In February 2014, TLIC purchased one acre of land in Houston, Texas that included a 9,195 square foot building constructed on approximately 25% of this land at a cost of $977,013 (including closing costs of $31,063). The building is leased through December 31, 2023 plus four future five year extensions effective on January 1, 2024, January 1, 2029, January 1, 2034 and January 1, 2039. The terms of the lease have the lessee responsible for paying real estate taxes and building insurance. TLIC is responsible for paying building and ground maintenance. The monthly lease payments are $5,833 through December 31, 2019.
In February 2014, TLIC purchased three-fourths of an acre of land in Harrisonville, Missouri that included a 6,895 square foot building constructed on approximately 20% of this land at a cost of $1,752,397 (including closing costs of $44,864). The building is leased through October 31, 2028 plus three future five year extensions on November 1, 2028, November 1, 2033 and November 1, 2038. The terms of the lease have the lessee responsible for paying real estate taxes, building insurance and building and ground maintenance. The monthly lease payments are $9,463 through October 31, 2028.
On March 11, 2015, the Company closed on the sale of its investment real estate in buildings and land held for sale in Greensburg, Indiana; Norman, Oklahoma; Houston, Texas and Harrisonville, Missouri with an aggregate carrying value of $6,828,936 as of both December 31, 2014 and March 11, 2015. The Company expects to record a gross profit on these sales of approximately $254,310 based on an aggregate sales price of $7,083,246 less closing costs and expenses of $20,067.
In addition, simultaneously with these sales, the Company will settle its two notes payable, collateralized by the held for sale buildings and land (including assignment of the tenant leases), with an aggregate payment to Grand Bank (the creditor) of $4,076, 473. In connection with the repayments of the two notes payable, the Company will expense the loan origination fees remaining as of March 11, 2015 of $72,744. During the period from January 1, 2015 to March 11, 2015, the Company will also incur interest expense of $38,217 on the two notes payable and amortize $7,423 of loan origination fees.
We have established a valuation allowance for mortgage loans on real estate that are not supported by funds held in escrow. This allowance for possible loan losses from investments in mortgage loans on real estate is a reserve established through a provision for possible loan losses charged to expense which represents, in our judgment, the known and inherent credit losses existing in the residential and commercial mortgage loan portfolio. This allowance, in our judgment, is necessary to reserve for estimated loan losses inherent in the residential and commercial mortgage loan portfolio and reduces the carrying value of investments in mortgage loans on real estate to the estimated net realizable value on the consolidated statement of financial position.
We determine the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the mortgage loan on real estate and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis.
In April 2014, the FASB issued revised guidance to reduce diversity in practice for reporting discontinued operations. Under the previous guidance, any component of an entity that was a reportable segment, an operating segment, a reporting unit, a subsidiary or an asset group was eligible for discontinued operations presentation. The revised guidance only allows disposals of components of an entity that represent a strategic shift (e.g., disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of an entity) and that have a major effect on a reporting entity's operations and financial results to be reported as discontinued operations. The revised guidance also requires expanded disclosure in the financial statements for discontinued operations as well as for disposals of significant components of an entity that do not qualify for discontinued operations presentation.
In January 2014, the FASB issued updated guidance for troubled debt restructurings clarifying when an in substance repossession or foreclosure occurs, and when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. The new guidance is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2015. This guidance can be elected for prospective adoption or by using a retrospective transition method. The adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
Our revenues for the years ended December 31, 2014 and 2013 are summarized as follows:
Our premiums for the years ended December 31, 2014 and 2013 are summarized as follows:
The major components of our net investment income for the years ended December 31, 2014 and 2013 are summarized as follows:
The $1,950,261 increase in gross investment income for the year ended December 31, 2014 is due to the 2014 investment primarily in mortgage loans, real estate and fixed maturity securities. During 2014, our investments in mortgage loans have increased approximately $19.5 million. In addition, since December 31, 2013, we have purchased two retail business buildings and land located in Missouri and Texas for approximately $2.7 million and capitalized $88,447 additional closing costs related to the 2013 purchase of two retail business buildings and land located in Indiana and Oklahoma. Investments in fixed maturity securities have also increased $10.2 million since December 31, 2013. The interest and rental income on these investments in mortgage loans, real estate and fixed maturity securities accounted for $1,901,163 of the $1,950,261 increase in gross investment income.
The net realized investment gains from the sales and maturities of fixed maturity securities available-for-sale of $796,141 for the year ended December 31, 2014 resulted from proceeds of $14,462,534 for these securities that had carrying values of $13,666,393 at the 2014 disposal dates.
The net realized investment gains from mortgage loans on real estate of $218,504 for the year ended December 31, 2014 resulted from the early payoff of mortgage loans that the Company had acquired at a discounted price.
The net realized investment gains from mortgage loans on real estate of $264,396 for the year ended December 31, 2013 resulted from the early payoff of mortgage loans that the Company had acquired at a discounted price.
We recorded no other-than-temporary impairments in 2014 or 2013 other than the $42,500 realized loss recorded on the equity security that was deemed to be fully impaired in fourth quarter 2013.
The $1,164,362 increase in benefits and claims for the year ended December 31, 2014 is primarily due to the following:
Certain costs related to the successful acquisition of traditional life insurance policies are capitalized and amortized over the premium-paying period of the policies. Certain costs related to the successful acquisition of insurance and annuity policies that subject us to mortality or morbidity risk over a period that extends beyond the period or periods in which premiums are collected and that have terms that are fixed and guaranteed (i.e., limited-payment long-duration annuity contracts) are capitalized and amortized in relation to the present value of actual and expected gross profits on the policies. These acquisition costs, which are referred to as deferred policy acquisition costs, include commissions and other successful costs of acquiring policies and contracts, which vary with, and are primarily related to, the successful production of new and renewal life insurance policies and annuity contracts.
For the years ended December 31, 2014 and 2013, capitalized costs were $2,351,163 and $1,950,072, respectively. Amortization of deferred policy acquisition costs for the years ended December 31, 2014 and 2013 were $1,212,426 and $831,637, respectively.
FTFC files a consolidated federal income tax return with FTCC but does not file a consolidated tax return with TLIC or FBLIC. TLIC and FBLIC are taxed as life insurance companies under the provisions of the Internal Revenue Code. Life insurance companies must file separate tax returns until they have been a member of the consolidated filing group for five years. However, we filed consolidated life insurance company federal tax returns for TLIC and FBLIC for 2012 and 2013 and intend to also file a consolidated life insurance company federal tax return for TLIC and FBLIC in 2014.
The Company has a life insurance segment, consisting of the life insurance operations of TLIC and FBLIC, an annuity segment, consisting of the annuity operations of TLIC and FBLIC, and a corporate segment. Results for the parent company and the operations of FTCC and SIS, after elimination of intercompany amounts, are allocated to the corporate segment. Prior to January 1, 2014, the Company’s segment data was reported based upon a life insurance segment, consisting of the operations of TLIC and FBLIC, a premium financing segment, consisting of the operations of FTCC and SIS, and a corporate segment. Prior to January 1, 2014, the results for the parent company, after elimination of intercompany amounts, were allocated to the corporate segment.
The segment data as of December 31, 2013 has been restated from what was previously reported and now follows the new segmentation methodology established on January 1, 2014.
The $270,685 increase in revenues from Life Insurance Operations for the year ended December 31, 2014 is primarily due to the following:
The $466,406 decreased profitability from Life Insurance Operations for the year ended December 31, 2014 is primarily due to the following:
The $300,637 decreased profitability from Annuity Operations for the year ended December 31, 2014 is due to the following:
The $1,002,041 increased Corporate Operations profitability for the year ended December 31, 2014 is primarily due to $110,376 of increased net investment income, $42,500 of decreased realized losses, $8,626 of increased other income and $840,539 of decreased operating expenses. The decreased Corporate segment operating expenses relate to decreased expenses incurred by that segment since we are focused on expanding the life insurance and annuity operations of TLIC and FBLIC. The focus of our marketing and executive team is on expanding FBLIC into additional states utilizing final expense and annuity products. There is also significant marketing and executive focus on increasing TLIC production of life insurance and annuity products in TLIC’s current eight licensed states.
The $10,221,718 increase in available for sale fixed maturity securities for the year ended December 31, 2014 is primarily due to purchases of $23,740,124 in excess of sales and maturities of $14,462,534, net realized investment gains of $796,141, increase in unrealized appreciation of $1,028,219 and premium amortization of $880,232. This portfolio is reported at fair value with unrealized gains and losses, net of applicable income taxes, reflected as a separate component in shareholders' equity within “Accumulated Other Comprehensive Income.” The available-for-sale fixed maturity securities portfolio is invested primarily in a variety of companies and U. S. government and foreign securities.
As of December 31, 2014, we held one available-for-sale equity security with an unrealized loss of $1,700, fair value of $48,300 and cost of $50,000. The ratio of fair value to cost of this security is 97%.
The $2,633,119 increase in investment real estate is due to the purchase of held for sale buildings and land in Harrisonville, Missouri and Houston, Texas for $2,729,410 and the capitalization of $88,447 additional closing costs related to the 2013 purchase of held for sale buildings and land in Greensburg, Indiana and Norman, Oklahoma less depreciation of the building held for the production of income for $148,738 and the sale of a small, undeveloped land parcel in Mississippi with a carrying value of $36,000.
The $18,277 increase in other long-term investments (comprised of lottery receivables) for the year ended December 31, 2014 is primarily due to the purchases of $2,221,728 and $1,622,893 of accretion of discount less principal payments of $3,826,344.
Other assets consist primarily of recoverable federal and state income taxes, receivables from mortgage loans and other long-term assets (lottery receivables), guaranty funds, notes receivable, customer account balances receivable, prepaid expenses, other receivables, loans from premium financing and receivables for securities purchased with trade dates and settlement dates in different years. The $1,673,120 increase in other assets is primarily due to $1,429,243 increase in receivables from mortgage loans and other long-term assets (lottery receivables), $168,254 of increased recoverable federal and state income taxes and a $54,702 increase in guaranty funds.
The $277,113 increase in agents’ balances and due premiums is primarily due to a $259,912 increase in agents’ balances. This increase is due to increased production of annuity contracts and final expense policies.
In February 2014, TLIC purchased one acre of land in Houston, Texas that included a 9,195 square foot building constructed on approximately 25% of this land at a cost of $977,013 (including closing costs of $31,063). The building is leased through December 31, 2023 plus four future five year extensions effective on January 1, 2024, January 1, 2029, January 1, 2034 and January 1, 2039. The terms of the lease have the lessee responsible for paying real estate taxes and building insurance. TLIC is responsible for building and ground maintenance. The monthly lease payments are $5,833 through December 31, 2019.
When the two promissory notes were originated on March 26, 2014, $106,889 of loan origination fees were capitalized with amortization of the capitalized loan origination fees during the 36 month term of the loan. For the year ended December 31, 2014, $26,722 of the loan origination fees has been amortized and the unamortized loan origination fees as of December 31, 2014 are $80,167. We incurred $137,581 of interest expense during 2014 on these two notes payable.
The $345,072 decrease in deferred federal income taxes during the year ended December 31, 2014 was due to $546,421 of operating deferred tax benefits and $201,346 of increased deferred federal income taxes on the unrealized appreciation of available-for-sale fixed maturity and equity securities. The $546,421 deferred tax benefit is primarily due to a reduction in the valuation allowances on deferred tax assets as it is probable that a portion of the net operating loss carryforwards on the consolidated federal income tax returns of FTFC and FTCC will be utilized due to projected taxable income in future years demonstrated by the taxable income generated in 2014.
The historic impact of these two stock dividend charges of $5,270,288 decreased during 2011 and 2012 the balance of accumulated earnings and resulted in a reported balance as of December 31, 2014 of $2,616,849, as shown in the accumulated earnings caption in the December 31, 2014 consolidated statement of financial position.
As of December 31, 2014, we had cash and cash equivalents totaling $10,158,386. As of December 31, 2014, cash and cash equivalents of $6,351,976 and $2,628,578, respectively, of the total $10,158,386 were held by TLIC and FBLIC and may not be available for use by FTFC due to the required pre-approval by the OID and MDOI of any dividend or intercompany transaction to transfer funds to FTFC. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year.
The $11,608,267 increase in cash used for investing activities during the year ended December 31, 2014 was primarily related to increased purchases of mortgage loans, fixed maturity securities and investment real estate that exceeded increased sales and maturities of fixed maturity securities, increased payments of mortgage loans and decreased purchases of other long-term investments (i.e., lottery receivables).
The $11,392,019 increase in cash provided by financing activities for the year ended December 31, 2014 primarily resulted from $7,409,211 of increased policyholder account deposits in excess of withdrawals and $4,076,473 in proceeds from the issuance of two promissory notes payable in excess of $116,437 of increased purchases of treasury shares.
Our shareholders’ equity as of December 31, 2014 and 2013 is summarized as follows:
We are subject to various market risks. The quality of our investment portfolio and the current level of shareholders’ equity continue to provide a sound financial base as we strive to expand our marketing to offer competitive products. Our investment portfolio had unrealized appreciation on available-for-sale securities of $3,390,869 and $2,360,624 as of December 31, 2014 and 2013, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. An increase of $1,829,286 in unrealized gains arising for the year ended December 31, 2014 has been offset by the 2014 net realized investment gains of $799,041 originating from the sale and call activity for fixed maturity and equity securities resulting in net unrealized gains on investment of $1,030,245.
In addition to the measures described above, TLIC and FBLIC must comply with the NAIC promulgated Standard Valuation Law ("SVL") which specifies minimum reserve levels and prescribes methods for determining them, with the intent of enhancing solvency. Upon meeting certain tests, which TLIC and FBLIC met during 2014, the SVL also requires the Company to perform annual cash flow testing for TLIC and FBLIC. This testing is designed to ensure that statutory reserve levels will maintain adequate protection in a variety of potential interest rate scenarios. The Actuarial Standards Board of the American Academy of Actuaries also requires cash flow testing as a basis for the actuarial opinion on the adequacy of the reserves which is a required part of the annual statutory reporting process.
the ability and willingness of counterparties to our reinsurance arrangements and derivative instruments to pay balances due to us;
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
In 2013, the Company foreclosed on a delinquent note receivable and recovered the former home office building of Southern Insurance Services, LLC that was subsequently sold during the third quarter of 2013. In conjunction with this 2013 transaction, the non-cash impact on investing and finance activities is summarized as follows:
The Company has also purchased 238,155 shares of treasury stock at a cost of $855,304 from former members of the Board of Directors including the former Chairman of the Board of Directors, a former agent, the former spouse of the Company’s Chairman, Chief Executive Officer and President and a charitable organization where a former member of the Board of Directors had donated shares of the Company’s common stock.
Investment real estate in buildings held for the production of income is carried at cost less accumulated depreciation. Depreciation on investment real estate in buildings held for the production of income is calculated over an estimated useful life of 19 years. Investment real estate in buildings held for sale is carried at cost with no provision for depreciation. Investment real estate in land is carried at cost.
Policy loans are carried at unpaid principal balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned.
As of December 31, 2014 and 2013, there was $2,065,464 and $1,653,088, respectively, of accumulated amortization of the value of insurance business acquired due to the purchases of FLAC and FBLIC. The Company expects to amortize the value of insurance business acquired by the following amounts over the next five years: $363,920 in 2015, $356,090 in 2016, $331,336 in 2017, $306,915 in 2018 and $273,658 in 2019.
On March 3, 2015, the Company repurchased 9,425 shares of its common stock at a cost of $38,642 from the Company’s former Chairman.
Investments in fixed maturity and equity securities available-for-sale as of December 31, 2014 and 2013 are summarized as follows:
As of December 31, 2014, the Company held 81 available-for-sale fixed maturity securities with an unrealized loss of $1,149,612, fair value of $19,933,429 and amortized cost of $21,083,041. These unrealized losses were primarily due to market interest rate movements in the bond market as of December 31, 2014. The ratio of the fair value to the amortized cost of these 81 securities is 95%.
Fixed maturity securities were 95% and 96% investment grade as rated by Standard & Poor’s as of December 31, 2014 and 2013, respectively.
Based on management’s review, an equity security with a carrying value of $42,500 was deemed to be fully impaired in fourth quarter 2013 with the decrease in value reported as a realized loss. The Company experienced no other-than-temporary impairments during the year ended December 31, 2014. Management believes that the Company will fully recover its cost basis in the securities held as of December 31, 2014, and management does not have the intent to sell nor is it more likely than not that the Company will be required to sell such securities until they recover or mature. The remaining temporary impairments shown herein are primarily the result of the current interest rate environment rather than credit factors that would imply other-than-temporary impairment.
The amortized cost and fair value of fixed maturity available-for-sale securities as of December 31, 2014, by contractual maturity, are summarized as follows:
Proceeds and gross realized gains (losses) from the sales, calls and maturities of fixed maturity and equity securities available-for-sale, mortgage loans on real estate and investment real estate for the years ended December 31, 2014 and 2013 are summarized as follows:
The Company’s mortgage loans by property type as of December 31, 2014 and 2013 are summarized as follows:
There were six loans more than 90 days past due as of December 31, 2014 with a remaining principal balance of $431,072. There were two loans more than 90 days past due as of December 31, 2013 with a remaining principal balance of $86,861. There were no mortgage loans in default as of December 31, 2014 and 2013. These loans are all serviced by external providers and have a maximum loan to fair value of 80.00% or less at the time of purchase.
There are allowances for losses on mortgage loans of $126,466 and $58,195 as of December 31, 2014 and 2013, respectively. As of December 31, 2014, $540,049 of independent mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in mortgage loans on real estate with one loan originator. As of December 31, 2013, $201,936 of cash and $203,841 of independent mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in mortgage loans on real estate with one loan originator.
In December 2013, TLIC purchased one acre of land in Greensburg, Indiana that included a 3,975 square foot retail building on approximately 8% of this land. Also in December 2013, TLIC purchased another acre of land in Norman, Oklahoma that included a 9,100 square foot retail building on approximately 18% of this land. These buildings and land are held for sale.
In February 2014, TLIC purchased one acre of land in Houston, Texas that included a 9,195 square foot building constructed on approximately 25% of this land. Also in February 2014, TLIC purchased three-fourths of an acre of land in Harrisonville, Missouri that included a 6,895 square foot building constructed on approximately 20% of this land. These buildings and land are held for sale.
The outstanding balance of lottery prize cash flows, by state lottery, as of December 31, 2014 and 2013 are summarized as follows:
The Company’s equity securities are included in Level 1 and Level 2 and the private placement common stocks are included in Level 3. Level 1 for those equity securities classified as such is appropriate since they trade on a daily basis, are based on quoted market prices in active markets and are based upon unadjusted prices. Level 2 for those equity securities classified as such is appropriate since they are not actively traded as of December 31, 2014.
The change in the fair value of the Company’s Level 3 equity securities available-for-sale for the years ended December 31, 2014 and 2013 is summarized as follows:
Cash and Cash Equivalents, Short-Term Investments, Accrued Investment Income, Policy Loans and Loans from Premium Financing
The $3,009,265 promissory note is collateralized (including assignment of the tenant leases) by three properties, located in Indiana, Oklahoma and Texas, purchased for $4,940,647 in December 2013 and February 2014.
In December 2013, TLIC purchased one acre of land in Greensburg, Indiana that included a 3,975 square foot building constructed on approximately 8% of this land at a cost of $2,444,203 (including closing costs of $50,516). The building is leased through October 31, 2027 plus four future five year extensions effective on November 1, 2027, November 1, 2032, November 1, 2037 and November 1, 2042. The terms of the lease have the lessee responsible for paying real estate taxes, building insurance and building and ground maintenance. The monthly lease payments are as follows: $14,661 in 2014; $14,881 in 2015; $15,104 in 2016; $15,331 in 2017; $15,561 in 2018 and $15,794 in 2019.
When the two promissory notes were originated on March 26, 2014, $106,889 of loan origination fees were capitalized with amortization of the capitalized loan origination fees during the 36 month term of the loan. For the year ended December 31, 2014, $26,722 of the loan origination fees has been amortized and the unamortized loan origination fees as of December 31, 2014 are $80,167. The Company incurred $137,581 of interest expense during 2014 on these two notes payable.
As of December 31, 2014, $540,049 of independent mortgage loan balances are held in escrow by a third party for the benefit of the Company related to its investment in $12,892,150 of mortgage loans on real estate with one loan originator. In addition, the Company has an additional $126,466 allowance for possible loan losses in the remaining $25,757,583 of investments in mortgage loans on real estate as of December 31, 2014. As of December 31, 2013, $201,936 of cash and $203,841 of independent mortgage loan balances totaling $405,777 are held in escrow by a third party for the benefit of the Company related to its investment in $6,084,840 of mortgage loans on real estate with one loan originator. In addition, the Company has an additional $58,195 allowance for possible loan losses in the remaining $13,040,029 of investments on real estate as of December 31, 2013.
The balances of and changes in deferred acquisition costs as of and for the years ended December 31, 2014 and 2013 are summarized as follows:
FTFC files a consolidated federal income tax return with FTCC but does not file a consolidated tax return with TLIC or FBLIC. TLIC and FBLIC are taxed as life insurance companies under the provisions of the Internal Revenue Code. Life insurance companies must file separate tax returns until they have been a member of the consolidated filing group for five years. However, in 2014 and 2013, TLIC and FBLIC filed combined life insurance company 2013 and 2012 federal tax returns and intend to also file a combined life insurance company 2014 federal tax return for TLIC and FBLIC in 2015.
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2014 and 2013 are summarized as follows:
FTFC has net operating loss carryforwards of approximately $5,690,981 expiring in 2019 through 2028. FTFC has capital loss carryforwards of approximately $42,500 expiring in 2018. During 2014, FTFC utilized $304,004 of the net operating loss carryforward existing as of January 1, 2014 to offset 2014 federal taxable income.
Due to FTFC’s taxable income generated in 2014 and FTFC’s projected taxable income in future years, the valuation allowance on FTFC’s net operating loss carryforward was reduced by $1,695,996 during 2014 since it is probable that a portion of the net operating loss carryforwards will be utilized. In addition, FTFC utilized $304,004 of net operating losses in 2014 to offset its 2014 taxable income.
TLIC participates in reinsurance in order to provide risk diversification, additional capacity for future growth and limit the maximum net loss potential arising from large risk. TLIC reinsures all amounts of risk on any one life in excess of $75,000 for individual life insurance with Investors Heritage Life Insurance Company, Optimum Re Insurance Company and Wilton Reassurance Company.
Reinsurance assumed and ceded amounts for TLIC and FBLIC for 2014 and 2013 are summarized as follows:
In December 2013, TLIC purchased one acre of land in Greensburg, Indiana that included a 3,975 square foot building constructed on approximately 8% of this land at a cost of $2,444,203 (including closing costs of $50,516). The building is leased through October 31, 2027 plus four future five year extensions effective on November 1, 2027, November 1, 2032, November 1, 2037 and November 1, 2042. The terms of the lease have the lessee responsible for paying real estate taxes, building insurance and building and ground maintenance. The monthly lease payments are as follows: $14,661 in 2014; $14,881 in 2015; $15,104 in 2016; $15,531 in 2017; $15,561 in 2018 and $15,794 in 2019.
TLIC is domiciled in Oklahoma and prepares its statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Oklahoma Insurance Department. FBLIC is domiciled in Missouri and prepares its statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Missouri Department of Insurance. Prescribed statutory accounting practices include publications of the NAIC, state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. Statutory accounting practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing investments, deferred taxes, and certain assets on a different basis.
The statutory net income for TLIC amounted to $2,250,901 and $1,319,748 for the years ended December 31, 2014 and 2013, respectively. The statutory capital and surplus of TLIC was $8,894,804 and $7,484,026 as of December 31, 2014 and 2013, respectively. The statutory net income for FBLIC amounted to $980,060 and $1,109,125 for the years ended December 31, 2014 and 2013, respectively. The statutory capital and surplus of FBLIC was $10,966,560 and $11,473,143 as of December 31, 2014 and 2013, respectively.
The Company has a life insurance segment, consisting of the life insurance operations of TLIC and FBLIC, an annuity segment, consisting of the annuity operations of TLIC and FBLIC, and a corporate segment. Results for the parent company and the operations of FTCC and SIS, after elimination of intercompany amounts, are allocated to the corporate segment. Prior to January 1, 2014, the Company’s quarterly and annual segment data was reported based upon a life insurance segment, consisting of the operations of TLIC and FBLIC, a premium financing segment, consisting of the operations of FTCC and SIS, and a corporate segment. Prior to January 1, 2014, the results for the parent company, after elimination of intercompany amounts, were included in the corporate segment.
The segment data as of December 31, 2013 and for the year ended December 31, 2013 have been restated from what was previously reported and now follows the new segmentation methodology established on January 1, 2014.
These segments as of and for the years ended December 31, 2014 and 2013 are summarized as follows:
Guaranty fund assessments may be taken as a credit against premium taxes over a five-year period. These assessments, brought about by the insolvency of life and health insurers, are levied at the discretion of the various state guaranty fund associations to cover association obligations.