Premium and annuity considerations - were $136.2 million and $134.2 million for the twelve-month periods ended December 31, 2010 and 2009, respectively.
Other income represents fees charged for the cost of insurance, investment advisory services, asset participation fees, benefit fees and administrative service fees. Other income was $109.6 million and $72.1 million for the twelve-month periods ended December 31, 2010 and 2009, respectively. The $37.5 million increase was primarily due to an increase in benefit fees and administrative services fees from affiliates. The increase in benefit fees was attributable to an increase in the sale of certain variable annuity products with optional living benefit features.
Amortization of DAC - DAC relates to the costs of acquiring new business, which vary with and are primarily related to the production of new business. Such acquisition costs include commissions, costs of policy issuance, and underwriting and selling expenses. DAC amortization expense was $663.2 million and $1,013.7 million for the twelve-month periods ended December 31, 2010 and 2009, respectively. The $350.5 million change in amortization expense during the twelve-month period ended December 31, 2010, as compared to the twelve-month period ended December 31, 2009, was primarily attributable to a decrease in current period amortization expense and interest on the DAC asset, partially offset by an increase in unlocking adjustments.
The $112.3 million increase in fee and other income was primarily due to increases in mortality and expense charges, rider fees and 12b-1 fees which related to an increase in the average variable annuity separate account balances during the twelve-month period ended December 31, 2010, as compared to the twelve-month period ended December 31, 2009.
The Group Protection Segment had pre-tax income of $20.8 million and $16.1 million for year ended December 31, 2010 and 2009, respectively. Total revenues for the year ended December 31, 2010 decreased by $8.1 million, as compared to the year ended December 31, 2009. The decrease in revenues resulted mainly from decreases in premiums and net investment income of $1.3 million and $6.8 million, respectively. The decrease in net investment income was primarily attributable to the change in fair value of securities in the trading portfolio.
The following provides a summary of operations for the Corporate segment for the years ended December 31 (in 000’s):
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for stock life insurance companies.
Reserves for GMDB and guaranteed minimum income benefits (“GMIB”) are calculated according to the methodology prescribed by the American Institute of Certified Public Accountants (“AICPA”) which is included in FASB ASC
The Company accounts for current and deferred income taxes and recognizes reserves for income tax contingencies in accordance with FASB ASC Topic 740, “Income Taxes.”
On January 1, 2010, the Company adopted the provisions of FASB ASC Topic 810 which were issued in June 2009. This guidance amends previously issued consolidation guidance which affects all entities currently within the scope of FASB ASC Topic 810, including QSPEs, as the concept of these entities was eliminated by FASB ASC Topic 860. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009. The adoption did not have a material impact on the Company’s consolidated financial statements.
During the years ended December 31, 2010 and 2009, the Company received capital contributions totaling $400.0 million and $748.7 million, respectively, from the Parent. The cash contributions were recorded as additional paid-in capital and were made to ensure that the Company continues to exceed certain capital requirements prescribed by the National Association of Insurance Comissioners (“NAIC”). The NAIC has established regulations that provide minimum capitalization requirements based on risk-based capital formulas for life insurance companies. The risk-based capital formulas for life insurance companies establishes capital requirements relating to insurance, business, asset and interest rate risks, including equity, interest rate and expense recovery risks associated with variable annuities that contain death benefits or certain living benefits.
Effective December 31, 2009, the Company distributed all of Sun Life Vermont’s issued and outstanding common stock and net assets totaling $94.9 million in the form of a dividend to the Parent. The Company did not declare or pay cash dividends to the Parent in 2010, 2009 or 2008.
The account values related to these funding agreements issued to LLC III, LLC II and LLC are reported in the Company’s balance sheets as a component of contractholder deposits funds and other policy liabilities.
The gross carrying value of the Company’s mortgage loans on nonaccrual status was $114.7 million at December 31, 2010.
The Company was an owner participant in a trust that is a lessor in a leveraged lease agreement entered into on October 21, 1994, under which equipment having an estimated economic life of 25-40 years was originally leased through a VIE for a term of 9.78 years. The master lessee had the option to purchase the equipment at the expiration of the lease term. The Company's equity investment in this VIE represented 8.33% of the partnership that provided 22.9% of the purchase price of the equipment. The Company did not have the ability to direct the activities that most significantly impact the economic performance of the VIE nor the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Therefore, the Company did not consolidate this trust in its consolidated financial statements. The balance of the purchase price was furnished by third-party long-term debt financing, collateralized by the equipment, and was non-recourse to the Company. The leveraged lease investment was included as a part of other invested assets in the Company’s consolidated balance sheet at December 31, 2009.
Effective January 1, 2010, the Company and BarbCo 3 amended the agreement to include coverage of certain corporate and bank-owned variable universal life and private placement variable universal life insurance cases sold between December 31, 2009 and March 31, 2010, inclusive. Reinsurance coverage continued for all cases sold prior to April 1, 2010. However, cases sold on or after April 1, 2010 have not been reinsured. This amendment also enabled the Company to discontinue reinsuring a portion of the covered business that was previously reinsured on a modified coinsurance basis, effective April 1, 2010. The discontinuance of the business reinsured on a modified coinsurance basis did not have a material impact on the Company’s consolidated financial statements.
The change in fair value of the embedded derivative increased (reduced) derivative income by $2.2 million and $(26.3) million for the years ended December 31, 2010 and 2009, respectively. In addition, during the years ended December 31, 2010 and 2009, the reinsurance agreement reduced revenues by $24.3 million and $43.8 million, respectively, and decreased expenses by $56.2 million and $38.4 million, respectively.
Weighted average assumptions used to determine benefit obligations for the Pension Plans and the Other Post Retirement Benefit Plan were as follows:
Effective December 31, 2009, Sun Life Services sponsors a savings plan that qualifies under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) and in which substantially all employees of at least age 21 are eligible to participate at date of hire. Prior to December 31, 2009, the Company sponsored the 401(k) Plan. Employee contributions, up to specified amounts, are matched by Sun Life Services under the 401(k) Plan.
(1)SLUS as parent’s, SLNY’s and Other Subs’ net investment income includes an increase in market value of trading fixed maturity securities of $1,913.3 million, $173.4 million and $0.0 million, respectively, for the year ended December 31, 2009.
Pursuant to Delaware's statute, the maximum amount of dividends and other distributions that a domestic insurer may pay in any twelve-month period without prior approval of the Delaware Commissioner of Insurance is limited to the greater of (i) ten percent of its statutory surplus as of the preceding December 31, or (ii) the individual company's statutory net gain from operations for the preceding calendar year. Any dividends to be paid by an insurer from a source other than statutory surplus, whether or not in excess of the aforementioned threshold, would also require the prior approval of the Delaware Commissioner of Insurance. The Company is permitted to pay dividends up to a maximum of $188.0 million in 2011 without prior approval from the Delaware Commissioner of Insurance.
Rhode Island law requires prior regulatory approval for any dividend where the amount of such dividend paid during the preceding twelve-month period would exceed the lesser of (i) ten percent of the insurance company’s surplus as of the December 31 next preceding, or (ii) its net gain from operations, not including realized capital gains, for the immediately preceding calendar year, excluding pro rata distributions of any class of the insurance company’s own securities. INDY is permitted to pay dividends up to a maximum of $2.5 million in 2011 without prior approval from the Rhode Island Commissioner of Insurance. No dividends were paid by INDY during 2010, 2009 or 2008.
The components of accumulated other comprehensive income as of December 31, were as follows: