On January 1, 2011, the Company received a $120,000 leasehold improvement allowance from the lessor related to the original lease that was fully amortized by September 30, 2015. In accordance with the amended lease on October 1, 2015, the Company was provided an allowance of $54,152 for leasehold improvements. The leasehold improvement allowance is amortized over the remaining amended non-cancellable lease term and reduced rent expense by $10,830 for both the years ended December 31, 2019 and 2018. The future minimum lease payments to be paid under the amended non-cancellable lease agreement is $82,446 for the year 2020.
This 10,000 square feet lease was renewed for five years to be effective from June 1, 2016 through May 31, 2021, with an option for an additional five years from June 1, 2021 through May 31, 2026. Beginning June 1, 2021, the lessee can terminate the lease with a 120 day written notice. The terms of the lease leave TLIC responsible for paying real estate taxes, building insurance and building and ground maintenance with partial reimbursement from the lessee. The lease agreement calls for a monthly lease payment of $16,598 from June 1, 2016 through June 30, 2016. Starting July 1, 2016, the lease agreement includes an $88,833 tenant improvement allowance that is amortized over 59 months with interest at 5.00%. The monthly lease payments were $18,299 from July 1, 2016 through May 31, 2017, $18,376 from June 1, 2017 through May 31, 2018, $18,508 from June 1, 2018 through May 31, 2019 and $18,584 from June 1, 2019 through May 31, 2021.
A five year lease agreement effective September 1, 2010 automatically renewed on 2,500 square feet of the Topeka, Kansas office building with a 90 day notice by the lessee to terminate the lease. This lease was renewed on September 1, 2015 to run through August 31, 2017 with an option for an additional three years through August 31, 2020. Beginning September 1, 2017, the lessee can terminate the lease with a 120 day written notice. The terms of the lease leave TLIC responsible for paying real estate taxes, building insurance and building and ground maintenance with partial reimbursement from the lessee. The lease payments are $4,236 per month from September 1, 2015 through August 31, 2016, $4,242 from September 1, 2016 through August 31, 2017, $4,263 from September 1, 2017 through August 31, 2018, $4,293 from September 1, 2018 through August 31, 2019 and $4,310 from September 1, 2019 through December 31, 2019.
FBLIC owns approximately one-half acre of undeveloped land located in Jefferson City, Missouri with a carrying value of $131,000.
With the acquisition of FBLIC in late 2011, we expanded into Arizona, Colorado, Missouri and New Mexico. FBLIC also had initial licenses in Kansas, Nebraska and Oklahoma where TLIC was also licensed. In late 2012, FBLIC was licensed in Arkansas, Indiana, Kentucky, North Dakota, South Dakota, Texas and West Virginia. In 2013, FBLIC was licensed in Illinois and Pennsylvania. In 2014, FBLIC was licensed in Georgia, Louisiana, Michigan, Mississippi, North Carolina, Ohio, and Virginia. In 2015, FBLIC was licensed in Alabama and Utah. In 2018, FBLIC was licensed in Montana. In 2019, FBLIC was licensed in Tennessee.
In late April 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement. The Company acquired assets of $3,644,839, assumed liabilities of $3,055,916 and recorded a gain on reinsurance assumption of $588,923.
As a result of our purchases of FLAC and FBLIC, an asset was recorded in the application of purchase accounting to recognize the value of acquired insurance in force. The Company’s value of acquired insurance in force is an intangible asset with a definite life and is amortized under FASB guidance. The value of acquired insurance in force is amortized primarily over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits. The recovery of the value of insurance business acquired is dependent on the future profitability of the underlying business that was initially recorded in the purchases of FLAC and FBLIC. Each reporting period, we evaluate the recoverability of the unamortized balance of the value of insurance business acquired.
Since many of these factors are interdependent and subject to short-term volatility during the long-duration contract period, substantial judgment is required. Actual experience may emerge differently from that originally estimated. Any such difference would be recognized in the current year’s consolidated statement of operations.
In July 2018, the FASB amended the updated guidance on leases that was issued in February 2016 (Accounting Standards Update 2018-11) and provided an additional transition method with which to adopt the updated guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. Consequently, if this transition method is elected, an entity’s reporting for the comparative periods prior to adoption presented in the financial statements would continue to be in accordance with current lease guidance. The amendments also provide lessors with a practical expedient to combine non-lease components (e.g., a fee for common area maintenance when leasing office space) with the associated lease component rather than accounting for those components separately if certain criteria are met. The updated guidance requires entities to recognize a right-of-use asset and lease liability equal to the present value of lease payments for all leases other than those that are less than one year. The updated guidance, as amended, is effective for reporting periods beginning after December 15, 2018.
The updated guidance was effective for reporting periods beginning after December 15, 2020. As a Smaller Reporting Company, the effective date was recently changed and the delayed effective date is now for reporting periods beginning after December 15, 2023. Early adoption is permitted. With respect to the liability for future policyholder benefits for traditional and limited-payment contracts and deferred acquisition costs, an insurance entity may elect to apply the amendments retrospectively as of the beginning of the earliest period presented. With respect to the market risk benefits, an insurance entity should apply the amendments retrospectively as of the beginning of the earliest period presented. The Company expects that the impact on the Company’s results of operations, financial position and liquidity at the date of adoption of the updated guidance in 2024 will be determined by the long-duration contracts then held by the Company and the economic conditions at that time.
Consolidated Condensed Financial Position as of December 31, 2019 and 2018
Our revenues for the years ended December 31, 2019 and 2018 are summarized as follows:
The $10,535,600 increase in total revenues for the year ended December 31, 2019 is discussed below.
Our premiums for the years ended December 31, 2019 and 2018 are summarized as follows:
The increase in final expense renewal premiums reflects the persistency of prior years’ final expense production. Our marketing efforts are focused on final expense and annuity production. The increase in ordinary life first year premiums reflects ordinary life insurance sold in the international market that the Company started producing in fourth quarter 2018.
The $4,834,701 increase in gross investment income for the year ended December 31, 2019 is primarily due to increased investments in fixed maturity securities, mortgage loans and other long-term investments. In the year ended December 31, 2019, we have increased investments in fixed maturity securities by $47.8 million, mortgage loans on real estate by $32.4 million and other long-term investments by $12.6 million.
Our net realized investment gains for the years ended December 31, 2019 and 2018 are summarized as follows:
The $621,653 increase in service fees for the year ended December 31, 2019 is primarily due to ceding fees related to TLIC’s annuity coinsurance agreement with an offshore annuity and life insurance company.
The $8,920,251 increase in total benefits, claims and expenses for the year ended December 31, 2019 is discussed below.
$2,499,861 increase in interest credited to policyholders is primarily due to an increase of approximately $65.9 million in the amount of policyholders’ account balances in the consolidated statement of financial position (increased deposits and interest credited in excess of withdrawals) during the year ended December 31, 2019.
$1,209,294 increase in death benefits is primarily due to approximately $1.2 million of increased final expense settlements. The increase in final expense incurred claims is expected by the Company due to the continued growth in the number and amount of final expense policies in force.
For the years ended December 31, 2019 and 2018, capitalized costs were $12,369,350 and $8,527,380, respectively. During 2019, $11,521,406 of commissions (95.0% of total 2019 commissions of $12,125,929) and $847,944 of expenses (9.3% of total 2019 other underwriting, insurance and acquisition expenses of $9,095,141) were eligible for deferral and were capitalized. During 2018, $7,505,616 of commissions (91.2% of total 2018 commissions of $8,228,279) and $1,021,764 of expenses (15.4% of total 2018 other underwriting, insurance and acquisition expenses of $6,623,647) were eligible for deferral and were capitalized. The $3,841,970 increase in the 2019 acquisition costs deferred primarily relates to increased ordinary life, final expense and annuity production and deferral and capitalization of the increased eligible commissions and decreased eligible expenses.
Amortization of deferred policy acquisition costs for the years ended December 31, 2019 and 2018 were $4,015,480 and $3,515,624, respectively. The $499,856 increase in the 2019 amortization of deferred acquisition costs is primarily due to an increased number and amount of final expense policies and annuity contracts in force and lapsation of ordinary life policies reflected by increased death benefits, surrenders and annuity withdrawals.
The $2,471,494 increase in other underwriting, insurance and acquisition expenses for the year ended December 31, 2019 was primarily related to increases in bonuses, salaries, benefits, consulting fees, legal fees, third party administration fees and expenses associated with the increased production of ordinary life, final expense and annuity policies and contracts.
For the years ended December 31, 2019 and 2018, current income tax expense was $1,388,711 and $100,075, respectively. Deferred federal income tax expense was $731,185 and $1,362,046 for the years ended December 31, 2019 and 2018, respectively.
Net income was $6,099,720 ($0.78 per common share basic and diluted) and $5,142,146 ($0.66 per common share basic and diluted) for the years ended December 31, 2019 and 2018, respectively.
The $5,185,553 increase in revenues from Life Insurance Operations for the year ended December 31, 2019 is primarily due to the following:
The $5,191,975 increase in revenues from Annuity Operations for the year ended December 31, 2019 is due to the following:
The $158,072 increase in revenues from Corporate Operations for the year ended December 31, 2019 is primarily due to $101,653 of increased net investment income and $56,419 of increased other income.
The $47,799,125 increase and $18,530,940 decrease in fixed maturity available-for-sale securities for the years ended December 31, 2019 and 2018, respectively, are summarized as follows:
The $2,356 increase and $372,759 decrease in equity securities available-for-sale for the years ended December 31, 2019 and 2018, respectively, are summarized as follows:
The $440,272 decrease and $9,065 increase in investment real estate for the years ended December 31, 2019 and 2018, respectively, are summarized as follows:
The $12,569,003 and $3,440,894 increases in other long-term investments (comprised of lottery receivables) for the years ended December 31, 2019 and 2018, respectively, are summarized as follows:
The $6,453,435 decrease in cash and cash equivalents for the year ended December 31, 2019 and the corresponding decrease of $1,830,554 for the year ended December 31, 2018 are summarized in the Company’s consolidated statements of cash flows.
The $79,594,540 increase in assets held in trust under the coinsurance agreement is due to assets acquired under TLIC’s annuity coinsurance agreement with an offshore annuity and life insurance company that is administered on a funds withheld basis.
Our other assets as of December 31, 2019 and December 31, 2018 are summarized as follows:
The decrease in other receivables, prepaid assets and deposits of $95,905 was primarily due to a reclassification of a $125,000 deposit to record the acquisition of Trinity American, Inc., a Barbados, West Indies domiciled life insurance company, approved by local country regulators and the certifications were received in 2019.
Our liabilities as of December 31, 2019 and 2018 are summarized as follows:
The $65,915,427 and $4,258,649 increases in policyholders’ account balances for the years ended December 31, 2019 and 2018, respectively, are summarized as follows:
The $3,972,440 increase in deferred federal income taxes during the year ended December 31, 2019 was due to $3,241,255 of increased deferred federal income taxes on the unrealized appreciation of fixed maturity and preferred stock available-for-sale and $731,185 of operating deferred federal tax expense.
Our other liabilities as of December 31, 2019 and December 31, 2018 are summarized as follows:
As of December 31, 2019, the Company had $564 of security purchases where the trade date and settlement date were in different financial reporting periods compared to $393,762 of security purchases overlapping financial reporting periods as of December 31, 2018.
The $277,141 decrease in other payables, withholdings and escrows is primarily due to a $273,000 increase in escrow amounts on purchased mortgage loans due from previous servicers that has been traditionally recorded as a contra liability.
As of December 31, 2019, we had cash and cash equivalents totaling $23,212,170. As of December 31, 2019, cash and cash equivalents of $11,650,247 and $9,690,063, respectively, totaling $21,340,310 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.
Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is capacity for TLIC to pay a dividend up to $1,245,184 in 2020 without prior approval. In addition, based on those limitations, there is the capacity for FBLIC to pay a dividend up to $918,511 in 2020 without prior approval. FBLIC paid dividends of $760,347 to TLIC in 2018 but none in 2019. Dividends paid by FBLIC are eliminated in consolidation. TLIC has paid no dividends to FTFC.
Our cash flows for the years ended December 31, 2019 and 2018 are summarized as follows:
Please see the consolidated statements of cash flows for the years ended December 31, 2019 and 2018 for a summary of the components of net cash used in investing activities and net cash provided by financing activities.
Our shareholders’ equity as of December 31, 2019 and 2018 is summarized as follows:
The increase in shareholders’ equity of $18,293,011 for the year ended December 31, 2019 is due to $12,193,291 in accumulated other comprehensive income and $6,099,720 in net income.
Our investment portfolio had unrealized appreciation (depreciation) on available-for-sale securities of $12,192,831 and ($3,271,683) as of December 31, 2019 and 2018, respectively, prior to the impact of income taxes and deferred acquisition cost adjustments. An increase of $16,454,021 in unrealized gains arising for year ended December 31, 2019 and 2019 net realized investment gains of $989,507 originating from the sale and call activity for fixed maturity securities available-for-sale resulting in net unrealized gains on investments of $15,464,514.
the assimilation of life insurance businesses we acquire and the sound management of these businesses; and
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
During 2019 and 2018, the Company foreclosed on residential mortgage loans of real estate totaling $99,218 and $467,593, respectively, and transferred those properties to investment real estate that are now held for sale.
The Company owns 100% of TAI (formerly known as Citizens American Life, Inc.). TAI was incorporated in Barbados, West Indies on March 24, 2016 for the primary purpose of forming a life insurance company producing United States (U.S.) dollar denominated life insurance policies and annuity contracts outside of the United States and Barbados. TAI is licensed as an Exempt Insurance Company under the Exempt Insurance Act of Barbados. TAI was initially involved in developing life insurance and annuity contracts through an association with distribution channels but is now issuing life insurance policies and annuity contracts. The Company’s acquisition of TAI was formally approved by Barbados regulators and the certifications were received in 2019.
For fixed maturity securities available-for-sale, the amount of any other-than-temporary impairment related to a credit loss is recognized in earnings and reflected as a reduction in the cost basis of the security; and the amount of any other-than-temporary impairment related to other factors is recognized in other comprehensive income (loss) with no change to the cost basis of the security. For preferred stocks available-for-sale, the amount of any other-than-temporary impairment is recognized in earnings and reflected as a reduction in the cost basis of the security.
Other long term investments are comprised of lottery prize receivables and are carried at amortized cost. Interest income and the accretion of discount are included in net investment income.
Cash and cash equivalents include cash on hand, amounts due from banks and money market instruments.
The Company cedes reinsurance under various agreements allowing management to control exposure to potential losses arising from large risks and providing additional capacity for growth. Estimated reinsurance recoverable balances are reported as assets and are recognized in a manner consistent with the liabilities related to the underlying reinsured ceded contracts. The Company also assumes reinsurance under various agreements allowing management to increase growth in assets and profitability. Estimated reinsurance payable balances are reported as liabilities and are recognized in a manner consistent with the assets related to the underlying assumed reinsurance contracts.
FASB guidance requires the inclusion of unrealized gains or losses on available-for-sale securities, net of tax, as a component of other comprehensive income (loss). Unrealized gains and losses recognized in accumulated other comprehensive income (loss) that are later recognized in net income through a reclassification adjustment are identified on the specific identification method. In addition, deferred acquisition costs related to limited-payment long-duration insurance and annuity contracts are also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from available-for-sale securities had actually been realized. This adjustment is included in the change in net unrealized appreciation (depreciation) on available-for-sale securities, a component of “Accumulated Other Comprehensive Income (Loss)” in the shareholders’ equity section of the statement of financial position.
Effective January 1, 2020, the Company acquired 100% of the outstanding common stock of K-TENN Insurance Company (“K-TENN”) from its sole shareholder in exchange for 168,866 shares of FTFC’s common stock. The acquisition of K-TENN was accounted for as a purchase. The aggregate purchase price of K-TENN was $1,837,469. Immediately subsequent to this acquisition, the $1,837,469 of net assets and liabilities of K-TENN along with the related life insurance business operations was contributed to TLIC.
Since regulatory approval has recently been granted by the OID and Missouri Department of Insurance (“MDOI”) and approved at the Company’s October 2, 2019 Annual Shareholders’ Meeting (pending formal adoption by the Company’s Board of Directors in March 2020), the Company’s Certificate of Incorporation will be amended and restated to authorize a.) 50,000,000 shares of common stock to be divided into 40,000,000 shares of Class A common stock and 10,000,000 shares of Class B common stock and will establish the relative rights, preferences and privileges of, and the restrictions and limitations on, the Class A common stock and the Class B common stock and b.) there will be an automatic reclassification of each existing share of common stock into one (1) share of Class A common stock or, at the shareholder’s election, into one (1) share of Class B common stock.
Management has evaluated all other events subsequent to December 31, 2019 through the date that these financial statements have been issued.
In July 2018, the FASB amended the updated guidance on leases that was issued in February 2016 (Accounting Standards Update 2018-11) and provided an additional transition method with which to adopt the updated guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption
Consequently, if this transition method is elected, an entity’s reporting for the comparative periods prior to adoption presented in the financial statements would continue to be in accordance with current lease guidance. The amendments also provide lessors with a practical expedient to combine non-lease components (e.g., a fee for common area maintenance when leasing office space) with the associated lease component rather than accounting for those components separately if certain criteria are met. The updated guidance requires entities to recognize a right-of-use asset and lease liability equal to the present value of lease payments for all leases other than those that are less than one year. The updated guidance, as amended, is effective for reporting periods beginning after December 15, 2018.
The implied fair value of goodwill is currently determined in Step 2 by deducting the fair value of all assets and liabilities of the reporting unit (determined in the same manner as a business combination) from the reporting unit’s fair value as determined in Step 1 (including any corporate-level assets or liabilities that were included in the determination of the carrying amount and fair value of the reporting unit in Step 1). The updated guidance requires an entity to perform its annual, or interim, impairment test by either: (1) an initial qualitative assessment of factors (such as changes in management, key personnel, strategy, key technology or customers) that may impact a reporting unit’s fair value and lead to the determination that it is more likely than not that the reporting unit’s fair value is less than its carrying value, including goodwill (consistent with current guidance), or (2) applying Step 1.
In August 2018, the FASB issued amendments (Accounting Standards Update 2018-13) to modify the disclosure requirements related to fair value measurements including the consideration of costs and benefits of producing the modified disclosures. The updated guidance is effective for reporting periods beginning after December 15, 2019. Early adoption is permitted and an entity is permitted to early adopt any removed or modified disclosures upon issuance and delay adoption of the additional disclosures until their effective date. The adoption of this guidance in 2020 is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
Fixed maturity securities were 97% and 96% investment grade as rated by Standard & Poor’s as of December 31, 2019 and December 31, 2018, respectively.
Management believes that the Company will fully recover its cost basis in the securities held as of December 31, 2019, 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.
Net unrealized gains (losses) included in other comprehensive income (loss) for investments classified as available-for-sale, net of the effect of deferred income taxes and deferred acquisition costs assuming that the appreciation (depreciation) had been realized as of December 31, 2019 and 2018 are summarized as follows:
The amortized cost and fair value of fixed maturity available-for-sale securities as of December 31, 2019, by contractual maturity, are summarized as follows:
Proceeds and gross realized gains (losses) from the sales, calls and maturities of fixed maturity securities available-for-sale, equity securities, investment real estate and preferred stock available-for-sale for the years ended December 31, 2019 and 2018 are summarized as follows:
The Company utilizes the ratio of the carrying value of individual mortgage loans compared to the individual appraisal value to evaluate the credit quality of its mortgage loans on real estate (commonly referred to as the loan-to-value ratio). The Company’s residential and commercial (includes apartment, industrial, lodging, office building and retail) mortgage loans on real estate by credit quality using this ratio as of December 31, 2019 and 2018 are summarized as follows:
During 2019 the Company foreclosed on residential mortgage loans of real estate totaling $99,218 and transferred those properties to investment real estate held for sale. During 2018 the Company foreclosed on residential mortgage loans of real estate totaling $467,593 and transferred those properties to investment real estate held for sale.
The principal balances of the 1,051 residential mortgage loans owned by the Company as of December 31, 2018 that aggregated to $120,108,297 ranged from a low of $796 to a high of $994,500 and the interest rates ranged from 3.43% to 58.04%. The principal balances of the 29 commercial (includes apartment, industrial, lodging, office building and retail) mortgage loans owned by the Company as of December 31, 2018 that aggregated to $9,941,313 ranged from a low of $113,059 to a high of $1,000,000 and the interest rates ranged from 5.75% to 12.90%.
In 2019 and 2018 the Company did not experience any impairment on mortgage loan investments.
During 2019 the Company foreclosed on residential mortgage loans of real estate totaling $99,218 and transferred those properties to investment real estate held for sale. During 2019, the Company sold investment real estate property with an aggregate carrying value of $394,002. The Company recorded a gross realized investment loss on sale of $43,185 based on an aggregate sales price of $350,817.
The Company’s investment real estate as of December 31, 2019 and 2018 is summarized as follows:
The Company’s investment in lottery prize cash flows was $71,824,480 and $59,255,477 as of December 31, 2019 and 2018, respectively. The lottery prize cash flows are assignments of the future rights from lottery winners purchased at a discounted price. Payments on these investments are made by state run lotteries.
The amortized cost and estimated fair value of lottery prize cash flows, by contractual maturity, as of December 31, 2019 are summarized as follows:
Fair values for Level 1 and Level 2 assets for the Company’s fixed maturity and preferred stock available-for-sale and equity securities are primarily based on prices supplied by a third party investment service. The third party investment service provides quoted prices in the market which use observable inputs in developing such rates.
The change in the fair value of the Company’s Level 3 equity securities available-for-sale for the years ended December 31, 2019 and 2018 is summarized as follows:
The carrying amount and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value as of December 31, 2019 and 2018, and the level within the fair value hierarchy at which such assets and liabilities are measured on a recurring basis are summarized as follows:
The fair values for mortgage loans are estimated using discounted cash flow analyses. For residential mortgage loans, the discount rate used was indexed to the LIBOR yield curve adjusted for an appropriate credit spread. For commercial (includes apartment, industrial, lodging, office building and retail) mortgage loans, the discount rate used was assumed to be the interest rate on the last commercial mortgage acquired by the Company.
The fair values for insurance contracts other than investment-type contracts are not required to be disclosed.
TLIC and FBLIC are required to hold assets on deposit for the benefit of policyholders and other special deposits in accordance with statutory rules and regulations. As of December 31, 2019 and 2018, these required deposits had amortized costs that totaled $4,434,662 and $4,376,463, respectively. As of December 31, 2019 and 2018, these required deposits had fair values that totaled $4,468,783 and $4,292,657, respectively.
The balances of and changes in deferred acquisition costs as of and for the years ended December 31, 2019 and 2018 are summarized as follows:
FTFC filed 2018 and 2017 consolidated federal income tax returns that included TLIC, FBLIC, FTFC and FTCC since all companies had been members of a consolidated group for five years.
A reconciliation of federal income tax expense computed by applying the federal income tax rate of 21% to income before federal income tax expense for the years ended December 31, 2019 and 2018, respectively, is summarized as follows:
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, 2019 and 2018 are summarized as follows:
FTFC has net operating loss carryforwards of $3,685,729 expiring in 2027 through 2033. During 2019, FTFC utilized $596,123 of the net operating loss carryforward existing as of January 1, 2019 to offset 2019 federal taxable income. During 2018, FTFC utilized $753,915 of the net operating loss carryforward existing as of January 1, 2018 to offset 2018 federal taxable income.
Effective September 29, 2005, FLAC and Wilton Re executed a binding letter of intent whereby both parties agreed that FLAC would cede the simplified issue version of its Golden Eagle Whole Life (Final Expense) product to Wilton Re on a 50/50 quota share original term coinsurance basis. The letter of intent was executed on a retroactive basis to cover all applicable business issued by FLAC subsequent to January 1, 2005. Wilton Re agreed to provide various commission and expense allowances to FLAC in exchange for FLAC ceding 50% of the applicable premiums to Wilton Re as they were collected. As of June 24, 2006, Wilton Re terminated the reinsurance agreement for new business issued after the termination date.
Statutory reinsurance assumed and ceded amounts for TLIC and FBLIC for 2019 and 2018 are summarized as follows:
The future minimum lease payments to be received under the non-cancellable lease agreements are $223,008 and $92,920 for the years 2020 and 2021, respectively.
The statutory net income for TLIC amounted to $652,807 and $2,098,488 for the years ended December 31, 2019 and 2018, respectively. The statutory capital and surplus of TLIC was $12,451,837 and $12,686,538 as of December 31, 2019 and 2018, respectively. The statutory net income (loss) for FBLIC amounted to ($2,150,286) and $1,001,594 for the years ended December 31, 2019 and 2018, respectively. The statutory capital and surplus of FBLIC was $9,185,113 and $7,400,476 as of December 31, 2019 and 2018, respectively.
These segments as of and for the years ended December 31, 2019 and 2018 are summarized as follows:
Credit risk is limited by diversifying the Company’s investments. The Company maintains cash and cash equivalents at multiple institutions. The Federal Deposit Insurance Corporation insures accounts up to $250,000. Uninsured balances aggregate $18,089,331 as of December 31, 2019. Other funds are invested in mutual funds that invest in U.S. government securities. The Company monitors the solvency of all financial institutions in which it has funds to minimize the exposure for loss. The Company has not experienced any losses in such accounts.
On November 22, 2013, a lawsuit was filed in the Circuit Court of Greene County, Missouri asserting claims by two individuals and a class of Missouri residents against FBLIC relating to this decision to not pay a non-guaranteed dividend. A trial was held November 27, 2017 through December 1, 2017 regarding those class and individual claims. During 2018, a settlement was reached by the parties and the Court approved the settlement agreement on June 11, 2018. FBLIC paid $1.85 million to resolve all class and individual claims and all active Decreasing Term to 95 policies for individuals in the class were cancelled.
The pretax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit) for each component for the years ended December 31, 2019 and 2018 are summarized as follows:
The pretax and the related income tax components of the amounts reclassified from the Company’s accumulated other comprehensive income (loss) to the Company’s consolidated statements of operations for the years ended December 31, 2019 and 2018 are summarized as follows:
(a) These items appear within net realized investment gains in the consolidated statements of operations.