Per common share: Net income, basic and diluted $ 1.24 $ 2.63 $ 2.49 $ 4.08 $ 3.66
Overview Kansas City Life Insurance Company (the Company) is a financial services company. The Company offers a full line of traditional, interest sensitive, and variable life and annuity insurance products, in addition to a wide variety of group life and group accident and health insurance products; and is licensed in 48 states and the District of Columbia. The Company’s principal subsidiaries are Sunset Life Insurance Company of America (Sunset Life) and Old American Insurance Company (Old American). Sunset Life is a full line life insurance and annuity carrier and is licensed in 43 states and the District of Columbia. Old American, which specializes in final expense insurance for seniors, is licensed in 46 states and the District of Columbia. The Company offers investment products and broker dealer services through its subsidiary Sunset Financial Services, Inc. (SFS) for both its proprietary and non-proprietary variable insurance products and mutual funds. The Company offers banking services through its subsidiary Generations Bank, such as deposit accounts, loans and internet banking.
The acquisition of GuideOne expanded the scope of the Company’s individual insurance business, including the introduction of new marketing opportunities through an exclusive marketing arrangement with the independent general agents of the GuideOne Mutual Company (property casualty insurance carrier and former parent). The Company will also benefit from efficiencies and improved economies of scale in terms of managing and administering the acquired insurance business.
Customer and agent response to new products, distribution channels and marketing initiatives;
Deposits relate to insurance products that include universal life, variable life, variable annuities, fixed annuities and deposit products without life contingencies. The cash flows from deposits are credited to policyholder account balances. Deposits are not recorded as revenue, but revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges, and are recognized in the period in which the services are provided.
Policyholder account balances include universal life insurance, deferred annuity contracts and investment-type contracts. The account balances for universal life contracts are equal to cumulative premiums, less contract charges, plus interest credited. The account balances for deferred annuities and investment contracts are equal to the cumulative deposits less any applicable contract charges plus interest credited. The profitability of these products is also dependent on principal assumptions similar to traditional insurance products, and differences between actual experience and pricing assumptions may result in variability of net income.
The Company’s measure of sales is new premiums and deposits. Premiums are included in insurance revenues in the Consolidated Statements of Income, while deposits are shown in the Consolidated Statements of Cash Flows. The first table below reconciles the premiums included in insurance revenues and provides detail by new and renewal business, with new premiums detailed by product. The second table reconciles deposits with the Consolidated Statements of Cash Flows and provides detail by new and renewal deposits, with new deposits detailed by product.
2003 % 2002 % 2001 ------------- ------------- ------------- New deposits Universal life insurance $ 9,448 19 $ 7,947 47 $ 5,398 Variable universal life insurance 3,093 (58) 7,316 (52) 15,356 Flexible annuities 145,057 45 100,148 160 38,517 Variable annuities 38,293 68 22,795 (43) 40,137 ------------- ------------- ------------- Total new deposits 195,891 42 138,206 39 99,408 142,198 133,904 Renewal deposits 142,198 6 133,904 (2) 136,970 ------------- ------------- ------------- Total deposits $ 338,089 24 $ 272,110 15 $ 236,378 ============= ============= =============
Insurance revenues consist of premiums and contract charges, less reinsurance ceded. Insurance revenues were up 10% or $24.8 million in 2003 at $271.8 million, while 2002 was essentially flat over 2001. Premiums were up 14% and 5%, for 2003 and 2002, respectively, and reflect the Company’s and industry’s trend towards fixed rate guarantee products. Contract charges earned in 2003 increased due to the addition of GuideOne’s portfolio of universal life and deferred annuity products. Prior to 2003, contract charges had decreased due to a reduction in policy expense loads assessed against policyholder account balances. Reinsurance ceded has increased from $36.3 million in 2001 to $43.2 million in 2002 and $48.8 million in 2003. The Company has expanded its use of reinsurance over the past few years. In addition, the GuideOne acquisition accounted for 64% of the growth in reinsurance premiums in 2003.
Net investment income rose slightly in 2003 to $194.8 million, an increase of $0.5 million over 2002, but lower than the 2001 total of $203.1 million. These declines resulted from reduced portfolio yields due to historically low reinvestment rates. At year-end 2003, short-term investments were $71.8 million or 2% of investments; while at year-end 2002 short-term investments were $186.8 million or 6% of investments. In 2003, the Company’s short-term holdings decreased as a result of the purchase of longer-term investments and the acquisition of GuideOne.
The following table provides credit quality information on fixed maturity securities as determined by one of the nationally recognized ratings firms as of December 31, 2003.
% of Investment Amortized Fair Fair Quality Cost Value Value ------- ---- ----- -----
The portfolio had unrealized gains, net of related taxes, of $57.4 million at year-end 2003. The portfolio is broadly diversified across sectors and a variety of measures have been employed to manage the portfolio’s credit and interest rate risks, as discussed later in this document in
/s/R. Philip Bixby /s/ Tracy W. Knapp R. Philip Bixby Tracy W. Knapp President and CEO Senior Vice President, Finance
LIABILITIES Future policy benefits: Life insurance $ 829,500 $ 769,597 Accident and health 42,614 42,036 Policyholder account balances 2,239,223 1,784,634 Policy and contract claims 33,012 28,906 Other policyholder funds 101,084 106,683 Notes payable 133,670 97,241 Income taxes 36,918 15,539 Other liabilities 186,762 180,365 Separate account liabilities 304,691 244,862 Total liabilities 3,907,474 3,269,863
Year Ended December 31 2003 2002 2001 REVENUES Insurance revenues: Premiums $ 210,671 $ 184,703 $ 176,395 Contract charges 110,006 105,520 107,370 Reinsurance ceded (48,830) (43,223) (36,295) Total insurance revenues 271,847 247,000 247,470 Investment revenues: Net investment income 194,763 194,235 203,091 Realized investment losses (29,280) (18,240) (15,748) Other revenues 8,300 15,140 12,428 Total revenues 445,630 438,135 447,241
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Beginning of year (24,437) (38,806) (55,280) Other comprehensive income 47,855 14,369 16,474
Year Ended December 31 2003 2002 2001 OPERATING ACTIVITIES Net income $ 14,793 $ 31,549 $ 29,922 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of investment premium (discount) 4,287 (641) 601 Depreciation 12,949 5,916 5,181 Acquisition costs capitalized (29,575) (27,868) (27,916) Amortization of deferred acquisition costs 30,915 23,813 27,766 Amortization of value of business acquired 6,993 7,156 7,578 Realized investment losses 29,280 18,240 15,748 Changes in assets and liabilities: Legal settlement liability - (16,965) 16,295 Future policy benefits 21,031 (4,316) (1,337) Policyholder account balances 29,390 41,111 531 Income taxes payable and deferred (17,237) (2,271) (4,036) Other, net (8,679) (26,961) (28,239) Net cash provided 94,147 48,763 42,094
INVESTING ACTIVITIES Purchases of investment securities: Fixed maturities (1,251,481) (788,919) (884,654) Equity securities (4,279) (5,598) (5,116) Sales of investment securities: Fixed maturities 188,849 359,375 661,134 Equity securities 17,036 9,986 17,289 Maturities and principal paydowns of investment securities: Fixed maturities 725,589 364,984 187,673 Equity securities 8,771 6,925 16,088 Purchases of other investments (72,386) (149,627) (185,392) Sales, maturities and principal paydowns of other investments 183,161 79,805 51,215 Net additions to property and equipment (969) (21,029) (1,878) Insurance business acquired or disposed (52,264) - (4,000) Net cash used (257,973) (144,098) (147,641)
Increase (decrease) in cash 5,384 (1,129) (14,929) Cash at beginning of year 14,645 15,774 30,703
Cash at end of year $ 20,029 $ 14,645 $ 15,774
Kansas City Life Insurance Company and its subsidiaries (the Company) is a Missouri domiciled stock life insurance company which, with its subsidiaries, is licensed to sell insurance products in 49 states and the District of Columbia. The Company offers a diversified portfolio of individual insurance, annuity and group products.
On June 30, 2003, the Company acquired all of the issued and outstanding stock of GuideOne Life Insurance Company (GuideOne) from GuideOne Financial Group, Inc. and GuideOne Mutual Company. The purchase price of the acquisition was $59.4 million and added $393.1 million in assets on the acquisition date, including an identifiable intangible asset called VOBA of $38.0 million. The financial position and results of operations of GuideOne have been included in these financial statements on a GAAP basis using the purchase method of accounting since July 1, 2003. As of October 1, 2003, GuideOne was merged into Kansas City Life Insurance Company. For segment reporting purposes, GuideOne is included in the Kansas City Life - Individual segment.
Real estate is carried at amortized cost. Real estate joint ventures are valued at cost, adjusted for the Company’s equity in earnings since acquisition.
DAC is reviewed on an ongoing basis to determine that the unamortized portion does not exceed the expected recoverable amounts. If it is determined from emerging experience that the premium margins or gross profits are insufficient to amortize deferred acquisition costs, then the asset will be adjusted downward with the adjustment recorded as an expense in the current period. No impairment adjustments have been recorded in the years presented.
Balance at end of year $ 241,057 $ 246,286 $ 243,606 ============== ============= =============
When new insurance business is purchased through an acquisition, a portion of the purchase price is allocated to a separately identifiable intangible asset, called the value of business acquired (VOBA). VOBA is established as the actuarially determined present value of anticipated profits to be realized from the insurance business purchased, using the same assumptions used to value the related liabilities. VOBA is amortized in proportion to future premium revenues or the expected future profits, depending on the type of insurance business acquired. Amortization of VOBA occurs over the related contract periods, using current crediting rates to accrete interest or using investment yield rates, depending on the type of insurance product. The Company regularly assesses the recoverability of VOBA through an analysis of expected future cash flows.
Balance at end of year $ 106,334 $ 75,322 $ 82,478 ============= ============= =============
Balance at end of year $ 304,691 $ 244,862 $ 305,283 ========== ========== ==========
Life insurance $ 750,864 $ 716,331 Immediate annuities and supplementary contracts with life contingencies 78,636 53,266 ------------ ------------- Total 829,500 769,597
Liabilities for universal life and flexible annuity products represent policyholder account balances, without reduction for potential surrender charges, and deferred front-end contract charges, which are amortized over the term of the policies. Benefits and claims are charged to expense in the period incurred. Interest on policyholder account balances is credited as earned.
Universal life insurance $ 1,079,914 $ 971,885 Flexible annuities 1,090,045 786,444 Other 69,264 26,305 ---------------- ---------------- $ 2,239,223 $ 1,784,634 ================ ================
FASB Interpretation (FIN) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” was issued in November 2002. This is an interpretation of FASB Statements No. 5, 57, and 107 and is a rescission of FASB Interpretation No. 34. This interpretation requires certain guarantees to be recorded at fair value instead of when a loss is probable and reasonably estimated. FIN 45 also requires disclosures even when the likelihood of making any payments under the guarantee is remote. Although liability recognition only applies to guarantees issued or amended after January 1, 2003, disclosure requirements are presently effective. This interpretation was adopted January 1, 2003 and the Company is not aware of any guarantees that would have a material effect on its financial statements.
FASB’s Derivatives Implementation Group (DIG) issued SFAS No. 133 Implementation Issue No. B36, “Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments that Incorporate Credit Risk Exposures that are Unrelated or Only Partially Related to the Creditworthiness of the Obligor Under those Instruments,” in April 2003 (DIG B36). This standard deals with the treatment of embedded derivatives related to Modified Coinsurance (Modco). DIG B36 was adopted on October 1, 2003 with no material impact.
Statement of Position (SOP) 03-01, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts,” was issued in July 2003 by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants. The SOP addresses: 1) separate account presentation; 2) accounting for an insurance company’s proportionate interest in separate accounts; 3) transfers of assets from the general account to a separate account; 4) valuation of certain insurance liabilities and policy features such as guaranteed minimum death benefits and annuitization benefits; and 5) accounting for sales inducements. This SOP will be adopted on January 1, 2004, and will have no material impact.
2003 2002 2001 ---------- --------- --------- Available for sale: End of year $ 85,478 $ 2,631 $ (38,382) Amounts allocable to: Deferred acquisition costs (5,245) (477) 1,268 Policyholder account balances (8,070) - - Deferred income taxes (25,258) (754) 12,995 ---------- --------- ---------
Increase (decrease) in net unrealized gains during the year: Fixed maturities $ 43,997 $ 24,736 $ 17,129 Equity securities 1,508 783 2,550 ---------- ---------- ---------
End of year $ - $ - $ - ========== ========== =========
Increase (decrease) in net unrealized gains during the year $ - $ - $ 109 ========== ========== =========
Gross Amortized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- Bonds: U.S. govt. & agency $ 58,703 $ 3,268 $ 96 $ 61,875 Public utility 157,061 12,012 1,719 167,354 Corporate 1,309,340 77,151 15,337 1,371,154 Mortgage-backed 1,058,368 18,925 7,301 1,069,992 Other 147,049 925 3,954 144,020 Redeemable preferred stocks 91 - 1 90 ----------------- -------------- ------------- ------------------
$ 2,792,815 $114,400 $ 28,922 $ 2,878,293 ================= ============== ============= ==================
The amortized cost and fair value of investments in securities available for sale at December 31, 2002, are as follows.
Gross Amortized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- Bonds: U.S. govt. & agency $ 53,838 $ 4,816 $ 60 $ 58,594 Public utility 250,330 8,974 17,969 241,335 Corporate 1,099,806 57,550 69,582 1,087,774 Mortgage-backed 704,359 26,782 7,844 723,297 Other 29,224 1,197 89 30,332 Redeemable preferred stocks 110 - 3 107 ---------------- ---------------------------- ----------------
$ 2,196,395 $ 100,114 $ 97,483 $ 2,199,026 ================ ============= ============= ================
The Company held non-income producing securities with a carrying value of $3,949 at December 31, 2003 (2002 -- $9,407).
Fixed maturities 921,419 20,669 109,961 7,739 1,031,380 28,408 Equity securities 17,950 460 129 54 18,079 514
Unrealized losses occur from market price declines that may be due to a number of factors including economic downturns, competitive forces within an industry, issuer specific events or operational difficulties, lawsuits and market pricing anomalies caused by factors such as temporary lack of liquidity.
Following is the distribution of maturities for fixed maturity investment securities available for sale as of December 31, 2003. Expected maturities may differ from these contractual maturities since borrowers may have the right to call or prepay obligations.
Proceeds $ 205,885 $ 369,361 $ 678,423 Gross realized gains 9,467 9,809 17,971 Gross realized losses 20,443 19,216 16,132
The Company is exposed to risk that issuers of securities owned by the Company will default, or that interest rates or credit spreads will change and cause a decrease in the value of its investments. With mortgage-backed securities, the Company is also exposed to prepayment and extension risks. As interest rates change, the rate at which these securities pay down principal may change. These risks are mitigated by investing in high-grade securities and managing the maturities and cash flows of investments and liabilities.
Most of the Company's mortgage loans are secured by commercial real estate and are carried net of a valuation reserve of $4,809 (2002 -- $4,746). The Company does not hold mortgage loans of any borrower that exceeds 5% of stockholders' equity.
The mortgage portfolio is diversified geographically and by property type as follows, at December 31.
2003 2002 ---------------------------- ----------------------------- Carrying Fair Carrying Fair Amount Value Amount Value ------ ----- ------ ----- Geographic region: East north central $ 27,757 $ 29,335 $ 34,700 $ 37,325 Mountain 69,630 73,157 79,657 85,874 Pacific 151,565 159,601 148,696 161,520 West south central 90,213 94,981 83,195 90,455 West north central 85,450 87,782 80,023 85,136 Other 36,850 38,236 41,625 44,371 Valuation reserve (4,809) (4,809) (4,746) (4,746) ------------------------------- -------------------------------- $ 456,656 $ 478,283 $ 463,150 $ 499,935 =============================== ================================ Property type: Industrial $ 269,462 $ 282,914 $ 283,217 $ 306,170 Retail 6,628 7,137 12,167 13,321 Office 158,935 165,989 135,379 146,631 Other 26,440 27,052 37,133 38,559 Valuation reserve (4,809) (4,809) (4,746) (4,746) ------------------------------- -------------------------------- $ 456,656 $ 478,283 $ 463,150 $ 499,935 =============================== ================================
The Company held non-income producing real estate equaling $11,825 consisting of properties under development at December 31, 2003 (2002 -- $14,598).
2003 2002 2001 --------------- --------------- --------------- Gross liability at beginning of year $ 8,140 $ 8,775 $ 9,983 Less reinsurance recoverable (2,552) (2,772) (4,678) --------------- --------------- --------------- Net liability at beginning of year 5,588 6,003 5,305 --------------- --------------- --------------- Incurred benefits related to: Current year 32,485 36,965 32,528 Prior years (931) (882) 307 --------------- --------------- --------------- Total incurred benefits 31,554 36,083 32,835 --------------- --------------- --------------- Paid benefits related to: Current year 28,172 30,962 26,315 Prior years 4,693 5,536 5,822 --------------- --------------- --------------- Total paid benefits 32,865 36,498 32,137 --------------- --------------- --------------- Net liability at end of year 4,277 5,588 6,003 Plus reinsurance recoverable 3,579 2,552 2,772 --------------- --------------- --------------- Gross liability at end of year $ 7,856 $ 8,140 $ 8,775 =============== =============== ===============
The following table provides information for Notes Payable as of December 31.
2003 2002 -------------- ------------- Federal Home Loan Bank loans with various maturities and a weighted average interest rate, currently 1.24%, secured by mortgage-backed securities totaling $125,254 $ 111,624 $ 96,033
Eight real estate loans with interest rates between 6.85% and 9.00% and various maturities in years 2004 to 2010, secured by the properties. 19,083 703
Note Payable due June 2005, related to the purchase of GuideOne Life Insurance Company, with an interest rate equal to the prime rate published in the Wall Street Journal (4.00% at December 31, 2003). 2,000 -
Maturities on notes payable are as follows in millions: $115.0 due in 2004; $2.3 due in 2005; $7.4 due in 2006; none in 2007; $6.8 due in 2008 and $2.1 due thereafter.
The table below provides the Company’s net gain from operations, net income, unassigned surplus (retained earnings) and capital and surplus (stockholders’ equity), on the statutory basis used to report to regulatory authorities for the years ended December 31.
The following tables provide information about income taxes and a reconciliation of the Federal income tax rate to the Company's effective income tax rate for the years ended December 31.
Effective income tax rate (60)% 17 % 5 % ============== ============= ==============
The tax effects of temporary differences that result in significant deferred tax assets and liabilities are presented below for the years ended December 31.
Policyholders’ surplus, which is frozen under the Deficit Reduction Act of 1984, is $51,257 for Kansas City Life, $2,866 for Sunset Life and $13,700 for Old American. The Companies do not plan to distribute their policyholders’ surplus. Consequently, the possibility of such surplus becoming subject to tax is remote, and no provision has been made in the financial statements for taxes thereon. Should the balance in policyholders’ surplus become taxable, the tax computed at current rates would approximate $23,729.
Income taxed on a current basis is accumulated in shareholders’ surplus and can be distributed to stockholders without tax to the Company. Shareholders’ surplus equals $572,872 for Kansas City Life, $33,411 for Sunset Life and $54,869 for Old American.
The Company has pension and other postretirement benefit plans covering substantially all its employees. December 31 was used as the measurement date for these plans.
The Kansas City Life Pension Plan was amended and restated effective January 1, 1998 as the Kansas City Life Cash Balance Pension Plan. Plan benefits are based on a cash balance account consisting of credits to the account based upon an employee years of service, compensation and interest credits on account balances calculated using the greater of the average 30-year Treasury bond rate for November of each year or 5.5%. The benefits expected to be paid in each year from 2004 through 2008 are $7,700, $8,700, $8,200, $8,700, and $10,800 respectively. The aggregate benefits expected to be paid in the five years from 2009 through 2013 are $62,400. The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2003 and include estimated future employee service. The 2004 contribution for the plan cannot be reasonably estimated at this time. The asset allocation of the fair value of pension plan assets at December 31 were:
The current assumption for the expected long-term rate of return on plan assets is 8.0%. This assumption is determined by analyzing: 1) historical average returns, 2) historical data on the volatility of returns, 3) current yields available in the marketplace, 4) actual returns on plan assets, and 5) current and anticipated future allocation to asset classes. The asset classes used for this analysis are large cap equities, investment grade corporate bonds and cash. The overall rate is derived as a weighted average of the estimated long-term returns on the asset classes represented in the investment portfolio of the plan.
The postretirement life insurance plan is noncontributory with level annual payments over the participants’ expected service periods. The plan covers only those employees with at least one year of service as of December 31, 1997. The benefits in this plan are frozen using the employees’ years of service and compensation as of December 31, 1997.
Noncontributory defined contribution retirement plans for general agents and eligible sales agents provide supplemental payments based upon earned agency first year individual life and annuity commissions. Contributions to these plans were $132 (2002 -- $132; 2001 -- $162). Noncontributory deferred compensation plans for eligible agents based upon earned first year commissions are also offered. Contributions to these plans were $614 (2002 -- $711; 2001 -- $639).
Savings plans for eligible employees and agents match employee contributions up to 6% of salary and agent contributions up to 2.5% of prior year paid commissions. Contributions to the plan were $1,437 (2002 -- $1,452; 2001 -- $1,459). The Company may contribute an additional profit sharing amount up to 4% of salary, depending upon corporate profits. The Company made no profit sharing contribution this year or in the prior two years.
Accumulated benefit obligation $ 117,354 $ 110,263 $ - $ - ---------------------------- ----------------------------
Change in projected benefit obligation: Benefit obligation at beginning of year $ 114,617 $ 107,672 $ 25,075 $ 19,559 Service cost 2,335 2,223 755 676 Interest cost 7,215 7,564 1,406 1,423 Net loss from past experience 7,132 8,629 1,980 4,246 Benefits paid (9,599) (11,471) (979) (829) ---------------------------- ---------------------------- Benefit obligation at end of year $ 121,700 $ 114,617 $ 28,237 $ 25,075 ============================ ============================
Plan underfunding $ (27,663) $ (32,223) $ (27,028) $ (23,685) Unrecognized net loss 45,038 49,309 6,634 4,672 Unrecognized prior service cost (4,558) (5,205) - - ---------------------------- ---------------------------- Prepaid (accrued) benefit cost $ 12,817 $ 11,881 $ (20,394) $ (19,013) ============================ ============================
Amounts recognized in the consolidated balance sheet: Accrued benefit liability $ (23,317) $ (27,868) $ (20,394) $ (19,013) Accumulated other comprehensive income 36,134 39,749 - - ---------------------------- ---------------------------- Net amount recognized $ 12,817 $ 11,881 $ (20,394) $ (19,013) ============================ ============================
Weighted average assumptions: Discount rate 6.00 % 6.25 % 6.00 % 6.25 % Expected return on plan assets 8.00 8.50 5.50 5.50 Rate of compensation increase 4.50 4.50 - -
For measurement purposes, a 10.0% annual increase in the per capita cost of covered health care benefits was assumed to decrease gradually to 5% in 2013 and thereafter.
Separate investment portfolios are maintained for each of the companies. However, investments are allocated to the group segment based upon its cash flows. Its investment income is modeled using the year of investment method. Home office functions are fully integrated for the three companies in order to maximize economies of scale. Therefore, operating expenses are allocated to the segments based upon internal cost studies, which are consistent with industry cost methodologies.
Kansas City Life Sunset Old Individual Group Life American Total 2003: Revenues from customers $ 142,466 $ 52,200 $ 16,156 $ 69,325 $ 280,147 Net investment income 151,316 281 29,282 13,884 194,763 Segment income (loss) 10,893 (4,004) 5,178 2,726 14,793 Other significant noncash items: Increase in policy reserves 90,711 418 17,727 2,451 111,307 Amortization of deferred acquisition costs 15,596 - 4,517 10,802 30,915 Amortization of value of business acquired 3,948 - - 3,045 6,993 Interest expense 1,497 - - 428 1,925 Income tax expense (benefit) (4,466) (1,716) (72) 692 (5,562)
Segment assets 3,571,144 6,731 555,245 418,792 4,551,912 Expenditures for other long-lived assets 2,245 81 - 75 2,401
Segment assets 2,848,164 6,546 574,669 437,981 3,867,360 Expenditures for other long-lived assets 15,881 211 - 49 16,141
Segment assets 2,780,268 6,993 548,840 439,897 3,775,998 Expenditures for other long-lived assets 2,004 65 - 30 2,099
2003 2002 2001 ----------- ----------- ----------- Revenues from customers by line of business: Traditional individual insurance products, net $ 111,832 $ 84,204 $ 87,660 Interest sensitive products 93,023 88,061 89,559 Variable life insurance and annuities 16,983 17,460 17,811 Group life and disability products, net 50,009 57,275 52,440 Group ASO services 2,191 3,989 4,949 Other 6,109 11,151 7,479 -------------- ------------- ------------- Total $ 280,147 $ 262,140 $ 259,898 ============== ============= =============
Less accumulated depreciation (30,007) (35,029) ----------- ---------- $ 32,981 $ 36,013 =========== ==========
2003 2002 2001 -------------- -------------- -------------- Life insurance in force (in millions): Direct $ 29,253 $ 24,133 $ 24,019 Ceded (12,039) (10,224) (7,144) Assumed 3,302 2,458 2,626 -------------- -------------- --------------
Accident and health: Direct $ 53,079 $ 56,003 $ 51,237 Ceded (9,682) (5,450) (5,426) Assumed 157 1 - -------------- -------------- --------------
Old American has a coinsurance agreement that reinsures certain whole life policies issued by Old American prior to December 1, 1986. These policies had a face value of $77.2 million as of this year-end. The reserve for future policy benefits ceded under this agreement was $35,704 (2002 -- $39,181).
Kansas City Life acquired a block of traditional life and universal life-type products in 1997. As of this year-end, the block had $2.3 billion of life insurance in force (2002 -- $2.4 billion). The block generated life insurance premiums of $3,120 (2002 -- $4,058).
Sunset Life entered into a yearly renewable term reinsurance agreement January 1, 2002, whereby it ceded 80% of its retained mortality risk on traditional and universal life policies. The insurance in force ceded approximates $2.6 billion (2002 -- $2.7 billion) and premiums totaled $7,586.
The maximum retention on any one life is $350 thousand for ordinary life plans and $100 thousand for group coverage. A contingent liability exists with respect to reinsurance, which may become a liability of the Company in the unlikely event that the reinsurers should be unable to meet obligations assumed under reinsurance contracts. Reinsurers’ solvency is reviewed annually.
Other comprehensive income $ 45,505 $ 2,350 $ 47,855 ================= ============== ===============
2002: Unrealized holding gains arising during the year $ 14,542 $ - $ 14,542 Less: Realized losses included in net income (26,471) - (26,471) ----------------- -------------- --------------- Net unrealized gains 41,013 - 41,013 Increase in minimum pension liability - (17,154) (17,154) Effect on deferred acquisition costs (1,745) - (1,745) Deferred income taxes (13,749) 6,004 (7,745) ----------------- -------------- ---------------
Other comprehensive income (loss) $ 25,519 $ (11,150) $ 14,369 ================= ============== ===============
2001: Unrealized holding gains arising during the year $ 13,972 $ - $ 13,972 Less: Realized losses included in net income (18,404) - (18,404) ----------------- -------------- --------------- Net unrealized gains 32,376 - 32,376 Increase in minimum pension liability - (4,931) (4,931) Effect on deferred acquisition costs (2,113) - (2,113) Deferred income taxes (10,584) 1,726 (8,858) ----------------- -------------- ---------------
Other comprehensive income (loss) $ 19,679 $ (3,205) $ 16,474 ================= ============== ===============
2002: Beginning of year $ (24,119) $ (14,687) $ (38,806) Other comprehensive income (loss) 25,519 (11,150) 14,369 ------------------ --------------- ---------------- End of year 1,400 (25,837) (24,437)
Fair values for liabilities under investment-type insurance contracts, included with policyholder account balances for flexible annuities and with other policyholder funds for supplementary contracts without life contingencies, are estimated to be their cash surrender values.
In regards to bank deposits, the fair value of checking, savings and money market accounts is the amount payable on demand. The fair value of fixed maturity certificate accounts is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.