SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
================================
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
// TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------------- to -----------------
Commission file number 0-21459
AmerUs Life Holdings, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Iowa 42-1459712
- --------------------------------------------------------------------------------
(State of other jurisdiction of incorporation or organization)(IRS employer
identification no.)
418 Sixth Avenue, Des Moines, Iowa 50309-2407
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (515) 280-1331
- --------------------------------------------------------------------------------
Former name, former address and formal fiscal year, if changed since last report
Indicate by check X 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 //
The number of shares outstanding of each of the registrant's classes of common
stock on August 13, 1997 was as follows:
Class A, Common Stock 18,155,989 shares
Class B, Common Stock 5,000,000 shares
Exhibit index - Page 37 Page 1 of 47
<PAGE>
INDEX
Page No.
Part I - Financial Information . . . . . . . . . . . . . . . . . .4
Item 1. Consolidated Financial Statements . . . . . . . . . . . .4
Consolidated Balance Sheets June 30, 1997
(Unaudited) and December 31, 1996 . . . . . . . . . . . . . . .4
Consolidated Statements of Income (Unaudited) - For
the Six Months Ended June 30, 1997 and 1996 and the
Three Months Ended June 30, 1997 and 1996 . . . . . . . . . . .7
Consolidated Statements of Cash Flows (Unaudited) -
For the Six Months Ended June 30, 1997 and 1996 . . . . . . . .8
Notes to Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . .15
Part II - Other Information . . . . . . . . . . . . . . . . . . . 34
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 34
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . .34
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .35
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . 37
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars In thousands)
<CAPTION>
June 30, December 31,
1997 1996
--------- -----------
(Unaudited)
<S> <C> <C>
Assets
Investments:
Securities available-for-sale at fair value:
Fixed maturity securities(Cost 1997
$2,332,766; 1996 $2,335,875; $2,405,580 $2,414,807 Equity securities
(Cost 1997 $59,121; 1996 $60,247) 63,008 64,033
Short-term investments (Cost 1997
$5,632; 1996 $13,288) 5,632 13,288
Investment in unconsolidated subsidiaries 23,131 20,809
Mortgage loans on real estate 230,368 225,743
Real estate 4,417 4,561
Policy loans 66,064 65,183
Other investments 78,960 93,228
---------- ----------
Total investments 2,877,160 2,901,652
Cash 7,752 1,814
Accrued investment income 33,442 30,792
Premiums and fees receivable 3,195 1,489
Reinsurance receivables 1,964 1,329
Deferred policy acquisition costs 138,455 120,481
Deferred income taxes 6,043 -
Property and equipment (less accumulated
depreciation 1997 $13,095; 1996 $11,775) 3,874 4,393
Other assets 71,230 52,111
Closed block assets 1,307,386 1,270,168
---------- ----------
Total assets $4,450,501 $4,384,229
========== ==========
Liabilities and Shareholders' Equity
Liabilities
Policy reserves and policyowner funds:
Future life and annuity policy benefits $1,999,838 $2,053,740
Policyowner funds 66,004 55,369
---------- ----------
Total 2,065,842 2,109,109
Accrued expenses 17,056 14,227
Dividends payable to policyowners 970 -
Policy and contract claims 5,412 7,039
Income taxes payable 29,365 25,182
Deferred income taxes - 1,337
Other liabilities 65,532 64,173
Debt 81,548 188,381
Closed block liabilities 1,563,790 1,517,271
--------- ---------
Total liabilities 3,829,515 3,926,719
--------- ---------
Company obligated mandatorily redeemable preferred
capital securities of subsidiary trust holding
solely junior subordinated debentures of the
Company 86,000 -
Shareholders' equity
Preferred stock, no par value,
20,000,000 shares authorized, none issued - -
Common stock, Class A, no par value,
75,000,000 shares authorized;
18,155,989 shares issued and outstanding
1997; 14,500,000 shares issued and
outstanding 1996 18,156 14,500
Common stock, Class B, no par value,
50,000,000 shares authorized;
5,000,000 shares issued and outstanding 5,000 5,000
Unrealized appreciation of
available-for-sale securities 31,043 35,300
Additional paid in capital 51,371 -
Retained earnings 429,416 402,710
---------- ----------
Total shareholders' equity 534,986 457,510
---------- ----------
Total liabilities and
shareholders' equity $4,450,501 $4,384,229
========== ==========
</TABLE>
<PAGE>
<TABLE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(unaudited)
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $20,928$123,063 $12,758 $60,834
Universal life and annuity
product charges 20,287 29,272 10,252 14,371
Net investment income 96,856 143,589 48,308 70,369
Realized gains on investments 9,523 64,409 4,264 5,669
Other revenues 3,000 1,329 387 1,186
Contribution from the Closed Block 13,410 - 4,134 -
------- ------- ------ -----
164,004 361,662 80,103 152,429
------- ------- ------- -------
Benefits and expenses:
Policyowner benefits 83,875 188,063 39,501 92,081
Underwriting, acquisition, and
insurance expenses 29,029 29,115 14,826 13,884
Amortization of deferred policy
acquisition costs 10,973 29,157 5,916 14,195
Dividends to policyowners 173 26,324 52 12,883
------- ------- ------- -------
124,050 272,659 60,295 133,043
------- ------- ------- -------
Income before income tax expense
and equity in earnings of
unconsolidated subsidiary 39,954 89,003 19,808 19,386
Income tax expense 11,586 32,841 5,847 8,014
------- ------- ------- ------
Income before equity in earnings
of unconsolidated subsidiary $28,368 $56,162 $13,961 $11,372
Equity in earnings of unconsolidated
subsidiary 654 299 481 299
------- ------- ------- -------
Net income $29,022 $56,461 $14,442 $11,671
======= ======= ======= =======
Pro forma net income per common share $1.25 $2.44 $0.62 $0.51
===== ===== ===== =====
Weighted average Common
Shares outstanding 23,155,989 23,155,989 23,155,989 23,155,989
========== ========== ========== ==========
</TABLE>
<TABLE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
(In thousands)
(unaudited)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $29,022 $56,462
Adjustments to reconcile net
income to net cash provided
by operating activities:
Policyowner assessments on
universal life and
annuity products (20,287) (29,272)
Interest credited to
policyowner account balances 53,137 60,090
Realized investment (gains)
losses (9,523) (64,409)
Change in:
Accrued investment income (2,650) 3,616
Reinsurance ceded receivables (635) 225
Deferred policy acquisition
costs (12,195) 3,795
Liabilities for future
policy benefits (16,381) 30,636
Policy and contract claims
and other policyowner funds (1,627) (3,789)
Income taxes:
Current 4,183 14,865
Deferred (5,718) (5,009)
Other, net 20,347 (15,015)
Change in Closed Block assets
and liabilities, net 68,656 -
-------- --------
Net cash provided by operating
activities 106,329 52,195
-------- --------
Cash flows from investing activities:
Purchase of fixed maturities
available for sale (620,969) (765,036)
Maturities, calls, and principal
reductions of fixed maturities
available for sale 538,801 686,987
Purchase of equity securities (23,042) (66,921)
Proceeds from sale of equity
securities 26,706 84,982
Proceeds from repayment and sale
of mortgage loans 26,174 62,248
Purchase of mortgage loans (30,653) -
Purchase of real estate and other
invested assets 14,670 7,240
Change in policy loans, net (882) (5,675)
Tax on capital gains (3) 1
Other assets, net 39,271 16,145
Change in Closed Block
investments, net (41,758) -
Initial establishment of the Closed Block - -
-------- -------
Net cash used in investing
activities (71,685) 19,971
-------- -------
Cash flows from financing activities:
Deposits to policyowner account
balances 63,191 91,918
Withdrawals from policyowner
account balances (123,775) (167,569)
Change in debt, net (106,833) (7,162)
Change in checks drawn in excess
of bank balance - 10,590
Dividends to American Mutual
Holding Company - (4,563)
Initial public offering of common stock 55,027 -
Dividends to shareholders (2,316) -
Issuance of company-obligated
mandatory redeemable
capital securities 86,000 -
------- -------
Net cash used in financing
activities (28,706) (76,786)
------- -------
Net (decrease) increase in cash 5,938 (4,620)
Cash at beginning of period 1,814 4,620
------ --------
Cash at end of period $7,752 $ -
======== ========
Supplemental disclosure of cash
activities:
Interest paid $2,919 $929
====== ====
Income taxes paid $26,235 $35,000
======= =======
/TABLE
<PAGE>
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All adjustments were of
a normal recurring nature, unless otherwise noted in Management's Discussion
and Analysis and the Notes to Financial Statements. Operating results for the
six months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. For further
information and for capitalized terms not defined in this 10-Q, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 financial statement presentation.
EARNINGS PER COMMON SHARE
Earnings per share have been computed on a pro forma basis by giving
retroactive effect to the issuance of 18.16 million shares of Class A common
stock and 5 million shares of Class B common stock as if all such shares had
been issued at the beginning of the respective periods and by giving
retroactive effect to the capital contribution (by the Company) to former
subsidiaries of AmerUs Life. For further discussion, refer to the consolidated
financial statements of the Company for the year ended December 31, 1996.
(2) CLOSED BLOCK
Summarized financial information of the Closed Block balance sheet as of
June 30, 1997, and statements of income for the six months and three months
ended June 30, 1997 is as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Assets: Closed Block
June 30, 1997
-------------
<S> <C>
Fixed maturity securities, at fair value
(amortized cost of $933,019) $950,617
Short-term investments, at fair value 14,040
Policy loans 169,029
Cash (3,115)
Accrued Investment Income 10,995
Premiums and fees receivable 3,023
Deferred policy acquisition costs 161,125
Other assets 1,672
----------
$1,307,386
==========
Liabilities:
Future life and annuity policy benefits $1,407,021
Policyowner funds 7,357
Accrued expenses 2,868
Dividends payable to policyowners 133,263
Policy and contract claims 7,429
Other liabilities 5,852
----------
$1,563,790
==========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, 1997 June 30, 1997
----------- -----------
<S> <C> <C>
Revenues and Expenses:
Insurance premiums $104,994 $ 50,058
Universal life and annuity product
charges 10,007 5,129
Net investment income 54,278 27,977
Realized (losses) on investments (989) (416)
Policyowner benefits (108,382) (57,504)
Underwriting, acquisition, and
insurance expenses (2,821) (1,330)
Amortization of deferred policy
acquisition costs (14,111) (7,280)
Dividends to policyowners (29,566) (12,500)
------- --------
Contribution from the Closed Block
before income taxes $ 13,410 $4,134
======== ======
</TABLE>
(3) DEBT AND CAPITAL SECURITIES
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- -----------
<S> <C> <C>
Line of credit with Federal Home Loan Bank-bearing
interest at 6.90% at June 30, 1997 $19,927 $ -
Federal Home Loan Bank community investment
long-term advances with a weighted average
interest rate of 6.35% at June 30,1997 16,621 13,381
Bank Credit Facility:
Term loan bearing interest at 6.63% 45,000 100,000
at June 30, 1997
Revolving credit loan - 75,000
------- --------
$81,548 $188,381
======= ========
</TABLE>
<PAGE>
For an additional discussion of the terms of the above indebtedness,
refer to the Company's consolidated financial statements as of December 31,
1996.
On February 3, 1997, the Company issued $86,000,000 of 8.85% Capital
Securities, Series A, through a wholly-owned subsidiary trust. The sole asset
of the trust is the junior subordinated debentures of the Company in the
principal amount of $88.66 million with interest at 8.85% maturing February 1,
2027. The Company has fully and unconditionally guaranteed the obligation of
the trust under the Capital Securities and is obligated to mandatorily redeem
the securities on February 1, 2027. The Company may prepay the securities at
anytime after February 1, 2007.
(4) LEGAL PROCEEDINGS
As previously discussed in the Company's annual report, AmerUs Life is a
defendant in a class action lawsuit, Cozad v. American Mutual Life Insurance
Company, which was brought on August 31, 1995 in the District Court for Travis
County, Texas. The complaint, which seeks unspecified damages, was filed by
former policyowners on behalf of themselves and all similarly situated persons
who purchased individual life insurance policies which were underwritten and
sold by AmerUs Life within Texas and which were allegedly based upon uniform
sales presentations and policy illustrations from and after 1980. AmerUs Life
has denied the allegations contained in such complaint.
Following a court-initiated mediation process, the Company and the
plaintiffs have entered into a nationwide class settlement of certain market
conduct issues for a substantial block of its policies. The court has entered
an order preliminarily approving the certification of the class and the
fairness of the settlement. A final hearing is scheduled for September 16,
1997, following notice to class members. There can be no assurance the
agreement will be approved by the court and become effective. Should a
settlement not be approved, this litigation would continue and the Company
would continue to vigorously defend against claims asserted, including the
existence of a legitimate class.
<PAGE>
AmerUs Life Holdings, Inc. June 30, 1997
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company is engaged in the business of underwriting, marketing and
distributing a broad range of individual life insurance and annuity products to
individuals and businesses in 45 states and the District of Columbia. The
Company's primary product offerings consist of whole life, universal life and
term life insurance policies and fixed annuities. Since April 1, 1996 the
Company has been a party to the Ameritas Joint Venture with Ameritas Life
Insurance Corp., through which it markets fixed annuities, variable annuities
and variable life insurance products.
In accordance with GAAP, universal life insurance premiums and annuity
deposits received are reflected as increases in liabilities for policyowner
account balances and not as revenues. Revenues reported for universal life and
annuity products consist of policy charges for the cost of insurance,
administration charges and surrender charges assessed against policyowner
account balances. Surrender benefits paid relating to universal life insurance
policies and annuity products are reflected as decreases in liabilities for
policyowner account balances and not as expenses. Amounts for interest credited
to universal life and annuity policyowner account balances and benefit claims
in excess of policyowner account balances are reported as expenses in the
financial statements. The Company receives investment income earned from the
funds deposited into account balances by universal life and annuity
policyowners, the majority of which is passed through to such policyowners in
the form of interest credited.
Premium revenues reported for traditional life insurance products are
recognized as revenues when due. Future policy benefits and policy acquisition
costs are recognized as expenses over the life of the policy by means of a
provision for future policy benefits and amortization of deferred policy
acquisition costs.
The costs related to acquiring new business, including certain costs of
issuing policies and certain other variable selling expenses (principally
commissions), defined as deferred policy acquisition costs, are capitalized and
amortized as an expense in proportion to expected profits or margins. This
amortization is adjusted when current or estimated future gross profits or
margins on the underlying policies vary from previous estimates. For example,
the amortization of deferred policy acquisition costs is accelerated when
policy terminations are higher than originally estimated or when investments
supporting the policies are sold at a gain prior to their anticipated maturity.
Death and other policyowner benefits reflect exposure to mortality risk and
fluctuate from period to period based on the level of claims incurred within
insurance retention limits. The profitability of the Company is primarily
affected by expense levels, interest spread results (i.e., the excess of
investment earnings over the interest credited to policyowners) and
fluctuations in mortality, persistency and other policyowner benefits. The
Company has the ability to mitigate adverse experience through adjustments to
credited interest rates, policyowner dividends or cost of insurance charges.
Sales
The following table sets forth information regarding the Company's
sales activity by product:
<PAGE>
<TABLE>
Sales Activity by Product
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------ -----------------
($ in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Individual life insurance:
Participating whole life $ 8,603 $ 8,948 $4,018 $4,666
Universal life 3,666 3,494 1,560 1,720
Term life 1,756 1,369 1,193 642
------ ------- ------- -------
Total life insurance (A) $14,025 $13,811 $6,771 $7,028
======= ======= ====== ======
Individual annuities (B) $21,305 $49,537 $11,109 $21,987
======== ======= ======= =======
<FN>
(A) Direct first year annualized premiums
(B) Direct first year and single-collected premiums
</FN>
</TABLE>
<PAGE>
Life insurance sales as measured by annualized premiums increased $0.2
million, or 1.5%, for the six months, and decreased $0.3 million, or 3.7%, for
the three months ended June 30, 1997, from the same periods in 1996. As a
result of the introduction of new term products in February 1997, sales of term
insurance products increased by $0.4 million and $0.5 million for the six
months and three months ended June 30, 1997, respectively. These increases
were partially offset by lower sales levels of other traditional products, as
our distribution system increased its sales of variable products through the
Ameritas Joint Venture. Including production from the Company's distribution
systems through the joint venture, life insurance sales through June 30, 1997
increased 5.7% for the six months and decreased 2.1% for the three months ended
June 30, 1997, from the same periods in 1996. The decrease in annuity sales
for the Company resulted from the transfer of substantially all new sales of
individual deferred annuities to the Ameritas Joint Venture in May 1996.
Including production from the Company's distribution systems through the joint
venture, annuity sales through June 30, 1997 have increased 25.9% and 18.7% for
the six months and three months ended June 30, 1997, respectively, from the
comparable periods in 1996. The Company's investment in Ameritas Joint Venture
is carried on the equity method.
Premium Receipts
The following table sets forth the Company's collected premiums for the
periods indicated:
<PAGE>
<TABLE>
Collected Premiums by Product
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------- -------------------
($ in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Direct individual life premiums collected:
Traditional life:
First year & single $ 35,841 $ 34,427 $17,602 $17,158
Renewal 83,703 81,721 41,021 39,130
-------- -------- ------- -------
Total $119,544 $116,148 $58,623 $56,288
======== ======== ======= =======
Universal life:
First year & single $ 6,992 $ 7,549 $ 3,063 $ 3,892
Renewal 37,585 38,446 18,741 18,995
-------- -------- ------- -------
Total $ 44,577 $ 45,995 $21,804 $22,887
======== ======== ======= =======
Total direct life $164,121 $162,143 $ 80,427 $ 79,175
Reinsurance assumed 814 757 468 337
Reinsurance ceded (4,926) (6,580) (2,485) (3,996)
-------- -------- ------- -------
Total individual life,
net of reinsurance $160,009 $156,320 $ 78,410 $ 75,516
======== ======== ======== ========
Direct annuity premiums collected:
Individual (1) $ 25,611 $ 54,568 $ 13,067 $ 24,591
Group - 50 - 4
-------- -------- -------- --------
Total annuities 25,611 54,618 13,067 24,595
Reinsurance ceded (281) (345) (101) (144)
-------- -------- ------ --------
Total annuities, net
of reinsurance $25,330 $54,273 $12,966 $24,451
======== ======== ======= =======
Total group life, net
of reinsurance (2) $ (10) $ 1,544 - 874
======== ======== ======= =======
Total accident and health,
net of reinsurance $ 129 $ 102 $ 52 $ 48
======= ======== ======= =======
Total collected premiums,
net of reinsurance $185,458 $212,239 $91,428 $100,889
======= ======== ======= ========
<FN>
(1) Effective May 1996, substantially all new sales of individual deferred annuities are made through the Ameritas Joint Venture.
(2) The Company sold substantially all of its group life business as of July 1, 1996 and is no longer actively marketing
this line of business.
</FN>
</TABLE>
<PAGE>
Life Insurance and Annuities in Force
The following table sets forth information regarding life insurance and
annuities in force for each date presented:
<PAGE>
<TABLE>
Life Insurance and Annuities in Force
<CAPTION>
As of June 30,
---------------
($ in thousands) 1997 1996
---- ----
<S> <C> <C>
Individual life insurance:
Traditional
Number of policies 252,101 257,664
GAAP life reserves $1,254,953 $1,165,658
Face amounts $17,113,000 $16,636,000
Universal life
Number of policies 118,720 120,231
GAAP life reserves $835,914 $804,044
Face amounts $12,125,000 $12,306,000
Total individual life
Number of policies 370,821 377,895
GAAP life reserves $2,090,867 $1,969,702
Face amounts $29,238,000 $28,942,000
Annuities (1):
Number of policies 52,654 56,646
GAAP reserves $1,118,099 $1,237,769
Group life insurance (2):
Number of lives 30,235 33,119
Face amounts $870,200 $872,057
___________________
<FN>
(1) Effective May 1996, substantially all new sales of individual deferred annuities are made through the Ameritas
Joint Venture.
(2) The Company sold substantially all of its group life business as of July 1, 1996 and is no longer actively
marketing this line of business.
</FN>
</TABLE>
<PAGE>
The Company's traditional life insurance products include participating
whole life and term life insurance products. The reduction in the number of
traditional life insurance policies is attributable to policy surrenders,
policy terminations or expirations, and consolidations of one or more
outstanding policies into new policies. The Company has issued traditional
life insurance policies since its incorporation in 1896. Many of the policies
which have terminated were issued years ago at lower face amounts than the
average for all traditional life policies in force. Therefore, while the
Company has experienced a decrease in the number of traditional life policies,
the size of the policies outstanding has increased and the amount of premiums
collected has also increased. For universal life products, the Company has
experienced a reduction in both the number of policies and face amounts in
force during the current reporting period, and over the past several years as
well. Such reductions in universal life policies in force are attributable to
similar termination activities as with the traditional life products. For
universal life, the Company has not experienced as dramatic a growth in average
size policy in force in recent years as it has for traditional life due to its
more recent introduction in the 1980's. Therefore, the reduction in number of
policies has translated to a reduction in the amount of insurance in force.
The reduction in the amount of annuity business in force is primarily
attributable to the transfer of new annuity production to the Ameritas Joint
Venture in May 1996. The Company's investment in the joint venture is carried
on the equity method.
The Closed Block
In connection with the Reorganization of the Company, the Closed Block
was established as of June 30, 1996. Insurance policies which had a dividend
scale in effect at that time were included in the Closed Block. The Closed
Block was designed to provide reasonable assurance to owners of insurance
policies included therein that, after the Reorganization, assets would be
available to maintain the dividend scales and interest credits in effect for
1995 if the experience underlying such scales and credits continues.
The contribution to the operating income of the Company from the Closed
Block is reported as a single line item in the income statement. Accordingly,
premiums, product charges, investment income, realized gains (losses) on
investments, policyowner benefits and dividends attributable to the Closed
Block, less certain minor expenses and the amortization of deferred policy
acquisition costs, are shown as a net number under the caption "Contribution
from the Closed Block." This results in material reductions in the respective
line items in the income statement while having no effect on net income. The
expenses associated with the administration of the policies included in the
Closed Block and the renewal commissions on these policies are not charged
against the Contribution from the Closed Block, but rather are grouped with
underwriting, acquisition and insurance expenses. Also, all assets allocated
to the Closed Block are grouped together and shown as a separate item entitled
"Closed Block Assets." Likewise, all liabilities attributable to the Closed
Block are combined and disclosed as the "Closed Block Liabilities."
Since the operating results from the Closed Block for the six months and
the three months ended June 30, 1997 are reported on one line of the income
statements, "Contribution from the Closed Block," the individual income
statement components for 1997 are not fully comparable with those for 1996,
prior to the establishment of the Closed Block. Management believes that the
presentation of the results of operations on a combined basis as if the Closed
Block had not been formed facilitates comparability with the results of
operations for periods prior to its formation. Accordingly, the combined
presentation set forth below includes certain revenues and expenses associated
with the policies included in the Closed Block. Such presentation does not,
however, affect the Company's reported net income.
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
-----------------------------------
($ in thousands) As Reported Closed Block Combined
----------- ------------ ----------
<S> <C> <C> <C>
Revenues
Insurance premiums $20,928 $104,994 $125,922
Product changes 20,287 10,007 30,294
Net investment income 96,856 54,278 151,134
Realized gains (losses) on
investments 9,523 (989) 8,534
Other revenues 3,000 - 3,000
Contribution from the
Closed Block 13,410 (13,410) -
------ ------ -------
Total revenues 164,004 154,880 318,884
Benefits and expenses
Policyowner benefits 83,875 108,382 192,257
Underwriting, acquisition
and insurance expenses 29,029 2,821 31,850
Amortization of deferred
policy acquisition costs 10,973 14,111 25,084
Dividends to policyowners 173 29,566 29,739
------ ------ -------
Total benefits and expenses 124,050 154,880 278,930
Income before income tax expense
and equity in earnings of
unconsolidated subsidiary 39,954 - 39,954
Income tax expense 11,586 - 11,586
------ -------- -------
Income before equity in
earnings of unconsolidated
subsidiary 28,368 - 28,368
Equity in earnings of
unconsolidated subsidiary 654 - 654
------ ------ ------
Net income $29,022 $ - $29,022
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997
--------------------------------
($ in thousands) As Reported Closed BlockCombined
----------- --------------------
<S> <C> <C> <C>
Revenues
Insurance premiums $12,758 $50,058 62,816
Product charges 10,252 5,129 15,381
Net investment income 48,308 27,977 76,285
Realized gains (losses) on investments 4,264 (416) 3,848
Other revenues 387 - 387
Contribution from the Closed Block 4,134 (4,134) -
------- ------- --------
Total revenues 80,103 78,614 158,717
Benefits and expenses
Policyowner benefits 39,501 57,504 97,005
Underwriting, acquisition
and insurance expenses 14,826 1,330 16,156
Amortization of deferred policy
acquisition costs 5,916 7,280 13,196
Dividends to policyowners 52 12,500 12,552
------- ------- -------
Total benefits and expenses 60,295 78,614 138,909
Income before income tax expense
and equity in earnings of
unconsolidated subsidiary 19,808 - 19,808
Income tax expense 5,847 - 5,847
------- ------- -------
Income before equity in earnings of
unconsolidated subsidiary 13,961 - 13,961
Equity in earnings of unconsolidated
subsidiary 481 - 481
------- ------- -------
Net income $14,442 $ - 14,442
======= ======= =======
</TABLE>
<PAGE>
COMBINED RESULTS OF OPERATIONS
SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
A summary of the Company's combined revenues, including revenues associated with
the Closed Block, follows:
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------- ------------------
($ in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Insurance premiums:
Traditional life insurance
premiums $117,459 $113,347 $57,971 $56,123
Immediate annuity and
supplementary
contract premiums 8,395 8,097 4,802 3,881
Other premiums 68 1,619 43 830
-------- ------- ------- ------
Total insurance
premiums 125,922 123,063 62,816 60,834
Universal life product
charges 29,886 28,841 15,126 14,148
Annuity product charges 408 431 255 223
------- ------- ------- -------
Total product charges 30,294 29,272 15,381 14,371
Net investment income 151,134 143,589 76,285 70,369
Realized gains on investments 8,534 64,409 3,848 5,669
Other revenues 3,000 1,329 387 1,186
------- ------- ------- -------
Total revenues $318,884 $361,662 $158,717 $152,429
======== ======== ======== ========
</TABLE>
<PAGE>
Individual life and annuity premiums and product charges increased $5.4
million, or 3.6%, for the six months and increased $3.8 million, or 5.1%, for
the three months ended June 30, 1997 from the same periods in 1996. Traditional
life insurance premiums increased $4.1 million for the six months and increased
$1.8 million for the three months as a result of continued growth in renewal
premiums. Immediate annuity deposits and supplementary contract premiums were
$0.3 million higher for the six months and $0.9 million higher for the three
months ended June 30, 1997 compared to the same periods in 1996. The increases
were primarily the result of higher supplementary contract premiums. Other
premiums were lower in 1997 for both the six month and three month periods
primarily due to the sale of the Company's remaining group life operation in the
third quarter of 1996.
Universal life product charges increased $1.0 million for both the six
months ended and the three months ended June 30, 1997 compared to the same
periods in 1996. The increased product charges in 1997 are primarily due to
increased cost of insurance charges as a result of the normal aging of the block
of business.
Net investment income increased $7.5 million for the six months and
increased $5.9 million for the three months ended June 30,1997 from the same
periods in 1996. Average invested assets for the first half of 1997 increased
$152.3 million (excluding market value adjustments) over the same period in
1996, and the effective yield on average invested assets (excluding market value
adjustments) increased from 7.74% for the first six months of 1996 to 7.89% for
the same period in 1997. The increase in net investment income from the second
quarter of 1996 to the second quarter of 1997 was also primarily due to
increased effective yields and average invested assets. Also included in the
second quarter 1997 net investment income was $2.6 million from other invested
assets.
Realized gains on investments decreased $55.9 million for the six months
and decreased $1.8 million for the three months ended June 30, 1997 from the
same periods in 1996. Included in the six month amounts for 1996 were
approximately $52.4 million of gains from the sale of common stock as a result
of the substantial liquidation of the Company's equity portfolio, with
approximately $51.5 million of the gains occurring during the first quarter of
1996.
Other revenues increased $1.7 million for the six months ended June 30,
1997 from the same period in 1996 primarily due to the sale of certain
investment partnerships in the first quarter of 1997. Other revenues decreased
$0.8 million for the three months ended June 30, 1997 from the same period in
1996 primarily due to proceeds from a favorable litigation settlement in the
second quarter of 1996.
A summary of the Company's combined policyowner benefits, including
policyowner benefits associated with the Closed Block, follows:
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------------
($ in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Traditional life insurance
Death benefits $20,973 $19,664 $12,380 $11,656
Change in liability for
future policy benefits
and other policy benefits 83,967 79,764 40,720 36,592 ------- ------- ------- -------
Total traditional life
insurance benefits 104,940 99,428 53,100 48,248
Universal life insurance
Death benefits in excess
of cash value 14,886 11,705 7,222 6,364
Interest credited on
policyowner account
balances 22,612 21,031 11,665 10,576
Other policy benefits 1,622 1,758 1,029 649
------- ------ ------ ------
Total universal life
insurance benefits 39,120 34,494 19,916 17,589
Annuities
Interest credited to
deferred annuity account
balances 30,525 35,712 15,125 17,604
Other annuity benefits 17,236 16,234 8,838 7,411
------- ------- ------ ------
Total annuity benefits 47,761 51,946 23,963 25,015
Miscellaneous benefits 436 2,195 26 1,229
------- ------ ------ ------
Total policyowner benefits $192,257 $188,063 $97,005 $92,081
======== ======== ======= =======
</TABLE>
<PAGE>
Total policyowner benefits increased $4.2 million for the six months and
increased $4.9 million for the three months ended June 30, 1997 from the same
periods in 1996. Traditional life insurance benefits increased $5.5 million for
the six month period and increased $4.8 million for the three month period
primarily due to the growth and aging of the business in force and increased
death benefits as a result of slightly higher mortality. Universal life
insurance benefits increased $4.6 million for the six months ended June 30, 1997
from the same period in 1996 primarily as a result of increased death benefits
due to higher mortality. Universal life insurance benefits increased $2.3
million for the three month period due to increased death benefits as a result
of higher mortality, and increased interest credited amounts.
Interest credited to universal life policyowner account balances increased
$1.6 million for the six months and increased $1.1 million for the three months
ended June 30, 1997 from the same periods in 1996. While the weighted average
crediting rate for the Company's universal life liabilities decreased 12 basis
points from 6.36% for the first six months of 1996 to 6.24% for the first six
months of 1997, the Company's average liabilities increased $33.3 million over
the same period, resulting in the increased credited amounts during the first
six months of 1997. Increased interest credited amounts in the second quarter of
1997 as compared to the second quarter of 1996 reflect similar increases in
average liabilities and reasonably consistent reductions in quarterly credited
rates.
Annuity benefits decreased $4.2 million for the six months and decreased
$1.1 million for the three months ended June 30, 1997 from the same periods in
1996, in each case primarily due to reduced interest credited to policyowner
account balances. The decrease in interest credited amounts in 1997 compared to
1996 amounted to $5.2 million and $2.5 million for the six months and three
months ended June 30, respectively. The weighted average crediting rate for the
Company's individual deferred annuity liabilities decreased 13 basis points to
5.38% for the first six months of 1997 compared to 5.51% for the first six
months of 1996. The Company's average deferred annuity liabilities decreased
$125.7 million from the first six months of 1996 to the first six months of 1997
also contributing to the decrease in interest credited amounts in 1997. Lower
interest credited amounts in the second quarter of 1997 as compared to the
second quarter of 1996 reflect similar decreases in average liabilities and
reasonably consistent reductions in quarterly credited rates. The increase in
other annuity benefits in 1997 was primarily the result of higher supplementary
contract premiums.
Miscellaneous benefits were lower in 1997 for both the six month and three
month periods primarily due to the sale of the Company's remaining group life
operation in the third quarter of 1996.
A summary of the Company's combined expenses, including expenses associated
with the Closed Block, follows:
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------- ------------------
($ in thousands) 1997 1996 1997 1996 ---- ---- ---- ----
<S> <C> <C> <C> <C>
Commission expense, net of deferrals $4,081 $4,503 $1,968 $1,902
Other underwriting, acquisition and
insurance expenses, net
of deferrals 27,769 24,612 14,188 11,982
Amortization of deferred policy
acquisition costs 25,084 29,157 13,196 14,195
------- ------- ------- -------
Total expenses $56,934 $58,272 $29,352 $28,079
======= ======= ======= =======
</TABLE>
<PAGE>
Commission expense, net of deferrals was $4.1 million for the six months
ended June 30, 1997, decreasing $0.4 million from the same period a year ago
primarily due to lower sales of products for which commissions are not
capitalized. Other underwriting, acquisition and insurance expenses, net of
deferrals, increased $3.2 million for the six months and increased $2.2 million
for the three months ended June 30, 1997, from the same periods in 1996. The
increase in expenses in 1997 for both the six month and three month periods is
primarily due to interest expense on capital securities issued by the Company in
February 1997 and interest expense on the revolving line of credit. This added
expense was largely offset by investment of the borrowed funds which contributed
to the growth in invested assets and the higher investment earnings.
The amortization of deferred policy acquisition costs decreased $4.1
million for the six months and decreased $1.0 million for the three months ended
June 30, 1997, from the same periods in 1996. Deferred policy acquisition costs
are generally amortized in proportion to gross margins, including realized
capital gains. Higher death benefits and lower realized capital gains in the
first six months of 1997, compared to the first six months of 1996, contributed
to lower gross margins in 1997 on products for which deferred costs are
amortized, resulting in the lower amortization during the first six months of
1997. Higher death benefits, partially offset by higher realized capital gains,
in the second quarter of 1997, compared to the second quarter of 1996,
contributed to lower gross margins on these same products, resulting in the
lower amortization during the second quarter of 1997.
Dividends to policyowners increased $3.4 million for the six months and
decreased $0.3 million for the three months ended June 30, 1997, from the same
periods in 1996. The increase in the dividends for the six month period was the
result of the growth and aging of the in force policies and the establishment of
a deferred dividend liability for the Closed Block, as actual gross profits on
such policies through June 30, 1997, exceeded expected profits. The decrease in
dividends for the three month period was the result of the growth and aging of
the in force policies being more than offset by the release of deferred dividend
liability for the Closed Block during the second quarter of 1997 primarily as a
result of elevated death claims on the Closed Block policies. Traditional life
reserves grew 7.8% from June 30, 1996, to $1.25 billion at June 30, 1997. The
weighted average interest rate used in the dividend formula for these policies
was 7.18% during the first six months of 1997 compared to 7.17% during the same
period of 1996.
Income before income taxes decreased $48.7 million for the six months ended
June 30, 1997 to $40.6 million compared to $89.3 million for the same period in
1996, due to lower realized gains on investments in 1997. Income before income
taxes for the three months ended June 30, 1997 increased $0.6 million to $20.3
million compared to $19.7 million for the second quarter of 1996, with increased
pre-tax operating earnings nearly offset by lower realized gains on investments.
Income tax expense decreased $21.3 million for the six months primarily as
a result of the lower pre-tax income due to the lower realized gains on
investments. Income tax expense decreased $2.2 million for the three months
ended June 30, 1997, from the same period in 1996 primarily due to the
elimination of the mutual insurance company equity add-on tax, which the Company
believes will not be applicable to the Company after June 30, 1996 due to the
conversion to a stock company.
Net income decreased $27.5 million for the six months and increased $2.8
million for the three months ended June 30, 1997 from the same periods in 1996.
The reduced net income for the six month period resulted primarily from lower
realized gains on investments. The increased net income for the three month
period resulted primarily from increased operating earnings due primarily to
higher net investment income.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
The Company's cash flows from operations consists of dividends from
subsidiaries, if declared and paid, interest income on loans and advances to its
subsidiaries (including a surplus note issued to the Company by AmerUs Life),
investment income on assets held by the Company and fees which the Company will
charge AmerUs Group, AmerUs Life and certain other of its affiliates for
management services, offset by the expenses incurred for debt service, salaries
and other expenses.
The Company intends to rely primarily on dividends and interest income from
AmerUs Life to make any dividend payments to its shareholders. The payment of
dividends by AmerUs Life to the Company is regulated under Iowa law. Under Iowa
law, AmerUs Life may pay dividends only from the earned surplus arising from its
business and must receive the prior approval of the Iowa Commissioner to pay a
dividend, if such dividend would exceed certain statutory limitations. The
current statutory limitation is the greater of (i) 10% of AmerUs Life's capital
and surplus as of the preceding year end or (ii) the net gain from operations
for the previous calendar year. Iowa law gives the Iowa Commissioner broad
discretion to disapprove requests for dividends in excess of these limits.
During 1997, the maximum amount that would have been legally available for
distribution to the Company, absent the dividends paid as a part of the
reorganization of the Company, without further regulatory approval would have
been approximately $34 million. However, as a result of the distribution made as
a part of the reorganization, AmerUs Life will not be able to pay dividends to
the Company in 1997 without the prior consent of the Iowa Commissioner. It is
the Company's intention to seek regulatory approval to pay dividends from AmerUs
Life during 1997 and through June 30, 1996 the Company has requested and
received approval for the payment of a $5 million dividend from AmerUs Life. At
June 30, 1997, the Company also had the ability to borrow up to approximately
$119.0 million from AmerUs Life without prior regulatory approval. The Company
would utilize this borrowing capacity, if necessary, to meet its liquidity needs
including the payment of dividends to its shareholders. Any such borrowings from
AmerUs Life would be repaid from future available dividends from AmerUs Life.
Management believes that the Company's access to capital through borrowings from
AmerUs Life, public equity and debt markets and its $75 million revolving credit
facility provide the Company with sufficient liquidity and capital resources
during 1997, irrespective of whether regulatory approval for the payment of
dividends by AmerUs Life is obtained.
In December, 1996, the Company entered into a bank credit agreement, which
was comprised of $100 million in term debt and $75 million under a revolving
line of credit ("Bank Credit Facility"). Immediately after establishing the Bank
Credit Facility the Company borrowed $100 million under the term debt component
of the facility and $75 million under the revolving line of credit. The Company
contributed $125 million of the borrowings under the Bank Credit Facility to
AmerUs Life and used $50 million to purchase a 9% surplus note, due December 1,
2006, from AmerUs Life. Proceeds from the Company's common stock and capital
note offerings were used to repay $50 million of borrowings outstanding under
the term facility and $75 million of borrowing outstanding under the revolving
line of credit. The Company has $75 million of unused borrowing capacity under
its revolving line of credit.
On February 3, 1997, the Company issued $86,000,000 of 8.85% Capital
Securities, Series A, through a wholly-owned subsidiary trust for which the
Company is obligated to mandatorily redeem the securities on February 1, 2027.
The Company may prepay the securities at anytime after February 1, 2007.
In connection with the Bank Credit Facility, the Company pledged
approximately 49.9% of the common stock of AmerUs Life owned by the Company and
a $50 million 9% surplus note payable to the Company by AmerUs Life.
As of June 30, 1997 the Company had no material commitments for
capital expenditures. In the future the Company anticipates that its liquidity
and capital needs will be met through interest and dividends from AmerUs Life,
accessing the public equity and debt markets depending upon market conditions,
or alternatively from bank financing.
At June 30, 1997, AmerUs Life had substantial excess statutory capital as
its adjusted statutory capital was $379.4 million resulting in an RBC ratio in
excess of 800% of the authorized control level RBC.
AMERUS LIFE
AmerUs Life's cash inflows consist primarily of premium income, deposits to
policyowner account balances, income from investments, sales, maturities and
calls of investments and repayments of investment principal. Cash outflows are
primarily related to withdrawals of policyowner account balances, investment
purchases, payment of policy acquisition costs, payment of policyowner benefits,
income taxes and current operating expenses. Life insurance companies generally
produce a positive cash flow from operations, as measured by the amount by which
cash inflows are adequate to meet benefit obligations to policyowners and
normal operating expenses as they are incurred. The remaining cash flow is
generally used to increase the asset base to provide funds to meet the need for
future policy benefit payments and for writing new business.
Management anticipates that funds to meet its short-term and long-term
capital expenditures, cash dividends to shareholders and operating cash needs
will come from existing capital and internally generated funds. Management
believes that the current level of cash and available-for-sale and short-term
securities, combined with expected net cash inflows from operations, maturities
of fixed maturity investments, principal payments on mortgage-backed securities
and its insurance products, will be adequate to meet AmerUs Life's anticipated
short-term cash obligations.
AmerUs Life generated cash flows from operating activities of
$106.3 million and $52.2 million, for the six months ended June 30, 1997 and
1996, respectively. Excess operating cash flows were primarily used to increase
AmerUs Life's fixed maturity investment portfolio.
Matching the investment portfolio maturities to the cash flow demands of
the type of insurance being provided is an important consideration for each type
of life insurance product and annuity. AmerUs Life continuously monitors
benefits and surrenders to provide projections of future cash requirements. As
part of this monitoring process, AmerUs Life performs cash flow testing of its
assets and liabilities under various scenarios to evaluate the adequacy of
reserves. In developing its investment strategy, AmerUs Life establishes a
level of cash and securities which, combined with expected net cash inflows from
operations, maturities of fixed maturity investments and principal payments on
mortgage-backed securities, are believed adequate to meet anticipated short-term
and long-term benefit and expense payment obligations. There can be no assurance
that future experience regarding benefits and surrenders will be similar to
historic experience since withdrawal and surrender levels are influenced by such
factors as the interest rate environment and AmerUs Life's claims-paying and
financial strength ratings.
AmerUs Life takes into account asset-liability management considerations.
Contract terms for AmerUs Life's interest-sensitive products include surrender
and withdrawal provisions which mitigate the risk of losses due to early
withdrawals. These provisions generally do one or more of the following: limit
the amount of penalty-free withdrawals, limit the circumstances under which
withdrawals are permitted, or assess a surrender charge or market value
adjustment relating to the underlying assets. The following table summarizes
statutory liabilities for interest-sensitive life products and annuities by
their contractual withdrawal provisions at June 30, 1997 (in millions):
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Not subject to discretionary withdrawal $ 209
Subject to discretionary withdrawal with adjustments:
Specified surrender charges (1) $901
Market value adjustments 386
----
Subtotal 1,287
Subject to discretionary withdrawal
without adjustments 586
------
Total $2,082
======
<FN>
(1) Includes $318 million of statutory liabilities with a contractual surrender charge of less than five percent of the account
balance.
</FN>
</TABLE>
<PAGE>
Through its membership in the Federal Home Loan Bank of Des Moines, AmerUs
Life is eligible to borrow on a line of credit available to provide it
additional liquidity. The line of credit, the amount of which is re-set
annually, is based on the amount of capital stock of the Federal Home Loan Bank
of Des Moines owned by AmerUs Life, which supported a borrowing capacity of
$33.4 million as of June 30, 1997. Interest is payable at a current rate at the
time of any advance. As of June 30, 1997, AmerUs Life had a $25 million open
secured line of credit with $19.9 million outstanding.
In the future, in addition to cash flows from operations and AmerUs Life's
borrowing capacity, AmerUs Life would anticipate obtaining its required capital
from the Company as the Company has access to the public markets.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously discussed in the Company's annual report, AmerUs Life is a
defendant in a class action lawsuit, Cozad v. American Mutual Life Ins. Co.,
which was brought on August 31, 1995 in the District Court for Travis County,
Texas. The complaint, which seeks unspecified damages, was filed by former
policyowners on behalf of themselves and all similarly situated persons who
purchased individual life insurance policies which were underwritten and sold by
AmerUs Life within Texas and which were allegedly based upon uniform sales
presentations and policy illustrations from and after 1980. AmerUs Life has
denied the allegations contained in such complaint.
Following a court-initiated mediation process, the Company and the
plaintiffs have entered into a nationwide class settlement of certain market
conduct issues for a substantial block of its policies. The court has entered
an order preliminarily approving the certification of the class and the fairness
of the settlement. A final hearing is scheduled for September 16, 1997,
following notice to class members. There can be no assurance the agreement will
be approved by the court and become effective. Should a settlement not be
approved, this litigation would continue and the company would continue to
vigorously defend against claims asserted, including the existence of a
legitimate class.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of its shareholders on May
2, 1997. There were two matters voted upon at the meeting. The first was the
election of directors. The nominees, Messrs. Malcolm Candlish, Sam C. Kalainov
and John W. Norris, Jr., were elected to three-year terms. Other directors
continuing to serve are John R. Albers, Roger K. Brooks, Thomas F. Gaffney,
Maureen M. Culhane, Ilene B. Jacobs, Jack C. Pester and John A. Wing.
The second matter voted upon resulted in the ratification of the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company.
The results of the balloting were as follows:
AGAINST OR
FOR WITHHELD ABSTENTIONS
--- ---------- -----------
Election of Directors:
Malcolm Candlish 21,810,569 10,194
Sam C. Kalainov 21,811,469 9,294
John W. Norris, Jr. 21,810,569 10,194
Ratification of KPMG Peat
Marwick LLP 21,798,197 6,615 15,951
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits included as part of this report is set forth in the
Exhibit Index which immediately precedes such exhibits and is hereby
incorporated by reference herein.
(b) The following report on Form 8-K was filed during the quarter ended
June 30, 1997:
(i) None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DATED: August 13, 1997 AMERUS LIFE HOLDINGS, INC.
By/s/Michael E. Sproule
-------------------------------------
Executive Vice President and CFO
(Chief Financial Officer)
By/s/Michael G. Fraizer
-------------------------------------
Senior Vice President -
Controller and Treasurer
(Principal Accounting Officer)
<PAGE>
<TABLE>
AMERUS LIFE HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
2.1* Plan of Reorganization dated October 27, 1995
3.1 Amended and Restated Articles of Incorporation of the Company filed as Exhibit 3.5 to the registration statement of the
Company on Form S-1, Registration Number 333-12234, is hereby incorporated by reference.
3.2* Bylaws of the Company
4.1 Amended and Restated Trust Agreement dated as of February 3, 1997 among the Company, Wilmington Trust Company, as property
trustee, and the administrative trustees named therein (AmerUs Capital I business trust), filed as exhibit 3.6 to the
registration statement of the Company and AmerUs Capital I on Form S-1, Registration Number 333-13713, is hereby
incorporated by reference.
4.2 Indenture dated as of February 3, 1997 between the Company and Wilmington Trust Company relating to the Company's 8.85%
Junior Subordinated Debentures, Series A, filed as exhibit 4.1 to the registration statement of the Company and AmerUs
Capital I on Form S-1, Registration Number, 333-13713, is hereby incorporated by reference.
4.3 Guaranty Agreement dated as of February 3, 1997 between the Company, as guarantor and Wilmington Trust Company, as trustee,
relating to the 8.85% Capital Securities, Series A, issued by AmerUs Capital I, filed as exhibit 4.4 on Form S-1,
Registration Number, 333-13713, is hereby incorporated by reference.
10.1 Amended and Restated Intercompany Agreement dated as of December 1, 1996, among American Mutual Holding Company, AmerUs
Group Co. and the Company. Filed as Exhibit 10.81 to the company's registration statement on Form S-1, Registration Number
333-12237, is hereby incorporated by reference
10.2* Joint Venture Agreement, dated as of March 8, 1996, between American Mutual Insurance Company and Ameritas Life Insurance
Corp., and First Amendment thereto dated as of April 1, 1996 between American Mutual Life Insurance Company and Ameritas
Life Insurance Corp.
10.3* Management and Administrative Service Agreement, dated as of April 1, 1996, among American Mutual Life Insurance Company,
Ameritas Variable Life Insurance Company and Ameritas Life Insurance Corp.
10.4* Agreement and Plan of Merger, dated as of August 24, 1994, between Central Life Assurance Company and American Mutual Life
Insurance Company
10.5* Line of Credit Application and Approval, dated February 28, 1996 and April 22, 1996, respectively, between American Mutual
Life Insurance Company and Federal Home Loan Bank of Des Moines
10.6* All*AmerUs Supplemental Executive Retirement Plan, effective January 1, 1996
10.7* American Mutual Life Insurance Company Supplemental Pension Plan (which was curtailed as of December 31, 1995)
10.8* Central Life Assurance Company Supplemental Pension Plan (which was curtailed as of December 31, 1995)
10.9* Management Incentive Plan
10.10* AmerUs Life Insurance Company Performance Share Plan
10.11* AmerUs Life Stock Incentive Plan
10.12* Employment Agreement, dated February 1, 1995, between American Mutual Life Insurance Company and Sam C. Kalainov
10.13* AmerUs Life Non-Employee Director Stock Plan
10.14* Modification of Real Estate Contract, dated as of July 1, 1996, between AmerUs Life Insurance Company and AmerUs
Properties, Inc.
10.15* Asset Management and Disposition Agreement, dated January 3, 1995, between American Mutual Life Insurance Company and
Central Properties, Inc. (now AmerUs Properties, Inc.)
10.16* Management Contract, dated January 1, 1993, between Central Life Assurance Company and Central Properties, Inc. (now AmerUs
Properties, Inc.)
10.17* Management Contract, dated November 1, 1994, between American Mutual Life Insurance Company and CPI Resource Group (now
AmerUs Group Co.)
10.18* Management Contract, dated January 1, 1993, between Central Life Assurance Company and Central Properties, Inc. (now AmerUs
Properties, Inc.)
10.19* Management Contract, dated January 1, 1995, between American Mutual Life Insurance Company and Central Properties, Inc.
(now AmerUs Properties, Inc.)
10.20* Management Contract, dated July 1, 1994, between Central Life Assurance Company and CPI Resource Group (now AmerUs Group
Co.)
10.21* Management Contract, dated February 1, 1994, between Central Life Assurance Company and Central Properties, Inc. (now
AmerUs Properties, Inc.)
10.22* Management Contract, dated May 1, 1994, between Central Life Assurance Company and Central Properties, Inc. (now AmerUs
Properties, Inc.)
10.23* Management Contract, dated February 1, 1994, between Central Life Assurance Company and Central Properties, Inc. (now
AmerUs Properties, Inc.)
10.24* Management Contract, dated January 4, 1994, between Central Life Assurance Company and CPI Resource Group (now AmerUs Group
Co.)
10.25* Management Contract, dated November 1, 1994, between American Mutual Life Insurance Company and CPI Resource Group (now
AmerUs Group Co.)
10.26* Lease - Business Property, dated December 1, 1995, between American Mutual Life Insurance Company and AmerUs Leasing
10.27* Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and AmerUs Bank
10.28* Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and AmerUs Bank
10.29* Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and AmerUs Bank
10.30* Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and AmerUs Group
10.31* Lease - Business Property, dated January 1, 1996, between American Mutual Life Insurance Company and AmerUs Group
10.32* Assumption and Amendment of Lease Agreement, dated as of November 27, 1993 among Central Life Assurance Company, Midland
Savings Bank FSB (now AmerUs Bank) and Midland Financial Mortgages, Inc. (now AmerUs Mortgage, Inc.)
10.33* Form of Indemnification Agreement executed with directors and certain officers
10.34* Amended and Restated Agreement and Certificate of Limited Partnership of CPI Housing Partners I, L.P., dated as of
September 1, 1995, among AmerUs Properties, Inc., American Mutual Life Insurance Company and American Mutual Affordable
Housing Partners, L.P.
10.35* Amended and Restated Agreement of Limited Partnership of American Mutual Affordable Housing Partners, L.P., dated as of
September 1, 1995, among GrA Partners Joint Venture, AmerUs Properties, Inc., American Mutual Life Insurance Company, NCC
Polar Company and NCC Orion Company
10.36* Amended and Restated Agreement and Certificate of Limited Partnership of 65th & Vista, L.P., dated as of September 1, 1995,
among AmerUs Properties, Inc., American Mutual Life Insurance Company and American Mutual Affordable Housing Partners, L.P.
10.37* Amended and Restated Agreement and Certificate of Limited Partnership of 60th & Vista, L.P., dated as of September 1, 1995,
among I.R.F.B. Joint Venture, American Mutual Life Insurance Company and American Mutual Affordable Housing Partners, L.P.
10.38* Certificate of Limited Partnership and Limited Partnership Agreement of CPI Housing Partners II, L.P., dated March 27,
1995, between Central Properties, Inc. (now AmerUs Properties, Inc.) and American Mutual Life Insurance Company
10.39* Amended and Restated Agreement and Certificate of Limited Partnership of API Housing Partners III, L.P., dated as of March
1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance Company, American Mutual Affordable Housing Partners
II, L.P. and AmerUs Management, Inc.
10.40* Certificate of Limited Partnership and Limited Partnership Agreement of API Housing Partners IV, L.P., dated as of June
1995, between AmerUs Properties, Inc. and American Mutual Life Insurance Company
10.41* Amended and Restated Agreement and Certificate of Limited Partnership of API Housing Partners V, L.P., dated as of March 1,
1996, among AmerUs Properties, Inc., American Mutual Life Insurance Company, American Mutual Affordable Housing
Partners II, L.P. and AmerUs Management, Inc.
10.42* Amended and Restated Agreement and Certificate of Limited Partnership of API-Chimney Ridge Partners, L.P., dated as of
March 1, 1996, among AmerUs Properties, Inc., American Mutual Life Insurance Company, American Mutual Affordable Housing
Partners II, L.P. and AmerUs Management, Inc.
10.43* Certificate of Limited Partnership and Limited Partnership Agreement of API Housing Partners VI, L.P., dated as of October
10, 1995, between AmerUs Properties, Inc. and American Mutual Life Insurance Company
10.44* Certificate of Limited Partnership and Limited Partnership Agreement of 86th & Meredith Associates, L.P., dated as of
February 14, 1995, between Central Properties, Inc. (now AmerUs Properties, Inc.) and American Mutual Life Insurance
Company
10.45* Certificate of Limited Partnership and Limited Partnership Agreement of Altoona Meadows Investors, L.P., dated as of
February 22, 1995, between KPI Investments, Inc. and Dennis Galeazzi
10.46* First Amendment to the Certificate of Limited Partnership and Limited Partnership Agreement of Altoona Meadows Investors,
L.P., dated as of September 28, 1995, between KPI Investments, Inc. and American Mutual Life Insurance Company
10.47* Loan Servicing Agreement, dated August 1, 1990, between Central Life Assurance Company and Midland Financial Mortgages,
Inc. (now AmerUs Mortgage), filed as Exhibit 10.30 to Central Resource Group, Inc.'s Registration Statement on Form S-1,
Registration No. 33-48359, filed on June 4, 1992
10.48* Construction Loan Servicing Agreement, dated November 20, 1995, between American Mutual Life Insurance Company and AmerUs
Properties, Inc.
10.49* Servicing Agreement, dated March 1996, between American Mutual Life Insurance Company and AmerUs Properties, Inc.
10.50* Loan Servicing Agreement, dated September 1, 1994, between Central Life Assurance Company and Midland Savings Bank, FSB
(now AmerUs Bank)
10.51* Miscellaneous Services Agreement, dated as of January 1, 1996, among American Mutual Life Insurance Company, AmerUs Group
Co., AmerUs Bank, AmerUs Mortgage, Inc., Iowa Realty Co., Inc., Midland Homes, Inc., Iowa Title Company, AmerUs Insurance,
Inc., and AmerUs Finance Inc.
10.52* Amendment to Service Agreement, dated as of May 1, 1996, between American Mutual Life Insurance Company and AmerUs Bank
10.53* Data Processing Service Agreement, dated November 1, 1989, between Central Life Assurance Company and Midland Financial
Savings and Loan Association (now AmerUs Bank), filed as Exhibit 10.29 to Central Resource Group, Inc.'s Registration
Statement on Form S-1, Registration No. 33-48359, filed on June 4, 1992
10.54* First Amendment to Data Processing Service Agreement, dated as of September 30, 1990, between Central Life Assurance
Company and Midland Savings Bank FSB (now AmerUs Bank)
10.55* Second Amendment to Data Processing Service Agreement, dated as of May 1, 1991, between Central Life Assurance Company and
Midland Savings Bank FSB (now AmerUs Bank)
10.56* Third Amendment to Data Processing Service Agreement, dated as of October 1, 1991, between Central Life Assurance Company
and Midland Savings Bank, FSB (now AmerUs Bank)
10.57* Fourth Amendment to Data Processing Service Agreement, dated as of January 2, 1992, between Central Life Assurance Company
and Midland Savings Bank, (now AmerUs Bank)
10.58* Fifth Amendment to Data Processing Service Agreement, dated as of June 1, 1993, between Central Life Assurance Company and
Midland Savings Bank FSB (now AmerUs Bank)
10.59* Sixth Amendment to Data Processing Service Agreement, dated as of September 1, 1995, between American Mutual Life Company
and AmerUs Bank
10.60* Seventh Amendment to Data Processing Service Agreement, dated as of January 1, 1996, between American Mutual Life Insurance
Company and AmerUs Bank
10.61* Data Processing Support Services Agreement, dated as of July 1, 1993, between Central Life Assurance Company and Midland
Savings Bank, FSB (now AmerUs Bank)
10.62* Miscellaneous Services Agreement, dated as of February 5, 1992, between Central Life Assurance Company and Midland Savings
Bank FSB (now AmerUs Bank)
10.63* Investment Management Agreement, dated as of August 15, 1992, between Central Life Assurance Company and Midland Savings
Bank FSB (now AmerUs Bank)
10.64* Disbursement Services Agreement, dated as of April 15, 1995, between American Mutual Life Insurance Company and Midland
Savings Bank FSB (now AmerUs Bank)
10.65* Purchase Agreement, dated as of June 28, 1996, between AmerUs Life Insurance Company and AmerUs Bank
10.66* Brokerage Contract dated January 1, 1995, between American Mutual Life Insurance Company and Midland Investment Services,
Inc. (now AmerUs Investments, Inc.)
10.67* Servicing Agreement, dated March 1, 1992, between Central Life Assurance Company and Midland Investment Services, Inc. (now
AmerUs Investments, Inc.)
10.68* Tax Allocation Agreement dated as of November 4, 1996
10.69* Amended and Restated Articles of Limited Partnership of T.L.B. Limited Partnership, undated, among F. Barry Tapp, Lartnec
Investment Co., Michael H. Taylor, Michael Longley and Michael A. Hammond, along with a Memorandum of Understanding
Regarding Assignments of Partnership Interests dated December 21, 1988 and three corresponding Assignments of Partnership
Interest dated December 6, 1988 wherein Central Life Assurance Company is Assignee, and an Assignment of Partnership
Interest of T.L.B. Limited Partnership dated December 29, 1995, between Lartnec Investment Co. and AmerUs Properties, Inc.
10.70* Assignment of Partnership Interest of T.L.B. Limited Partnership, dated December 28, 1994, between Lartnec Investment Co.
and Central Properties, Inc. (now AmerUs Properties, Inc.) and Assignment of Limited Partnership Interest of T.L.B. Limited
Partnership, dated December 30, 1995, between American Mutual Life Insurance Company and AmerUs Properties, Inc.
10.71* Limited Partnership Agreement of South 19th Limited Partnership, dated December 30, 1985, among Lartnec Investment Co., F.
Barry Tapp and Michael H. Taylor, along with a Memorandum of Understanding Regarding Assignments of Partnership Interests
dated December 21, 1988 and three corresponding Assignments of Partnership Interest dated December 6, 1988 wherein Central
Life Assurance Company is Assignee, and an Assignment of Partnership Interest of South 19th Limited Partnership dated
December 29, 1995, between Lartnec Investment Co. and AmerUs Properties, Inc.
10.72* Assignment of Partnership Interest of South 19th Limited Partnership, dated December 28, 1994, between Lartnec Investment
Co. and Central Properties, Inc. (now AmerUs Properties, Inc.) and Assignment of Partnership Interest of South 19th Limited
Partnership, dated December 30, 1995, between American Mutual Life Insurance Company and AmerUs Properties, Inc.
10.73* Limited Partnership Agreement of Theater Project Limited Partnership dated March 15, 1985, among Tapp Management, Inc.,
Tapp Management Co., Ltd., Michael Longley, Michael A. Hammond and Gary L. Wood along with an Amendment to Certificate of
Limited Partnership, dated August 22, 1986, and an Assignment of Limited Partnership Interest, dated November 15, 1992,
between F. Barry Tapp and Tapp Development Co., Ltd., and an Amended Certificate of Limited Partnership dated December
24, 1992
10.74* Assignment of Limited Partnership Interest of Theater Project Limited Partnership, dated December 30, 1995, between
American Mutual Life Insurance Company and AmerUs Properties, Inc.
10.75* Certificate of Limited Partnership and Limited Partnership Agreement of Lagos Vista Limited Partnership, dated August 10,
1994, between Central Properties, Inc. (now AmerUs Properties, Inc.) and Central Life Assurance Company
10.76* Joint Venture Agreement, dated July 30, 1980, between F. Barry Tapp and Lartnec Investment Co., along with an Assignment by
F. Barry Tapp of Interest in Tapp & LICO Properties, dated December 24, 1981, between F. Barry Tapp and Tapp Development
Co., Ltd., an Assignment of Partnership Interest, dated December 6, 1988, between Tapp Development Co., Ltd. and Central
Life Assurance Company and an Assignment of Joint Venture Interest of Tapp and LICO Properties, dated December 29, 1995,
between Lartnec Investment Co. and AmerUs Properties, Inc.
10.77* Assignment of Joint Venture Interest of Tapp and LICO Properties, dated December 28, 1994, between Lartnec Investment Co.
and Central Properties, Inc. (now AmerUs Properties, Inc.) and Assignment of Joint Venture Interest of Tapp and LICO
Properties, dated December 30, 1995, between American Mutual Life Insurance Company and AmerUs Properties, Inc.
10.78* Joint Venture Agreement, dated December 30, 1980, between MBT, Ltd. and Lartnec Investment Co., along with an Assignment by
F. Barry Tapp of Interest in MBT, Ltd., dated December 24, 1981, between F. Barry Tapp and Tapp Development Co., Ltd., an
Assignment by Michael H. Taylor of Interest in MBT, Ltd., dated December 23, 1981, between Michael H. Taylor and Tapp
Development Co., Ltd., an Assignment of Limited Partnership interest, dated December 6, 1988, between Tapp Development Co.,
Ltd. and Central Life Assurance Company, and an Assignment of Joint Venture Interest of Round Rock Outlet, Ltd., dated
December 29, 1995, between Lartnec Investment Co. and AmerUs Properties, Inc.
10.79* Assignment of Joint Venture Interest of Round Rock Outlet, Ltd., dated December 28, 1994, between Lartnec Investment Co.
and Central Properties, Inc. (now AmerUs Properties, Inc.) and Assignment of Joint Venture Interest of Round Rock Outlet,
Ltd., dated December 30, 1995, between American Mutual Life Insurance Company and AmerUs Properties, Inc.
10.80* Revolving Credit and Term Loan Agreement, dated as of December 1996, among the Company, certain Signatory Banks thereto and
The Chase Manhattan Bank, Note issued by the Company and Borrower Pledge Agreement
11 Statement Regarding Computation of Per Share Earnings
21* List of Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore
have been omitted.
_____________________________
* Previously filed and identified with the same exhibit number in the Company's
Registration Statement on Form S-1, Registration Number 333-12239, and is
hereby incorporated by reference.
<PAGE>
AMERUS LIFE HOLDINGS, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Pro Forma Weighted Average Number of Shares* (in thousands)
<TABLE>
<CAPTION>
<S> <C>
Class A Common Stock owned by AmerUs Group 11,707
Class A Common Stock owned by the public 6,449
Class B Common Stock owned by AmerUs Group 5,000
------
23,156
======
* The issuance of Class A and Class B Common Stock is considered to have occurred as of January 1, 1996 for pro forma purposes;
therefore, the weighted average number of shares outstanding is 23,156,000. The Company has no dilution of shares.
</TABLE>
Primary Pro Forma Earnings Per Common Share
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary Pro Forma Earnings
Per Common Share $1.25 $2.44 $0.62 $0.51
===== ===== ===== =====
/TABLE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from AmerUs Life Holdings, Inc.
and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 2,405,580
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 63,008
<MORTGAGE> 230,368
<REAL-ESTATE> 4,417
<TOTAL-INVEST> 2,877,160
<CASH> 7,752
<RECOVER-REINSURE> 1,964
<DEFERRED-ACQUISITION> 138,455
<TOTAL-ASSETS> 4,450,501
<POLICY-LOSSES> 1,999,838
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 5,412
<POLICY-HOLDER-FUNDS> 66,004
<NOTES-PAYABLE> 81,548
86,000
0
<COMMON> 23,156
<OTHER-SE> 511,830
<TOTAL-LIABILITY-AND-EQUITY> 4,450,501
41,215
<INVESTMENT-INCOME> 96,856
<INVESTMENT-GAINS> 9,523
<OTHER-INCOME> 3,000
<BENEFITS> 83,875
<UNDERWRITING-AMORTIZATION> 10,973
<UNDERWRITING-OTHER> 29,029
<INCOME-PRETAX> 39,954
<INCOME-TAX> 11,586
<INCOME-CONTINUING> 29,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,022
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
