Universal life and investment-type product fees were $122.0 million for 1998, an increase of $21.2 million, or 21. 0%, from $100.8 million reported for 1997. This increase was a result of an increase in fees relating to the Company's flexible premium variable annuity ("FPVA") business of $11.9 million and higher fees relating primarily to the Company's variable universal life ("VUL") and corporate sponsored variable universal life ("CSVUL") business of $10.9 million. For the year ended December 31, 1998, the Company reported total fees in its FPVA business of $56.0 million, as compared to $44.1 million reported for the year ended December 31, 1997. FPVA account value increased $404.2 million during 1998 to $4,176.1 million, as compared to $3,771.9 million in 1997. The increase in account value in 1998 resulted from new sales and other deposits of $529.3 million and market appreciation of $264.0 million, offset by approximately $389.1 million in withdrawals and surrenders. The increase relating to the Company's VUL and CSVUL business was $8.9 million and $2.0 million, respectively. The Company began offering CSVUL during the fourth quarter of 1997. For 1998, the Company reported total fees from its VUL business of $26.0 million, as compared to $17.1 million reported from 1997. The increase in VUL fees is primarily due to higher charges for the cost of insurance, administration, and loading of approximately $5.0 million, $0.7 million and $1.6 million, respectively.
Amortization of deferred policy acquisition costs ("DAC") was $ 35.5 million for 1998, a decrease of $10.8 million, or 23.3%, from $46.3 million reported for 1997. The decrease primarily consisted of lower amortization on universal life ("UL") products due to revised estimate of mortality; VUL decreased reflecting higher claims during 1998 as compared to 1997. Amortization of DAC on the SPDA product line decreased due to lower profit margins as a result of the declining fund balances and narrowing of interest spreads.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Other operating costs and expenses were $46.0 million for 1997, an increase of $6.6 million, or 16.8%, from $39.4 million reported for 1996. The increase is primarily due to higher intercompany allocation of expenses from MONY Life which reflects the Company's higher production relative to that of MONY Life on a consolidated basis.
In 1996, the Company in conjunction with MONY Life and affiliates (hereafter collectively referred to as "MONY Life and its subsidiaries") initiated a formal Year 2000 Project (the "Project") to resolve the Year 2000 issue. The scope of the Project was identified, and funding was established. In early 1997, MONY Life and its subsidiaries retained Command Systems, Inc., and Keane, Inc. to assist in bringing its computer and information systems into Year 2000 compliance. MONY Life and its subsidiaries' overall goal for information technology ("IT") related items was to have business-critical hardware and software compliant by December 31, 1998, with additional testing and enterprise end-to-end testing occurring in 1999. MONY Life and its subsidiaries have also retained a consulting firm to assist in the evaluation of Year 2000 issues affecting its non-IT systems in facilities and equipment which may contain date logic in embedded chips. MONY Life and its subsidiaries' overall goal is to have these non-IT systems compliant by mid-1999.
The Company's investment operations are managed by MONY Life's investment area pursuant to an agreement between the Company and MONY Life dated January 1, 1982. The investment area reports directly to the Chief Investment Officer of MONY Life. The investment area, in consultation with the product actuaries of MONY Life is responsible for determining, within specified risk tolerances and investment guidelines, the general asset allocation, duration and other characteristics of the Company's investment portfolio.
At December 31, 1998, the percentage, based on estimated fair value, of total public and private placement fixed maturities that were investment grade (NAIC Designation 1 or 2) was 94.9% compared to 92.8% for December 31, 1997. The fixed maturities portfolio was comprised, based on estimated fair value, of 56.2% in public fixed maturities and 43.8% in private fixed maturities at December 31, 1998 and 57.7% in public fixed maturities and 42.3% in private fixed maturities at December 31, 1997.