Long-term care in run-off consists of: (i) the long-term care business that was recaptured due to the termination of certain reinsurance agreements effective September 30, 2016 (such business is not actively marketed and was issued or acquired by Washington National and BCLIC); and (ii) certain legacy (prior to 2003) comprehensive and nursing home long-term care policies which were ceded in September 2018 (such business was not actively marketed and was issued by Bankers Life).
At CNO, our mission is to enrich lives by providing financial solutions that help protect the health and retirement needs of middle-income Americans, while building enduring value for all our stakeholders. We remain committed to our strategic priorities to grow the franchise; engage consumers with valuable products, services and experiences; expand to the right to reach slightly younger, wealthier consumers within the middle market; and deploy excess capital to its highest and best use.
The following summarizes the components of the reserves related to our long-term care business in our Bankers Life and Long-term care in run-off segments:
Net investment income related to fixed index products represents the change in the estimated fair value of options which are purchased in an effort to offset or hedge certain potential benefits accruing to the policyholders of our fixed index products. Our fixed index products are designed so that investment income spread is expected to be more than adequate to cover the cost of the options and other costs related to these policies. Net investment income (loss) related to fixed index products was $147.5 million, $(41.5) million and $153.5 million in 2019, 2018 and 2017, respectively. Such amounts were substantially offset by the corresponding charge (credit) to amounts added to policyholder account liabilities - market value changes credited to policyholders. Such income and related charges fluctuate based on the value of options embedded in the segment's fixed index annuity policyholder account liabilities subject to this benefit and to the performance of the index to which the returns on such products are linked.
The net cash flows from our long-term care products generally cause an accumulation of amounts in the early years of a policy (accounted for as reserve increases) which will be paid out as benefits in later policy years (accounted for as reserve decreases). Accordingly, as the policies age, the benefit ratio typically increases, but the increase in reserves is partially offset by investment income earned on the accumulated assets. The benefit ratio on our long-term care business in the Bankers Life segment was 121.7 percent, 119.0 percent and 116.2 percent in 2019, 2018 and 2017, respectively. The interest-adjusted benefit ratio on this business was 77.1 percent, 76.0 percent and 75.0 percent in 2019, 2018 and 2017, respectively. The interest-adjusted benefit ratio in 2017 was favorably impacted by $3.4 million of one-time reserve releases which was comprised of: (i) $1.9 million related to lower persistency (including the results of procedures performed to identify policies that had terminated prior to June 30, 2017 due to death); (ii) $.9 million related to an out-of-period adjustment that reduced reserves; and (iii) $.6 million related to the impact of policyholder decisions to surrender or reduce coverage following rate increases. The interest-adjusted benefit ratio in 2017, excluding such favorable reserve releases, was 76.3 percent. The interest-adjusted benefit ratio in 2019 on this long-term care business was in line with our previously announced expectations which were in the range of 74 percent to 79 percent for 2019.
Commission expense and distribution fees were higher in 2019 due to higher sales of insurance products, including the sales of third-party Medicare Advantage policies.
Fee revenue and other income increased in 2019 due to the fee income recognized by WBD subsequent to its acquisition as further described in the note to the consolidated financial statements entitled "Business and Basis of Presentation".
Net investment income on general investment portfolio fluctuates based on the amount and type of invested assets in the corporate operations segment.
Other operating costs and expenses include general corporate expenses, net of amounts charged to subsidiaries for services provided by the corporate operations. These amounts fluctuate as a result of expenses such as legal, consulting and regulatory expenses which often vary from period to period and were higher in 2019.
The Company used the net proceeds from the offering of the 2029 Notes to: (i) repay all amounts outstanding under its existing Revolving Credit Agreement; (ii) redeem and satisfy and discharge all of its outstanding 4.500% Senior Notes due May 2020; and (iii) pay fees and expenses related to the foregoing. The remaining proceeds were used for general corporate purposes. The following table sets forth the sources and uses of cash from the transaction (dollars in millions):
In 2019, 2018 and 2017, dividends declared on common stock totaled $67.2 million ($0.43 per common share), $65.1 million ($0.39 per common share) and $59.6 million ($0.35 per common share), respectively. In May 2019, the Company increased its quarterly common stock dividend to $0.11 per share from $0.10 per share.
Bankers Life, which underwrites, markets and distributes Medicare supplement insurance, interest-sensitive life insurance, traditional life insurance, fixed annuities and long-term care insurance products to the middle-income senior market through a dedicated field force of career agents, financial and investment advisors, and sales managers supported by a network of community-based sales offices. The Bankers Life segment includes primarily the business of Bankers Life and Casualty Company ("Bankers Life"). Bankers Life also has various distribution and marketing agreements with other insurance companies to use Bankers Life's career agents to distribute Medicare Advantage and prescription drug plan products in exchange for a fee.
The impact of adopting the cash flow guidance described above was as follows (dollars in millions):
During 2018, the $65.8 million of realized losses on sales of $1,295.8 million of fixed maturity securities, available for sale included: (i) $54.0 million related to various corporate securities; (ii) $4.1 million related to commercial mortgage-backed securities; (iii) $4.1 million related to asset-backed securities; and (iv) $3.6 million related to various other investments.
During 2017, the $24.2 million of realized losses on sales of $427.6 million of fixed maturity securities, available for sale, included: (i) $16.8 million related to various corporate securities; (ii) $3.6 million related to commercial mortgage-backed securities; and (iii) $3.8 million related to various other investments.
Level 2 - includes assets and liabilities valued using inputs that are quoted prices for similar assets in an active market, quoted prices for identical or similar assets in a market that is not active, observable inputs, or observable inputs that can be corroborated by market data. Level 2 assets and liabilities include those financial instruments that are valued by independent pricing services using models or other valuation methodologies. These models consider various inputs such as credit rating, maturity, corporate credit spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by transactions executed in the marketplace. Financial assets in this category primarily include: certain publicly registered and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain equity securities; most investments held by our consolidated VIEs; certain mutual fund investments; most short-term investments; and non-exchange-traded derivatives such as call options. Financial liabilities in this category include investment borrowings, notes payable and borrowings related to VIEs.
In August 2011, we were notified of an examination to be done on behalf of a number of states for the purpose of determining compliance with unclaimed property laws by the Company and its subsidiaries. Such examination has included inquiries related to the use of data available on the U.S. Social Security Administration's Death Master File ("SSADMF") to
The following reconciles net income (loss) to net cash provided by operating activities (dollars in millions):
Statutory earnings build the capital required by ratings agencies and regulators. Statutory earnings, fees and interest paid by the insurance companies to the parent company create the "cash flow capacity" the parent company needs to meet its obligations, including debt service. The consolidated statutory net income (loss) (a non-GAAP measure) of our insurance subsidiaries was $291.4 million, $(293.3) million (including approximately $541 million loss related to a reinsurance transaction) and $352.3 million in 2019, 2018 and 2017, respectively. Net income in 2019 includes a $46.0 million tax benefit to be received from CNO (resulting from the implementation of a tax planning strategy). Such amount is offset by an accrued dividend of $46.0 million payable to the non-life parent of the insurance subsidiaries. Accordingly, there was no impact on capital and surplus in 2019 related to these transactions. Also included in net income were net realized capital gains (losses), net of income taxes, of $(16.6) million, $43.8 million and $(9.9) million in 2019, 2018 and 2017, respectively. In addition, such net income included pre-tax amounts for fees and interest paid to CNO or its non-life subsidiaries totaling $166.3 million, $159.2 million and $158.3 million in 2019, 2018 and 2017, respectively.
The following table sets forth the amortized cost and estimated fair value of those investments held by the VIEs with unrealized losses at December 31, 2019, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.