Total benefits and expenses decreased $46.5 million or 2% in 2001 when compared to 2000. The decrease in 2001 was primarily in the Employee Benefits segment reflecting lower claims associated with a decrease in membership. The total benefits and expenses increased $384.4 million or 16% in 2000, when compared to 1999. The increase in 2000 was due to General American group life and health business that resulted in an increase in benefits and expenses of $296.6 million. Excluding General American, benefits and expenses would have increased $87.8 million or 4% in 2000.
Equivalent premium revenue and fee income for group life and health decreased 3% from 2000 levels as the result of a decline in membership. From 1999 to 2000, equivalent premium revenue and fee income increased 23% as a result of increased sales and the Allmerica and General American acquisitions.
The Employee Benefits segment experienced a net decrease of 1,232 group health care customers (employer groups) during 2001. There was an 18% decrease in total health care membership from 3,158,900 at the end of 2000 to 2,587,900 at year-end 2001. POS and HMO members decreased 30% from 718,400 in 2000 to 500,600 in 2001.
In 1996, the U.S. Congress enacted legislation to phase out the tax deductibility of interest on policy loans on COLI products. Since then, renewal premiums and deposits for COLI products have decreased to $83.1 million in 2001 from $84.1 million in 2000 and $128.5 million in 1999 and the Company expects this decline to continue. As a result of these legislative changes, the Company has shifted its emphasis in new sales from COLI to the BOLI market. This product provides long-term benefits for employees and was not affected by the 1996 legislative changes. BOLI premiums and deposits were $547.9 million during 2001 compared to $581.9 million in 2000 and $436.3 million in 1999. The Company continues working closely with existing COLI customers to determine the options available to them and is confident that the effect of the legislative changes will not be material to the Company's operations.
We have audited the accompanying consolidated balance sheets of Great-West Life & Annuity Insurance Company and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
Organization - Great-West Life & Annuity Insurance Company (the Company) is a wholly-owned subsidiary of GWL&A Financial Inc., a holding company formed in 1998 (GWL&A Financial). The Company offers a wide range of life insurance, health insurance, and retirement and investment products to individuals, businesses, and other private and public organizations throughout the United States.
The fair value of due to GWL&A Financial reflects the last trading price of the subordinated notes in the public market at December 31, 2001.
The Company's income tax provision was favorably impacted in 1999 by the release of contingent liabilities relating to taxes of the GWL's U.S. branch associated with blocks of business that were transferred from GWL's U.S. branch to the Company from 1989 to 1993; the Company had agreed to the transfer of these tax liabilities as part of the transfer of this business. The release recorded in 1999 reflected the resolution of certain tax issues with the Internal Revenue Service (IRS), and totaled $17,150; however, $8,900 of the release was attributable to participating policyholders and therefore had no effect on the net income of the Company since that amount was credited to the provision for policyholders' share of earnings on participating business in the accompanying 1999 statement of income.
No dividends were paid on preferred stock in 2001, 2000, and 1999, respectively. In addition, dividends of $187,633, $134,149, and $92,053 were paid on common stock in 2001, 2000, and 1999, respectively. Dividends are paid as determined by the Board of Directors, subject to restrictions as discussed below.