Item 1. BUSINESS
Kansas City Life Insurance Company (KCL) was incorporated under the assess- ment 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 49 states and the District of Columbia.
The Company primarily operates in four business segments: Kansas City Life Insurance Company, divided between its individual and group businesses, and its two insurance affiliates, Sunset Life Insurance Company of America (Sunset) and Old American Insurance Company (Old American). KCL markets its individual products, principally interest sensitive and variable products, through a career general agency sales force and these products generate 42% of consolidated insur- ance revenues. Variable universal life and annuities totaled 49% of new statutory premiums in 1998. The group products, largely life, disability and administrative services only, are sold through the general agency sales force and appointed group agents. Group revenues account for 19% of insurance revenues. Sunset markets interest sensitive and traditional products to individuals through a personal pro- ducing general agency system. Sunset operates in 24 states generally west of the Mississippi and is in the process of filing for admission to operate in most of the remaining states. This segment provides 10% of revenues. The Old American segment markets whole life final expense products to seniors through a general agency sales force. Old American operates in 46 states and accounts for 29% of consolidated insurance revenues.
Old American's administrative operations are merged into KCL's home office and its administrative and accounting systems. Sunset's administrative operations likewise will be merged into KCL's home office during 1999. Increased efficiencies and expense savings should be realized in 2000 and subsequent years.
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 govern- ment 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 Old American respectively have 529 and 76 full time employees who are located in KCL's home office. Sunset has 92 full time employees currently located in Olympia, Washington.
The Company is engaged in a 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 currently 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. This building will be offered for sale in the latter half of 1999.
The Company owns various other properties held for investment.
Item 3.
Item 3. LEGAL PROCEEDINGS
In recent years, life insurance companies have been named as defendants in litigation related to life insurance pricing and sales practices. It has become increasingly common for plaintiffs in these cases and other cases to seek class action status and punitive damages. Among cases of this nature involving the Company are the following:
Stewart, et al, v. Security Benefit Life Insurance Company; Tenth Judicial District Court of Kansas, Johnson County, Kansas; Case No. 98-C04036. The Company, through a coinsurance agreement, purchased a block of insurance business, including the policies at issue, from Security Benefit Life ("SBL"). The Company is providing a defense to SBL pursuant to the agreement. This lawsuit was filed by four SBL policyholders who allege SBL (through its agent, Bank Market Service, Inc.) sold the policies as retirement plans when, in fact, the policies are for life insurance and have only a minimal cash value. The plaintiffs seek to rescind their insurance contracts with SBL and recover the benefits that "true" retirement plans would have provided. Plaintiffs seek to certify a class comprised of "all persons who have an ownership interest (or had at the time the policy terminated) in one or more life insurance policies marketed as retirement plans by defendants between 1977 and the present." The Company's motion to dismiss has been denied and discovery is cur- rently in process.
Adams v. Kansas City Life Insurance Company, et al; United States District Court for the Western District of Missouri; Case No. 98-1053-CV-W-9. This liti- gation was brought by four Company policyholders in the Middle District of Florida but was subsequently transferred based on a motion by the Company to the Western District of Missouri. The policyholders allege the Company marketed the policies as policies that would pay for themselves after a certain period of time - i.e., the premiums would "vanish". Plaintiffs seek to certify a class comprised of "all persons and/or entities who have (or had at the time of the policy's termination) an ownership interest in one or more permanent life insurance policies that were issued by Kansas City Life...based upon the nationwide fraudulent scheme and common course of conduct involving deceptive sales practices described herein from January 1, 1985 to the present...and who were thereby harmed." A motion to dismiss is pending and limited discovery has been conducted.
Management denies the allegations, including the existence of a legitimate class and intends to defend these cases vigorously. To date, class certification has not been granted in any of the cases in which the Company is involved.
In addition to the above, the Company and certain of its subsidiaries are defendants in lawsuits involving claims and disputes with policyholders that may include clients seeking class action status and/or 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, management believes that the total amounts that would ultimately be paid, if any, would have no material effect on the Company's results of operations and financial position.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the Company during the fourth quarter of the fiscal year ended December 31, 1998.
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 OPERATION
Incorporated by Reference.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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, 1998, 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, III (3)(6) 40 1999 None 1996
Webb R. Gilmore 54 1999 None 1990 (2)(3)(4)(5)(6)
Nancy Bixby Hudson (3)(6) 46 1999 None 1996
Daryl D. Jensen (3)(6) 59 1999 None 1978
Term as Director Served as Expires Other Positions Director Name of Director Age in April with the Company From
C. John Malacarne 57 1999 Vice President, 1991 (1)(2)(3) General Counsel and Secretary
J. R. Bixby (1)(2) 73 2000 Chairman of the Board 1957
R. Philip Bixby 45 2000 President and CEO 1985 (1)(2)
Richard L. Finn 57 2000 Senior Vice President, 1983 (1)(2) Finance
Warren J. Hunzicker, M.D. 78 2000 None 1989 (6)
Larry Winn, Jr. 79 2000 None 1985 (2)(4)(5)(6)
W. E. Bixby (1)(2) 66 2001 Vice Chairman of 1966 the Board
Jack D. Hayes (1) 58 2001 Senior Vice President, 1995 Marketing
Francis P. Lemery 59 2001 Senior Vice President 1985 (1)(2) and Actuary
Michael J. Ross 57 2001 None 1972 (2)(4)(5)(6)
Elizabeth T. Solberg 59 2001 None 1997 (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 share- holders to be held on April 22, 1999, will be elected for a three year term ending in 2002.
(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 Chairman, CEO and Shareholder of the law firm of Gilmore & Bell. Nancy Bixby Hudson has served as a Director of Sunset Life, a sub- sidiary, 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 Chairman of the Board of Jefferson Bank and Trust Company, St. Louis, Missouri, since 1983. Mrs. Solberg became a Regional President and Senior Partner of Fleishman-Hillard, Inc., in January, 1998. She had been Executive Vice President 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, 73 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, 66 Vice Chairman of the Board since 1974; elected Vice Chairman of Executive Vice President in January, 1987; the Board President and CEO from 1990 until he retired in April, 1998. Chairman of the Board of Sunset Life and Old American, subsidiaries.
R. Philip Bixby, 45 Elected Assistant Secretary in 1979; Assistant Vice President and CEO President in 1982; Vice President in 1984; Senior Vice President, Operations in 1990; Executive Vice President in 1996; and to present position in April, 1998. Director of Sunset Life and Old American, subsidiaries.
Richard L. Finn, 57 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, 58 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, 59 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, 52 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., 51 Elected Vice President, Computer Information Senior Vice President, Services in 1989; Vice President, Insurance Operations Administration 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.
Name, Age and Business Experience Position During Past 5 Years
John K. Koetting, 53 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, 57 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, 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 pro- ceedings 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, 1998 for the fiscal years ending December 31, 1998, 1997 and 1996.
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 $ $ $ $ $
R. P. Bixby, Presi- 1998 348,692 77,971 0 7,000 22,857 dent and CEO and 1997 284,700 400 132,660 4,750 29,820 Director, Kansas City 1996 176,880 12,081 0 4,000 18,488 Life; Director of Sunset Life and Old American, subsidiaries.
W. E. Bixby, Vice 1998 156,032 34,132 0 68,500 69,541 Chairman of the 1997 445,800 400 374,976 7,000 61,575 Board, retired as 1996 416,640 58,042 0 7,000 55,586 President and CEO of Kansas City Life in April, 1998; Chairman of the Board of Sunset Life and Old American, subsidiaries.
Long Term Other All Annual Compensation Incentive Annual Other Compensa- Compen- Compen- Name and Salary Bonus tion Payouts sation sation Principal Position Year $ $ $ $ $
R. L. Finn, Senior 1998 221,712 33,748 0 7,000 17,842 Vice President, 1997 212,160 400 151,560 7,000 25,540 Finance and Director, 1996 202,080 28,336 0 5,500 24,305 Kansas City Life; Director of Sunset Life and Old American, subsidiaries.
F. P. Lemery, Senior 1998 221,712 33,748 0 7,000 17,842 Vice President and 1997 212,160 400 151,560 7,000 25,540 Actuary and Director, 1996 202,080 28,336 0 7,000 24,305 Kansas City Life; Director of Sunset Life and Old American, subsidiaries.
Jack D. Hayes, Senior 1998 192,624 71,211 0 4,000 15,621 Vice President, Mar- 1997 184,320 400 132,930 4,000 22,309 keting, and Director, 1996 177,240 45,713 0 4,000 21,442 Kansas City Life.
ALL OTHER COMPENSATION INCLUDES THE FOLLOWING:
The Company has a contributory Internal Revenue Code Section 401(k) savings and profit sharing 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 15% of their monthly base salary. Highly compensated employees are limited to contributions of 6%. The Company contributes an amount equal to 50%, 75% or 100% of the employee contributions based on a schedule of years of employment to a maximum of 6% of an employee's compensation in the form of capital stock of the Company. The Company contributed $9,362 to the plan for the account of W. E. Bixby and $10,000 to the accounts of the other named individuals.
The Company has adopted a nonqualified deferred compensation plan for approximately 53 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 15% of their monthly salary and the Company contributes up to a maximum of 6% of their monthly salary. The amount contributed to the plan in 1998 for the accounts of the named indi- viduals are as follows: W. E. Bixby, $0; R. P. Bixby, $9,997; R. L. Finn, $3,303; F. P. Lemery, $3,303; J. D. Hayes, $1,557.
The Company provides yearly renewable term insurance to its employees in the amount of 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 1998 are as follows: W. E. Bixby, $5,970; R. P. Bixby, $2,860; R. L. Finn, $4,539; F. P. Lemery, $4,539; J. D. Hayes, $4,064.
(f) Defined Benefit or Actuarial Plan Disclosure
The Company has a noncontributory defined benefit pension plan which covers employees age 21 and over. Effective January 1, 1998, the pension plan was con- verted to a cash balance plan. Benefits under the plan will no longer be determined primarily by final average compensation and years of service. Each participant's benefit accrued under the prior plan formula as of December 31, 1997 was converted to an opening account balance in the cash balance plan.
Beginning in 1998, participants accumulate annual pay credits equal to a percentage of annual compensation, ranging from 3% to 16% based on service of the participant. The cash balance account is further credited with interest annually which is based on the 30-year treasury bond rate in effect for November of the prior plan year. For 1998, however, a 7% pay credit was used. Upon termination of employment, the account balance as of such date may be distributed to the participant in lump sum or annuity form, at the election of the participant. Benefits vest according to years of service after age 18 on a graded scale, beginning with 30% vesting with 3 years, and becoming 100% vested with 7 years. Compensation for determining benefits under the plan is equal to base salary, excluding overtime and bonuses.
Participants age 55 with 15 years of service as of December 31, 1997 will receive the greater of the benefit under the cash balance plan, or the prior plan formula based on final average compensation and years of service. The following table illustrates the possible annual pension benefits under the prior plan formula based upon final average compensation and years of service, for these employees. Participants may elect a lump sum distribution.
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.
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 benefits from the qualified plan. For the individuals named in the Cash Compensation Table, the years of service covered by the plan for the year ended December 31, 1998, were: R. P. Bixby, 21 years; R. L. Finn, 25 years; F. P. Lemery, 34 years; J. D. Hayes, 5 years.
The estimated annual annuity benefit payable starting at normal retirement age (age 65) as accrued through December 31, 1998 under the cash balance plan for each of the named individuals are as follows: W. E. Bixby $0; R. P. Bixby, $128,457; R. L. Finn, $121,272; F. P. Lemery, $150,662; J. D. Hayes, $21,812.
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 maxi- mum 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. Participants may elect a lump sum distribution. (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. W. E. Bixby receives $75,000 annually for his services as Chairman of the Board of Sunset Life and $25,000 annually for his services as Chairman of the Board of Old American. 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 26, 1999, 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 Anne C. Moberg, Trustees of the Kansas City Life Insurance Company Savings and Profit Sharing Plan 3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
423,902 shares 6.8
John K. Koetting, Robert C. Miller and Anne C. Moberg, Trustees of the Kansas City Life Employee Stock Plan 3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
36,053 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
351,344 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 22, 1999 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, III President, Old 1996 176,004 5.7 3520 Broadway American Insur- 2,451(1) Kansas City, MO ance Company, 174,500(2) Kansas City, MO 5,456(3)
Webb R. Gilmore Chairman, CEO 1990 500 * 833 Westover Rd. and Shareholder, Kansas City, MO Gilmore & Bell, Kansas City, MO
Nancy Bixby Hudson Investor 1996 165,783(4) 2.7 425 Baldwin Creek Rd. Lander, WY
Daryl D. Jensen Vice Chairman of the 1978 24 2143 Old Port Dr. Board and President, 11,272(1) * Olympia, WA Sunset Life Insurance Company of America, Olympia, WA
Served Shares of as a Record and Principal Director Beneficially Percent Nominee Occupation Since Owned of Class
C. John Malacarne Vice President, 1991 10 3520 Broadway General Counsel 6,302(1) * Kansas City, MO and Secretary
The following Directors were elected April 24, 1997 for a three year term:
J. R. Bixby Chairman of the 1957 1,484,056(5) 24.0 3520 Broadway Board Kansas City, MO
R. Philip Bixby President 1985 174,599 5.9 3520 Broadway and CEO 6,752(1) Kansas City, MO 174,500(2) 10,602(6)
Richard L. Finn Senior Vice Presi- 1983 12 3520 Broadway dent, Finance 6,895(1) * 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
The following Directors were elected April 23, 1998 for a three year term:
W. E. Bixby Vice Chairman of 1966 1,179,170 19.0 3520 Broadway the Board Kansas City, MO
Jack D. Hayes Senior Vice Presi- 1995 250 * 3520 Broadway dent, Marketing 521(1) Kansas City, MO
Francis P. Lemery Senior Vice Presi- 1985 1,713 * 3520 Broadway dent and Actuary 7,929(1) Kansas City, MO
Michael J. Ross Chairman of the 1972 300 * 12826 Dubon Lane Board, Jefferson St. Louis, MO Bank and Trust Company, St. Louis, MO
Elizabeth T. Solberg Regional President 1997 100 * 850 W. 52nd St. and Senior Partner, Kansas City, MO Fleishman-Hillard, Inc., Kansas City, MO
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) 4,208,662 67.9
*Less than 1%.
(1) 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.
(2) 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.
(3) Shares as to which W. E. Bixby, III is Custodian for his minor niece and nephews under the Missouri Uniform Gifts to Minors law.
(4) Shares held by Nancy Bixby Hudson, Trustee, Nancy Bixby Hudson Revocable Trust.
(5) Includes 900 shares owned by the spouse of J. R. Bixby. Beneficial ownership of these shares is disclaimed.
(6) 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, 1998 at the following pages:
Page
Consolidated Income Statement - Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . 16 Consolidated Balance Sheet - December 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . 17 Consolidated Statement of Stockholders' Equity - Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . 18 Consolidated Statement of Cash Flows - Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . 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, 1998 . . . . . . . . . 18 II - Condensed Financial Information of Registrant, Years ended December 31, 1998, 1997 and 1996 . . . . . . 19-21 III - Supplementary Insurance Information, Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 22 IV - Reinsurance Information, Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 23 V - Valuation and Qualifying Accounts, Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 24
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 in- corporated herein by reference]
10(a)Seventh Amendment, Kansas City Life Deferred Compensation Plan.
10(b)Twenty-second Amendment, Kansas City Life Insurance Company Savings and Profit Sharing Plan.
10(c) Tenth Amendment, Kansas City Life Employee Stock Plan.
10(d) First Amendment, Kansas City Life Excess Benefit Plan.
10(e)Kansas City Life Insurance Company Long-Term Incentive Plan for 1994-1996. [Filed as Exhibit 10(e) to the Company's 10-K Report for 1997 and incorporated herein by reference]
13 Annual Report to Shareholders for the year ended December 31, 1998.
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 Profit Sharing Plan for the year 1998 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 29, 1999
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 Regis- trant and in the capacities and on the dates indicated.
By: /s/ R. Philip Bixby By: /s/ Richard L. Finn R. Philip Bixby Richard L. Finn Director; President and Director; Senior Vice Chief Executive Officer President, Finance (Principal Executive Officer) (Principal Financial Officer) Date: March 29, 1999 Date: March 29, 1999
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 29, 1999 Date: March 29, 1999
By: /s/ W. E. Bixby By: /s/ C. John Malacarne W. E. Bixby C. John Malacarne Director; Vice Chairman Director; Vice President, of the Board General Counsel and Secretary Date: March 29, 1999 Date: March 29, 1999
By: /s/ W. E. Bixby, III By: /s/ Warren J. Hunzicker, M.D. W. E. Bixby, III Warren J. Hunzicker, M.D. Director Director Date: March 29, 1999 Date: March 29, 1999
Schedule I
KANSAS CITY LIFE INSURANCE COMPANY SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES December 31, 1998
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 $ 45,079 46,445 46,445 Mortgage-backed securities 278,657 288,981 288,981 States, municipalities and political subdivisions 65,264 68,658 68,658 Public utilities 294,016 307,920 307,920 All other bonds 1,326,328 1,378,734 1,378,734 Redeemable preferred stocks 3,631 3,624 3,624 Total 2,012,975 2,094,362 2,094,362
Equity securities, available for sale: Common stocks 19,958 19,851 19,851 Nonredeemable preferred stocks 78,551 80,898 80,898 Total 98,509 100,749 100,749
Fixed maturity securities, held to maturity: Bonds: States, municipalities and political subdivisions 1,548 1,713 1,548 Public utilities 25,325 27,252 25,325 All other bonds 88,631 94,550 88,631 Total 115,504 123,515 115,504
Mortgage loans on real estate, net 315,705 315,705 Real estate, net 43,840 43,840 Real estate joint ventures 39,388 39,388 Policy loans 122,860 122,860 Short-term 59,160 59,160 Total investments $2,807,941 2,891,568
Schedule II
KANSAS CITY LIFE INSURANCE COMPANY CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEET
December 31
1998 1997
(in thousands)
Assets Investments: Fixed maturity securities: Available for sale, at fair value $1,614,849 1,546,655 Held to maturity, at amortized cost 68,354 90,688 Equity securities available for sale, at fair value: Investments in affiliates 237,340 218,128 Other 72,314 86,803 Mortgage loans on real estate, net 254,987 221,323 Real estate, net 43,227 36,163 Real estate joint ventures 30,758 34,666 Policy loans 101,620 102,106 Short-term 36,235 46,203 Total investments 2,459,684 2,382,735
Deferred acquisition costs 102,850 95,638 Value of purchased insurance in force 68,557 73,217 Other 105,796 157,686 Separate account assets 143,008 57,980
Total assets $2,879,895 2,767,256
Liabilities and stockholders' equity Future policy benefits $ 539,767 538,361 Accumulated contract values 1,397,507 1,427,769 Other 221,680 212,552 Separate account liabilities 143,008 57,980 Total liabilities 2,301,962 2,236,662
Stockholders' equity: Common stock 23,121 23,121 Paid in capital 17,633 16,256 Accumulated other comprehensive income 45,466 36,448 Retained earnings including $122,538,000 undis- tributed earnings of affiliates ($107,260,000 - 1997) 581,074 543,715 Less treasury stock, at cost (89,361) (88,946) Total stockholders' equity 577,933 530,594
Total liabilities and stockholders' equity $2,879,895 2,767,256
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
1998 1997 1996
(in thousands)
Revenues Insurance revenues: Premiums: Life insurance $ 31,899 28,145 26,186 Accident and health 37,963 39,435 31,264 Contract charges 82,273 68,431 55,123 Investment revenues: Investment income, net 152,033 148,291 142,119 Dividends from affiliates 100 150 5,000 Realized investment gains, net 9,198 13,175 3,089 Other 10,359 5,786 7,877 Total revenues 323,825 303,413 270,658
Benefits and expenses Policy benefits: Death benefits 58,929 51,762 46,033 Surrenders of life insurance 14,589 11,280 11,737 Other benefits 64,404 62,997 56,239 Increase in benefit and contract reserves 58,118 56,126 52,348 Amortization of deferred policy acquisition costs 16,861 15,138 14,619 Insurance operating expenses 71,075 66,891 53,338 Management fees from affiliates (5,923) (6,291) (5,721) Total benefits and expenses 278,053 257,903 228,593
Income before federal income taxes and equity in undistributed net income of affiliates 45,772 45,510 42,065
Federal income taxes 12,538 12,602 9,844
Income before equity in undistributed net income of affiliates 33,234 32,908 32,221
Equity in undistributed net income of affiliates 15,278 11,953 10,094
Net income $ 48,512 44,861 42,315
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 STATEMENT OF CASH FLOWS
Years ended December 31
1998 1997 1996
(in thousands)
Net cash from operating activities $ 40,286 14,081 38,020
Investing activities Investments called, matured or repaid 218,805 215,239 225,957 Decrease (increase) in short-term investments, net 9,968 (35,291) 16,053 Investments sold 364,541 492,920 102,733 Investments purchased or originated (620,514) (840,802) (387,849) Other 3,403 3,685 1,056 Acquisitions and dispositions of insur- ance blocks - net cash received (paid) (13,250) 213,092 - Net cash from (used in) investing activities (37,047) 48,843 (42,050)
Financing activities Proceeds from borrowings - 245,050 1,650 Repayment of borrowings - (245,050) (1,650) Policyowner contract deposits 126,743 119,639 115,493 Withdrawals of policyowner contract deposits (154,172) (127,341) (107,073) Cash dividends to stockholders (11,153) (10,894) (10,393) Other 962 278 592
Net cash (used in) financing activities (37,620) (18,318) (1,381)
Increase (decrease) in cash (34,381) 44,606 (5,411) Cash at beginning of year 44,519 (87) 5,324
Cash at end of year $ 10,138 44,519 (87)
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
Future Policy Deferred Benefits, Contract Other Acquisition Values and Claim Unearned Policyholders' Costs Liabilities Premiums Funds (in thousands) December 31, 1998: KCL - Individual $102,850 1,939,018 330 120,781 KCL - Group - 19,070 55 - Sunset 47,240 380,134 17 10,966 Old American 68,867 249,729 413 5,197 Total $218,957 2,587,951 815 136,944
December 31, 1997: KCL - Individual $ 95,638 1,970,235 306 114,504 KCL - Group - 20,685 91 - Sunset 47,044 373,228 31 11,117 Old American 67,144 232,292 520 4,348 Total $209,826 2,596,440 948 129,969
December 31, 1996: KCL - Individual $ 94,096 1,680,110 251 89,278 KCL - Group - 19,174 58 - Sunset 48,337 365,910 26 11,828 Old American 64,587 216,303 574 2,096 Total $207,020 2,281,497 909 103,202
Insurance Accident and Policy Operating Health Written Benefits Expenses@ Premiums (in thousands) 1998: @Allocations KCL - Individual $161,236 48 149 385 of Insurance KCL - Group 34,801 20,289 38,820 Operating Sunset 29,255 10,452 28 Expenses are Old American 58,048 17,457 4,354 based on a Total $283,340 96,347 43,587 number of assumptions 1997: and esti- KCL - Individual $145,561 44,309 402 mates, and KCL - Group 36,603 19,065 40,065 the results Sunset 29,756 11,013 31 would change Old American 61,258 16,994 5,419 if different Total $273,178 91,381 45,917 methods were applied. 1996: KCL - Individual $135,798 34,154 449 KCL - Group 30,561 14,488 31,434 Sunset 29,872 10,268 34 Old American 58,248 16,317 6,249 Total $254,479 75,227 38,166
All other information required by this Schedule is shown in the accompanying Segment Information Note to the Consolidated Financial Statements.
Schedule IV
KANSAS CITY LIFE INSURANCE COMPANY REINSURANCE INFORMATION
Life Insurance Premiums Accident and Health Premiums 1998 1997 1996 1998 1997 1996 (in thousands) Direct KCL - Individual $ 26,836 25,105 25,010 440 467 496 KCL - Group 12,537 12,974 12,136 46,736 46,710 39,232 Sunset 5,656 5,049 4,770 31 34 38 Old American 83,555 85,363 85,234 6,815 7,811 8,928 Total $128,584 128,491 127,150 54,022 55,022 48,694
Ceded KCL - Individual (11,967) (11,528) (9,447) (55) (62) (56) KCL - Group (2,181) (2,229) (2,006) (9,158) (7,680) (8,659) Sunset (4,584) (3,642) (3,112) (3) (3) (4) Old American (8,016) (8,863) (9,815) (2,365) (2,346) (2,651) Total (26,748) (26,262) (24,380) (11,581) (10,091) (11,370)
Assumed KCL - Individual 6,674 3,822 493 - - 251 KCL - Group - - - - - - Sunset - - - - - - Old American - - - - - - Total 6,674 3,822 493 - - 251 Net $108,510 106,051 103,263 42,441 44,931 37,575
% of Assumed to Net 6 4 - - - -
Life Insurance in Force 1998 1997 1996 (in millions) Direct KCL - Individual $ 12,569 11,768 11,250 KCL - Group 3,823 4,278 4,155 Sunset 5,768 5,615 5,501 Old American 1,101 1,139 1,215 Total 23,261 22,800 22,121
Ceded KCL - Individual (2,832) (2,111) (1,777) KCL - Group (256) (295) (197) Sunset (1,274) (830) (617) Old American (126) (139) (151) Total (4,488) (3,375) (2,742)
Assumed KCL - Individual 3,380 3,796 28 KCL - Group - - - Sunset - - - Old American - - - Total 3,380 3,796 28 Net $ 22,153 23,221 19,407
% of Assumed to Net 15 16 -
All other information required by this Schedule is shown in the accompanying Reinsurance Note to the Consolidated Financial Statements.
Schedule V
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31
1998 1997 1996
(in thousands)
Real estate valuation account Beginning of year $ 3,686 5,227 7,378 Deductions ( 809) (1,541) (2,151) End of year $ 2,877 3,686 5,227
Mortgage loan valuation account Beginning of year $ 8,500 8,500 10,500 Deductions - - (2,000) End of year $ 8,500 8,500 8,500
Allowance for uncollectible accounts Beginning of year $ 1,209 1,160 1,123 Additions 449 230 845 Deductions (321) (181) (808) End of year $ 1,337 1,209 1,160