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 March 31, 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 April 14, 1995
Common Stock, $2.50 par value
6,169,609 shares
Kansas City Life Insurance Company
Quarter ended March 31, 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's first quarter operating earnings were at a record level,
totaling $1.78 per share, up 22 percent over last year. Net income per share
equaled $1.79 per share, up 29 percent. Income results are largely the result
of margin spreads on interest sensitive products and the continued restraint of
home office expenses.
Sales
Consolidated sales results did not met expectations during the first quarter of
1995 as new annualized premiums declined slightly. However, sales results
showed improvement during March as new annualized commissions were the highest
in 15 months. C onsolidated annualized premiums fell 4 percent compared with
1994. Universal life sales were down 22 percent and traditional life sales were
down 14 percent. However, sales of flexible annuities were up 9 percent.
Additionally, insurance in-force was up 3 percent, annualized.
As part of our increased market focus, the Company is seeking penetration into
the Asian-American market. It is felt that this segment offers the potential
for solid growth over the next several years. In addition, the Company is
currently developi ng both variable annuity and universal life products and
plans to introduce these products in late 1995. These products will expand the
agents' ability to more fully compete in the marketplace.
Insurance Revenues
Total insurance revenues fell 4 percent in the first quarter. Traditional life
insurance premiums were down 7 percent while accident and health premiums were
down 13 percent. Group premiums, included in accident and health premiums, were
down 4 per cent with stop loss premiums down 20 percent. However, group dental
premiums were up 15 percent. Contract charges on interest sensitive products
were up 5 percent.
Investment Revenues
Net investment income increased 8 percent in the first quarter. Market yields
were above those of a year earlier helping investment income comparisons.
Realized gains from investments were down $1.5 million compared with 1994.
Benefits
Total benefits were flat compared with the first quarter of 1994. Death
benefits were up just 1 percent versus 1994 and other benefits, primarily group
disability benefits, were up 6 percent. Surrenders of traditional life
insurance fell 22 percent .
Yield spreads on the Company's interest sensitive products were maintained in
the first quarter.
Other Expenses
The Company's programs to improve operational efficiency and monitor service to
our agents and policyholders, continue to hold expenses in check. As a result,
home office operating expenses were flat compared with 1994.
Liquidity and Capital Resources
Statements made in the Company's 1994 Annual Report to Stockholders remain
pertinent.
Total funds provided from operations totaled $18.3 million. Funds from all
sources totaled $156.2 million. This is significantly less than 1994 due
largely to a decline in calls on the securities portfolio.
The Company's assets totaled $2.7 billion at March 31, 1995, an annualized
growth rate of 8 percent from the beginning of the year. Book value per share
equaled $59.64, a 28 percent annualized increase from year end due partially to
declines in unre alized losses on the securities "available for sale."
Excluding unrealized losses on these securities, book value per share totaled
$65.50, a 9 percent annualized increase since the first of the year.
Part II: Other Information
Item 4. Result of Votes of Security Holders
On April 20, 1995, the Annual Stockholders Meeting was held at 3520 Broadway,
Kansas City, Missouri. At this meeting, the following Directors were elected
for a three year term:
W. E. Bixby
David D. Dysart
Jack D. Hayes
Francis P. Lemery
Michael J. Ross
The following Directors continued their term of office after this meeting:
J. R. Bixby
Kathryn A. Bixby-Haddad
R. Philip Bixby
Ilus W. Davis
Richard L. Finn
Webb R. Gilmore
Warren J. Hunzicker, M. D.
Daryl D. Jensen
C. John Malacarne
Larry Winn, Jr.
All of the above named Directors constitute the full Board of Kansas City Life
Insurance Company.
Item 6.
(a) Exhibits: None
(b) Reports on 8-K: There were no reports on Form 8-K filed for the three
months ended March 31, 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: May 3, 1995
<TABLE>
Consolidated
Balance Sheet
[MULTIPLIER]
1,000
<CAPTION>
March 31 December 31
1995 1994
------------- -------------
<S> <C> <C>
Assets
Investments:
Fixed maturities:
Securities available for sale,
at market $ 1,341,483 1,309,297
Securities held to maturity,
at amortized cost 388,441 395,886
Equity securities available
for sale, at market 75,344 82,251
Mortgage loans 278,465 267,695
Real estate, net 55,548 54,976
Real estate joint ventures 25,458 26,120
Policy loans 95,969 95,854
Short-term 38,383 19,340
------------- -------------
2,299,091 2,251,419
Deferred acquisition costs 191,896 193,667
Other assets 227,319 218,667
------------- -------------
$ 2,718,306 2,663,753
============= =============
Liabilities and equity
Future policy benefits $ 674,007 670,658
Accumulated contract values 1,473,836 1,459,045
Other liabilities 202,471 190,355
------------- -------------
Total liabilities 2,350,314 2,320,058
Stockholders' equity:
Capital stock 23,121 23,121
Paid in capital 12,119 11,847
Unrealized gains (losses) on
securities available for sale (36,170) (51,345)
Retained earnings 454,958 446,149
Less treasury stock (86,036) (86,077)
------------- -------------
367,992 343,695
------------- -------------
$ 2,718,306 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
(6165670 - 1995 and 6148105 - 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 Quarter ended
March 31 March 31
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Insurance revenues:
Premiums:
Life insurance $ 24,815 26,563 24,815 26,563
Accident and health 7,131 8,155 7,131 8,155
Contract charges 18,419 17,568 18,419 17,568
Investment revenues:
Investment income, net 45,675 42,184 45,675 42,184
Realized gains 105 1,569 105 1,569
Other 2,588 2,538 2,588 2,538
------- ------- ------- -------
Total revenues 98,733 98,577 98,733 98,577
------- ------- ------- -------
Benefits and expenses
Policy benefits:
Death benefits 20,426 20,199 20,426 20,199
Surrenders of life insurance 3,542 4,566 3,542 4,566
Other benefits 13,596 12,830 13,596 12,830
Increase in benefit and contract reserve 20,607 20,733 20,607 20,733
Amortization of policy acquisition costs 6,325 7,142 6,325 7,142
Insurance operating expenses 18,294 17,833 18,294 17,833
Interest expense 0 311 0 311
------- ------- ------- -------
Total benefits and expenses 82,790 83,614 82,790 83,614
------- ------- ------- -------
Pretax income 15,943 14,963 15,943 14,963
------- ------- ------- -------
Federal income taxes:
Current 5,013 6,471 5,013 6,471
Deferred (98) (1,505) (98) (1,505)
------- ------- ------- -------
4,915 4,966 4,915 4,966
------- ------- ------- -------
Income before nonrecurring item 11,028 9,997 11,028 9,997
Postemployment benefits, net 0 1,481 0 1,481
------- ------- ------- -------
Net income $ 11,028 8,516 11,028 8,516
======= ======= ======= =======
Per common share
Income before nonrecurring item $ 1.79 1.63 1.79 1.63
Postemployment benefits, net 0 .24 0 .24
------- ------- ------- -------
Net income $ 1.79 1.39 1.79 1.39
======= ======= ======= =======
</TABLE>
<TABLE>
CONSOLIDATED
STATEMENT OF CASH FLOWS
[MULTIPLIER]
1,000
<CAPTION>
Quarter ended
March 31
1995 1994
<S> <C> <C>
Operating activities
Net cash provided $18,312 20,229
Investing activities
Investments called or matured:
Fixed maturities available for sale 18,490 71,204
Fixed maturities held to maturity 9,512 35,367
Equity securities available for sale 505 15,345
Mortgage loans 4,752 14,033
Other 2,648 1,469
Investments sold:
Fixed maturities available for sale 45,378 15,965
Equity securities available for sale 9,578 0
Other 461 229
Investments made:
Decrease (increase) in
short-term investments, net (19,058) 54,621
Fixed maturities available for sale (70,153) (242,406)
Equity securities available for sale (1,747) (1,106)
Mortgages (15,153) (535)
Other (2,616) (1,312)
Other, net 69 (1,243)
Net cash used (17,334) (38,369)
Financing activities
Policyowner contract deposits 46,540 44,696
Withdrawals of policyowner
contract deposits (33,856) (30,262)
Dividends paid to stockholders (2,219) (2,090)
Other, net (124) (374)
Net cash provided 10,341 11,970
Increase (decrease) in cash $11,319 (6,170)
</TABLE>
Message from the President
Kansas City Life celebrated its centennial on May 1. Adding to the festivities
was the fact that the last quarter in the Company's first 100 years was its best
quarter ever in terms of operating earnings and its third best in terms of net
income. First quarter operating earnings per share equaled $1.78, a 22 percent
increase over 1994. Net income, which includes realized investment gains and
nonrecurring charges, was $1.79 per share, a 29 percent improvement over last
year.
The outstanding earnings performance reflected substantial investment earnings
growth in the traditional lines of business, maintenance of favorable interest
spreads in the interest sensitive lines, and continued restraint in home office
expenses, which were unchanged from a year ago. Partially offsetting these
positive factors was mortality experience for the quarter, which was less
favorable than last year.
The many changes we have made over the past fourteen months to revitalize sales
have yet to produce the results we expect. New annualized premiums declined
slightly in the first quarter. However, sales figures for the month of March
were encouraging. Paid applications were the highest in 24 months, while new
annualized commissions for the month were the best in 15 months. Thus we
continue to believe that we will achieve our marketing goals for this year.
Insurance in force totaled $20.2 billion at quarter's end and we generated $87.3
million in direct statutory premiums for the quarter.
Investment earnings rose 8 percent reflecting improved yields in the marketplace
and growth in invested assets. In addition, realized investment gains totaled
$0.1 million in the first quarter compared with $1.6 million a year earlier.
Book value per share was $59.64 at quarter's end, an increase of $3.86 for the
quarter, or 28 percent annualized. Approximately $2.50 of this increase arose
from the effect of the drop in interest rates during the quarter upon the market
value of our securities classified as "available for sale." If the unrealized
losses on these securities are disregarded, book value per share rose from
$64.11 at year end to $65.50 a share at the end of the quarter.
The Board of Directors increased the quarterly dividend by $.03 a share to $.39
a share in response to the earnings performance. The Board also declared a
special dividend of $.10 a share in commemoration of our Centennial. Both
dividends will be paid on May 22 to stockholders of record on May 8.
We are justifiably proud of our first 100 years. Through the nation's economic
good times and bad, Kansas City Life has provided financial security and quality
service to its insureds. We join with our agents and employees in celebrating
what we have achieved and in looking forward with optimism to what the next 100
years will bring.
W. E. Bixby
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 1,341,483<F1>
<DEBT-CARRYING-VALUE> 388,441<F2>
<DEBT-MARKET-VALUE> 398,299<F2>
<EQUITIES> 75,344<F3>
<MORTGAGE> 278,465
<REAL-ESTATE> 81,006<F4>
<TOTAL-INVEST> 2,260,708
<CASH> 56,953
<RECOVER-REINSURE> 87,260
<DEFERRED-ACQUISITION> 191,896
<TOTAL-ASSETS> 2,718,306
<POLICY-LOSSES> 674,007
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 30,641
<POLICY-HOLDER-FUNDS> 1,568,553<F5>
<NOTES-PAYABLE> 0
<COMMON> 23,121
0
0
<OTHER-SE> 344,871
<TOTAL-LIABILITY-AND-EQUITY> 2,718,306
31,946
<INVESTMENT-INCOME> 45,675
<INVESTMENT-GAINS> 105
<OTHER-INCOME> 21,007
<BENEFITS> 58,170
<UNDERWRITING-AMORTIZATION> 6,325
<UNDERWRITING-OTHER> 233<F6>
<INCOME-PRETAX> 15,943
<INCOME-TAX> 4,915
<INCOME-CONTINUING> 11,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,028
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
<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>
