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CURRENT REPORT | ||
Date of Report (Date of earliest event reported): November 7, 2011 | ||
Presidential Life Corporation (Exact name of registrant as specified in its charter) | ||
Delaware 000-05486 13-2652144 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) | ||
69 Lydecker Street Nyack, New York 10960 (Address of principal executive offices) (Zip Code) | ||
(845) 358-2300 | ||
Registrants telephone number, including area code | ||
(Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02
Results of Operations and Financial Condition
On November 7, 2011, Presidential Life Corporation (the Company) issued a press release announcing the Companys financial results for its fiscal third quarter ended September 30, 2011. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) that is furnished pursuant to this Item 2.02 shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. In addition, the information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) that is furnished pursuant to this Item 2.02 shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference into such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
99.1 Press Release entitled Presidential Life Corporation Announces Third Quarter 2011 Results issued by Presidential Life Corporation on November 7, 2011.
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 hereunto duly authorized.
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| PRESIDENTIAL LIFE CORPORATION | ||||
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Date: November 7, 2011 |
| By: | /s/ Donald L. Barnes |
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| Name: | Donald L. Barnes | ||
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| Title: | Chief Executive Officer | ||
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EXHIBIT INDEX
Exhibit
99.1
Press Release entitled Presidential Life Corporation Announces Third Quarter 2011 Results issued by Presidential Life Corporation on November 7, 2011.
Presidential Life Corporation Announces Third Quarter 2011 Results
- Reports third quarter 2011 EPS of $0.10 compared to $0.06 EPS for the third quarter 2010 and
EPS for the nine months ended September 30, 2011 and 2010 of $0.82 and $0.23 respectively
Nyack, N.Y. (November 7, 2011) Presidential Life Corporation (Presidential Life or the Company) (NASDAQ: PLFE) today announced results for the third quarter ended September 30, 2011. Presidential Life, through its wholly owned subsidiary Presidential Life Insurance Company, is engaged in the sale of individual fixed deferred and immediate annuities, life insurance and accident & health insurance products.
Third quarter 2011 net income was $2.9 million or $0.10 per share, compared with net income of $1.7 million or $0.06 per share for the comparable three-month period in 2010. Net income for the first nine months of 2011 was $24.2 million or $0.82 per share, compared with a net income of $6.9 million or $0.23 per share for the comparable nine month period in 2010.
Total revenues in the third quarter of 2011 were $54.7 million, a decrease of 29.7% or $23.1 million from $77.8 million in the third quarter of 2010. Total revenues for the first nine months totaled $193.8 million, a decrease of 6.9% or $14.4 million from $208.2 million for the comparable nine month period in 2010. These decreases were largely attributable to a decline in individual fixed annuity sales given the low interest rate environment, partially offset by an increase in earnings from our limited partnership portfolio in the first nine months of 2011 relative to 2010.
Bottom-line results have improved throughout 2011, along with our book value per share, which is at $19.68 per share (excluding other comprehensive income), as of the end of the third quarter. However, management remains focused on the longer term execution of its core business strategy to expand the individual fixed annuity business. To that end, progress was made in the current quarter by signing agreements with two major software vendors to supply new systems for policy administration and customer communication. Also, in our continuing efforts to broaden annuity product offerings, product development initiatives began during the current quarter to design a new series of indexed annuities. said Donald Barnes, Vice Chairman of the Board, CEO and President.
Key Items for the Third Quarter Results
·
Basis point spread1 totaled 148 basis points in the first nine months of 2011 compared to 28 basis points for the first nine months of 2010.
·
Total annuity sales2 of $12.9 million in the third quarter, a decrease of 69% over 2010 levels due to the continued low interest rate environment.
·
Deferred annuity surrenders were $24.2 million in the third quarter of 2011 compared to $26.6 million for the same period in 2010 (a 9.0% decrease) representing average surrender rates for these periods of 1.3% and 1.4%, respectively.
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Strong capital base with our NAIC Company Action Level Risk-Based Capital (RBC) ratio increasing to 526% at the end of the third quarter 2011 versus 449% at year-end 2010.
Discussion of Third Quarter 2011 and Year-to-Date Financial and Operating Results
As previously discussed, total revenues were $54.7 million and $77.8 million in the third quarter of 2011 and 2010, respectively, a decrease of $23.1 million or 29.7%, and were $193.8 million and $208.2 million for the first nine months of 2011
and 2010, respectively, a decrease of $14.4 million or 6.9%. The decreases from the prior year were largely attributable to a decline in individual fixed annuity sales given the low interest rate environment partially reduced by an increase in earnings from our limited partnership portfolio.
Total insurance revenues were $6.2 million and $25.4 million in the third quarter of 2011 and 2010, respectively, a decrease of $19.2 million or 75.6%, and were $19.5 million and $53.3 million for the first nine months of 2011 and 2010, respectively, a decrease of $33.8 million or 63.4%. Immediate annuity considerations with life contingencies were $1.6 million and $21.1 million in the third quarter of 2011 and 2010, respectively, a decrease of $19.5 million or 92.4%, and were $6.0 million and $40.3 million for the first nine months of 2011 and 2010, respectively, a decrease of $34.3 million or 85.1%. Life insurance and accident & health premiums were $4.6 million and $4.3 million in the third quarter of 2011 and 2010, respectively, an increase of $0.3 million or 7.0%, and were $13.5 million and $13.0 million for the first nine months of 2011 and 2010, respectively, an increase of $0.5 million or 3.8%.
Sales of deferred annuities and immediate annuities without life contingencies were $11.3 million and $20.5 million in the third quarter of 2011 and 2010, respectively, a decrease of $9.2 million or 44.9%, and were $40.8 million and $66.3 million for the first nine months of 2011 and 2010, respectively, a decrease of $25.5 million or 38.5%. The decreases were primarily due to the low interest rate environment that continued throughout the first nine months of 2011.
Net investment income was $48.2 million and $49.8 in the third quarter of 2011 and 2010, respectively, a decrease of $1.6 million or 3.2%, and was $146.6 million and $147.7 million for the first nine months of 2011 and 2010, respectively, a decrease of $1.1 million or 0.7%. Net realized investment gains (losses), including other-than-temporary impairments (OTTI), were $(0.9) million and $1.8 million in the third quarter of 2011 and 2010, respectively, a reduction of $2.7 million, and were $20.9 million and $7.9 million in the first nine months of 2011 and 2010, respectively, an increase of $13.0 million. The year-to-date increase was largely due to gains related to distributions from limited partnerships (accounted for under the fair value method). These gains included the liquidation of one hedge fund which was held in the Companys limited partnership portfolio that resulted in a realized investment gain of approximately $10.6 million. These gains were partially offset by a decrease in the fair value of payor swaptions of $5.0 million due to lower interest rates. The Companys investment yield for the first nine months of 2011 was 6.47 % versus 5.29% for the same period in 2010.
Interest credited and benefits paid and accrued to policyholders were $43.8 million and $66.7 million in the third quarter of 2011 and 2010, respectively, a decrease of $22.9 million or 34.3%, and were $131.8 million and $173.6 million for the first nine months of 2011 and 2010, respectively, a decrease of $41.8 million or 24.1%. The decrease is principally due to the decline in sales of immediate annuities with life contingencies in 2011 relative to 2010. General expenses and commissions to agents were $5.2 million and $7.4 million in the third quarter of 2011 and 2010, respectively, a decrease of $2.2 million or 29.7%, and were $20.6 million and $19.5 million for the first nine months of 2011 and 2010, respectively, an increase of $1.1 million or 5.6% from the same respective periods in 2010. The third quarter decline is principally due to lower sales and a related decrease in commissions. The year-to-date increase was primarily due to an increase in general expenses including severance costs, the New York State triennial examination and legal/accounting expenses associated with Companys financial restatements partially offset by lower commissions.
The Company recorded an income tax expense of $1.5 million and $0.9 million in the third quarter of 2011 and 2010, respectively, an increase of $0.6 million. Income tax expense was $12.7 million and $3.7 million for the first nine months of 2011 and 2010, respectively, an increase of $9.0 million. The increase in income tax expense for 2011 relative to 2010 was due to higher pre-tax income.
Cautionary statement regarding forward-looking statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, quotations from management, statements about our future plans and business strategy, and expected or anticipated future events or performance.
These forward-looking statements involve risks and uncertainties that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors. Accordingly, there is no assurance that our plans, strategy and expectations will be realized. Actual future events and results may differ materially from those expressed or implied in forward-looking statements.
About Presidential Life
Presidential Life Corporation, through its wholly owned subsidiary Presidential Life Insurance Company, has a proud and distinguished history as a provider of individual fixed deferred and immediate annuities, life insurance and accident & health insurance products to financial service professionals and their clients. Headquartered in Nyack, New York, the Corporation was founded in 1969 and, through the Insurance Company, markets its products in 50 states and the District of Columbia. For more information, visit our website www.presidentiallife.com.
Contacts
Presidential Life Corporation Donald Barnes Vice Chairman of the Board, CEO and President (845) 358-2300 ext. 250 | Presidential Life Corporation P.B. (Pete) Pheffer Senior Vice President, CFO and Treasurer (845) 358-2300 ext. 205 |
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
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| September 30, |
| December 31, | ||
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| 2011 |
| 2010 | ||
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| (Unaudited) |
| (Audited) | ||
ASSETS: |
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Investments: |
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| Fixed maturities: |
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| Available for sale at market (Amortized cost |
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| of $3,198,134 and $3,209,803 respectively) | $ | 3,521,326 |
| $ | 3,391,998 |
| Common stocks (Cost of $748 and |
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| $472, respectively) |
| 1,229 |
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| 1,279 |
| Derivative instruments, at fair value |
| 4,051 |
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| 9,402 | |
| Real estate |
| 415 |
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| 415 | |
| Policy loans |
| 18,336 |
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| 19,607 | |
| Short-term investments |
| 145,537 |
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| 107,958 | |
| Limited Partnerships |
| 208,252 |
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| 195,501 | |
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| Total Investments |
| 3,899,146 |
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| 3,726,160 |
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Cash and cash equivalents |
| 3,687 |
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| 5,924 | ||
Accrued investment income |
| 46,063 |
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| 42,757 | ||
Deferred policy acquisition costs |
| 41,709 |
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| 57,298 | ||
Furniture and equipment, net |
| 497 |
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| 376 | ||
Amounts due from reinsurers |
| 18,315 |
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| 16,644 | ||
Amounts due from investments transactions |
| 1,319 |
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| 49,005 | ||
Federal income taxes recoverable |
| - |
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| 2,627 | ||
Other assets |
| 1,391 |
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| 1,495 | ||
TOTAL ASSETS | $ | 4,012,127 |
| $ | 3,902,286 | ||
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LIABILITIES AND SHAREHOLDERS' EQUITY: |
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Liabilities: |
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Policy Liabilities: |
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| Policyholders' account balances | $ | 2,349,930 |
| $ | 2,401,482 | |
| Annuity |
| 640,911 |
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| 663,456 | |
| Life and accident and health |
| 83,632 |
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| 81,081 | |
| Other policy liabilities |
| 16,089 |
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| 11,718 | |
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| Total Policy Liabilities |
| 3,090,562 |
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| 3,157,737 |
Deposits on policies to be issued |
| 836 |
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| 1,166 | ||
General expenses and taxes accrued |
| 1,883 |
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| 1,573 | ||
Federal income taxes payable |
| 5,988 |
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| - | ||
Deferred federal income taxes, net |
| 92,166 |
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| 45,157 | ||
Amounts due for security transactions |
| 8,476 |
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| - | ||
Other liabilities |
| 13,723 |
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| 14,745 | ||
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| Total Liabilities | $ | 3,213,634 |
| $ | 3,220,378 |
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Commitments and Contingencies |
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Shareholders Equity: |
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| Capital stock ($.01 par value; authorized |
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| 100,000,000 shares outstanding, |
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| 29,574,697 and 29,574,697 shares, respectively) |
| 296 |
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| 296 | |
| Additional paid in capital |
| 7,362 |
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| 7,123 | |
| Accumulated other comprehensive gain |
| 216,320 |
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| 118,609 | |
| Retained earnings |
| 574,515 |
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| 555,880 | |
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| Total Shareholders Equity |
| 798,493 |
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| 681,908 |
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | $ | 4,012,127 |
| $ | 3,902,286 | ||
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PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES | ||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
(In thousands, except share data) | ||||||||||||||
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| THREE MONTHS ENDED |
| NINE MONTHS ENDED | ||||||||
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| September 30, |
| September 30, | ||||||||
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| (UNAUDITED) |
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REVENUES: | 2011 |
| 2010 |
| 2011 |
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| Insurance Revenues: |
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| Premiums | $ | 4,572 |
| $ | 4,274 |
| $ | 13,533 |
| $ | 13,031 | |
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| Annuity considerations |
| 1,586 |
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| 21,114 |
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| 5,983 |
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| 40,267 | |
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| Universal life and investment type policy fee income |
| 849 |
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| 528 |
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| 2,647 |
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| 1,587 | |
| Equity in earnings (losses) on limited partnerships |
| 103 |
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| (845) |
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| 2,067 |
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| (6,036) | ||
| Net investment income |
| 48,212 |
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| 49,830 |
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| 146,555 |
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| 147,682 | ||
| Net realized investment gains (losses): |
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| Total Other-than-temporary impairment ("OTTI") losses |
| (3,971) |
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| - |
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| (10,687) |
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| - | |
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| OTTI losses recognized in other comprehensive income |
| 836 |
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| - |
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| 3,924 |
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| - | |
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| Net OTTI losses recognized in earnings |
| (3,135) |
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| - |
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| (6,763) |
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| - | |
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| Net realized capital gains, excluding OTTI losses |
| 2,215 |
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| 1,807 |
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| 27,626 |
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| 7,921 | |
| Other income |
| 257 |
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| 1,124 |
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| 2,201 |
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| 3,739 | ||
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| TOTAL REVENUES |
| 54,659 |
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| 77,832 |
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| 193,849 |
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| 208,191 |
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BENEFITS AND EXPENSES: |
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| Death and other life insurance benefits |
| 4,519 |
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| 4,408 |
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| 13,435 |
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| 13,549 | ||
| Annuity benefits |
| 20,426 |
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| 19,991 |
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| 62,284 |
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| 60,670 | ||
| Interest credited to policyholders' account balances |
| 25,428 |
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| 26,677 |
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| 76,454 |
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| 79,996 | ||
| Other interest and other charges |
| 243 |
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| 319 |
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| 950 |
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| 877 | ||
| Increase (decrease) in liability for future policy benefits |
| (6,836) |
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| 15,344 |
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| (21,293) |
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| 18,540 | ||
| Commissions to agents, net |
| 700 |
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| 2,117 |
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| 3,064 |
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| 5,578 | ||
| Costs related to consent revocation solicitation and related matters |
| - |
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| 297 |
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| - |
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| 1,470 | ||
| General expenses and taxes |
| 4,460 |
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| 5,237 |
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| 17,583 |
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| 13,966 | ||
| Change in deferred policy acquisition costs |
| 1,295 |
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| 881 |
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| 4,457 |
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| 2,989 | ||
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| TOTAL BENEFITS AND EXPENSES |
| 50,235 |
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| 75,271 |
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| 156,934 |
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| 197,635 |
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| Income before income taxes |
| 4,424 |
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| 2,561 |
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| 36,915 |
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| 10,556 | ||
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| Provision (benefit) for income taxes: |
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| Current |
| 16,051 |
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| 181 |
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| 18,341 |
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| 6,565 | |
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| Deferred |
| (14,525) |
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| 710 |
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| (5,605) |
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| (2,906) | |
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| 1,526 |
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| 891 |
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| 12,736 |
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| 3,659 |
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NET INCOME | $ | 2,898 |
| $ | 1,670 |
| $ | 24,179 |
| $ | 6,897 | |||
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| Earnings per common share, basic | $ | 0.10 |
| $ | 0.06 |
| $ | 0.82 |
| $ | 0.23 | ||
| Earnings per common share, diluted | $ | 0.10 |
| $ | 0.06 |
| $ | 0.82 |
| $ | 0.23 | ||
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| Weighted average number of shares outstanding during the period, basic |
| 29,574,697 |
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| 29,574,697 |
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| 29,574,697 |
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| 29,574,697 | ||
| Weighted average number of shares outstanding during the period, diluted |
| 29,574,697 |
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| 29,574,697 |
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| 29,574,697 |
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| 29,574,697 | ||
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Footnotes
1 Defined as the yield on invested assets over the cost of money on annuity liabilities. Yield is inclusive of realized capital gains/ (losses), other-than-temporary-impairments and equity in earnings/(losses) on limited partnerships.
2 In accordance with Generally Accepted Accounting Principles (GAAP), sales of deferred annuities and immediate annuities without life contingencies ($11.3 million) are not reported as insurance revenues, but rather as additions to policyholder account balances. In addition, sales of immediate annuities with life contingencies, which are reported as insurance revenues under GAAP, totaled $1.6 million.