Item 1. BUSINESS
Kansas City Life Insurance Company (KCL) was incorporated under the assessment laws of Missouri in 1895 as the Bankers Life Association. In 1900, its present corporate title was adopted and it was reorganized as a legal reserve company in 1903. The Company operates nationwide, being licensed in 48 states and the District of Columbia.
The Company primarily operates in a single business segment: individual life insurance and annuity products. A general agency distribution system is employed. Nearly 86% of statutory premiums are derived from individual life insurance and annuities on a consolidated basis. Interest sensitive products, universal life and flexible annuities, comprise the vast majority of these premiums. Individual life insurance and annuities accounted for 90% of new statutory premiums in 1997. KCL introduced its first variable annuity in late 1995 and its first variable universal life product in January, 1996. Together these products totaled 30% of new statutory premiums in 1997.
KCL has two wholly owned life insurance subsidiaries, Sunset Life Insurance Company of America (Sunset) and Old American Insurance Company (OAIC). Sunset was acquired in 1974. Headquartered in Olympia, Washington, Sunset operates in 21 states, principally west of the Mississippi. California provides one-third of its statutory premiums. The Company offers products similar to KCL's and sells through personal producing general agents. OAIC was acquired in 1991 and its operations, excluding marketing, have been merged into KCL's home office and administrative and accounting systems. OAIC operates in 46 states, primarily selling relatively small policies to the senior market to cover funeral and other final expenses.
KCL and its subsidiaries are subject to state regulations in their states of domicile and in the states in which they do business. Although the federal government generally does not regulate the business of insurance, federal initiatives often have an impact on the business in a variety of ways including the taxation of insurance companies and the tax treatment of insurance products.
KCL and OAIC respectively have 501 and 85 full time employees who are located in KCL's home office. Sunset has 103 full time employees located in Olympia, Washington.
The Company is engaged in a crowded, competitive industry, competing with 1,500 to 2,000 other life insurance companies in the United States. The industry is highly competitive with respect to pricing, selection of products and quality of service. No single competitor nor any small group of competitors dominates any of the markets in which the Company operates.
Item 2.
Item 2. PROPERTIES
Kansas City Life's home office is located at 3520 Broadway in Kansas City, Missouri. The Company owns and wholly occupies two five story buildings on an eight acre site.
Sunset owns and wholly occupies a two story office building at 3200 Capitol Boulevard in Olympia, Washington. The building is situated on four acres of land.
Kansas City Life owns various other properties held for investment.
Item 3.
Item 3. LEGAL PROCEEDINGS
In January, 1998, the Oklahoma Supreme Court refused to rehear its prior decision which held that the Company was not liable for any portion of a punitive and compensatory damage award against its agent. The case, Nita Charlene Pelter Cox and Verna Leanne Pelter Graybill, Personal Representatives of the Estate of Leora Pearl Pelter, Deceased, Plaintiffs, vs. Kansas City Life Insurance Company and Billy D. Stearman, Defendants, arose out of certain alleged actions by Stearman, a former agent. In January, 1996, a division of the Oklahoma Appellate Court reduced a prior $10.7 million judgment against the Company to $1.3 million which the Company has accrued. Subsequently, an Oklahoma District Court judge ruled that the Company was also responsible for $2.5 million of a separate judgment rendered against the agent in the same case. The Oklahoma Supreme Court reversed the $2.5 million judgment against the Company and resolved all major issues in this matter.
In recent years, life insurance companies have been named as defendants in lawsuits including class action lawsuits related to life insurance pricing and sales practices. These so-called "vanishing premium" cases typically contain allegations that an interest-sensitive policy was sold with a projection that the policy would be paid up or become self-sustaining after a period of years. In late December, 1997, the Company was served as a defendant in a lawsuit filed in United States District Court for the Middle District of Florida, Tampa Division. The case, Patricia A. Adams, Kevin J. Palamarchuck and Karolynne K. Palamarchuck, On Behalf of Themselves and All Others Similarly Situated vs. Kansas City Life Insurance Company, claims unspecified compensatory and punitive damages as a result of an alleged nationwide fraudulent scheme by the Company and its agents involving deceptive sales practices including "vanishing premium" claims. The plaintiffs, former policyowners, purport to represent themselves and all others who were induced by deceptive sales practices to purchase permanent life insurance from the Company. Management denies the allegations, including the existence of a legitimate class and believes that full and appropriate disclosure was made as a matter of practice. Management intends to defend this suit vigorously. The litigation is in early procedural stages and plaintiffs have not yet moved for class certification. The amount of any liability which may arise as a result of this case cannot be reasonably estimated, and no provision for loss has been made in the Company's financial statements. However, there can be no assurance that this case or any future litigation relating to sales practices will not have a material effect on the Company.
In addition to the above, the Company and certain of its subsidiaries are defendants in lawsuits involving claims and disputes with policyowners that may include claims seeking punitive damages. Some of these lawsuits arise in jurisdictions where juries sometime award punitive damages grossly disproportionate to the actual damages. Although no assurances can be given and no determinations can be made at this time as to the outcome of any particular lawsuit or proceeding, the Company and its subsidiaries believe that there are meritorious defenses for these claims and are defending them vigorously. In the opinion of management, the amounts that would ultimately be paid, if any, are not expected to have a material effect on the Company's consolidated results of operations and financial position.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated by Reference.
Item 6.
Item 6. SELECTED FINANCIAL DATA
Incorporated by Reference.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated by Reference.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by Reference.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information, as of December 31, 1997, is provided with respect to each Director:
Term as Director Served as Expires Other Positions Director Name of Director Age in April with the Company From
W. E. Bixby (1)(2)(3) 65 1998 Vice Chairman of the 1966 Board and President
Jack D. Hayes (1)(3) 57 1998 Senior Vice President, 1995 Marketing
Francis P. Lemery 58 1998 Senior Vice President 1985 (1)(2)(3) and Actuary
Michael J. Ross 56 1998 None 1972 (2)(3)(4)(5)(6)
Elizabeth T. Solberg 58 1998 None 1997 (3)(6)
W. E. Bixby, III (6) 39 1999 None 1996
Webb R. Gilmore 53 1999 None 1990 (2)(4)(5)(6)
Nancy Bixby Hudson (6) 45 1999 None 1996
Daryl D. Jensen (6) 58 1999 None 1978
C. John Malacarne 56 1999 Vice President, 1991 (1)(2) General Counsel and Secretary Term as Director Served as Expires Other Positions Director Name of Director Age in April with the Company From
J. R. Bixby (1)(2) 72 2000 Chairman of the Board 1957
R. Philip Bixby 44 2000 Executive Vice President 1985 (1)(2)
Richard L. Finn 56 2000 Senior Vice President, 1983 (1)(2) Finance
Warren J. Hunzicker, M.D. 77 2000 None 1989 (6)
Larry Winn, Jr. 78 2000 None 1985 (2)(4)(5)(6)
(1) See below with respect to the business experience of executive officers of the Company.
(2) Member of Executive Committee.
(3) Subject to the approval of the shareholders at the annual meeting of shareholders to be held on April 23, 1998, will be elected for a three year term ending in 2001.
(4) Member of Audit Committee.
(5) Member of Compensation Committee.
(6) W. E. Bixby, III was elected Assistant Vice President of the Company in 1985, Vice President, Marketing in 1990, Vice President, Marketing Operations in 1992, and President of Old American, a subsidiary, in 1996. He also serves as a Director of Sunset Life and Old American,subsidiaries. Mr. Gilmore is a partner in the law firm of Gilmore & Bell. Nancy Bixby Hudson has served as a Director of Sunset Life, a subsidiary, since 1986. Dr. Hunzicker was elected by the Board of Directors to an unexpired term in 1989. Dr. Hunzicker served as the Company's Medical Director from 1987 to 1989; he formerly served as a member of the Company's Board of Directors from 1977 to 1980. Mr. Jensen has been President of Sunset Life Insurance Company of America, a subsidiary of Registrant, since 1973. Mr. Ross has been President of Jefferson Bank and Trust Company, St. Louis, Missouri, since 1971 and was elected Chairman of the Board in 1983. Mrs. Solberg is Executive Vice President and Senior Partner of Fleishman-Hillard, Inc., a position she has held since 1984. Mr. Winn is retired as the Kansas Third District Representative to the U.S. Congress.
Name, Age and Business Experience Position During Past 5 Years
J. R. Bixby, 72 Chairman since 1972; President from 1964 until he Chairman of the Board retired in April, 1990. Responsible for overall corporate policy. Director of Sunset Life and Old American, subsidiaries.
W. E. Bixby, 65 Vice Chairman of the Board since 1974; elected Vice Chairman of the Executive Vice President in January, 1987; and Board President, President and CEO and CEO in April, 1990. Primarily responsible for the operation of the Company. Chairman of the Board of Sunset Life and Old American, subsidiaries.
Name, Age and Business Experience Position During Past 5 Years
R. Philip Bixby, 44 Elected Assistant Secretary in 1979; Assistant Vice Executive Vice President President in 1982; Vice President in 1984; Senior Vice President, Operations in 1990; and to present position in 1996. Director of Sunset Life and Old American, subsidiaries.
Richard L. Finn, 56 Elected Vice President in 1976; Financial Vice Senior Vice President, President in 1983; and to present position in 1984. Finance Chief financial officer and responsible for investment of the Company's funds, accounting and taxes. Director and Treasurer of Sunset Life and Director, Vice President and Chief Financial Officer and Assistant Treasurer of Old American, subsidiaries.
Jack D. Hayes, 57 Elected Senior Vice President, Marketing in Senior Vice President, February 1994. Responsible for Marketing, Marketing Marketing Administration, Communications and Public Relations. Served as Executive Vice President and Chief Marketing Officer of Fidelity Union Life, Dallas, Texas, from June, 1981 to January, 1994.
Francis P. Lemery, 58 Elected Vice President in 1979; Vice President and Senior Vice President Actuary in 1980; and to present position in 1984. Actuary Responsible for Group Insurance Department, Actuarial Services, State Compliance, New Business and Underwriting. Director of Sunset Life and Old American, subsidiaries.
Robert C. Miller, 51 Elected Assistant Auditor in 1972; Auditor in 1973; Senior Vice President, Vice President and Auditor in 1987; and to present Administrative Services position in 1991. Responsible for Human Resources and Home Office building and maintenance.
Charles R. Duffy, Jr., 50 Elected Vice President, Computer Information Senior Vice President, Services in 1989; Vice President, Insurance Admini- Operations stration in 1992; and to present position in 1996. Responsible for the Company's Computer Operations, Customer Services, Claims, Premium Collection and Agency Administration. Director of Sunset Life and Old American, subsidiaries.
John K. Koetting, 52 Elected Assistant Controller in 1975; and to Vice President and present position in 1980. Chief accounting officer Controller responsible for all corporate accounting reports. Director of Old American, a subsidiary.
C. John Malacarne, 56 Elected Associate General Counsel in 1976; General Vice President, General Counsel in 1980; Vice President and General Counsel Counsel and Secretary in 1981; and to present position in 1991. Responsible for Legal Department, Office of the Secretary, Stock Transfer Department and Market Compliance. Director and Secretary of Sunset Life and Old American, subsidiaries.
(d) J. R. Bixby, Chairman of the Board, and W. E. Bixby, Vice Chairman of the Board and President, are brothers. Nancy Bixby Hudson is the daughter of J. R. Bixby; R. Philip Bixby and W. E. Bixby, III are the sons of W. E. Bixby.
(e) See Business Experience During Past 5 Years above.
(f) There have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any Director, nominee or executive officer during the past five years.
Item 11.
Item 11. EXECUTIVE COMPENSATION
(a) Compensation
The following table sets forth information concerning cash compensation paid or accrued by the Company and its subsidiaries to the Chief Executive Officer and the other four most highly paid executive officers as of December 31, 1997 for the fiscal years ending December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
Long Term Other All Annual Compensation Incentive Annual Other Compensa- Compen- Compen- Name and Salary Bonus tion Payouts sation sation Principal Position Year $ $ $ $ $
W. E. Bixby, Vice 1997 445,800 400 374,976 7,000 61,575 Chairman of the 1996 416,640 58,042 0 7,000 55,586 Board, President and 1995 396,780 143,344 0 7,000 52,903 CEO, Kansas City Life; Chairman of the Board of Sunset Life and Old American, subsidiaries.
R. L. Finn, Senior 1997 212,160 400 151,560 7,000 25,540 Vice President, 1996 202,080 28,336 0 5,500 24,305 Finance and Director, 1995 193,380 52,231 0 5,000 21,835 Kansas City Life; Director of Sunset Life and Old American, subsidiaries.
F. P. Lemery, Senior 1997 212,160 400 151,560 7,000 25,540 Vice President and 1996 202,080 28,336 0 7,000 24,305 Actuary and Director, 1995 193,380 52,232 0 7,000 23,239 Kansas City Life; Director of Sunset Life and Old American, subsidiaries.
D. D. Jensen, Director,1997 193,200 18,097 138,000 6,000 23,217 Kansas City Life; Vice 1996 184,000 29,515 0 6,000 22,090 Chairman of the Board 1995 176,190 35,275 0 6,000 21,133 and President, Sunset Life, subsidiary.
R. P. Bixby, Execu- 1997 284,700 400 132,660 4,750 29,820 tive Vice President 1996 176,880 12,081 0 4,000 18,488 and Director, Kansas 1995 169,260 34,400 0 4,000 17,687 City Life; Director of Sunset Life and Old American, subsidiaries.
LONG TERM INCENTIVE PLAN
The amounts shown above reflect payouts in 1997 under the Company's Long Term Incentive Plan for the performance period of January 1, 1994 through December 31, 1996. The plan covers eight senior executives, including those named above. For plan participants to receive an award, Kansas City Life statutory capital and surplus had to be maintained at a minimum of 9% of assets over the three year period. The award is a percent of salary based on achieving specified levels of return on equity with certain adjustments over the three year period.
ALL OTHER COMPENSATION INCLUDES THE FOLLOWING:
The Company has a contributory Internal Revenue Code Section 401(k) savings and investment plan. Directors and officers who are full time employees of the Registrant or its subsidiaries participate in the plan on the same basis as all other employees. Employees may contribute from 1% to 10% of their monthly base salary. Highly compensated employees are limited to contributions of 6%. The Company contributes an amount equal to the employee contributions in the form of capital stock of the Company. The Company contributed $9,000 to the plan for the accounts of the named individuals in 1995 and 1996 and $9,500 in 1997.
The Company has adopted a nonqualified deferred compensation plan for approximately 58 highly compensated officers and employees. It is similar to the Company's 401(k) plan. Participants contribute amounts to this plan that they cannot contribute to the 401(k) plan up to a total of 10% of their monthly salary and the Company contributes an equal amount. The amount contributed to the plan for fiscal years 1995, 1996 and 1997 respectively for the accounts of the named individuals are as follows: W. E. Bixby, $30,678, $32,664, $35,080; R. L. Finn, $10,338, $11,208, $11,716; F. P. Lemery, $10,338, $11,208, $11,716; D. D. Jensen, $8,619, $9,400, $9,820; R. P. Bixby, $7,926, $8,688, $18,970.
The Company provides yearly renewable term insurance to its employees in the amount of 2 1/2 times their annual salary. Directors and officers who are full time employees participate in the program on the same basis as all other employees. Premiums paid for the named individuals for fiscal years 1995, 1996 and 1997 respectively are as follows: W. E. Bixby, $13,225, $13,922, $16,995; R. L. Finn, $2,497, $4,097, $4,324; F. P. Lemery, $3,901, $4,097, $4,324; D. D. Jensen, $3,514, $3,690, $3,897; R. P. Bixby, $761, $800, $1,350.
(f) Defined Benefit or Actuarial Plan Disclosure
The following table illustrates the possible annual pension benefits upon completion of the indicated years of service with the five year average salary for all officers and employees. Benefits are calculated on a straight life annuity basis. The Social Security offset and benefit has been estimated.
PENSION PLAN TABLE
Compensation Years of Service SS**
10 20 30 40
$ 75,000 $ 18,750 $ 37,500 $ 51,948* $ 51,948* $16,104 100,000 25,000 50,000 70,000 71,948* 16,104 125,000 31,250 62,500 87,500 91,948* 16,104 150,000 37,500 75,000 105,000 111,948* 16,104 200,000 50,000 100,000 140,000 151,948* 16,104 250,000 62,500 125,000 175,000 191,948* 16,104 300,000 75,000 150,000 210,000 231,948* 16,104 350,000 87,500 175,000 245,000 271,948* 16,104 400,000 100,000 200,000 280,000 311,948* 16,104 450,000 112,500 225,000 315,000 351,948* 16,104 500,000 125,000 250,000 350,000 391,948* 16,104
*Maximum pension based on an estimate of Social Security. **Estimated annual Social Security benefit at age 65.
The Company has a noncontributory defined benefit pension plan which covers all full time employees age 21 and over. A participant's retirement benefit is determined by multiplying his or her highest average annual salary for five consecutive years, from the last ten years of his or her employment, by a percentage determined from the participant's total years of service from that participant's 21st birthdate. The participant's percentage is determined by multiplying 2 1/2% for each of the participant's years of service up to the first twenty years, 2% for each year of service for the next ten years, and 1% for each year of the next ten. A participant's benefit may not exceed 80% of such average salary reduced by 1/2 of his or her Social Security benefit. Early retirement benefits are available after age 55, depending upon years of service and age. Benefits are fully vested after five years of service following a participant's 18th birthdate.
Effective January 1, 1998, the pension plan was converted to a cash balance plan. Benefits under the plan will no longer be determined primarily by final average compensation and years of service. Participants who were age 55 or older with 15 or more years of service on December 31, 1997 can receive the greater of the cash balance benefit or the benefit the participant would have accrued had the prior plan remained in effect.
A participant's base salary not to exceed $150,000 (as adjusted for cost of living) commencing January 1, 1994, was used to determine compensation under the plan. For the individuals named in the Cash Compensation Table, the years of service covered by the plan for the year ended December 31, 1997, were: W. E. Bixby, 40 years; R. L. Finn, 23 years; F. P. Lemery, 37 years; D. D. Jensen, 31 years; R. P. Bixby, 20 years.
The Company has adopted an unfunded excess benefit plan which covers any employee who is an active participant in the noncontributory defined benefit pension plan and whose pension benefit under that plan would exceed the maximum benefit limited under Internal Revenue Code Section 415. A participant under this plan is entitled to a monthly benefit of the difference between the maximum monthly normal, early, or deferred vested retirement benefit determined without regard to the Internal Revenue Code Section 415 limitation and the monthly equivalent of the maximum benefit permitted by Internal Revenue Code Section 415.
(g) Compensation of Directors
Outside Directors are paid $4,000 quarterly; $2,000 if they attend Special Board Meetings; $1,000 if they attend Executive Committee Meetings; $500 if they attend all other Committee Meetings. Inside Directors are paid $1,000 quarterly and $400 if they attend Special Board Meetings. J. R. Bixby, Chairman of the Board, is paid $30,000 quarterly. Directors of Sunset Life, a subsidiary, are paid $500 quarterly and Directors of Old American are paid $250 quarterly. Director fees are included in the Compensation Table.
(h) Employment Contracts and Termination of Employment and Change in Control Arrangements
There are no employment contracts between the Company and its executive officers. The Company's benefit plans contain typical provisions applicable to all employees for termination of employment.
(j) Additional Information with Respect to Compensation Committee
The members of the Compensation Committee: Webb R. Gilmore, Michael J. Ross and Larry Winn, Jr.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The following sets forth information as of February 27, 1998, concerning holding of voting securities of the Company's $2.50 par value capital stock, which is the Company's only class of voting stock.
Name and Address of Beneficial Owners:
John K. Koetting, Robert C. Miller and Ronald E. Hiatt, Trustees of the Kansas City Life Insurance Company Savings and Investment Plan 3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
446,892 shares 7.2
John K. Koetting, Robert C. Miller and Ronald E. Hiatt, Trustees of the Kansas City Life Employee Stock Plan 3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
38,342 shares .6
*Trustees have the power to sell plan assets. Participants may instruct the Trustees how to vote their shares.
Angeline I. O'Connor c/o William A. Hirsch, Esq. Morrison & Hecker 2600 Grand Avenue, Kansas City, MO 64108
Amount and Nature of Ownership** Percent of Class
351,224 shares 5.7
**Includes 174,500 shares in the Walter E. Bixby Descendants Trust. Angeline I. O'Connor, R. Philip Bixby and W. E. Bixby, III are Co-Trustees. The Trustees share voting and investment power. The terms of the Trust restrict the transfer of the shares.
Angeline I. O'Connor (then known as Angeline I. Oxler); J. R. Bixby; Margie Morris Bixby; Kathryn A. Bixby-Haddad; Kathryn A. Bixby-Haddad as Custodian for Kellie S. Curtis; Sorouch Haddad; Nancy Bixby Hudson; R. Philip Bixby; W. E. Bixby, III; James R. Gammon as Trustee of the Walter E. Bixby Family Trust; R. Philip Bixby, Angeline I. O'Connor and W. E. Bixby, III as Co-Trustees of the Walter E. Bixby Descendants Trust; W. E. Bixby; W. E. Bixby as Trustee for Trust B created pursuant to the Will of Edwin Bixby and Trust B created pursuant to the Will of Angeline Reynolds Bixby were members of a group that agreed to act together for the purpose of holding common stock, and the common stock ownership of such group was reflected in a Schedule 13D filed with the Commission on November 23, 1988 and subsequently amended. The agreement that documented the various rights and obligations among all of the members of that group expired May 20, 1990.
Nonetheless, Mrs. O'Connor and other former members of the Bixby Group in subsequent filings with the Commission have indicated that they currently share the expectation of many members of their extended family that a majority of the common stock will continue to be beneficially owned by such individuals or be under the control of Trustees under certain testamentary or inter vivos Trusts for the benefit of such individuals.
(b) Security Ownership of Management
The names of the nominees proposed by management for election to three year terms at the annual meeting to be held April 23, 1998 are set forth as follows:
Served Shares of as a Record and Principal Director Beneficially Percent Nominee Occupation Since Owned of Class
W. E. Bixby Vice Chairman of 1966 1,153,909 19.0 3520 Broadway the Board and 26,373(2) Kansas City, MO President
Jack D. Hayes Senior Vice Presi- 1995 600 * 3520 Broadway dent, Marketing 521(2) Kansas City, MO
Francis P. Lemery Senior Vice Presi- 1985 1,713 * 3520 Broadway dent and Actuary 7,688(2) Kansas City, MO
Michael J. Ross Chairman of the 1972 300 * 12826 Dubon Lane Board and President, St. Louis, MO Jefferson Bank and Trust Company, St. Louis, MO
Elizabeth T. Solberg Executive Vice 1997 100 * 850 W. 52nd St. President and Senior Kansas City, MO Partner, Fleishman- Hillard, Inc., Kansas City, MO
The following Directors were elected April 18, 1996 for a three year term:
W. E. Bixby, III President, Old 1996 176,124 5.7 3520 Broadway American Insur- 2,217(2) Kansas City, MO ance Company, 174,500(3) Kansas City, MO 4,376(4)
Webb R. Gilmore Partner - 1990 500 * Attorney at Law Gilmore & Bell, 833 Westover Rd. Kansas City, MO Kansas City, MO
Nancy Bixby Hudson Investor 1996 165,783 2.7 425 Baldwin Creek Rd. Lander, WY
Daryl D. Jensen Vice Chairman of the 1978 24 2143 Old Port Dr. Board and President, 7,361(2) * Olympia, WA Sunset Life Insurance Company of America, Olympia, WA
C. John Malacarne Vice President, 1991 10 3520 Broadway General Counsel 6,085(2) * Kansas City, MO and Secretary
Served Shares of as a Record and Principal Director Beneficially Percent Nominee Occupation Since Owned of Class
The following Directors were elected April 24, 1997 for a three year term:
J. R. Bixby Chairman of the 1957 1,484,056(1) 24.0 3520 Broadway Board Kansas City, MO
R. Philip Bixby Executive Vice 1985 174,599 5.9 3520 Broadway President 6,391(2) Kansas City, MO 174,500(3) 9,882(5)
Richard L. Finn Senior Vice Presi- 1983 12 3520 Broadway dent, Finance 6,664(2) * Kansas City, MO
Warren J. Hunzicker, M.D. Director 1989 150 * 1248 Stratford Rd. Kansas City, MO
Larry Winn, Jr. Retired Represent- 1985 166 * 8420 Roe Ave. ative, U.S. Congress Prairie Village, KS
All Directors, executive officers and their spouses (also includes all shares held by Trustees of Company benefit plans and shares held by the Bixby Family and related Trusts) 4,205,181 67.9
*Less than 1%.
(1) Includes 900 shares owned by the spouse of J. R. Bixby. Beneficial ownership of these shares is disclaimed.
(2) Approximate beneficial interest in shares held by the Trustees of Kansas City Life Insurance Company employee benefit plans. Participants in the plans may instruct the Trustees how to vote those shares held in their account.
(3) Shares in the Walter E. Bixby Descendants Trust. R. Philip Bixby, W. E. Bixby, III and Angeline I. O'Connor are Co-Trustees. The Trustees share voting and investment power. The terms of the Trust restrict transferring shares.
(4) Shares as to which W. E. Bixby, III is Custodian for his minor niece and nephews under the Missouri Uniform Gifts to Minors law.
(5) Shares as to which R. Philip Bixby is Custodian for his minor niece and nephews under the Missouri Uniform Gifts to Minors law.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of Kansas City Life Insurance Company are incorporated by reference from the Company's Annual Report to Shareholders for the year ended December 31, 1997 at the following pages:
Page
Consolidated Income Statement - Years ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . 16 Consolidated Balance Sheet - December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . 17 Consolidated Statement of Stockholders' Equity - Years ended December 31, 1997, 1996 and 1995 . . . . . . . . . 18 Consolidated Statement of Cash Flows - Years ended December 31, 1997, 1996 and 1995 . . . . . . . . . 19 Notes to Consolidated Financial Statements . . . . . . . . . . . 20-28 Report of Independent Auditors . . . . . . . . . . . . . . . . . 29
(a)(2) Supplementary Data and Financial Statement Schedules
Schedules are attached hereto at the following pages:
Page
I - Summary of Investments - Other than Investments in Related Parties, December 31, 1997 . . . . . . . . . 17 II - Condensed Financial Information of Registrant, Years ended December 31, 1997, 1996 and 1995 . . . . . . 18-20 III - Supplementary Insurance Information, Years ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . 21 V - Valuation and Qualifying Accounts, Years ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . 21
All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
(b) Reports on Form 8-K
None.
(c) Exhibits
Exhibit Number: Basic Documents:
3(a) 1986 Restatement of Articles of Incorporation. [Filed as Exhibit 3(a) to the Company's 10-K Report for 1986 and incorporated herein by reference]
3(b) Bylaws as amended October 26, 1986. [Filed as Exhibit 3(b) to the Company's 10-K Report for 1986 and incorporated herein by reference]
3(c) Specimen copies of Capital Stock Certificates, (a) less than 100 shares; (b) 100 shares; and (c) unlimited. [Filed as Exhibit 3(d) to the Company's 10-K Report for 1985 and incorporated herein by reference]
10(a) Fourth Amendment, Kansas City Life Deferred Compensation Plan. [Filed as Exhibit 10(a) to the Company's 10-K Report for 1993 and incorporated herein by reference]
10(b) Twenty-first Amendment, Kansas City Life Insurance Company Savings and Investment Plan. [Filed as Exhibit 10(b) to the Company's 10-K Report for 1994 and incorporated herein by reference]
10(c) Ninth Amendment, Kansas City Life Employee Stock Plan. [Filed as Exhibit 10(c) to the Company's 10-K Report for 1994 and incorporated herein by reference]
10(d) Kansas City Life Excess Benefit Plan. [Filed as Exhibit 10(e) to the Company's 10-K Report for 1990 and incorporated herein by reference]
10(e) Kansas City Life Insurance Company Long-Term Incentive Plan for 1994-1996.
13 Annual Report to Shareholders for the year ended December 31, 1997.
21 Subsidiaries.
23(a) Consent of Independent Auditors.
23(b) Consent of Independent Auditors.
27 Financial Data Schedule.
99(a) Form 11-K for the Kansas City Life Insurance Company Savings and Investment Plan for the year 1997 and filed as a part hereof and incorporated herein by reference.
99(b) Prospectus for Kansas City Life Insurance Company Savings and Investment Plan. [Filed as Exhibit 99(b) to the Company's 10-K Report for 1995 and incorporated herein by reference]
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.
KANSAS CITY LIFE INSURANCE COMPANY
By: /s/ John K. Koetting John K. Koetting Vice President and Controller (Principal Accounting Officer) Date: March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ W. E. Bixby By: /s/ Richard L. Finn W. E. Bixby Richard L. Finn Director; Vice Chairman of the Director; Senior Vice Board and President President, Finance (Principal Executive Officer) (Principal Financial Officer) Date: March 25, 1998 Date: March 25, 1998
By: /s/ J. R. Bixby By: /s/ Francis P. Lemery J. R. Bixby Francis P. Lemery Director; Chairman of Director; Senior Vice the Board President and Actuary Date: March 25, 1998 Date: March 25, 1998
By: /s/ R. Philip Bixby By: /s/ C. John Malacarne R. Philip Bixby C. John Malacarne Director; Executive Director; Vice President, Vice President General Counsel and Secretary Date: March 25, 1998 Date: March 25, 1998
By: /s/ Warren J. Hunzicker By: /s/ Daryl D. Jensen Warren J. Hunzicker, M.D. Daryl D.Jensen Director Director Date: March 25, 1998 Date: March 25, 1998
Schedule I
KANSAS CITY LIFE INSURANCE COMPANY SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES December 31, 1997
Amount at Which Shown Fair in Balance Type of Investment Cost Value Sheet
(in thousands)
Fixed maturity securities, available for sale: Bonds: United States government and government agencies and authorities $ 135,182 138,051 138,051 Mortgage-backed securities 315,621 324,662 324,662 States, municipalities and political subdivisions 74,693 76,915 76,915 Public utilities 281,781 288,075 288,075 All other bonds 1,137,714 1,168,839 1,168,839 Redeemable preferred stocks 7,750 7,974 7,974 Total 1,952,741 2,004,516 2,004,516
Equity securities, available for sale: Common stocks 20,187 20,085 20,085 Perpetual preferred stocks 86,847 94,901 94,901 Total 107,034 114,986 114,986
Fixed maturity securities, held to maturity: Bonds: States, municipalities and political subdivisions 1,549 1,696 1,549 Public utilities 50,291 52,729 50,291 All other bonds 93,821 97,070 93,821 Total 145,661 151,495 145,661
Mortgage loans on real estate, net 270,054 270,054 Real estate, net 36,764 36,764 Real estate joint ventures 43,347 43,347 Policy loans 123,186 123,186 Short-term 74,341 74,341 Other 7,500 7,500 Total investments $2,760,628 2,820,355
Schedule II
KANSAS CITY LIFE INSURANCE COMPANY CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEET
December 31
1997 1996
(in thousands)
Assets Investments: Fixed maturity securities: Available for sale, at fair value $1,546,655 1,322,965 Held to maturity, at amortized cost 90,688 162,502 Equity securities available for sale, at fair value: Investments in affiliates 218,128 197,424 Other 86,803 61,783 Mortgage loans on real estate, net 221,323 222,548 Real estate, net 36,163 42,658 Real estate joint ventures 34,666 24,025 Policy loans 102,106 74,070 Short-term 46,203 10,912 Total investments 2,382,735 2,118,887
Deferred acquisition costs 95,638 94,095 Value of purchased insurance in force 73,217 - Other 157,686 85,385 Separate account assets 57,980 13,916
Total assets $2,767,256 2,312,283
Liabilities and stockholders' equity Future policy benefits $ 538,361 452,126 Accumulated contract values 1,427,769 1,224,377 Other 212,552 159,000 Separate account liabilities 57,980 13,916 Total liabilities 2,236,662 1,849,419
Stockholders' equity: Common stock 23,121 23,121 Paid-in capital 16,256 14,761 Unrealized gains on securities available for sale, net 36,448 2,963 Retained earnings including $107,260,000 undis- tributed earnings of affiliates ($95,307,000 - 1996) 543,715 509,748 Less treasury stock, at cost (88,946) (87,729) Total stockholders' equity 530,594 462,864
Total liabilities and stockholders' equity $2,767,256 2,312,283
The above condensed financial statement should be read in conjunction with the consolidated financial statements and notes thereto of Kansas City Life Insurance Company.
Schedule II (continued)
KANSAS CITY LIFE INSURANCE COMPANY CONDENSED FINANCIAL INFORMATION OF REGISTRANT INCOME STATEMENT
Years ended December 31
1997 1996 1995
(in thousands)
Revenues Insurance revenues: Premiums: Life insurance $ 28,145 26,186 23,927 Accident and health 39,435 31,264 22,324 Contract charges 68,431 55,123 52,932 Investment revenues: Investment income, net 148,291 142,119 144,502 Dividends from affiliates 150 5,000 6,400 Realized investment gains, net 13,175 3,089 4,581 Other 5,786 7,877 6,906 Total revenues 303,413 270,658 261,572
Benefits and expenses Policy benefits: Death benefits 51,762 46,033 42,217 Surrenders of life insurance 11,280 11,737 12,491 Other benefits 62,997 56,239 44,066 Increase in benefit and contract reserves 56,126 52,348 54,348 Amortization of policy acquisition costs 15,138 14,619 13,693 Insurance operating expenses 66,891 53,338 52,328 Management fees from affiliates (6,291) (5,721) (5,995) Total benefits and expenses 257,903 228,593 213,148
Income before federal income taxes 45,510 42,065 48,424
Federal income taxes 12,602 9,844 12,404
Income before equity in undistributed net income of affiliates 32,908 32,221 36,020
Equity in undistributed net income of affiliates 11,953 10,094 5,718
Net income $ 44,861 42,315 41,738
The above condensed financial statement should be read in conjunction with the consolidated financial statements and notes thereto of Kansas City Life Insurance Company.
Schedule II (continued)
KANSAS CITY LIFE INSURANCE COMPANY CONDENSED FINANCIAL INFORMATION OF REGISTRANT CASH FLOW STATEMENT
Years ended December 31
1997 1996 1995
(in thousands)
Net cash provided by operating activities $ 14,081 38,020 32,553
Investing activities Investments called, matured or repaid 215,239 225,957 232,966 Decrease (increase) in short-term investments, net (35,291) 16,053 10,482 Investments sold 492,920 102,733 141,990 Investments purchased or originated (840,802) (387,849) (445,236) Other 3,685 1,056 (538) Acquisition of life block: Cash received net of purchase price paid213,092 - -
Net cash provided (used) 48,843 (42,050) (60,336)
Financing activities Proceeds from borrowings 245,050 1,650 22,730 Repayment of borrowings (245,050) (1,650) (22,730) Policyowner contract deposits 119,639 115,493 132,408 Withdrawals of policyowner contract deposits (127,341) (107,073) (94,150) Cash dividends to stockholders (10,894) (10,393) (10,061) Other 278 592 670
Net cash provided (used) (18,318) (1,381) 28,867
Increase (decrease) in cash 44,606 (5,411) 1,084 Cash at beginning of year (87) 5,324 4,240
Cash at end of year $ 44,519 (87) 5,324
The above condensed financial statement should be read in conjunction with the consolidated financial statements and notes thereto of Kansas City Life Insurance Company.
Schedule III
KANSAS CITY LIFE INSURANCE COMPANY SUPPLEMENTARY INSURANCE INFORMATION
The Company believes it operates in a single industry segment, that of providing life and accident and health insurance coverage. Therefore, supplementary information for this segment is limited to the following:
December 31
1997 1996
(in thousands)
Unearned premiums (included in $949 909 other policyowners' funds in the accompanying Consolidated Balance Sheet)
All other information required by this Schedule is shown in the accompanying Consolidated Income Statement and Consolidated Balance Sheet.
Schedule V
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31
1997 1996 1995
(in thousands)
Real estate valuation account Beginning of year $ 5,227 7,378 9,942 Deductions (1,541) (2,151) (2,564) End of year $ 3,686 5,227 7,378
Mortgage loan valuation account Beginning of year $ 8,500 10,500 10,500 Deductions - (2,000) - End of year $ 8,500 8,500 10,500
Allowance for uncollectible accounts Beginning of year $ 1,160 1,123 2,732 Additions 230 845 1,258 Deductions (181) (808) (2,867) End of year $ 1,209 1,160 1,123