Kansas City Life Insurance Company Reports Operating Results (10-Q)
Kansas City Life Insurance Company has a market cap of $413.7 million; its shares were traded at around $36.07 with a P/E ratio of 15.7 and P/S ratio of 1. The dividend yield of Kansas City Life Insurance Company stocks is 3%.
Highlight of Business Operations:Consolidated total premiums decreased $5.9 million or 4% for the first nine months of 2011 versus the same period in the prior year, reflecting an $11.0 million or 66% decrease in new immediate annuity sales. However, total renewal premiums increased $3.7 million or 3% in the nine months. The decrease in new immediate annuities was largely the result of elevated sales of this product in 2010 due to the demand of guaranteed benefits by consumers at that time. The decrease in new immediate annuity sales can also be attributed to lower interest rates and increased competition from alternative products. New individual life insurance premiums increased $0.7 million or 6%, primarily reflecting a 10% increase in new premiums in the Old American segment. The increase in new premiums from the Old American segment primarily reflects the continued results of greater field force productivity and targeted geographic distribution opportunities. New group accident and health premiums increased $0.8 million or 9%, primarily due to increased sales of short-term disability products. The Group segment expanded the use of a third-party marketing organization in 2011, specifically in the short-term disability market, which has resulted in increased new sales of this product. However, the segment has also significantly reinsured the risk associated with this product. The increase in renewal premiums included a $1.6 million or 2% increase in individual life sales, reflecting increases from both the Old American and Individual Insurance segments. Also contributing to the increase in renewal premiums was a $1.6 million or 6% increase in group accident and health premiums from both short-term disability and dental products.
Insurance revenues consist of premiums, net of reinsurance, and contract charges. In the third quarter of 2011, total insurance revenues decreased $4.5 million or 7%, reflecting a $3.3 million or 9% decrease in net premiums and a $1.2 million or 5% decrease in contract charges. Total immediate annuity premiums decreased $4.8 million or 72%. However, total individual life premiums and total accident and health premiums increased $1.2 million and $1.5 million, respectively, versus the prior year. In addition, reinsurance ceded increased $1.2 million or 9% in the third quarter, largely from new short-term disability sales.
The Company uses reinsurance as a means to mitigate its risks and to reduce the earnings volatility from claims. Reinsurance ceded premiums increased $1.2 million or 9% in the third quarter and $2.1 million or 5% in the first nine months, as compared to the same periods in 2010. Reinsurance ceded premiums for the Individual Insurance segment increased $0.6 million or 6% in the third quarter and $0.4 million or 1% in the nine months. The Group segment experienced a $0.7 million or 30% increase in reinsurance ceded in the third quarter and $2.0 million or 30% in the nine months, largely due to increased disability sales from a third-party arrangement where the risk is 100% reinsured. Reinsurance ceded for the Old American segment declined 12% in both the third quarter and first nine months of 2011, reflecting the continued runoff of a large closed block of reinsured business.
Total new premiums increased $0.4 million or 10% in the third quarter and $0.6 million or 6% in the nine months, while total renewal premiums increased $1.4 million or 14% in the third quarter and $2.0 million 6% in the nine months. New disability premiums increased $1.3 million or 118% in the third quarter and $3.7 million or 110% in the nine months. These were partially offset by decreases in new dental premiums of $1.0 million or 54% in the third quarter and $2.8 million or 47% in the nine months. The improvement in new group disability premiums continues to reflect results from the expanded distribution from a third-party arrangement pertaining primarily to short-term disability products. This arrangement accounted for 58% and 54% of total new premiums in the third quarter and first nine months of 2011, respectively, of total new premiums. The increase in renewal premiums for the third quarter was primarily driven by renewals from the dental product, while the increase in renewal premiums for the nine months largely reflected increases in the disability and dental products.
Net cash used for investing activities for the nine months ended September 30, 2011 was $13.5 million, down from net cash used of $30.3 million for the same period in 2010. The Companys new investments in fixed maturity and equity securities were $146.7 million for the nine months, a 53% decrease from $309.0 million in the prior year. New investments in mortgage loans were $122.9 million, compared with $93.9 million last year. Purchases of real estate totaled $7.2 million, down from $9.7 million in 2010. Sales and maturities of fixed maturity and equity securities totaled $227.2 million for the first nine months of 2011, a 5% decrease versus $240.2 million a year ago. Mortgage loan maturities and principal paydowns totaled $58.7 million, compared to $28.3 million last year.
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