0000950109-95-003177.txt : 19950815
0000950109-95-003177.hdr.sgml : 19950815
ACCESSION NUMBER: 0000950109-95-003177
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AETNA LIFE INSURANCE & ANNUITY CO /CT
CENTRAL INDEX KEY: 0000837010
STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311]
IRS NUMBER: 710294708
STATE OF INCORPORATION: CT
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 033-23376
FILM NUMBER: 95562917
BUSINESS ADDRESS:
STREET 1: 151 FARMINGTON AVE
CITY: HARTFORD
STATE: CT
ZIP: 06156
BUSINESS PHONE: 2032737834
MAIL ADDRESS:
STREET 1: 151 FARMINGTON AVENUE
CITY: HARTFORD
STATE: CT
ZIP: 06156
10-Q
1
FORM 10-Q DATED JUNE 30, 1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995 Commission file number 33-23376
------------- --------
Aetna Life Insurance and Annuity Company
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 71-0294708
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
--------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (203) 273-0978
------------------
None
--------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Title of Class at July 31, 1995
-------------- ----------------
Common Stock,
par value $50 55,000
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Quarterly Report For Period Ended June 30, 1995 on Form 10-Q
TABLE OF CONTENTS
-----------------
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income.............................. 3
Consolidated Balance Sheets.................................... 4
Consolidated Statements of Changes in Shareholder's Equity..... 5
Consolidated Statements of Cash Flows.......................... 6
Condensed Notes to Consolidated Financial Statements........... 7
Independent Auditors' Review Report............................ 8
Item 2. Management's Analysis of the Results of Operations.......... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 14
Item 6. Exhibits and Reports on Form 8-K............................ 14
Signatures............................................................ 15
(2)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Statements of Income
(millions)
3 Months Ended June 30, 6 Months Ended June 30,
----------------------- -----------------------
1995 1994 1995 1994
---- ---- ---- ----
Revenue:
Premiums $ 38.5 $ 27.1 $ 70.7 $ 52.5
Charges assessed against policyholders 76.0 68.2 150.9 136.4
Net investment income 246.1 229.7 481.9 460.8
Net realized capital gains 5.9 1.1 11.0 1.9
Other income 9.8 .8 22.5 2.9
------ ------ ------ ------
Total revenue 376.3 326.9 737.0 654.5
Benefits and expenses:
Current and future benefits 231.8 208.1 446.9 414.5
Operating expenses 73.3 51.9 148.6 112.2
Amortization of deferred policy acquisition costs 9.2 6.7 20.4 19.8
------ ------ ------ ------
Total benefits and expenses 314.3 266.7 615.9 546.5
Income before federal income taxes 62.0 60.2 121.1 108.0
Federal income taxes 20.4 19.8 39.2 35.4
------ ------ ------ ------
Net income $ 41.6 $ 40.4 $ 81.9 $ 72.6
====== ====== ====== ======
See Condensed Notes to Consolidated Financial Statements.
(3)
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Balance Sheets
(millions)
June 30, December 31,
Assets 1995 1994
------ ---- ----
Investments:
Debt securities, available for sale:
(amortized cost: $11,388.2 and $10,577.8) $11,852.2 $10,191.4
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $58.6 and $43.3) 65.5 47.2
Investment in affiliated mutual funds (cost: $210.9 and $187.1) 227.5 181.9
Common stock (cost: $2.0 at June 30, 1995) 2.0 --
Short-term investments 21.0 98.0
Mortgage loans 5.6 9.9
Policy loans 284.4 248.7
Limited partnership 21.7 24.4
-------------- --------------
Total investments 12,479.9 10,801.5
Cash and cash equivalents 487.4 623.3
Accrued investment income 149.6 142.2
Premiums due and other receivables 113.8 75.8
Deferred policy acquisition costs 1,241.5 1,172.0
Reinsurance loan to affiliate 668.2 690.3
Other assets 24.3 15.9
Separate Accounts assets 8,841.5 7,420.8
-------------- --------------
Total assets $24,006.2 $20,941.8
============== ==============
Liabilities and Shareholder's Equity
------------------------------------
Liabilities:
Future policy benefits $3,186.8 $2,920.4
Unpaid claims and claim expenses 19.7 23.8
Policyholders' funds left with the Company 9,921.6 8,949.3
-------------- --------------
Total insurance reserve liabilities 13,128.1 11,893.5
Other liabilities 389.9 302.1
Federal income taxes:
Current 17.0 3.4
Deferred 167.9 233.5
Separate Accounts liabilities 8,841.5 7,420.8
-------------- --------------
Total liabilities 22,544.4 19,853.3
-------------- --------------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized; 55,000 shares issued and outstanding) 2.8 2.8
Paid-in capital 407.6 407.6
Net unrealized capital gains (losses) 102.4 (189.0)
Retained earnings 949.0 867.1
-------------- --------------
Total shareholder's equity 1,461.8 1,088.5
-------------- --------------
Total liabilities and shareholder's equity $24,006.2 $20,941.8
============== ==============
See Condensed Notes to Consolidated Financial Statements.
(4)
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
6 Months Ended June 30,
-------------------------------
1995 1994
---- ----
Shareholder's equity, beginning of period $1,088.5 $1,246.7
Net change in unrealized capital gains (losses) 291.4 (129.4)
Net income 81.9 72.6
-------------- --------------
Shareholder's equity, end of period $1,461.8 $1,189.9
============== ==============
See Condensed Notes to Consolidated Financial Statements.
(5)
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Statements of Cash Flows
(millions)
6 Months Ended June 30,
-----------------------------
1995 1994
---- ----
Cash Flows from Operating Activities:
Net income $81.9 $72.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued investment income (7.4) (13.6)
Decrease (increase) in premiums due and other receivables 3.3 (3.2)
Increase in policy loans (35.7) (20.7)
Increase in deferred policy acquisition costs (69.5) (31.3)
Decrease in reinsurance loan to affiliate 22.1 14.7
Net increase in universal life account balances 111.4 70.9
Increase in other insurance reserve liabilities 15.3 15.7
Net decrease in other liabilities and other assets 39.7 13.0
Decrease (increase) in federal income taxes liability 1.0 (21.4)
Net accretion of discount on debt securities (32.1) (46.6)
Net realized capital gains (11.0) (1.9)
-------------- -------------
Net cash provided by operating activities 119.0 48.2
-------------- -------------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 2,342.2 1,493.2
Equity securities 77.8 86.5
Investment maturities and collections of:
Debt securities available for sale 259.5 945.6
Short-term investments 86.6 3.5
Cost of investment purchases in:
Debt securities (3,339.7) (2,800.3)
Equity securities (118.2) (152.5)
Short-term investments (9.5) (62.1)
-------------- -------------
Net cash used for investing activities (701.3) (486.1)
-------------- -------------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 977.4 917.9
Withdrawals of investment contracts (531.0) (534.3)
-------------- -------------
Net cash provided by financing activities 446.4 383.6
-------------- -------------
Net decrease in cash and cash equivalents (135.9) (54.3)
Cash and cash equivalents, beginning of period 623.3 536.1
-------------- -------------
Cash and cash equivalents, end of period $487.4 $481.8
============== =============
Supplemental cash flow information:
Income taxes paid, net $38.1 $56.8
============== =============
See Condensed Notes to Consolidated Financial Statements.
(6)
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Condensed Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiaries, Aetna Insurance Company
of America, Systematized Benefits Administrators, Inc., Aetna Private
Capital, Inc. and Aetna Investment Services, Inc. (collectively, the
"Company"). Aetna Life Insurance and Annuity Company is a wholly owned
subsidiary of Aetna Life and Casualty Company ("Aetna").
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and are unaudited. Certain
reclassifications have been made to 1994 financial information to conform
to 1995 presentation. These interim statements necessarily rely heavily on
estimates including assumptions as to annualized tax rates. In the opinion
of management, all adjustments necessary for a fair statement of results
for the interim periods have been made. All such adjustments are of a
normal recurring nature.
2. Federal Income Taxes
--------------------
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. During the six months ended June 30, 1995,
the Company moved from a net unrealized capital loss position at December
31, 1994 of $189.0 million to a net unrealized capital gain position of
$102.4 million at June 30, 1995, primarily due to decreases in interest
rates. As a result, all valuation allowances previously established
related to deferred tax assets on these capital losses were reversed,
which had no impact on net income for the three and six months ended June
30, 1995.
(7)
Independent Auditors' Review Report
-----------------------------------
The Board of Directors
Aetna Life Insurance and Annuity Company:
We have reviewed the accompanying condensed consolidated balance sheet of Aetna
Life Insurance and Annuity Company and Subsidiaries as of June 30, 1995, and the
related condensed consolidated statements of income for the three-month and six-
month periods ended June 30, 1995 and 1994, and the related condensed
consolidated statements of changes in shareholder's equity and cash flows for
the six-month periods then ended. These condensed consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Aetna Life Insurance and Annuity
Company and Subsidiaries as of December 31, 1994, and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for the
year then ended (not presented herein); and in our report dated February 7,
1995, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1994, is fairly
presented, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 27, 1995
(8)
Item 2. Management's Analysis of the Results of Operations
Consolidated Results of Operations: Operating Summary
-----------------------------------------------------
3 Months Ended 6 Months Ended
June 30, June 30,
Operating Summary (millions) 1995 1994 1995 1994
------------------------------------------------------------------------------------------------------
Premiums $ 38.5 $ 27.1 $ 70.7 $ 52.5
Charges assessed against policyholders 76.0 68.2 150.9 136.4
Net investment income 246.1 229.7 481.9 460.8
Net realized capital gains 5.9 1.1 11.0 1.9
Other income 9.8 .8 22.5 2.9
-------------------------------------------------------------------------------------------------
Total revenue 376.3 326.9 737.0 654.5
-------------------------------------------------------------------------------------------------
Current and future benefits 231.8 208.1 446.9 414.5
Operating expenses 73.3 51.9 148.6 112.2
Amortization of deferred policy
acquisition costs 9.2 6.7 20.4 19.8
-------------------------------------------------------------------------------------------------
Total benefits and expenses 314.3 266.7 615.9 546.5
-------------------------------------------------------------------------------------------------
Income before federal income taxes 62.0 60.2 121.1 108.0
Federal income taxes 20.4 19.8 39.2 35.4
-------------------------------------------------------------------------------------------------
Net income $ 41.6 $ 40.4 $ 81.9 $ 72.6
======================================================================================================
------------------------------------------------------------------------------------------------------
Deposits not included in premiums
above: (1)
Fully guaranteed $ 273.9 $ 167.1 $ 573.2 $ 352.9
Experience-rated 288.3 303.0 559.1 616.0
Non-guaranteed 366.9 358.2 717.9 701.2
-------------------------------------------------------------
Total $ 929.1 $ 828.3 $ 1,850.2 $ 1,670.1
======================================================================================================
Assets under management: (2)
Fully guaranteed $ 3,209.8 $ 2,553.1
Experience-rated 10,215.5 8,947.6
Non-guaranteed 9,515.6 7,295.1
-------------------------------
Total $22,940.9 $18,795.8
======================================================================================================
(1) Under FAS 97, certain deposits are not included in premiums or revenue.
(2) Under FAS 115, included above are net unrealized capital gains of $ 463.9
million and net unrealized capital losses of $ 118.9 million at June 30,
1995 and 1994, respectively.
OVERVIEW
The Company's adjusted earnings (after-tax) follow (in millions):
3 Months Ended 6 Months Ended
June 30, June 30,
1995 1994 1995 1994
-------------------------------------------------------------
Net income $ 41.6 $ 40.4 $ 81.9 $ 72.6
Less:
Net realized capital gains 3.8 .8 7.1 1.3
-------------------------------------------------------------
Adjusted earnings $ 37.8 $ 39.6 $ 74.8 $ 71.3
=============================================================
The Company's adjusted earnings for the six months ended June 30, 1995
increased 5% when compared with the same period a year ago while second quarter
of 1995 adjusted earnings reflected a 5% decrease when compared to the second
quarter of 1994.
Second quarter and year-to-date results in 1995 reflected an increase in
charges assessed against policyholders and net investment income, primarily due
to an increase in assets under management. Results in 1995 also reflected
increases in operating expenses, primarily related to continued business growth
and the implementation of a new contract administration system.
(9)
SEGMENT RESULTS
Life Insurance Segment
----------------------
3 Months Ended 6 Months Ended
June 30, June 30,
Operating Summary (millions) 1995 1994 1995 1994
------------------------------------------------------------------------------------------------------
Premiums $ 12.7 $ 12.2 $ 25.2 $ 24.8
Charges assessed against policyholders 40.5 37.5 81.4 74.5
Net investment income 43.3 43.0 85.4 86.7
Net realized capital gains (losses) (1.1) .2 (.4) .3
Other income 1.2 1.0 3.0 2.5
-------------------------------------------------------------------------------------------------
Total revenue 96.6 93.9 194.6 188.8
-------------------------------------------------------------------------------------------------
Current and future benefits 46.8 52.3 94.3 103.4
Operating expenses 15.9 13.4 31.1 30.8
Amortization of deferred policy
acquisition costs 8.3 1.2 17.9 7.8
-------------------------------------------------------------------------------------------------
Total benefits and expenses 71.0 66.9 143.3 142.0
-------------------------------------------------------------------------------------------------
Income before federal income taxes 25.6 27.0 51.3 46.8
Federal income taxes 10.2 9.5 19.9 17.3
-------------------------------------------------------------------------------------------------
Net income $ 15.4 $ 17.5 $ 31.4 $ 29.5
======================================================================================================
------------------------------------------------------------------------------------------------------
Deposits not included in premiums
above: (1)
Experience-rated $ 85.9 $ 67.4 $ 165.0 $ 130.9
Non-guaranteed 11.7 6.8 19.9 12.6
--------------------------------------------------------------
Total $ 97.6 $ 74.2 $ 184.9 $ 143.5
======================================================================================================
Assets under management: (2)
Fully guaranteed $ 618.1 $ 632.7
Experience-rated 1,665.0 1,410.1
Non-guaranteed 103.4 72.8
------------------------------
Total $2,386.5 $2,115.6
======================================================================================================
(1) Under FAS 97, certain deposits are not included in premiums or revenue.
(2) Under FAS 115, included above are net unrealized capital gains of $ 65.0
million and net unrealized capital losses $ 5.6 million at June 30, 1995
and 1994, respectively.
Adjusted earnings in the Life Insurance segment (after-tax) follow (in
millions):
3 Months Ended 6 Months Ended
June 30, June 30,
1995 1994 1995 1994
--------------------------------------------------------------
Net income $ 15.4 $ 17.5 $ 31.4 $ 29.5
Less:
Net realized capital gains (.7) .1 (.3) .2
(losses)
--------------------------------------------------------------
Adjusted earnings $ 16.1 $ 17.4 $ 31.7 $ 29.3
==============================================================
Adjusted earnings for the six months ended June 30, 1995 increased 8% when
compared with the same period a year ago while second quarter of 1995 adjusted
earnings reflected a 7% decrease when compared to the second quarter of 1994.
Second quarter and year-to-date results in 1995 reflected an increase in the
volume of business in force as a result of strong sales over the past year.
Charges assessed against policyholders for universal life and interest-
sensitive whole life insurance increased 8% and 9% for the three and six months
ended June 30, 1995 when compared with the same periods a year ago reflecting
an increase in the volume of business in force.
(10)
Net investment income for the three and six months ended June 30, 1995
decreased by 1% when compared with the same periods a year ago reflecting the
lower net investment yield on the Company's portfolio of investments, partially
offset by the increase in universal life assets under management.
Current and future benefits decreased 10% and 9% in the three and six months
ended June 30, 1995 when compared with the same periods a year ago reflecting
improved mortality experience related to universal life insurance.
Operating expenses for the six months ended June 30, 1995 remained level when
compared with the same period a year ago. Second quarter 1995 expenses
increased by 19% when compared with second quarter of 1994 primarily
attributable to continued business growth.
Financial Services Segment
--------------------------
3 Months Ended 6 Months Ended
June 30, June 30,
Operating Summary (millions) 1995 1994 1995 1994
------------------------------------------------------------------------------------------------------
Premiums $ 25.8 $ 14.9 $ 45.5 $ 27.7
Charges assessed against policyholders 35.5 30.7 69.5 61.9
Net investment income 202.8 186.7 396.5 374.1
Net realized capital gains 7.0 .9 11.4 1.6
Other income 8.6 (.2) 19.5 .4
-------------------------------------------------------------------------------------------------
Total revenue 279.7 233.0 542.4 465.7
-------------------------------------------------------------------------------------------------
Current and future benefits 185.0 155.8 352.6 311.1
Operating expenses 57.4 38.5 117.5 81.4
Amortization of deferred policy
acquisition costs .9 5.5 2.5 12.0
-------------------------------------------------------------------------------------------------
Total benefits and expenses 243.3 199.8 472.6 404.5
-------------------------------------------------------------------------------------------------
Income before federal income taxes 36.4 33.2 69.8 61.2
Federal income taxes 10.2 10.3 19.3 18.1
-------------------------------------------------------------------------------------------------
Net income $ 26.2 $ 22.9 $ 50.5 $ 43.1
======================================================================================================
------------------------------------------------------------------------------------------------------
Deposits not included in premiums
above: (1)
Fully guaranteed $ 273.9 $ 167.1 $ 573.2 $ 352.9
Experience-rated 202.4 235.6 394.1 485.1
Non-guaranteed 355.2 351.4 698.0 688.6
--------------------------------------------------------------
Total $ 831.5 $ 754.1 $ 1,665.3 $ 1,526.6
======================================================================================================
Assets under management: (2)
Fully guaranteed $ 2,591.7 $ 1,920.4
Experience-rated 8,550.5 7,537.5
Non-guaranteed 9,412.2 7,222.3
-------------------------------
Total $20,554.4 $16,680.2
======================================================================================================
(1) Under FAS 97, certain deposits are not included in premiums or revenue.
(2) Under FAS 115, included above are net unrealized capital gains of $ 398.9
million and net unrealized capital losses of $ 113.3 million at June 30,
1995 and 1994, respectively.
Adjusted earnings in the Financial Services segment (after-tax) follow (in
millions):
3 Months Ended 6 Months Ended
June 30, June 30,
1995 1994 1995 1994
-------------------------------------------------------------
Net income $ 26.2 $ 22.9 $ 50.5 $ 43.1
Less:
Net realized capital gains 4.5 .7 7.4 1.1
-------------------------------------------------------------
Adjusted earnings $ 21.7 $ 22.2 $ 43.1 $ 42.0
=============================================================
(11)
Effective January 1, 1995 the Company assumed responsibility for two service
organizations, a record keeping service organization and a payment and retiree
administration service organization, with year-to-date combined adjusted
earnings of $(.1) million. As a result, other income and operating expenses
reflect variances of $9.4 million and $8.8 million for the three months ended
June 30, 1995, and $19.8 million and $19.8 million for the six months ended June
30, 1995 when comparing to the same periods a year ago. The results of these
organizations were previously reported by an affiliate.
Adjusted earnings for the six months ended June 30, 1995 increased 3% when
compared with the same period a year ago while the second quarter of 1995
adjusted earnings reflected a 2% decrease when compared to the second quarter of
1994. Second quarter and year-to-date results in 1995 reflected an increase in
charges assessed against policyholders and net investment income, primarily due
to an increase in assets under management. Results in 1995 for the three and
six months ended also reflected increases in operating expenses.
Charges assessed against policyholders for annuity contracts increased 16% and
12% for the three and six months ended June 30, 1995 when compared with the same
periods a year ago, reflecting the increase in assets under management.
Net investment income increased 9% and 6% for the three and six months ended
June 30, 1995 when compared with the same periods a year ago, reflecting the
increase in assets under management offset by a lower net investment yield on
the Company's portfolio of investments.
Operating expenses for the three and six months ended June 30, 1995, excluding
the impact of moving the two service organizations into the Company as discussed
above, increased by 26% and 20% when compared to the same periods a year ago.
The increase reflected expenses associated with continued business growth and
the implementation of a new contract administration system.
General Account Investments
---------------------------
The Company's investment strategies and portfolios are intended to match the
duration of the related liabilities and provide sufficient cash flow to meet
obligations while maintaining a competitive after-tax rate of return. The
duration of these investments is monitored, and investment purchases and sales
are executed with the objective of having adequate funds available to satisfy
the Company's maturing liabilities. The risks associated with investments
supporting experience-rated products are assumed by those customers subject to,
among other things, certain minimum guarantees.
(12)
The Company's invested assets were comprised of the following, net of
impairment reserves:
June 30, December 31,
(Millions) 1995 1994
---------------------------------------------------------------------------------
Debt securities $11,852.2 $10,191.4
Equity securities
Non-redeemable preferred stock 65.5 47.2
Investment in affiliated mutual funds 227.5 181.9
Common stock 2.0 -
Short-term investments 21.0 98.0
Mortgage loans 5.6 9.9
Policy loans 284.4 248.7
Limited partnership 21.7 24.4
------------------------------
Total Investments 12,479.9 10,801.5
Cash and cash equivalents 487.4 623.3
------------------------------
Total Investments and Cash and Cash Equivalents $12,967.3 $11,424.8
================================================================================
At June 30, 1995 and December 31, 1994, the Company's carrying value of
investments in debt securities were $11.8 billion and $10.2 billion, 95% and
94%, respectively, of total general account invested assets. At June 30, 1995
and December 31, 1994, $9.2 billion and $8.0 billion, respectively, or 78% of
total debt securities supported experience-rated products.
It is management's objective that the portfolio of debt securities be of high
quality and be well-diversified by market sector. The debt securities in the
Company's portfolio are generally rated by external rating agencies, and, if
not externally rated, are rated by the Company on a basis believed to be
similar to that used by the rating agencies. The average quality rating of the
Company's debt security portfolio was AA- at June 30, 1995 and AA at December
31, 1994.
Debt Security Quality Ratings Debt Securities Investments by Market Sector
at June 30, 1995 at June 30, 1995
---------------------------------- ----------------------------------------------------------
AAA 48.6% U.S. Corporate Securities 43.2%
AA 10.9 Residential Mortgage-Backed Securities 30.2
A 25.3 Foreign Securities - U.S. Dollar Denominated 7.2
BBB 11.3 U.S. Treasuries/Agencies 5.3
BB 2.9 Other Loan-Backed Securities 6.7
B 1.0 Commercial/Multifamily Mortgage-
----------
100.0% Backed Securities 4.0
==========
Other 3.4
----------
100.0%
==========
(13)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal proceedings
pending to which the Company is a party or which would materially affect the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K
None.
(14)
EX-27
2
FINANCIAL DATA SCHEDULE
7
1,000,000
6-MOS
DEC-31-1995
JAN-01-1995
JUN-30-1995
11,852
0
0
295
6
0
12,480
487
7
1,242
24,006
3,186
2
18
9,922
0
3
0
0
1,459
24,006
71
482
11
23
447
0
0
121
39
82
0
0
0
82
0
0
0
0
0
0
0
0
0