Headquarters. Our headquarters is located on a 170-acre corporate campus in Carmel, Indiana, immediately north of Indianapolis. The 11 buildings on the campus (all but one of which are owned) contain approximately 810,000 square feet of space and house Conseco's executive offices and certain administrative operations of its subsidiaries. The campus has ample room for additional buildings to support future growth.
Sales of receivables occur when we sell finance receivables that we originate through securitizations. The total receivables sold in a particular period depends on many factors, including: (i) the volume of recent originations; (ii) market conditions; and (iii) the availability and cost of alternative financing. Total finance receivables sold increased by 24 percent in 1998. Total finance receivables sold in 1997 were up 28 percent over 1996. Total finance receivables held by the Company were $3.3 billion at December 31, 1998, an increase of $1.3 billion over December 31, 1997, as a result of: (i) an increase in the pace of originations; and (ii) our election to hold more of the loans scheduled for sale late in each quarter until early in the next quarter, when the market supply of securitizations is usually lower and the spreads are usually better.
We offer deferred annuity products with a "market value adjustment" feature. These products provide us with additional protection from early terminations when interest rates rise by reducing the surrender value payable upon a full surrender of the policy in excess of the allowable penalty-free withdrawal amount. Conversely, when interest rates fall, the market value adjustment feature increases the surrender value payable to the policyholder. Annuity premiums collected with this feature decreased by 47 percent, to $94.7 million, in 1998 and by 30 percent to $179.5 million, in 1997.
In general, prepayments on the underlying mortgage loans and the securities backed by these loans increase when the level of prevailing interest rates declines significantly relative to the interest rates on such loans. Mortgage-backed securities purchased at a discount to par will experience an increase in yield when the underlying mortgages prepay faster than expected. These securities purchased at a premium that prepay faster than expected will incur a reduction in yield. When interest rates decline, the proceeds from the prepayment of mortgage-backed securities are likely to be reinvested at lower rates than we were earning on the prepaid securities. When interest rates increase, prepayments on mortgage-backed securities decrease, because fewer underlying mortgages are refinanced. When this occurs, the average duration of the mortgage-backed securities increases, which decreases the yield on mortgage-backed securities purchased at a discount, because
When we sell finance receivables, we recognize a gain equal to the proceeds from the sale, net of related transaction costs and the allocated carrying amount of the receivables sold. We allocate the carrying amount of finance receivables between the assets sold and retained based on their relative fair values at the date of sale. We determine the estimated fair value of the retained assets (securities classified as fixed maturities, interest-only securities and servicing rights) by discounting their projected future cash flows using current prepayment, default, loss, servicing cost and discount rate assumptions. Since we recognize no gain on securities we retain, our decision to retain additional securities in some securitizations (as described in the preceding paragraph) reduces the gain recognized in the current period. Such decision, however, increases investment income in future periods, or creates the opportunity to recognize additional gains in a later period if we decide to sell the securities.
Consistent with recent discussions with rating agencies, the Company has targeted the following goals for sometime during 1999: (i) the ratio of corporate debt to total capital to be at or below 25 percent; and (ii) the ratio of corporate debt and preferred stock to total capital to be at or below 40 percent.
Consolidation issues. The consolidated financial statements have been prepared to give retroactive effect to the merger (the "Green Tree Merger") with Green Tree Financial Corporation ("Green Tree") accounted for as a pooling of interests (see note 2, "Acquisitions"). The pooling of interests method of accounting requires the restatement of all periods presented as if Conseco and Green Tree had always been combined. The consolidated statement of shareholders' equity therefore reflects the accounts of the Company as if additional shares of Conseco common stock had been issued during all periods presented. Intercompany transactions prior to the merger have been eliminated, and we have made certain reclassifications to Green Tree's financial statements to conform to Conseco's presentations. See note 2 for additional discussion of the Green Tree Merger.
Other invested assets. We use quoted market prices, where available. When quotes are not available, we assume a market value equal to carrying value.
(b) The valuation of interest-only securities is affected not only by the projected level of prepayments of principal and net credit losses, but also by the projected timing of such prepayments and net credit losses. Should the timing of projected prepayments of principal or net credit losses differ materially from the timing projected by the Company, such timing could have a material effect on the valuation of the interest-only securities.