SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Nine Months Ended September 30, 1995
Commission File Number 0-15330
AMVESTORS FINANCIAL CORPORATION
______________________________________________
(Exact name of registrant as specified in its charter)
Kansas 48-1021516
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
415 Southwest 8th Avenue, Topeka, Kansas 66603
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (913) 232-6945
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.
Class Outstanding September 30, 1995
_______ _______________________________
Common Stock, no par value 10,135,175 shares
AMVESTORS FINANCIAL CORPORATION
INDEX
PARTI. Financial Information: Page Number
Consolidated Balance Sheets-
September 30, 1995 and December 31, 1994 2-3
Consolidated Statements of Earnings-
Nine months ended September 30, 1995 and 1994 4
Consolidated Statements of Earnings-
Three months ended September 30, 1995 and 1994 5
Consolidated Statements of Stockholders' Equity-
Twelve months ended December 31, 1994 and
Nine months ended September 30, 1995 6
Consolidated Statements of Cash Flow-
Nine months ended September 30, 1995 and 1994 7-8
Notes to Consolidated Financial Statements 9-23
Management's Discussion and Analysis of Financial
Condition and Results of Operations 23-30
PART II. Other Information 31-32
1
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(000's Omitted)
(Unaudited)
ASSETS 1995 1994
Investments:
Debt securities:
Bonds:
Held-to-maturity (market $1,206,446 and $1,145,692). $ 1,184,634 1,237,185
Available-for-sale (cost $752,253 and $621,138)..... 781,259 607,046
1,965,893 1,844,231
Equity securities, available-for-sale:
Common stock (cost $557 and $2,124)................... 882 2,325
Preferred stock (cost $4,704 and $45).................. 4,761 31
5,643 2,356
Other long-term investments.............................. 41,694 58,773
Short-term investments................................... 460 520
2,013,690 1,905,880
Less allowance for credit losses........................... (1,580) (2,231)
Total investments...................................... 2,012,110 1,903,649
Cash and cash equivalents..................................... 16,708 10,621
Accounts receivable (net of allowance for uncollectible
accounts of $267 and $227)............................... 1,084 2,310
Amounts receivable under reinsurance agreements............. 146,218 149,656
Amounts receivable on securities settlements in process...... 3,789 905
Accrued investment income................................... 28,632 29,296
Deferred policy acquisition costs............................ 155,047 148,871
Deferred income taxes....................................... - 11,136
Other assets................................................. 4,549 3,577
Total assets............................................ $ 2,368,137 2,260,021
See notes to consolidated financial statements.
2
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(000's Omitted, except per share data)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
Liabilities:
Policy liabilities:
Future policy benefits................................................ $ 2,209,756 2,148,763
Other policy liabilities.............................................. 4,965 2,983
2,214,721 2,151,746
Amounts due on securities settlements in process........................ 7,565 274
Deferred income taxes................................................... 4,306 -
Accrued expenses and other liabilities.................................. 4,197 3,805
Total liabilities......................................... 2,230,789 2,155,825
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value, authorized -
2,000,000 shares...................................................... - -
Common stock, no par value, authorized -
25,000,000 shares; issued - 10,135,175 shares
in 1995 and 10,034,742 shares in 1994................................ 12,897 12,769
Paid in capital......................................................... 64,250 63,499
Unrealized investment gains (losses)(net of deferred
policy acquisition cost amortization expense (benefit)
of $7,347 and $(3,476) and deferred income tax
expense (benefit) of $7,715 and $(2,616))............................. 14,327 (7,813)
Retained earnings....................................................... 49,009 38,876
140,483 107,331
Less leveraged employee stock ownership trust
(LESOP) ............................................................. (3,135) (3,135)
Total stockholders' equity................................ 137,348 104,196
Total liabilities and stockholders' equity................ $ 2,368,137 2,260,021
See notes to consolidated financial statements.
3
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Nine months ended September 30, 1995 and 1994
(000's Omitted, except per share data)
(Unaudited)
1995 1994
Revenue:
Insurance premiums and policy charges............................. $ 6,554 4,831
Net investment income............................................. 114,724 105,361
Net investment gains (losses)..................................... (993) 328
Other revenue..................................................... 683 443
Total revenue..................................................... 120,968 110,963
Benefits and expenses:
Benefits, claims and interest credited
to policyholders.................................................. 88,588 83,198
Amortization of deferred policy acquisition
costs ......................................................... 8,085 7,524
General insurance expenses........................................ 6,315 5,301
Premium and other taxes, licenses and fees........................ 1,256 682
Other expenses.................................................... 214 176
Total benefits and expenses....................................... 104,458 96,881
Operating earnings.................................................... 16,510 14,082
Income tax expense.................................................... 5,617 4,816
Net earnings.......................................................... $ 10,893 9,266
Earnings per share of common stock:
Primary:
Net earnings...................................................... $ 1.05 .90
Fully diluted:
Net earnings...................................................... $ 1.05 .89
Average share outstanding:
Primary 10,330 10,352
Fully diluted..................................................... 10,378 10,358
See notes to consolidated financial statements.
4
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three months ended September 30, 1995 and 1994
(000's Omitted, except per share data)
(Unaudited)
1995 1994
Revenue:
Insurance premiums and policy charges............................. $ 2,038 1,886
Net investment income............................................. 38,534 36,198
Net investment gains (losses)..................................... (687) (727)
Other revenue..................................................... 493 162
Total revenue..................................................... 40,378 37,519
Benefits and expenses:
Benefits, claims and interest credited
to policyholders.................................................. 29,891 28,519
Amortization of deferred policy acquisition
costs ......................................................... 2,516 2,530
General insurance expenses........................................ 1,914 1,361
Premium and other taxes, licenses and fees........................ 383 198
Other expenses.................................................... 67 60
Total benefits and expenses....................................... 34,771 32,668
Operating earnings.................................................... 5,607 4,851
Income tax expense.................................................... 1,801 1,646
Net earnings.......................................................... $ 3,806 3,205
Earnings per share of common stock:
Primary:
Net earnings...................................................... $ .37 .31
Fully diluted:
Net earnings...................................................... $ .37 .31
Average share outstanding:
Primary 10,410 10,347
Fully diluted..................................................... 10,410 10,354
See notes to consolidated financial statements.
5
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000's Omitted, except share and per share data)
(Unaudited)
Unrealized
Investment
Common Paid-in Gains Retained Treasury
Stock Capital (Losses) Earnings Stock LESOP Total
Balance as of January 1, 1994............. $ 12,907 64,612 1,064 25,183 - (3,421) 100,345
Net earnings................ .............. - - - 13,693 - - 13,693
Cumulative effect of adoption
of SFAS 115............................... - - 19,613 - - - 19,613
Increase in unrealized invest-
ment losses............................... - - (28,490) - - - (28,490)
Remaining offering costs.................... - (135) - - - - (135)
Redemption of stockholders
rights plan................................ - (101) - - - - (101)
Issuance of common stock:
upon exercise of options.................... 28 133 - - - - 161
Tax effect of option exercises.......... - 10 - - - - 10
Purchase of treasury shares.................. - - - - (1,186) - (1,186)
Retirement of treasury stock............... (166) (1,020) - - 1,186 - 0
Allocation of LESOP shares............... - - - - - 286 286
Balance as of December 31, 1994......... 12,769 63,499 (7,813) 38,876 - (3,135) 104,196
Net earnings.......................... - - - 10,893 - - 10,893
Change in unrealized investment
gains (losses)...................... - - 22,140 - - - 22,140
Cash dividends to stockholders
($.075 cents per share on
common stock)...................... - - - (760) - - (760)
Issuance of common stock:
upon exercise of options........... 128 634 - - - - 762
Tax effect of option exercises......... - 117 - - - - 117
Balance September 30, 1995............ $12,897 64,250 14,327 49,009 - (3,135) 137,348
See notes to consolidated financial statements.
6
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash and Cash Equivalents
Nine months ended September 30, 1995 and 1994
(Unaudited)
(000's Omitted)
1995 1994
Operating Activities:
Net earnings...................................................... $ 10,893 9,266
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Interest credited to policyholders.............................. 90,145 84,935
Amortization of (discounts) premiums on debt
securities, net................................................ (755) (2,062)
Amortization of deferred policy acquisition costs............... 8,085 7,524
Net investment (gains) losses................................... 993 (328)
Accrued investment income....................................... 664 (533)
Deferred income taxes........................................... 5,111 (486)
Other, net...................................................... 2,233 (1,149)
Net cash provided by operating activities......................... 117,369 97,167
Investing Activities:
Purchases of securities:
Held-to-maturity................................................. (5,118) (236,642)
Available-for-sale............................................... (232,752) (274,764)
Proceeds from sale of securities:
Held-to-maturity................................................. - 8,302
Available-for-sale............................................... 72,830 277,441
Proceeds from maturity or redemption of securities:
Held-to-maturity................................................. 26,303 32,098
Available-for-sale............................................... 56,193 72,448
Other long-term investments, net.................................. 17,067 (4,120)
Short-term investments, net....................................... 60 1,287
Capitalization of deferred policy acquisition
costs ......................................................... (25,085) (19,517)
Other, net........................................................ (1,218) (385)
Net cash used in investing activities............................. (91,720) (143,852)
Financing Activities:
Premiums received................................................. 256,815 206,889
Surrender and death benefits paid................................. (290,210) (181,223)
Surrender and risk charges collected.............................. 5,274 4,199
Securities settlements in process................................. 4,407 2,811
Cash dividends to stockholders.................................... (760) -
Issuance of common stock.......................................... 762 (64)
Other, net........................................................ 4,150 1,426
Net cash provided by (used in) financing
activities....................................................... (19,562) 34,038
Increase (Decrease) in Cash and Cash Equivalents...................... 6,087 (12,647)
Cash and Cash Equivalents:
Beginning of year................................................. 10,621 21,782
End of year....................................................... $ 16,708 9,135
See notes to consolidated financial statements.
7
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
Increase (Decrease) in Cash and Cash Equivalents
Nine months ended September 30, 1995 and 1994
(Unaudited)
(000's Omitted)
1995 1994
Supplemental schedule of cash flow information:
Income tax payments (refunds)...................... $ (1,332) 5,305
Interest payments............. .................... $ - -
Change in net unrealized investment gains (losses)
on available-for-sale securities.................. $ 43,294 (2,166)
Less: Associated (increase) reduction in amortization
of deferred policy acquisition costs....... (10,823) (387)
Deferred income tax (expense) benefit........ (10,331) 877
Net change in net unrealized gains (losses) on
available-for-sale securities..................... $ 22,140 (1,676)
See notes to consolidated financial statements.
8
AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
_______________________________________________
A. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of
AmVestors and its wholly-owned subsidiaries, American Investors Life
Insurance Company, Inc. (American), American Investors Sales Group, Inc.
(American Sales), AmVestors Investment Group, Inc. (AIG) and Omni-Tech
Medical, Inc. (Omni-Tech), (collectively the company). All significant
intercompany accounts and transactions have been eliminated.
B. ACCOUNTING PRINCIPLES AND PRACTICES:
The accompanying unaudited consolidated financial statements have
been prepared on the basis of generally accepted accounting principles as
promulgated by the American Institute of Certified Public Accountants. In the
opinion of the company, the consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of September 30, 1995 and the
results of earnings and the statements of cash flow for the nine month periods
ended September 30, 1995 and 1994.
C. INVESTMENTS:
Securities investments that the company has the positive intent and
ability to hold to maturity are classified as held-to-maturity and recorded
at amortized cost, except those securities with an other than temporary
impairment in value which are carried at estimated net realizable value. The
company's securities investments that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities. Trading securities are recorded at fair value on the balance
sheet, with the change in fair value during the period included in earnings.
Securities investments not classified as either held-to-maturity or trading
securities are classified as available-for-sale securities.
Available-for-sale securities are recorded at fair value on the balance
sheet, with the change in fair value during the period excluded from earnings
and recorded net of amortization of deferred acquisition cost and income tax
as a separate component of stockholders' equity.
Investments are reviewed on each balance sheet date to determine if
they are impaired. In determining whether an investment is impaired, the
company considers whether the decline in market value at the balance sheet
date is an other than temporary decline; if so, then the investment's
carrying value is reduced to a new cost basis which represents estimated net
realizable value. The decline in value is reported as a realized loss, and a
recovery from the new cost basis is recognized as a realized gain only at
sale.
The estimates of net realizable value are based on information
obtained from published financial information provided by issuers,
independent sources such as broker dealers or the company's independent
investment advisors. Such amounts represent an estimate of the consideration
to be received in the future when the defaulted company's debt is settled
through the sale of their assets or the restructuring of their debt. These
estimates do not represent the discounted present value of these future
considerations.
An allowance for credit losses has been recorded to reduce total
investments by charging investment losses. The recorded allowance reflects
management's estimate of losses existing in the company's invested assets,
which may occur in the future due to conditions unknown to management at this
time. Management periodically reviews the adequacy of the allowance for
credit losses. As credit losses are realized, they are charged against the
allowance.
Investments in common stock and non-redeemable preferred stock are
carried at market.
The cost of securities sold is determined on the identified
certificate basis.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
1. Summary of Significant Accounting Policies (continued):
___________________________________________________________
Other long-term investments include policy loans and mortgage loans
on real estate which are carried at cost less principal payments since date
of acquisition, and certain partnership investments which are carried at an
amount equal to the company's share of the partnerships' estimated market
value with any unrealized gains or losses recorded in net investment income.
D. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Estimated fair value amounts have been determined by the company
using available market information and appropriate valuation methodologies.
Due to the fact that considerable
judgment is required to interpret market data to develop the
estimates of fair value, the estimates presented are not necessarily
indicative of the amounts that could be realized in a current market
exchange.
The carrying values and estimated fair values of the company's
financial
instruments as of September 30, 1995, and December 31, 1994, were as
follows:
(000'sOmitted)
1995 1994
Carrying Fair Carrying Fair
Value Value Value Value
Assets
Debt securities..................... $1,965,893 1,987,705 1,844,231 1,752,738
Equity securities................... 5,643 5,643 2,356 2,356
Other long-term investments......... 41,694 41,726 58,773 58,536
Short-term investments.............. 460 460 520 520
Cash and cash equivalents........... 16,708 16,708 10,621 10,621
Accounts receivable on
securities settlements in
process........................... 3,789 3,789 905 905
Accounts receivable and
accrued investment income.......... 29,716 29,716 31,606 31,606
Liabilities:
Future policy benefits -
investment contracts............... 1,974,495 1,855,570 1,917,066 1,799,090
Other policy liabilities............ 4,965 4,965 2,983 2,983
Amounts due on securities
settlements in process............. 7,565 7,565 274 274
Accrued expenses and other
liabilities........................ 4,197 4,197 3,805 3,805
DEBT SECURITIES - Fair values are based on quoted market prices or
dealer quotes, if available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
EQUITY SECURITIES - Fair value equals the carrying value as these
securities are carried at quoted market value.
OTHER LONG-TERM INVESTMENTS - For certain homogeneous categories of
mortgage loans, fair value is estimated using quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. Fair value of policy loans and other
long-term investments is estimated to approximate the assets'
carrying value.
SHORT-TERM INVESTMENTS and cash and cash equivalents - The carrying
amounts reported in the balance sheet approximate the assets' fair value.
AMOUNTS RECEIVABLE ON SECURITIES SETTLEMENTS IN PROCESS - The
carrying amount reported in the balance sheet approximates the fair value of
this asset.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
1. Summary of Significant Accounting Policies (continued):
___________________________________________________________
ACCOUNTS RECEIVABLE AND ACCRUED INVESTMENT INCOME - THE CARRYING
AMOUNTS REPORTED IN THE BALANCE SHEET FOR THESE ASSETS APPROXIMATES FAIR
VALUE.
FUTURE POLICY BENEFITS FOR INVESTMENT CONTRACTS - The fair values for
deferred annuities were estimated to be the amount payable on demand at the
reporting date as those investment contracts have no defined maturity and are
similar to a deposit liability. The amount payable at the reporting date was
calculated as the account balance less any applicable surrender charges.
OTHER POLICY LIABILITIES - The carrying amount reported in the
balance sheet approximates the fair value of these liabilities.
AMOUNTS DUE ON SECURITIES SETTLEMENTS IN PROCESS - The carrying
amount reported in the
balance sheet approximates the fair value of this liability.
ACCRUED EXPENSES AND OTHER LIABILITIES - The carrying amount reported
in the balance sheet approximates the fair value of these liabilities.
The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair value
amounts.
E. DEFERRED POLICY ACQUISITION COSTS:
The costs of acquiring new business (primarily commissions and policy
expenses), which vary with and are directly related to the production of new
business, have been deferred. The deferred costs related to investment-type
deferred annuity contracts are amortized in relation to the incidence of
expected gross profits over the expected life of the policies. For single
premium life insurance, deferred policy acquisition costs are amortized over
the life of the policies, but not more than 20 years for policies issued
before January l, 1987, and not more than 30 years for policies issued after
December 31, 1986, based on the expected gross profits for the amortization
periods. The deferred costs related to traditional life contracts are
amortized over the premium paying period for the related policies using the
same actuarial assumptions as to interest, mortality and withdrawals as are
used to calculate the reserves for future benefits.
Determination of expected gross profits includes management's best
estimate of certain
elements over the life of the contracts, including anticipated excess
investment income,
surrender charge revenues and mortality charge revenues (single
premium life insurance). Estimates of expected gross profits used as a basis
for amortization are evaluated regularly by management, and the total
amortization recorded to date is adjusted by a charge or credit to the
statement of earnings if actual experience indicates that the estimates
should be revised.
Net investment gains (losses) will result in the company experiencing
investment margins greater than or less than those estimated. As a result of
losses experienced during the first nine months of 1995, amortization of
deferred policy acquisition costs was reduced by $229,637. Gains experienced
during the same period of 1994 resulted in additional amortization of
$78,480. The amount charged off is based on actual gross profits earned to
date in relation to total gross profits expected to be earned over the life
of the related contracts.
Estimates of the expected gross profits to be realized in future
years include the
anticipated yield on investments. Deferred policy acquisition costs
will be adjusted in the future based on actual investment income earned.
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
1. Summary of Significant Accounting Policies (continued):
___________________________________________________________
f. Future policy benefits:
Liabilities for future policy benefits under life insurance policies,
other than single
premium life insurance, have been computed by the net level premium
method based upon estimated future policy benefits (excluding participating
dividends), investment yield, mortality and withdrawals giving recognition to
risk of adverse deviation. Interest rates range from 41\2% to 101\2%
depending on the year of issue, with mortality and withdrawal assumptions
based on company and industry experience prevailing at the time of issue.
For single premium life insurance and single premium annuities, the
future policy
benefits are equal to the accumulation of the single premiums at the
credited rate of interest and for single premium whole life, less any
mortality charges.
G. PARTICIPATING POLICIES:
The company issued participating policies in past years on which
dividends are paid to policyholders as determined annually by the Board of
Directors. The amount of dividends declared but undistributed is included in
other liabilities. Policy benefit reserves do not include a provision for
estimated future participating dividends.
H. DEPRECIATION:
The home office buildings are depreciated on the straight-line basis
over estimated lives of 40 years. Other depreciation is provided on the
straight-line basis over useful lives ranging from 3 to 10 years.
I. INCOME TAXES:
The company and its subsidiaries prepare and file their income tax
returns on a
consolidated basis.
The company provides for the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
reported in the financial statements on the liability method.
J. EARNINGS PER SHARE:
Earnings per share of common stock are computed by dividing net
earnings by the sum of the weighted average number of shares outstanding
during the period plus dilutive common stock equivalents applicable to stock
options and warrants calculated using the treasury stock method.
K. CONSOLIDATED STATEMENTS OF CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents
includes cash and money market accounts.
L. NEW ACCOUNTING STANDARDS:
Effective January 1, 1995, the company adopted the provisions of SFAS
No. 119, "Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments." This Statement requires disclosure about the amount,
nature, and terms of derivative financial instruments. Since the company has
no derivative financial
instruments as defined in the Statement, the adoption of this
accounting standard did not result in any additional financial statement
disclosure.
M. RECLASSIFICATIONS:
Certain reclassifications have been made to conform the September 30,
1994 and December 31, 1994 financial statements to the September 30, 1995
presentation.
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments:
_________________
A summary of investment income is as follows:
(000's Omitted)
For the Period
Ended September 30,
1995 1994
Debt securities........................................... $ 109,827 105,999
Equity securities................................. 70 38
Other long-term investments........................ 5,258 69
Short-term investments.............................. 1,173 642
116,328 106,748
Less investment expenses............................... 1,604 1,387
Net investment income................................... $ 114,724 105,361
Net investment gains (losses):
Debt securities........................................... $ (1,119) (252)
Equity securities.......................................... 475 580
Increase in allowance for credit losses..................... (325) -
Other...................................................... (24) -
Net investment gains (losses)................................... $ (993) 328
Certain limited partnership investments are included in income from
other long-term investments. These funds (commonly referred to as hedge
funds) are managed by outside investment advisors. The investment guidelines
of these partnerships provide for a broad range of investment alternatives,
including stocks, bonds, futures, options, commodities, and various other
financial instruments. These investments were purchased with the strategy
that yields in excess of the S&P 500 Index may be obtained. The partnerships
are carried at an amount equal to the company's share of the partnerships'
estimated market value with related unrealized gains and losses recorded in
net investment income. In accordance with the permitted guidelines, the
investments purchased by these partnerships may experience greater than
normal volatility which could materially affect the company's earnings for
any given period.
The maturity of the company's debt and equity securities portfolio as
of September 30, 1995 was as follows:
(000'sOmitted)
As ofSeptember 30, 1995
Held-to-Maturity Available-for-Sale
Estimated Estimated
Book Market Book Market
Value Value Value Value
Debt securities:
One year or less $ 6,499 6,580 25,457 24,011
Two years through five years 251,640 256,462 178,267 182,753
Six years through ten years 821,049 837,594 415,375 436,531
Eleven years and after 105,446 105,810 133,154 137,964
1,184,634 1,206,446 752,253 781,259
Equity securities - - 5,261 5,643
$ 1,184,634 1,206,446 757,514 786,902
These tables include mortgage-backed securities based on the
estimated cash flows of the
underlying mortgages.
As used in the above table and elsewhere in this report, book value
is defined as amortized cost, including adjustments for any other than
temporary dimunitions in value, prior to any market value adjustments.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
_____________________________
The book value, estimated market value and unrealized market gains
and losses of debt and equity securities as of September 30, 1995, and
December 31, 1994, were as follows:
(000's Omitted)
Estimated
Book Unrealized Unrealized Market
Value Gains Losses Value
September 30, 1995
___________________
Bonds held-to-maturity:
Corporate debt obligations
Investment grade........................ $ 771,556 20,595 8,501 783,650
High-yield........................ 101,790 3,381 1,272 103,899
873,346 23,976 9,773 887,549
U.S. Treasury obligations..... 8,298 277 100 8,475
Mortgage-backed securities....... 302,990 8,151 719 310,422
Bonds held-to-maturity............ 1,184,634 32,404 10,592 1,206,446
Bonds available-for-sale:
Corporate debt obligations
Investment grade.............. 323,906 18,111 137 341,880
High-yield................... 40,670 421 958 40,133
364,576 18,532 1,095 382,013
U.S. Treasury obligations................. 44,362 21 124 44,259
Mortgage-backed securities....... 343,315 13,266 1,594 354,987
Bonds available-for-sale..... 752,253 31,819 2,813 781,259
Total bonds................... 1,936,887 64,223 13,405 1,987,705
Equity securities available-for-sale.. 5,261 713 331 5,643
$ 1,942,148 64,936 13,736 1,993,348
December 31, 1994
__________________
Bonds held-to-maturity:
Corporate debt obligations
Investment grade............................ $ 792,746 1,160 62,907 730,999
High-yield............................ 135,698 108 9,267 126,539
928,444 1,268 72,174 857,538
U.S. Treasury obligations.......... 3,618 - 319 3,299
Mortgage-backed securities........ 305,123 1 20,269 284,855
Bonds held-to-maturity............ 1,237,185 1,269 92,762 1,145,692
Bonds available-for-sale:
Corporate debt obligations
Investment grade.................. 253,055 1,005 5,633 248,427
High-yield........................ 1,218 - 8 1,210
254,273 1,005 5,641 249,637
Mortgage-backed securities....................... 366,865 590 10,046 357,409
Bonds available-for-sale.................... 621,138 1,595 15,687 607,046
Total bonds........................ 1,858,323 2,864 108,449 1,752,738
Equity securities available-for-sale.......... 2,169 417 230 2,356
$ 1,860,492 3,281 108,679 1,755,094
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
____________________________
The preceding table includes the carrying value and estimated market
value of debt securities which the company has determined to be impaired
(other
than temporary decline in value) as
follows:
(000's Omitted)
Accumulated Estimated
Original Write Carrying Market
Cost Downs Value Value
September 30, 1995 $ 7,545 7,545 - -
December 31, 1994 $ 9,535 7,814 1,721 1,721
The company defines high-yield securities as those corporate debt
obligations rated below investment grade by Standard & Poor's and Moody's or,
if unrated, those that meet the objective criteria developed by the company's
independent investment advisory firm. Management believes that the return on
high-yield securities adequately compensates the company for additional
credit and liquidity risks that characterize such investments. In some cases,
the ultimate
collection of principal and timely receipt of interest is dependent
upon the issuer attaining improved operating results, selling assets or
obtaining financing.
The book value, estimated market value and unrealized market gains
and losses by type of mortgage-backed security as of September 30, 1995, and
December 31, 1994 were as follows:
(000's Omitted)
Estimated
Book Unrealized Unrealized Market
September 30, 1995 Value Gains Losses Value
Government agency mortgage-backed securities:
Planned amortization classes................................$ 75,647 650 - 76,297
Targeted amortization classes and
accretion directed classes................................. 7,796 242 - 8,038
Pass-throughs............................................... 33 3 - 36
Total government agency
mortgage-backed securities............................. 83,476 895 - 84,371
Government-sponsored enterprise
mortgage-backed securities:
Planned amortization classes................................ 389,770 16,314 334 405,750
Sequential classes.......................................... 19,603 1,025 - 20,628
Pass-throughs............................................... 3,286 12 - 3,298
Total government-sponsored enterprise
mortgage-backed securities.......................... 412,659 17,351 334 429,676
Other mortgage-backed securities:
Planned amortization classes................................ 19,486 109 - 19,595
Sequential classes.......................................... 116,442 3,061 385 119,118
Pass-throughs............................................... 11 1 - 12
Subordinated classes........................................ 14,231 - 1,594 12,637
Total other mortgage-backed securities................ 150,170 3,171 1,979 151,362
Total mortgage-backed securities................................ $ 646,305 21,417 2,313 665,409
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
___________________________
(000's Omitted)
Estimated
Book Unrealized Unrealized Market
December 31, 1994 Value Gains Losses Value
Government agency mortgage-backed securities:
Planned amortization classes................................ $ 75,557 12 5,614 69,955
Targeted amortization classes and
accretion directed classes........................... 7,729 - 319 7,410
Pass-throughs................................ ...... 40 2 - 42
Total government agency
mortgage-backed securities........................ 83,326 14 5,933 77,407
Government sponsored enterprise
mortgage-backed securities:
Planned amortization classes......................... 410,313 104 15,852 394,565
Sequential classes............................. ...... 19,705 - 1,087 18,618
Pass-throughs....................................... 299 - 2 297
Total government sponsored enterprise
mortgage-backed securities.................... 430,317 104 16,941 413,480
Other mortgage-backed securities:
Planned amortization classes......................... 22,686 22 745 21,963
Sequential classes.................................... 125,100 451 5,345 120,206
Pass-throughs...................................... 13 - - 13
Subordinated classes................................. 10,546 - 1,351 9,195
Total other mortgage-backed securities......... 158,345 473 7,441 151,377
Total mortgage-backed securities.......................... $ 671,988 591 30,315 642,264
Certain mortgage-backed securities are subject to significant
prepayment risk. This is due to the fact that in periods of declining
interest rates, mortgages may be repaid more rapidly than scheduled, as
individuals refinance higher rate mortgages to take advantage of the lower
current rates. As a result, holders of mortgage-backed securities may
receive large prepayments on their investments which they are unable to
reinvest at an interest rate comparable to the rate on the prepaying
mortgages. Mortgage-backed pass-through securities and sequential
classes, which comprised 21.6% and 21.6% of the carrying value of the
company's mortgage-backed securities as of September 30, 1995 and December
31, 1994, respectively, are sensitive to this prepayment risk.
A portion of the company's mortgage-backed securities portfolio
consists of planned
amortization class ("PAC"), targeted amortization class ("TAC") and
accretion directed class ("AD") instruments. These securities are designed to
amortize in a more predictable manner by shifting the primary risk of
prepayment to investors in other tranches (support classes) of the
mortgage-backed security. PAC, TAC and ADsecurities comprised 76.2% and 76.8%
of the carrying value of the company's mortgage-backed securities as of
September 30, 1995 and December 31, 1994.
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
___________________________
As of September 30, 1995, 76.8% of the company's mortgage-backed
securities were issued by either government agencies or government-sponsored
enterprises, compared to 76.4% as of December 31, 1994. The credit risk
associated with these securities is generally less than other mortgage-backed
securities. With the exception of 6 issues, with a carrying value of
$20,288,693 as of September 30, 1995, all of the company's investments in
other mortgage-backed securities are rated A or better by Standard& Poor's or
Moody's.
The amounts shown as "estimated market" are primarily based on
quotations obtained from independent sources such as broker dealers who make
markets in similar securities. Unless representative trades of securities
actually occur at the balance sheet date, these quotes are generally
estimates of market value based on an evaluation of appropriate factors such
as institution-size trading in similar securities, yield, credit quality,
coupon rate, maturity, type of issue and other market data. Losses are recogni
zed in the period they occur based upon specific review of the securities
portfolio and other factors.
The consideration received on sales of debt and equity securities,
carrying value and realized gains and losses on those sales were as follows:
(000's Omitted)
For the Period Ended September 30,
1995 1994
Consideration received.............................. $ 175,505 400,561
Carrying value...................................... 176,149 400,233
Net investment gains (losses)..................... $ (644) 328
Investment gains.................................... $ 1,533 3,388
Investment losses................................... (2,177) (3,060)
Net investment gains (losses)..................... $ (644) 328
During 1995, the company transferred bonds of nine issuers from
held-to-maturity to available-for-sale based upon a significant deterioration
in the issuers' creditworthiness. The book value of these bonds at the time
of transfer was $30,671,714. Included in the above table are 1995 losses of
$2,096,881 on the sale of bonds of four issuers which the company had
transferred from held-to-maturity to available-for-sale.
The 1994 amounts include bonds of one issuer which the company had
classified as held-to-maturity, the sale of which resulted in a loss of
$205,526. The decision to sell these bonds was based upon a significant
deterioration in the issuers' creditworthiness. The book value of these bonds
at the time of sale was $8,507,732.
Net unrealized gains (losses) on debt securities held-to-maturity,
debt securities
available-for-sale, equity securities available-for-sale and other
long-term investments changed as follows:
(000's) Omitted
Net Unrealized Gains (Losses)
Debt Debt Equity
Securities Securities Securities Other
Held-to- Available- Available- Long Term
Maturity for-Sale for-Sale Investments
Balance as of January 1, 1994........... $ 38,331 43,035 282 1,330
1994 Net Change......................... (129,824) (57,127) (95) (1,330)
Balance as of December 31, 1994......... (91,493) (14,092) 187 -
1995 Net Change......................... 113,305 43,098 195 -
Balance as of September 30, 1995........ $ 21,812 29,006 382 -
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
___________________________
At September 30, 1995, and December 31, 1994, investments with
statutory carrying values of
$1,948,676,266 and $1,866,074,033, respectively, were on deposit with
various insurance departments. These amounts exceeded the minimum required
deposits by $67,474,357 and $66,325,834 as of September 30, 1995, and
December 31, 1994, respectively.
3. Other Assets:
________________
Other assets consist of the following:
(000's Omitted)
September 30, December 31,
1995 1994
Home office building
(including land of $352)................ $ 3,160 2,152
Furniture and equipment.................. 3,644 3,464
Automobiles.............................. 115 115
6,919 5,731
Less accumulated depreciation.......... 3,635 3,336
3,284 2,395
Other...................................... 1,265 1,182
$ 4,549 3,577
4. Reinsurance:
_______________
The company reinsures portions of insurance it writes. The maximum
amount of risk retained by the company on any one life is $150,000.
A summary of reinsurance data follows (000's Omitted):
For the Ceded to
Period Gross Other Net
Ended Descriptions Amount Companies Amount
September 30, Life insurance in force $318,346 243,301 75,045
1995 Insurance premiums and
policy charges 7,267 713 6,554
September 30, Life insurance in force 336,808 264,858 71,950
1994 Insurance premiums and
policy charges 5,558 727 4,831
September 30, Future policy benefits 2,209,756 145,512 2,064,244
1995
December 31, Future policy benefits 2,148,763 148,575 2,000,188
1994
The company had amounts receivable under reinsurance agreements of
$146,217,620 and $149,656,094 as of September 30, 1995, and December 31,
1994, respectively. Of the amounts,
$144,509,068 and $147,949,099 were associated with a single
reinsurer. In 1989, the company entered into a coinsurance agreement which
ceded 90% of the risk on the company's block of single premium whole life
policies written prior to 1989 to Employers Reassurance Corporation (ERC).
The agreement provides that ERC assumes 90% of all risks associated with each
policy in the block.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
4. Reinsurance (continued):
__________________________
The following table identifies the components of the amounts
receivable from ERC:
(000'sOmitted)
September 30, December 31,
1995 1994
Reserve for future policy benefits................ $143,835 146,919
Reimbursement for benefit payments and
administrative allowance................... 674 1,030
$144,509 147,949
5. Credit Agreement:
____________________
On December 29, 1994, the company entered into a credit agreement
with The First National Bank of Chicago (First Chicago) and Boatmen's First
National Bank of Kansas City (Boatmen's), as Lenders. On July 28, 1995, this
agreement was amended to reduce the commitment from $25,000,000 to
$15,000,000. The company has agreed to pay a commitment fee of .25% per annum
on the unused portion of the commitment. Borrowings under this agreement may
be used for general corporate purposes.
Interest on the borrowings under this agreement is determined at the
option of the
company to be: (i) a fluctuating rate of interest equal to the higher of the
corporate base rate announced by First Chicago from time to time, and a
fluctuating rate equal to the weighted average of rates on overnight Federal
Funds transactions with members of the Federal Reserve System as published by
the Federal Reserve Bank of New York plus .50% per annum, or (ii) a
Eurodollar rate plus a margin ranging from 1.00% to 1.25%.
In addition to general covenants which are customary for facilities
such as this, the company has agreed to maintain minimum consolidated net
worth, a minimum cash flow
coverage ratio, minimum risk based capital for American, minimum
capital, surplus and asset valuation reserve of American and to maintain a
maximum debt to equity (including indebtedness) ratio. The July 28, 1995
amendment deferred the minimum cash flow coverage ratio until December 31,
1995 and added a covenant requiring American to have statutory operating
income in each quarter until the cash flow coverage ratio becomes effective.
Additional covenants include: (i) limitations on acquisitions; (ii)
maintenance of
current lines of business; (iii) limitations on additional
indebtedness; (iv) limitations on investments; (v) limitations on dividends
and stock repurchases; and (vi) limitations on mergers, consolidations and
sales of assets, typical of such facilities.
At September 30, 1995, there had been no borrowings under this
agreement.
6. Retirement Plans:
____________________
The company sponsors an Employee Stock Ownership Plan (ESOP) for all
full-time
employees with one year of service. Qualifying participants may
contribute an amount not to exceed 10% of covered compensation. The company
made no contributions to this plan during either the nine months ended
September 30, 1995 or 1994.
The company sponsors a Leveraged Employee Stock Ownership Plan
(LESOP) for all
full-time employees with one year of service.
The LESOP has acquired shares of the company aggregating 370,244
through the proceeds of a note payable to American. The note bears interest
at 7.0% and is payable in annual installments through December 30, 2002. The
note had an unpaid principal balance of $3,336,038 as of September 30, 1995,
and December 31, 1994.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
6. Retirement Plans (continued):
________________________________
Each year the company will make contributions to the LESOP which are
to be used to make loan interest and principal payments. On December 31 of
each year, a portion of the common stock will be allocated to participating
employees. Of the 361,735 shares of the company's common stock now owned by
the LESOP, 93,360 shares have been allocated to the participating employees
with the remaining 268,375 shares being held by American as collateral for
the loan.
The unallocated portion of the company's common stock owned by the
LESOP has been
recorded as a separate reduction of stockholders' equity. Accrued
contributions to the LESOP were $229,173, and $214,174, for the nine months
ended September 30, 1995, and 1994, respectively.
During 1992, the company's Board of Directors approved retirement
plans for its members and members of the Board of Directors of certain of its
subsidiaries. The plans provide that retired Directors shall serve as
Advisory Members to the Board at a fee of $750 per meeting attended and a
monthly lifetime benefit in the amount of $750 be paid to each qualified
Director upon retirement. In addition, the company has agreed to continue any
life insurance policies being provided as of the date of retirement.
To qualify for this benefit, a Director must reach the age of 60 and
meet years of service requirements thereafter. The plan also calls for a
mandatory retirement on the date the Director's term expires following age
70.
As of September 30, 1995, three of the company's directors qualified
for benefits under the plan. A liability in the amount of $433,419,
representing the present value of future benefits, has been established.
Charges (credits) to earnings related to the plans were
($87,761) and $(10,662) for the nine months ended September 30, 1995
and 1994, respectively.
Effective January 1, 1993, the company adopted an Age-Weighted Money
Purchase Plan for all full-time employees with one year of service. The full
cost of this plan will be paid by the company with qualifying participants
receiving contributions based upon their age at plan implementation and
current salary. Contributions to the Age-Weighted Money Purchase Plan for the
nine months ended September 30, 1995, and 1994 were $166,292 and
$146,277 respectively.
7. Stockholders' Equity:
________________________
Dividends by American to AmVestors are limited by laws applicable to
insurance companies. Under Kansas law, American may pay a dividend, without
prior consent of the Kansas Commissioner of Insurance, in an amount equal to
the greater of 10% of statutory capital and surplus at the end of the
preceding year or all of the statutory net gain from operations of the
preceding year, provided that such dividend does not exceed its unassigned
surplus (surplus profits) at the end of the preceding year. As of December
31, 1994, surplus profits of American were $12,996,673 and 10% of statutory
capital and surplus was $8,752,120. Statutory net gain (loss) from operations
for the year 1994 was $5,645,097. American is also required to maintain, on a
statutory basis, paid-in capital stock and surplus (capital in excess of par
value and unassigned surplus) of $100,000 each. As of September 30, 1995, and
December 31, 1994, American's statutory capital and surplus was
$86,852,958 and $87,521,204, respectively.
In connection with the original establishment of the Interest
Maintenance Reserve (IMR), the Commissioner of Insurance of Kansas (the
company's domiciliary state) ordered that American prepare its December 31,
1992, NAIC Annual Statement Form to equitably allocate 1992 capital gains and
losses not included in the calculation of the Asset Valuation Reserve (AVR)
on other than government securities, fifty (50%) percent to surplus and fifty
(50%) percent to IMR, after calculation of the AVR pursuant to the
instructions.
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
7. Stockholders' Equity (continued):
____________________________________
provided by the NAIC. This differs from prescribed statutory accounting
practices.
This permitted accounting practice increased statutory surplus as of
December 31, 1992, by $8,167,587. Gains and losses for years subsequent to
1992 are recorded in accordance with prescribed statutory accounting
practices.
On March 17, 1989, the Board of Directors of the company adopted the
1989 Nonqualified Stock Option Plan. These options have an exercise price
equal to the closing price of the company's stock on the date of grant and
none may be exercised beyond ten years from the grant date. A total of
845,404 options to acquire common stock are outstanding under the 1989
Nonqualified Plan.
The 1989 Nonqualified Plan is administered by the Board of Directors
and officers of the company and its subsidiaries. The terms of the options,
including the number of shares, and the exercise price are subject to the
sole discretion of the Board of Directors.
Changes during the periods were as follows:
For the PeriodEnded
September30, December 31,
1995 1994
Options outstanding, beginning of period.............. 859,837 816,107
Options granted....................................... 86,000 95,000
Options exercised.................................... (100,433) (22,200)
Options expired.................................... - (29,070)
Options outstanding, end of period.................. 845,404 859,837
Outstanding options exercisable at end of period....... 704,404 764,837
Options reserved for future grants at end of period.... 46,247 132,247
Option prices per share:
Exercised, during the period......................... $4.84-$10.63 $5.31-$7.50
Outstanding, end of period........................... $4.84-$12.66 $4.84-$12.66
On March 17, 1989, the Board of Directors also adopted the 1989 Stock
Appreciation Rights Plan (the SAR Plan) and the 1989 Restricted Stock Plan
(the Restricted Stock Plan). The SAR Plan authorized the Board of Directors
to grant stock appreciation rights to employees, officers and directors in
such amounts and with such exercise prices as it shall determine. No stock
appreciation rights granted under the SAR Plan may be exercised more than
five years from its date of grant. The SAR Plan authorized a maximum of
125,000 shares to be issued pursuant to stock appreciation rights granted
thereunder.
For thePeriod Ended
September30, December 31,
1995 1994
Rights outstanding, beginning of period................... - 30,000
Rights granted............................................ - -
Rights exercised.......................................... - (30,000)
Rights expired............................................ - -
Rights cancelled.......................................... - -
Rights outstanding, end of period......................... -0- -0-
Rights reserved for future grants
at end of period......................................... 5,000 5,000
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
7. Stockholders' Equity (continued):
____________________________________
The company recorded no compensation expense relating to stock
appreciation rights for the nine months ended September 30, 1995, and 1994,
respectively.
The Restricted Stock Plan authorizes the Board of Directors to make
restricted stock awards to employees, officers and directors in such amounts
as it shall determine. The stock issued pursuant to such awards is subject to
restrictions on transferability for a period of five years. Such stock is
subject to a five-year vesting schedule, and the company is required to
repurchase all vested stock from a grantee if such grantee's employment with
the company is terminated prior to the lapse of the transfer restrictions.
The Restricted Stock Plan authorizes a maximum of 125,000 shares to be issued
thereunder. No restricted stock awards have been granted pursuant to the
Restricted Stock Plan.
In conjunction with a previous bank borrowing, the company issued
ten-year warrants to purchase a total of 170,002 shares of its common stock
as summarized in the following table:
Warrant Issue Number Exercise Expiration
Holder Date of Shares Price Date
Morgan Guaranty 12/8/88 75,000 $ 3.9688 12/9/98
4/30/92 95,002 6.3855 5/1/02
170,002
8. Stockholders' Rights Plan:
______________________________
On June 30, 1994, the company's Board of Directors voted to repeal
the 1988 Stockholders' Rights Plan and set the close of business on July 22,
1994 as the record date for the payment of the one cent per share redemption
price. Stockholders of record were paid on August 8, 1994, in full redemption
of the rights under the plan. The total amount to redeem the Rights was
$101,432.
9. Other Revenue:
__________________
Effective December 1, 1989, the company entered into a coinsurance
agreement with Employers Reassurance Corporation (ERC) which reinsured 90% of
the risk on the company's block of SPWL policies written prior to 1989. The
agreement provides that ERC assumes 90% of all risks associated with each
policy in the block. These policies continue to be administered by American.
In return, American receives an administrative allowance of $31.50 per policy
per year. The total allowance received during the nine months ended September
30, 1995 and 1994 was $92,103 and $98,148, respectively.
10. Income Taxes:
_________________
The provision for income taxes charged to operations was as follows:
(000's Omitted)
For the Nine Months
Ended September30,
1995 1994
Current income tax expense (benefit)................... $506 5,302
Deferred income tax expense (benefit).................. 5,111 (486)
Total income tax expense.......................... $5,617 4,816
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
11. Acquisition:
__________________
On September 8, 1995, the company signed a merger agreement pursuant
to which it will acquire all of the outstanding capital stock of Financial
Benefit Group, Inc., (FBG) a Delaware corporation, for $5.31 per share,
payable in the company's common stock, warrants and cash.
FBG is an insurance holding company which owns all of the shares of
Financial Benefit Life Insurance Company, a Florida domiciled insurer which
specializes in the sale and underwriting of annuity products and is admitted
in 41 jurisdictions, which includes 39 states, the District of Columbia and
the U.S. Virgin Islands. FBG also owns all of the shares of Annuity
International Marketing Corporation and The Insurancemart, Inc. both of which
specialize in the distribution and marketing of annuities.
The merger is subject to the approval of the shareholders of FBG and
the company and the fulfillment of certain other conditions set forth in the
merger agreement. In addition, approval of the Commissioner of Insurance of
the State of Florida is required prior to consummation of this transaction.
The company expects to receive all necessary approvals so that a
closing may occur prior to January 31, 1996.
The transaction will be accounted for using the purchase method with
any resulting goodwill being amortized over a period not to exceed 40 years.
12. Contingencies:
__________________
The company's insurance subsidiary is subject to state guaranty
association assessments in all states in which it is admitted. Generally
these associations guarantee specified amounts payable to residents of the
state under policies issued by insolvent insurers. Most state laws permit
assessments or some portion thereof to be credited against future premium
taxes. Charges (credits) relating to the guaranty fund assessments impacted
1994 and 1993 income before taxes by approximately $(368,000) and $1,594,000,
respectively. The company expects that further charges to income may be
required in the future and will record such amounts when they become known.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The company specializes in the sale of deferred annuity products as a
retirement savings vehicle for individuals. During each of the past three
years, sales of deferred annuities have accounted for at least 96% of the
company's premiums received, while sales of Single Premium Immediate
Annuities (SPIAs) and Flexible Premium Universal Life policies (FPULs) have
accounted for virtually all remaining premiums received.
The company's operating earnings are derived primarily from its
investment results, including realized gains (losses), less interest credited
to annuity contracts and expenses. Under Generally Accepted Accounting
Principals (GAAP), premiums received on deferred annuities, SPIAs without
life contingencies and FPULs are not recognized as revenue at the time of
sale. Similarly, policy acquisition costs (principally commissions) related
to such sales are not recognized as expenses but are capitalized as deferred
acquisition costs, or "DAC". As a result of this deferral of costs and the
lack of revenue recognition for premiums received, no profit or loss is
realized on these contracts at the time of sale. Premiums received on
deferred annuities, SPIAs without life contingencies and FPULs are reflected
on the company's balance sheet by an increase in assets equal to the premiums
received and by a corresponding increase in future policy liabilities.
23
The company's earnings depend, in significant part, upon the
persistency of its annuities. Over the life of the annuity, net investment
income, net investment gains (losses) and policy charges are realized as
revenue, and DAC is amortized as an expense. The timing of DAC amortization
is based on the projected realization of profits including realized gains
(losses) for each type of annuity contract and is periodically adjusted for
actual experience. If a policy is terminated prior to its expected maturity,
any remaining related DAC is expensed in the current period. Most of
American's annuity policies in force have surrender charges which are
designed to discourage and mitigate the effect of premature withdrawals. As a
result, the impact on earnings from surrenders will depend upon the extent to
which available surrender charges offset the associated amortization of DAC.
For the years ended 1994, 1993 and 1992, the company's weighted average
expected surrender levels were 9.0%, 13.0%, and 9.9%, compared to the
weighted average actual surrenders of 9.8%, 14.7%, and 9.6%. For the first
nine months of 1995, the company's weighted average expected surrender level
was 8.9%, compared to weighted average actual surrenders of 15.5% for such
period. Historically, the negative impact on earnings of any difference
between the actual surrender levels and expected surrender levels has been
more than offset by the realization of gains on the sale of securities and
the change in future expected gross profits as the result of the company's
reduction in credited rates.
Recent periods of low interest rates have reduced the company's
investment yields. As a result of the lower investment yields, the company
elected to reduce credited interest rates on certain of its annuity products.
Certain annuities issued by the company include a "bailout" feature. This
feature generally allows policyowners to withdraw their entire account
balance without surrender charge for a period of 45 to 60 days following the
initial determination of a renewal crediting rate below a predetermined
level. If a policyowner elects not to withdraw funds during this period,
surrender charges are reinstated. On policies including a "bailout" feature,
the company announces its renewal crediting rates on January 14 of each year.
In January 1994, 1993 and 1992, the company deemed it advisable, due to the
general decline in interest rates and the yield on its investment portfolio,
to reduce credited interest rates on certain annuity contracts below the
"bailout" level. The aggregate account values of annuity contracts on which
the crediting rate was reduced below the "bailout" level totalled $109.8
million, $326.2 million, and $160.4 million during 1994, 1993 and 1992,
respectively. As a result, $18.3 million, or 17%, $139.6 million, or 43%, and
$34.6 million, or 22%, of such policies were surrendered during 1994, 1993,
and 1992, respectively. The company was able to offset the negative impact of
"bailout" surrenders on its earnings through the realization of gains on the
sale of its securities. Excluding surrenders from "bailout" products,
American's annuity withdrawal rates were 9% for 1994, 7% for 1993 and 7% for
1992. Although, as of December 31, 1994, approximately $180.9 million, or 14%
of annuity account values contained a "bailout" provision, the current
credited rates on these policies are above the "bailout" rate. The "bailout"
rate on $180.5 million of this amount is 6% or less. If the company reduces
credited rate below the "bailout" rates on policies containing "bailout"
provisions in the future, it intends to pay any resulting surrenders from
cash provided by operations and premiums received. In the event such sources
are not sufficient to pay surrenders, the company would have to sell
securities at the then current market prices. American expects that
withdrawals on its annuity contracts will increase as such contracts approach
maturity. There is no certainty as to the company's ability to realize
investment gains in the future to offset the adverse impact on earnings,
should future "bailout" surrenders occur.
24
MARGIN ANALYSIS
The company's earnings are impacted by realized investment gains and
losses and by the associated amortization of DAC. The actual timing and
pattern of such amortization is determined by the actual profitability to
date (which includes realized investment gains and losses) and the expected
future profitability on a particular annuity contract. To the extent
investment income is accelerated through realization of investment gains, the
corresponding amortization of DAC is also accelerated as the stream of
profitability on the underlying annuities is effectively accelerated. When
investment losses are realized, the reverse is true. The following margin
analysis depicts the effects of realized gains (losses) on the company's
operating earnings:
For the Nine Months Ended September 30,
1995 1994
(dollars in millions)
(percent of average
invested assets annualized)
Average invested assets <F1>................... $1,962.5 100.00% $ 1,850.6 100.00%
Insurance premiums and policy charges.............. $ 6.6 .45% 4.8 .34%
Net investment income <F2>...................... 114.7 7.79 105.4 7.45
Policyholder benefits..................... (88.6) (6.02) (83.2) (5.88)
Gross interest margin..................... 32.7 2.22 27.0 1.91
Associated amortization of deferred
acquisition costs........................ (8.3) (.56) (7.4) (.53)
Net interest margin........................ 24.4 1.66 19.6 1.38
Net investment gains (losses)............. (1.0) (.07) .3 .02
Associated amortization of deferred
acquisition costs........................ .2 .02 (.1) (.01)
Net margin from investment gains (losses).... (.8) (.05) .2 .01
Total net margin......................... 23.6 1.60 19.8 1.39
Expenses, net............................ (7.1) (.48) (5.7) (.41)
Operating earnings....................... 16.5 1.12 14.1 .98
Interest expense.......................... - - - -
Earnings before income taxes............. 16.5 1.12 14.1 .98
Income tax expense (benefit).............. 5.6 .38 4.8 .31
Net earnings................................ $ 10.9 .74% 9.3 .67%
Operating earnings........................... $ 16.5 1.12% 14.1 .98%
Less: Net margin from investment gains
(losses)................................... (.8) (.05) .2 .01
Operating earnings excluding net margin
from investment gains (losses)............... $ 17.3 1.17% 13.9 .97%
<FN><F1>Average of cash, invested assets (before SFAS 115 adjustment) and net
amounts due to
or from brokers on unsettled security trades at the beginningand end of
period.
<F2>Net investment income is presented net of investment expense.
Note: Numbers may not add due to rounding.
25
For the QuarterEnded September 30,
_________________________________________________________
1995 1994
(dollars inmillions)
(percent ofaverage
investedassets annualized)
Average invested assets <F1>............ $ 1,973.6 100.00% $ 1,886.5 100.00%
Insurance premiums and policy charges........ $ 2.0 .41% 1.9 .40%
Net investment income <F2>.................. 38.5 7.80 36.2 7.68
Policyholder benefits....................... (29.9) (6.06) (28.5) (6.05)
Gross interest margin....................... 10.7 2.16 9.6 2.03
Associated amortization of deferred
acquisition costs......................... (2.7) (.55) (.7) (.57)
Net interest margin........................ 8.0 1.62 8.9 1.46
Net investment gains (losses)............ (.7) (.14) (.7) (.15)
Associated amortization of deferred
acquisition costs..................... .2 .04 .2 .04
Net margin from investment gains (losses) (.5) (.10) (.5) (.11)
Total net margin.......................... 7.5 1.52 6.4 1.35
Expenses, net........................... (1.9) (.38) (1.5) (.31)
Operating earnings....................... 5.6 1.14 4.9 1.04
Interest expense................. - - - -
Earnings before income taxes................. 5.6 1.14 4.9 1.04
Income tax expense (benefit)................ 1.8 .37 1.7 .36
Net earnings............................... $ 3.8 .77% 3.2 .68%
Operating earnings......................... $ 5.6 1.14% 4.9 1.04%
Less: Net margin from investment gains
(losses)................................ (.5) (.10) (.5) (.11)
Operating earnings excluding net margin
from investments gains (losses)............ $ 6.1 1.24% 5.4 1.15%
<FN><F1>Average of cash, invested assets (before SFAS 115 adjustment) and net
amounts due to or from brokers on unsettled security trades at the
beginningand end of period.
<F2>Net investment income is presented net of investment expense.
Note: Numbers may not add due to rounding.
26
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1995, and 1994
INSURANCE PREMIUMS AND POLICY CHARGES increased $1.8 million or 38%,
to $6.6 million in 1995 from $4.8 million in 1994, due to a $1.8 million
increase in surrender charges received on increased surrenders of annuity
policies.
NET INVESTMENT INCOME increased $9.3 million, or 9%, to $114.7
million from $105.4
million in 1994. This increase reflects both an increase in average
invested assets from $1,850.6 million in 1994 to $1,962.5 million in 1995 and
an increase in the average yield on invested assets from 7.5% for the nine
months ended September 30, 1994, to 7.8% for the same period in 1995. The
1994 yield was impacted by losses generated by an investment in investment
partnerships. These partnerships form a fund of funds totalling $22.4 million
on September 30, 1995, which is structured in an attempt to consistently
provide returns in excess of the Standard & Poor's (S&P) 500 over time
without regard to the general direction of financial markets. This fund
generated income of $3.0 million in 1995 compared with a loss of $1.5 million
in 1994.
NET INVESTMENT GAINS (LOSSES) decreased $1.3 million, to a $1.0
million loss in 1995, from a $.3 million gain in 1994. Gains and losses may
be realized upon securities which are disposed of for various reasons. The
gains realized during 1994 are the result of general portfolio management.
The losses realized during 1995 reflect writedowns of $1.0 million taken on
securities deemed to have an other than temporary dimunition in value offset
in part by gains and losses realized as a result of general portfolio
management. Unrealized gains (losses) in the company's bond portfolio were
$50.8 million, $(105.6) million and $(68.7) million as of September 30, 1995,
December 31, 1994 and September 30, 1994, respectively.
OTHER REVENUE increased $.3 million, or 75%, to $.7 million for the
1995 nine months from $.4 million for the same period in 1994. This increase
is due to an increase in Omni-Tech sales.
BENEFITS, CLAIMS AND INTEREST CREDITED TO POLICYHOLDERS increased
$5.4 million, or 6%, to $88.6 million in 1995 from $83.2 million in 1994.
This increase results primarily from an increase in the average interest rate
credited on the company's annuity liabilities, from 5.8% as of September 30,
1994, to 6.0% as of September 30, 1995, along with an increase in annuity
liabilities to $2,033.2 million on September 30, 1995, from $1,944.1 million
on September 30, 1994.
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS increased $.6
million, or 8%, to $8.1 million in 1995 from $7.5 million in 1994.
Amortization of deferred policy acquisition costs (DAC) associated with
investment gains decreased $.3 million to a benefit of $.3 million in 1995 on
$1.0 million of losses, from $.1 million in 1994 on $.3 million of gains.
Amortization of DAC associated with gross interest margin increased $.9
million to $8.3 million in 1995 from $7.4 million in 1994. Acquisition costs
incurred during 1995 and deferred into future policy periods were $25.1
million, compared with $19.5 million in 1994.
General insurance expenses increased $1.0 million, or 19%, to $6.3
million for the 1995 nine months from $5.3 million for the same period in
1994. Management believes this increase can be attributed to increases in
business activity and assets under management.
Premium and other taxes, licenses and fees increased $.6 million to
$1.3 million in 1995 from $.7 million in 1994. This increase results from
state guaranty association assessments covering policies issued by insolvent
insurers. See Note 12 of Notes to Consolidated Financial Statements.
27
Income tax expense increased $.8 million to $5.6 million in 1995 from
$4.8 million in 1994. Taxes were provided at an effective rate of 34% on 1995
and 1994 income.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995, and 1994
INSURANCE PREMIUMS AND POLICY CHARGES increased $.1 million or 5%, to
$2.0 million in 1995 from $1.9 million in 1994, due primarily to a $.3
million increase in surrender charges received on increased surrenders of
annuity policies partially offset by a $.2 million decrease in SPIA sales.
NET INVESTMENT INCOME increased $2.3 million, or 6%, to $38.5 million
from $36.2 million in 1994. This increase reflects both an increase in
average invested assets from $1,886.5 million in 1994 to $1,973.6 million in
1995 and an increase in the average yield on invested assets from 7.7% for
the quarter ended September 30, 1994, to 7.8% for the same period in 1995.
The 1994 yield was impacted by losses generated by an investment in
investment partnerships. These partnerships form a fund of funds totalling
$22.4 million on September 30, 1995, which is structured in an attempt to
consistently provide returns in excess of the Standard & Poor's (S&P) 500
over time without regard to the general direction of financial markets. This
fund generated income of $1.0 million in 1995 compared to $.3 million in
1994.
NET INVESTMENT GAINS (LOSSES) were unchanged with a loss of $.7
million for both the 1995 and 1994 period. Gains and losses may be realized
upon securities which are disposed of for various reasons. The losses
realized during both the 1995 and 1994 period are the result of general portfo
lio management. Unrealized gains (losses) in the company's bond portfolio
were $50.8 million, $(105.6) million and $(68.7) million as of September 30,
1995, December 31, 1994 and September 30, 1994, respectively.
OTHER REVENUE increased $.3 million, or 50%, to $.5 million for the
1995 three months from $.2 million for the same period in 1994. This increase
is due to an increase in Omni-Tech sales.
BENEFITS, CLAIMS AND INTEREST CREDITED TO POLICYHOLDERS increased
$1.4 million, or 5%, to $29.9 million in 1995 from $28.5 million in 1994.
This increase results primarily from an increase in the average interest rate
credited on the company's annuity liabilities, from 5.8% as of September 30,
1994, to 6.0% as of September 30, 1995, along with an increase in annuity
liabilities to $2,033.2 million on September 30, 1995, from $1,944.1 million
on September 30, 1994.
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS (DAC) associated
with investment gains represents a benefit of $.2 million on $.7 million of
losses in both the 1995 and 1994 period. Amortization of DAC associated with
gross interest margin increased $.1 million to $2.7 million in 1995 from $2.6
million in 1994. Acquisition costs incurred during 1995 and deferred into
future policy periods were $9.0 million, compared with $6.4 million in 1994.
General insurance expenses increased $.5 million or 36% to $1.9
million for the 1995 quarter from $1.4 million for the same period in 1994.
Management believes this increase can be attributed to increases in business
activity and assets under management.
Premium and other taxes, licenses and fees increased $.2 million to
$.4 million in 1995 from $.2 million in 1994. This increase results from
state guaranty association assessments covering policies issued by insolvent
insurers. See Note 12 of Notes to Consolidated Financial Statements.
Income tax expense increased $.1 million to $1.8 million in 1995 from
$1.7 million in 1994. Taxes were provided at an effective rate of 32% on 1995
income and 34% on 1994 income.
28
LIQUIDITY AND CAPITAL RESOURCES
The company is an insurance holding company whose principal asset is
the common stock of American. The company's primary cash requirements are to
pay operating expenses.
As a holding company, the company relies on funds received from
American to meet its cash requirements at the holding company level. The
company receives funds from American in the form of commissions paid to
American Sales, investment fees paid to AIG, rent, administrative, printing
and data processing charges and dividends. The insurance laws of Kansas
generally limit the ability of American to pay cash dividends in excess of
certain amounts without prior regulatory approval and also require that certai
n agreements relating to the payment of fees and charges to the company by
American be approved by the Kansas Insurance Commissioner.
The liquidity requirements of American are met by premiums received
from annuity sales, net investment income received, and proceeds from
investments upon maturity, sale or redemption. The primary uses of funds by
American are the payment of surrenders, policy benefits, operating expenses
and commissions, as well as the purchase of assets for
investment.
For purposes of the company's consolidated statements of cash flows,
financing activities include premiums received from sales of SPDAs,
surrenders and death benefits paid, and
surrender and policy charges collected on these contracts. The net
cash provided by (used in) these particular financing activities for the nine
months ended September 30, 1995, and 1994, was ($91.7) million and $(143.8)
million, respectively.
The decrease in net cash provided by annuity contracts without life
contingencies in the first nine months of 1995 resulted primarily from a
$109.0 million increase in surrender and death benefits paid, from $181.2
million to $290.2 million offset by a $49.9 million increase in premiums
received from $206.9 million to $256.8 million.
Net cash provided by the company's operating activities was $117.4
million and $97.1
million in 1995 and 1994, respectively.
Cash provided by financing and operating activities and by the sale
and maturity of
portfolio investments is used primarily to purchase portfolio
investments and for the
payment of acquisition costs (commissions and expenses associated
with the sale and issue of policies). To meet its anticipated liquidity
requirements, the company purchases
investments taking into account the anticipated future cash flow
requirements of its
underlying liabilities. In addition, the company invests a portion of
its assets in short-term investments and maturities of less than one year (2%
and 2% as of September 30, 1995, and December 31, 1994, respectively). The
weighted average duration of the company's investment portfolio was 4.4 years
as of September 30, 1995.
The company continually assesses its capital requirements in light of
business developments and various capital and surplus adequacy ratios which
affect insurance companies. During the past five years, the company has met
its capital needs and those of American through several different sources
including bank borrowing and the sale of both preferred and common stock. On
December 31, 1991, the company issued 172,000 shares of its $2.00 Series B
Convertible Preferred Stock with a total stated value of $4.3 million. The
Preferred Stock was convertible at $7.50 per share into 573,332 shares of the
company's Common Stock. On December 30, 1992, the company issued and sold
235,294 shares of Common Stock at $10.625 per share to the company's
Leveraged Employee Stock Ownership Plan ("LESOP"). This purchase was financed
with the proceeds of a $2.5 million loan from American. For additional
information regarding the LESOP, see Note 6 of Notes to Consolidated
Financial Statements. In 1993, the company raised $29.4 million through the
sale of 3,451,668 shares of Common Stock. In December 31, 1994, the company
entered into a credit agreement with The First National Bank of Chicago and
Boatman's First National Bank of Kansas City, as Lenders. Under the terms of
this agreement, the Lenders have committed to lend up to $15,000,000 in the
form of a 5-year reducing credit facility. For additional
29
information
regarding this credit agreement, see Note 5 of Notes to Consolidated
Financial Statements.
Recent regulatory actions against certain large life insurers
encountering financial
difficulty have prompted the various state guaranty associations to
begin assessing life insurance companies for the resulting losses. For
further information regarding the effects of guaranty fund assessments, see
Note 11 of Notes to Consolidated Financial Statements.
REINSURANCE. The company had amounts receivable under reinsurance
agreements of 146.2 million and $149.7 million as of September 30, 1995, and
December 31, 1994, respectively. Of the amounts, $144.5 million and $147.9
million, respectively, were associated with a single insurer, ERC. In 1989,
the company entered into a coinsurance agreement which ceded 90% of the risk
on the company's block of Single Premium Whole Life (SPWL) policies written
prior to 1989 to ERC. The agreement provides that ERC assumes 90% of all risks
associated with each policy in the block. Under the terms of the contract,
the company continues to administer the policies and is reimbursed for all
payments made under the terms of those policies. The company also receives a
fee from the reinsurer for administering such policies. Cash settlements
under the contract are made with ERC on a monthly basis. If ERC were to
become insolvent, American would remain responsible for the payment of all
policy liabilities.
In addition, the company is a party to two assumption reinsurance
agreements with other reinsurers.
EFFECT OF INFLATION AND CHANGES IN INTEREST RATES. The company does
not believe that inflation has had a material effect on its consolidated
results of operations during the past three years. The company seeks to
manage its investment portfolio, in part, to reduce its exposure to interest
rate fluctuations. In general, the market value of the company's fixed income
securities increases or decreases directly with interest rate changes. For
example, if interest rates decline (as was the case in 1992 and 1993), the
company's fixed income investments generally will increase in market value,
while net investment income will decrease. Conversely, if interest rates rise
(as was the case in 1994), fixed income investments generally will decrease
in market value, while net investment income will increase.
In a rising interest rate environment (such as that experienced in
1994), the company's average cost of funds would increase over time as it
prices its new and renewing annuities to maintain a generally competitive
market rate. During such a rise in interest rates, new funds would be
invested in bonds with higher yields than the liabilities assumed. In a
declining interest rate environment, the company's cost of funds would
decrease over time, reflecting lower interest crediting rates on its fixed
annuities.
In addition to the increase in the company's average cost of funds
caused by a rising interest rate environment, surrenders of annuities that
are no longer protected by surrender charges increase. While the company
experienced a decrease in total surrenders during 1994, the decrease was
primarily due to the large number of bailout surrenders in 1993. Throughout
1994, the company saw an increase in surrenders of policies which no longer
were covered by surrender charges. Management believes the increased
surrenders experienced in 1994 were due to the increasing interest rates
throughout 1994. This trend has continued into 1995. Management believes that
surrenders are lower during periods of declining interest rates.
30
PART II. OTHER INFORMATION
AMVESTORS FINANCIAL CORPORATION
Item 1. Legal Proceedings
________________________________
The company has no material legal proceedings pending against it.
Item 2. Changes in Securities
_____________________________________
None
Item 3. Defaults upon Senior Securities
_________________________________________________
None
Item 4. Submission of Matters to a Vote of Security Holders
__________________________________________________________________________
None
Item 5. Other Information
________________________________
None
Item 6. Exhibits and Reports on Form 8-K
___________________________________________________
(a)Exhibits (numbered in accordance with Item 601 of Regulations
S-K).
Exhibit
Page Number or Incorporation
Number Description
by Reference
(2)(a) Plan and Agreement of Union dated
Exhibit (2) to Registration
July 10, 1986, between AmVestors
Statement on Form S-2,
Financial Corporation and American
File #2-82811 dated
Investors Life Insurance Company,
November 26, 1996.
Inc.
(2)(b) Resolutions of the Board of
Exhibit (2)(a) to Form 10-Q
Directors dated January 7, 1988,
dated May 11, 1988.
providing for succession to the
position of Chairman of the Board
of Directors
(2)(c) Agreement and Plan of Merger dated
PP 34-74
September 8, 1995, between Financial
Benefit Group, Inc., AmVestors
Financial Corporation and AmVestors
Acquisition Subsidiary, Inc.
(2)(d) Amendment No. 1 dated October 17, 1995
PP 75-76
to the Agreement and Plan of Merger
dated September 8, 1995, between
Financial Benefit Group, Inc.,
AmVestors Financial Corporation and
AmVestors Acquisition Subsidiary, Inc.
(4)(a) Specimen Common Stock Certificate
Exhibit (4)(a) to Form 10-K
dated March 30, 1995.
31
Exhibit
Page Number or Incorporation
Number Description
by Reference
(10)(a) Amendment No. 1 to Credit Agreement
Exhibit (10)(a) to Form 10-Q
dated December 29, 1994, between the
dated August 11, 1995.
company, First National Bank of Chicago
and Boatmen's First National Bank
of Kansas City
(11) Calculation of Earnings (Loss) per Share
P 77
(20)(a) Reports on Form 8-K
The company filed a report on Form 8-K
on September 22, 1995
(22) Wholly-owned subsidiaries of the
registrant:
American Investors Life Insurance
Company, Inc.
415 Southwest Eighth Avenue
Topeka, Kansas 66603
American Investors Sales Group, Inc.
(formerly Gateway Corporation)
415 Southwest Eighth Avenue
Topeka, Kansas 66603
AmVestors Investment Group, Inc.
(formerly American Investors Sales
Group, Inc.)
415 Southwest Eighth Avenue
Topeka, Kansas 66603
Omni-Tech Medical, Inc.
6206 Southwest Ninth Terrace
Topeka, Kansas 66615
(27) Financial Data Schedule
32
SIGNATURES
_____________________________
Pursuant to the requirements of Section 13 or 15 (d) 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.
AMVESTORS FINANCIAL CORPORATION
By: /c/Ralph W. Laster, Jr.
Ralph W. Laster, Jr.
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
and Chief Financial Officer
(Principal Accounting Officer)
Date: November 13, 1995
____________________
33