.2 million at December 31, 1998 to $57.5 million at December 31, 1999. The increase was due to the acquisition of the block of business from Funeral Security Life Insurance Company offset by cancellations of policies and the absence of the issuance of new annuity policies. Policyholder deposits are comprised primarily of annuities acquired with the block of business from Woodmen Accident and Life, World Insurance Company, and Funeral Security Life Insurance Company.
Deferred tax assets increased approximately $3.8 million from $3.4 million at December 31, 1998 to $7.2 million at December 31, 1999 due primarily to deferred taxes on unrealized losses on fixed maturity and equity securities.
The following factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to: (i) general economic conditions and other factors, including prevailing interest rate levels and stock market performance, which may affect our ability to sell our products, the market value of our investments and the lapse rate and profitability of our policies; (ii) our ability to achieve anticipated levels of operational efficiencies for recently acquired companies, blocks of policies or properties, as well as through other cost-saving initiatives; (iii) mortality, morbidity, and other factors which may affect the profitability of our insurance products; (iv) changes in the federal income tax laws and regulations which may affect the cost of or demand our products; (v) increasing competition in the sale of our products; (vi) regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products, regulation of the sale, underwriting and pricing of insurance products and regulation of the sale and pricing of funeral home operations and products; (vii) the availability and terms of future acquisitions; and (viii) the risk factors or uncertainties listed in our other filings with the Securities and Exchange Commission.
Additionally, we may not be successful in identifying, acquiring, and integrating other companies or their business, implementing improved management and accounting information systems and controls and may be dependent upon additional capital and equipment purchases for future growth. There may be other risks and uncertainties that management is not able to predict.
In December 1997, the American Institute of Certified Public Accountants issued Statement of Position 97-3 Accounting by Insurance and Other Enterprises for Insurance-related Assessments. Statement of Position 97-3 provides guidance for determining when an insurance company or other enterprise should recognize a liability for guaranty-fund assessments and guidance for measuring the liability. Statement of Position 97-3 is effective for financial statements of fiscal years beginning after December 15, 1998. Our adoption of Statement of Position 97-3 did not have a material effect on our financial position, results of operations or cash flows.
Reference is made to the financial statements listed under the heading "(a)1. Consolidated Financial Statements" of Item 14 hereof, which financial statements are incorporated herein by reference in response to this Item 8.