There was no other revenue for fiscal year 2000, as compared to $715,000 in other revenue in 1999. The amount of other revenue was the result of a settlement from insurance claims filed for the recovery of the costs to litigate a case against a former officer of the Company.
Net investment income increased by $322,000, or 9.0%, to $3,909,000 for fiscal year 1999 from $3,587,000 for fiscal year 1998. The increase was primarily due to a rental income being paid to the Company from Security National Financial Corporation, the Company's ultimate parent under the terms of the Administrative Services Agreement entered into by the Company on January 1, 1999. See Note 11 to the Notes to Financial Statements included in this report. In addition the Company was able to increase its yield by investing in mortgage loans.
Notes to Financial Statements............ . . . . . . . . . . . . . . . 23
1. Nature of business and summary of significant accounting policies, continued: ---------------------------------------------------------------------------- (e) Cash and cash equivalents
The Company has performed tests concerning the recoverability of deferred acquisition costs. These methods include those typically used by many companies in the life insurance industry. Further, the Company conducts a sensitivity analysis of its assumptions that are used to estimate the future expected gross profits, which management has used to determine the future recoverability of the deferred acquisition costs.
1. Nature of business and summary of significant accounting policies, continued: ---------------------------------------------------------------------------- (k) Recognition of premium revenue and related costs
A reconciliation of net income (loss) for the years ended December 31, 2000, 1999, 1998 and shareholders' equity as of December 31, 2000 and 1999 between the amounts reported on a statutory basis and the related amounts presented on the basis of generally accepted accounting principles is as follows:
For non-universal life policies written during 1983 through 1988, interest rates used are 8.0 percent for policy years one through five, decreasing by .1 percent per year for policy years six through twenty, to 6.5 percent for policy years twenty-one and thereafter. For certain non universal life contracts written in 1996-2000, interest rates of 6.75% level have been assumed. For non-universal life policies written in 1982 and prior, interest rates vary, depending on policy type, from 7 percent for all policy years to 6 percent for policy years one through five and 5 percent for years six and thereafter. For universal life policies written since 1988, the interest rate used is a credited rate generally based upon the Company's investment yield less 1%.
Income tax expense (benefit) for the years ended December 31, 2000, 1999, 1998 is summarized as follows:
At December 31, 2000, the balance of the Policyholders' Surplus account aggregated approximately $236,000. The Company has not recorded deferred income taxes totaling approximately $80,000 relating to this amount as it has no plan to distribute the amounts in Policyholders' Surplus in the foreseeable future. The Tax Reform Act of 1986 enacted a new separate parallel tax system referred to as the Alternative Minimum Tax (AMT) system. AMT is based on a flat rate applied to a broader tax base. It is calculated separately from the regular federal income tax and the higher of the two taxes is paid. The excess of the AMT over regular tax is a tax credit, which can be carried forward indefinitely to reduce regular tax liabilities of future years. In 2000, 1999, 1998, AMT exceeded regular tax by $19,854, $27,338, and $156,820, respectively. At December 31, 2000, the AMT tax credit available to reduce future regular tax totaled $262,528.