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 September 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.)
699 Walnut Street, Des Moines, Iowa 50309-3948
- -------------------------------------------------------------------------------
(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 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 November 11, 1997 was as follows:
Class A, Common Stock 18,155,989 shares
Class B, Common Stock 5,000,000 shares
Exhibit index - Page 34 Page 1 of 39 <PAGE>
INDEX
Page
No.
Part I - Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets September 30, 1997
(Unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Income (Unaudited) - For
the Nine Months Ended September 30, 1997 and 1996 (Audited) and the
Three Months Ended September 30, 1997 and 1996 . . . . . . . . .. . . . . 5
Consolidated Statements of Cash Flows (Unaudited) -
For the Nine Months Ended September 30, 1997 and 1996 (Audited) . . . . . 7
Notes to Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . .15
Part II - Other Information . . . . . . . . . . . . . . . . . . .. . . . . . 32
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . .32
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . .32
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .34
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ---------------
(Unaudited)
<S> <C> <C>
Assets
Investments:
Securities available-for-sale at fair value:
Fixed maturity securities
(cost: 1997 $2,231,249; 1996 $2,335,875) $2,338,050 $2,414,807
Equity securities
(cost 1997 $48,599; 1996 $60,247) 52,964 64,033
Short-term investments
(cost: 1997 $24,425; 1996 $13,288) 24,425 13,288
Investment in unconsolidated subsidiaries 23,746 20,809
Mortgage loans on real estate 303,263 225,743
Real estate 4,331 4,561
Policy loans 66,295 65,183
Other investments 87,917 93,228
---------- ----------
Total investments 2,900,991 2,901,652
Cash 0 1,814
Accrued investment income 39,998 30,792
Premiums and fees receivable 2,794 1,489
Reinsurance receivables 1,476 1,329
Deferred policy acquisition costs 128,515 120,481
Property and equipment (less accumulated
depreciation 1997 $12,294; 1996 $11,775) 3,434 4,393
Other assets 56,148 52,111
Closed block assets 1,350,343 1,270,168
---------- ----------
Total assets $4,483,699 $4,384,229
========== ==========
Liabilities and Shareholders' Equity
Liabilities:
Policy reserves and policyowner funds:
Future life and annuity policy benefits $1,986,065 $2,053,740
Policyowner funds 65,510 55,369
---------- ----------
Total 2,051,575 2,109,109
Checks drawn in excess of bank balances 1,040 0
Accrued expenses 15,358 14,227
Dividends payable to policyowners 1,723 0
Policy and contract claims 5,391 7,039
Income taxes payable 34,544 25,182
Deferred income taxes 10,303 1,337
Other liabilities 52,336 64,173
Debt 61,527 188,381
Closed block liabilities 1,587,088 1,517,271
---------- ----------
Total liabilities 3,820,885 3,926,719
---------- ----------
Company obligated mandatorily redeemable preferred
capital securities of subsidiary trust holding
solely junior subordinated debentures of the
Company 86,000 0
Shareholders' equity:
Preferred Stock, no par value, 20,000,000
shares authorized, none issued 0 0
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 58,712 35,300
Additional paid in capital 51,371 0
Retained earnings 443,575 402,710
---------- ----------
Total shareholders' equity 576,814 457,510
---------- ----------
Total liabilities and shareholders' equity $4,483,699 $4,384,229
========== ==========
/TABLE
<PAGE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(unaudited, except nine months ended September 30, 1996)
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------- ----------------
1997 1996 1997 1996
------ ------ ------ ----
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums $33,522 $133,704 $12,594 $10,641
Universal life and annuity
product charges 30,741 39,135 10,454 9,864
Net investment income 149,774 188,336 50,548 44,910
Realized gains (losses)
on investments 14,510 62,555 4,987 (1,854)
Other revenues 2,207 2,280 1,577 950
Contribution from the
Closed Block 21,652 2,659 8,242 2,659
---------- ----------- --------- ------
252,406 428,669 88,402 67,170
---------- ----------- --------- -------
Benefits and expenses:
Policyowner benefits 126,125 222,929 42,250 34,866
Underwriting, acquisition,
and insurance expenses 46,662 46,729 17,633 17,777
Amortization of deferred policy
acquisition costs 16,767 31,865 5,794 2,708
Dividends to policyowners 835 26,343 662 19
---------- ---------- --------- -------
190,389 327,866 66,339 55,370
---------- ---------- --------- -------
Income before income tax expense
and equity in earnings of
unconsolidated subsidiary 62,017 100,803 22,063 11,800
Income tax expense 17,694 38,653 6,108 5,812
---------- ---------- --------- --------
<PAGE>
Income before equity in earnings
of unconsolidated
subsidiary $44,323 $62,150 $15,955 $5,988
Equity in earnings of
unconsolidated subsidiary 1,174 794 520 495
---------- ---------- -------- --------
Net income $45,497 $62,944 $16,475 $6,483
========== ========== ======== ========
Net income per common share $1.96 $2.72 $0.71 $0.28
===== ===== ===== =====
Weighted average Common
Shares outstanding 23,155,989 23,155,989 23,155,989 23,155,989
========== ========== ========== ==========
</TABLE>
<PAGE>
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
(In thousands)
(unaudited, except nine months ended September 30, 1996)
<TABLE>
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $45,497 $62,944
Adjustments to reconcile net
income to net cash provided
by operating activities:
Policyowner assessments on
universal life and annuity products (30,741) (43,792)
Interest credited to
policyowner account balances 78,954 87,599
Realized investment (gains) losses (14,510) (62,625)
Change in:
Accrued investment income (9,206) (3,300)
Reinsurance ceded receivables (147) 1,297
Deferred policy acquisition costs (18,163) 5,803
Liabilities for future policy benefits (18,738) 7,994
Policy and contract claims
and other policyowner funds (1,648) (11,730)
Income taxes:
Current 9,362 15,317
Deferred (4,262) (6,747)
Other, net 8,886 2,930
Change in Closed Block assets
and liabilities, net 98,599 41,604
---------- ----------
Net cash provided by operating
activities 143,883 97,294
---------- ----------
Cash flows from investing activities:
Purchase of fixed maturities
available for sale (900,920) (1,124,125)
Maturities, calls, and principal
reductions of fixed maturities
available for sale 873,469 1,012,271
Purchase of equity securities (45,511) (102,814)
Proceeds from sale of equity
securities 54,624 122,147
Proceeds from repayment and sale
of mortgage loans 35,252 94,385
Purchase of mortgage loans (112,768) (22,810)
Purchase of real estate and other
invested assets 10,628 2,486
Change in policy loans, net (1,112) (5,432)
Tax on capital gains 6 7
Other assets, net 89,067 60,049
Change in Closed Block
investments, net (71,180) (19,360)
Initial establishment of the Closed Block 0 (22,925)
---------- ---------
Net cash used in investing
activities (68,445) (6,121)
---------- ---------
Cash flows from financing activities:
Deposits to policyowner account
balances 92,685 126,688
Withdrawals from policyowner
account balances (180,519) (234,923)
Change in debt, net (126,854) 8,594
Change in checks drawn in excess
of bank balance 1,040 8,311
Dividends to American Mutual
Holding Company 0 (4,463)
Initial public offering of
common stock 55,027 0
Dividends to shareholders (4,631) 0
Issuance of company-obligated
mandatory redeemable
capital securities 86,000 0
--------- ---------
<PAGE>
Net cash used in financing
activities (77,252) (95,793)
--------- ---------
Net (decrease) increase
in cash (1,814) (4,620)
Cash at beginning of period 1,814 4,620
-------- ----------
Cash at end of period $ 0 $ 0
======== =========
Supplemental disclosure of cash
activities:
Interest paid $7,781 $1,154
====== ======
Income taxes paid $26,235 $42,000
======= =======
</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 nine months ended September 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
September 30, 1997, and statements of income for the nine months and three
months ended September 30, 1997 is as follows (in thousands):
Assets:
<TABLE> Closed Block
September 30, 1997
-----------------
<S> <C>
Fixed maturity securities, at fair value
(amortized cost of $959,553) $997,330
Short-term investments, at fair value 7,379
Policy loans 173,084
Other investments 2,380
Accrued investment income 9,221
Premiums and fees receivable 2,141
Deferred policy acquisition costs 154,878
Other assets 3,930
--------
$1,350,343
==========
Liabilities:
Future life and annuity policy benefits $1,427,884
Policyowner funds 7,051
Checks drawn in excess of bank balances (335)
Accrued expenses 4,096
Dividends payable to policyowners 134,409
Policy and contract claims 5,930
Other liabilities 8,053
----------
$1,587,088
==========
</TABLE>
<TABLE>
Nine Months Ended Three Months Ended
September 30, 1997 September 30, 1997
------------------ -----------------
<S> <C> <C>
Revenues and Expenses:
Insurance premiums $153,610 $48,616
Universal life and annuity
product charges 14,353 4,346
Net investment income 81,384 27,106
Realized gains (losses) on investments (192) 797
Policyowner benefits (158,707) (50,325)
Underwriting, acquisition, and
insurance expenses (4,096) (1,275)
Amortization of deferred policy
acquisition costs (20,357) (6,246)
Dividends to policyowners (44,343) (14,777)
---------- --------
Contribution from the Closed Block
before income taxes $21,652 $8,242
====== =====
</TABLE>
(3) DEBT AND CAPITAL SECURITIES
Debt consists of the following (in thousands):
<TABLE>
September 30, December 31,
1997 1996
------------ ----------------
<S> <C> <C>
Federal Home Loan Bank community
investment long-term advances
with a weighted average interest
rate of 6.35% at September 30,1997 $16,527 $13,381
Bank Credit Facility:
Term loan bearing interest at 6.56%
at September 30, 1997 45,000 100,000
Revolving credit loan 0 75,000
------- -------
$61,527 $188,381
======= =======
</TABLE>
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.
On October 23, 1997, the Company entered into a new bank credit facility
and repaid the term loan under the prior bank credit facility. The new loan
agreement provides for a $250 million revolving credit facility on substantially
the same terms as the former agreement. The Company immediately borrowed $235
million to finance the acquisition of Delta Life Corporation, retire the former
term loan and retire certain indebtedness of Delta.
(4) FEDERAL INCOME TAXES
The effective income tax rate for the period ending September 30, 1997 was
lower than the prevailing corporate rate primarily as a result of earned low
income housing and historic rehabilitation credits.
(5) COMMITMENTS AND CONTINGENCIES
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, AmerUs Life and the
plaintiffs have entered into a nationwide class settlement of certain market
conduct issues for a substantial block of its policies. On September 16, 1997,
the court entered an order approving the certification of the class and the
fairness of the settlement. Due to the potential that a settlement may be
reached in this case, AmerUs Life incurred a significant charge to income in
the third quarter of 1996. Based upon estimates of the range of loss at between
five and eight million dollars, AmerUs Life established a reserve of five
million dollars. The eventual costs of the settlement cannot be precisely
determined at this time, and may be more or less than the amount of the range.
A class action lawsuit, BHAT V. AMERUS LIFE INSURANCE COMPANY,
was also filed in December 1996 in the United States District Court for the
Northern District of California. The complaint alleges that AmerUs Life
breached the terms of certain life and annuity policies, and breached certain
other duties owed to policyowners, when it allegedly passed an increase in its
corporate income taxes (known as the deferred acquisition cost, or DAC, tax)
through to owners of those policies. The complaint also includes RICO
allegations. The plaintiff, an insured under a universal life policy issued
by Central Life, seeks unspecified actual and punitive damages and injunctive
relief on behalf of himself and all policyowners of AmerUs Life with
universal life, term and "blended" life insurance policies and annuities.
AmerUs Life denies the allegations contained in the complaint, including
the existence of a legitimate class. The litigation is in the discovery
stage and is being vigorously defended by AmerUs Life. A hearing on
certification of the class has not yet been scheduled. At this time, the
Company cannot determine the ultimate outcome of this litigation or the
amount of potential liability, if any.
Despite AmerUs' vigorous defense of these class action lawsuits and its
denial of any wrongdoing, there can be no assurance that the outcome of such
lawsuits will not have a material adverse effect on the life insurance
industry generally or on AmerUs.
In the ordinary course of business, AmerUs and its subsidiaries are also
engaged in certain other litigation, none of which management believes is
material.
AmerUs Life and its joint venture partner are contingently liable in the
event the joint venture, Ameritas Variable Life Insurance Company ("AVLIC"),
cannot meet its policyholder obligations. At September 30, 1997, AVLIC had
statutory assets of $1.4 billion, liabilities of $1.3 billion, and
surplus of $45.6 million.
(6) RELATED PARTY TRANSACTIONS
AmerUs Life entered into a master agreement of purchase and sale with
AmerUs Bank, dated as of March 5, 1997, whereby AmerUs Life agreed to purchase
whole loans from AmerUs Bank from time to time. AmerUs Life also entered into
a loan servicing agreement with AmerUs Bank, dated as of March 5, 1997, whereby
AmerUs Bank acts as servicer of the loans and receives a servicing
fee ranging from 50 to 58 basis points of the outstanding principal balances
of the loans. AmerUs Life has made three purchases under this agreement during
1997. On March 7, 1997, $25.3 million in outstanding principal at a $1.4
million premium; on September 10, 1997, $39.1 million in outstanding
principal at a $2.7 million premium; and on September 28, 1997, $34.0 million in
outstanding principal at a $2.4 million premium. Subsequent to September 30,
1997, these loans were sold by AmerUs Life at a small gain.
AmerUs Life entered into a purchase agreement with AmerUs Mortgage dated
March 1, 1997, whereby AmerUs Life has committed to purchase up to $200 million
principal amount of first mortgage loans originated by AmerUs Mortgage. The
commitment expires on December 31, 1997, and is terminable by either party upon
sixty days' notice. To date, AmerUs Life has purchased 13 mortgage loans
pursuant to such commitment for a total purchase price of $1.8 million.
(7) SUBSEQUENT EVENT
The Company completed the acquisition of Delta Life Corporation following
receipt of an order on October 23, 1997 from the Tennessee Department of
Commerce and Insurance approving the change of control for $162.9 in cash.
Delta Life Corporation provides deferred annuity and equity index annuity
products through an insurance subsidiary and had assets of approximately
$2.0 billion, at the date of the closing.<PAGE>
AmerUs Life Holdings, Inc.
ITEM 2. SEPTEMBER 30, 1997
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:
<TABLE>
Sales Activity by Product
Nine Months Ended Three Months Ended
September 30, September 30,
------------------- ------------------------
($ in thousands) 1997 1996 1997 1996
---------- ------------------- ----------
<S> <C> <C> <C> <C>
Individual life insurance:
Participating whole life $12,409 $13,658 $3,806 $4,710
Universal life 5,789 5,650 2,123 2,156
Term life 3,302 1,958 1,546 589
------- ------- ------ ------
Total life insurance <F1> $21,500 $21,266 $7,475 $7,455
======= ======= ====== ======
Individual annuities <F2> $31,549 $63,098 $10,244 $13,561
======= ======= ======= =======
<FN>
<F1> Direct first year annualized premiums
<F2> Direct first year and single collected premiums
</FN>
</TABLE>
Life insurance sales as measured by annualized premiums increased
$0.2 million, or 1.1%, for the nine months ended September 30, 1997, from the
same period in 1996, with third quarter, 1997 sales in line with sales from the
third quarter of 1996. As result of the introduction of new term products
earlier this year, sales of term insurance increased by $1.3 million and $0.9
million for the nine months and three months ended September 30, 1997,
respectively. These increases were partially offset by lower sales of other
traditional products as our distribution systems increased sales of variable
products through the Ameritas Joint Venture. Including production from the
Company's distribution systems through the joint venture, life insurance
sales through September 30, 1997 increased 4.1% for the nine months and
increased 1.2% for the three months ended September 30, 1997, from the same
periods in 1996. The decrease in annuity sales for the Company resulted from
the transfer of substantially all new sales of individual deferred annuities
to the Ameritas Joint Venture in May 1996. Including production from the
Company's distribution systems through the joint venture, annuity sales
through September 30, 1997 have increased 19.9% and 9.2% for the nine months
and three months ended September 30, 1997, respectively, from the comparable
periods in 1996. The Company's investment in the Ameritas Joint Venture is
carried on the equity method.
<PAGE>
Premium Receipts
The following table sets forth the Company's collected premiums for the
periods indicated:
Collected Premiums by Product
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
($ in thousands) 1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Direct individual life premiums collected:
Traditional life:
First year & single $ 53,850 $ 51,890 $18,009 $17,463
Renewal 124,778 120,625 41,075 38,904
-------- -------- ------- -------
Total $178,628 $172,515 $59,084 $56,367
======== ======== ======= =======
Universal life:
First year & single $10,366 $ 10,972 $ 3,374 $ 3,423
Renewal 56,013 57,199 18,428 18,753
------- ------- ------- -------
Total $66,379 $ 68,171 $21,802 $22,176
======= ======= ======= =======
Total direct life $245,007 $240,686 $ 80,886 $ 78,543
Reinsurance assumed 1,292 1,098 478 341
Reinsurance ceded (9,739) (10,269) (4,813) (3,689)
-------- -------- ------- --------
Total individual life,
net of reinsurance $236,560 $231,515 $ 76,551 $ 75,195
======== ======== ======== ========
Direct annuity premiums collected:
Individual <F1> $ 37,515 $ 70,192 $ 11,904 $ 15,624
Group 0 50 0 0
-------- -------- ------- --------
Total annuities 37,515 70,242 11,904 15,624
Reinsurance ceded (336) (424) (55) (79)
-------- -------- ------- --------
Total annuities, net
of reinsurance $37,179 $69,818 $11,849 $15,545
======= ======= ======= =======
Total group life, net
of reinsurance <F2> $ (170) $ 2,171 $ (160) $ 627
======== ======= ======= =======
Total accident and health,
net of reinsurance <F3> $ 184 $ 148 $ 55 $ 46
======= ======= ======= =======
Total collected premiums,
net of reinsurance $273,753 $303,652 $88,295 $91,413
======== ======== ======= =======
<FN>
<F1> Effective May 1996, substantially all new sales of individual deferred
annuities are made through the Ameritas Joint Venture.
<F2> The Company sold substantially all of its group life business as of
July 1, 1996 and is no longer actively marketing this line of business.
<F3> The Company sold substantially all of its accident and health business
in 1991 and is no longer actively marketing this line of business.
</FN>
</TABLE>
Life Insurance and Annuities in Force
The following table sets forth information regarding life insurance and
annuities in force for each date presented:
Life Insurance and Annuities in Force
<TABLE>
As of September 30,
------------------
($ in thousands) 1997 1996
------ ------
<S> <C> <C>
Individual life insurance:
Traditional
Number of policies 251,208 255,916
GAAP life reserves $1,280,065 $1,184,259
Face amounts $17,464,000 $16,691,000
Universal life
Number of policies 118,043 121,114
GAAP life reserves $843,770 $812,173
Face amounts $12,043,000 $12,286,000
Total individual life
Number of policies 369,251 377,030
GAAP life reserves $2,123,835 $1,996,432
Face amounts $29,507,000 $28,977,000
Annuities <F1>:
Number of policies 50,904 56,831
GAAP reserves $1,092,489 $1,227,023
Group life insurance <F2>:
Number of lives 29,781 33,857
Face amounts $878,000 $894,000
___________________
<FN>
<F1> Effective May 1996, substantially all new sales of individual
deferred annuities are made through the Ameritas Joint Venture.
<F2> 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>
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 nine months and the
three months ended September 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.
<TABLE>
Nine Months Ended September 30, 1997
----------------------------------
($ in thousands) As Reported Closed Block Combined
------------- ----------- -----------
<S> <C> <C> <C>
Revenues
Insurance premiums $33,522 $153,610 $187,132
Product charges 30,741 14,353 45,094
Net investment income 149,774 81,384 231,158
Realized gains (losses) on
investments 14,510 (192) 14,318
Other revenues 2,207 0 2,207
Contribution from the
Closed Block 21,652 (21,652) 0
------- -------- --------
Total revenues 252,406 227,503 479,909
Benefits and expenses
Policyowner benefits 126,125 158,707 284,832
Underwriting, acquisition
and insurance expenses 46,662 4,096 50,758
Amortization of deferred
policy acquisition costs 16,767 20,357 37,124
Dividends to policyowners 835 44,343 45,178
------- -------- --------
Total benefits and expenses 190,389 227,503 417,892
Income before income tax expense
and equity in earnings of
unconsolidated subsidiary 62,017 0 62,017
Income tax expense 17,694 0 17,694
------- -------- --------
Income before equity in
earnings of unconsolidated
subsidiary 44,323 0 44,323
Equity in earnings of
unconsolidated subsidiary 1,174 0 1,174
------ --------- --------
Net income $45,497 $ 0 $ 45,497
====== ========= ========
</TABLE>
<TABLE>
Three Months Ended September 30, 1997
------------------------------------------------
($ in thousands) As Reported Closed Block Combined
----------- ------------ --------
<S> <C> <C> <C>
Revenues
Insurance premiums $12,594 $48,616 $61,210
Product charges 10,454 4,346 14,800
Net investment income 50,548 27,106 77,654
Realized gains (losses) on
investments 4,987 797 5,784
Other revenues 1,577 0 1,577
Contribution from the
Closed Block 8,242 (8,242) 0
------- ------- --------
Total revenues 88,402 72,623 161,025
Benefits and expenses
Policyowner benefits 42,250 50,325 92,575
Underwriting, acquisition
and insurance expenses 17,633 1,275 18,908
Amortization of deferred
policy acquisition costs 5,794 6,246 12,040
Dividends to policyowners 662 14,777 15,439
------- ------- -------
Total benefits and
expenses 66,339 72,623 138,962
Income before income tax
expense and equity in earnings of
unconsolidated subsidiary 22,063 0 22,063
Income tax expense 6,108 0 6,108
------- ------- -------
Income before equity in
earnings of
unconsolidated subsidiary 15,955 0 15,955
Equity in earnings of
unconsolidated subsidiary 520 0 520
------- ------- -------
Net income $16,475 $ 0 $16,475
======= ======= =======
/TABLE
<PAGE>
COMBINED RESULTS OF OPERATIONS
NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
A summary of the Company's combined revenues, including revenues associated
with the Closed Block, follows:
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------ ------------------
($ in thousands) 1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Insurance premiums:
Traditional life insurance
premiums $173,828 $169,435 $56,369 $56,088
Immediate annuity and
supplementary contract premiums 13,196 11,366 4,801 3,269
Other premiums 108 1,650 40 31
-------- -------- ------- -------
Total insurance premiums 187,132 182,451 61,210 59,388
Universal life product charges 44,363 43,139 14,477 14,298
Annuity product charges 731 654 323 223
-------- -------- ------- -------
Total product charges 45,094 43,793 14,800 14,521
Net investment income 231,158 215,325 77,654 71,736
Realized gains (losses) on investments 14,318 62,625 5,784 (1,784)
Other revenues 2,207 2,279 1,577 950
-------- -------- ------ -------
Total revenues $479,909 $506,473 $161,025 $144,811
======= ======= ======= =======
</TABLE>
Individual life and annuity premiums and product charges increased $7.5
million, or 3.4%, for the nine months and increased $2.1 million, or 2.8%, for
the three months ended September 30, 1997 from the same periods in 1996.
Traditional life insurance premiums increased $4.4 million for the nine months
and increased $0.3 million for the three months as a result of continued
growth in renewal premiums. Immediate annuity deposits and supplementary
contract premiums were $1.8 million higher for the nine months and $1.5 million
higher for the three months ended September 30, 1997 compared to the same
periods in 1996. The increase for the nine months was primarily the result of
higher supplementary contract premiums, with the increase for the quarter
primarily due to increased immediate annuity sales. Other premiums for the
first nine months of 1997 were lower than for the same period in 1996
primarily due to the sale of the Company's remaining group life operation in
the third quarter of 1996.
Universal life product charges increased $1.2 million for the nine months
and increased $0.2 million for the three months ended September 30, 1997
compared to the same periods in 1996. The increased product charges were
primarily due to increased cost of insurance charges as a result of the
normal aging of the block of business.
Net investment income increased $15.8 million for the nine months and
increased $5.9 million for the three months ended September 30,1997 from the
same periods in 1996. Average invested assets for the first nine months of 1997
increased $159.0 million (excluding market value adjustments) from the same
period in 1996, and the effective yield on average invested assets (excluding
market value adjustments) increased from 7.67% for the first nine months of
1996 to 7.90% for the same period in 1997. The increase in net investment
income from the third quarter of 1996 to the third quarter of 1997 was also
primarily due to increased effective yields and average invested assets.
Contributing to the higher yields for the first nine months of 1997 was
investment income of $6.1 million from other invested assets ($3.5 million
during the third quarter).
Realized gains on investments decreased $48.3 million for the nine months
and increased $7.6 million for the three months ended September 30, 1997 from
the same periods in 1996. Included in the nine month amounts for 1996 were
approximately $52.6 million of gains from the sale of common stock as a
result of the liquidation of the Company's equity portfolio, with approximately
$51.5 million of the gains occurring during the first quarter of 1996. The
increase for the quarter is primarily the result of gains in the bond and
preferred stock portfolios during the current quarter compared to losses in the
bond and real estate portfolios during the third quarter of 1996.
A summary of the Company's combined policyowner benefits, including
policyowner benefits associated with the Closed Block, follows:
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------- ----------------
($ in thousands) 1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Traditional life insurance
Death benefits $30,494 $25,656 $9,521 $5,992
Change in liability for
future policy benefits
and other policy benefits 125,869 117,849 41,902 38,085
-------- -------- ------ -------
Total traditional life
insurance benefits 156,363 143,505 51,423 44,077
Universal life insurance
Death benefits in excess of
cash value 19,572 17,173 4,686 5,468
Interest credited on policyowner
account balances 33,674 32,498 11,062 11,467
Other policy benefits 2,417 2,993 795 1,235
-------- -------- ------ ------
Total universal life insurance benefits 55,663 52,664 16,543 18,170
Annuities
Interest credited to
deferred annuity account
balances 45,281 52,142 14,756 16,430
Other annuity benefits 27,078 23,988 9,842 7,754
-------- -------- ------ ------
Total annuity benefits 72,359 76,130 24,598 24,184
Miscellaneous benefits 447 1,658 11 (537)
-------- -------- ------ ------
Total policyowner benefits $284,832 $273,957 $92,575 $85,894
======= ======= ====== ======
</TABLE>
Total policyowner benefits increased $10.9 million for the nine months and
increased $6.7 million for the three months ended September 30, 1997 from the
same periods in 1996. Traditional life insurance benefits increased $12.9
million for the nine month period and increased $7.3 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 higher mortality. Universal life
insurance benefits increased $3.0 million for the nine months ended September
30, 1997 from the same period in 1996 primarily as a result of increased death
benefits due to higher mortality. Universal life insurance benefits decreased
$1.6 million for the three month period due primarily to lower death benefits.
Interest credited to universal life policyowner account balances increased
$1.2 million for the nine months ended September 30, 1997 from the same period
in 1996. While the weighted average crediting rate for the Company's universal
life liabilities decreased six basis points from 6.31% for the first nine months
of 1996 to 6.25% for the first nine months of 1997, the Company's average
liabilities increased $33.7 million over the same period, resulting in the
increased credited amounts during the first nine months of 1997.
Annuity benefits decreased $3.8 million for the nine months and increased
$0.4 million for the three months ended September 30, 1997 from the same periods
in 1996. The decrease in annuity benefits for the nine month period is
primarily due to reduced interest credited to policyowner account balances.
Reduced interest credited amounts for the three month period are
more than offset by increased other annuity benefits due primarily to higher
immediate annuity sales. The decrease in interest credited amounts in 1997
compared to 1996 amounted to $6.9 million and $1.7 million for the nine months
and three months ended September 30, respectively. The weighted average
crediting rate for the Company's individual deferred annuity liabilities
decreased eight basis points to 5.31% for the first nine months of 1997
compared to 5.39% for the first nine months of 1996. The Company's average
deferred annuity liabilities decreased $124.7 million from the first nine
months of 1996 to the first nine months of 1997 also contributing to the
decrease in interest credited amounts in 1997. Lower interest credited
amounts in the third quarter of 1997 as compared to the third quarter of 1996
reflect similar decreases in average liabilities and reasonably consistent
reductions in quarterly credited rates. The increase in other annuity benefits
for the first nine months of 1997 was primarily the result of higher
supplementary contract premiums.
Miscellaneous benefits were lower for the first nine months of 1997
compared to the same period in 1996 primarily due to the sale of the Company's
remaining group life operation in the third quarter of 1996. The $0.5 million
higher benefits for the three months ended September 30, 1997 compared to the
same period in 1996 was the result of the release of the group life reserves
due to the sale of this operation in the third quarter of 1996.
A summary of the Company's combined expenses, including expenses
associated with the Closed Block, follows:
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------- ----------------
($ in thousands) 1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Commission expense, net of deferrals $6,415 $6,843 $2,334 $2,340
Other underwriting, acquisition and
insurance expenses, net of deferrals 44,343 41,087 16,574 16,475
Amortization of deferred policy
acquisition costs 37,124 43,109 12,040 13,952
------- ------- ------- ------
Total expenses $87,882 $91,039 $30,948 $32,767
====== ====== ====== ======
</TABLE>
Commission expense, net of deferrals was $6.4 million for the nine months
ended September 30, 1997, decreasing $0.4 million from the same period a year
ago primarily due to a change in the mix of products sold. Other underwriting,
acquisition and insurance expenses, net of deferrals, increased $3.3 million
for the nine months ended September 30, 1997, from the same period in 1996.
The increase in expenses in 1997 for the nine month period is primarily due to
interest expense of $9.0 million on capital securities issued by the Company
and on the revolving line of credit, which more than offsets a $5.0 million
reserve established during the third quarter of 1996 in connection with
certain class action litigation. This added interest 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 $6.0
million for the nine months and decreased $1.9 million for the three months
ended September 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 in the first nine months
of 1997, compared to the first nine 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 nine months of 1997. Higher death
benefits, partially offset by higher realized capital gains, in the third
quarter of 1997, compared to the third quarter of 1996, contributed
to lower gross margins on these same products, resulting in the lower
amortization during the third quarter of 1997.
Dividends to policyowners increased $4.5 million for the nine months and
increased $1.1 million for the three months ended September 30, 1997, from the
same periods in 1996. The increases in the dividends for both the nine month
and three month periods were primarily the result of the growth and aging of
the in force policies resulting in higher policyowner reserves. Traditional
life reserves grew 8.1% from September 30, 1996, to $1.28 billion at
September 30, 1997. The weighted average interest rate used in the dividend
formula for these policies was 7.19% during the first nine months of 1997
compared to 7.17% during the same period of 1996.
Income before income taxes decreased $38.8 million for the nine months
ended September 30, 1997 to $62.0 million compared to $100.8 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 September 30, 1997
increased $10.3 million to $22.1 million compared to $11.8 million for the
third quarter of 1996, primarily due to increased realized gains on investments.
Income tax expense decreased $21.0 million for the nine months ended
September 30, 1997 compared to the same period in 1996 primarily as a result of
the lower pre-tax income due to the lower realized gains on investments, the
$4.5 million provision for the equity add-on tax in the first half of 1996,
and increased tax credits of $3.2 million in 1997. Income tax expense
increased $0.3 million for the three months ended September 30, 1997, from the
same period in 1996 primarily due to higher pre-tax income in 1997 due in large
part to increased realized gains on investments, partially offset by increased
tax credits of $1.3 million in 1997.
Net income decreased $17.4 million for the nine months and increased
$10.0 million for the three months ended September 30, 1997 from the same
periods in 1996. The reduced net income for the nine month period resulted
primarily from lower realized gains on investments. The increased net income
for the three month period resulted from increased operating income aided
by increased tax credits, and higher realized gains on investments.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
The Company's cash flows from operations consist 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 charges 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 its life insurance subsidiaries to make 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. Based on this limitation and 1996
statutory results, and absent the dividends paid as a part of the
reorganization of the Company, AmerUs Life would have been able to pay
approximately $34 million in dividends without obtaining the Iowa
Commissioner's approval. However, as a result of the distribution made as a
part of the reorganization of the Company, AmerUs Life is not able to pay
dividends to the Company until December 1997 without the prior approval of the
Iowa Commissioner. Thus far in 1997, AmerUs Life has requested and received
approval to pay $10 million of dividends. It is AmerUs Life's intention to
seek regulatory approval to pay additional dividends to the Company during 1997.
The payment of future dividends by Delta Life Corporation, the Company's recent
acquisition, will be regulated by Tennessee law which has similar statutory
limitations as Iowa. Management believes that the Company will have adequate
access to capital through the public equity and debt markets and the Bank
Credit Facility to meet presently anticipated capital requirements.
On October 23, 1997, the Company entered into a $250 million revolving
credit facility with a syndicate of lenders (the "Bank Credit Facility") to be
used to replace its existing credit facility, to finance the acquisition of
Delta Life Corporation ("Delta"), to finance permitted mergers and acquisitions
and to finance other general corporate purposes. The Bank Credit Facility is
secured by a pledge of approximately 49.9% of the outstanding common stock of
AmerUs Life, 100% of the outstanding common stock of Delta and a $50 million
9% surplus note payable to the Company by AmerUs Life. As of October 31, 1997,
there was an outstanding loan balance of $235.1 million under the facility.
The Bank Credit Facility provides for typical events of default and covenants
with respect to the conduct of the business of the Company and its subsidiaries
and requires the maintenance of various financial levels and ratios. Among
other covenants, the Company (a) cannot have a leverage ratio greater than
0.35:1.0 or an interest coverage ratio less than 2.5:1.0, (b) is prohibited
from paying cash dividends on its common stock in excess of an amount equal
to 3% of its consolidated net worth of the last day of the preceding fiscal
year, and (c) must cause certain of its subsidiaries including AmerUs Life and
Delta Life to maintain certain ratings from A.M. Best and certain levels of
adjusted capital and surplus and risk-based capital.
Management currently expects the Company to issue approximately $200
million in debt securities. It is currently anticipated that the proceeds
would be used to pay down the indebtedness under the Bank Credit Facility.
The Company may from time to time review other potential acquisition
opportunities. It is anticipated that funding for any such acquisition may be
provided from available cash resources or from debt or equity financing. In
the future the Company anticipates that its liquidity and capital needs will be
met through interest and dividends from its life insurance subsidiaries,
accessing the public equity and debt markets depending upon market conditions,
or alternatively from bank financing.
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 form operating activities of $143.9
million and $97.3 million, for the nine months ended September 30, 1997 and
1996, respectively. Excess operating cash flows were primarily used to
increase AmerUs Life's fixed maturity investment portfolio, consistent with
the long-term investment objective of the Company to reduce the level of equity
investments and mortgages as a percentage of its 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 and annuity product. 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 assets supporting its 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-payment 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 withdrawals provisions at September 30, 1997
(in millions):
<TABLE>
<S> <C> <C>
No subject to discretionary withdrawal $ 215
Subject to discretionary withdrawal with adjustments:
Specified surrender charges >F1> $845
Market value adjustments 381
-----
Subtotal 1,226
Subject to discretionary withdrawal
without adjustments 557
------
Total $1,998
======
<FN>
<F1> Includes $293 million of statutory liabilities with a contractual
surrender charge of less than five percent of the account balance.
</FN>
</TABLE>
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 September 30, 1997. Interest is payable at a
current rate at the time of any advance. As of September 30, 1997, AmerUs Life
had a $25 million open secured line of credit with none outstanding.
AmerUs Life may also obtain liquidity through sales of investments or
borrowings collateralized by their investment portfolios. AmerUs Life's
investment portfolio as September 30, 1997 had a carrying value of $4.1 billion
including Closed Block investments. As of September 30, 1997 fixed maturity
securities were $3.3 billion, or 81.7% of invested assets, with public and
private fixed maturity securities constituting $3.0 billion or 73%, and $327.8
million, or 8%, of invested assets, respectively.
At September 30, 1997, the statutory surplus of AmerUs Life was $305.7
million. Management believes that this level of statutory capital is more than
adequate as this level is significantly in excess of required levels.
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.
The Company does not believe that inflation has had a material effect on
its consolidated results of operations.
Interest rate changes may have temporary effects on the sale and
profitability of the annuities and life insurance products offered by AmerUs
Life. For example, if interest rates rise, competing investments (such as
annuities or life insurance products offered by AmerUs Life's competitors,
certificates of deposit, mutual funds, and similar instruments) may become more
attractive to potential purchasers of AmerUs Life's products until AmerUs Life
increases the interest rate credited to owners of its annuities and life
insurance products. In contrast, as interest rates fall, AmerUs Life attempts
to adjust its credited rates to compensate for the corresponding decline in
reinvestment rates. AmerUs Life monitors interest rates and sells annuities
and life insurance policies that permit flexible responses to interest rate
changes as part of AmerUs Life's management of interest spreads. However,
the profitability of AmerUs Life's products is not based solely upon interest
rate spreads but also on persistency, mortality and expenses.
AmerUs Life manages its investment portfolio in part to reduce its
exposure to interest rate fluctuations. In general, the market value of AmerUs
Life's fixed maturity portfolio increases or decreases in an inverse
relationship with fluctuations in interest rates, and AmerUs Life's net
investment income increases or decreases in a direct relationship with interest
rate changes.
Although all of its assets support all of its liabilities, AmerUs Life has
developed an asset/liability management approach with separate investment
portfolios for major product lines such as traditional life, universal life and
annuities. Investment policies and strategies have been established based on
the specific characteristics of each product line. The portfolio investment
policies and strategics establish asset duration, quality and other
guidelines. AmerUs Life utilizes analytical systems to establish an optimal
asset mix for each line of business. AmerUs Life seeks to manage the
asset/liability mismatch and the associated interest rate risk through active
management of the investment portfolio. Financial, actuarial, investment,
product development and product marketing professionals work together
throughout the product development, introduction and management phases to
jointly develop and implement product features, initial and renewal crediting
strategies, and investment strategies based on extensive modeling of a variety
of factors under a number of interest rate scenarios.
Inforce reserves and the assets allocated to each segment are modeled on a
regular basis to analyze projected cash flows under a variety of economic
scenarios. The result of this modeling is used to modify asset allocation,
investment portfolio duration and convexity and renewal crediting strategies.
AmerUs Life does invest in collaterized mortgage obligations as part of its
basic portfolio strategy, but uses other types of derivatives only as a hedge
against the effects of interest rate fluctuations or to synthetically alter the
investment characteristics of specific assets.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 certain 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, AmerUs Life and the
plaintiffs have entered into a nation-wide class settlement of certain market
conduct issues for a substantial block of its policies. On September 16, 1997,
the court entered an order approving the certification of the class and the
fairness of the settlement.
Due to the potential that a settlement may be reached in this case, AmerUs
Life incurred a significant charge to income in the third quarter of 1996.
Based upon estimates of the range of loss at between five and eight million
dollars, AmerUs Life has established a reserve of five million dollars. The
eventual costs of the settlement cannot be precisely determined at this time,
and may be more or less than the amount of the range.
Despite AmerUs Life's vigorous defense of these class action lawsuits and
its denial of any wrongdoing, there can be no assurance that the outcome of
such lawsuits will not have a material adverse effect on the life insurance
industry generally or on AmerUs Life.
In the ordinary course of business, AmerUs Life and its subsidiaries are
also engaged in certain other litigation, none of which management believes is
material.
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
September 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: November 11, 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)
AMERUS LIFE HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<C> <S>
EXHIBIT NO. DESCRIPTION
- ------------------ --------------------
2.1* Plan of Reorganization dated October 27, 1995.
2.2# Amended and Restated Agreement and Plan of Merger, dated as of September
19, 1997 and as amended and restated as of October 8, 1997, by and among
the Registrant, AFC Corp. and AmVestors Financial Corporation
("AmVestors").
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.
5.1# Opinion of Joseph K. Haggerty, Esq., General Counsel of the Registrant,
as to the legality of securities being registered.
8.1# Opinion of Skaddeen, Arps, Slate, Meagher & Flom LLP, as to certain
federal income tax matters.
8.2# Opinion of Bryan Cave LLP, as to certain federal income tax matters.
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.
10.81# Agreement and Plan of Merger, dated as of August 13, 1997 and as amended
as of September 5, 1997, among the Registrant, a wholly owned subsidiary
of the Registrant and Delta Life Corporation, filed as Exhibit 2.2 to
the Registrant's current report on Form 8-K on October 8, 1997, is
hereby incorporated by reference.
10.82# Purchase Agreement between AmerUs Life and AmerUs Bank dated March 5,
1997 relating to the sale of certain loans.
10.83# Letter Agreement dated as of March 1, 1997 between AmerUs Life and
AmerUs Mortgage relating to the purchase of residential mortgage loans,
together with an amendment thereto dated March 11, 1997.
10.84# Credit Agreement, dated as of October 23, 1997, among the Registrant,
Various Lender Institutions, the Co-Arrangers and The Chase Manhattan
Bank, as Administrative Agent.
10.85# Coinsurance Agreement, effective February 1, 1996, between Delta Life
and Annuity Company and London Life Reinsurance Company.
11 Statement Regarding Computation of Per Share Earnings.
21.1# List of Subsidiaries of the Registrant.
23.1# Consent of KPMG Peat Marwick LLP.
23.2# Consent of Deloitte & Touche, LLP.
23.3# Consent of Person About to Become a Director.
27 Financial Data Schedule.
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.
# Previously filed and identified with the same exhibit number in the
Company's Registration Statement on Form S-4, filed November 11, 1997,
and is hereby incorporated by reference.
</TABLE>
AMERUS LIFE HOLDINGS, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
Pro Forma Weighted Average Number of Shares* (in thousands)
<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
23,155,989. The Company has no dilution of shares.
</TABLE>
Primary Pro Forma Earnings Per Common Share
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------- ---------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Primary Pro Forma Earnings
Per Common Share $1.96 $2.72 $0.71 $0.28
===== ===== ===== =====
</TABLE>
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 2,338,050
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 52,964
<MORTGAGE> 303,263
<REAL-ESTATE> 4,331
<TOTAL-INVEST> 2,900,991
<CASH> 0
<RECOVER-REINSURE> 1,476
<DEFERRED-ACQUISITION> 128,515
<TOTAL-ASSETS> 4,483,699
<POLICY-LOSSES> 1,986,065
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 5,391
<POLICY-HOLDER-FUNDS> 65,510
<NOTES-PAYABLE> 61,527
86,000
0
<COMMON> 23,156
<OTHER-SE> 553,658
<TOTAL-LIABILITY-AND-EQUITY> 4,483,699
64,263
<INVESTMENT-INCOME> 149,774
<INVESTMENT-GAINS> 14,510
<OTHER-INCOME> 2,207
<BENEFITS> 126,125
<UNDERWRITING-AMORTIZATION> 16,767
<UNDERWRITING-OTHER> 46,662
<INCOME-PRETAX> 62,017
<INCOME-TAX> 17,694
<INCOME-CONTINUING> 45,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,497
<EPS-PRIMARY> 1.96
<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>
