UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number: 2-17039
NATIONAL WESTERN LIFE INSURANCE COMPANY
(Exact name of Registrant as specified in its charter)
COLORADO 84-0467208
(State of Incorporation) (I.R.S. Employer Identification Number)
850 EAST ANDERSON LANE
AUSTIN, TEXAS 78752-1602 (512) 836-1010
(Address of Principal Executive Offices) (Telephone Number)
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes [ X ] No [ ]
As of November 10 , 1995, the number of shares of Registrant's common stock
outstanding was: Class A - 3,288,204 and Class B - 200,000.
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
INDEX
Part I. Financial Information: Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1995 (Unaudited) and December 31, 1994
Condensed Consolidated Statements of Operations -
For the Three Months Ended September 30, 1995 and 1994 (Unaudited)
Condensed Consolidated Statements of Operations -
For the Nine Months Ended September 30, 1995 and 1994 (Unaudited)
Condensed Consolidated Statements of Stockholders' Equity -
For the Nine Months Ended September 30, 1995 and 1994 (Unaudited)
Condensed Consolidated Statements of Cash Flows -
For the Nine Months Ended September 30, 1995 and 1994 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11 - Computation of Earnings per Common Share -
For the Three Months Ended September 30, 1995 and 1994 (Unaudited)
Exhibit 11 - Computation of Earnings per Common Share -
For the Nine Months Ended September 30, 1995 and 1994 (Unaudited)
Signatures
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
ASSETS
<S> <C> <C> <C>
Cash and investments:
Securities held to maturity, at amortized cost $ 1,722,544 1,605,813
Securities available for sale, at fair value 473,537 354,300
Mortgage loans, net of allowances for possible
losses ($5,668 and $5,929) 191,390 189,632
Policy loans 149,739 151,487
Other long-term investments 32,218 24,872
Cash and short-term investments 6,273 17,723
Total cash and investments 2,575,701 2,343,827
Accrued investment income 33,622 31,630
Deferred policy acquisition costs 281,979 291,274
Other assets 22,769 16,266
Assets of discontinued operations 6,177 232,057
$ 2,920,248 2,915,054
<FN>
Note: The balance sheet at December 31, 1994 has been taken from the
audited financial statements at that date.
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Shares Outstanding)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
<S> <C> <C> <C>
Future policy benefits:
Traditional life and annuity products $ 174,940 177,429
Universal life and investment annuity
contracts 2,377,095 2,194,264
Other policyholder liabilities 25,014 23,183
Federal income taxes payable:
Current 392 -
Deferred 7,461 1,996
Other liabilities 33,374 27,718
Liabilities of discontinued operations 6,177 215,330
Total liabilities 2,624,453 2,639,920
STOCKHOLDERS' EQUITY:
Common stock:
Class A - $1 par value; 7,500,000 shares
authorized; 3,288,204 and 3,288,192 shares
issued and outstanding in 1995 and 1994 3,288 3,288
Class B - $1 par value; 200,000 shares
authorized, issued and outstanding in
1995 and 1994 200 200
Additional paid-in capital 24,475 24,475
Net unrealized gains (losses) on investment
securities 7,077 (2,199)
Retained earnings 260,755 249,370
Total stockholders' equity 295,795 275,134
$ 2,920,248 2,915,054
<FN>
Note: The balance sheet at December 31, 1994 has been taken from the
audited financial statements at that date.
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1995 and 1994
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Premiums and other revenue:
Life and annuity premiums $ 4,381 4,834
Universal life and investment annuity
contract revenues 17,236 15,603
Net investment income 50,317 49,155
Other income 26 749
Realized gains (losses) on investments (2,030) 382
Total premiums and other revenue 69,930 70,723
Benefits and expenses:
Life and other policy benefits 8,813 7,746
Change in liabilities for future policy
benefits (621) 28
Amortization of deferred policy
acquisition costs 7,429 7,715
Universal life and investment annuity
contract interest 37,155 31,245
Other insurance operating expenses 5,993 6,361
Total benefits and expenses 58,769 53,095
Earnings from continuing operations before Federal
income taxes 11,161 17,628
Provision (benefit) for Federal income taxes:
Current (1,853) 4,951
Deferred 1,230 1,218
Total Federal income taxes (benefit) (623) 6,169
Earnings from continuing operations 11,784 11,459<PAGE>
Discontinued operations:
Earnings (losses) from operations of discontinued
subsidiary (net of applicable Federal income
taxes of $156 in 1994) (6,752) 288
Estimated loss on disposal of discontinued
operations (6,381) -
Earnings (losses) from discontinued operations (13,133) 288
Net earnings (losses) $ (1,349) 11,747
Earnings (losses) per share of common stock:
Earnings from continuing operations $ 3.38 3.29
Earnings (losses) from discontinued operations (3.77) 0.08
Net earnings (losses) $ (0.39) 3.37
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Premiums and other revenue:
Life and annuity premiums $ 13,061 14,003
Universal life and investment annuity
contract revenues 51,390 48,972
Net investment income 149,161 142,255
Other income 611 957
Realized gains (losses) on investments (1,729) 2,486
Total premiums and other revenue 212,494 208,673
Benefits and expenses:
Life and other policy benefits 29,033 24,250
Change in liabilities for future
policy benefits (2,489) (240)
Amortization of deferred policy
acquisition costs 24,522 25,112
Universal life and investment annuity
interest contract 107,603 95,880
Other insurance operating expenses 19,973 18,410
Total benefits and expenses 178,642 163,412
Earnings from continuing operations before
Federal income taxes 33,852 45,261
Provision (benefit) for Federal income taxes:
Current 5,812 16,031
Deferred 305 (190)
Total Federal income taxes 6,117 15,841
Earnings from continuing operations 27,735 29,420
Discontinued operations:
Earnings (losses) from operations of
discontinued subsidiary (net of
applicable Federal income taxes of
$556 in 1994) (9,969) 1,032
Estimated loss on disposal of
discontinued operations (6,381) -
Earnings (losses) from discontinued operations (16,350) 1,032
Net earnings $ 11,385 30,452
Earnings (losses) per share of common stock:
Earnings from continuing operations $ 7.95 8.45
Earnings (losses) from discontinued operations (4.69) 0.29
Net earnings $ 3.26 8.74
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Common stock shares outstanding:
Shares outstanding at beginning of year
and end of period 3,488 3,485
Common stock:
Balance at beginning of year and
end of period $ 3,488 3,485
Additional paid-in capital:
Balance at beginning of year and end of period 24,475 24,356
Net unrealized gains (losses) on investment
securities:
Balance at beginning of year (2,199) (257)
Effect of change in accounting for investments
in debt and equity securities - 26,610
Change in unrealized gains (losses) on
investment securities during the period 10,016 (27,525)
Net unrealized gain related to transfer of
securities available for sale to securities
held to maturity - 1,380
Amortization of net unrealized gain related to
transfer of securities available for sale
to securities held to maturity (740) (178)
Balance at end of period 7,077 30
Retained earnings:
Balance at beginning of year 249,370 215,134
Net earnings 11,385 30,452
Balance at end of period 260,755 245,586
Total stockholders' equity $ 295,795 273,457
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 11,385 30,452
Adjustments to reconcile net earnings to
net cash from operating activities:
Universal life and investment annuity
contract interest 107,603 95,880
Surrender charges (25,313) (25,426)
Realized (gains) losses on investments 1,729 (2,486)
Accrual and amortization of investment income (5,543) (10,355)
Depreciation and amortization 451 459
Decrease (increase) in insurance receivables
and other assets (1,176) 3,228
Increase in accrued investment income (1,992) (265)
Decrease (increase) in deferred policy
acquisition costs (11,410) 6,585
Decrease in liability for future policy benefits (2,489) (240)
Increase (decrease) in other policyholder
liabilities 1,831 (2,498)
Decrease in Federal income taxes payable (4,016) (4,003)
Increase in other liabilities 2,858 6,835
Net cash provided by operating activities 73,918 98,166
Cash flows from investing activities:
Proceeds from sales of:
Securities held to maturity 7,720 -
Securities available for sale 42,374 7,362
Other investments 1,048 22,427
Proceeds from maturities and redemptions of:
Securities held to maturity 36,915 54,801
Securities available for sale 5,757 55,723
Purchases of:
Securities held to maturity (159,837) (152,323)
Securities available for sale (130,066) (59,608)
Other investments (5,281) (7,114)
Principal payments on mortgage loans 12,207 20,933
Cost of mortgage loans acquired (14,573) (26,912)
Decrease in policy loans 1,748 1,854
Decrease in assets of discontinued operations 225,880 102,132
Decrease in liabilities of discontinued
operations (209,153) (102,689)
Other (651) (289)
Net cash used in investing activities (185,912) (83,703)
<FN>
(Continued on next page)
</FN>
</TABLE>
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Cash flows from financing activities:
Increase in short-term borrowings $ - 8,005
Deposits to account balances for universal life
and investment annuity contracts 280,533 111,141
Return of account balances on universal life
and investment annuity contracts (179,989) (156,456)
Net cash provided by (used in) financing
activities 100,544 (37,310)
Net decrease in cash and short-term investments (11,450) (22,847)
Cash and short-term investments at beginning
of year 17,723 24,308
Cash and short-term investments at end of period $ 6,273 1,461
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of National Western Life Insurance Company and its wholly-owned
subsidiaries (the Company), The Westcap Corporation, Commercial Adjusters,
Inc., NWL Investments, Inc., NWL Properties, Inc., and NWL 806 Main, Inc.
The Westcap Corporation has been reflected as discontinued operations in the
accompanying financial statements. Commercial Adjusters, Inc. was dissolved
in October, 1994, and all remaining assets and liabilities were assumed by
National Western Life Insurance Company. All significant intercorporate
transactions and accounts have been eliminated in consolidation.
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of September 30, 1995, and the results of its
operations for the three months and nine months ended September 30, 1995
and 1994 and its cash flows for the nine months ended September 30, 1995 and
1994. The results of operations for the three months and nine months ended
September 30, 1995 and 1994 are not necessarily indicative of the results
to be expected for the full year.
(2) DIVIDENDS
The Company paid no cash dividends on common stock during the nine months
ended September 30, 1995 and 1994.
(3) CHANGES IN ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan," in May, 1993. In October, 1994, the FASB also issued
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," which amends SFAS No. 114. These statements
address the accounting by creditors for impairment of certain loans and
related financial statement disclosures. The statements are applicable to
all creditors and to all loans, uncollateralized as well as collateralized,
with certain exceptions and also apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. The
statements require that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral
dependent.
Effective January 1, 1995, the Company adopted both SFAS No. 114 and No.
118. As the Company was already providing for impairment of loans through
an allowance for possible losses, the implementation of this statement had
no effect on the level of this allowance. As a result, there was no net
impact on the Company's results of operations or stockholders' equity.
However, additional disclosures are required by these statements which are
provided below.
As of September 30, 1995 and 1994, impaired mortgage loans on real estate
were as follows:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C> <C>
Impaired loans:
With allowance * $ - 703
Without allowance 338 -
Total impaired loans $ 338 703
<FN>
* Represents gross amounts before allowance for mortgage loan losses of
$163,000 at September 30, 1994.
</FN>
</TABLE>
For the quarters ended September 30, 1995 and 1994, average investments in
impaired mortgage loans were $169,000 and $634,000, respectively. Interest
income recognized on impaired loans during the quarters ended September 30,
1995 and 1994, was not significant.
Impaired loans are typically placed on non-accrual status and no interest
income is recognized. However, if cash is received on the impaired loan, it
is applied to principal and interest on past due payments, beginning with
the most delinquent payment.
Detailed below are the changes in the allowance for mortgage loan losses for
the nine months ended September 30, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 5,929 6,849
Net additions charged to realized investment
gains and losses - 135
Deductions resulting from foreclosures (261) (694)
Balance at end of period $ 5,668 6,290
</TABLE>
(4) STOCK AND INCENTIVE PLAN
General
On April 21, 1995, the Company's Board of Directors adopted the National
Western Life Insurance Company 1995 Stock and Incentive Plan (the Plan),
subject to the approval of the Plan by the stockholders. The Plan was
subsequently approved by the Company's stockholders on June 17, 1995, at the
annual meeting of stockholders. The purpose of the Plan is to align the
personal financial incentives of key personnel with the long-term growth of
the Company and the interests of the Company's stockholders through the
ownership and performance of the Company's Class A, $1.00 par value, common
stock, to enhance the Company's ability to retain key personnel, and to
attract outstanding prospective employees and directors.
The adoption of the Plan is part of the establishment of the Company's
initial long-term incentive programs. In structuring the Plan, the Board of
Directors sought to provide for a variety of awards that could be flexibly
administered. This flexibility will permit the Company to keep pace with
changing developments in management compensation and make the Company
competitive with those companies that offer creative incentives to attract
and keep key management employees. The Plan is designed to allow the
Company to respond to changing circumstances such as changes in tax laws,
accounting rules, securities regulations, and other rules regarding benefit
plans. The Plan grants the Compensation and Stock Option Committee, which
administers the Plan, flexibility in creating the terms and restrictions
deemed appropriate for particular awards as facts and circumstances warrant.
Types of Awards
The Plan provides for the grant of any or all of the following types of
awards: (1) stock options, including incentive stock options and
non-qualified stock options; (2) stock appreciation rights, in tandem with
stock options or freestanding; (3) restricted stock; (4) incentive
awards; and (5) performance awards. Any stock option granted in the form
of an incentive stock option must satisfy the applicable requirements of
Section 422 of the Internal Revenue Code. Awards may be made to the same
person on more than one occasion and may be granted singly, in combination,
or in tandem as determined by the Compensation and Stock Option Committee of
the Board of Directors (the Committee).
Term
The Plan is effective as of April 21, 1995, and will terminate on April 20,
2005, unless terminated earlier by the Board of Directors. Termination of
the Plan will not affect awards made prior to termination, but awards will
not be made after termination.
Administration
The Plan is administered by the Committee. None of the members of the
Committee are officers or employees of the Company or its subsidiaries.
Subject to the terms of the Plan, the Committee, consistent with the terms
of the Plan, has authority (i) to select personnel to receive awards, (ii)
to determine the timing, form, amount or value, and terms of grants and
awards, and the conditions and restrictions, if any, subject to which grants
and awards will be made and become payable under the Plan (other than
non-discretionary stock options for non-employee Directors), (iii) to
construe the Plan and to prescribe rules and regulations with respect to the
administration of the Plan, and (iv) to make such other determinations
authorized under the Plan as the Committee deems necessary or appropriate.
Eligibility
All of the employees of the Company and its subsidiaries are eligible to
participate in the Plan. In addition, directors of the Company (other than
Committee members) are eligible for restricted stock awards, incentive
awards, and performance awards, and non-employee directors (including
members of the Committee) receive non-discretionary stock options. The
selection of participants from eligible personnel is within the discretion
of the Committee, except with respect to non-discretionary stock options
automatically awarded to non-employee directors.
Shares Subject to the Plan
The number of shares of Class A, $1.00 par value, common stock which may be
issued under the Plan, or as to which stock appreciation rights or other
awards may be granted, may not exceed 300,000. These shares may be
authorized and unissued shares or treasury shares.
Stock Options Granted
On May 19, 1995, the Committee approved the issuance of 52,500 non-qualified
stock options to selected officers of the Company. The Committee also
granted 7,000 non-qualified, non-discretionary stock options to non-employee
Company directors. The stock options begin to vest following three full
years of service to the Company, with 20% of the options to vest at the
beginning of the fourth year of service, and with 20% thereof to vest at the
beginning of each of the next four years of service. The exercise price of
the stock options was set at the fair market value of the common stock on
the date of grant, May 19, 1995.
(5) DISCONTINUED BROKERAGE OPERATIONS
Effective July 17, 1995, The Westcap Corporation, a wholly owned brokerage
subsidiary of National Western Life Insurance Company, discontinued all
sales and trading activities in its Houston, Texas office. At that time,
The Westcap Corporation (Westcap) continued its corporate operations and
small sales operations in its New Jersey office. However, in September,
1995, Westcap approved a plan to close the remaining sales office in New
Jersey and to proceed with the liquidation of the corporation.
Declines in both sales revenues and earnings were the principal reasons for
ceasing all sales activities and led to the decision to liquidate Westcap.
Increasing market interest rates and resulting adverse bond market
conditions during 1994 and 1995 compared to previous years has had a
negative impact on the entire bond brokerage industry. These conditions,
coupled with adverse publicity about litigation related to sales of
collateralized mortgage obligation (CMO) products, led to the declines in
sales and earnings. The publicity surrounding these claims has made it
extremely difficult to keep Westcap's customer base and sales force in
place. Additionally, because much publicity characterizes CMOs as
derivatives, adverse publicity about derivatives has impacted the market for
CMOs and decreased Westcap's prospects for future sales.
In connection with the plan of liquidation, Westcap's assets are being
carried at their estimated fair value, and estimated future costs to
liquidate have been accrued. As a result of the plan and in accordance with
generally accepted accounting principles, the assets and liabilities of
Westcap have been reclassified in the accompanying consolidated balance
sheets to separately identify them as assets and liabilities of the
discontinued operations. The assets of the discontinued operations as of
September 30, 1995, consist primarily of cash, while the liabilities consist
primarily of estimated costs to operate and liquidate the corporation.
Revenues of Westcap totaled $5,112,000 for the nine months ended September
30, 1995.
Losses from the discontinued brokerage operations totaling $13,133,000, and
$16,350,000, for the three months and nine months ended September 30, 1995,
have been reflected separately from continuing operations of the Company in
the accompanying consolidated financial statements. These losses include
estimated future operating losses as well as estimated costs to liquidate
and close the corporation totaling $6,381,000 and have resulted in the
complete write-off of the Company's investment in Westcap on a consolidated
basis. Although The Westcap Corporation could incur additional losses as it
proceeds with litigation and ultimate liquidation, such losses will not be
reported on a consolidated basis as National Western Life Insurance
Company's loss in the subsidiary is limited to its investment. The
liquidation period is currently estimated at two years. However, this
estimate could change significantly depending primarily on the results of
litigation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Investment Philosophy
The Company's investment philosophy is to maintain a diversified portfolio
of investment grade debt and equity securities that provide adequate
liquidity to meet policyholder obligations and other cash needs. The
prevailing strategy within this philosophy is the intent to hold investments
in debt securities to maturity. However, the Company does manage its
portfolio, which entails monitoring and reacting to all components which
affect changes in the price or value of investments in debt and equity
securities. Additionally, the Company's overall conservative investment
philosophy is reflected in the allocation of investments of its insurance
operations which is detailed below as of September 30, 1995, and December
31, 1994. The Company emphasizes debt securities with smaller holdings in
mortgage loans and real estate than industry averages.
<TABLE>
<CAPTION>
Percent of Insurance
Operations Investments
1995 1994
<S> <C> <C> <C> <C>
Debt securities 84.2 % 82.5 %
Mortgage loans 7.4 8.1
Policy loans 5.8 6.5
Equity securities 1.1 1.1
Real estate 0.8 0.8
Other 0.7 1.0
Totals 100.0 % 100.0 %
</TABLE>
In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," the Company classifies its investments in debt and
equity securities into the following categories: held to maturity,
available for sale, and trading. The reporting category chosen for the
Company's securities investments depends on various factors including the
type and quality of the particular security and how it will be incorporated
into the Company's overall asset/liability management strategy.
Securities the Company purchases with the intent to hold to maturity are
classified as securities held to maturity. Because the Company has strong
cash flows and matches expected maturities of assets and liabilities, the
Company has the ability to hold the securities, as it would be unlikely that
forced sales of securities would be required prior to maturity to cover
payments of liabilities. As a result, securities held to maturity are
carried at amortized cost less declines in value that are other than
temporary. However, certain situations may change the Company's intent to
hold a particular security to maturity, the most notable of which is a
deterioration in the issuer's creditworthiness. Accordingly, a security may
be sold to avoid a further decline in realizable value when there has been a
significant change in the credit risk of the issuer.
Securities that are held for current resale are classified as trading
securities. These securities are typically held for short periods of time,
as the intent is to sell them, producing a trading profit. The Company
currently does not maintain a trading securities portfolio.
Securities that are not classified as either held to maturity or trading
securities are reported as securities available for sale. At September 30,
1995, approximately 22% of the Company's total carrying value of debt and
equity securities were classified as securities available for sale. These
holdings provide flexibility to the Company to react to market opportunities
and conditions and to practice active management within the portfolio to
provide adequate liquidity to meet policyholder obligations and other cash
needs. These securities may be sold if market or other measurement factors
change unexpectedly after the securities were acquired. For example,
opportunities arise when factors change that allow the Company to improve
the performance and credit quality of the investment portfolio by replacing
an existing security with an alternative security while still maintaining an
appropriate matching of expected maturities of assets and liabilities.
Examples of such improvements are as follows: improving the yield earned on
invested assets, improving the credit quality, changing the duration of the
portfolio, and selling securities in advance of anticipated calls or other
prepayments. Securities available for sale are reported in the Company's
financial statements at individual fair value. Any unrealized gains or
losses resulting from changes in the fair value of the securities are
reflected as a component of stockholders' equity.
As an integral part of its investment philosophy, the Company performs an
ongoing process of monitoring the creditworthiness of issuers within the
investment portfolio. In addition, review procedures are performed on
securities that have had significant declines in fair value. The Company's
objective in these circumstances is to determine if the decline in fair
value is due to changing market expectations regarding inflation and general
interest rates or other factors.
Additional review procedures are performed on those fair value declines
which are caused by factors other than market expectations regarding
inflation and general interest rates. Specific conditions of the issuer and
its ability to comply with all terms of the instrument are considered in the
evaluation of the realizable value of the investment. Information reviewed
in making this evaluation would include the recent operational results and
financial position of the issuer, information about its industry, recent
press releases and other available data. If evidence does not exist to
support a realizable value equal to or greater than the carrying value of
the investment, such decline in fair value is determined to be other than
temporary, and the carrying amount is reduced to its net realizable value.
The amount of the reduction is reported as a realized loss.
Portfolio Analysis
At September 30, 1995, securities held to maturity totaled $1.723 billion or
66.9% of total invested assets. The fair value of these securities was
$1.771 billion which reflects gross unrealized gains of $48 million. This
represents an unrealized gain of $166 million since December 31, 1994, due
primarily to decreases in market interest rates. The Company sold several
held to maturity securities during the nine months ended September 30, 1995,
due to significant credit deterioration of the issuing companies.
Amortization cost for the securities sold totaled $7,631,000 and
realized gains of $89,000 were recognized on the sales.
Securities available for sale totaled $474 million at September 30, 1995, or
18.4% of total invested assets. Equity securities, which are included in
securities available for sale, continue to be a small component of the
Company's total investment portfolio totaling only $29 million. Securities
available for sale are reported in the accompanying financial statements at
fair value with changes in values reported as a separate component of
stockholders' equity, net of taxes and adjustments to deferred policy
acquisition costs. Net unrealized gains on these securities totaled $7.1
million at September 30, 1995, reflecting an increase of $9.3 million from
December 31, 1994. Again, the positive results for the nine months are due
primarily to decreases in market interest rates during that period.
The Company's insurance operations maintain a diversified debt securities
portfolio which consists of various types of fixed income securities
including primarily U.S. government, public utilities, corporate and
mortgage-backed securities. Investments in mortgage-backed securities
include U.S. government and private issue mortgage-backed pass-through
securities as well as collateralized mortgage obligations (CMOs).
The Company substantially reduces prepayment and extension risks in its
mortgage-backed securities portfolio by investing primarily in
collateralized mortgage obligations which have more predictable cash flow
patterns than pass-through securities. The Company invests primarily in
planned amortization class I (PAC I) CMOs which are designed to amortize in
a more predictable manner than other CMO classes or pass-throughs. Due to
this strategy, the Company continues to manage and reduce prepayment and
extension risks, thereby helping to maintain the appropriate matching of the
Company's assets and liabilities.
In addition to managing prepayment and extension risks, the Company
continues to maintain high quality investments in debt securities. Much
attention is often placed on a company's holdings of below investment grade
debt securities, as these securities generally have greater default risk
than higher rated corporate debt. These issuers usually have high levels of
indebtedness and are more sensitive to adverse industry or economic
conditions than are investment grade issuers. The Company's small holdings
of below investment grade debt securities are summarized as follows:
<TABLE>
<CAPTION>
Below Investment
Grade Debt Securities
% of
Carrying Market Invested
Value Value Assets
(In thousands)
<C> <C> <C> <C> <C>
September 30, 1995 $ 15,814 15,470 0.6%
December 31, 1994 $ 31,861 28,670 1.4%
</TABLE>
The level of investments in debt securities which are in default as to
principal or interest payments is indicative of the Company's minimal
holdings of below investment grade debt securities. At September 30, 1995,
and December 31, 1994, securities with principal balances totaling
$3,781,000 and $2,415,000 were in default and on non-accrual status.
MORTGAGE LOANS AND REAL ESTATE
Investment Philosophy
In general, the Company seeks loans on high quality, income producing
properties such as shopping centers, freestanding retail stores, office
buildings, industrial and sales or service facilities, selected apartment
buildings, motels, and health care facilities. The location of these loans
is typically in growth areas that offer a potential for property value
appreciation. These growth areas are found primarily in major metropolitan
areas, but occasionally in selected smaller communities. The Company
currently seeks loans ranging from $500,000 to $11,000,000, with terms
ranging from three to twenty-five years, at interest rates dictated by the
marketplace.
The Company continues to improve the quality of its mortgage loan portfolio
through strict underwriting guidelines and diversification of underlying
property types and geographic locations. In addition to all mortgage loans
being secured by the property, the majority of loans originated since 1991
are amortized over the term of the lease on the property, which is
guaranteed by the lessee, and are approved based on the credit strength of
the lessee. This approach also enables the Company to choose the locale in
which the property securing the loan is located. In addition, the Company's
underwriting guidelines require a loan-to-value ratio of 75% or less.
The Company's direct investments in real estate are not a significant
portion of its total investment portfolio, and the majority of real estate
owned was acquired through mortgage loan foreclosures. However, the Company
is also currently participating in several real estate joint ventures. The
joint ventures invest primarily in income-producing retail properties.
While not a significant portion of the Company's investment portfolio, the
joint ventures have produced favorable returns to date. The Company has no
current plans to significantly increase its investments in real estate in
the foreseeable future.
Portfolio Analysis
The Company held net investments in mortgage loans totaling $191,390,000 and
$189,632,000, or 7.4% and 8.1% of total invested assets, at September 30,
1995, and December 31, 1994, respectively. The loans are real estate
mortgages, substantially all of which are related to commercial properties
and developments and have fixed interest rates.
As of September 30, 1995, the allowance for possible losses on mortgage
loans was $5,668,000. No additions were made to the allowance in the quarter
ended September 30, 1995, as management believes that the current balance is
adequate. However, while management uses available information to recognize
losses, future additions to the allowance may be necessary based on changes
in economic conditions, particularly in the region where the majority of the
loans and underlying properties are located. This region includes Texas,
Louisiana, Oklahoma, and Arkansas.
The Company typically places impaired loans on non-accrual status and no
interest income is recognized during this period. Also, the Company will at
times restructure mortgage loans under certain conditions which may involve
changes in interest rates, payment terms or other modifications. For the
three months ended September 30, 1995 and 1994, the reductions in interest
income due to impaired and restructured mortgage loans were not significant.
The Company owns real estate that was acquired through foreclosure and
through direct investment totaling approximately $20,480,000 and $17,766,000
at September 30, 1995, and December 31, 1994, respectively. This small
concentration of properties represents less than one percent of the
Company's entire investment portfolio. The real estate holdings consist
primarily of income-producing properties which are being operated by the
Company. The Company recognized small operating gains on these properties
of approximately $45,000 for the three months ended September 30, 1995, and
losses of $264,000 for the three months ended September 30, 1994. The
Company does not anticipate significant changes in these operating results
in the near future.
The Company monitors the conditions and market values of these properties on
a regular basis. No significant realized losses were recognized due to
declines in values of properties for the three months ended September 30,
1995 and 1994, respectively. The Company makes repairs and capital
improvements to keep the properties in good condition and will continue this
maintenance as needed. However, the amounts expended for this maintenance
have not had a significant impact on the Company's liquidity and capital
resources, and such maintenance is not foreseen to have a significant impact
in the near future.
REULTS OF OPERATIONS
Summary of Consolidated Operations
A summary of operating results, net of taxes, for the periods ended
September 30, 1995 and 1994 is provided below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(In thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Insurance revenues excluding
realized gains (losses) on
investments $ 71,960 70,341 214,223 206,187
Realized gains (losses) on
investments (2,030) 382 (1,729) 2,486
Total revenues $ 69,930 70,723 212,494 208,673
Earnings:
Earnings from insurance
operations $ 13,103 11,210 28,858 27,804
Earnings (losses) from
discontinued brokerage
operations (13,133) 288 (16,350) 1,032
Net realized gains (losses)
on investments (1,319) 249 (1,123) 1,616
Net earnings (losses) $ (1,349) 11,747 11,385 30,452
Earnings Per Share:
Earnings from insurance
operations $ 3.76 3.22 8.27 7.98
Earnings (losses) from
discontinued brokerage
operations (3.77) 0.08 (4.69) 0.29
Net realized gains (losses)
on investments (0.38) 0.07 (0.32) 0.47
Net earnings (losses) $ (0.39) 3.37 3.26 8.74
</TABLE>
Significant changes and fluctuations in income and expense items between the
three months ended September 30, 1995 and 1994 are described in detail for
insurance operations and discontinued brokerage operations as follows:
Insurance Operations
Insurance Operations Net Earnings: Earnings from insurance operations for
the quarter ended September 30, 1995, totaled $13,103,000 compared to
$11,210,000 for the third quarter of 1994. The 1995 earnings include a $4.5
million tax benefit resulting from the Company's subsidiary brokerage
operations losses. This benefit was recognized in accordance with the
Company's tax allocation agreement with its subsidiaries. Also, as
previously reported, comparative earnings from insurance operations for the
quarter ended September 30, 1994, were higher than other quarters due to
yield and amortization adjustments on mortgage-backed securities.
Universal Life and Investment Annuity Contract Revenues: These revenues are
from the Company's non-traditional products which are universal life and
investment annuities. Revenues from these types of products consist of
policy charges for the cost of insurance, policy administration fees and
surrender charges assessed during the period. These revenues increased from
$15,603,000 for the quarter ended September 30, 1994, to $17,236,000 for the
same 1995 period. Increases totaling $820,000 in cost of insurance revenues
and $629,000 in surrender charge revenues resulted in the majority of the
increase in these contract revenues. Increases in cost of insurance
revenues are primarily from increased universal life insurance in force.
Actual universal life and investment annuity deposits collected for the
quarters ended September 30, 1995 and 1994, are detailed below. Deposits
collected on these non-traditional products are not reflected as revenues in
the Company's statements of earnings, as they are recorded directly to
policyholder liabilities upon receipt, in accordance with generally accepted
accounting principles.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1995 1994
(In thousands)
<S> <C> <C> <C>
Investment annuities $ 76,211 43,102
Universal life insurance 16,748 16,915
Totals $ 92,959 60,017
</TABLE>
As detailed above, deposits increased significantly from 1994 due primarily
to investment annuities. The Company's increased marketing efforts through
agency additions and new product developments, beginning in latter 1994,
continue to produce positive sales results.
Net Investment Income: Net investment income increased $1,162,000 from
$49,155,000 in 1994 to $50,317,000 in 1995. The majority of the increase
resulted from increases in invested assets. The increases in invested
assets are attributable primarily to increases in annuity production as
previously described.
Net investment income for the quarter ended September 30, 1994 was higher
than other quarters due to yield and amortization adjustments on
mortgage-backed securities totaling approximately $3.7 million. The yield
and amortization adjustments were made in accordance with Statement of
Financial Accounting Standards No. 91, "Accounting for Nonrefundable Fees
and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases." The adjustments are made to reflect changes in
mortgage-backed securities prepayment levels, caused by changes in market
interest rates, which affect average lives, yields and amortization periods
of the securities.
Realized Gains (Losses) on Investments: The Company had realized losses of
$2,030,000 in 1995 compared to realized gains of $382,000 in 1994. The 1995
realized losses result primarily from sales of investments in debt
securities while the 1994 realized gains result primarily from real estate
sales. The Company made the decision to realize losses in 1995 in order to
obtain tax benefits related to the losses which are scheduled to expire on
December 31, 1995. The losses were primarily from sales of the Company's
remaining investments in principal exchange rate linked securities.
Life and Other Policy Benefits: Expenses totaled $8,813,000 for the three
months ended September 30, 1995, compared to $7,746,000 for the same period
in 1994. The increase in these expenses is due to both higher life
insurance benefit claims and higher policy surrenders on traditional life
insurance products.
Universal Life and Investment Annuity Contract Interest: Interest expense
was up $5,910,000 from $31,245,000 in 1994 to $37,155,000 in 1995.
Increases in annuity production, resulting in corresponding increases in
policy liabilities, are the primary reason for the higher expenses. Also,
some of the Company's new annuity products credit higher interest rates in
the first policy year resulting in higher interest costs.
Federal Income Taxes: Federal income taxes for the three months ended
September 30, 1995 reflect a tax benefit of $623,000 although earnings from
continuing operations before taxes totaled $11,161,000 for the same period.
This result is due to a $4.5 million tax benefit resulting from the
Company's subsidiary brokerage operations losses. This tax benefit was
reflected in earnings from continuing operations in accordance with the
Company's tax allocation agreement with its subsidiaries.
Discontinued Brokerage Operations
As more fully described in note 5 to the financial statements, during
September, 1995, The Westcap Corporation approved a plan to close its
remaining sales office in New Jersey and to proceed with the liquidation of
the corporation. Declines in both sales revenues and earnings were the
principal reasons for ceasing all sales activities and led to the decision
to liquidate The Westcap Corporation. Volatile bond market conditions,
coupled with adverse publicity about litigation related to sales of
collateralized mortgage obligation (CMO) products, led to the declines in
sales and earnings.
Third quarter losses from brokerage operations totaling $13,133,000, or
$3.77 per share, include estimated future operating losses as well as
estimated costs to liquidate and close the corporation and have resulted in
the complete write-off of the Company's investment in Westcap on a
consolidated basis. Although The Westcap Corporation could incur additional
losses as it proceeds with litigation and ultimate liquidation, such losses
will not be reported on a consolidated basis as National Western Life
Insurance Company's loss in the subsidiary is limited to its investment.
Significant changes and fluctuations in income and expense items between the
nine months ended September 30, 1995 and 1994 are described in detail for
insurance operations and discontinued brokerage operations as follows:
Insurance Operations
Insurance Operations Net Earnings: Earnings from insurance operations
increased $1,054,000, or $0.29 per share, compared to the first nine months
of 1994. The increase in earnings for the nine months ended September 30,
1995, is due primarily to the $4.5 million tax benefit resulting from the
Company's subsidiary brokerage operations losses as previously described.
However, life and other policy benefit expenses were up significantly during
the first nine months of 1995, thereby reducing earnings. These expenses,
consisting primarily of life insurance benefit claims, were up over $3
million, net of taxes, compared to 1994.
Universal Life and Investment Annuity Contract Revenues: For the nine
months ended September 30, 1995, these revenues increased $2,418,000
compared to the 1994 period. This increase is due to increases in cost of
insurance revenues offset somewhat by decreases in surrender charge
revenues.
Actual universal life and investment annuity deposits collected for the nine
months ended September 30, 1995 and 1994, are detailed below. Deposits
collected on these non-traditional products are not reflected as revenues in
the Company's statements of earnings, as they are recorded directly to
policyholder liabilities upon receipt, in accordance with generally accepted
accounting principles.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
(In thousands)
<S> <C> <C> <C>
Investment annuities $ 254,837 86,746
Universal life insurance 51,773 47,941
Totals $ 306,610 134,687
</TABLE>
Net Investment Income: Net investment income increased $6,906,000 from
$142,255,000 in 1994 to $149,161,000 in 1995, primarily due to increases in
invested assets resulting from increased annuity production. Also, included
in 1994 net investment income are yield and amortization adjustments on
mortgage-backed securities totaling approximately $3.7 million as previously
described.
Realized Gains (Losses) on Investments: The Company recognized realized
losses of $1,729,000 in 1995 compared to realized gains of $2,486,000 in
1994. The 1995 realized losses are primarily from write-downs and sales of
investments in debt securities. The losses were realized for the tax
purposes as previously described for the three months ended September 30,
1995. The 1994 realized gains resulted primarily from debt securities
redemptions and included no significant write-downs.
Life and Other Policy Benefits: Expenses for 1995 and 1994 were $29.0
million and $24.3 million, respectively. The significant increase in
expenses is due to higher life insurance benefit claims. The 1995 expenses
are abnormally high due to adverse claims experience incurred primarily in
the first quarter of 1995. Throughout the Company's history, it has
experienced both periods of higher and lower benefit claims in comparison to
Company averages. The first quarter of 1995 reflects such a period as
benefit claims were significantly higher. Such deviations are not uncommon
in the life insurance industry and, over extended periods of time, tend to
be offset by periods of lower claims experience.
Universal Life and Investment Annuity Contract Interest: Interest expense
was up $11,723,000 from $95,880,000 in 1994 to $107,603,000 in 1995 for the
same reasons as previously described for the three months ended September
30, 1995.
Other Insurance Operating Expenses: Other insurance operating expenses are
up $1,563,000 in 1995 due primarily to state guaranty fund assessments.
Federal Income Taxes: Federal income taxes for the nine months ended
September 30, 1995, include a $4.5 million tax benefit resulting from the
Company's subsidiary brokerage operations as previously described. This
benefit resulted in the low effective tax rate for the period for earnings
from continuing operations.
Discontinued Brokerage Operations
Losses for the nine months ended September 30, 1995, from the Company's
discontinued brokerage subsidiary, The Westcap Corporation, totaled
$16,350,000, or $4.69 per share, compared to earnings of $1,032,000, or
$0.29 per share, for the nine months ended September 30, 1994. The losses
from the subsidiary are due to both adverse bond market conditions and
adverse publicity about litigation involving sales of CMO products. The
losses also include estimated costs accrued for discontinuation of the
operations as previously described for the three months ended September 30,
1995, and in note 5 to the financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of the Company are met primarily by funds
provided from operations. Premium deposits and revenues, investment income,
and investment maturities are the primary sources of funds, while investment
purchases and policy benefits are the primary uses of funds. Primary
sources of liquidity to meet unexpected cash needs are the Company's
securities available for sale portfolio, net cash provided by operations and
a $60 million bank line of credit.
A primary liquidity concern for the Company's life insurance operations is
the risk of early policyholder withdrawals. Consequently, the Company
closely evaluates and manages the risk of early surrenders or withdrawals.
The Company includes provisions within annuity and universal life insurance
policies, such as surrender charges, that help limit early withdrawals. The
Company also prepares cash flow projections and performs cash flow tests
under various market interest rate scenarios to assist in evaluating
liquidity needs and adequacy. The Company currently expects available
liquidity sources and future cash flows to be adequate to meet the demand
for funds.
The Company had no long-term debt during 1995 or 1994. There are no present
material commitments for capital expenditures in 1995, and the Company does
not anticipate incurring any such commitments in the remainder of 1995.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Part 1 - Exhibit 11: Computation of Earnings Per Common Share
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
quarter ended September 30, 1995.<PAGE>
EXHIBIT 11
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
For the Three Months Ended September 30, 1995 and 1994
(Unaudited)
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Earnings (losses) applicable to common shares:
Earnings from continuing operations $ 11,784 11,459
Earnings (losses) from discontinued operations (13,133) 288
Net earnings (losses) $ (1,349) 11,747
Weighted average common shares outstanding 3,488 3,485
Earnings (losses) per common share:
Earnings from continuing operations $ 3.38 3.29
Earnings (losses) from discontinued operations (3.77) 0.08
Net earnings (losses) $ (0.39) 3.37
</TABLE>
EXHIBIT 11
NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Earnings (losses) applicable to common shares:
Earnings from continuing operations $ 27,735 29,420
Earnings (losses) from discontinued
operations (16,350) 1,032
Net earnings $ 11,385 30,452
Weighted average common shares outstanding 3,488 3,485
Earnings (losses) per common share:
Earnings from continuing operations $ 7.95 8.45
Earnings (losses) from discontinued
operations (4.69) 0.29
Net earnings $ 3.26 8.74
</TABLE>
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.
National Western Life Insurance Company
(Registrant)
Date: November 10, 1995 /S/ Ross R. Moody
Ross R. Moody
President and Chief Operating Officer
Date: November 10, 1995 /S/ Robert L. Busby, III
Robert L. Busby, III
Senior Vice President -
Chief Administrative Officer,
Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SEPTEMBER 30, 1995 FINANCIAL STATEMENTS OF NATIONAL WESTERN LIFE INSURANCE
COMPANY AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 444,162
<DEBT-CARRYING-VALUE> 1,722,544
<DEBT-MARKET-VALUE> 2,214,804
<EQUITIES> 29,375
<MORTGAGE> 191,390
<REAL-ESTATE> 20,480
<TOTAL-INVEST> 2,575,701
<CASH> 6,273
<RECOVER-REINSURE> 1,121
<DEFERRED-ACQUISITION> 281,979
<TOTAL-ASSETS> 2,920,248
<POLICY-LOSSES> 2,552,035
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 14,997
<POLICY-HOLDER-FUNDS> 10,017
<NOTES-PAYABLE> 0
<COMMON> 3,488
0
0
<OTHER-SE> 292,307
<TOTAL-LIABILITY-AND-EQUITY> 2,920,248
64,451<F1>
<INVESTMENT-INCOME> 149,161
<INVESTMENT-GAINS> (1,729)
<OTHER-INCOME> 611
<BENEFITS> 134,147<F2>
<UNDERWRITING-AMORTIZATION> 24,522
<UNDERWRITING-OTHER> 19,973
<INCOME-PRETAX> 33,852
<INCOME-TAX> 6,117
<INCOME-CONTINUING> 27,735
<DISCONTINUED> (16,350)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,385
<EPS-PRIMARY> 3.26
<EPS-DILUTED> 3.26
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Consists of $13,061 revenues from traditional contracts subject to FAS
60 accounting treatment and $51,390 revenues from universal life and
investment annuity contracts subject to FAS 97 accounting treatment.
<F2>Consists of $29,033 benefits paid to policyholders, $(2,489) decrease in
reserves on traditional contracts and $107,603 interest on universal life
and investment annuity contracts.
</FN>
</TABLE>
