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, 1996
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 the 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, 1996
Common Stock, $2.50 par value 6,193,038 shares
Kansas City Life Insurance Company
Quarter ended June 30, 1996
Part I
Item 1. Financial Statements
Incorporated by reference from the Quarterly Report to Stockholders (pages 4
through 7) see the attached exhibit. These interim financial statements should
be read in conjunction with the Company's 1995 Annual Report to Stockholders.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Operating income per share rose 8 percent for both the second quarter and six
months to $1.62 and $3.55, respectively. Results for 1996 have been aided by
improved benefits experience in the individual lines and reduced operating
expenses. Net income per share, which includes realized gains, was up 9
percent to $3.60. Second quarter net income per share equaled $1.57,
representing 5 percent growth.
Sales
Consolidated new annualized premiums increased 4 percent over 1995 for both the
first half and second quarter. Group premiums doubled last year's six month
volume due to a triple-digit increase in dental business. Second quarter group
premiums increased 69 percent compared to a year ago. Universal life premiums
were 6 percent higher year-to-date while annuities declined 13 percent. The
Company's new variable annuity and universal life products contributed $4.3
million in new annualized premiums, representing 11 percent of 1996 individual
sales. Life insurance in-force totaled $21.6 billion at period end, a 5
percent annualized increase from last year end.
Insurance Revenues
Total insurance revenues increased 7 percent for the six months and 2 percent
for the second quarter. Accident and health premiums grew 23 percent for the
six months and 15 percent in the quarter due largely to increases in group
dental business. Life premiums grew 3 percent in the first half, but declined
3 percent in the quarter. Life premiums include group life and individual
annuities, both of which increased considerably this year, and traditional
individual life which was down 1 percent through the first half. Contract
charges on interest sensitive products rose 5 percent in the six months and 4
percent in the quarter.
Investment Revenues
Net investment income increased 2 percent for the six months and 1 percent for
the quarter. Excluding the effects of unrealized gains and losses, investments
have grown 4 percent over the past twelve months. Income growth has not kept
pace with asset growth due to market yields on new investments which are
considerably below the portfolio's yield. Realized investment gains have been
minimal in both years totaling $.5 million in 1996, up $.3 million from a year
ago.
Benefits
Total benefits were up 5 percent for the six months and were 59.3 percent of
operating revenues, a slight increase from a year ago. More favorable claims
experience in the individual lines was offset by the group lines' experience as
discussed below. Benefits for the quarter were up 3 percent. Surrenders of
traditional life insurance were 13 percent lower for the first half and
declined 30 percent for the quarter. Mortality experience was generally
favorable as death benefits rose 2 percent year-to-date and 3 percent in the
second quarter. Other benefits, up 18 percent for the first half and 22
percent for the quarter, resulted from increased group volume and higher claims
ratios.
Other Expenses
Operating expenses have been restrained over the past several years with the
Company's efficiency programs, and 1996 continues this favorable trend. Home
office insurance operating expenses declined in both the six months and second
quarter.
Liquidity and Capital Resources
Statements made in the Company's 1995 Annual Report to Stockholders remain
pertinent.
Total funds provided from operations totaled $21.4 million for the first half,
down 4 percent from last year. Funds from all sources, however, rose 6 percent
to $339.6 million due to increased maturities of investments this year.
The Company's assets totaled $2.9 billion at June 30, down slightly from prior
year end due to a drop in market values for securities available-for-sale.
Market values declined due to rising interest rates throughout 1996. Excluding
market value changes for these securities, total assets increased 3 percent on
an annualized basis. Book value per share equaled $69.35 at June 30, down
$4.64 from year end. This decline was attributable to a $45.5 million decrease
in the market values of securities available-for-sale, net of related deferred
policy acquisition costs and income taxes. Excluding unrealized gains and
losses, book value totaled $71.90 per share, an 8 percent annualized increase
from last year end.
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, 1996.
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
Senior Vice President, Finance
___________________________
/s/John K. Koetting
Vice President and Controller
___________________________
/s/C. John Malacarne
Vice President, General Counsel and Secretary
Date: August 6, 1996
KANSAS CITY LIFE INSURANCE COMPANY
Quarter ended June 30, 1996
EXHIBIT
Quarterly Report to Stockholders
Consolidated
Balance Sheet
(in thousands)
June 30 December 31
1996 1995
------------- -------------
Assets
Investments:
Fixed maturities:
Securities available for sale,
at market $ 1,693,914 1,647,674
Securities held to maturity,
at amortized cost 278,587 320,394
Equity securities available
for sale, at market 70,995 70,837
Mortgage loans 237,392 235,213
Real estate, net 45,634 48,542
Real estate joint ventures 26,707 36,103
Policy loans 94,304 94,312
Short-term 6,931 36,898
------------- -------------
2,454,464 2,489,973
Deferred acquisition costs 203,927 192,476
Other assets 215,373 220,055
Separate account assets 6,056 1,264
------------- -------------
$ 2,879,820 2,903,768
============= =============
Liabilities and equity
Future policy benefits $ 694,851 685,729
Accumulated contract values 1,531,384 1,518,968
Other liabilities 218,019 240,680
Separate account liabilities 6,056 1,264
------------- -------------
Total liabilities 2,450,310 2,446,641
Stockholders' equity:
Capital stock 23,121 23,121
Paid in capital 14,244 13,039
Unrealized gains (losses) on
securities available for sale (15,747) 29,740
Retained earnings 494,875 477,826
Less treasury stock (86,983) (86,599)
------------- -------------
429,510 457,127
------------- -------------
$ 2,879,820 2,903,768
============= =============
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
(6185168 in 1996 and 6169488 in 1995).
* These interim financial statements should be read
in conjunction with the Company's 1995 Annual Report to
Stockholders. The results of operations for any interim
period are not necessarily indicative of the Company's
operating results for a full year.
Consolidated
Income Statement
(in thousands, except per share data)
Quarter ended Six Months ended
June 30 June 30
1996 1995 1996 1995
------- ------- ------- -------
Revenues
Insurance revenues:
Premiums:
Life insurance $ 25,076 25,757 51,856 50,572
Accident and health 8,449 7,341 17,857 14,472
Contract charges 19,362 18,622 39,017 37,040
Investment revenues:
Investment income, net 46,435 45,977 93,361 91,652
Realized gains (losses) (474) 41 470 146
Other 3,240 2,617 6,395 5,206
------- ------- ------- -------
Total revenues 102,088 100,355 208,956 199,088
------- ------- ------- -------
Benefits and expenses
Policy benefits:
Death benefits 21,766 21,119 42,580 41,545
Surrenders of life insurance 3,815 5,417 7,755 8,959
Other benefits 15,284 12,579 30,762 26,175
Increase in benefit and contract reserve 20,615 20,527 42,596 41,133
Amortization of policy acquisition costs 7,408 7,718 14,965 14,043
Insurance operating expenses 19,522 19,367 38,577 37,661
------- ------- ------- -------
Total benefits and expenses 88,410 86,727 177,235 169,516
------- ------- ------- -------
Pretax income 13,678 13,629 31,721 29,572
------- ------- ------- -------
Federal income taxes:
Current 5,890 5,284 13,542 10,297
Deferred (1,906) (937) (4,063) (1,035)
------- ------- ------- -------
3,984 4,347 9,479 9,262
------- ------- ------- -------
Net income $ 9,695 9,282 22,242 20,310
======= ======= ======= =======
Per common share
Operating income $ 1.62 1.50 3.55 3.28
Realized gains (losses), net (0.05) (0.00) 0.05 0.01
------- ------- ------- -------
Net income $ 1.57 1.50 3.60 3.29
======= ======= ======= =======
CONSOLIDATED
STATEMENT OF CASH FLOWS
(in thousands)
Six Months ended June 30
1996 1995
Operating activities
Net cash provided $21,371 22,307
Investing activities
Investments called or matured:
Decrease in short-term investments, net 29,967 982
Fixed maturities available for sale 94,660 40,852
Fixed maturities held to maturity 45,252 20,453
Mortgage loans 19,525 24,747
Other 3,431 2,960
Investments sold:
Fixed maturities available for sale 53,628 97,306
Equity securities available for sale 504 14,670
Real estateJoint ventures 12,325 1,438
Other 1,733 2,619
Investments made:
Fixed maturities available for sale (270,169) (220,037)
Equity securities available for sale (6,297) (10,121)
Mortgage loans (19,705) (16,690)
Real estate joint ventures (1,221) (5,566)
Other (1,340) (144)
Other, net 1,289 (1,695)
Net cash used (36,418) (48,226)
Financing activities
Policyowner contract deposits 87,176 92,488
Withdrawals of policyowner
contract deposits (71,447) (66,335)
Dividends paid to stockholders (5,194) (5,242)
Other, net 403 703
Net cash provided 10,938 21,614
Decrease in cash ($4,109) (4,305)
Message to the President
Kansas City Life's growth in operating earnings in the second
quarter continued at the pace established in the first quarter.
Operating earnings per share rose 8 percent in both the second
quarter and the first half, totaling $1.62 for the quarter and
$3.55 for the half. Improved benefits experience and reduced
operating expenses accounted for much of the growth in earnings.
Net income per share for the quarter rose 5 percent to $1.57 a
share and for the half rose 9 percent to $3.60 a share.
Sales, in terms of annualized new premiums, rose 4 percent in
the first half. Universal life premiums increased 6 percent
while group premiums more than doubled, led by a triple-digit
increase in group dental premiums. However, a 28 percent
decline in new annuity premiums partially offset the other
lines' improved sales. Our recently introduced variable
universal life and annuity products contributed $4.3 million in
new annualized premiums in the half, which represents 11 percent
of our individual sales. For the half, insurance in force rose
at a 5 percent annualized rate to $21.6 billion.
Insurance revenues rose 7 percent in the first half and 2
percent in the quarter. Life insurance premiums rose 3 percent
in the half as 28 percent growth in group life premiums and a 40
percent improvement in traditional annuity premiums offset a 1
percent decline in traditional individual life premiums.
Accident and health premiums advanced 23 percent as group
disability premiums rose by a third. Contract charges arising
from our interest sensitive lines increased 5 percent in the
first half.
Investment income rose 2 percent in the first half and 1 percent
in the quarter. This compares with a 4 percent growth in
invested assets over the past twelve months, excluding the
effects of unrealized gains and losses. The market value of
securities classified as available-for-sale declined in the
first half in response to rising market interest rates.
Stockholders' equity per share, or book value, equaled $69.35 at
period's end, down $4.64 per share from year end. The decline
in our securities' market value over the period because of
rising interest rates resulted in a $45.5 million reduction in
stockholders' equity, net of income tax effects. Excluding these
unrealized gains and losses, book value climbed 8 percent on an
annualized basis to $71.90 a share.
The Board recently approved a $.42 a share quarterly dividend to
be paid on August 19 to our stockholders of record on August 5.
/s/ W. E. Bixby
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 1,693,914<F1>
<DEBT-CARRYING-VALUE> 278,587<F2>
<DEBT-MARKET-VALUE> 286,203<F2>
<EQUITIES> 70,995<F3>
<MORTGAGE> 237,392
<REAL-ESTATE> 72,341<F4>
<TOTAL-INVEST> 2,447,533
<CASH> 12,434
<RECOVER-REINSURE> 93,385
<DEFERRED-ACQUISITION> 203,927
<TOTAL-ASSETS> 2,879,820
<POLICY-LOSSES> 694,851
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 30,752
<POLICY-HOLDER-FUNDS> 1,634,570<F5>
<NOTES-PAYABLE> 0
<COMMON> 23,121
0
0
<OTHER-SE> 406,389
<TOTAL-LIABILITY-AND-EQUITY> 2,879,820
69,713
<INVESTMENT-INCOME> 93,361
<INVESTMENT-GAINS> 470
<OTHER-INCOME> 45,412
<BENEFITS> 123,693
<UNDERWRITING-AMORTIZATION> 14,965
<UNDERWRITING-OTHER> 526<F6>
<INCOME-PRETAX> 31,721
<INCOME-TAX> 9,479
<INCOME-CONTINUING> 22,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,242
<EPS-PRIMARY> 3.60
<EPS-DILUTED> 3.60
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
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<FN>
<F1>Debt securities held for sale represent FASB 115 available for sale fixed
maturity securities reported on a current value basis, and do not include
trading securities or securities held to maturity.
<F2>Debt securities represent FASB 115 held to maturity fixed maturity
securities, and do not include trading securities or
securities available for sale.
<F3>Equity securities include equity securities that are available for sale,
under FASB 115.
<F4>Real estate includes real estate joint ventures.
<F5>Policyholder funds include accumulated contract values as defined by FASB
97, dividend and coupon accumulations and other policyowner funds.
<F6>Underwriting expenses represent amortization of the value of purchased
insurance in force.
</FN>
</TABLE>
