The limited growth in new business premiums in 1995, is attributable to: (i) an increase in policyholders' selection of monthly premium payment plans as opposed to annual premium payments, a practice the Company promotes; and (ii)increased competition. The Company does not know whether and to what extent its competition is likely to increase or change in the future but believes that it is well-positioned to remain competitive in all of its markets.
During 1993, the Company began purchasing tax-free municipal securities, which provided superior after-tax yields when compared to taxable securities of similar quality and maturity. This practice was continued during the first nine months in 1994. In the fourth quarter of 1994, the Company changed its investment criteria to include the purchase of taxable securities in response to its changing tax planning requirements. The Company intends to sell these tax-free municipal bonds in 1996.
As further discussed in Note 3 to the financial statements, the Company has classified all of its investments as "available for sale" at December 31, 1995, and as "held to maturity" at December 31, 1994.
CommonStock CapitalinNet Unreal- RetainedTreasuryTotal SharesAmountExcessof ized Gain onEarnings Stock Shareholders' Par ValueInvestments Equity
The accompanying consolidated financial statements include the accounts of American Travellers Corporation ("ATC") and its wholly owned subsidiaries, American Travellers Life Insurance Company ("ATL"), United General Life Insurance Company ("UGL"), American Travellers Insurance Company of New York ("ATICNY") and American Travellers Insurance Services Company, Inc. ("ATIS"). ATC, ATL, UGL, ATICNY and ATIS are collectively referred to as the "Company." All material intercompany accounts and transactions have been eliminated in consolidation.
For purposes of reporting cash flows, cash and cash equivalents include all cash and short-term deposits available on demand.
As of December 31, 1994 the Company classified all of its investments as "held to maturity" pursuant to the provisions of SFAS 115. As a result of the changes in the investment portfolio and strategy and as a result of the acquisition discussed in Note 15 and other factors, the Company changed the classification of its investments to "available for sale" effective December 1995.
The statutory financial statements of ATL, the Company's principal subsidiary, as filed, reflect the following-
In the event that the Company merges with or transfers 50% or more of its assets or earnings to any entity after the rights become exercisable, holders of rights may purchase, at the right's then current exercise price, common stock of the acquiring entity having a value equal to twice the right's exercise price.
Net pension cost includes the following components: Service cost $ 162 $ 137 Interest cost on projected benefit obligation 72 60 Actual return on plan assets (47) (16) Net amortization 16 0
In December 1995, the Company closed on an reinsurance agreement to acquire the long term care insurance business of an unrelated insurance company which consisted of approximately $96,000 of annualized premium. The transaction was effective as of October 1, 1995. Under the terms of the reinsurance agreement, the Company assumed all existing liabilities associated with the long term care insurance business on a coinsurance basis. Cash and marketable securities of approximately $249,969 were transferred to the Company. In October 1994, the Company acquired the long term insurance business of an unrelated insurance company which consisted of approximately $25,000 of annualized premiums. Approximately $29,400 in cash was transferred to the Company. These acquisitions have been accounted for using the purchase accounting method. Total cash and marketable securities received in connection with these acquisitions approximates reserve liabilities assumed.
Market Value Type of Investment Amortized Amount as shown Cost in Balance Sheet
Payable to subsidiaries $ 469 $ 300 Other liabilities 2,966 1,149 Notes payable - 20,000 Current & deferred income taxes 43,545 27,154 6.5% convertible subordinated debentures 103,500 -