NLV Financial Corporation and Subsidiaries Quarterly Performance Review and Financial Statements Second Quarter 2015

Transcription

1 NLV Financial Corporation and Subsidiaries Quarterly Performance Review and Financial Statements Second Quarter 2015

2 Index Consolidated Financial Statements (Unaudited) Quarterly Financial Performance Review... 1 Basis of Presentation: Consolidated Financial Statements... 9 Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Changes in Stockholder s Equity Consolidated Statements of Cash Flows... 13

3 Quarterly Financial Performance Review About the Company NLV Financial Corporation ( NLVF ) through its subsidiaries (collectively, the Company, we, our ) offers life insurance policies, annuity contracts and investment products and services. The Company s principal insurance product lines include whole life, term life, universal life, indexed universal life, variable universal life, fixed annuities, indexed annuities and variable annuities. The Company also offers mutual funds and investment brokerage services. In 1999, National Life Insurance Company ( NLIC ) reorganized from a mutual to a stock insurance company as part of a reorganization into a mutual insurance holding company structure in order, among other things, to compete more effectively, have a more flexible and cost-effective capital structure, and be part of an enterprise which is better positioned to make strategic acquisitions. Concurrent with the reorganization into a mutual insurance holding company structure, NLIC created a Closed Block of life insurance and annuity policies to provide reasonable assurance to owners of policies in the Closed Block that assets will be available to provide for the continuation of dividend payments following the reorganization. National Life Holding Company, a Vermont mutual insurance holding company, owns 100% of the outstanding common stock of NLVF, an intermediate stock insurance holding company incorporated under the laws of the state of Delaware. NLVF directly owns 100% of the outstanding common stock of NLIC, Sentinel Asset Management, Inc. ( Sentinel Investments ), Equity Services, Inc. ( ESI ), and certain other subsidiaries, and indirectly owns 100% of the outstanding common stock of Life Insurance Company of the Southwest ( LSW ), which is wholly owned by NLIC. In March 2015, National Life Distribution, LLC ( NLD ) was formed as a subsidiary of LSW. In 2015, the entity is expected to serve as a paymaster for National Life Group s field force operations. All commission expenses will continue to be incurred in the operating companies. Distribution Our target market is small business owners, professionals and middle to upper income individuals, including a strong presence in the 403(b) qualified tax deferred retirement savings market, with a particular emphasis on the K- 12 teacher segment of the market. Our middle market strategy includes individuals, small business owners, and the multicultural market and leverages our Living Benefit riders. The Company markets and distributes its products throughout the United States through three principal channels: Career, Affiliated Independent, and Sentinel Investments. Career: The Career channel consists of approximately 2,300 agents and general agents who specialize in selling products to the middle and emerging affluent markets, professionals, business owners and other affluent individuals for financial and business planning purposes. Affiliated Independent: The Affiliated Independent channel consists of approximately 19,600 agents. While the agents have access to all products, approximately 6,000 of the agents primarily sell life insurance and annuity products with an emphasis on the 403(b) qualified tax deferred retirement savings market for individuals employed by public schools. All other agents primarily offer life insurance, annuity, and mutual fund products to the middle and emerging affluent markets, for purposes of providing for the financial consequences of specific life events, such as death, retirement, college funding, and chronic or long term illness. Sentinel Investments: Sentinel Investments consists of wholesale mutual fund distribution through wire-houses and independent financial advisors; mutual fund and sub-advisory investment management services provided to institutional, investment-only retirement, registered investment advisory, and bank trust channels; and investment advisory services provided to the Company s other subsidiaries. 1

4 Quarterly Financial Performance Review (continued) Overview This Quarterly Financial Performance Review analyzes NLVF s results of operations for the three and six month periods ended June 30, 2015 and 2014 and, where appropriate, factors that may affect NLVF s future financial performance. This review should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements as of and for the years ended December 31, 2014 and The discussion below, unless otherwise noted, is prepared in conformity with accounting principles generally accepted in the United States of America ( U.S. GAAP ). Our fixed indexed life and annuity products may experience significant period to period income statement volatility due to changes in external market-related factors that are not aligned with the long-term results of these products. In addition to net income, we use core earnings and pre-tax operating income, both non-gaap financial measures, to evaluate our financial performance. Pre-tax operating income equals net income before taxes and net realized gains (losses) on investments. Core earnings equal pre-tax operating income before changes in the fair value of derivatives and embedded derivatives. Because these items fluctuate from period to period in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and discussion of pre-tax operating income and core earnings together with net income, provides information that will enhance readers understanding of our underlying results, operating trends and profitability. A reconciliation of core earnings, pre-tax operating income and net income is presented on page 5. Quarterly Financial Performance Review Core earnings for the second quarter of 2015 were $47.6 million compared to $32.5 million in the second quarter of Year-to-date core earnings as of June 30, 2015 were $80.4 million, compared to $84.4 million for the six months ended June 30, Each of the components of core earnings and the factors contributing to the changes for the three and six periods are described in detail below. For the Three Months Ended June 30, For the Six Months Ended June 30, (In Thousands) Revenues: Insurance premiums $ 45,042 $ 45,193 $ 92,923 $ 93,322 Policy and contract charges 109,662 97, , ,538 Net investment income 255, , , ,266 Change in value of trading equity securities (28) Mutual fund commissions and fee income 25,893 26,734 51,543 53,097 Other income 4,654 6,475 10,093 12,662 Total revenues 440, , , ,531 Benefits and Expenses: Policy reserves (3,362) (28,592) (14,080) (43,469) Policy benefits 105, , , ,746 Policyholders' dividends and dividend obligations 15,725 17,647 37,183 35,696 Interest credited 112, , , ,855 Operating expenses 64,695 65, , ,162 Interest expense 10,250 10,803 20,313 21,077 Policy acquisition expenses and amortization of present value of future profits, net 87,589 73, , ,036 Total benefits and expenses 392, , , ,103 Core Earnings $ 47,584 $ 32,512 $ 80,407 $ 84,428 2

5 Quarterly Financial Performance Review (continued) Insurance premiums include considerations on traditional whole life, term life and disability income contracts. Revenue from universal life policies, which comprise the majority of new sales, is reflected in policy and contract charges. Premium income remained relatively flat at $45.0 million and $92.9 million for the three and six months ended June 30, 2015, respectively, as compared to $45.2 million and $93.3 million for the three and six months ended June 30, 2014, respectively. Policy and contract charges includes fees charged on indexed universal life products, variable annuities, premium loads, cost of insurance charges, surrender charges, and rider charges. Policy and contract charges increased $12.2 million, or 12.6%, to $109.6 million for the three months ended June 30, 2015 compared to $97.4 million for the three months ended June 30, For the six month period ended June 30, 2015, these charges increased $23.1 million, or 12.1% to $214.6 million from $191.5 million. The increase for both the three and six month periods is driven by an increase in overall policies in-force due to continued strong sales of indexed universal life products. Net investment income represents income earned on our investment portfolio including interest income on bonds, mortgage loans, contract loans and short term investments along with bond premium/discount amortization, dividends on preferred and common stock and partnership income. Net investment income excludes the options that economically hedge our indexed products which are included as a component of interest credited in the core earnings presentation. Net investment income increased $16.9 million, or 7.1%, to $255.2 million for the three months ended June 30, 2015 compared to $238.3 million for the three months ended June 30, For the six month period ended June 30, 2015, net investment income increased $21.1 million, or 4.4% to $498.4 million from $477.3 million. The increase for both periods is primarily driven by an increase in the size of the bond portfolio driven by the overall growth of our inforce business as well as an increase in bond and mortgage prepayments. The table below provides a breakdown of the components of net investment income: For the Three Months Ended For the Six Months Ended June 30, June 30, (In Thousands) Gross investment income Bonds $ 207,123 $ 193,339 $ 409,987 $ 388,121 Preferred stocks Common stocks Mortgage loans 33,504 30,667 64,410 61,117 Policy loans 10,356 9,978 20,682 20,035 Real estate 1,917 2,162 4,086 4,016 Partnerships 8,463 6,566 12,344 12,058 Derivatives (1,839) (431) (1,846) - Other invested assets (17) 679 Total gross investment income 260, , , ,036 Investment expenses (5,507) (5,179) (11,832) (9,770) Net investment income $ 255,239 $ 238,261 $ 498,359 $ 477,266 Mutual fund commissions and fee income consists of dealer concessions earned by the Company s affiliated broker-dealers, Equity Services, Inc. and Sentinel Financial Services Company. Mutual fund fees consist primarily of mutual fund administration and asset management fees earned by the Company s affiliated investment advisors, Sentinel Administrative Services, Inc. and Sentinel Asset Management, Inc. Revenues from mutual fund commissions, fees and other income remained relatively flat for both the three and six month periods at $25.9 million as compared to $26.7 million for the three month periods ended June 30, 2015 and June 30, 2014, respectively and $51.5 million as compared to $53.1 million for the six month periods ended June 30, 2015 and June 30, 2014, respectively. 3

6 Quarterly Financial Performance Review (continued) Policy reserves reflect the impact of changes in the product liability reserves for life insurance, disability income insurance and the additional reserves held on certain annuities. The change in policy reserves increased $25.2 million for the three months ended June 30, The change in policy reserves for the six month period ended June 30, 2015 increased $29.4 million. These increases in reserves are the result of favorable mortality experience in the second quarter of 2015 as compared to 2014, resulting in lower reserves released on death. Policy benefits include death benefits for life insurance policies, policy surrenders for whole life policies and disability income benefits. In addition, policy benefits include a small amount of miscellaneous benefits such as payments on life-contingent immediate annuities and premium waiver benefits due to disability. Policy benefits decreased $25.0 million or 19.2% to $105.4 million from $130.4 million for the three months ended June 30, 2015 and 2014, respectively. For the six month period ended June 30, 2015, policy benefits decreased $18.9 million, or 7.9% to $219.8 million from $238.7 million. The favorable variance for both periods is primarily the result of unusually high mortality experience for the Closed Block during the second quarter of 2014 that did not recur in the first half of Policyholders dividends and dividend obligations consist of the pro rata amount of dividends earned that will be paid or credited at the next policy anniversary and the Policyholder Dividend Obligations ( PDO ) arising from the Closed Block. Dividends are based on a scale that seeks to reflect the relative contribution of each group of policies to the Company s overall operating results, and are approved annually by the Board of Directors. For the Closed Block, earnings in excess of anticipated earnings inure to the policyholder through the PDO. For the second quarter, policyholders dividends and dividend obligations decreased $1.9 million over the corresponding prior year period, which is primarily the result of changes in Closed Block earnings. Policyholders dividends and dividend obligations increased $1.5 million year over year due to favorable experience in the Closed Block which generated an increase in the obligation to the policyholder. Interest credited to policyholder account liabilities consists of interest credited to universal life insurance, fixed deferred annuities and indexed products. Interest credited remained relatively flat for the three month period ended June 30, 2015 at $112.6 million compared to $112.1 million for the three months ended June 30, For the six month period, interest credited increased $7.8 million to $224.6 at June 30, 2015 compared to $216.8 at June 30, The increase is primarily due to growth in account value within the indexed product lines, partially offset by a lower crediting rate on our indexed products. Operating expenses decreased $1.1 million, or 1.6%, to $64.7 million compared to $65.8 million for the three months ended June 30, 2015 and 2014, respectively. The decrease is primarily the result of lower legal fees as compared to the second quarter of For the six month period, operating expenses increased $6.3 million, or 4.9% to $135.5 million at June 30, 2015 compared to $129.2 million at June 30, The increase is attributed to certain information technology expenses related to improving technology infrastructure as well as an increase in the expense associated with the Company s pension plans as a result of a required change in the mortality tables used in the valuation of the plan liabilities. Policy acquisition expenses and amortization of present value of future profits, net includes commissions and other costs that are directly related to the successful acquisition of new or renewal business. Policy acquisition expenses are net of amounts deferred on life and annuity sales and include the amortization of amounts previously deferred. Policy acquisition expenses increased $13.7 million, or 18.5%, to $87.6 million for the three months ended June 30, 2015 as compared with $73.9 million for the three months ended June 30, Policy acquisition expenses increased $18.2 million, or 12.5%, to $164.2 million for the six months ended June 30, 2015 as compared with $146.0 million for the six months ended June 30, The increase for both periods is related to an increase in amortization due to higher current gross profits associated with our indexed products as well as higher nondeferrable expenses. 4

7 Quarterly Financial Performance Review (continued) Net Income Reconciliation For the Three Months Ended For the Six Months Ended June 30, June 30, (In Thousands) Net Income $ 21,966 $ 25,458 $ 44,241 $ 60,576 Net realized losses, net of offsets , Income tax on operations 9,460 12,193 18,249 27,062 Pre-Tax Operating Income 32,018 38,210 64,429 88,052 Net effect of derivatives, embedded derivatives, and other market effects 15,566 (5,698) 15,978 (3,624) Core Earnings $ 47,584 $ 32,512 $ 80,407 $ 84,428 Net realized gains and net OTTI losses on investments, net of offsets remained flat with a loss of $0.6 million for the three months ended June 30, For the six month period ended June 30, 2015, the net realized loss was $1.9 million compared to a loss of $0.4 million at June 30, Details are provided in the table below. For the Three Months Ended For the Six Months Ended June 30, June 30, (In Thousands) Bonds and other debt securities Gross gains $ 4,587 $ 578 $ 5,886 $ 1,657 Gross losses (644) (139) (1,801) (303) Common stocks Gross gains ,533 Gross losses (138) - (144) (126) Preferred stocks Gross gains Gross losses - - (21) - Mortgage Loans Gross losses (1,822) (159) (1,868) (8) Other than temporary declines (350) (462) (724) (1,710) Real Estate Gross gains ,103 Partnerships Gross losses (282) - (282) - Other than temporary declines (154) (1,366) (154) (1,366) Other Gross gains Gross losses (2,636) (248) (3,914) (948) Net realized investment (losses) gains (1,111) (1,246) (2,538) (137) Mortgage Loan Loss DAC Amortization (387) 89 (350) (1,101) Interest Credited (48) - (150) - Income Taxes , Net realized (losses) gains, net of offsets $ (592) $ (559) $ (1,939) $ (414) 5

8 Quarterly Financial Performance Review (continued) Income tax on operations for the three months ended June 30, 2015 decreased $2.7 million. For the six months ended June 30, 2015, income tax on operations decreased $8.8 million. The variance for both periods is consistent with the decrease in pre-tax operating income. Net effect of derivatives, embedded derivatives, and other market effects decreased $21.2 million to a loss of $15.5 million for the three months ended June 30, 2015 compared to a gain of $5.7 million for the three months ended June 30, The year-to-date net effect was a decrease of $19.6 million to a loss of $16.0 million for the six months ended June 30, 2015 compared to a gain of $3.6 million for the six months ended June 30, These changes are due to a combination of the impact from the change in the interest rates that influence the values of the embedded derivatives and related options, changes in our portfolio earned rates, and the overall movement of the S&P. 6

9 Quarterly Financial Performance Review (continued) Prospective Information Forward-looking statements contained in the following discussion are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors. The following uncertainties, among others, may have such an effect: Difficult conditions in the global capital markets and the economy; Significant market valuation fluctuations of the Company s investments, including some that are relatively illiquid; Subjectivity in determining the amount of allowances and impairments taken on certain Company investments; Defaults on commercial mortgages held by the Company; Exposure to mortgage-backed securities; Impairments of other institutions; Changes in interest rates; Effectiveness of the Company s hedging strategies; Impact of economic conditions on customers and vendors; Downgrades or potential downgrades in the Company s ratings; Changes in accounting rules; Adverse regulatory and legislative developments; Litigation and regulatory investigations; Effectiveness of the Company s risk management policies and procedures; Availability of reinsurance; Failure of counterparties to perform under reinsurance agreements and other contracts with the Company; Significant competition in the Company s businesses; Sensitivity of the amount of statutory capital the Company must hold to factors outside of the Company s control; Adequacy of the Company s reserves for future policy benefits and claims; Deviations from assumptions regarding future mortality, morbidity, and interest rates used in calculating reserve amounts and pricing the Company s products; Ability to attract and retain career agents, independent agents and key personnel; Ability to raise additional capital; 7

10 Quarterly Financial Performance Review (continued) Costs related to future pension obligations; Impact of international tension between the United States and other nations, terrorist attacks and ongoing military and other actions; Pandemics or other catastrophic events; and A computer system failure or security breach. Consequently, such forward-looking statements should be regarded solely as our current plans, estimates, and beliefs. We do not intend, and do not undertake, any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements. Our goals over the next several years are to grow and improve our life insurance, annuity, and asset management businesses by continuing responsible growth in life insurance and flow annuity business and improve the efficiency and effectiveness of the overall organization. The Company will drive production by continuing to deliver new and innovative products and riders. We will also continue to seek efficiencies throughout our operations and invest in our technology infrastructure to improve services for our business, producers, customers and employees. We will continue to effectively manage our investment portfolio to maximize risk-adjusted returns and to maintain duration matching of our product obligations and its related investments. 8

11 Basis of Presentation: Consolidated Financial Statements Basis of Presentation The following unaudited NLVF condensed consolidated financial information represents the financial position as of June 30, 2015 and December 31, 2014 and the results of operations for the three month periods ended June 30, 2015 and 2014, respectively. The unaudited NLVF consolidated financial information has been prepared in conformity with accounting principles generally accepted in the United States of America ( U.S. GAAP ). The unaudited NLVF condensed consolidated financial information should be read in conjunction with the audited NLVF Consolidated Financial Statements as of and for the years ended December 31, 2014 and In the Quarterly Financial Performance Review, certain non-gaap measures are used to provide a clearer understanding of how management views and manages our operations. The preparation of financial information requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, and benefits and expenses during the reporting periods. The most significant estimates include those used in determining estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and universal life-type contracts; policy liabilities; valuation of investments and derivative instruments; embedded derivatives; evaluation of other-thantemporary impairments on available-for-sale securities; valuations related to benefit plans; and litigation and regulatory contingencies. Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the debt or equity markets could have a material impact on the consolidated financial statements. Future events including, but not limited to, changes in the levels of mortality, morbidity, interest rates, persistency, asset valuations and defaults, could cause actual results to differ from the estimates used in the financial statements. Although management believes the amounts presented represent its best estimates, actual results could differ from those estimates. The results of past accounting periods are not necessarily indicative of the results to be expected in future periods. 9

12 Consolidated Balance Sheets (Unaudited) As of As of (In Thousands) June 30, 2015 December 31, 2014 Assets: Cash and investments: Available-for-sale debt securities $ 17,223,702 $ 16,879,781 Available-for-sale equity securities 80,736 43,638 Trading equity securities 15,799 14,890 Mortgage loans 2,381,604 2,331,749 Policy loans 814, ,598 Real estate investments 53,092 54,041 Derivatives 371, ,169 Other invested assets 582, ,924 Short term investments 156, ,320 Cash and restricted cash 242, ,452 T otal cash and investments 21,922,462 21,832,562 Deferred policy acquisition costs 1,089, ,160 Accrued investment income 192, ,877 Premiums and fees receivable 8,051 19,422 Amounts recoverable from reinsurers 134, ,013 Present value of future profits of insurance acquired 11,441 13,236 Property and equipment, net 157, ,304 Federal income tax recoverable 30,867 12,863 Other assets 116, ,495 Corporate owned life insurance 249, ,025 Separate account assets 771, ,669 Total assets $ 24,685,244 $ 24,417,626 Liabilities: Policy liabilities: Policy benefit liabilities $ 4,534,543 $ 4,572,292 Policyholder account liabilities 15,062,127 14,358,653 Policyholders deposits 79,935 82,482 Policy claims payable 72,400 61,405 Policyholders dividends 197, ,145 T otal policy liabilities 19,946,293 19,320,977 Amounts payable to reinsurers 22,081 38,853 Derivatives 148, ,905 Other liabilities and accrued expenses 512, ,343 Pension and other post-retirement benefit obligations 244, ,801 Deferred income taxes 225, ,922 Debt 461, ,381 Separate account liabilities 771, ,669 Total liabilities 22,332,737 22,013,851 Stockholder s Equity: Class A common stock, 2,000 shares authorized, no shares issued and outstanding - - Class B common stock, par value of $0.01, 1,001 shares authorized, 100 shares - - issued and outstanding Preferred stock, 500 shares authorized, no shares issued and outstanding - - Retained earnings 2,178,825 2,134,584 Accumulated other comprehensive income 173, ,191 Total stockholder s equity 2,352,507 2,403,775 Total liabilities and stockholder s equity $ 24,685,244 $ 24,417,626 The accompanying management's discussion of results of operations contains unaudited information. 10

13 Consolidated Statements of Operations (Unaudited) For the Three Months Ended For the Six Months Ended June 30, June 30, (In Thousands) Revenues: Insurance premiums $ 45,042 $ 45,193 $ 92,923 $ 93,322 Policy and contract charges 109,662 97, , ,538 Net investment income 254, , , ,203 Net realized investment (losses) gains (1,085) (949) (2,483) 464 Change in value of trading equity securities (28) Mutual fund commissions and fee income 25,893 26,734 51,543 53,097 Other income 4,654 6,475 10,093 12,662 Total revenues 438, , , ,932 Benefits and Expenses: Policy reserves (3,362) (28,592) (14,080) (43,469) Policy benefits 105, , , ,746 Policyholders' dividends and dividend obligations 15,725 17,647 37,183 35,696 Interest credited to policyholder account liabilities 133, , , ,383 Operating expenses 64,695 65, , ,162 Interest expense 10,250 10,803 20,313 21,077 Policy acquisition expenses and amortization of present value of future profits, net 82,033 74, , ,922 Total benefits and expenses 407, , , ,517 Income before income taxes 30,498 37,350 61,446 87,415 Income tax expense 8,532 11,892 17,205 26,839 Net Income $ 21,966 $ 25,458 $ 44,241 $ 60,576 The accompanying management's discussion of results of operations contains unaudited information. 11

14 Consolidated Statements of Changes in Stockholder's Equity (Unaudited) (In Thousands) Class A Common Stock Class B Common Stock Preferred Stock Retained Earn i n gs Accumulated Other Comprehensive Income Total January 1, 2014 $ - $ - $ - $ 1,990,266 $ 261,872 $ 2,252,138 Comprehensive income: Net income ,576-60,576 Change in unrealized gains on availablefor-sale securities, net , ,576 Change in cash flow hedge on debt issuance, net Change in additional minimum pension liability, net ,237 4,237 Total comprehensive income 222,405 June 30, 2014 $ - $ - $ - $ 2,050,842 $ 423,701 $2,474,543 (In Thousands) Class A Common Stock Class B Common Stock Preferred Stock Retained Earn i n gs Accumulated Other Comprehensive Income Total January 1, 2015 $ - $ - $ - $2,134,584 $ 269,191 $ 2,403,775 Comprehensive income: Net income ,241-44,241 Change in unrealized gains on availablefor-sale securities, net (100,177) (100,177) Change in cash flow hedge on debt issuance, net Change in additional minimum pension liability, net ,651 4,651 Total comprehensive income (51,268) June 30, 2015 $ - $ - $ - $2,178,825 $173,682 $2,352,507 The accompanying management's discussion of results of operations contains unaudited information. 12

15 Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, (In Thousands) Cash Flows from Operating Activities: Net income $ 44,241 $ 60,576 Adjustments to reconcile net income to net cash provided by operating activities: Provision for deferred income taxes 25,877 15,122 Interest credited to policyholder account liabilities 262, ,383 Amortization of deferred policy acquisition costs 103,959 96,002 Policy and contract charges (214,629) (191,538) Net realized losses (gains) 2,483 (464) Net option (gains) losses (15,484) (98,937) Change on corporate owned life insurance policies (4,329) (4,275) Amortization of present value of future profits of insurance acquired 1,795 2,024 Depreciation 10,969 8,769 Other (3,272) (4,348) Changes in assets and liabilities: Accrued investment income (8,065) (4,856) Deferred policy acquisition costs (152,369) (147,905) Policy liabilities 45,194 (13,848) Other assets and liabilities (39,450) 3,603 Net cash provided (used) by operating activities 59,290 32,308 Cash Flows from Investing Activities: Proceeds from sales, maturities and repayments of investments 1,169,900 1,076,605 Cost of investments acquired (1,835,432) (1,599,029) Change in policy loans (5,887) (13,411) Change in short term investments 114, ,726 Change in short term broker collateral (127,980) (45,870) Other (19,768) 1,360 Net cash (used) provided by investing activities (705,027) (440,619) Cash Flows from Financing Activities: Policyholders' deposits 879, ,505 Policyholders' withdrawals (501,220) (499,815) Proceeds from FHLB 224,900 - Change in other deposits 26,887 (22,992) Net cash provided (used) by financing activities 630, ,698 Net Decrease in Cash (15,555) (29,613) Cash and Restricted Cash: Beginning of year 258, ,071 End of period $ 242,897 $ 295,458 The accompanying management's discussion of results of operations contains unaudited information. 13