The Life Company presently leases space for 63 district and detached offices in Delaware, Maryland, the District of Columbia, West Virginia, Virginia, Tennessee and North Carolina. The termination dates on these leases range from 1997 to 2005; all of the longer term leases being for district office purposes. The maximum annual rent paid under any lease is $29,000. The annualized rent under all leases in effect on December 31, 1996 was approximately $770,000.
The Corporation is primarily engaged in the life insurance business which historically has provided a positive cash flow. By statute, the Life Company is required to invest in quality securities which provide ample protection for its policyholders. Policy liabilities of the Life Company are predominately long-term in nature and are supported primarily by long-term fixed maturity investments and mortgage loans on real estate.
Assets totaled $1.4 billion at December 31, 1996 with investment assets totaling $1.3 billion or 90% of total assets. Growth in investment assets for 1996 was affected by reduced market value adjustments to fixed maturities as a result of increasing interest rates during 1996 and the use of internal funds to repurchase $9.3 million of the Corporation's common stock. At December 31, 1996 there were no principal and interest payments past due on fixed maturities and over 99% of the mortgage loans on real estate were current for both principal and interest. The Corporation is not aware of any potential problem loans, and there are no mortgage loans whose terms were restructured during 1996.
As disclosed in the Notes to Consolidated Financial Statements at December 31, 1996, $157 million of consolidated stockholders' equity represents net assets of the Life Company that cannot be transferred in the form of dividends, loans or advances to the Corporation. However, this poses no liquidity concerns to the Corporation as it has sufficient cash flow to meet its operational requirements.
In May 1993, the FASB issued SFAS No. 114, "Accounting for Creditors for Impairment of a Loan". SFAS No. 114 requires that impaired loans be valued at the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price, or the fair market value of the collateral if the loan is collateral dependent. The Corporation adopted the provisions of SFAS No. 114 as of January 1, 1995. Adoption of this Standard does not have any effect on the financial condition or results of operations of the Corporation.
matching, and other business factors. The RBC formula will be used by states as an early warning tool to identify companies that potentially are inadequately capitalized for the purpose of initiating regulatory action. The Life Company's statutory adjusted capital exceeds the authorized control level of the RBC requirement.
On December 22, 1996 the Corporation's Board of Directors approved the merger of the Corporation with and into a wholly owned subsidiary of American General Corporation. Subject to shareholder approval and regulatory consents, the transaction is expected to close during the first quarter of 1997.
Individual life insurance sales for 1996 increased 6% over 1995 results, which were up 18%. Premiums increased 3% compared to decreases of approximately 2% and 1% for 1995 and 1994, respectively. The growth in premiums for 1996 resulted principally from increased individual premiums. Premium growth for 1995 was affected by a decline in premiums recognized from participation in a large group reinsurance contract. Premium growth for 1994 was affected by reduced individual life insurance sales. Net investment income, excluding realized investment gains and losses, increased 1.5% compared to an increase of 3.6% for 1995 and a decrease of 1.4% for 1994. The improvement for both 1996 and 1995 resulted from growth in invested assets. Net investment income for 1994 was affected by the downward trend experienced in portfolio interest rates during 1993. In addition, the Corporation used $34 million of internally generated funds between April 1991 and July 1994 to repurchase 1.5 million shares of its common stock. During 1996 the Corporation used $9.3 million of internally generated funds to repurchase 0.4 million shares of its common stock. Realized investment gains and losses for 1995 and 1994 were insignificant. Realized investment gains amounted to $6.9 million for 1996. Benefits and claims increased 2% for both 1996 and 1995 compared to a decrease of 4% for 1994. Mortality costs contributed to the changes in each of the years. Amortization of deferred policy acquisition costs for 1996 increased as a result of increased individual policy terminations. General expenses increased 9% for 1996 compared to a 9% decrease for 1995. The decline for 1995 was attributable to increased policy acquisition cost deferral related to increased individual sales and an improvement in employee health plan cost provisions. The increase for 1996 resulted primarily from increases in employee health plan cost provisions.