Net Investment Income and Net Realized Gain on Investments. Net investment income decreased $335,000, or 45%, from $742,000 for the year ended December 31, 2002 to $407,000 for the same period in 2003, primarily due to the decreased size of our fixed maturity securities portfolio during 2003 as compared to 2002. The decrease in our fixed maturity securities portfolio resulted from the sale of
Change in Future Policy Benefits. Change in future policy benefits decreased $471,000, or 31%, from $1.5 million for the year ended December 31, 2002 to $1.1 million for the same period in 2003. The decrease resulted from the aging of the policies and the decrease in business in force reinsured on a monthly renewable term basis.
Costs of Withdrawn Offering. During October 2002, we withdrew the registration statement for our proposed initial public offering of 9.5 million shares of common stock. Offering costs related to our withdrawn offering were $1.7 million for the year ended December 31, 2002. These costs, which consisted primarily of legal, printing, accounting, and actuarial fees, were expensed during the quarter ended September 30, 2002. We did not incur any similar expenses in 2003.
Interest Expense. Interest expense decreased $5,000, or 1%, from $380,000, for the year ended December 31, 2002 to $375,000 for the comparable period in 2003. The decrease was due to the interest associated with the $7.2 million settlement paid to Western Reserve on April 2, 2002 to fund the reinsurance amendments that were effective January 1, 2002.
Benefits, Claims and Settlement Expenses. Benefits, claims, and settlement expenses increased $2.1 million, or 33%, from $6.3 million for the year ended December 31, 2001 to $8.4 million for the same period in 2002. The increase was primarily associated with a lower incidence of life insurance death claims in 2001 compared to the incidence of death claims in 2002, the increasing age of the policies reinsured and an increase in variable annuity death claims. The aggregate face value of insurance underlying the polices we reinsured at December 31, 2001 was $9.1 billion compared to $8.5 billion at December 31, 2002.
Change in Future Policy Benefits. Change in future policy benefits decreased $886,000, or 37%, from $2.4 million for the year ended December 31, 2001 to $1.5 million for the same period in 2002. The majority of this decrease was due to the conversion of all Western Reserve Financial Freedom Builder variable universal life policies and riders, issued from April 1, 2001 through December 31, 2001, which had been reinsured by us on a monthly renewable term basis, to a coinsurance and modified coinsurance basis, effective January 1, 2002.
Financing Cash Flows. Financing cash flows relate primarily to activities associated with our capital position. Net cash flows used in financing activities were $1.1 million, $1.1 million and zero for the years ended December 31, 2001, 2002 and 2003, respectively. There were no cash flows provided by or used in financing operations in 2003. Cash flows used in financing activities in 2002 related to the withdrawal of the registration statement in October 2002 for our proposed initial public offering of 9.5 million shares of