Edgar Filing: NATIONAL WESTERN LIFE INSURANCE CO

nwl10q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2007

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 2-17039


NATIONAL WESTERN LIFE INSURANCE COMPANY
(Exact name of Registrant as specified in its charter)



COLORADO	84-0467208
(State of Incorporation)	(I.R.S. Employer Identification Number)

850 EAST ANDERSON LANE
AUSTIN, TEXAS 78752-1602	(512) 836-1010
(Address of Principal Executive Offices)	(Telephone Number)


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated file" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of August 7, 2007, the number of shares of Registrant's common stock outstanding was: Class A – 3,422,324 and Class B - 200,000.

TABLE OF CONTENTS

	Page

Part I. Financial Information:	3

Item 1. Financial Statements	3

Condensed Consolidated Balance Sheets	3
June 30, 2007 (Unaudited) and December 31, 2006

Condensed Consolidated Statements of Earnings	5
For the Three Months Ended June 30, 2007 and 2006 (Unaudited)

Condensed Consolidated Statements of Earnings	6
For the Six Months Ended June 30, 2007 and 2006 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income	7
For the Three Months Ended June 30, 2007 and 2006 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income	8
For the Six Months Ended June 30, 2007 and 2006 (Unaudited)

Condensed Consolidated Statements of Stockholders' Equity	9
For the Six Months Ended June 30, 2007 and 2006 (Unaudited)

Condensed Consolidated Statements of Cash Flows	10
For the Six Months Ended June 30, 2007 and 2006 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)	12

Item 2. Management's Discussion and Analysis of	23
Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk	46

Item 4. Controls and Procedures	46

Part II. Other Information:	46

Item 1. Legal Proceedings	46

Item 1A. Risk Factors	46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 4. Submission of Matters to a Vote of Security Holders	47

Item 6. Exhibits	47

Signatures	48

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


	(Unaudited)
	June 30,		December 31,
	2007		2006
ASSETS
Investments:
Securities held to maturity, at amortized cost	$	3,708,513		3,603,434
Securities available for sale, at fair value		1,867,565		1,902,568
Mortgage loans, net of allowances for possible losses ($2,100)		104,085		103,325
Policy loans		85,279		86,856
Derivatives		74,886		72,012
Other long-term investments		21,604		22,822

Total investments		5,861,932		5,791,017

Cash and short-term investments		28,566		49,901
Deferred policy acquisition costs		655,015		643,964
Deferred sales inducements		99,622		93,139
Accrued investment income		64,452		64,393
Federal income tax receivable		8,118		-
Other assets		46,688		51,029

	$	6,764,393		6,693,443


Note: The condensed consolidated balance sheet at December 31, 2006,
has been derived from the audited consolidated financial statements as of that date.

See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)


	(Unaudited)
	June 30,			December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY	2007			2006

LIABILITIES:

Future policy benefits:
Traditional life and annuity contracts	$	139,109			138,382
Universal life and annuity contracts		5,434,960			5,395,075
Other policyholder liabilities		123,517			112,449
Federal income tax liability:
Current		-			1,666
Deferred		32,060			32,207
Other liabilities		74,291			80,680

Total liabilities		5,803,937			5,760,459

COMMITMENTS AND CONTINGENCIES (Note 5 and 9)

STOCKHOLDERS' EQUITY:

Common stock:
Class A - $1 par value; 7,500,000 shares authorized; 3,422,324 and
3,420,824 issued and outstanding in 2007 and 2006		3,422			3,421
Class B - $1 par value; 200,000 shares authorized, issued,
and outstanding in 2007 and 2006		200			200
Additional paid-in capital		36,236			36,110
Accumulated other comprehensive loss		(14,714	)		(3,731	)
Retained earnings		935,312			896,984

Total stockholders' equity		960,456			932,984

	$	6,764,393			6,693,443

Note: The condensed consolidated balance sheet at December 31, 2006,
has been derived from the audited consolidated financial statements as of that date.

See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended June 30, 2007 and 2006
(Unaudited)
(In thousands, except per share amounts)


	2007		2006

Premiums and other revenue:
Traditional life and annuity premiums	$	4,586		4,097
Universal life and annuity contract revenues		28,653		25,598
Net investment income		107,932		66,323
Other income		3,359		3,009
Realized gains on investments		4,165		1,616

Total premiums and other revenue		148,695		100,643

Benefits and expenses:
Life and other policy benefits		10,437		7,646
Amortization of deferred acquisition costs		25,637		22,715
Universal life and annuity contract interest		67,385		23,565
Other operating expenses		16,367		13,724

Total benefits and expenses		119,826		67,650

Earnings before Federal income taxes		28,869		32,993

Provision for Federal income taxes:
Current		5,073		9,286
Deferred		1,945		1,480

Total Federal income taxes		7,018		10,766

Net earnings	$	21,851		22,227


Basic Earnings Per Share	$	6.03		6.13


Diluted Earnings Per Share	$	5.98		6.07


See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Six Months Ended June 30, 2007 and 2006
(Unaudited)
(In thousands, except per share amounts)


	2007		2006

Premiums and other revenue:
Traditional life and annuity premiums	$	9,319		8,088
Universal life and annuity contract revenues		57,449		52,554
Net investment income		184,958		165,010
Other income		6,675		8,207
Realized gains on investments		4,406		3,039

Total premiums and other revenue		262,807		236,898

Benefits and expenses:
Life and other policy benefits		21,411		19,088
Amortization of deferred acquisition costs		49,422		45,013
Universal life and annuity contract interest		104,818		79,613
Other operating expenses		30,483		39,098

Total benefits and expenses		206,134		182,812

Earnings before Federal income taxes		56,673		54,086

Provision (benefit) for Federal income taxes:
Current		9,387		20,773
Deferred		6,763		(2,959	)

Total Federal income taxes		16,150		17,814

Net earnings	$	40,523		36,272


Basic Earnings Per Share	$	11.19		10.01


Diluted Earnings Per Share	$	11.09		9.91


See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended June 30, 2007 and 2006
(Unaudited)
(In thousands)


	2007			2006

Net earnings	$	21,851			22,227

Other comprehensive income (loss), net of effects of
deferred policy acquisition costs and taxes:
Net unrealized losses on securities:
Net unrealized holding losses arising during period		(13,326	)		(9,898	)
Reclassification adjustment for gains included in net earnings		(2,697	)		(806	)
Amortization of net unrealized gains
related to transferred securities		34			1

Net unrealized losses on securities		(15,989	)		(10,703	)

Foreign currency translation adjustments		(99	)		100
Benefit plan adjustment		618			-

Other comprehensive loss		(15,470	)		(10,603	)

Comprehensive income	$	6,381			11,624


See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Six Months Ended June 30, 2007 and 2006
(Unaudited)
(In thousands)


	2007			2006

Net earnings	$	40,523			36,272

Other comprehensive income (loss), net of effects of
deferred policy acquisition costs and taxes:
Net unrealized losses on securities:
Net unrealized holding losses arising during period		(8,605	)		(20,260	)
Reclassification adjustment for gains included in net earnings		(2,864	)		(1,698	)
Amortization of net unrealized gains (losses)
related to transferred securities		54			(96	)

Net unrealized losses on securities		(11,415	)		(22,054	)

Foreign currency translation adjustments		(186	)		165
Benefit plan adjustment		618			-

Other comprehensive loss		(10,983	)		(21,889	)

Comprehensive income	$	29,540			14,383


See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2007 and 2006
(Unaudited)
(In thousands)


	2007			2006
Common stock:
Balance at beginning of year	$	3,621			3,613
Shares exercised under stock option plan		1			8

Balance at end of period		3,622			3,621

Additional paid-in capital:
Balance at beginning of year		36,110			37,923
Shares exercised under the stock option plan		126			503
Adjustment for stock option liability classification		-			(719	)

Balance at end of period		36,236			37,707

Accumulated other comprehensive income:
Unrealized gains (losses) on securities:
Balance at beginning of year		3,148			10,401
Change in unrealized losses during period		(11,415	)		(22,054	)

Balance at end of period		(8,267	)		(11,653	)

Foreign currency translation adjustments:
Balance at beginning of year		3,122			3,300
Change in translation adjustments during period		(186	)		165

Balance at end of period		2,936			3,465

Benefit plan liability adjustment:
Balance at beginning of year		(10,001	)		(3,137	)
Change in benefit plan liability adjustment during period		618			-

Balance at end of period		(9,383	)		(3,137	)

Accumulated other comprehensive loss at end of period		(14,714	)		(11,325	)

Retained earnings:
Balance at beginning of year		896,984			821,908
Cumulative effect of change in accounting principle, net of tax		(2,195	)		-
Net earnings		40,523			36,272

Balance at end of period		935,312			858,180

Total stockholders' equity	$	960,456			888,183


See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2007 and 2006
(Unaudited)
(In thousands)


	2007			2006

Cash flows from operating activities:
Net earnings	$	40,523			36,272
Adjustments to reconcile net earnings to net cash
from operating activities:
Universal life and annuity contract interest		104,818			79,613
Surrender charges and other policy revenues		(17,630	)		(16,283	)
Realized gains on investments		(4,406	)		(3,039	)
Accrual and amortization of investment income		(2,641	)		(2,655	)
Depreciation and amortization		707			770
(Increase) decrease in value of derivatives		(78	)		6,905
Increase in deferred policy acquisition and sales inducement costs		(4,601	)		(2,817	)
Increase in accrued investment income		(59	)		(2,101	)
(Increase) decrease in other assets		1,157			(10,575	)
Increase in liabilities for future policy benefits		727			226
Increase in other policyholder liabilities		11,068			13,002
Decrease in Federal income tax liability		(2,365	)		(2,687	)
Increase (decrease) in other liabilities		(10,946	)		16,024
Other		1,802			(1,852	)

Net cash provided by operating activities		118,076			110,803

Cash flows from investing activities:
Proceeds from sales of:
Securities held to maturity		5,175			-
Securities available for sale		11,562			21,368
Other investments		12,766			21,759
Proceeds from maturities and redemptions of:
Securities held to maturity		73,694			105,889
Securities available for sale		186,519			52,497
Derivatives		8,570			-
Purchases of:
Securities held to maturity		(182,115	)		(197,703	)
Securities available for sale		(174,781	)		(111,436	)
Other investments		(24,947	)		(20,780	)
Principal payments on mortgage loans		15,275			7,547
Cost of mortgage loans acquired		(15,932	)		(2,715	)
Decrease in policy loans		(1,446	)		(117	)
Other		(1,872	)		(538	)

Net cash used in investing activities		(87,532	)		(124,229	)


	(Continued on next page)

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the Six Months Ended June 30, 2007 and 2006
(Unaudited)
(In thousands)


	2007			2006

Cash flows from financing activities:
Deposits to account balances for universal life
and annuity contracts	$	247,944			273,949
Return of account balances on universal life
and annuity contracts		(299,755	)		(265,222	)
Issuance of common stock under stock option plan		127			511

Net cash used in financing activities		(51,684	)		9,238

Effect of foreign exchange		(195	)		1,239

Net decrease in cash and short-term investments		(21,335	)		(2,949	)
Cash and short-term investments at beginning of year		49,901			31,355

Cash and short-term investments at end of period	$	28,566			28,406


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the six month period for:
Interest	$	20			20
Income taxes		19,097			21,915



See accompanying notes to condensed consolidated financial statements.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2007, and the results of its operations and its cash flows for the three months and six months ended June 30, 2007 and 2006. The results of operations for the three months and six months ended June 30, 2007 and 2006 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2006 accessible free of charge through the Company's internet site at www.nationalwesternlife.com or the Securities and Exchange Commission internet site at www.sec.gov.

The accompanying condensed consolidated financial statements include the accounts of National Western Life Insurance Company and its wholly-owned subsidiaries ("Company"), The Westcap Corporation, NWL Investments, Inc., NWL Services, Inc., and NWL Financial, Inc. All significant intercorporate transactions and accounts have been eliminated in consolidation.

Certain reclassifications have been made to the prior periods to conform to the reporting categories used in 2007.

(2) CHANGES IN ACCOUNTING PRINCIPLES

In September 2005, the AICPA issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1") which is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in FASB No. 97. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. The Company has an impact related to the adoption of SOP 05-1 for contracts which have annuitized and relative to reinstatements of contracts in that the unamortized deferred acquisition costs and deferred sales inducement assets must be written-off at the time of annuitization and may not be continued related to reinstatements. SOP 05-1 results in changes in assumptions relative to estimated gross profits which affects unamortized deferred acquisition costs, unearned revenue liabilities, and deferred sales inducement balances as of the beginning of the year. The effect of this SOP on beginning retained earnings as of January 1, 2007 was a decrease of $2.2 million, net of tax, as detailed below.

	Amounts
	(In thousands)

Write-off of deferred acquisition cost	$	3,321
Adjustment to deferred annuity revenue		56
		3,377

Federal income tax		(1,182	)

Cumulative effect of change in accounting for
internal replacements and investment contracts	$	2,195

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The FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ("FIN 48"), dated June, 2006. The interpretation requires public companies to recognize the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. The amount recognized would be the amount that represents the largest amount of tax benefit that is greater than 50% likely of being ultimately realized. A liability would be recognized for any benefit claimed, or expected to be claimed, in a tax return in excess of the benefit recorded in the financial statements, along with any interest and penalty (if applicable) on the excess. FIN 48 requires a tabular reconciliation of the change in the aggregate unrecognized tax benefits claimed, or expected to be claimed, in tax returns and disclosure relating to accrued interest and penalties for unrecognized tax benefits. Discussion is required for those uncertain tax positions where it is reasonably possible that the estimate of the tax benefit will change significantly in the next 12 months. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on the Company's consolidated financial statements.

On February 16, 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivatives and Hedging Activities, and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Hybrid financial instruments are single financial instruments that contain an embedded derivative. Under SFAS No. 155, entities can elect to record certain hybrid financial instruments at fair value as individual financial instruments. Prior to this amendment, certain hybrid financial instruments were required to be separated into two instruments – a derivative and host – and generally only the derivative was recorded at fair value. SFAS No. 155 also requires that beneficial interests in securitized assets be evaluated for either freestanding or embedded derivatives. SFAS No. 155 is effective for all financial instruments acquired or issued after January 1, 2007. SFAS No. 155 did not have a material effect on the Company's consolidated financial statements on the date of adoption.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires additional disclosures about fair value measurements. This Statement does not require any new fair value measurements, but the application of this Statement could change current practices in determining fair value. The Company plans to adopt this guidance effective January 1, 2008. The Company is currently assessing the impact of SFAS No. 157 on the Company's consolidated financial position and results of operations.

In February of 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS No. 159.

(3) STOCKHOLDERS' EQUITY

The Company is restricted by state insurance laws as to dividend amounts which may be paid to stockholders without prior approval from the Colorado Division of Insurance. The Company paid no cash dividends on common stock during the six months ended June 30, 2007 and 2006, as it generally follows a policy of retaining any earnings in order to finance the development of business and to meet regulatory requirements for capital.

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(4) EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net income by the weighted-average basic common shares outstanding during the period. Diluted earnings per share assumes the issuance of common shares applicable to stock options in the denominator.

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
	(In thousands, except per share data)

Numerator for basic and diluted
earnings per share:
Earnings available to common stockholders
before and after assumed conversions	$	21,851		22,227		40,523		36,272


Denominator:
Basic earnings per share -
weighted-average shares		3,622		3,628		3,622		3,623

Effect of dilutive stock options		28		37		31		38

Diluted earnings per share -
adjusted weighted-average
shares for assumed conversions		3,650		3,665		3,653		3,661


Basic earnings per share	$	6.03		6.13		11.19		10.01


Diluted earnings per share	$	5.98		6.07		11.09		9.91

(5) PENSION AND OTHER POSTRETIREMENT PLANS

(A) Defined Benefit Pension Plans

The Company sponsors a qualified defined benefit pension plan covering substantially all employees. The plan provides benefits based on the participants' years of service and compensation. The Company makes annual contributions to the plan that complies with the minimum funding provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). The following summarizes the components of net periodic benefit cost.

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	(In thousands)

Service cost	$	187			172			360			343
Interest cost		288			243			543			487
Expected return on plan assets		(313	)		(227	)		(550	)		(455	)
Amortization of prior service cost		1			1			2			2
Amortization of net loss		72			82			160			165

Net periodic benefit cost	$	235			271			515			542

The Company expects to contribute $1.8 million to the plan in 2007. As of June 30, 2007, the Company has contributed $0.7 million to the plan.

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The Company also sponsors a non-qualified defined benefit plan primarily for senior officers. The plan provides benefits based on the participants' years of service and compensation. The pension obligations and administrative responsibilities of the plan are maintained by a pension administration firm, which is a subsidiary of American National Insurance Company ("ANICO"). ANICO has guaranteed the payment of pension obligations under the plan. However, the Company has a contingent liability with respect to the pension plan should these entities be unable to meet their obligations under the existing agreements. Also, the Company has a contingent liability with respect to the plan in the event that a plan participant continues employment with the Company beyond age seventy, the aggregate average annual participant salary increases exceed 10% per year, or any additional employees become eligible to participate in the plan. If any of these conditions are met, the Company would be responsible for any additional pension obligations resulting from these items. Amendments were made to the plan to allow an additional employee to participate and to change the benefit formula for the Chairman of the Company. As previously mentioned, these additional obligations are a liability to the Company. Effective December 31, 2004, this plan was frozen with respect to the continued accrual of benefits of the Chairman and the President of the Company in order to comply with law changes under the American Jobs Creation Act of 2004 ("Act").

Effective July 1, 2005, the Company established a second non-qualified defined benefit plan for the benefit of the Chairman of the Company. This plan is intended to provide for post-2004 benefit accruals that mirror and supplement the pre-2005 benefit accruals under the previously discussed non-qualified plan, while complying with the requirements of the Act.

Effective November 1, 2005, the Company established a third non-qualified defined benefit plan for the benefit of the President of the Company. This plan is intended to provide for post-2004 benefit accruals that supplement the pre-2005 benefit accruals under the first non-qualified plan as previously discussed, while complying with the requirements of the Act.

The following summarizes the components of net periodic benefit costs for these non-qualified plans.

	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007		2006
	(In thousands)

Service cost	$	(21	)		324		386		648
Interest cost		304			73		481		146
Amortization of prior service cost		260			161		520		323
Amortization of net loss		156			-		202		-

Net periodic benefit cost	$	699			558		1,589		1,117

The Company expects to contribute $1.4 million to these plans in 2007. As of June 30, 2007, the Company has contributed $0.6 million to the plan.

(B) Defined Benefit Postretirement Plans

The Company sponsors two healthcare plans to provide postretirement benefits to certain fully-vested individuals. The following summarizes the components of net periodic benefit costs.

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
	(In thousands)

Interest cost	$	41		25		70		50
Amortization of prior service cost		26		25		52		51
Amortization of net loss		15		-		15		-

Net periodic benefit cost	$	82		50		137		101

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As previously disclosed in its financial statements for the year ended December 31, 2006, the Company expects to contribute minimal amounts to the plan in 2007.

(6) SEGMENT AND OTHER OPERATING INFORMATION

Under Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures About Segments of an Enterprise and Related Information, the Company defines its reportable operating segments as domestic life insurance, international life insurance, and annuities. These segments are organized based on product types and geographic marketing areas. A summary of segment information for the quarters ended June 30, 2007 and 2006 is provided below.

Selected Segment Information.
	Domestic		International
	Life		Life					All
	Insurance		Insurance			Annuities		Others		Totals
	(In thousands)

June 30, 2007:
Selected Balance Sheet Items:
Deferred policy acquisition
costs and sales inducements	$	54,622		185,507			514,508		-		754,637
Total segment assets		387,613		748,423			5,500,959		104,690		6,741,685
Future policy benefits		317,127		526,618			4,730,324		-		5,574,069
Other policyholder liabilities		11,517		21,093			90,907		-		123,517

Three Months Ended
June 30, 2007:
Condensed Income Statements:
Premiums and contract
revenues	$	6,314		20,564			6,361		-		33,239
Net investment income		4,515		8,853			91,677		2,887		107,932
Other income		13		42			138		3,166		3,359

Total revenues		10,842		29,459			98,176		6,053		144,530

Life and other policy benefits		2,617		7,300			520		-		10,437
Amortization of deferred
policy acquisition costs		2,324		7,817			15,496		-		25,637
Universal life and annuity
contract interest		2,312		7,844			57,229		-		67,385
Other operating expenses		2,119		5,838			5,599		2,811		16,367
Federal income taxes (benefit)		509		(112	)		4,318		845		5,560

Total expenses		9,881		28,687			83,162		3,656		125,386

Segment earnings	$	961		772			15,014		2,397		19,144

Table of Contents

	Domestic			International
	Life			Life				All
	Insurance			Insurance		Annuities		Others		Totals
	(In thousands)

Six Months Ended
June 30, 2007:
Condensed Income Statements:
Premiums and contract
revenues	$	12,647			42,235		11,886		-		66,768
Net investment income		9,193			14,615		157,430		3,720		184,958
Other income		27			87		366		6,195		6,675

Total revenues		21,867			56,937		169,682		9,915		258,401

Life and other policy benefits		8,758			10,977		1,676		-		21,411
Amortization of deferred
policy acquisition costs		4,188			15,980		29,254		-		49,422
Universal life and annuity
contract interest		4,632			13,096		87,090		-		104,818
Other operating expenses		4,831			10,148		10,080		5,424		30,483
Federal income taxes (benefit)		(151	)		1,883		11,621		1,255		14,608

Total expenses		22,258			52,084		139,721		6,679		220,742

Segment earnings (losses)	$	(391	)		4,853		29,961		3,236		37,659

Table of Contents

Selected Segment Information.

Domestic

International

Life

All

Insurance

Annuities

Others

Totals

(In thousands)

June 30, 2006:

Selected Balance Sheet Items:

Deferred policy acquisition

costs and sales inducements

46,914

176,709

517,180

740,803

Total segment assets

370,597

671,099

5,319,538

97,658

6,458,892

Future policy benefits