UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 2003.
[ ]
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from N/A to N/A.
Commission file number 333-02491*.
KEMPER INVESTORS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in charter)
ILLINOIS
(State of Incorporation)
36-3050975
(I.R.S. Employer Identification Number)
1600 McCONNOR PARKWAY
SCHAUMBURG, ILLINOIS
(Address of Principal Executive Offices)
60196-6801
(Zip Code)
Registrant's telephone number, including area code: (847) 874-4000
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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes
No X
* Pursuant to Rule 429 under the Securities Act of 1933, this Form 10-Q also
relates to Commission file numbers 333-22389, 333-32632,333-54252 and
333-86044.
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
FORM 10-Q
PART I. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
June 30, 2003 and December 31, 2002
3
Consolidated Statements of Operations -
Six months and three months ended June 30, 2003 and 2002
5
Consolidated Statements of Comprehensive Income (Loss)-
Six months and three months ended June 30, 2003 and 2002
6
Consolidated Statements of Cash Flows -
Six months ended June 30, 2003 and 2002
7
Notes to Consolidated Financial Statements
9
Management's Discussion and Analysis
Results of Operations
11
Investments
22
Liquidity and Capital Resources
24
Controls and Procedure
26
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a vote of Security Holders
27
ITEM 6. Exhibits and Reports on Form 8-K
28
Signatures
29
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
June 30 | December 31 | |
ASSETS | ||
Investments: | ||
Fixed maturity securities, available for sale, at fair | $ 3,665,489 | $ 3,420,773 |
Equity securities, at fair value (cost: June 30, 2003 | 62,107 | 58,615 |
Short-term investments | 46,866 | - |
Joint venture mortgage loans | 119,355 | 114,061 |
Third-party mortgage loans | 56,891 | 57,985 |
Other real estate-related investments | 5,495 | 5,645 |
Policy loans | 214,693 | 223,888 |
Other invested assets | 2,320 ---------- | 2,491 ---------- |
Total investments | 4,173,216 | 3,883,458 |
Cash | 23,946 | 47,436 |
Accrued investment income | 151,863 | 148,549 |
Reinsurance recoverable | 472,284 | 433,566 |
Deferred insurance acquisition costs | 422,358 | 431,915 |
Value of business acquired | 49,105 | 53,600 |
Other intangible assets | 5,122 | 5,502 |
Deferred income taxes | 46,083 | 73,228 |
Federal income tax receivable | - | 11,232 |
Fixed assets Other assets and receivables | 2,576 29,812 | 3,179 27,241 |
Assets held in separate accounts | 14,204,713 ---------- | 13,547,376 |
Total assets | $ 19,581,078 | $ 18,666,282 |
LIABILITIES AND STOCKHOLDER'S EQUITY | ||
Liabilities: | ||
Future policy benefits | $ 4,304,673 | $ 4,111,063 |
Other policyholder benefits and funds payable | 220,370 | 203,159 |
Other accounts payable and liabilities | 42,716 | 80,905 |
Liabilities related to separate accounts | 14,204,713 | 13,547,376 |
Total liabilities | 18,772,472 | 17,942,503 |
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands, except share data)
June 30 | December 31 | |
Commitments and contingent liabilities | - | - |
Stockholder's equity: | ||
Capital stock-$10 par value, authorized 300,000 | 2,500 | 2,500 |
Additional paid-in capital | 847,432 | 841,633 |
Accumulated other comprehensive income | 109,323 | 54,009 |
Retained deficit | (150,649) ----------- | (174,363) |
Total stockholder's equity | 808,606 | 723,779 |
Total liabilities and stockholder's equity | $19,581,078 | $18,666,282 |
See accompanying notes to consolidated financial statements.
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Operations
(in thousands)
(unaudited)
Six Months Ended | Three Months Ended | |||||
2003 | 2002 | 2003 | 2002 | |||
REVENUE | ||||||
Net investment income | $111,065 | $115,901 | $54,624 | $56,048 | ||
Realized investment gains | 4,925 | 10,418 | 1,765 | 11,712 | ||
Premium income | 554 | 410 | 119 | 220 | ||
Separate account fees and charges | 47,869 | 51,923 | 25,597 | 26,686 | ||
Broker/dealer commission revenue | 13,533 | 14,524 | 6,432 | 7,601 | ||
Other income | 8,167 | 4,316 | 4,274 | 2,903 | ||
Total revenue | 186,113 | 197,492 | 92,811 | 105,170 | ||
BENEFITS AND EXPENSES | ||||||
Interest credited to policyholders | 79,625 | 76,354 | 40,572 | 38,537 | ||
Claims incurred and other policyholder | 8,091 | 22,973 | (4,814) | 13,283 | ||
Taxes, licenses and fees | (3,860) | 5,466 | (3,668) | 1,840 | ||
Commissions | 30,056 | 47,151 | 10,813 | 12,108 | ||
Broker/dealer commission expense | 13,422 | 14,349 | 6,504 | 7,508 | ||
Operating expenses | 21,672 | 35,299 | 9,690 | 17,485 | ||
Deferral of insurance acquisition | (33,479) | (54,661) | (12,527) | (16,943) | ||
Amortization of deferred insurance | 30,594 | 19,955 | 19,081 | 13,046 | ||
Amortization of value of business | 2,822 | 9,658 | (627) | 6,210 | ||
Amortization of other intangible | 379 | 379 | 189 | 189 | ||
Total benefits and expenses | 149,322 | 176,923 | 65,213 | 93,263 | ||
Income before income tax expense | 36,791 | 20,569 | 27,598 | 11,907 | ||
Income tax expense (benefit) | ||||||
Current | 15,716 | 6,177 | 26,487 | 3,560 | ||
Deferred | (2,639) | (883) | (16,829) | 340 | ||
Total income tax expense | 13,077 | 5,294 | 9,658 | 3,900 | ||
Net income before cumulative effect of accounting change | 23,714 | 15,275 | 17,940 | 8,007 | ||
Cumulative effect of accounting |
- -------- | (21,907) -------- |
- -------- | - ------- | ||
Net income (loss) | $ 23,714 | $ (6,632) | $ 17,940 | $ 8,007 | ||
See accompanying notes to consolidated financial statements.
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
Six Months Ended ------------------- | Three Months Ended ------------------- | |||
2003 | 2002 | 2003 | 2002 | |
Net income (loss) | $23,714 | $ (6,632) | $17,940 | $ 8,007 |
Other comprehensive income (loss), before tax: Unrealized holding gains (losses) on | ||||
Unrealized holding gains on investments | 95,198 | 18,027 | 70,151 | 51,727 |
Adjustment to value of business acquired | (1,677) | (184) | (1,423) | (1,840) |
Adjustment to deferred insurance acquisition | (14,505) -------- | (1,241) -------- | (6,292) -------- | -------- |
Total unrealized holding gains on | 79,016 -------- | ------- | 62,436 -------- | ------- |
Less reclassification adjustments for items | ||||
Adjustment for losses included in realized | 6,612 | | 1,490 | |
Adjustment for amortization of premium on | (10,630) | (2,823) | (5,402) | (1,296) |
Adjustment for gains included in amortization | (4) | (428) | (43) | (326) |
Adjustment for (gains) losses included in | (2,061) ------- | ------- | ------- | (2,461) ------- |
Total reclassification adjustments for items | (6,083) ----- | -------- | (3,834) ------ | -------- |
Other comprehensive income (loss), before |
85,099 | (242) |
66,270 | 30,085 |
Related income tax expense (benefit) | 29,785 -------- | (194) -------- | 23,195 -------- | 8,911 -------- |
Other comprehensive income (loss), net of tax | 55,314 -------- | (48) -------- | 43,075 -------- | 21,174 -------- |
Comprehensive income (loss) | $79,028 ========= | $(6,680) ======== | $61,015 ========= | $29,181 ======== |
See accompanying notes to consolidated financial statements.
Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended | ||
2003 | 2002 | |
Cash flows from operating activities | ||
Net income (loss) | $ 23,714 | $ (6,632) |
Reconciliation of net income (loss) to net cash flow | ||
Realized investment gains | (4,925) | (10,418) |
Interest credited and other charges | 75,307 | 86,257 |
Deferred insurance acquisition costs, net | (2,885) | (34,706) |
Amortization of value of business acquired | 2,822 | 9,658 |
Amortization of net discount/premium on investments | 10,630 | 2,823 |
Amortization of other intangible assets | 379 | 379 |
Deferred income taxes | (2,639) | (883) |
Net change in current federal income taxes | 12,984 | 7,961 |
Benefits and premium taxes due related to separate | (21,789) | (6,811) |
Funds withheld account transfer | - | (222,500) |
Cumulative effect of accounting change, net of tax | - | 21,907 |
Payable to affiliates | (812) | (17,619) |
Other, net | 791 | (32,644) |
Net cash flow from operating activities | 93,577 | (203,228) |
Cash flows from investing activities | ||
Cash from investments sold or matured: | ||
Fixed maturity securities held to maturity | 208,749 | 102,680 |
Fixed maturity securities sold prior to maturity | 763,351 | 1,196,411 |