JPFIC conducts operations in Omaha, NE in two buildings and also owns a third building on its 11 acre campus.
In a falling interest rate environment, the risk of prepayment on some fixed income securities increases, causing funds to be reinvested at lower yields. The Company limits this risk by concentrating the fixed income portfolio on non-callable securities, by carefully selecting CMO's that are structured to minimize cash flow volatility and by purchasing securities that provide for "make-whole" type prepayment fees. Falling interest rates can also impact demand for the Company's products, as bank certificates of deposit with no surrender charges, and higher average returns from equity markets, may become more attractive to new and existing customers. Conversely, in a rising interest rate environment, competitive pressures may make it difficult for the Company to sustain spreads between rates credited on interest-sensitive products and portfolio earnings rates, thereby prompting withdrawals by policyholders. The Company manages this risk by adjusting interest crediting rates, at least on an annual basis, with due regard to the yield of its investment portfolio and pricing assumptions and by prudently managing interest rate risk of assets and liabilities.
The Company is exposed to equity price risk on its equity securities (other than trading). JP holds common stock with a fair value of $549. Approximately $382 of such value is represented by investments in a single issuer, Bank of America Corporation (BankAmerica). The Company's Exchangeable Securities are exchangeable into shares of BankAmerica common stock. Had the Exchangeable Securities been redeemed as of year-end, the redemption value would have been $139 (see Note 8). Management believes that a hypothetical 20% decline in the equity market is reasonably possible in the near term. If the market value of the S&P 500 Index, and of BankAmerica common stock specifically, decreased 20%, the fair value of the Company's common stock and Exchangeable Securities would change as follows:
The Company sold certain securities that had been classified as held to maturity, due to significant declines in credit worthiness. Total proceeds were $13, $7 and $13 in 2000, 1999 and 1998.
Credited interest rates for universal life-type products ranged from 4.1% to 6.65% in 2000, 4.1% to 6.65% in 1999 and 3.8% to 6.85% in 1998. The average credited interest rates for universal life-type products were 5.59%, 5.6% and 5.84% for 2000, 1999 and 1998. For annuity products, credited interest rates generally ranged from 4.0% to 9.0% in 2000, 4% to 9.5% in 1999 and 4% to 8.15% in 1998.
The estimated fair value of the options under SFAS 123 is amortized to expense over the options' vesting period. The pro forma information follows:
The Company sponsors contributory health care and life insurance benefit plans for eligible retired employees, qualifying retired agents and certain surviving spouses. The Company contributes to a welfare benefit
The Company leases electronic data processing equipment and field office space under noncancelable operating lease agreements. The lease terms generally range from three to five years. Neither annual rent nor future rental commitments are significant.