2009 compared to 2008 and increased 111.6% to $31.1 million for 2008 compared to 2007. The increases in premiums for 2009 and 2008 were due to high levels of fixed-rate annuity sales as a result of strong demand. See “Business Segments-Asset Management Segment.”
Net capital losses were $26.9 million, $128.8 million and $0.6 million for 2009, 2008 and 2007, respectively. Net capital gains and losses are reported in the Other category and primarily occur as a result of other-than-temporary impairments (“OTTI”), from sales of our assets for more or less than amortized cost and from changes to the commercial mortgage loan loss allowance, none of which are likely to occur in regular patterns.
The decrease in benefits to policyholders for 2009 compared to 2008 was primarily due to a decline in business growth in our group insurance business, as evidenced by comparatively lower premiums, and comparatively favorable claims experience in our individual disability insurance businesses. The decrease in benefits to policyholders was partially offset by increased life-contingent annuities benefits to policyholders in the Asset
Persistency. During 2009, persistency was under pressure from a price-competitive sales environment, especially in the larger case market. Persistency in our group insurance business increased to 83.8% for 2009, compared to 82.9% for 2008. Although the increase in persistency was favorable compared to 2008, the 2009 persistency was below our historical average, which was 86.4% for the previous five years. Persistency in our individual disability products remained favorable. A significant portion of our in force individual disability policies are non-cancelable.
In addition to our two segments, we report our holding company and corporate activities in the Other category. This category includes return on capital not allocated to the product segments, holding company expenses, interest on debt, unallocated expenses including one-time costs, net capital gains and losses related to the impairment or the disposition of our invested assets and adjustments made in consolidation.
The estimated average loan to value ratio for the overall portfolio was approximately 66% at December 31, 2009. The average loan balance retained by us in the portfolio was approximately $0.8 million at December 31, 2009. We have the contractual ability to pursue full personal recourse on approximately 70% of our loans and partial personal recourse on a majority of the remaining loans. Average capitalization rates were 9.0% for the portfolio.
Standard and The Standard Life Insurance Company of New York prepare their statutory financial statements in accordance with accounting practices prescribed or permitted by their states of domicile. Prescribed statutory accounting practices include state laws, regulations, and general administrative rules, as well as the SSAP set forth in publications of the National Association of Insurance Commissioners (“NAIC”).
These assumptions are modified to reflect actual experience when appropriate. Additional amortization of DAC is charged to current earnings to the extent it is determined that future premiums or gross profits are not adequate to cover the remaining amounts deferred. DAC totaled $252.6 million and $249.2 million at December 31, 2009 and 2008, respectively. Changes in actual persistency are reflected in the calculated DAC balance. Costs that do not vary with the production of new business are not deferred as DAC and are charged to expense as incurred. Generally, annual commissions are considered expenses and are not deferred.
We have audited the accompanying consolidated balance sheets of StanCorp Financial Group, Inc., and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
Investments, excluding fixed maturity securities and commercial mortgage loans, include real estate held for investment, derivatives and policy loans. Capital gains and losses for these investments are recognized using the specific identification method. For real estate held for investment, we record impairments when it is determined that the decline in fair value of an investment below its amortized cost is other than temporary. The impairment loss is charged to net capital gains or losses, and the cost
StanCorp operates through two reportable segments: Insurance Services and Asset Management, as well as an Other category. Resources are allocated and performance is evaluated at the segment level. The Insurance Services segment offers group and individual disability insurance, group life and AD&D insurance, group dental and group vision insurance and absence management services. The Asset Management segment offers full-service 401(k) plans, 403(b) plans, 457 plans, defined benefit plans, money purchase pension plans, profit sharing plans and non-qualified deferred compensation products and services through an affiliated broker-dealer. This segment also offers investment advisory and management services, financial planning services, commercial mortgage loan origination and servicing, individual fixed-rate annuity products, group annuity contracts and retirement plan trust products. The Other category includes return on capital not allocated to the product segments, holding company expenses, interest on debt, unallocated expenses including one-time costs, net capital gains and losses related to the impairment or the disposition of our invested assets and adjustments made in consolidation.
revenues were $13.9 million, $12.9 million and $11.9 million for 2009, 2008 and 2007, respectively.
A liquidity premium that is estimated from historical loan sales and is applied over and above base yields.
See “Note 1-Summary of Significant Accounting Policies-Investment Valuations-Fixed Maturity Securities” for a discussion regarding fixed maturity securities’ OTTI and cumulative effect adjustment.
The following table sets forth the amount of commercial mortgage loans on the consolidated balance sheet at December 31, 2009, segregated by origination year:
The increase in the mortgage loan loss allowance in 2009 was primarily due to increased delinquencies, requests for forbearance and loans in the process of foreclosure in our mortgage loan portfolio.
The estimated prior service credit and net loss for the postretirement benefit plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2010 is $0.3 million and $0.2 million, respectively.
The Company granted 109,884, 77,712 and 83,655 Performance Shares for 2009, 2008 and 2007, respectively. The compensation cost that the Company will ultimately recognize as a result of these awards is dependent on the Company’s financial performance. Assuming that the maximum is achieved for each performance goal, $3.8 million in additional compensation cost would be recognized through 2012. A target or expected payout of 70% of the total would result in approximately $2.5 million of additional compensation cost through 2012. This cost is expected to be recognized over a weighted-average period of 1.6 years. During 2009, certain executive officers of the Company retired upon which they forfeited 82,027 Performance Shares in accordance with their long-term incentive compensation agreements.
The Terrorism Risk Insurance Act of 2002 (“TRIA”), which has been extended through 2014, provides for federal government assistance to property and casualty insurers in the event of material losses due to terrorist acts on behalf of a foreign person or foreign interest. Due to
Effective October 1, 2000, Standard assumed, through a reinsurance agreement, the individual disability insurance business of Minnesota Life. Standard paid a ceding commission of approximately $55 million and received approximately $500 million in assets and corresponding statutory liabilities. If Standard were to become unable to meet its obligations, Minnesota Life would retain the reinsured liabilities. Therefore, in accordance with the agreement with Minnesota Life, Standard established a trust for the benefit of Minnesota Life with the market value of assets in the trust equal to Minnesota Life’s reinsurance receivable from Standard. The market value of assets required to be maintained in the trust is determined quarterly. The market value of assets required to be maintained in the trust at December 31, 2009, was $596.0 million. Accompanying the transaction was a national marketing agreement that provides access to Minnesota