UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
================================
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------------- to -----------------
Commission file number 0-21459
AmerUs Life Holdings, Inc.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Iowa 42-1459712
- ------------------------------------------------------------------------------
(State of other jurisdiction of (IRS employer identification no.)
incorporation or organization)
699 Walnut Street, Des Moines, Iowa 50309-3948
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (515) 362-3600
- ------------------------------------------------------------------------------
Former name, former address and formal fiscal year, if changed since last report
Indicate by check /x/ 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 //
The number of shares outstanding of each of the registrant's classes of common
stock on August 11, 1998 was as follows:
Class A, Common Stock 29,734,918 shares
Class B, Common Stock 5,000,000 shares
Exhibit index - Page -- 38
Page 1 of 47
INDEX
Page No.
Part I - Financial Information . . . . . . . . . . . . . . . . . . . .3
Item 1. Consolidated Financial Statements . . . . . . . . . . . . . .3
Consolidated Balance Sheets June 30, 1998
(Unaudited) and December 31, 1997 . . . . . . . . . . . . . . . .3
Consolidated Statements of Income (Unaudited) - For
the Six Months Ended June 30, 1998 and 1997 and the
Three Months Ended June 30, 1998 and 1997 . . . . . . . . . . . .6
Consolidated Statement of Comprehensive Income
(Unaudited - For the Six Months Ended June 30, 1998
and 1997 and the Three Months Ended June 30, 1998 and 1997) . . .8
Consolidated Statements of Cash Flows (Unaudited) -
For the Six Months Ended June 30, 1998 and 1997 . . . . . . . . .9
Notes to Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . .. . . 12
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition . . . . . . . . .17
Part II - Other Information . . . . . . . . . . . . . . . . . . .. . 35
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . .. . . 35
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 36
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . .. . 38
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars In thousands)
June 30, December 31,
1998 1997
-------------- ---------------
(Unaudited)
Assets
Investments:
Securities available-for-sale at fair value:
Fixed maturity securities $6,745,359 $6,851,427
Equity securities 82,340 61,480
Short-term investments 31,120 12,595
Securities held for trading purposes at
fair value
Fixed maturity securities 894 22,955
Equity securities 449 -
Mortgage loans on real estate 512,717 462,473
Real estate 3,766 8,670
Policy loans 111,593 117,865
Other investments 220,844 158,073
----------- -----------
Total investments 7,709,082 7,695,538
Cash 160,061 58,081
Accrued investment income 81,801 84,713
Premiums and fees receivable 2,712 3,445
Reinsurance receivables 5,033 6,203
Deferred policy acquisition costs 166,945 118,896
Value of business acquired 252,903 266,014
Investment in unconsolidated subsidiaries 27,940 26,849
Goodwill 216,677 220,250
Property and equipment 23,548 22,863
Other assets 344,698 359,308
Closed block assets 1,478,152 1,391,848
----------- -----------
Total assets $10,469,552 $10,254,008
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Policy reserves and policyowner funds:
Future life and annuity
policy benefits $7,091,756 $7,074,444
Policyowner funds 92,569 89,641
---------- ----------
Total 7,184,325 7,164,085
Accrued expenses 37,999 39,095
Dividends payable to policyowners 585 1,575
Policy and contract claims 6,416 4,548
Income taxes payable 27,614 12,753
Deferred income taxes 7,686 16,914
Other liabilities 164,944 111,180
Debt 275,856 266,435
Closed block liabilities 1,717,216 1,623,432
----------- -----------
Total liabilities 9,422,641 9,240,017
------------ ------------
Company obligated mandatorily redeemable preferred
capital securities of subsidiary trust holding
solely junior subordinated debentures of the
Company 86,000 86,000
Stockholders' equity
Preferred stock, no par value,
20,000,000 shares authorized,
none issued - -
Common stock, Class A, no par value,
180,000,000 shares authorized 1998;
75,000,000 shares authorized 1997;
29,734,918 shares issued and
outstanding, less treasury stock 29,735 29,735
Common stock, Class B, no par value,
50,000,000 shares authorized;
5,000,000 shares issued and
outstanding 5,000 5,000
Paid in capital 383,686 383,686
Accumulated other comprehensive income 54,614 55,747
Retained earnings 489,498 453,823
Cost of treasury stock (1,622) -
---------- ----------
Total stockholders' equity 960,911 927,991
---------- ----------
Total liabilities and
stockholders' equity $10,469,552 $10,254,008
=========== ===========
/TABLE
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
---------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Insurance premiums $38,726 $20,928 $21,432 $12,752
Universal life and annuity
product charges 34,252 23,411 17,872 12,229
Net investment income 259,995 99,226 126,822 48,308
Realized gains on investments 10,783 9,523 4,564 4,264
Contribution from the
Closed Block 16,836 13,410 7,861 4,136
------- ------- ------- -------
360,592 166,498 178,551 81,689
------- ------- ------- -------
Benefits and expenses:
Policyowner benefits 219,286 86,999 111,930 41,478
Underwriting, acquisition, and
insurance expenses 38,449 22,438 17,215 11,421
Amortization of deferred policy
acquisition costs on policies
purchased or produced 30,688 10,973 15,750 5,916
Dividends to policyowners 710 173 395 52
------- ------- ------- -------
289,133 120,583 145,290 58,867
------- ------- ------- -------
Income from operations 71,459 45,915 33,261 22,822
Interest expense 12,610 5,961 5,928 3,014
------- ------- ------- -------
Income before income tax expense
and equity in earnings of
unconsolidated subsidiary 58,849 39,954 27,333 19,808
Income tax expense 17,319 11,586 7,142 5,847
------- ------- ------- -------
Income before equity in earnings
of unconsolidated subsidiary 41,530 28,368 20,197 13,961
Equity in earnings of unconsolidated
subsidiary 1,091 654 673 481
------- ------- ------- -------
Net income $42,621 $29,022 $20,864 $14,442
======= ======= ======= =======
Earnings per common share
Basic $1.23 $1.25 $0.60 $0.62
Diluted $1.21 $1.25 $0.60 $0.62
===== ===== ===== =====
Weighted average Common
Shares outstanding
Basic 34,733,710 23,155,989 34,732,514 23,155,989
Diluted 35,086,382 23,155,989 35,021,958 23,155,989
/TABLE
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Net income $ 42,621 $29,022 $20,864 $14,442
Other comprehensive (loss), net of tax:
Unrealized gains on securities:
Unrealized holding gains arising
during period (net of deferred tax of
$(2,175) and $(677) for the six
months ended and $(996) and $13,711
for the three months ended) 4,039 1,258 1,849 (25,462)
Less: reclassification adjustment
for gains included in net income
(net of deferred tax of $5,286
and $3,782 for six months ended
and $1,530 and $1,606 for three
months ended) (5,172) (5,515) (1,334) (2,342)
------- ------- ------ -----
Other comprehensive income (loss) (1,133) (4,257) 515 (27,804)
------- ------- ------ ------
Comprehensive income $41,488 $24,765 $21,379 ($13,362)
======= ======= ====== =======
/TABLE
AMERUS LIFE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Six Months Ended June 30,
--------------------------
1998 1997
------ ------
Cash flows from operating activities:
Net income $42,621 $29,022
Adjustments to reconcile net
income to net cash provided
by operating activities:
Policyowner assessments on
universal life and annuity products (34,252) (20,287)
Interest credited to
policyowner account balances 91,522 53,137
Realized investment (gains) losses (10,783) (9,523)
Change in:
Accrued investment income 2,912 (2,650)
Reinsurance ceded receivables 1,170 (635)
Deferred policy acquisition
costs (36,875) (12,195)
Liabilities for future
policy benefits 83,435 (16,381)
Policy and contract claims
and other policyowner funds 1,868 (1,627)
Income taxes:
Current 16,433 4,183
Deferred (6,465) (5,718)
Other, net 6,862 20,347
Change in Closed Block assets
and liabilities, net 109,318 68,656
---------- ----------
Net cash provided by operating
activities 267,766 106,329
---------- ----------
Cash flows from investing activities:
Purchase of fixed maturities
available for sale (1,865,403) (620,969)
Maturities, calls, and principal
reductions of fixed maturities
available for sale 2,017,374 538,801
Purchase of equity securities (112,055) (23,042)
Proceeds from sale of equity
securities 119,296 26,706
Proceeds from repayment and sale
of mortgage loans 44,265 26,174
Purchase of mortgage loans (99,077) (30,653)
Proceeds from sale of real estate
and other invested assets 15,317 -
Purchase of real estate and other
invested assets (65,796) 14,670
Change in policy loans, net 6,272 (882)
Tax on capital gains 12,507 (3)
Other assets, net 16,379 39,271
Change in Closed Block
investments, net (106,115) (41,758)
---------- ---------
Net cash used in investing
activities (17,036) (71,685)
---------- ---------
Cash flows from financing activities:
Deposits to policyowner account
balances 421,044 63,191
Withdrawals from policyowner
account balances (570,647) (123,775)
Change in debt, net 9,421 (106,833)
Purchase of treasury stock (1,622) -
Initial public offering of
common stock - 55,027
Dividends to shareholders (6,946) (2,316)
Issuance of company-obligated
mandatory redeemable
capital securities - 86,000
--------- ---------
Net cash used in financing
activities (148,750) (28,706)
------ ------
Net (decrease) increase in cash 101,980 5,938
Cash at beginning of period 58,081 1,814
------- -------
Cash at end of period $160,061 $7,752
======== ======
Supplemental disclosure of cash
activities:
Interest paid $12,069 $2,919
======= ======
Income taxes paid $24,541 $26,235
====== =======
/TABLE
AMERUS LIFE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All adjustments were of a
normal recurring nature, unless otherwise noted in Management's Discussion and
Analysis and the Notes to Financial Statements. Operating results for the three
months and six months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998. For further
information and for capitalized terms not defined in this 10-Q, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
SFAS 130
On January 1, 1998, the Company adopted SFAS 130, "Reporting Comprehensive
Income," and restated prior years' financial statements to conform to the
reporting standard. SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income includes all changes in
shareholders' equity during a period except those resulting from investments by
owners and distributions to owners. The adoption of SFAS 130 resulted in
revised and additional disclosures but had no effect on the financial position,
results of operations, or liquidity of the Company.
SFAS 131
On January 1, 1998, the Company adopted SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS 131 establishes
standards for the way that public businesses report information about operating
segments in financial statements. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and assess performance. Generally, financial information is
required to be reported on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to segments. The
provisions of SFAS 131 are of a reporting nature and have no impact on the
financial position or results of operations of the Company, as the life
insurance and annuity operation is the Company's only business segment.
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 financial statement presentation.
EARNINGS PER COMMON SHARE
The Company adopted the provisions of SFAS 128 "Earnings per Share" at
December 31, 1997, which had no effect on the Company's previously reported
earnings per share information. Basic earnings per share of common stock are
computed by dividing net income by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share assumes the issuance
of common shares applicable to stock options and warrants calculated using the
treasury stock method.
(2) CLOSED BLOCK
Summarized financial information of the Closed Block balance sheet as of
June 30, 1998 and December 31, 1997 and statements of income for the six months
and three months ended June 30, 1998 and 1997 are as follows (in thousands):
Assets:
June 30, 1998 December 31, 1997
--------------- ------------------
Fixed maturity securities, at fair value $1,083,852 $1,053,066
Short-term investments, at fair value 55,320 660
Policy loans 178,076 168,368
Other investments 5,619 591
Cash 1,678 21
Accrued investment income 12,674 12,617
Premiums and fees receivable 3,009 3,591
Deferred policy acquisition costs 130,947 143,765
Other assets 6,977 9,169
---------- ----------
$1,478,152 $1,391,848
========== ==========
Liabilities:
Future life and annuity policy benefits $1,480,559 $1,448,725
Policyowner funds 6,937 6,786
Accrued expenses 1,349 5,980
Dividends payable to policyowners 147,560 135,985
Policy and contract claims 5,607 5,966
Other liabilities 75,204 19,990
---------- ----------
$1,717,216 $1,623,432
========== ==========
/TABLE
Six months ended Six months ended
June 30, 1998 June 30, 1997
------------------ ------------------
Revenues and Expenses:
Insurance premiums $99,932 $104,994
Universal life and annuity
product charges 7,266 6,883
Net investment income 57,339 54,278
Realized gains on investments 8,177 (989)
Policyowner benefits (99,372) (105,258)
Underwriting, acquisition, and
insurance expenses (2,886) (2,821)
Amortization of deferred policy
acquisition costs on policies produced (12,818) (14,111)
Dividends to policyowners (40,802) (29,566)
------ ------
Contribution from the Closed Block
before income taxes $16,836 $13,410
====== ======
Three months ended Three months ended
June 30, 1998 June 30, 1997
------------------ ------------------
Revenues and Expenses:
Insurance premiums $49,516 $50,064
Universal life and annuity
product charges 3,745 3,152
Net investment income 28,156 27,977
Realized gains on investments 7,308 (416)
Policyowner benefits (50,341) (55,527)
Underwriting, acquisition, and
insurance expenses (1,525) (1,334)
Amortization of deferred policy
acquisition costs on policies produced (4,784) (7,280)
Dividends to policyowners (24,214) (12,500)
------ ------
Contribution from the Closed Block
before income taxes $7,861 $4,136
====== ======
(3) DEBT AND CAPITAL SECURITIES
Debt consists of the following (in thousands):
June 30, December 31,
1998 1997
------------ ----------------
(Unaudited)
Federal Home Loan Bank short-term loan
with an interest rate of 5.88% $ 9,610 $ -
Federal Home Loan Bank community
investment long-term advances
with a weighted average interest
rate of 6.35% at June 30, 1998 16,246 16,435
Revolving credit agreement bearing
interest at 6.34% as of June 30, 1998 125,000 250,000
Senior Notes bearing interest at
6.95% due June 2005 125,000 -
-------- --------
$275,856 $266,435
======== ========
On June 16, 1998, the Company issued $125,000,000 of 6.95% senior notes due
June 15, 2005. The proceeds of the offering were utilized to pay down amounts
owing under the revolving credit agreement and the commitment under that credit
facility was reduced from $250 million to $150 million.
For an additional discussion of the terms of the other above
indebtedness, refer to the Company's consolidated financial statements as of
December 31, 1997.
On February 3, 1997, the Company issued $86,000,000 of 8.85% Capital
Securities, Series A, through a wholly-owned subsidiary trust. The sole asset
of the trust is the junior subordinated debentures of the Company in the
principal amount of $88.66 million with interest at 8.85% maturing February 1,
2027. The Company has fully and unconditionally guaranteed the obligation of
the trust under the Capital Securities and is obligated to mandatorily redeem
the securities on February 1, 2027. The Company may prepay the securities at
anytime after February 1, 2007.
(4) FEDERAL INCOME TAXES
The effective income tax rate for the period ending March 31, 1998 was
lower than the prevailing corporate rate primarily as a result of earned low
income housing and historic rehabilitation credits.
(5) COMMITMENTS AND CONTINGENCIES
AmerUs Life Insurance Company ("AmerUs Life") and its joint venture partner
are contingently liable in the event the joint venture, Ameritas Variable Life
Insurance Company ("AVLIC"), cannot meet its policyholder obligations. At June
30, 1998, AVLIC had statutory assets of $1,687.6 million, liabilities of
$1,642.3 million, and surplus of $45.3 million.
(6) RELATED PARTY TRANSACTIONS
AmerUs Life had a master agreement of purchase and sale with AmerUs Bank,
whereby AmerUs Life agreed to purchase whole loans from AmerUs Bank from time to
time. AmerUs Life also had a loan servicing agreement with AmerUs Bank, whereby
AmerUs Bank acted as servicer of the loans and received a servicing fee ranging
from 50 to 58 basis points of the outstanding principal balances of the loans.
During the six months ended June 30, 1998, AmerUs Life purchased loans with a
total outstanding principal balance of $109.4 million at a $6.8 million
premium. Both agreements with AmerUs Bank were terminated on July 31, 1998.
Similar arrangements were entered into with AmerUs Home Equity, a wholly-owned
subsidiary of AmerUs Group Co.
(7) ACQUISITIONS
On October 23, 1997, the Company acquired all of the outstanding capital
stock of Delta Life Corporation ("Delta") in exchange for cash of approximately
$165 million. The acquisition was accounted for using the purchase method of
accounting with goodwill of $69.4 million established which is being amortized
on a straight-line basis over 30 years.
On December 19, 1997, the Company acquired AmVestors Financial Corporation
in a stock exchange valued at approximately $350 million. The acquisition was
accounted for using the purchase method of accounting with goodwill of $152.9
million established which is being amortized on a straight-line basis over 30
years.
(8) SUBSEQUENT EVENT
On July 27, 1998, the Company completed the public offering of 4,150,000
units of 7% Adjustable Conversion-rate Equity Security Units. The unit price
was $31.5625 with net proceeds to the Company of $127,513,315. Each unit
consists of a forward common stock purchase contract and a quarterly income
preferred security bearing interest at 6.86% and due July 27, 2003.
AmerUs Life Holdings, Inc. June 30, 1998
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Overview
The Company is a holding company engaged through its subsidiaries in the
business of marketing, underwriting and distributing a broad range of individual
life insurance and annuity products to individuals and business in 49 states,
the District of Columbia and the US Virgin Islands. The Company's primary
product offerings consist of whole life, universal life and term life insurance
policies and fixed annuities. Since April 1, 1996 the Company has been a party
to the Ameritas Joint Venture with Ameritas Life Insurance Corp., through which
it markets fixed annuities and sells variable annuities and variable life
insurance products.
In accordance with GAAP, universal life insurance premiums and annuity
deposits received are reflected as increases in liabilities for policyowner
account balances and not as revenues. Revenues reported for universal life and
annuity products consist of policy charges for the cost of insurance,
administration charges and surrender charges assessed against policyowner
account balances. Surrender benefits paid relating to universal life insurance
policies and annuity products are reflected as decreases in liabilities for
policyowner account balances and not as expenses. Amounts for interest credited
to universal life and annuity policyowner account balances and benefit claims in
excess of policyowner account balances are reported as expenses in the financial
statements. The Company receives investment income earned from the funds
deposited into account balances by universal life and annuity policyowners, the
majority of which is passed through to such policyowners in the form of interest
credited.
Premium revenues reported for traditional life insurance products are
recognized as revenues when due. Future policy benefits and policy acquisition
costs are recognized as expenses over the life of the policy by means of a
provision for future policy benefits and amortization of deferred policy
acquisition costs.
The costs related to acquiring new business, including certain costs of
issuing policies and certain other variable selling expenses (principally
commissions), defined as deferred policy acquisition costs, are capitalized and
amortized as an expense primarily in proportion to expected profits or margins
from such policies. This amortization is adjusted when current or estimated
future gross profits or margins on the underlying policies vary from previous
estimates. For example, the amortization of deferred policy acquisition costs is
accelerated when policy terminations are higher than originally estimated or
when investments supporting the policies are sold at a gain prior to their
anticipated maturity. Death and other policyowner benefits reflect exposure to
mortality risk and fluctuate from period to period based on the level of claims
incurred within insurance retention limits. The profitability of the Company is
primarily affected by expense levels, interest spread results (i.e., the excess
of investment earnings over the interest credited to policyowners) and
fluctuations in mortality, persistency and other policyowner benefits. The
Company has the ability to mitigate adverse experience through adjustments to
credited interest rates, policyowner dividends or cost of insurance charges.
Sales
The following table sets forth information regarding the Company's sales
activity by product:
Sales Activity by Product
For the Six For the Three
Months Ended Months Ended
June 30, June 30,
---------------- ---------------
($ in thousands) 1998 1997 1998 1997
---- ---- ---- ----
Individual life insurance:
Participating whole life $ 8,474 $ 8,603 $4,904 $4,018
Universal life 4,325 3,666 2,149 1,560
Term life 3,094 1,756 1,638 1,193
-------- ------- -------- ------
Total life insurance (A) $15,893 $14,025 $8,691 $6,771
======== ======= ======== ======
Annuities (B) $389,731 $25,611 $215,035 $13,067
======== ======= ======== =======
(A) Direct first year annualized premiums
(B) Direct collected premiums
Life insurance sales as measured by annualized premiums increased by $1.9
million, or 13.3%, for the six months, and increased by $1.9 million, or 28.4%,
for the three months ended June 30, 1998, from the same periods in 1997. As a
result of the introduction of new term products during the first quarter of 1997
and the introduction of three new term plans in January, 1998, sales of term
life insurance products during the first six months of 1998 increased by $1.3
million or 76.2%, from the same period in 1997. Sales of term life insurance
during the quarter ended June 30, 1998 increased by $0.4 million, or 37.3%, from
the same period in 1997. Sales of universal life insurance increased by $0.7
million and by $0.6 million for the six months and three months ended June 30,
1998, respectively, from the same periods in 1997. Increased sales of universal
life are attributable to the introduction of a new second-to-die universal life
product during the third quarter of 1997. Sales of participating whole life
insurance increased during the second quarter of 1998 and for the first six
months of 1998 are nearly level with the first six months of 1997. Annuity
sales for the first six months of 1998 include $45.2 million and $322.3 million
from Delta Life Corporation ("Delta") and AmVestors Financial Corporation
("AmVestors"), respectively, companies acquired in the fourth quarter of 1997.
Annuity sales for the quarter ended June 30, 1998 include $24.1 million and
$179.3 million from Delta and AmVestors, respectively.
Premium Receipts
The following table sets forth the Company's collected premiums, including
collected premiums associated with the Closed Block, for the periods indicated:
Collected Premiums by Product
For the Six Months Ended For the Three Months Ended
June 30, June 30,
-------------------------- ----------------------
($ in thousands) 1998 1997 1998 1997
------ ------ ------ ------
Direct individual life premiums collected:
Traditional life:
First year & single $ 39,302 $ 35,841 $19,791 $17,602
Renewal 86,973 83,703 41,961 41,021
-------- -------- ------- -------
Total $126,275 $119,544 $61,752 $58,623
======== ======== ======= =======
Universal life:
First year & single $ 8,733 $ 6,992 $ 4,655 $ 3,063
Renewal 37,408 37,585 18,329 18,741
-------- -------- ------- -------
Total $ 46,141 $ 44,577 $22,984 $21,804
======== ======== ======= =======
Total direct life $172,416 $164,121 $ 84,736 $ 80,427
Reinsurance assumed 408 814 311 468
Reinsurance ceded (5,423) (4,926) (2,587) (2,485)
------- -------- -------- --------
Total individual life,
net of reinsurance $167,401 $160,009 $82,460 $ 78,410
======= ======== ======= ========
Direct annuity premiums collected:
Individual $388,676 $ 25,611 $214,688 $ 13,067
Group 1,055 - 347 -
-------- -------- -------- --------
Total annuities 389,731 25,611 215,035 13,067
Reinsurance ceded (1,058) (281) (91) (101)
-------- -------- -------- --------
Total annuities, net
of reinsurance $388,673 $25,330 $214,944 $12,966
======== ======= ======== =======
Other collected premiums, net
of reinsurance $ (359) $ 119 $(305) $52
====== ====== ====== ======
Total collected premiums,
net of reinsurance $555,715 $185,458 $297,099 $91,428
======== ======== ======== =======
Annuity premiums, net of reinsurance, for the six months and three months
ended June 30, 1998, include $366.6 million and $203.4 million, respectively,
from Delta and AmVestors, in the aggregate.
Life Insurance and Annuities in Force
The following table sets forth information regarding the Company's life
insurance and annuities in force for each date presented:
Life Insurance and Annuities in Force
As of June 30,
------------------
($ in thousands) 1998 1997
------ ------
Individual life insurance:
Traditional life
Number of policies 255,767 252,101
GAAP life reserves $1,509,997 $1,254,953
Face amounts $18,764,000 $17,113,000
Universal life
Number of policies 116,409 118,720
GAAP life reserves $881,951 $835,914
Face amounts $12,116,000 $12,125,000
Total life insurance
Number of policies 372,176 370,821
GAAP life reserves $2,391,948 $2,090,867
Face amounts $30,880,000 $29,238,000
Annuities:
Number of policies 189,279 52,654
GAAP reserves $6,159,895 $1,290,683
Group life insurance:
Number of lives 16,573 30,235
Face amounts $438,000 $870,000
Included in the June 30,1998 annuity amounts are approximately 152,000 policies
and $4.9 billion of GAAP reserves from Delta and AmVestors. The Company sold
substantially all of its group life business as of July 1, 1996 and is no longer
actively marketing this line of business.
Adjusted Operating Income
The following table reflects net income adjusted to eliminate certain
items (net of applicable income taxes) which management believes are not
necessarily indicative of overall operating trends. For example, net realized
capital gains or losses on investments, excluding gains or losses on convertible
debt which are considered core earnings, are eliminated. Different items are
likely to occur in each period presented and others may have different opinions
as to which items may warrant adjustment. The adjusted operating income shown
below does not constitute net income computed in accordance with GAAP.
For the Six Months Ended For the Three Months Ended
June 30, June 30,
-------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except per share amounts)
Net income $42,621 $29,022 $20,864 $14,442
Net realized (gains) losses
on investments (A) (3,147) (5,188) (882) (2,207)
------- ------- ------- -------
Adjusted operating income $39,474 $23,834 $19,982 $12,235
======= ======= ======= =======
Adjusted operating income per
common share (B):
Basic $ 1.14 $1.03 $0.58 $0.53
Diluted $ 1.13 $1.03 $ 0.57 $0.53
(A) Represents non-core realized gains or losses on investments less that
portion of the amortization of deferred policy acquisition costs adjusted
for income taxes on such amounts. Realized gains may vary widely between
periods. Such amounts are determined by management's timing of individual
transactions and do not necessarily correspond to the underlying operating
trends.
(B) Basic adjusted operating income per common share for the six months ended
and three months ended June 30, 1998 is calculated using 34.73 million
weighted average shares of common stock outstanding. Diluted adjusted
operating income per common share for the six months ended June 30, 1998 is
calculated using 35.09 million weighted average shares outstanding. Diluted
adjusted operating income per common share for the three months ended June
30, 1998 is calculated using 35.02 million weighted average shares of
common stock outstanding. The basic and diluted adjusted operating income
per common share for the six months and three months ended June 30, 1997 is
calculated using 23.16 million shares of common stock outstanding.
The Closed Block
The Closed Block was established on June 30, 1996. Insurance policies which
had a dividend scale in effect as of June 30, 1996 were included in the Closed
Block. The Closed Block was designed to provide reasonable assurance to owners
of insurance policies included therein that, after the Company's reorganization,
assets would be available to maintain the dividend scales and interest credits
in effect prior to the Company's reorganization if the experience underlying
such scales and credits continues.
The contribution to the operating income of the Company from the Closed
Block is reported as a single line item in the income statement. Accordingly,
premiums, product charges, investment income, realized gains or losses on
investments, policyowner benefits and dividends attributable to the Closed
Block, less certain minor expenses including amortization of deferred policy
acquisition costs, are shown as a net number under the caption the "Contribution
from the Closed Block." This results in material reductions in the respective
line items in the income statement while having no effect on net income. The
expenses associated with the administration of the policies included in the
Closed Block and the renewal commissions on these policies are not charged
against the Contribution from the Closed Block, but rather are grouped with
underwriting, acquisition and insurance expenses. Also, all assets allocated to
the Closed Block are grouped together and shown as a separate item entitled
"Closed Block Assets." Likewise, all liabilities attributable to the Closed
Block are combined and disclosed as the "Closed Block Liabilities."
RESULTS OF OPERATIONS
SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
A summary of the Company's revenues follows:
For the Six Months For the Three Months
Ended June 30, Ended June 30,
------------------ -------------------
($ in thousands) 1998 1997 1998 1997
---- ---- ---- ----
Insurance premiums
Traditional life insurance
premiums $ 22,244 $ 12,465 $12,103 $7,907
Immediate annuity and
supplementary contract
premiums 16,319 8,395 9,242 4,802
Other premiums 163 68 87 43
-------- -------- -------- -------
Total insurance premiums 38,726 20,928 21,432 12,752
Universal life product charges 23,281 23,003 11,617 11,974
Annuity product charges 10,971 408 6,255 255
-------- -------- -------- -------
Total product charges 34,252 23,411 17,872 12,229
Net investment income 259,995 99,226 126,822 48,308
Realized gains on investments 10,783 9,523 4,564 4,264
Contribution from the Closed Block 16,836 13,410 7,861 4,136
-------- -------- -------- -------
Total revenues $360,592 $166,498 $178,551 $81,689
======== ======== ======== =======
Individual life and annuity premiums and product charges increased by $28.6
million, or 64.5%, for the six months and increased by $14.3 million, or 57.3%,
for the three months ended June 30, 1998 from the same periods in 1997.
Included in the 1998 increases were $16.5 million and $10.2 million of insurance
and annuity premium and product charges from Delta and AmVestors combined, for
the six month and three month period, respectively. Insurance premiums increased
by $17.8 million for the six month period and by $8.7 million for the three
month period ended June 30, 1998, compared to the same periods ended June 30,
1997. Included in the increased insurance premiums in 1998 were $6.3 million
and $4.4 million in aggregate from Delta and AmVestors for the six months and
three months ended June 30, 1998, respectively. Traditional life insurance
premiums increased by $9.8 million for the six months and increased by $4.2
million for the three months as a result of continued growth in renewal premiums
on traditional life insurance policies not included in the Closed Block (as
defined below), and increased sales in 1998 for both periods. Immediate annuity
deposits and supplementary contract premiums were $7.9 million higher for the
six months and $4.4 million higher for the three months ended June 30, 1998
compared to the same periods in 1997, with $6.1 million and $4.3 million in
aggregate from Delta and AmVestors for the 1998 six month and three month
periods, respectively. The increased premiums, exclusive of Delta and AmVestors,
for the six month period were primarily due to higher sales of immediate
annuities.
Universal life product charges increased by $0.3 million for the six months
ended June 30, 1998 primarily due to increased cost of insurance charges as a
result of the normal aging of the block of business. The product charges were
$0.3 million lower for the three months ended June 30, 1998 due to higher
reinsurance costs during the quarter compared to the same period in 1997.
Annuity product charges increased by $10.5 million and by $6.0 million for
the six months and three months ended June 30, 1998, respectively, due to the
inclusion of $10.2 million and $5.9 million of annuity product charges in
aggregate from Delta and AmVestors for the 1998 six month and three month
periods, respectively.
Net investment income increased by $160.7 million for the six months and
increased by $78.5 million for the three months ended June 30,1998 from the same
periods in 1997. Included in the 1998 increases in net investment income were
$162.9 million and $80.3 million in aggregate for Delta and AmVestors for the
six month and three month periods, respectively. The remaining $2.2 million and
$1.8 million decrease in net investment income for the six month and three month
periods were attributable to a decrease in average invested assets (excluding
market value adjustments, the Closed Block, Delta, and AmVestors) and lower
investment yields, primarily in the other asset and mortgage loan portfolios
partially offset by higher call premiums of $5.4 million and $4.4 million
for the six months and three months, respectively. Average invested assets
decreased by $51.6 million from the same period a year ago primarily due to
the continued runoff of AmerUs Life's individual deferred annuity business.
Effective May, 1996 substantially all new sales of individual deferred
annuities by AmerUs Life's distribution network have been made through
Ameritas Variable Life Insurance Company ("AVLIC").
Realized gains on investments were $10.8 million for the first six months
of 1998 and $4.6 million for the second quarter of 1998 compared to $9.5 million
and $4.3 million, respectively, for the same periods in 1997. Included in the
realized gains were $5.6 million and $3.6 million from Delta and AmVestors in
aggregate for the two periods in 1998. Gains on the convertible debt securities
considered to be a part of core operating earnings were $5.5 million and $2.7
million for the six months and three months ended June 30, 1998, respectively.
The level of realized gains is subject to fluctuation from period to period
depending on the prevailing interest rate and economic environment and the
timing of the sale of investments.
The Contribution from the Closed Block was $16.8 million and $7.8 million
for the six months and three months ended June 30, 1998, respectively. The
following table sets forth the operating results of the Closed Block for the
periods indicated.
For the Six For the Three
Months Ended Months Ended
June 30, June 30,
---------------- ----------------
($ in thousands) 1998 1997 1998 1997
------ ------ ------ ------
Revenues
Insurance premiums $99,932 $104,994 $49,516 $50,064
Product charges 7,266 6,883 3,745 3,152
Net investment income 57,339 54,278 28,156 27,977
Realized gains (losses)
on investments 8,177 (989) 7,308 (416)
-------- -------- ------- -------
Total revenues $172,714 $165,166 $88,725 $80,777
Benefits and expenses
Policyowner benefits 99,372 105,258 50,341 55,527
Underwriting, acquisition and
insurance expenses 2,886 2,821 1,525 1,334
Amortization of deferred policy
costs 12,818 14,111 4,784 7,280
Dividends to policyowners 40,802 29,566 24,214 12,500
------- ------- ------ -------
Total benefits and expenses 155,878 151,756 80,864 $76,641
------- ------- ------ -------
Contribution from the Closed Block $16,836 $13,410 $7,861 $4,136
======= ======= ====== ======
Closed Block insurance premiums decreased by $5.1 million for the six
months and by $0.6 million for the three months ended June 30, 1998. The
decrease in insurance premiums is consistent with the reduction of the Closed
Block's life insurance in force that is expected to continue over the life of
the block. Net investment income for the Closed Block increased by $3.1 million
for the six months and by $0.2 million for the three months ended June 30, 1998
due primarily to higher yields partially offset by a decrease in average
invested assets (excluding market value adjustments).
Realized gains on investments of the Closed Block were $9.2 million higher
for the six months and $7.7 million higher for the three months ended June 30,
1998 as compared to the same periods in 1997. The level of realized gains is
subject to fluctuation from period to period depending on the prevailing
interest rate and economic environment and the timing of the sale of
investments.
Closed block policyowner benefits decreased by $5.9 million for the six
months and by $5.2 million for the three months ended June 30, 1998 primarily
due to lower death benefits on Closed Block policies. The amortization of
deferred policy acquisition costs for the Closed Block decreased by $1.3 million
for the six months and by $2.5 million for the three months ended June 30, 1998.
Deferred policy acquisition costs are generally amortized in proportion to gross
margins, including realized capitalized gains. The change in the amortization
of deferred policy acquisition costs during the six months and three months
ended June 30, 1998, was primarily due to a restatement of estimated future
margins on the Closed Block reflected in the second quarter.
Closed Block dividends to policyowners increased by $11.2 million for the
six months and by $11.7 million for the three months ended June 30, 1998. The
increase for both periods was primarily due to the increase in the deferred
dividend liability resulting from increased realized capital gains and lower
death benefits in both periods.
A summary of the Company's policyowner benefits follows:
For the Six For the Three
Months Ended Months Ended
June 30, June 30,
---------------- ---------------
($ in thousands) 1998 1997 1998 1997
------ ------ ------ ------
Traditional life insurance
Death benefits $1,040 $699 $643 $197
Change in liability for
future policy benefits
and other policy
benefits 14,288 9,701 8,003 4,490
------- ------- ------ ------
Total traditional life
insurance benefits 15,328 10,400 8,646 4,687
Universal life insurance
Death benefits in excess of
cash value 7,676 10,095 3,016 3,656
Interest credited on policyowner
account balances 17,572 16,685 9,393 8,117
Other policy benefits 2,238 1,622 770 1,029
------- ------- ------- -------
Total universal life
insurance benefits 27,486 28,402 13,179 12,802
Annuities
Interest credited to deferred
annuity account balances 147,313 30,525 71,810 15,125
Other annuity benefits 28,227 17,236 17,924 8,838
-------- ------- -------- -------
Total annuity benefits 175,540 47,761 89,734 23,963
Miscellaneous benefits 932 436 371 26
-------- ------- -------- -------
Total policyowner benefits $219,286 $86,999 $111,930 $41,478
======== ======= ======== =======
Total policyowner benefits increased by $132.3 million for the six months
and increased by $70.5 million for the three months ended June 30, 1998 from the
same periods in 1997. Included in policyowner benefits were $131.4 million for
the six months and $68.4 million for the three months in the aggregate from
Delta and AmVestors primarily consisting of interest credited to deferred
annuity account balances. Traditional life insurance benefits increased by $4.9
million for the six month period and increased by $3.9 million for the three
month period primarily due to the growth and aging of such business in force.
Universal life insurance benefits decreased by $0.9 million for the six
months ended June 30, 1998 from the same period in 1997 primarily as a result of
decreased death benefits as a result of lower mortality, partially offset by
interest credited on account values.
Annuity benefits increased by $127.8 million for the six months and by
$65.8 million for the three months ended June 30, 1998 from the same periods in
1997. Included in the six month and three month 1998 amounts were $129.5
million and $67.5 million, respectively, of aggregate annuity benefits for Delta
and AmVestors. In the aggregate interest being credited to all annuity
portfolios within the Company has decreased 12 basis points from year end. The
annuity portfolios have increased from $6.1 billion in account value to $6.2
billion at June 30, 1998 from year end. The increase in other annuity benefits
for the six months and three months ended June 30, 1998 from the same periods in
1997 is primarily due to the acquisition of Delta and AmVestors.
A summary of the Company's expenses follows:
For the Six For the Three
Months Ended Months Ended
June 30, June 30,
------------------ -----------------
($ in thousands) 1998 1997 1998 1997
------ ------ ------ ------
Commission expense, net of deferrals $5,587 $4,081 $2,507 $1,968
Other underwriting, acquisition and
insurance expenses, net of
deferrals 32,862 18,357 14,708 9,453
Amortization of deferred policy
acquisition costs on policies
purchased or produced 30,688 10,973 15,750 5,916
------- ------- ------- -------
Total expenses $69,137 $33,411 $32,965 $17,337
======= ======= ======= =======
Commission expense, net of deferrals increased by $1.5 million for the six
months and by $0.5 million for the three months ended June 30, 1998 compared to
the same periods a year ago. Included in the 1998 amounts were $0.6 million for
the six month period and $0.2 million for the three month period of commission
expense, net of deferrals, in aggregate from Delta and AmVestors. Other
underwriting, acquisition and insurance expenses, net of deferrals, increased by
$14.5 million for the six months and increased by $5.3 million for the three
months ended June 30, 1998, from the same periods in 1997. Included in the
1998 amounts were $13.3 million and $4.8 million for the six month and three
month periods, respectively, of aggregate expenses for Delta and AmVestors.
Contributing to the increase in expenses from the prior year were $1.4 million
of costs related to Year 2000 initiatives.
The amortization of deferred policy acquisition costs on policies purchased
or produced increased by $19.7 million for the six months and increased by $9.8
million for the three months ended June 30, 1998, from the same periods in 1997.
Included in the 1998 amounts were $14.9 million for the six months and $8.2
million for the three months ended June 30, 1998 including amortization of
policies purchased of $14.0 million and $7.3 million for the respective periods,
for Delta and AmVestors combined. Deferred policy acquisition costs are
generally amortized in proportion to gross margins, including realized
capital gains. Increased mortality margins in both the six months and three
months ended June 30, 1998 from the same periods in 1997, on products for
which deferred costs are amortized, contributed to the higher amortizations
in 1998.
Income from operations increased by $25.5 million to $71.5 million and by
$10.4 million to $33.3 million for the six months and three months ended June
30, 1998, respectively, with the acquisitions of Delta and AmVestors accounting
for $24.8 million and $12.6 million for the respective periods in 1998.
Improved product margins, in large part the result of better mortality,
contributed to the remaining increase in income from operations for the first
six months of 1998. The decrease in income from operations for the three months
ended June 30, 1998, exclusive of Delta and AmVestors, is primarily due to
increased expenses and lower net investment income from the same period in 1997.
Interest expense increased by $6.6 million to $12.6 million for the six
months and by $2.9 million to $5.9 million for the three months ended June 30,
1998. The increased interest expense in both periods was primarily due to
increased debt levels resulting from the fourth quarter acquisition of Delta and
AmVestors.
Income before income tax expense and equity in earnings of unconsolidated
subsidiary increased by $18.9 to $58.8 million for the six months and by $7.5
million to $27.3 million for the three months ended June 30, 1998 compared the
same periods in 1997. Included in the 1998 amounts were $24.8 million and $12.6
million for the six months and for the second quarter, respectively, in
aggregate for Delta and AmVestors. The decrease in incomes before income tax
expense and equity in earnings of unconsolidated subsidiary exclusive of Delta
and AmVestors for the six month and three month periods are primarily due to
higher interest expense related to the acquisition of Delta and AmVestors.
Income tax expense increased by $5.7 million to $17.3 million for the six
months and by $1.3 million to $7.1 million for the three months ended June 30,
1998 as compared to the same periods in 1997. The increase in income tax
expense was primarily due to the higher pre-tax income including income from the
recent acquisitions of Delta and AmVestors. The effective tax rate for the six
month period of 1998 was 29.4% compared to 29.0% for the same period in 1997.
The effective tax rate for the second quarter of 1998 was 26.1% compared to
29.5% for the same period in 1997.
Net income increased by $13.6 million to $42.6 million for the six months
and by $6.4 million to $20.8 million for the three months ended June 30, 1998
compared to the same periods in 1997, with the recent acquisitions of Delta and
AmVestors adding $16.3 million and $9.5 million in the 1998 respective periods.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
THE COMPANY
The Company's cash flows from operations consist of dividends from
subsidiaries, if declared and paid, interest income on loans and advances to its
subsidiaries (including a surplus note issued to the Company by AmerUs Life),
investment income on assets held by the Company and fees which the Company
charges its subsidiaries and certain other of its affiliates for management
services, offset by the expenses incurred for debt service, salaries and other
expenses.
The Company intends to rely primarily on dividends and interest income from
its life insurance subsidiaries in order to make dividend payments to its
shareholders. The payment of dividends by its life insurance subsidiaries is
regulated under various state laws. Under Iowa law, AmerUs Life and Delta Life
and Annuity Company ("Delta Life") may pay dividends only from the earned
surplus arising from their respective businesses and must receive the prior
approval of the Iowa Commissioner to pay any dividend that would exceed certain
statutory limitations. The current statutory limitation is the greater of (i)
10% of the respective company's policyowners' surplus as of the preceding year
end or (ii) the net gain from operations for the previous calendar year. Iowa
law gives the Iowa Commissioner broad discretion to disapprove requests for
dividends in excess of these limits. Based on this limitation and 1997 results,
AmerUs Life and Delta Life would be able to pay approximately $58 million and $8
million, respectively, in dividends in 1998 without obtaining the Iowa
Commissioner's approval. The payment of dividends by American Investors Life
Insurance Company, Inc. ("American") and Financial Benefit Life Insurance
Company ("FBL") (together "AmVestors' Subsidiaries") is regulated under Kansas
law, which has statutory limitations similar to those in place in Iowa. During
the first six months of 1998, AmerUs Life paid the Company $40 million in
dividends. In July 1998, AmVestors Subsidiaries paid $27.3 million in dividends.
Based upon the cumulative limitations, the Company's subsidiaries could pay an
estimated $26 million in additional dividends in 1998 without obtaining
regulatory approval.
On October 23, 1997, the Company entered into a $250 million revolving
credit facility with a syndicate of lenders (the "Bank Credit Facility") to be
used to replace its then existing revolving credit facility, to finance the
acquisition of Delta, to finance permitted mergers and acquisitions and for
other general corporate purposes. The Bank Credit Facility was secured by a
pledge of approximately 49.9% of the outstanding common stock of AmerUs Life,
100% of the outstanding common stock of Delta and a $50 million 9% surplus note
payable to the Company by AmerUs Life. The Company completed a $125 million
senior note offering in June 1998, of which the proceeds were utilized to pay
down the revolving credit facility. As a result, the commitment under the
facility was reduced to $150 million and all collateral was released. As of
June 30, 1998, there was an outstanding loan balance of $125 million under the
facility. The Bank Credit Facility provides for typical events of default and
covenants with respect to the conduct of the business of the Company and its
subsidiaries and requires the maintenance of various financial levels and
ratios. Among other covenants, the Company (a) cannot have a leverage ratio
greater than 0.35:1.0 or an interest coverage ratio less than 2.5:1.0, (b) is
prohibited from paying cash dividends on its common stock in excess of an amount
equal to 3% of its consolidated net worth as of the last day of the preceding
fiscal year, and (c) must cause certain of its life insurance subsidiaries to
maintain certain ratings from A.M. Best and certain levels of adjusted capital
and surplus and risk-based capital.
The Company may from time to time review other potential acquisition
opportunities. The Company anticipates that funding for any such acquisition may
be provided from available cash resources, from debt or equity financing or
stock-for-stock acquisitions. In the future, the Company anticipates that its
liquidity and capital needs will be met through interest and dividends from its
life insurance subsidiaries, accessing the public equity and debt markets
depending upon market conditions, or alternatively from bank financing.
LIFE INSURANCE SUBSIDIARIES
The cash flows of the Company's life insurance subsidiaries consist
primarily of premium income, deposits to policyowner account balances, income
from investments, sales, maturities and calls of investments and repayments of
investment principal. Cash outflows are primarily related to withdrawals of
policyowner account balances, investment purchases, payment of policy
acquisition costs, payment of policyowner benefits, income taxes and current
operating expenses. Life insurance companies generally produce a positive cash
flow from operations, as measured by the amount by which cash flows are adequate
to meet benefit obligations to policyowners and normal operating expenses as
they are incurred. The remaining cash flow is generally used to increase the
asset base to provide funds to meet the need for future policy benefit payments
and for writing new business.
Management anticipates that funds to meet its short-term and long-term
capital expenditures, cash dividends to shareholders and operating cash needs
will come from existing capital and internally generated funds. Management
believes that the current level of cash and available-for-sale and short-term
securities, combined with expected net cash inflows from operations, maturities
of fixed maturity investments, principal payments on mortgage-backed securities
and its insurance products, will be adequate to meet the anticipated short-term
cash obligations of the Company's life insurance subsidiaries.
The Company and its subsidiaries generated cash flows from operating
activities of $267.8 million and $106.3 million for the six months ended June
30, 1998 and 1997, respectively. Excess operating cash flows were primarily
used to increase the Company's fixed maturity investment portfolio.
Matching the investment portfolio maturities to the cash flow demands of
the type of insurance being provided is an important consideration for each type
of life insurance product and annuity. The Company continuously monitors
benefits and surrenders to provide projections of future cash requirements. As
part of this monitoring process, the Company performs cash flow testing of its
assets and liabilities under various scenarios to evaluate the adequacy of
reserves. In developing its investment strategy, the Company establishes a level
of cash and securities which, combined with expected net cash inflows from
operations, maturities of fixed maturity investments and principal payments on
mortgage-backed securities, are believed adequate to meet anticipated short-term
and long-term benefit and expense payment obligations. There can be no assurance
that future experience regarding benefits and surrenders will be similar to
historic experience since withdrawal and surrender levels are influenced by such
factors as the interest rate environment and the claims-paying and financial
strength ratings of the Company's life insurance subsidiaries.
The Company takes into account asset-liability management considerations in
the product development and design process. Contract terms for the Company's
interest-sensitive products include surrender and withdrawal provisions which
mitigate the risk of losses due to early withdrawals. These provisions generally
do one or more of the following: limit the amount of penalty-free withdrawals,
limit the circumstances under which withdrawals are permitted, or assess a
surrender charge or market value adjustment relating to the underlying assets.
The following table summarizes liabilities for interest-sensitive life
products and annuities by their contractual withdrawal provisions at June 30,
1998 (dollars in millions):
Not subject to discretionary withdrawal $365.9
Subject to discretionary withdrawal with adjustments:
Specified surrender charges (A) 3,991.1
Market value adjustments 1,299.2
--------
Subtotal 5,290.3
--------
Subject to discretionary withdrawal without adjustments 1,419.6
--------
Total $7,075.8
========
(A) Includes $1,233.0 million of liabilities with a contractual
surrender charge of less than five percent of the account balance.
Through its membership in the Federal Home Loan Bank ("FHLB") of Des
Moines, AmerUs Life is eligible to borrow on a line of credit available to
provide it additional liquidity. Interest is payable at a current rate at the
time of any advance. As of June 30, 1998, AmerUs Life had a $25.0 million open
secured line of credit against which there were no borrowings. In addition to
the line of credit, AmerUs Life has long-term advances from the FHLB outstanding
of $16.3 million and short term advances of $9.6 million at June 30, 1998.
The Company's life insurance subsidiaries may also obtain liquidity through
sales of investments or borrowings collateralized by their investment
portfolios. The Company's investment portfolio as of June 30, 1998 had a
carrying value of $9.0 billion, including Closed Block investments. As of June
30, 1998, fixed maturity securities were $7.8 billion, or 86.7% of invested
assets, with public and private fixed maturity securities constituting $7.4
billion, or 94.9%, and $373.7 million, or 5.1%, of total fixed maturity
securities, respectively.
At June 30, 1998, the statutory surplus of AmerUs Life, Delta Life,
American and FBL were approximately $294.4 million, $82.3 million, $116.4
million and $43.6 million, respectively. The Company believes that these
levels of statutory capital are more than adequate as each life insurance
subsidiary's risk-based capital is significantly in excess of required levels.
In the future, in addition to their cash flows from operations and
borrowing capacity, the life insurance subsidiaries would anticipate obtaining
their required capital from the Company as the Company will have access to the
public debt and equity markets.
The Company does not believe that inflation has had a material effect on
its consolidated results of operations.
Interest rate changes may have temporary effects on the sale and
profitability of the annuities and life insurance products offered by the
Company. For example, if interest rates rise, competing investments (such as
annuities or life insurance products offered by the Company's competitors,
certificates of deposit, mutual funds, and similar instruments) may become more
attractive to potential purchasers of the Company's products until the Company
increases the interest rate credited to owners of its annuities and life
insurance products. In contrast, as interest rates fall, the Company attempts
to adjust its credited rates to compensate for the corresponding decline in
reinvestment rates. The Company monitors interest rates and sells annuities and
life insurance policies that permit flexibility to make interest rate changes as
part of its management of interest spreads. However, the profitability of the
Company's products is based upon persistency, mortality and expenses, as well as
interest rate spreads.
The Company manages its investment portfolio in part to reduce its exposure
to interest rate fluctuations. In general, the market value of its fixed
maturity portfolio increases or decreases in an inverse relationship with
fluctuations in interest rates, and net investment income increases or decreases
in a direct relationship with interest rate changes.
The Company has developed an asset/liability management approach with
separate investment portfolios for major product lines such as traditional life,
universal life and annuities. Investment policies and strategies have been
established based on the specific characteristics of each product line. The
portfolio investment policies and strategies establish asset duration, quality
and other guidelines. The Company utilizes analytical systems to establish an
optimal asset mix for each line of business. The Company seeks to manage the
asset/liability mismatch and the associated interest rate risk through active
management of the investment portfolio. Financial, actuarial, investment,
product development and product marketing professionals work together throughout
the product development, introduction and management phases to jointly develop
and implement product features, initial and renewal crediting strategies, and
investment strategies based on extensive modeling of a variety of factors under
a number of interest rate scenarios.
Inforce reserves and the assets allocated to each segment are modeled on a
regular basis to analyze projected cash flows under a variety of economic
scenarios. The result of this modeling is used to modify asset allocation,
investment portfolio duration and convexity and renewal crediting strategies.
The Company invests in CMOs as part of its basic portfolio strategy, but uses
other types of derivatives only as a hedge against the effects of interest rate
fluctuations or to synthetically alter the investment characteristics of
specific assets.
YEAR 2000 COMPLIANCE
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate the date value "2000." Many existing application software products
were designed to only accommodate a two digit date position which represents the
year (e.g., the number "95" is stored on the system and represents the year
1995). As a result, the year 1999 (i.e., "99") is the maximum date value many
systems will be able to accurately process. The Company formed a year 2000
working group to address potential problems posed by this development to assure
that the Company is prepared for the year 2000. The Company has already made
significant progress in accomplishing the necessary modifications and
conversions to deal with year 2000 issues and anticipates that the majority of
the required efforts will be completed by the end of 1998. Management does not
anticipate that the Company will incur significant operating expenses or be
required to invest heavily in computer system improvements to address year 2000
issues. Total estimated costs are in a range of $4 to $6 million with
approximately $3 million to be incurred in 1998. As of June 30, 1998, the
Company has incurred $1.4 million of such costs. However, if modifications
and conversions to deal with year 2000 issues are not completed on a timely
basis or are not fully effective, such issues may have a material adverse effect
on the operations of the Company. All cost associated with year 2000
modifications and conversions will be expensed as incurred.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of its shareholders on May 8, 1998.
There were three matters voted upon at the meeting. The first was the
election of directors. The nominees, Messrs. John R. Albers, Thomas F. Gaffney
and Ralph W. Laster, Jr. and Ms. Ilene B. Jacobs were elected to three-year
terms. Other directors continuing to serve are Roger K. Brooks, Malcolm
Candlish, Maureen M. Culhane, Sam C. Kalainov, John W. Norris, Jr., Jack C.
Pester and John A. Wing.
The second matter was the approval of an amendment to the Company's
Amended and Restated Articles of Incorporation to increase the authorized
number of shares of Class A common stock from 75 million to 180 million.
The third matter voted upon resulted in the ratification of the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company.
The results of the balloting were as follows:
AGAINST OR ABSTENTIONS
FOR WITHHELD BROKER NON-VOTES
---- --------- ----------------
Election of Directors:
John R. Albers 31,880,946 397,446
Thomas F. Gaffney 31,885,922 392,470
Ilene B. Jacobs 31,879,383 399,009
Ralph W. Laster, Jr. 31,878,005 400,387
Amendment of Articles
Class A and Class B common stock 27,686,461 4,558,263 33,668
Class A common stock 22,686,461 4,558,263 33,668
Ratification of KPMG Peat
Marwick LLP 32,238,181 31,096 9,115
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits included as part of this report is set forth in the
Exhibit Index which immediately precedes such exhibits and is hereby
incorporated by reference herein.
(b) The following report on Form 8-K was filed during the quarter ended
June 30, 1998:
(i) None.
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.
DATED: August 13, 1998 AMERUS LIFE HOLDINGS, INC.
By /s/ Michael E. Sproule
--------------------------------
Executive Vice President and CFO
(Chief Financial Officer)
By /s/ Michael G. Fraizer
--------------------------------
Senior Vice President -
Controller and Treasurer
(Principal Accounting Officer)
AMERUS LIFE HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ------------------ --------------------
1.1* Underwriting Agreement, dated as of June 16, 1998, among the
Registrant, Salomon Brothers, Inc and Goldman, Sachs & Co. relating to
the Registrant's 6.95% Senior Notes.
2.1 Plan of Reorganization dated October 27, 1995, filed as Exhibit 2.1 to
the registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
2.2 Amended and Restated Agreement and Plan of Merger, dated as of
September 19, 1997 and as amended and restated as of October 8, 1997,
by and among the Registrant, AFC Corp. and AmVestors Financial
Corporation ("AmVestors"), filed as Exhibit 2.2 to the Registration
Statement of the Registrant on Form S-4, Registration Number 333-40065
is hereby incorporated by reference.
2.3 Agreement and Plan of Merger, dated as of August 13, 1997 and as
amended as of September 5, 1997, among the Registrant, a wholly owned
subsidiary of the Registrant and Delta Life Corporation, filed as
Exhibit 2.2 to Form 8-K of the Registrant dated October 8, 1997, is
hereby incorporated by reference.
3.1 Amended and Restated Articles of Incorporation of the Registrant filed
as Exhibit 3.5 to the registration statement of the Registrant on Form
S-1, Registration Number 333-12239, are hereby incorporated by
reference.
3.2 Bylaws of the Registrant, filed as Exhibit 3.2 to the registration
statement of the Registrant on Form S-1, Registration Number 333-12239,
are hereby incorporated by reference.
4.1 Amended and Restated Trust Agreement dated as of February 3, 1997 among
the Registrant, Wilmington Trust Company, as property trustee, and the
administrative trustees named therein (AmerUs Capital I business
trust), filed as Exhibit 3.6 to the registration statement of the
Registrant and AmerUs Capital I on Form S-1, Registration Number
333-13713, is hereby incorporated by reference.
4.2 Indenture dated as of February 3, 1997 between the Registrant and
Wilmington Trust Company relating to the Registrant's 8.85% Junior
Subordinated Debentures, Series A, filed as Exhibit 4.1 to the
registration statement of the Registrant and AmerUs Capital I on Form
S-1, Registration Number, 333-13713, is hereby incorporated by
reference.
4.3 Guaranty Agreement dated as of February 3, 1997 between the Registrant,
as guarantor, and Wilmington Trust Company, as trustee, relating to the
8.85% Capital Securities, Series A, issued by AmerUs Capital I, filed
as Exhibit 4.4 to the registration statement on Form S-1, Registration
Number, 333-13713, is hereby incorporated by reference.
4.4 Common Stock Purchase Warrant, filed as Exhibit (10)(v) to Form 10-Q of
AmVestors Financial Corporation dated May 13, 1992, is hereby
incorporated by reference.
4.5* Amended and Restated Declaration of Trust of AmerUs Capital II, dated
as of July 27, 1998, among the Registrant, First Union Trust Company
and the administrative trustees named therein, relating to the
Registrant's 7.0% ACES Units.
4.6 Certificate of Trust of AmerUs Capital III filed as Exhibit 4.7 to the
registration statement of the Registrant, AmerUs Capital II and AmerUs
Capital III, on Form S-3 (No. 333-50249), is hereby incorporated by
reference.
4.7* Common Trust Securities Guarantee Agreement, dated as of July 27, 1998,
by the Registrant, relating to the Registrant's 7.0% ACES Units.
4.8* QUIPS Guarantee Agreement, dated as of July 27, 1998, by the
Registrant, relating to the Registrant's 7.0% ACES Units.
4.9* Master Unit Agreement, dated as of July 27, 1998, between the
Registrant and First Union National Bank relating to the Registrant's
7.0% ACES Units.
4.10* Call Option Agreement, dated as of July 27, 1998, between Goldman,
Sachs & Co. and First Union National Bank relating to the Registrant's
7.0% ACES Units.
4.11* Pledge Agreement, dated as of July 27, 1998, among the Registrant,
Goldman, Sachs & Co. and First Union National Bank relating to the
Registrant's 7.0% ACES Units.
4.12* Form of Debt Security relating to the Registrant's 6.86% Junior
Subordinated Deferrable Interest Debentures.
4.13 Amended and Restated Intercompany Agreement dated as of December 1,
1996 among American Mutual Holding Company, AmerUs Group Co. and the
Registrant is incorporated herein by reference to Exhibit 10.81 to the
Registrant's Registration Statement on Form S-1 (No. 333-12239).
4.14* Senior Indenture, dated as of June 16, 1998, by and between the
Registrant and First Union National Bank, as Indenture Trustee,
relating to the Registrant's 6.95% Senior Notes.
4.15* Subordinated Indenture, dated as of July 27, 1998, by and between the
Registrant and First Union National Bank, as Indenture Trustee,
relating to the Registrant's 6.86% Junior Subordinated Deferrable
Interest Debentures.
4.16* Form of Debt Security relating to the Registrant's 6.95% Senior Notes.
4.17 Form of 7.0% Adjustable Conversion-rate Equity Security Unit of the
Registrant and AmerUs Capital II (included with Exhibit 4.9).
4.18 Form of 6.86% Quarterly Income Preferred Security (included with
Exhibit 4.5).
10.1 Amended and Restated Intercompany Agreement dated as of December 1,
1996, among American Mutual Holding Company, AmerUs Group Co. and the
Company. Filed as Exhibit 10.81 to the Registrant's registration
statement on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference
10.2 Joint Venture Agreement, dated as of June 30, 1996, between American
Mutual Insurance Company and Ameritas Life Insurance Corp., filed as
Exhibit 10.2 to the Annual Report of the Registrant on Form 10-K, dated
March 25, 1998, is hereby incorporated by reference.
10.3 Management and Administration Service Agreement, dated as of April 1,
1996, among American Mutual Life Insurance Company, Ameritas Variable
Life Insurance Company and Ameritas Life Insurance Corp., filed as
Exhibit 10.3 to the registration statement of the Registrant on Form
S-1, Registration Number 333-12239, is hereby incorporated by reference.
10.4 Agreement and Plan of Merger, dated as of August 24, 1994, among
Central Life Assurance Company and American Mutual Life Insurance
Company, filed as Exhibit 10.4 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.5 All*AmerUs Supplemental Executive Retirement Plan, effective January 1,
1996, filed as Exhibit 10.6 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.6 American Mutual Life Insurance Company Supplemental Pension Plan (which
was curtailed as of December 31, 1995), filed as Exhibit 10.7 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.7 Central Life Assurance Company Supplemental Pension Plan (which was
curtailed as of December 31, 1995), filed as Exhibit 10.8 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.8 Management Incentive Plan, filed as Exhibit 10.9 to the registration
statement of the Registrant on Form S-1, Registration Number 333-12239,
is hereby incorporated by reference.
10.9 AmerUs Life Insurance Company Performance Share Plan, filed as Exhibit
10.10 to the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by reference.
10.10 AmerUs Life Stock Incentive Plan, filed as Exhibit 10.11 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.11 AmerUs Life Non-Employee Director Stock Plan, filed as Exhibit 10.13 to
the registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.12 Modification of Real Estate Contract, dated as of July 1, 1996, between
AmerUs Life Insurance Company and AmerUs Properties, Inc., filed as
Exhibit 10.14 to the registration statement of the Registrant on Form
S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.13 Asset Management and Disposition Agreement, dated January 3, 1995,
between American Mutual Life Insurance Company and Central Properties,
Inc. (now AmerUs Properties, Inc.), filed as Exhibit 10.15 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.14 Form of Indemnification Agreement executed with directors and certain
officers, filed as Exhibit 10.33 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.15 Amended and Restated Agreement and Certificate of Limited Partnership
of CPI Housing Partners I, L.P., dated as of September 1, 1995, among
AmerUs Properties, Inc., American Mutual Life Insurance Company and
American Mutual Affordable Housing Partners, L.P., filed as Exhibit
10.34 to the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by reference.
10.16 Amended and Restated Agreement of Limited Partnership of American
Mutual Affordable Housing Partners, L.P., dated as of September 1,
1995, among GrA Partners Joint Venture, AmerUs Properties, Inc.,
American Mutual Life Insurance Company, NCC Polar Company and NCC Orion
Company, filed as Exhibit 10.35 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.17 Amended and Restated Agreement and Certificate of Limited Partnership
of 65th & Vista, L.P., dated as of September 1, 1995, among AmerUs
Properties, Inc., American Mutual Life Insurance Company and American
Mutual Affordable Housing Partners, L.P., filed as Exhibit 10.36 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.18 Amended and Restated Agreement and Certificate of Limited Partnership
of 60th & Vista, L.P., dated as of September 1, 1995, among I.R.F.B.
Joint Venture, American Mutual Life Insurance Company and American
Mutual Affordable Housing Partners, L.P., filed as Exhibit 10.37 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.19 Certificate of Limited Partnership and Limited Partnership Agreement of
CPI Housing Partners II, L.P., dated March 27, 1995, between Central
Properties, Inc. (now AmerUs Properties, Inc.) and American Mutual Life
Insurance Company, filed as Exhibit 10.38 to the registration statement
of the Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.20 Amended and Restated Agreement and Certificate of Limited Partnership
of API Housing Partners III, L.P., dated as of March 1, 1996, among
AmerUs Properties, Inc., American Mutual Life Insurance Company,
American Mutual Affordable Housing Partners II, L.P. and AmerUs
Management, Inc., filed as Exhibit 10.39 to the registration statement
of the Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.21 Certificate of Limited Partnership and Limited Partnership Agreement of
API Housing Partners IV, L.P., dated as of June 1995, between AmerUs
Properties, Inc. and American Mutual Life Insurance Company, filed as
Exhibit 10.40 to the registration statement of the Registrant on Form
S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.22 Amended and Restated Agreement and Certificate of Limited Partnership
of API Housing Partners V, L.P., dated as of March 1, 1996, among
AmerUs Properties, Inc., American Mutual Life Insurance Company,
American Mutual Affordable Housing Partners II, L.P. and AmerUs
Management, Inc., filed as Exhibit 10.41 to the registration statement
of the Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.23 Amended and Restated Agreement and Certificate of Limited Partnership
of API-Chimney Ridge Partners, L.P., dated as of March 1, 1996, among
AmerUs Properties, Inc., American Mutual Life Insurance Company,
American Mutual Affordable Housing Partners II, L.P. and AmerUs
Management, Inc., filed as Exhibit 10.42 to the registration statement
of the Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.24 Certificate of Limited Partnership and Limited Partnership Agreement of
API Housing Partners VI, L.P., dated as of October 10, 1995, between
AmerUs Properties, Inc. and American Mutual Life Insurance Company,
filed as Exhibit 10.43 to the registration statement of the Registrant
on Form S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.25 Certificate of Limited Partnership and Limited Partnership Agreement of
86th & Meredith Associates, L.P., dated as of February 14, 1995,
between Central Properties, Inc. (now AmerUs Properties, Inc.) and
American Mutual Life Insurance Company, filed as Exhibit 10.44 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.26 Certificate of Limited Partnership and Limited Partnership Agreement of
Altoona Meadows Investors, L.P., dated as of February 22, 1995, between
KPI Investments, Inc. and Dennis Galeazzi, filed as Exhibit 10.45 to
the registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.27 First Amendment to the Certificate of Limited Partnership and Limited
Partnership Agreement of Altoona Meadows Investors, L.P., dated as of
September 28, 1995, between KPI Investments, Inc. and American Mutual
Life Insurance Company, filed as Exhibit 10.46 to the registration
statement of the Registrant on Form S-1, Registration Number 333-12239,
is hereby incorporated by reference.
10.28 Loan Servicing Agreement, dated August 1, 1990, between Central Life
Assurance Company and Midland Financial Mortgages, Inc. (now AmerUs
Mortgage), filed as Exhibit 10.47 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.29 Construction Loan Servicing Agreement, dated November 20, 1995, between
American Mutual Life Insurance Company and AmerUs Properties, Inc.,
filed as Exhibit 10.48 to the registration statement of the Registrant
on Form S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.30 Loan Servicing Agreement, dated September 1, 1994, between Central Life
Assurance Company and Midland Savings Bank, FSB (now AmerUs Bank),
filed as Exhibit 10.50 to the registration statement of the Registrant
on Form S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.31 Amendment to Service Agreement, dated as of May 1, 1996, between
American Mutual Life Insurance Company and AmerUs Bank, filed as
Exhibit 10.52 to the registration statement of the Registrant on Form
S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.32 Data Processing Service Agreement, dated November 1, 1989, between
Central Life Assurance Company and Midland Financial Savings and Loan
Association (now AmerUs Bank), filed as Exhibit 10.53 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.33 First Amendment to Data Processing Service Agreement, dated as of
September 30, 1990, between Central Life Assurance Company and Midland
Savings Bank FSB (now AmerUs Bank), filed as Exhibit 10.54 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.34 Second Amendment to Data Processing Service Agreement, dated as of May
1, 1991, between Central Life Assurance Company and Midland Savings
Bank FSB (now AmerUs Bank), filed as Exhibit 10.55 to the registration
statement of the Registrant on Form S-1, Registration Number 333-12239,
is hereby incorporated by reference.
10.35 Third Amendment to Data Processing Service Agreement, dated as of
October 1, 1991, between Central Life Assurance Company and Midland
Savings Bank, FSB (now AmerUs Bank), filed as Exhibit 10.56 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.36 Fourth Amendment to Data Processing Service Agreement, dated as of
January 2, 1992, between Central Life Assurance Company and Midland
Savings Bank, (now AmerUs Bank), filed as Exhibit 10.57 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.37 Fifth Amendment to Data Processing Service Agreement, dated as of June
1, 1993, between Central Life Assurance Company and Midland Savings
Bank FSB (now AmerUs Bank), filed as Exhibit 10.58 to the registration
statement of the Registrant on Form S-1, Registration Number 333-12239,
is hereby incorporated by reference.
10.38 Sixth Amendment to Data Processing Service Agreement, dated as of
September 1, 1995, between American Mutual Life Company and AmerUs
Bank, filed as Exhibit 10.59 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.39 Seventh Amendment to Data Processing Service Agreement, dated as of
January 1, 1996, between American Mutual Life Insurance Company and
AmerUs Bank, filed as Exhibit 10.60 to the registration statement of
the Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.40 Data Processing Support Services Agreement, dated as of July 1, 1993,
between Central Life Assurance Company and Midland Savings Bank, FSB
(now AmerUs Bank), filed as Exhibit 10.61 to the registration statement
of the Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.41 Investment Management Agreement, dated as of August 15, 1992, between
Central Life Assurance Company and Midland Savings Bank FSB (now AmerUs
Bank), filed as Exhibit 10.63 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.42 Purchase Agreement, dated as of June 28, 1996, between AmerUs Life
Insurance Company and AmerUs Bank, filed as Exhibit 10.65 to the
registration statement of the Registrant on Form S-1, Registration
Number 333-12239, is hereby incorporated by reference.
10.43 Brokerage Contract dated January 1, 1995, among American Mutual Life
Insurance Company and Midland Investment Services, Inc. (now AmerUs
Investments, Inc.), filed as Exhibit 10.66 to the registration
statement of the Registrant on Form S-1, Registration Number 333-12239,
is hereby incorporated by reference.
10.44 Servicing Agreement, dated March 1, 1992, between Central Life
Assurance Company and Midland Investment Services, Inc. (now AmerUs
Investments, Inc.), filed as Exhibit 10.67 to the registration
statement of the Registrant on Form S-1, Registration Number 333-12239,
is hereby incorporated by reference.
10.45 Tax Allocation Agreement dated as of November 4, 1996, filed as Exhibit
10.68 to the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by reference.
10.46 Limited Partnership Agreement of Theater Project Limited Partnership
dated March 15, 1985, among Tapp Management, Inc., Tapp Management Co.,
Ltd., Michael Longley, Michael A. Hammond and Gary L. Wood along with
an Amendment to Certificate of Limited Partnership, dated August 22,
1986, and an Assignment of Limited Partnership Interest, dated November
15, 1992, between F. Barry Tapp and Tapp Development Co., Ltd., and an
Amended Certificate of Limited Partnership dated December 24, 1992,
filed as Exhibit 10.73 to the registration statement of the Registrant
on Form S-1, Registration Number 333-12239, is hereby incorporated by
reference.
10.47 Assignment of Limited Partnership Interest of Theater Project Limited
Partnership, dated December 30, 1995, between American Mutual Life
Insurance Company and AmerUs Properties, Inc., filed as Exhibit 10.74
to the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by reference.
10.48 Certificate of Limited Partnership and Limited Partnership Agreement of
Lagos Vista Limited Partnership, dated August 10, 1994, between Central
Properties, Inc. (now AmerUs Properties, Inc.) and Central Life
Assurance Company, filed as Exhibit 10.75 to the registration statement
of the Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.49 Revolving Credit and Term Loan Agreement, dated as of December 1996,
among the Registrant, certain Signatory Banks thereto and The Chase
Manhattan Bank, Note issued by the Registrant and Borrower Pledge
Agreement, filed as Exhibit 10.80 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.50 Agreement and Plan of Merger, dated as of August 13, 1997 and as
amended as of September 5, 1997, among the Registrant, a wholly-owned
subsidiary of the Registrant and Delta Life Corporation, filed as
Exhibit 2.2 to the Registrant's current report on Form 8-K on October
8, 1997, is hereby incorporated by reference.
10.51 Purchase Agreement between AmerUs Life and AmerUs Bank dated March 5,
1997 relating to the sale of certain loans , filed as Exhibit 10.82 to
the registration statement of the Registrant on Form S-4, Registration
Number 333-40065, is incorporated by reference.
10.52 Letter Agreement dated as of March 1, 1997 between AmerUs Life and
AmerUs Mortgage relating to the purchase of residential mortgage loans,
together with an amendment thereto dated March 11, 1997 , filed as
Exhibit 10.83 to the registration statement of the Registrant on Form
S-4, Registration Number 333-40065, is incorporated by reference.
10.53 Credit Agreement, dated as of October 23, 1997, among the Registrant,
Various Lender Institutions, the Co-Arrangers and The Chase Manhattan
Bank, as Administrative Agent , filed as Exhibit 10.84 to the
registration statement of the Registrant on Form S-4, Registration
Number 333-40065, is incorporated by reference.
10.54 Coinsurance Agreement, effective February 1, 1996, between Delta Life
and Annuity Company and London Life Reinsurance Company , filed as
Exhibit 10.85 to the registration statement of the Registrant on Form
S-4, Registration Number 333-40065, is incorporated by reference.
10.55 AmVestors Financial Corporation 1996 Incentive Stock Option Plan, filed
as Exhibit (4)(a) to the registration statement of AmVestors Financial
Corporation on Form S-8, Registration Number 333-14571 dated October
21, 1996, is hereby incorporated by reference.
10.56 1989 Non-Qualified Stock Option Plan adopted March 17, 1989, filed as
Exhibit (10)(q) to Form 10-K of AmVestors Financial Corporation, dated
April 12, 1989, is hereby incorporated by reference.
10.57 Amended and Restated Miscellaneous Service Agreement, dated as of July
21, 1997, among American Mutual Holding Company, Registrant, AmerUs
Life Insurance Company, AmerUs Group Co., AmerUs Bank, AmerUs Mortgage,
Inc., Iowa Realty Co., Inc., Iowa Title Company, AmerUs Insurance,
Inc., AmerUs Properties, Inc., and AmerUs Direct, Inc., filed as
Exhibit 10.57 to the Annual Report of the Registrant on Form 10-K,
dated March 25, 1998, is hereby incorporated by reference.
10.58 Lease - Business Property, dated December 1, 1996, between AmerUs
Properties, Inc. and AmerUs Life Insurance Company, property 611 Fifth
Avenue, Des Moines, Iowa , filed as Exhibit 10.58 to the Annual Report
of the Registrant on Form 10-K, dated March 25, 1998, is hereby
incorporated by reference.
10.59 First Amendment dated February 1, 1998 to Lease Agreement dated
December 1, 1996 between AmerUs Properties, Inc. and AmerUs Life
Insurance Company, property 611 Fifth Avenue, Des Moines, Iowa , filed
as Exhibit 10.59 to the Annual Report of the Registrant on Form 10-K,
dated March 25, 1998, is hereby incorporated by reference.
10.60 Lease - Business Property, dated December 1, 1996, between AmerUs
Properties, Inc. and AmerUs Life Insurance Company, 1213 Cherry Street,
Des Moines, Iowa , filed as Exhibit 10.60 to the Annual Report of the
Registrant on Form 10-K, dated March 25, 1998, is hereby incorporated
by reference.
10.61 Lease - Business Property, dated December 1, 1996, between AmerUs
Properties, Inc. and the Registrant, property 418 Sixth Avenue Moines,
Iowa , filed as Exhibit 10.61 to the Annual Report of the Registrant on
Form 10-K, dated March 25, 1998, is hereby incorporated by reference.
10.62 Lease - Business Property, dated December 31, 1997, between AmerUs
Properties, Inc. and the Registrant property, 699 Walnut Street, Des
Moines, Iowa , filed as Exhibit 10.62 to the Annual Report of the
Registrant on Form 10-K, dated March 25, 1998, is hereby incorporated
by reference.
10.63 First Amendment dated February 1, 1998 to lease dated December 31, 1997
between AmerUs Properties and the Registrant , filed as Exhibit 10.63
to the Annual Report of the Registrant on Form 10-K, dated March 25,
1998, is hereby incorporated by reference.
10.64 Servicing Agreement, dated March 5, 1997, between AmerUs Life Insurance
Company and AmerUs Properties, Inc., filed as Exhibit 10.64 to the
Annual Report of the Registrant on Form 10-K, dated March 25, 1998, is
hereby incorporated by reference.
10.65 First Amended and Restated Articles of Limited Partnership of Cotton
Mill Limited Partnership, dated as of September 30, 1996, among
API-Cotton Mill Partners, L.P., Historic Restoration Incorporated and
AmerUs Management, Inc., filed as Exhibit 10.65 to the Annual Report of
the Registrant on Form 10-K, dated March 25, 1998, is hereby
incorporated by reference.
10.66 Articles of Organization of AmerUs-Blackstone, L.L.C. dated July 8,
1997 , filed as Exhibit 10.66 to the Annual Report of the Registrant on
Form 10-K, dated March 25, 1998, is hereby incorporated by reference.
10.67 First Amended and Restated Articles of Limited Partnership of
Blackstone Hotel Partners L.P. dated as of July 23, 1997 , filed as
Exhibit 10.67 to the Annual Report of the Registrant on Form 10-K,
dated March 25, 1998, is hereby incorporated by reference.
10.68 First Amended and Restated Limited Partnership Agreement of Briggs
Renewal Limited Partnership dated as of November 18, 1997 , filed as
Exhibit 10.68 to the Annual Report of the Registrant on Form 10-K,
dated March 25, 1998, is hereby incorporated by reference.
10.69 Declaration of Operating Agreement of AmerUs-Blackstone, L.L.C., dated
as of July 23, 1997, filed as Exhibit 10.69 to the Annual Report of the
Registrant on Form 10-K, dated March 25, 1998, is hereby incorporated
by reference.
10.70 Open Line of Credit Application and Terms Agreement, dated March 3,
1997, between Federal Home Loan Bank of Des Moines and AmerUs Life
Insurance Company , filed as Exhibit 10.70 to the Annual Report of the
Registrant on Form 10-K, dated March 25, 1998, is hereby incorporated
by reference.
10.71 Certificate of Limited Partnership Agreement of API Cottonmill Partner,
L.P., dated as of June 21, 1996, among AmerUs Management, Inc. and
AmerUs Properties, Inc., filed as Exhibit 10.71 to the Annual Report of
the Registrant on Form 10-K, dated March 25, 1998, is hereby
incorporated by reference.
11 Computation of Earnings per Share
27 Financial Data Schedule
99.3 Employment Agreement, dated as of September 19, 1997, among Mark V.
Heitz, AmVestors Financial Corporation, American Investors Life
Insurance Company, Inc., AmVestors Investment Group, Inc. and American
Investors Sales Group, Inc., filed as Exhibit 99.3 to the registration
statement of the Registrant on Form S-4, Registration Number 333-40065,
is incorporated by reference.
99.4 Agreement of Sale, dated as of October 22, 1997, by and between R. Rex
Lee and AmerUs Group, Co., filed as Exhibit 99.4 to the registration
statement of the Registrant on Form S-4, Registration Number 333-40065,
is incorporated by reference.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
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* Filed herewith