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, 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 April 18, 1996
Common Stock, $2.50 par value 6,182,989 shares
Kansas City Life Insurance Company
Quarter ended March 31, 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
Kansas City Life's first quarter operating earnings totaled $1.93 per share,
exceeding last year's record level by 8 percent. Net income per share equaled
$2.03, a 13 percent increase over last year. Improvements in claims and
mortality experience at all three of our insurance companies largely account
for the increase over last year. In addition, continued expense control
contributed to the improvement.
Sales
Consolidated sales, in terms of new annualized premiums, rose 5 percent due to
10 percent growth in universal life and a six-fold increase in group dental.
Flexible annuities declined 19 percent in the first quarter partially
offsetting the growth in the lines noted above. Our new variable annuity
product produced $1.6 million in annualized premiums. Additionally,
insurance in-force was up 4 percent on an annualized basis.
Insurance Revenues
Total insurance revenues rose 11 percent in the first quarter. Traditional
life insurance premiums, consisting of traditional annuities, largely single
premium business, and group life, increased 8 percent or $2.0 million. Much
of this growth was attributable to the group life and single premium annuity
lines of business. Accident and health premiums increased 32 percent or
$2.3 million, reflecting $2.1 million growth in group dental premiums.
Contract charges on interest sensitive products were up 7 percent.
Investment Revenues
Net investment income increased 3 percent in the first quarter, largely in line
with investment asset growth. Realized gains from investments totaled $0.9
million compared with $0.1 million in 1995.
Benefits
Total benefits rose 7 percent for the quarter. However, mortality experience
improved versus last year. Additionally, surrenders of traditional life
insurance rose 11 percent in the quarter as they returned to historical levels
from an unusually be neficial year in 1995. Other benefits increased 14
percent, largely due to increased group dental payments. In total, benefits
equaled 111 percent of insurance revenues in the first quarter compared with
116 percent last year.
Other Expenses
Home office insurance operating expenses declined slightly in the first quarter
reflecting the Company's continued focus on expense control and reduction.
Liquidity and Capital Resources
Statements made in the Company's 1995 Annual Report to Stockholders remain
pertinent.
Total funds provided from operations totaled $17.6 million, slightly down from
last year's $18.3 million. Funds from all other sources rose $17.9 million
above last year due to increases in sales and maturities of investments.
The Company's assets totaled $2.9 billion at period end, slightly down from the
prior year end, due to a decline in the market value of our available-for-sale
securities. This decline in market value was due to a general rise in interest
rates. Thu s, these securities experienced a $31.7 million unrealized decline,
net of taxes and the related impact on deferred policy acquisition costs.
Excluding this change in market value, assets grew at a 5 percent annualized
rate in the first quarter. Bo ok value per share equaled $70.46 at quarter end.
Excluding unrealized losses of $1.9 million at the end of the quarter, book
value per share totaled $70.77, 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 18, 1996, the Annual Stockholders Meeting was held at 3520 Broadway,
Kansas City, Missouri. At this meeting, there were 6,184,705 shares
outstanding and eligible to vote, and 5,341,881 shares were represented at the
meeting either in person or by proxy. The following Directors were elected for
a three year term:
Director Elected Votes Received
Walter E. Bixby, III 5,303,260
Webb R. Gilmore 5,307,589
Nancy Bixby Hudson 5,304,680
Daryl D. Jensen 5,300,941
C. John Malacarne 5,326,825
The following Directors continued their term of office after this meeting:
J. R. Bixby
R. Philip Bixby
W. E. Bixby
David D. Dysart
Richard L. Finn
Jack D. Hayes
Warren J. Hunzicker, M. D.
Francis P. Lemery
Michael J. Ross
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, 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: May 10, 1996
KANSAS CITY LIFE INSURANCE COMPANY
Quarter ended March 31, 1996
EXHIBIT
Quarterly Report to Stockholders
Consolidated
Balance Sheet
(in thousands)
March 31 December 31
1996 1995
------------- -------------
Assets
Investments:
Fixed maturities:
Securities available for sale,
at market $ 1,667,323 1,647,674
Securities held to maturity,
at amortized cost 305,498 320,394
Equity securities available
for sale, at market 72,812 70,837
Mortgage loans 227,064 235,213
Real estate, net 48,626 48,542
Real estate joint ventures 26,949 36,103
Policy loans 94,536 94,312
Short-term 18,277 36,898
------------- -------------
2,461,085 2,489,973
Deferred acquisition costs 200,266 192,476
Other assets 223,590 220,055
Separate account assets 3,155 1,264
------------- -------------
$ 2,888,096 2,903,768
============= =============
Liabilities and equity
Future policy benefits $ 691,858 685,729
Accumulated contract values 1,523,724 1,518,968
Other liabilities 233,703 240,680
Separate account liabilities 3,155 1,264
------------- -------------
Total liabilities 2,452,440 2,446,641
Stockholders' equity:
Capital stock 23,121 23,121
Paid in capital 13,734 13,039
Unrealized gains (losses) on
securities available for sale (1,935) 29,740
Retained earnings 487,777 477,826
Less treasury stock (87,041) (86,599)
------------- -------------
435,656 457,127
------------- -------------
$ 2,888,096 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
(6181663 - 1996 and 6165670 - 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 Quarter ended
March 31 March 31
1996 1995 1996 1995
------- ------- ------- -------
Revenues
Insurance revenues:
Premiums:
Life insurance $ 26,780 24,815 26,780 24,815
Accident and health 9,408 7,131 9,408 7,131
Contract charges 19,655 18,418 19,655 18,418
Investment revenues:
Investment income, net 46,927 45,675 46,927 45,675
Realized gains 944 105 944 105
Other 3,154 2,589 3,154 2,589
------- ------- ------- -------
Total revenues 106,868 98,733 106,868 98,733
------- ------- ------- -------
Benefits and expenses
Policy benefits:
Death benefits 20,814 20,426 20,814 20,426
Surrenders of life insurance 3,940 3,542 3,940 3,542
Other benefits 15,478 13,596 15,478 13,596
Increase in benefit and contract reserve 21,981 20,607 21,981 20,607
Amortization of policy acquisition costs 7,557 6,325 7,557 6,325
Insurance operating expenses 19,054 18,294 19,054 18,294
Interest expense 1 0 1 0
------- ------- ------- -------
Total benefits and expenses 88,825 82,790 88,825 82,790
------- ------- ------- -------
Pretax income 18,043 15,943 18,043 15,943
------- ------- ------- -------
Federal income taxes:
Current 7,653 5,013 7,653 5,013
Deferred (2,157) (98) (2,157) (98)
------- ------- ------- -------
5,496 4,915 5,496 4,915
------- ------- ------- -------
Net income $ 12,547 11,028 12,547 11,028
======= ======= ======= =======
Per common share
Operating income $ 1.93 1.78 1.93 1.78
Realized gains, net 0.10 0.01 0.10 0.01
------- ------- ------- -------
Net income $ 2.03 1.79 2.03 1.79
======= ======= ======= =======
CONSOLIDATED
STATEMENT OF CASH FLOWS
(in thousands)
Quarter ended
March 31
1996 1995
Operating activities
Net cash provided $17,586 18,312
Investing activities
Investments called or matured:
Decrease (increase) in
short-term investments 18,620 (19,058)
Fixed maturities available for sale 48,975 18,490
Fixed maturities held to maturity 16,657 9,512
Mortgage loans 11,736 4,752
Joint ventures 6,199 2,859
Other 2,072 294
Investments sold:
Fixed maturities available for sale 14,900 45,378
Equity securities available for sale 504 9,578
Other 979 461
Investments made:
Fixed maturities available for sale (136,891) (70,153)
Mortgage loans (3,500) (15,153)
Other (3,142) (4,363)
Other, net 1,487 69
Net cash used (21,404) (17,334)
Financing activities
Policyowner contract deposits 43,495 46,540
Withdrawals of policyowner
contract deposits (36,928) (33,856)
Dividends paid to stockholders (2,596) (2,219)
Other, net 211 (124)
Net cash provided 4,182 10,341
Increase in cash $364 11,319
Message from the President
I am pleased to report a record quarter on an operating earnings
basis. Kansas City Life earned $1.93 per share, which was 8
percent above last year's first quarter, our previous best
quarter. Net income per share climbed 13 percent to $2.03 a
share. Much of this performance was attributable to improved
mortality and claims experience at all three of our insurance
companies. Home office insurance operating expenses were also
lower than the same quarter last year.
Consolidated new annualized premiums were 5 percent above last
year's first quarter, which was the best quarter of 1995 in
terms of sales. A primary contributor to this sales growth was
group dental premiums which rose sixfold. New universal life
premiums increased 10 percent, but flexible annuity premiums
were off by a third. Our recently introduced variable annuity
product contributed $1.6 million in annualized premiums and I
anticipate that it will become increasingly important to our
sales performance as 1996 unfolds. Insurance in force equals
$21.3 billion, a 4 percent annualized increase. Insurance
revenues rose 11 percent in the accompanying income statement,
reflecting double-digit growth in traditional annuity, group
life and group dental premiums, and 7 percent growth in contract
charges associated with our interest sensitive products.
Investment income increased 3 percent for the quarter. Realized
investment gains totaled $900 thousand for the quarter, compared
to $100 thousand a year ago. Rising interest rates during the
quarter caused the market value of the securities classified as
"available-for-sale" to decline, resulting in an unrealized loss
of $1.9 million as of the end of the quarter, net of related tax
and deferred acquisition costs effects. This contrasts with a
net unrealized gain of $29.7 million as of the end of last year.
There were two key promotions at the recent Board of Directors
meeting. R. Philip Bixby was promoted to Executive Vice
President and Charles R. Duffy, Jr. was named Senior Vice
President, Operations. Phil has served Kansas City Life in
various capacities over his 18-year career, most recently as
Senior Vice President, Operations. Charlie was formerly Vice
President, Insurance Administration, and has been with the
Company for six years.
Book value per share declined from $73.99 at last year end to
$70.46 at the end of the quarter. The decline was caused by the
change in the market value of our securities classified as
"available for sale" as discussed above.
The Board also approved a $.42 a share quarterly dividend to be
paid May 20 to stockholders of record on May 6.
/s/W. E. Bixby
<TABLE> <S> <C>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 1,667,323<F1>
<DEBT-CARRYING-VALUE> 305,498<F2>
<DEBT-MARKET-VALUE> 317,731<F2>
<EQUITIES> 72,812<F3>
<MORTGAGE> 227,064
<REAL-ESTATE> 75,575<F4>
<TOTAL-INVEST> 2,442,808
<CASH> 28,254
<RECOVER-REINSURE> 95,312
<DEFERRED-ACQUISITION> 200,266
<TOTAL-ASSETS> 2,888,096
<POLICY-LOSSES> 691,858
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 32,947
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<COMMON> 23,121
0
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<OTHER-SE> 412,535
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<INCOME-PRETAX> 18,043
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<EPS-PRIMARY> 2.03
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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>
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