Total Revenues were $584.4 million and $501.0 million for the years ended December 31, 2002 and 2001, respectively. The increase of $83.4 million is primarily due to the following:
The Corporate segment had a pre-tax net income of $42.8 million for the year ended December 31, 2002, compared to a net loss of $23.1 million for the year ended December 31, 2001. The $65.9 million pre-tax increase is primarily attributed to $36 million of derivative income earned during the year ended December 31, 2002, compared to $25 million of net derivative losses for the year ended December 31, 2001. During the last six months of 2001, the Company purchased put options on the S&P 500 index as part of its overall risk management strategy. These options were purchased as a hedge relating to the risks associated with the impact of the equity market decline on the variable annuity products. Effective July 1, 2002, the puts were reallocated to the Wealth Management segment to better reflect the economics of the put purchase and the results of the Wealth Management segment.
: The Transportation category includes airlines, railroads, trucking and shipping companies. Most of these sectors are experiencing some effects from the cyclical downturn. However, the airline industry has been particularly hard hit with demand reduced by the events of September 11, the weak economy and structural changes to the industry. As such, the domestic airline industry posted a historic loss of $9.0 billion in 2002. Two major airlines, United Airlines and U.S. Airways, filed for Chapter 11 protection. The Company generally lends to the industry on a secured basis. Thus, the emphasis of recovery values is based on the collateral backing the secured financings. These secured airline financing are of two types: Equipment Trust Certificates ("ETCs") and Enhanced Equipment Trust Certificates ("EETCs"). The ETCs have an initial 80% loan-to-value ratio and the EETCs senior tranches had an initial 40-50% loan-to-value ratio and include a provision for a third party to pay interest for eighteen months from default. Although the Company has experienced a fair amount of deterioration in the airline component of its transportation portfolio in 2002, it is provided protection due to the secured nature of its holdings.
On July 25, 2002, the Company issued an $80 million promissory note at 5.71%, maturing June 30, 2012 to an affiliate, Sun Life (Hungary) Group Financing Limited Liability Company ("Sun Life (Hungary) Ltd"). The Company pays interest semi-annually to Sun Life (Hungary), Ltd. On December 31, 2002 the Company paid $1.9 million in interest. The proceeds of the note were used to purchase fixed rate government and corporate bonds.
Fixed maturities with an amortized cost of approximately $2.7 million and $3.1 million at December 31, 2002 and 2001, respectively, were on deposit with federal and state governmental authorities as required by law.
The total principal amount of the commercial mortgage loans was $72.7 million at December 31, 2002, none of which were 60 days or more past due. There were no net credit losses incurred relating to the commercial mortgage loans at the date of securitization and at December 31, 2002.
The projected benefit obligations were based on calculations that utilize certain assumptions. The assumed weighted average discount rate was 6.75%, 7.00% and 7.50% for the years ended December 31, 2002, 2001 and 2000, respectively. The expected return on plan assets for 2002, 2001 and 2000 was 8.75% and the assumed rate of compensation increase was 4.0% for 2002, and 4.5% for 2001 and 2000. The Company's share of the net periodic benefit costs for the years ended December 31, 2001 and 2000 were $1.0 million and $0.81 million, respectively.