UNITED STATES
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, 1998.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from N/A to N/A.
Commission file number 333-02491*.
KEMPER INVESTORS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in charter)
ILLINOIS
(State of Incorporation)
36-3050975
(I.R.S. Employer
Identification Number)
1 KEMPER DRIVE
LONG GROVE, ILLINOIS
(Address of Principal Executive Offices)
60049-0001
(Zip Code)
Registrant's telephone number, including area code: (847) 550-5500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
As of November 1, 1998, 250,000 shares of common stock (all held by an
affiliate, Kemper Corporation) were outstanding. There is no market value for
any such shares.
* Pursuant to Rule 429 under the Securities Act of 1933, this Form 10-Q
also relates to Commission file numbers 33-33547, 33-43462 and 33-46881.
1
<PAGE>
KEMPER INVESTORS LIFE INSURANCE COMPANY
FORM 10-Q
PART I. FINANCIAL STATEMENTS PAGE NO.
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 ........................3
Consolidated Statements of Operations -
Nine months and three months ended September 30, 1998 and 1997...4
Consolidated Statements of Comprehensive Income -
Nine months and three months ended September 30, 1998 and 1997...5
Consolidated Statements of Stockholder's Equity -
September 30, 1998 and December 31, 1997.........................6
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1998 and 1997....................7
Notes to Consolidated Financial Statements..........................8
Management's Discussion and Analysis
Results of Operations...........................................10
Investments.....................................................15
Liquidity and Capital Resources.................................20
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K..........................23
Signatures.........................................................24
2
<PAGE>
<TABLE>
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
(CAPTION)
September 30 December 31
1998 1997
---------- -----------
ASSETS (unaudited)
<S> <C> <C>
Investments:
Fixed maturities, available for sale, at
market (cost: September 30, 1998,
$3,570,239; December 31, 1997,
$3,644,075) $3,670,429 $3,668,643
Short-term investments 25,457 236,057
Joint venture mortgage loans 71,028 72,663
Third-party mortgage loans 78,732 102,974
Other real estate-related investments 40,586 44,409
Policy loans 274,585 282,439
Equity securities 102,533 24,839
Other invested assets 21,488 20,820
---------- ----------
Total investments 4,284,838 4,452,844
Cash 30,763 23,868
Accrued investment income 122,179 117,789
Goodwill 219,837 229,393
Value of business acquired 110,789 138,482
Deferred insurance acquisition costs 85,328 59,459
Deferred income taxes 31,416 39,993
Reinsurance recoverable 352,836 382,609
Other assets and receivables 10,569 23,263
Assets held in separate accounts 5,680,360 5,121,950
---------- ----------
Total assets $10,928,915 $10,589,650
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Future policy benefits $3,604,928 $3,856,871
Ceded future policy benefits 352,836 382,609
Benefits and funds payable 277,098 150,524
Other accounts payable and liabilities 69,782 212,133
Liabilities related to separate accounts 5,680,360 5,121,950
---------- ----------
Total liabilities 9,985,004 9,724,087
---------- ----------
Commitments and contingent liabilities
Stockholder's equity:
Capital stock - $10 par value, authorized
300,000 shares; outstanding 250,000 shares 2,500 2,500
Additional paid-in capital 806,538 806,538
Accumulated other comprehensive income 52,881 12,637
Retained earnings 81,992 43,888
---------- ----------
Total stockholder's equity 943,911 865,563
---------- ----------
Total liabilities and stockholder's
equity $10,928,915 $10,589,650
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Operations
(in thousands)
(unaudited)
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
--------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Net investment income $ 205,910 $ 221,249 $ 66,892 $ 72,950
Realized investment gains (losses) 26,478 6,018 8,951 (3,032)
Premium income 16,422 13,067 5,278 3,938
Separate account fees and charges 50,206 26,643 15,826 9,816
Other income 7,765 7,442 1,805 2,399
------- ------- ------- -------
Total revenue 306,781 274,419 98,752 86,071
------- ------- ------- -------
BENEFITS AND EXPENSES
Interest credited to policyholders 134,147 151,437 43,978 49,551
Claims and other policyholder
benefits 35,973 21,030 10,273 8,414
Taxes, licenses and fees 10,956 3,754 1,198 690
Commissions 29,131 22,133 11,082 7,699
Operating expenses 32,781 25,969 10,528 10,014
Deferral of insurance acquisition
costs (34,760) (23,999) (13,160) (8,209)
Amortization of insurance
acquisition costs 5,135 2,435 3,491 738
Amortization of value of business
acquired 17,907 18,555 6,359 6,743
Amortization of goodwill 9,558 7,648 3,188 2,549
------- ------- ------- -------
Total benefits and expenses 240,828 228,962 76,937 78,189
------- ------- ------- -------
Income before income tax expense 65,953 45,457 21,815 7,882
Income tax expense (benefit)
Current 40,942 21,223 8,263 5,195
Deferred (13,093) (3,044) 565 (1,417)
------- ------- ------- -------
Total income tax expense 27,849 18,179 8,828 3,778
------- ------- ------- -------
Net income $ 38,104 $ 27,278 $ 12,987 $ 4,104
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------- -------------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net income $ 38,104 $ 27,278 $ 12,987 $ 4,104
Other comprehensive income,
before tax:
Unrealized holding gains
(losses) on investments
arising during period:
Unrealized holding gains
on investments 64,374 41,602 53,852 47,780
Adjustment to value of
business acquired (14,165) (22,204) (8,678) (7,602)
Adjustment to deferred
insurance acquisition costs (4,656) (1,484) (2,801) (427)
------- ------- ------- ------
Total unrealized holding
gains on investments
arising during period 45,553 17,914 42,373 39,751
------- ------- ------- -------
Less reclassification adjustments
for gains (losses) included in net
income on the preceding page:
Adjustment for gains (losses)
included in realized investment
gains (1,800) 6,037 621 7,015
Adjustment for amortization of
premium on fixed maturities
included in net investment
income 12,882 13,560 4,031 4,563
Adjustment for gains (losses)
included in amortization of
value of business acquired 4,379 1,446 1,046 (1,008)
Adjustment for gains (losses)
included in amortization of
insurance acquisition costs 900 203 40 (209)
Total reclassification
adjustments for gains ------- ------- ------- -------
included in net income 16,361 21,246 5,738 10,361
------- ------- ------- -------
Other comprehensive income, before
related income tax expense
(benefit) 61,914 39,160 48,111 50,112
Related income tax expense (benefit) 21,670 (7,714) 16,839 (3,237)
------- ------- ------- -------
Other comprehensive income, net
of tax 40,244 46,874 31,272 53,349
------- ------- ------- ------
Comprehensive income $ 78,348 $ 74,152 $ 44,259 $ 57,453
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Stockholder's Equity
(in thousands)
<CAPTION>
September 30 December 31
1998 1997
------- -------
(unaudited)
<S> <C> <C>
Capital stock, beginning and end of period $ 2,500 $ 2,500
-------- --------
Additional paid-in capital, beginning of period 806,538 761,538
Capital contributions from Parent - 45,000
-------- --------
End of period 806,538 806,538
-------- --------
Accumulated other comprehensive income,
beginning of period 12,637 (47,498)
Other comprehensive income, net of tax 40,244 60,135
-------- --------
End of period 52,881 12,637
-------- --------
Retained earnings, beginning of period 43,888 34,421
Net income 38,104 38,717
Dividend to parent - (29,250)
-------- --------
End of period 81,992 43,888
-------- --------
Total stockholder's equity $943,911 $865,563
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
<TABLE>
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<CAPTION>
Nine Months Ended
September 30
-----------------
1998 1997
------ ------
<S> <C> <C>
Cash flows from operating activities
Net income $ 38,104 $ 27,278
Reconcilement of net income to net cash provided:
Realized investment gains (26,478) (6,018)
Interest credited and other charges 131,438 153,726
Amortization of value of business acquired 17,907 18,555
Amortization of goodwill 9,558 7,648
Deferred insurance acquisition costs (29,625) (21,564)
Amortization of discount and premium on
investments 12,883 13,561
Deferred income taxes (13,094) (3,044)
Net change in current Federal income taxes (89,674) (2,515)
Benefits and premium taxes due related to
separate account bank-owned life insurance 59,207 -
Other, net (9,054) 19,601
------- --------
Net cash flow provided by operating activities 101,172 207,228
------- --------
Cash flows from investing activities
Cash from investments sold or matured:
Fixed maturities held to maturity 373,576 155,760
Fixed maturities sold prior to maturity 688,702 462,556
Equity securities 571 2,362
Mortgage loans, policy loans and other
invested assets 106,515 227,385
Cost of investments purchased or loans
originated:
Fixed maturities (998,849) (468,660)
Equity securities (74,171) (1,446)
Mortgage loans, policy loans and other
invested assets (39,987) (173,109)
Short-term investments, net 210,600 49,244
Net change in receivable and payable for
securities transactions 6,790 19,596
Net change in other assets - 148
-------- --------
Net cash provided by investing
activities 273,747 273,836
-------- --------
Cash flows from financing activities
Policyholder account balances:
Deposits 123,413 106,565
Withdrawals (507,283) (537,049)
Dividends to parent - (29,250)
Other 15,846 (14,517)
-------- --------
Net cash used in financing activities (368,024) (474,251)
-------- --------
Net increase in cash 6,895 6,813
Cash at the beginning of period 23,868 2,776
-------- --------
Cash at the end of the period $ 30,763 $ 9,589
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
7
<PAGE>
Kemper Investors Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
1. Kemper Investors Life Insurance Company ("KILICO") is incorporated under
the insurance laws of the State of Illinois. KILICO is licensed in the
District of Columbia and all states, except New York. KILICO is a wholly-
owned subsidiary of Kemper Corporation ("Kemper"), a nonoperating holding
company.
On January 4, 1996, an investor group comprised of Zurich Insurance
Company ("Zurich"), and Insurance Partners, L.P. ("Insurance Partners")
acquired all of the issued and outstanding common stock of Kemper. As a
result of the change in control, Zurich and Insurance Partners owned 80
percent and 20 percent, respectively, of Kemper and therefore KILICO. On
February 27, 1998, Zurich acquired Insurance Partner's remaining 20
percent interest for cash. As a result of this transaction, Kemper and
KILICO became wholly-owned subsidiaries of Zurich.
Effective September 7, 1998, the businesses of Zurich merged with the
financial services business of B.A.T. Industries forming Zurich Financial
Services ("ZFS"). ZFS is owned by Zurich Allied AG and Allied Zurich
p.l.c., fifty-seven percent and forty-three percent, respectively. Zurich
Allied AG representing the financial interest of the former Zurich Group,
is listed on the Swiss Market Index, replacing Zurich. Allied Zurich
p.l.c., representing the financial interest of B.A.T. Industries, is
included in the FTSE-100 Share Index in London. As a result of this
transaction, Kemper and KILICO are also owned by Zurich Allied AG and
Allied Zurich p.l.c., fifty-seven percent and forty-three percent,
respectively.
The acquisition of Kemper on January 4, 1996 was accounted for using the
purchase method of accounting. Under the purchase method of accounting,
KILICO's assets and liabilities have been marked to their relative fair
values as of the acquisition date. The difference between the cost of
acquiring KILICO and the net fair values of KILICO's assets and
liabilities as of the acquisition date has been recorded as goodwill.
KILICO began to amortize goodwill during 1996 on a straight-line basis
over twenty-five years. In December of 1997, KILICO changed its
amortization period to twenty years in order to conform to Zurich's
accounting practices and policies.
Deferred insurance acquisition costs, and the related amortization
thereof, for policies sold prior to January 4, 1996 have been replaced by
the value of business acquired.
The value of business acquired reflects the estimated fair value of
KILICO's life insurance business in force and represents the portion of
the cost to acquire KILICO that is allocated to the value of the right to
receive future cash flows from insurance contracts existing at the date of
acquisition. Such value is the present value of the actuarially
determined projected cash flows for the acquired policies.
8
<PAGE>
The value of the business acquired is amortized over the estimated
contract life of the business acquired in relation to the present value
of estimated gross profits using current assumptions based on an interest
rate equal to the liability or contract rate on the value of business
acquired. The estimated amortization and accretion of interest for the
value of business acquired for each of the years through December 31, 2003
are as follows:
<TABLE>
(in thousands)
<CAPTION>
Projected
Year ended Beginning Accretion of ending
December 31 balance Amortization interest balance
- ----------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
1998 $ 143,744 $(29,152) $ 8,584 $ 123,176
1999 123,176 (22,911) 7,694 107,959
2000 107,959 (20,946) 6,730 93,743
2001 93,743 (18,588) 5,851 81,006
2002 81,006 (17,338) 5,033 68,701
2003 68,701 (15,471) 4,261 57,491
</TABLE>
The projected ending balance of the value of business acquired will be
further adjusted to reflect the impact of unrealized gains or losses on
fixed maturities held as available for sale in the investment portfolio.
Such adjustments are not recorded in KILICO's net income but rather are
recorded as a credit or charge to accumulated other comprehensive income,
net of income tax. As of September 30, 1998, the accumulated affects of
this adjustment increased the value of business acquired and accumulated
other comprehensive income by approximately $15.0 million and $9.8
million, respectively.
2. In the opinion of management, all necessary adjustments consisting of
normal recurring accruals have been made for a fair statement of the
results of KILICO for the periods included in these financial statements.
These financial statements should be read in conjunction with the financial
statements and related notes in the 1997 Annual Report on Form 10-K/A No. 1.
3. In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses,
gains and losses). This statement requires that all items required to be
reported be displayed with the same prominence as other financial
statements. KILICO adopted SFAS No. 130 on January 1, 1998 and accordingly
restated 1997 results for comparative purposes. The impact of implementation
did not affect KILICO's reported net income before reporting other
comprehensive income. Other comprehensive income, however, by design, could
be materially different from reported net income, as changes in unrealized
appreciation and depreciation of investments for example are now included
as a component of reported comprehensive income.
4. During December 1997, KILICO entered into a funds held reinsurance
agreement with a Zurich affiliated company, EPICENTRE Reinsurance (Bermuda)
Limited ("EPICENTRE"). Under the terms of this agreement, KILICO ceded, on
a yearly renewable term basis, ninety percent of the net amount at risk
(death benefit payable to the insured less the insured's separate account
cash surrender value) related to a non-registered variable bank-owned life
insurance contract ("BOLI"), which is held in KILICO's separate accounts.
During the first nine months of 1998, KILICO ceded to EPICENTRE
approximately $116.5 million of separate account fees (cost of insurance
charges) paid to KILICO by these policyholders for the life insurance
coverage provided under the terms of each separate account contract.
KILICO has also withheld approximately $120.8 million of such funds due to
EPICENTRE under the terms of the reinsurance agreement as a component of
benefits and funds payable in the accompanying consolidated balance sheet
as of September 30, 1998. KILICO remains primarily liable to its
policyholders for these amounts.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
KILICO recorded net income of $38.1 million in the first nine months of 1998,
compared with net income of $27.3 million in the first nine months of 1997.
The increase in net income in the first nine months of 1998, compared with the
first nine months of 1997, was primarily related to an increase in realized
capital gains, partially offset by a slight decrease in operating earnings
before amortization of goodwill and an increase in goodwill amortization.
The following table reflects the components of net income:
<TABLE>
Net income:
(in millions)
<CAPTION>
Nine months ended
September 30
------------------
1998 1997
---- ----
<S> <C> <C>
Operating earnings before amortization of goodwill $ 30.5 $ 31.0
Amortization of goodwill (9.6) (7.6)
Net realized capital gains 17.2 3.9
---- ----
Net income $ 38.1 $ 27.3
===== =====
</TABLE>
The following table reflects the major components of net realized capital gains
(losses) included in net income. (See "INVESTMENTS" below.)
<TABLE>
Net realized capital gains (losses)
(in millions)
<CAPTION>
Nine months ended Three months ended
September 30 September 30
----------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Real estate-related gains $ 18.7 $ 8.9 $ 8.2 $ (.4)
Fixed maturity write-downs (1.1) (1.2) (1.1) (.2)
Other gains, net 8.9 (1.7) 1.9 (2.4)
---- ---- ---- ----
Realized investment gains 26.5 6.0 9.0 (3.0)
Income tax expense 9.3 2.1 3.2 (1.0)
---- ---- ---- ----
Net realized capital gains $ 17.2 $ 3.9 $ 5.8 $ (2.0)
===== ===== ==== ====
</TABLE>
The real estate-related gains in both 1998 and 1997 continue to reflect
KILICO's strategy to reduce its exposure to real estate-related investments,
as well as improving real estate market conditions in most areas of the
country. Fixed maturity write-downs in 1998 and 1997 primarily reflect
other-than-temporary declines in value of certain U.S. dollar denominated
fixed maturity investments which have significant exposure to countries in
Southeast Asia. Other realized investment gains and losses for 1998 and 1997
relate primarily to the sale of fixed maturity investments.
Operating earnings before amortization of goodwill decreased to $30.5 million
in the first nine months of 1998, compared with $31.0 million in the first
nine months of 1997. This decrease was primarily attributable to increases
in claims and nondeferrable operating expenses, partially offset by increases
in fees and other income and spread revenue (investment income earned, less
interest credited incurred).
10
<PAGE>
Spread revenue improved during 1998, due to a net decrease in interest
credited. Interest credited declined during 1998 due to crediting rate
reductions and a decrease in the liability for future policy benefits.
Investment income declined due to a decrease in invested assets. Invested
assets and the liability for future policy benefits both declined due to
surrenders and withdrawals during 1997 and 1998. Investment income in 1998,
compared with 1997, was positively impacted by a $45.0 million capital
contribution received by KILICO in December 1997.
11
<PAGE>
<TABLE>
Sales
(in millions)
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------ ------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Annuities:
General account $ 122.5 $ 106.6 $ 50.6 $ 39.4
Separate account 229.1 197.2 100.8 64.1
----- ----- ----- -----
Total annuities 351.6 303.8 151.4 103.5
----- ----- ----- -----
Life insurance:
Separate account bank-owned
life insurance 432.7 80.0 10.0 -
Separate account variable
universal life insurance 15.2 4.3 8.4 3.7
Term life 16.4 13.0 5.3 4.0
Interest-sensitive life - - (.1) (.2)
----- ----- ----- -----
Total life 464.3 97.3 23.6 7.5
----- ----- ----- -----
Total sales $ 815.9 $ 401.1 $ 175.0 $ 111.0
===== ===== ===== =====
</TABLE>
Sales of annuity products consist of total deposits received. Sales of variable
annuities increase administrative fees earned, and they pose minimal investment
risk for KILICO, as policyholders invest in one or more of several underlying
investment funds which invest in stocks and bonds.
General account fixed annuity sales increased $15.9 million in the first nine
months of 1998, compared with the first nine months of 1997, while separate
account variable annuity sales increased $31.9 million in the first nine months
of 1998, compared with the first nine months of 1997. Separate account annuity
sales increased during the first nine months of 1998, compared with 1997, as
a result of the introduction of new variable annuity products in certain
markets during the third quarter of 1998, offset by the negative impact of
certain tax proposals on KILICO's sales in certain markets during 1998. Fixed
annuity sales increased during the first nine months of 1998, compared with
1997, primarily due to third quarter sales as certain investors opted for fixed
crediting rates rather than other investment alternatives available during a
period of market uncertainty.
During late 1996, KILICO introduced a registered flexible individual variable
life insurance product and in mid 1997 KILICO began to introduce several
non-registered variable universal life insurance contracts, a variable
individual and group bank-owned life insurance contract ("BOLI") and a series
of variable individual universal life insurance contracts. Sales of these
separate account variable products, like variable annuities, pose minimal
investment risk for KILICO as policyholders also invest in one or more
underlying investment funds which invest in stocks and bonds. KILICO receives
premium tax and DAC tax expense loads from certain contract holders, as well
as administrative fees and cost of insurance charges which compensate KILICO
for providing life insurance coverage to the contractholders in excess of their
cash surrender values. The face amount of variable universal life insurance
business in force, before reinsurance, amounted to $61.3 billion at September
30, 1998, compared with $59.6 billion at December 31, 1997 and $2.0 billion at
September 30, 1997.
KILICO also sells low-cost term life insurance products offering initial level
premiums for 5, 10, 15, 20, and 30 years in order to balance its product mix
and asset-liability structure. In December 1996, KILICO assumed $14.4 billion
(face amount) of term life insurance premiums from Federal Kemper Life
Assurance Company ("FKLA"), a wholly-owned subsidiary of Kemper. Through the
first nine months of 1998 and 1997, KILICO assumed premiums of $15.7 million
and $12.5 million, respectively, and $13.4 million and $13.1 million of claims,
respectively, under the terms of the reinsurance agreement with FKLA.
Excluding the amounts assumed from FKLA, KILICO's total term life sales,
including new and renewal premiums, amounted to $668 thousand in the first nine
months of 1998, compared with $523 thousand in the first nine months of 1997.
12
<PAGE>
Separate account fees and charges consist of the following as of September 30,
1998 and 1997:
<TABLE>
(in millions)
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
---------------- ------------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Separate account fees on non-BOLI
variable life and annuities $ 28.8 $ 22.9 $ 9.9 $ 8.5
BOLI cost of insurance charges
and fees 14.2<F1> 1.7 4.8 1.3
BOLI premium tax expense loads 7.2<F2> 2.0 1.1 -
----- ----- ----- -----
Total $ 50.2 $ 26.6 $ 15.8 $ 9.8
====== ====== ====== ======
- -------------------
<FN>
<F1> KILICO ceded $116.5 million of such charges to EPICENTRE during 1998.
<F2> There is a corresponding offset in taxes, licenses and fees; however,
no commissions were paid on BOLI.
</FN>
</TABLE>
Separate account fees on non-BOLI variable life and annuities increased
during the first nine months of 1998, compared with 1997, due to an
increase in the market value of separate account assets and due to new
sales during 1997 and 1998.
<TABLE>
Policyholder surrenders, withdrawals and death benefits were as follows:
(in millions)
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
----------------- -----------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
General account $ 516.0 $ 515.4 $ 163.8 $ 189.4
Separate account 194.1 177.9 66.7 67.8
------ ------ ------ ------
Total $ 710.1 $ 693.3 $ 230.5 $ 257.2
====== ====== ====== ======
</TABLE>
Reflecting the current interest rate environment and other competitive
market factors, KILICO adjusts its crediting rates on interest-sensitive
products over time in order to manage spread revenue and policyholder
surrender and withdrawal activity. KILICO can also improve spread revenue
over time by increasing investment income.
General account surrenders, withdrawals and death benefits increased $.6
million in the first nine months of 1998, compared with the first nine
months of 1997, reflecting an increase in claims offset by a decrease in
overall surrenders and withdrawals. KILICO expects that the level of
surrender and withdrawal activity experienced in the first nine months of
1998 should remain at a similar level throughout 1998 given current
projections for relatively stable interest rates and cautious optimism
regarding the stock market.
Claims and other policyholder benefits increased $14.9 million in the
first nine months of 1998, compared with 1997, primarily due to BOLI-
related claims and benefits.
Taxes, licenses and fees increased $7.2 million during the first nine
months of 1998, compared with 1997, primarily reflecting premium taxes on
BOLI. KILICO received a corresponding expense load related to these
premium taxes in separate account fees and other charges during the first
nine months of 1998.
13
<PAGE>
Commissions and the deferral of insurance acquisition costs increased
reflecting the overall increase in new business during 1998, compared with
1997.
Operating expenses increased $6.8 million in the first nine months of
1998, compared with first nine months of 1997, due to increases in head
count in the sales and underwriting departments, an increase in data
processing expenses related to ongoing projects, new product development
and year 2000 compliance costs.
The difference between the cost of acquiring KILICO and the net fair value
of KILICO's assets and liabilities as of January 4, 1996 was recorded as
goodwill. As previously mentioned, KILICO changed its amortization period
in December of 1997, from 25 years to 20 years, in order to conform to
Zurich's accounting practices and policies. As a result of the change in
amortization periods, KILICO recorded an increase in amortization expense
of $1.9 million in the first nine months of 1998, compared with 1997.
14
<PAGE>
INVESTMENTS
KILICO's principal investment strategy is to maintain a balanced,
well-diversified portfolio supporting the insurance contracts written.
KILICO makes shifts in its investment portfolio depending on, among
other factors, its evaluation of risk and return in various markets,
consistency with KILICO's business strategy and investment guidelines
approved by the board of directors, the interest rate environment,
liability durations and changes in market and business conditions.
<TABLE>
Invested assets and cash
(in millions)
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C> <C> <C>
Cash and short-term investments $ 56 1.3% $ 260 5.8%
Fixed maturities:
Investment grade:
NAIC <F1> Class 1 2,873 66.6 3,004 67.1
NAIC <F1> Class 2 747 17.3 651 14.5
Below investment grade:
Performing 50 1.2 14 .3
Nonperforming - - - -
Joint venture mortgage loans 71 1.6 73 1.6
Third-party mortgage loans 79 1.8 103 2.3
Other real estate-related investments 41 .9 44 1.0
Policy loans 275 6.4 282 6.3
Equity securities 103 2.4 25 .6
Other 21 .5 21 .5
----- ----- ----- -----
Total $4,316 100.0% $4,477 100.0%
===== ===== ===== =====
__________________________________________________________
<FN>
<F1> National Association of Insurance Commissioners ("NAIC").
-- Class 1 = A- and above
-- Class 2 = BBB- through BBB+
</FN>
</TABLE>
Fixed maturities
KILICO is carrying its fixed maturity investment portfolio, which it
considers available for sale, at estimated fair value, with the aggregate
unrealized appreciation or depreciation being recorded as a component of
accumulated other comprehensive income, net of any applicable income tax
expense. The aggregate unrealized appreciation on fixed maturities at
September 30, 1998 was $100.2 million, compared with $24.6 million at
December 31, 1997. Fair values are sensitive to movements in interest
rates and other economic developments and can be expected to fluctuate, at
times significantly, from period to period.
At September 30, 1998, investment-grade fixed maturities and cash and
short-term investments accounted for 85.2 percent of KILICO's invested
assets and cash, compared with 87.4 percent at December 31, 1997.
Approximately 28.1 percent of KILICO's investment-grade fixed maturities at
September 30, 1998 were mortgage-backed securities, down from 35.1 percent
at December 31, 1997, due to sales and paydowns during 1998. These
investments consist primarily of marketable mortgage pass-through
securities issued by the Government National Mortgage Association, the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation and other investment-grade securities collateralized by
mortgage pass-through securities issued by these entities. KILICO has not
made any investments in interest-only or other similarly volatile tranches
of mortgage-backed securities. KILICO's mortgage-backed investments are
generally of AAA credit quality, and the markets for these investments have
15
<PAGE>
been and are expected to remain liquid. KILICO plans to continue to reduce
its holding of such investments over time.
Approximately 13.7 percent of KILICO's investment-grade fixed maturities at
September 30, 1998 consisted of corporate asset-backed securities, compared
with 10.8 percent at December 31, 1997. The majority of KILICO's
investments in asset-backed securities were backed by manufactured housing
loans, auto loans and home equity loans.
Future investment income from mortgage-backed securities and other asset-
backed securities may be affected by the timing of principal payments and
the yields on reinvestment alternatives available at the time of such
payments. As a result of purchase accounting adjustments to fixed
maturities, most of KILICO's mortgage-backed securities are carried at a
premium over par. Prepayment activity resulting from a decline in interest
rates on such securities purchased at a premium would accelerate the
amortization of the premiums which would result in reductions of investment
income related to such securities. At September 30, 1998, KILICO had
unamortized premiums and discounts of $15.7 million and $4.7 million,
respectively, related to mortgage-backed and asset-backed securities.
Reductions to investment income related to the amortization of premiums and
discounts amounted to $12.9 million during the first nine months of 1998,
compared with $13.6 million in the first nine months of 1997. KILICO
believes that as a result of the purchase accounting adjustments and the
current interest rate environment, anticipated prepayment activity is
expected to result in further reductions to future investment income for
the remainder of 1998.
Real estate-related investments
The $190.3 million real estate portfolio held by KILICO, consisting of
joint venture and third-party mortgage loans and other real estate-related
investments, constituted 4.3 percent of cash and invested assets at
September 30, 1998, compared with $220.0 million, or 4.9 percent, at
December 31, 1997.
As reflected in the "Real estate portfolio" table on the following page,
KILICO has continued to fund both existing projects and legal commitments.
The future legal commitments declined to $64.4 million at September 30,
1998, compared with $75.3 million at December 31, 1997, primarily due to
sales. As of September 30, 1998, KILICO expects to fund approximately $6.1
million of these legal commitments, along with providing capital to
existing projects. The disparity between total legal commitments and the
amount expected to be funded relates principally to standby financing
arrangements that provide credit enhancements to certain tax-exempt bonds,
which KILICO does not presently expect to fund. The total legal
commitments, along with estimated working capital requirements, are
considered in KILICO's evaluation of reserves and write-downs.
Excluding the $1.1 million of real estate owned and $18.5 million of net equity
investments in joint ventures, KILICO's real estate loans totaled $170.7
million at September 30, 1998, after reserves and writedowns. Of this amount,
$138.3 million are on accrual status with a weighted average interest rate of
approximately 9.2 percent. Of these accrual loans, 8.9 percent have terms
requiring current periodic payments of their full contractual interest, 44.8
percent require only partial payments or payments to the extent of cash flow of
the borrowers, and 46.3 percent defer all interest to maturity.
16
<PAGE>
<TABLE>
Real estate portfolio
(in millions)
<CAPTION>
Mortgage loans
----------------
Joint Third-
venture party
------- -------
<S> <C> <C>
Balance at December 31, 1997 $ 72.7 $ 103.0
Additions (deductions):
Fundings 1.3 -
Interest added to principal 6.3 2.3
Sales/paydowns/distributions (11.3) (26.6)
Operating gain/(loss) - -
Realized investments gains (losses) 5.7 6.1
Other transactions, net (3.7) (6.1)
------ ------
Balance at September 30, 1998 $ 71.0 $ 78.7
====== ======
<CAPTION>
Other real estate-related investments
-----------------------------------------
Other Real estate Equity
loans<F2> owned investments Total
-------- ----------- ----------- ----
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 21.1 $ 4.0 $19.2 $220.0 <F1>
Additions (deductions):
Fundings - .3 - 1.6
Interest added to principal - - - 8.6
Sales/paydowns/distributions (.1) (5.5) (5.2) (48.7)
Operating gain/(loss) - - .1 .1
Realized investments gains
(losses) .3 2.2 4.4 18.7
Other transactions, net (.3) .1 - (10.0)
----- ----- ----- -----
Balance at September 30, 1998 $ 21.0 $ 1.1 $18.5 $190.3 <F3>
===== ===== ===== =====
__________________________
<FN>
<F1> Net of $9.2 million reserve and writedowns. Excludes $9.5 million of
real estate-related accrued interest.
<F2> The other real estate loans were notes receivable evidencing financing,
primarily to joint ventures. These loans were issued by KILICO generally
to provide financing for Kemper's or KILICO's joint ventures for various
purposes.
<F3> Net of $8.8 million reserve and writedowns. Excludes $7.0 million of
real estate-related accrued interest.
</FN>
</TABLE>
Real estate concentrations
KILICO's real estate portfolio is distributed by geographic location and
property type. However, KILICO has concentration exposures in certain states
and in certain types of properties. In addition to these exposures, KILICO
also has exposures to certain real estate developers and partnerships.
<TABLE>
<CAPTION>
Geographic distribution as of Distribution by property type as of
September 30, 1998. September 30, 1998.
<S> <C> <S> <C>
California 46.4 % Land 35.1 %
Hawaii 12.6 Hotel 35.0
Colorado 8.9 Residential 14.1
Oregon 7.8 Retail 3.8
Washington 7.3 Office 2.2
Florida 6.1 Industrial .6
Texas 4.1 Other 9.2
Michigan 2.9 -----
Ohio 2.7 100.0 %
Other states 1.2 =====
-----
Total 100.0 %
=====
</TABLE>
Undeveloped land represented approximately 35.1 percent of KILICO's real estate
portfolio at September 30, 1998. To maximize the value of certain land and
other projects, additional development has been proceeding or has been planned.
Such development of existing projects would continue to require funding,
either from KILICO or third parties. In the present real estate markets,
third-party financing can require credit enhancing arrangements (e.g.,
standby financing arrangements and loan commitments) from KILICO. The values
of development projects are dependent on a number of factors, including Kemper's
and KILICO's plans with respect thereto, obtaining necessary construction and
zoning permits and market demand for the permitted use of the property. There
can be no assurance that such permits will be obtained as planned or at all,
nor that such expenditures will occur as scheduled, nor that Kemper's and
KILICO's plans with respect to such projects may not change substantially.
17
<PAGE>
Approximately half of KILICO's real estate loans are on properties or projects
where KILICO, Kemper, or their affiliates have taken ownership positions in
joint ventures with a small number of partners.
At September 30, 1998, loans to and investments in joint ventures in which
Patrick M. Nesbitt or his affiliates ("Nesbitt"), a third-party real estate
developer, have ownership interests constituted approximately $64.1 million, or
33.7 percent, of KILICO's real estate portfolio. The Nesbitt ventures consist
of nine hotel properties and two office buildings. At September 30, 1998,
KILICO did not have any Nesbitt-related off-balance sheet legal funding
commitments outstanding.
At September 30, 1998, loans to and investment in a master limited partnership
(the "MLP") between subsidiaries of Kemper and subsidiaries of Lumbermens
Mutual Casualty Company, a former affiliate, constituted approximately $68.1
million, or 35.8 percent, of KILICO's real estate portfolio. Kemper's interest
is 75 percent as of September 30, 1998. At September 30, 1998, MLP-related
commitments accounted for approximately $6.1 million of KILICO's off-balance
sheet legal commitments, which KILICO expects to fund.
At September 30, 1998, KILICO no longer had any outstanding loans or
investments in projects with the Prime Group, Inc. or its affiliates, as all
such investments have been sold or written down to zero. However, KILICO
continues to have Prime Group-related commitments, which accounted for $25.7
million of the off-balance-sheet legal commitments at September 30, 1998.
KILICO does not expect to fund any of these commitments.
The remaining significant real estate-related investment amounted to $27.9
million at September 30, 1998 and consisted of various zoned and unzoned
residential and commercial lots located in Hawaii. Due to certain negative
zoning restriction developments in January 1997 and a continuing economic slump
in Hawaii, KILICO has placed these real estate-related investments on
nonaccural status. KILICO is currently pursuing the zoning of all remaining
unzoned properties, as well as pursuing steps to sell all remaining zoned
properties. However, due to the state of the Hawaiian economy, which has
lagged behind the economic expansion of most of the rest of the United States,
KILICO anticipates that it could be several additional years until all of
KILICO's investments in Hawaii are completely disposed of.
18
<PAGE>
Real estate outlook
The following table is a summary of KILICO's troubled real estate-related
investments:
<TABLE>
Troubled real estate-related investments
(before reserves and write-downs, except for real estate owned)
(in millions)
<CAPTION>
September 30 December 31
1998 1997
------------ -----------
<S> <C> <C>
Potential problem loans <F1> $ - $ -
Past due loans <F2> - -
Nonaccrual loans <F3> (primarily Hawaiian
properties) 38.0 47.4
Real estate owned 1.1 4.0
----- -----
Total $39.1 $51.4
===== =====
____________________________________________________________________
<FN>
<F1> These are real estate-related investments where KILICO, based on known
information, has serious doubts about the borrowers' abilities to comply
with present repayment terms and which KILICO anticipates may go into
nonaccrual, past due or restructured status.
<F2> Interest more than 90 days past due but not on nonaccrual status.
<F3> KILICO does not accrue interest on real estate-related investments when
it judges that the likelihood of collection of interest is doubtful.
Loans on nonaccrual status after reserves and write-downs amounted to
$32.4 million and $41.8 million at September 30, 1998 and December 31,
1997, respectively.
</FN>
</TABLE>
KILICO evaluates its real estate-related investments (including accrued
interest) using an estimate of each investment's observable market price,
net of estimated costs to sell. Because KILICO's real estate review
process includes estimates, there can be no assurance that current
estimates will prove accurate over time due to changing economic
conditions and other factors. KILICO's real estate-related investments are
expected to continue to decline further through future sales. KILICO's net
income could be materially reduced in future periods if real estate market
conditions worsen in areas where KILICO's portfolio is located or if
Kemper's and KILICO's plans with respect to certain projects change or if
necessary construction or zoning permits are not obtained.
Realized investment results
Reflected in net income are after-tax net realized investment gains of
$17.2 million for the first nine months of 1998, compared with $3.9 million for
the first nine months of 1997.
Unrealized gains and losses on fixed maturity investments are not reflected in
KILICO's net income. These changes in unrealized value are included within
accumulated other comprehensive income, net of any applicable income taxes, in
accordance with SFAS No. 130, as previously discussed. If and to the extent a
fixed maturity investment suffers an other-than-temporary decline in value,
however, such security is written down to net realizable value, and the
write-down adversely impacts net income.
KILICO regularly monitors its investment portfolio and as part of this process
reviews its assets for possible impairments of carrying value. Because the
review process includes estimates, there can be no assurance that current
estimates will prove accurate over time due to changing economic conditions and
other factors.
A valuation allowance has been established, and is evaluated as of each
reported period end, to reduce the deferred tax asset for investment losses
to the amount that, based upon available evidence, is in management's judgment
more likely than not to be realized.
19
<PAGE>
Interest rates
Interest rates have declined in the first nine months of 1998, contributing to
an increase in unrealized fixed maturity investment gains. Interest rate
fluctuations can cause significant fluctuations in both future investment
income and future realized and unrealized investment gains and losses. Also,
lower renewal crediting rates on annuities, compared with competitors' higher
new money crediting rates, have also influenced certain annuity holders to seek
alternative products. KILICO mitigates this risk somewhat by charging surrender
fees which decrease over time when annuity holders withdraw funds prior to
maturity on certain annuity products. However, approximately 48 percent of
KILICO's fixed and variable annuity liabilities as of September 30, 1998 were
no longer subject to significant surrender fees.
LIQUIDITY AND CAPITAL RESOURCES
KILICO carefully monitors cash and short-term investments to maintain adequate
balances for timely payment of policyholder benefits, expenses, taxes and
policyholder's account balances. In addition, regulatory authorities establish
minimum liquidity and capital standards. The major ongoing sources of KILICO's
liquidity are deposits for fixed annuities, investment income, premium income,
separate account fees, other operating revenue and cash provided from maturing
or sold investments. (See the "Policyholder surrenders and withdrawals" table
and related discussion and "INVESTMENTS" above.)
The decrease in the net cash flow provided by operating activities between the
first nine months of 1998, compared with the first nine months of 1997,
primarily relates to an increase in Federal income tax payments related to BOLI
sales in 1997. KILICO received a corresponding expense load on these sales in
the fourth quarter of 1997. The increase in the Federal tax payments for the
nine months ended September 30, 1998 is somewhat offset by BOLI expense loads
received on 1998 BOLI sales.
Ratings
Ratings are an important factor in establishing the competitive position of
life insurance companies. Rating organizations continue to review the
financial performance and condition of life insurers and their investment
portfolios, including those of KILICO. Any reductions in KILICO's
claims-paying ability or financial strength ratings could result in its
products being less attractive to consumers. Any reductions in KILICO's
parent's ratings could also adversely impact KILICO's financial flexibility.
Ratings reductions for Kemper or its subsidiaries and other financial events
can also trigger obligations to fund certain real estate-related commitments to
take out other lenders. In such event, those lenders can be expected to
renegotiate their loan terms, although they are not contractually obligated to
do so.
Each rating is subject to revision or withdrawal at any time by the assigning
organization and should be evaluated independently of any other rating.
Year 2000 Compliance
Many existing computer programs were originally designed without considering
the impact of the year 2000 and currently use only two digits to identify the
year in the date field. This issue affects nearly all companies and
organizations and could cause computer applications and systems to fail or
create erroneous results to occur for any transaction with a date of January
1, 2000, or later.
Many companies must undertake major projects to address the year 2000 issue and
each company's costs and uncertainties will depend on a number of factors,
including its software and hardware, and the nature of the industry. Companies
must also coordinate with other entities with which they electronically
interact, including suppliers, customers, creditors and other financial
services institutions.
If a company does not successfully address its year 2000 issues, it could face
20
<PAGE>
material adverse consequences in the form of lawsuits against the company, lost
business, erroneous results and substantial operating problems after January 1,
2000.
KILICO has taken substantial steps over the last several years to ensure that
its systems will be compliant for the year 2000. Such steps have included the
replacement of older systems with new systems which are already compliant. In
1996, KILICO replaced its investment accounting system and in 1997 KILICO
replaced its general ledger and accounts payable system. KILICO has also
ensured that new systems developed to support new product introductions in
1996 and 1997 are already year 2000 compliant. Data processing expenses
related solely to bringing KILICO's systems in compliance with the year 2000
amounted to $88 thousand in 1997 and approximately $730 thousand through
October 31, 1998. KILICO anticipates it will cost an additional $750 thousand
to bring all remaining systems into compliance with $250 thousand expected to
be incurred in the fourth quarter of 1998.
KILICO's policy administration systems have been completely renovated to be
Year 2000 compliant and are currently running in a test environment. It is
anticipated that 50 percent of KILICO's ancillary systems confirmed to be Year
2000 compliant will be in production at December 31, 1998 and that all of
KILICO's systems will be in production at April 30, 1999 or sooner. Testing
procedures have confirmed the performance, functionality, and integration of
converted or replaced platforms, applications, databases, utilities, and
interfaces in an operational environment. KILICO's testing and verification for
year 2000 compliance has encompassed mainframe computing systems, mainframe
hardware and systems software, PC/LAN computing systems, PC/LAN hardware and
systems software, end-user computing systems, interfaces to and from third
parties and other miscellaneous electronic non-information systems.
KILICO has also undertaken steps which require that all entities with which
KILICO electronically interacts, including suppliers and other financial
services institutions, attest in writing to KILICO that their systems are
year 2000 compliant.
If KILICO does not successfully address its year 2000 issues it could face
material adverse consequences in the form of lawsuits, lost business, erroneous
results and substantial operating problems after January 1, 2000. Although
KILICO fully expects to be year 2000 compliant by the close of 1999, KILICO
is currently developing contingency plans to handle the most reasonably
likely worst case scenarios.
Forward-Looking Statements
All statements, trend analyses and other information contained in this report
and elsewhere (such as in other filings by KILICO with the Securities and
Exchange Commission, press releases, presentations by KILICO or its management
or oral statements) relative to markets for KILICO's products and trends in
KILICO's operations or financial results, as well as other statements
including words such as "anticipate", "believe", "plan", "estimate", "expect",
"intend", and other similar expressions, constitute forward-looking
statements under the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to known and unknown risks,
uncertainties and other factors which may cause actual results to be materially
different from those contemplated by the forward-looking statements. Such
factors include, among other things: (i) general economic conditions and other
factors, including prevailing interest rate levels and stock market performance,
which may affect the ability of KILICO to sell its products, the market value
of KILICO's investments and the lapse rate and profitability of KILICO's
contracts; (ii) KILICO's ability to achieve anticipated levels of operational
efficiencies through certain cost-saving initiatives; (iii) customer response
to new products, distribution channels and marketing initiatives; (iv)
mortality, morbidity, and other factors which may affect the profitability of
KILICO's insurance products; (v) changes in the Federal income tax laws and
regulations which may affect the relative tax advantages of some of KILICO's
products; (vi) increasing competition which could affect the sale of KILICO's
products; (vii) regulatory changes or actions,
21
<PAGE>
including those relating to regulation of financial services affecting (among
other things) bank sales and underwriting of insurance products, regulations of
the sale and underwriting and pricing of insurance products; and (viii) the
risk factors or uncertainties listed from time to time in KILICO's other
filings with the Securities and Exchange Commission.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) EXHIBIT INDEX.
Exhibit No.
-----------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the nine
months ended September 30, 1998.
23
<PAGE>
Kemper Investors Life Insurance Company
FORM 10-Q
For the fiscal period ended September 30, 1998
--------------------------------------------
SIGNATURES
Pursuant to the requirements 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.
Kemper Investors Life Insurance Company
(Registrant)
Date: November 12, 1998 By: /s/JOHN B. SCOTT
----------------------------------
John B. Scott
President, Chief Executive Officer and
Director
Date: November 12, 1998 By: /S/FREDERICK L. BLACKMON
---------------------------------
Frederick L. Blackmon
Sr. Vice President and
Chief Financial Officer
24
<PAGE>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD
QUARTER FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
[MULTIPLIER] 1,000
[PERIOD-TYPE] 9-MOS.
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] SEPT-30-1998
[DEBT-HELD-FOR-SALE] 3,670,429
[DEBT-CARRYING-VALUE] 3,670,429
[DEBT-MARKET-VALUE] 3,670,429
[EQUITIES] 102,533
<MORTGAGES> 149,760
[REAL-ESTATE] 40,586
[TOTAL-INVEST] 4,284,838
[CASH] 30,763
[RECOVER-REINSURE] 352,836
[DEFERRED-ACQUISITION] 85,328
[TOTAL-ASSETS] 10,928,915
[POLICY-LOSSES] 3,604,928
[UNEARNED-PREMIUMS] 0
[POLICY-OTHER] 0
[POLICY-HOLDER-FUNDS] 277,098
[NOTES-PAYABLE] 0
[COMMON] 2,500
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
<OTHER-S[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 941,411
<TOTAL-LIA[PREFERRED] 0
[OTHER-SE] 941,411
[TOTAL-LIABILITY-AND-EQUITY] 10,928,915
[PREMIUMS] 16,422
[INVESTMENT-INCOME] 205,910
[INVESTMENT-GAINS] 26,478
[OTHER-INCOME] 57,971
[BENEFITS] 170,120
[UNDERWRITING-AMORTIZATION] 5,135
[UNDERWRITING-OTHER] 0
[INCOME-PRETAX] 65,953
[INCOME-TAX] 27,849
[INCOME-CONTINUING] 38,104
<DISCOUNTED> 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 38,104
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
[RESERVE-OPEN] 0
[PROVISION-CURRENT] 0
[PROVISION-PRIOR] 0
[PAYMENTS-CURRENT] 0
[PAYMENTS-PRIOR] 0
[RESERVE-CLOSE] 0
[CUMULATIVE-DEFICIENCY] 0
25
