Sales commissions. In 2014, sales-based commissions grew from 2013 in line with the increase in sales-based revenues noted above. The increase in asset-based commissions in 2014 compared to 2013 was mostly consistent with the increase in asset-based revenues when including the relevant costs associated with asset-based revenue from segregated funds, which are recorded within insurance commissions and amortization of DAC. Additionally, changes in product mix contributed slightly to the increase in asset-based commissions in 2014 from 2013.
Asset Values in Client Accounts. Changes in asset values in client accounts were as follows:
Total Benefits and Expenses. The increase in total benefits and expenses in 2014 from 2013 was driven by higher other operating expenses mainly related to charges of approximately $4.2 million, reflecting Co-CEO transition expenses that were recognized in 2014 due to the modification of their employment terms, including ending their employment on April 1, 2015 instead of in August 2015. Other operating expenses also increased due to accelerated expense recognition from amendments to retirement provisions in our 2014 management equity award agreements, which, for the segment, were approximately $1.6 million.
Subsequent Events. The Company has evaluated subsequent events for recognition and disclosure for occurrences and transactions after the date of the consolidated financial statements at December 31, 2014.
Investments are reviewed on a quarterly basis for other-than-temporary impairments (“OTTI”). Credit risk, interest rate risk, the amount of time the security has been in an unrealized loss position, actions taken by ratings agencies, and other factors are considered in determining whether an unrealized loss is other-than-temporary. Our consolidated statements of income for the three years ended December 31, 2014 reflect the impairment on debt securities that we intend to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale (“AFS”) debt securities that we have no intent to sell and believe that it is more likely than not we will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the remainder is recognized in accumulated other comprehensive income (“AOCI”) in the accompanying consolidated financial statements. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security. Any subsequent changes in fair value of the security related to non-credit factors recognized in other comprehensive income are presented as an adjustment to the amount previously presented in the net unrealized investment gains (losses) other-than-temporarily impaired category of accumulated other comprehensive income.
Impairment charges recognized in earnings on available-for-sale securities were as follows:
The securities noted above were considered to be other-than-temporarily impaired due to our intent to sell them; adverse credit events, such as news of an impending filing for bankruptcy; analyses of the issuer’s most recent financial statements or other information in which liquidity deficiencies, significant losses and large declines in capitalization were evident; or analyses of rating agency information for issuances with severe ratings downgrades that indicated a significant increase in the possibility of default. During 2014, we recognized impairment losses related to invested assets held at the Parent Company that we intended to sell to fund share repurchases, as well as credit impairments on certain other investments.
A reconciliation of the change in the unrecognized income tax benefit for the years ended December 31, 2014 and 2013 is as follows:
In 2014, management (regardless of geography) received RSUs that have time-based vesting requirements with equal and annual graded vesting over approximately three years subsequent to the grant date. During the third quarter of 2014, the Compensation Committee of the Board of Directors amended the equity awards granted to management in 2014 (the “modified awards”) to provide for such awards to vest upon the voluntary termination of employment by any employee who is “retirement eligible” as of his or her termination date. In order to be retirement eligible, an employee must be at least 55 years old and his or her age plus years of service with the Company must equal at least 75.
significant time to complete, and it is unclear whether the Company will be required to compare the Social Security Administration’s Death Master File to its records for periods prior to 2011, including with respect to policies which have lapsed, to determine whether benefits are owed in instances where an insured appears to have died but no claim for death benefits has been made. The potential outcome of such actions is difficult to predict but could subject the Company to adverse consequences, including, but not limited to, settlement payments, additional payments to beneficiaries and additional escheatment of funds deemed abandoned under state laws. At this time, the Company cannot reasonably estimate the likelihood or the impact of additional costs or liabilities that could result from the resolution of these matters. These actions may also result in changes to the Company’s procedures for the identification and escheatment of abandoned property and other financial liability.