Securities and Exchange Commission
Washington, D. C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarter ended June 30, 1995
Commission File No. 2-40764
Kansas City Life Insurance Company
3520 Broadway
Kansas City, Missouri 64111-2565
Phone: (816) 753-7000
IRS Number: 44-0308260
Incorporated in State of Missouri
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most recent date available.
Class: Outstanding at July 3, 1995
Common Stock, $2.50 par value 6,179,444 shares
Kansas City Life Insurance Company
Quarter ended June 30, 1995
Part I
Item 1. Financial Statements
Incorporated by reference from the Quarterly Report to Stockholders (pages 4
through 7). These interim financial statements should be read in conjunction
with the Company's 1994 Annual Report to Stockholders.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Kansas City Life continued to produce record operating earnings in 1995, its
centennial year. First half operating earnings per share totaled $3.28, up $.29
per share, a 10 percent increase. Net income per share of $3.29 increased 4
percent over 19 94. These results reflect improved investment results in our
traditional lines of business, favorable interest margin spreads in our interest
sensitive lines and continued focus on home office expense control. Net income
growth was restrained by a sizable decline in realized investment gains. Second
quarter operating earnings of $1.50 per share were down $.03 per share compared
with last year.
Sales
Sales in terms of face value, however, rose 12 percent thus far in 1995. New
annualized premiums, however, remain below goal and were down 7 percent for the
first six months and 10 percent in the second quarter. Insurance in force
totaled $20.5 bil lion, which represents a 5 percent annualized growth from last
year end.
We have contracted with a professional organization to develop and present
comprehensive training to our sales agents. Our agents have shown considerable
interest in this program and are bearing a portion of its cost. Commissions
generated by Kansas City Life's new agents are 45 percent above a year ago.
Additionally, we expect to enter the rapidly growing variable insurance market
late this year with the introduction of variable annuity and universal life
products.
Insurance Revenues
Total insurance revenues fell 2 percent for the six months but rose slightly in
the second quarter. Traditional life insurance premiums were down 4 percent in
the first half and 2 percent in the second quarter. Accident and health
premiums declined 10 percent in the six months and 7 percent in the quarter due
to realignment of our group product mix and the run-off of a closed block of
individual accident and health business. Contract charges on interest
sensitive products rose 6 percent in th e first half and 7 percent in the
second quarter.
Investment Revenues
Net investment income rose 8 percent in both the six months and second quarter
reflecting investment asset growth and improved portfolio yields. Investment
gains declined $3.7 million for the six months and $2.3 million for the second
quarter.
Benefits
Total benefits rose 1 percent for the six months and 2 percent for the second
quarter. Comparative claims ratios for 1995 and 1994 remained unchanged versus
the first quarter. Changes in mortality experience had little impact on
earnings comparison s. Surrenders of traditional life insurance fell 5 percent
for the six months, but were up 11 percent in the second quarter. These
surrenders are small enough in dollar terms that some volatility may be expected
quarter-to-quarter, but the general trend should be down.
Yield spreads between interest rates earned and those credited on the Company's
interest sensitive products remained favorable and made a significant
contribution to earnings.
Other Expenses
Over the past several years the Company has focused significant efforts toward
controlling and monitoring our efficiency and the service provided to both our
agents and policyholders. One of the ways that we can maintain our competitive
position is through such expense control. The Company has performed very well
in this endeavor and as such, home office operating expenses rose less than 1
percent for the six months.
Liquidity and Capital Resources
Statements made in the Company's 1994 Annual Report to Stockholders remain
pertinent.
Total funds provided from operations totaled $22.3 million. Funds from all
sources exceeded $300 million. This is significantly less than 1994 largely due
to declines in calls on the securities portfolio.
The Company's assets totaled $2.8 billion, an annualized growth rate of 10
percent from the start of the year. Much of this growth resulted from increased
market values on those securities which are carried at market value. Excluding
changes in mar ket value, assets rose at a 4 percent annualized rate. Book
value per share equaled $66.91, a 40 percent annualized increase due partially
to a $53.9 million increase in unrealized gains on securities "available for
sale." However, excluding unreal ized gains on these securities, book value per
share totaled $66.49, a 7 percent annualized increase.
Part II: Other Information
Item 6.
(a). Exhibits. None.
(b). Reports on 8-K. There were no reports on Form 8-K filed for the three
months ended June 30, 1995.
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.
KANSAS CITY LIFE INSURANCE COMPANY
/s/ Richard L. Finn
Richard L. Finn
Senior Vice President, Finance
/s/ C. John Malacarne
C. John Malacarne
Vice President, General Counsel and Secretary
/s/ John K. Koetting
John K. Koetting
Vice President and Controller
Date: August 4, 1995 KANSAS CITY LIFE INSURANCE COMPANY
Quarter ended June 30, 1995
EXHIBIT
Quarterly Report to Stockholders
<TABLE>
Consolidated
Balance Sheet
(in thousands)
[MULTIPLIER]
1,000
<CAPTION>
June 30 December 31
1995 1994
------------- -------------
<S> <C> <C>
Assets
Investments:
Fixed maturities:
Securities available for sale,
at market $ 1,475,631 1,309,297
Securities held to maturity,
at amortized cost 379,219 395,886
Equity securities available
for sale, at market 82,343 82,251
Mortgage loans 259,192 267,695
Real estate, net 53,516 54,976
Real estate joint ventures 30,283 26,120
Policy loans 94,364 95,854
Short-term 18,316 19,340
------------- -------------
2,392,864 2,251,419
Deferred acquisition costs 190,819 193,667
Other assets 215,600 218,667
------------- -------------
$ 2,799,283 2,663,753
============= =============
Liabilities and equity
Future policy benefits $ 676,113 670,658
Accumulated contract values 1,489,295 1,459,045
Other liabilities 220,436 190,355
------------- -------------
Total liabilities 2,385,844 2,320,058
Stockholders' equity:
Capital stock 23,121 23,121
Paid in capital 12,573 11,847
Unrealized gains (losses) on
securities available for sale 2,590 (51,345)
Retained earnings 461,217 446,149
Less treasury stock (86,062) (86,077)
------------- -------------
413,439 343,695
------------- -------------
$ 2,799,283 2,663,753
============= =============
<FN>
Notes:
* These financial statements are unaudited but, in
management's opinion, include all adjustments
necessary for a fair presentation of the results.
* Income per common share is based upon the weighted
average number of shares outstanding during the period
(6169488 - 1995 and 6149869 - 1994).
* Certain amounts from the prior year's financial
statements have been reclassified to conform with
current year presentation.
</FN>
</TABLE>
<TABLE>
Consolidated
Income Statement
[MULTIPLIER]
1,000
<CAPTION>
Quarter ended Six Months ended
June 30 June 30
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Insurance revenues:
Premiums:
Life insurance $ 25,757 26,226 50,572 52,789
Accident and health 7,341 7,931 14,472 16,086
Contract charges 18,622 17,347 37,040 34,915
Investment revenues:
Investment income, net 45,977 42,502 91,652 84,686
Realized gains 41 2,314 146 3,883
Other 2,618 2,271 5,207 4,809
------- ------- ------- -------
Total revenues 100,356 98,591 199,089 197,168
------- ------- ------- -------
Benefits and expenses
Policy benefits:
Death benefits 21,119 19,606 41,545 39,805
Surrenders of life insurance 5,417 4,877 8,959 9,443
Other benefits 12,579 14,454 26,175 27,284
Increase in benefit and contract reserve 20,527 19,300 41,134 40,033
Amortization of policy acquisition costs 7,718 7,080 14,043 14,222
Insurance operating expenses 19,367 17,552 37,661 35,385
Interest expense 0 103 0 414
------- ------- ------- -------
Total benefits and expenses 86,727 82,972 169,517 166,586
------- ------- ------- -------
Pretax income 13,629 15,619 29,572 30,582
------- ------- ------- -------
Federal income taxes:
Current 5,284 6,202 10,297 12,673
Deferred (937) (1,468) (1,035) (2,973)
------- ------- ------- -------
4,347 4,734 9,262 9,700
------- ------- ------- -------
Income before nonrecurring item 9,282 10,885 20,310 20,882
Postemployment benefits, net 0 0 0 1,481
------- ------- ------- -------
Net income $ 9,282 10,885 20,310 19,401
======= ======= ======= =======
Per common share
Income before nonrecurring item $ 1.50 1.76 3.29 3.39
Postemployment benefits, net - - - .24
------ ----- ----- -----
Net income $ 1.50 1.76 3.29 3.15
======= ======= ======= =======
</TABLE>
<TABLE>
CONSOLIDATED
STATEMENT OF CASH FLOWS
[MULTIPLIER]
1,000
<CAPTION>
Six Months ended
June 30
1995 1994
<S> <C> <C>
Operating activities
Net cash provided $22,307 20,758
Investing activities
Investments called or matured:
Decrease in short-term
investments, net 982 56,305
Fixed maturities available for sale 40,852 151,492
Fixed maturities held to maturity 20,453 55,740
Equity securities available for sale 1,535 21,147
Mortgage loans 24,747 24,010
Other 2,863 2,649
Investments sold:
Fixed maturities available for sale 97,306 29,982
Equity securities available for sale 14,670 0
Other 2,619 214
Investments made:
Fixed maturities available for sale (220,037) (361,431)
Fixed maturities held to maturity 0 (21,210)
Equity securities available for sale (10,121) (1,106)
Mortgages (16,690) (2,278)
Real estate joint ventures (5,566) (1,201)
Other (144) (1,232)
Other, net (1,695) (2,195)
Net cash used (48,226) (49,114)
Financing activities
Policyowner contract deposits 92,488 89,860
Withdrawals of policyowner
contract deposits (66,335) (56,005)
Dividends paid to stockholders (5,242) (4,180)
Other, net 703 (53)
Net cash provided 21,614 29,622
Increase (decrease) in cash ($4,305) 1,266
</TABLE>
Message from the President
Kansas City Life produced record operating earnings in the first
half of our centennial year. Operating earnings equaled $3.28 a
share, a 10 percent improvement over last year, which was the
previous record. This performance was due to significant
investment earnings growth in the traditional lines, the
continuation of favorable interest spreads in our interest
sensitive lines, and the ongoing restraint of home office
operating costs, which rose less than 1 percent in the first
half. Net income was $3.29 a share, a 4 percent increase
compared to last year.
The second quarter's operating earnings per share declined 2
percent from last year. The quarter's earnings tracked closely
with the first quarter's record earnings except for an increase
in the amortization of capitalized acquisition costs. This
expense varies from period-to-period since current gross margins
in our interest sensitive lines are reassessed quarterly and the
amortization is adjusted accordingly. Net earnings per share
for the quarter decreased 15 percent due to a significant
decline in realized investment gains.
Substantial growth in sales is a primary corporate objective.
This objective has been advanced by significant strides being
made in the recruitment of new sales agents and the training of
our sales force. The number of Kansas City Life's producing
agencies has risen 23 percent over last year, and commissions
generated by new agents are 45 percent higher than last year.
However, new premiums in the first half remained slightly behind
those of a year ago. Variable annuity and universal life
products will be introduced late this year. Entrance into this
sizable, growing market is expected to provide a significant
stimulus to sales growth in coming years.
Total insurance revenues, as shown on the enclosed income
statement, were down slightly in the first half and were level
in the second quarter. Life premiums decreased 4 percent due to
declines in single premium ordinary annuities. Accident and
health premiums fell 10 percent reflecting the run-off of a
closed block of individual health business. These declines in
premiums were largely offset by 6 percent growth in contract
charges associated with our interest sensitive lines. Insurance
in force equals $20.5 billion, a 5 percent annualized growth
since the beginning of the year.
Investment income rose 8 percent in both the first half and the
second quarter, reflecting investment asset growth and improved
portfolio yields.
Book value rose to $66.91 a share, a 40 percent annualized
improvement from last year end. This performance was bolstered
by a $53.9 million increase in net unrealized gains associated
with our securities which are marked to market. Excluding
unrealized gains or losses, book value equaled $66.49 a share
compared to $64.11 a share at year end.
The Board of Directors approved a quarterly dividend of $.39 a
share payable August 21 to shareholders of record on August 7.
Employees, agents and friends of the Company thoroughly enjoyed
the festivities surrounding the Company's centennial on May 1st.
All look forward to our next 100 years with enthusiasm and
optimism.
W. E. Bixby
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 1,475,631<F1>
<DEBT-CARRYING-VALUE> 379,219<F2>
<DEBT-MARKET-VALUE> 397,850<F2>
<EQUITIES> 82,343<F3>
<MORTGAGE> 259,192
<REAL-ESTATE> 83,799<F4>
<TOTAL-INVEST> 2,374,548
<CASH> 21,262
<RECOVER-REINSURE> 89,879
<DEFERRED-ACQUISITION> 190,819
<TOTAL-ASSETS> 2,799,283
<POLICY-LOSSES> 676,113
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 30,580
<POLICY-HOLDER-FUNDS> 1,585,582<F5>
<NOTES-PAYABLE> 0
<COMMON> 23,121
0
0
<OTHER-SE> 390,318
<TOTAL-LIABILITY-AND-EQUITY> 2,799,283
65,044
<INVESTMENT-INCOME> 91,652
<INVESTMENT-GAINS> 146
<OTHER-INCOME> 42,247
<BENEFITS> 117,813
<UNDERWRITING-AMORTIZATION> 14,043
<UNDERWRITING-OTHER> 466<F6>
<INCOME-PRETAX> 29,572
<INCOME-TAX> 9,262
<INCOME-CONTINUING> 20,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,310
<EPS-PRIMARY> 3.29
<EPS-DILUTED> 3.29
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Represents FASB 115 available for sale fixed maturity securities reported
on a current value basis, and does not include trading securities or
securities held to maturity.
<F2>Represents FASB 115 held to maturity fixed maturity securities, and does
not include trading securities or securities available for sale.
<F3>Includes equity securities that are available for sale, per FASB 115.
<F4>Includes real estate joint ventures.
<F5>Includes accumulated contract values as defined by FASB 97, dividend and
coupon accumulations and other policyowner funds.
<F6>Represents amortization for value of purchased insurance in force.
</FN>
</TABLE>
