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(In thousands except per share data) 2001 2000 1999 1998 1997
Income Statement
Insurance revenues $ 343,691 344,225 336,283 323,173 313,844Index options (13,539) (32,268) 10,719 8,057 18Realized gains (losses) on investments (27,046) (19,242) 4,481 2,384 (1,588)Total revenues 303,106 292,715 351,483 333,614 312,274
Earnings from continuing operations $ 44,585 28,540 59,225 49,018 42,572Cumulative effect of change in
accounting principle 2,134 – – – –Losses from discontinued operations – – – (14,125) (1,000)Net earnings 46,719 28,540 59,225 34,893 41,572
Balance Sheet
Total assets $ 3,809,472 3,693,820 3,678,738 3,513,601 3,220,590Total liabilities 3,250,084 3,193,714 3,203,216 3,075,236 2,819,727Total stockholders’ equity 559,388 500,106 475,522 438,365 400,863
Diluted Earnings Per Share
Earnings from continuing operations:Continuing operations $ 17.55 11.66 15.96 13.43 12.38Net realized gains (losses) on investments (4.96) (3.55) 0.82 0.44 (0.29)Earnings from continuing operations 12.59 8.11 16.78 13.87 12.09
Cumulative effect of change in accounting principle 0.60 – – – –
Losses from discontinued operations – – – (4.00) (0.28)Net earnings $ 13.19 8.11 16.78 9.87 11.81
Stock Values Per ShareBook value $ 159.15 142.71 135.84 125.31 114.80Market price of Class A common stock 111.20 103.06 68.63 117.50 101.50
Book Value Per ShareTotal Assets Insurance Revenues Market Price of Class A Common Stock
1997
$114
.80
1998
$125
.31
1999
$135
.84
2000
$142
.71
2001
$159
.15
1997
$3
,220
,590
0
1998
$3,5
13,6
01
1999
$3,6
78,7
38
2000
$3,6
93,8
20
2001
$3,8
09,4
72
1997
$313
,844
1998
$323
,173
1999
$336
,283
2000
$344
,225
2001
$343
,691
1997
$101
.50
1998
$117
.50
1999
$68.
63
2000
$103
.06
2001
$111
.20
Financial Highlights
FINANCIAL HIGHLIGHTS 1
Corporate Information
“ T h e y e a r 2 0 0 1
w i l l b e f o r e v e r
r e m e m b e r e d f o r t h e
t r a g i c e v e n t s o f
S e p t e m b e r 1 1 t h . . .
t h e w o r d s “ u n i t e d
w e s t a n d ” h a v e n e v e r
m e a n t m o r e t h a n
t h e y h a v e s i n c e t h a t
d a y .”
“ T h e y e a r 2 0 0 1
w i l l b e f o r e v e r
r e m e m b e r e d f o r t h e
t r a g i c e v e n t s o f
S e p t e m b e r 1 1 t h . . .
t h e w o r d s “ u n i t e d
w e s t a n d ” h a v e n e v e r
m e a n t m o r e t h a n
t h e y h a v e s i n c e t h a t
d a y .”
he year 2001 will be foreverremembered for the tragic events ofSeptember 11th and the changes thatday brought to our lives as a result.Despite the invasion of terrorism intothe daily fabric of our society, neverwas the strength and resiliency of anation more boldly demonstrated bythe subsequent efforts of people com-ing together to help each other andstand up against that which wouldthreaten the basic foundations of free-dom and justice. The words “unitedwe stand” have never meant morethan they have since that day.
2001 was also a year in whichNational Western continued to buildupon its foundation of strength andstability by taking actions for growingprofitably and efficiently, enhancingvalue for stockholders and providingproducts and services to satisfy theneeds of our customers. Although theeconomy created a backdrop for achallenging year, we invested a signif-
icant amount of time and resourcesfor delivering on our commitments aswell as preparing for the future.
Financial HighlightsNational Western made strong gainsin financial performance in 2001 asevidenced by net earnings of $46.7million, earnings per share of $13.19,and total assets in excess of $3.8 bil-lion. In addition, the Companyreached a significant milestone atyear-end 2001 by surpassing $10 bil-lion of life insurance coverage inforce, a testament to the loyalty andhard work of both the agents repre-senting National Western and ourhome office staff.
Net earnings in 2001 increased nearly64% over the net earnings recorded in2000 of $28.5 million. While 2000net earnings were depressed as aresult of the precipitous fall in thestock market and its impact upon theprofitability of the Company’s equity-
2 NATIONAL WESTERN LIFE INSURANCE COMPANY 2001 ANNUAL REPORT
To Our StockholdersTo Our Stockholders
TT
To Our Stockholders
indexed annuity products,2001 earnings reflectimprovements across theboard in the economic funda-mentals of the Company’sbusiness. Improvements inmortality experience, productpersistency, expense manage-ment, and investment spreadmargins all contributed to thepositive direction of reportedearnings.
The year was not withoutchallenges however. Most of2001 was spent in the midstof an economic recessionwhich saw interest ratesmethodically decline to levelsnot seen in the past fortyyears. The migration to lowerinterest rates combined with alackluster stock market pro-duced a difficult selling envi-ronment for NationalWestern’s fixed interest rateand equity-indexed products.Impacted even more so wasthe credit quality of theCompany’s fixed income port-folio as the economic reces-sion, the events of September11th, and revelations of inap-propriate financial reportingpractices of major corpora-tions combined to create a cri-sis of confidence in corporatecredit quality. As a result,investments held by theCompany in debt securities ofseveral well-known companieswere written down to fairvalue reflecting an other thantemporary decline in value ofthe securities. Net realizedlosses on investments in 2001of $27.0 million primarilyreflect the losses associatedwith investment holdings ofthese entities.
Despite the challenges pre-sented, earnings per shareincreased 63% from $8.11per share in 2000 to $13.19per share in 2001. Our strate-gy has been to keep buildingthrough organic growth andreinvestment of earnings intooperations. Consequently, the
book value per share ofNational Western’s stockincreased to $159.15 at theend of 2001 from $142.71 atyear-end 2000. While broadbased market indices like theDow Jones Industrial Average,the Standard & Poor’s 500Index, and the NASDAQproduced negative returns in2001 of 7%, 13% and 21%,respectively, the market valueof National Western’s Class Acommon stock increasednearly 8% from $103.06 atDecember 31, 2000 to$111.20 at December 31,2001.
Operational HighlightsOur strategy focuses on lever-aging the financial strengthsof the Company for develop-ing products that meet theprotection and wealth man-agement needs of our cus-tomers, providing qualityservice that meets the expecta-tions of our independentagency distribution, and con-tinuing to invest in technolo-gy and people. 2001 was ayear of progress as we contin-ued to execute our strategy ineach of these areas by focus-ing on core protection andwealth management products,attracting new sources of dis-tribution, and expanding ourpresence in various markets.
Domestically, we secured cer-tificates of authority in threeadditional states(Massachusetts, New Jersey,and Vermont) bringing thetotal states authorized to con-duct business in to forty-six.Distributing products throughindependent marketing com-panies and agents, we activelyrecruited and attracted twen-ty-two new national market-ing organizations (NMO) in2001 to represent NationalWestern and its productsbringing the total number ofNMO’s to over eighty. TheseNMO’s have well developed
agent networks and provensuccess in marketing lifeinsurance and annuityproducts.
Internationally, NationalWestern’s longstanding repu-tation for products and ser-vice to residents of Centraland South America, theCaribbean, and the PacificRim produced dividends inbringing a significant numberof new independent broker-agents to the Company. Thenumber of internationalagents contracted withNational Western increasedfrom 1,600 at year-end 2000to nearly 2,600 at year-end2001 with most of the addi-tions occurring in the fourthquarter of the year. Many ofthese new agents were cur-rently producing significantamounts of business withother carriers.
During 2001, we undertookproduct development initia-tives into new niche marketswhere the Company had notpreviously had a presence.Domestically, we released anew mortgage term productproviding coverage that paysoff an insured’s mortgage ifthe insured passes away orrefunds all premiums paid atthe end of the mortgage termif the insured is still alive.Additional riders for disabili-ty, unemployment, and criti-cal illness allow the insuredand the agent to customizethe protection needed foreach individual’s situation.Internationally, we developedour first equity-indexed uni-versal life policy which pro-vides an opportunity for theinsured to participate in theupside potential of theStandard & Poor’s 500 Index®
while maintaining insuranceprotection coverage.
We made significant develop-ments in our informationtechnology resources byinvesting in new technologies
TO OUR STOCKHOLDERS 3
and beginning the process ofmigrating from “legacy” sys-tems. In 2001, we imple-mented automated workflowprocesses into our back officeadministration areas to movetoward a “paperless” environ-ment where paperwork previ-ously passed from area toarea, desk to desk, is nowmoved through the appropri-ate processing areas electroni-cally via images scanned androuted to personal desk topcomputers. Such technologiesallow us to be more flexibleand competitive as unit oper-ating costs are reduced. Ourobjective ultimately is to aug-ment our ability to providepersonal and expedited ser-vice to our policyholders andindependent agents.
Building for the FutureWe recognize that changecaused by consolidation, theblurring of financial serviceproviders, technologyadvances, economic forces,legislation and regulation allcombine to make the futureoperating framework difficultto predict or control. Weintend to keep growing effi-ciently and profitably leverag-ing our financial strengthsand competitive advantages inniche markets. By attractingand retaining talented indi-viduals and providing themwith the right tools and tech-nology, we are confident thatwe will be able to improveour business processes toreadily meet the needs of ourcustomers cost efficiently.
Our thanks and appreciationgo to our Board of Directors,our management and staff,and our independent market-ing organizations and agentsfor their hard work and sup-port behind the success ofNational Western. Their com-bined efforts and talents havepositioned us well for thefuture.
Puntos Sobresalientes Financieros
En el 2001 National Western logrógrandes mejoras en su desempeñofinanciero como se evidencia de susganancias netas de $46,7 millones,ganancias por acción de $13,19, yactivos totales en exceso a $3,8 milmillones. Adicionalmente, laCompañía alcanzó un hito significativoal sobrepasar los $10 mil millones deseguro de vida en vigor al final del año2001, una certificación de la lealtad ydel arduo trabajo de ambos los agentesque representan a National WesternLife y al el personal de la Casa Matriz.
Las ganancias netas en 2001 aumen-taron casi un 64% sobre las gananciasnetas registradas de $28,5 millones enel 2000 de $28,5 millones. Mientraslas ganancias netas del 2000 estu-vieron deprimidas como resultado dela descomunal caída de la bolsa de val-ores y su impacto sobre la rentabilidadde los productos de anualidades index-ados a valores de la Compañía, lasganancias del 2001 reflejan mejoras entodos los renglones de los fundamen-tos económicos de los negocios de laCompañía. Mejoras en la experienciade mortalidad, persistencia de los pro-ductos, administración de los gastos, ymárgenes de ganancia en las inver-siones todas contribuyeron a la direc-ción positiva de las ganancias repor-tadas.
Sin embargo, el año no estuvo sin susretos. La mayor parte del 2001 tran-scurrió en medio de una recesióneconómica que vió bajar las tasas deinterés a un nivel no visto en los últi-mos cuarenta años. La tendencia haciatasas de interés más bajas combinadacon una bolsa de valores sin brillo,crearon un ambiente difícil ambientede ventas para los productos de interésfijo e indexados a valores de NationalWestern. La calidad crediticia de lacartera de interés fijo de la Compañíafue impactada aún más, ante los even-tos del 11 de septiembre, y las revela-ciones de las prácticas financieras noinapropiadas de corporaciones impor-tantes, las cuales se combinaron paracrear una crisis de confianza en la cali-
4 NATIONAL WESTERN LIFE INSURANCE COMPANY 2001 ANNUAL REPORT
“ E l a ñ o 2 0 0 1 s i e m -
p r e s e r á r e c o r d a d o
p o r l o s t r á g i c o s
e v e n t o s d e l 1 1 d e
s e p t i e m b r e y l o s
c a m b i o s q u e c o m o
r e s u l t a d o e s e d í a
t r a j o a n u e s t r a s
v i d a s . L a s p a l a b r a s
“ u n i d o s e s t a m o s ”
n u n c a h a n t e n i d o u n
s i g n i f i c a d o m á s
p r o f u n d o .”
“ E l a ñ o 2 0 0 1 s i e m -
p r e s e r á r e c o r d a d o
p o r l o s t r á g i c o s
e v e n t o s d e l 1 1 d e
s e p t i e m b r e y l o s
c a m b i o s q u e c o m o
r e s u l t a d o e s e d í a
t r a j o a n u e s t r a s
v i d a s . L a s p a l a b r a s
“ u n i d o s e s t a m o s ”
n u n c a h a n t e n i d o u n
s i g n i f i c a d o m á s
p r o f u n d o .”
l año 2001 siempre será recorda-do por los trágicos eventos del 11 deseptiembre y como resultado los cam-bios que como resultado ese día trajoa nuestras vidas. A pesar de lainvasión del terrorismo en la vidacotidiana de nuestra sociedad, nuncase ha demostrado la fuerza y poder derecuperación de una nación como seha sido visto en los subsiguientesesfuerzos de la unión de la gente alunirse para ayudarse entre si yenfrentar aquello que amenazaría lafundación básica de la libertad y lajusticia. Las palabras “unidos esta-mos” nunca han tenido un significadomás profundo.
El 2001 también fue el año en el cualNational Western continuó con-struyendo sobre su base de fuerza yestabilidad al tomar pasos accionespara crecer rentablemente y eficiente-mente, mejorando el valor para losaccionistas y ofreciendo productos yservicios para satisfacer las necesidadesde nuestros clientes. Aunque laeconomía creó un telón de fondo paraun año lleno de retos, invertimos grancantidad de tiempo y recursos paracumplir con nuestros compromisosasí como para prepararnos para elfuturo.
A Nuestros Accionistas A Nuestros Accionistas y Dueños de Pólizas
EE
A Nuestrros Accionistas y Dueños de Pólizas
Robert L. Moody
Chairman of the Board andChief Executive OfficerPresidente de la Junta Directiva y Funcionario Ejecutivo Principal
A NUESTROS ACCIONISTAS 5
dad crediticia corporativa.Como resultado, las inver-siones en valores de variasbien conocidas empresasmantenidas por la Compañíafueron descontadas a un valorpropicio apropiado reflejandouna caída de índole perman-mente en su valor. Pérdidasnetas en inversiones en 2001de $27,0 millones reflejan laspérdidas asociadas principal-mente con inversiones man-tenidas con esas empresas.
A pesar de estos retos, lasganancias por acción aumen-taron en un 63% de $8,11 poracción en el 2000 a $13,19por acción en el 2001.Nuestra estrategia ha sido lade seguir construyendo porintermedio del crecimientoorgánico y la reinversión delas ganancias en nuestrasoperaciones. A consecuenciade esto, el valor en libro delprecio por acción de NationalWestern aumentó a $159,15al final de 2001 de un valor de$142,71 al final del año 2000.Mientras índices con una baseamplia como el Dow JonesIndustrial Average, el Indicede Standard and Poor’s 500, yel NASDAQ produjeron resul-tados negativos en el 2001 de7%, 13% y 21% respectiva-mente en 2001, la accióncomún Clase A de NationalWestern aumentó casi 8% de$103,06 al 31 de diciembredel 2000 a $111,20 al 31 dediciembre de 2001.
Puntos Sobresalientes delas Operaciones
Nuestra estrategia se dirige aestá enfocada en aprovechar lafuerza financiera de laCompañía para y en desarrol-lar productos que cumplencon las necesidades de protec-ción y administración de cap-ital de nuestros clientes,dando servicio de calidad quealcance las expectativas denuestra distribución de agen-cia independiente, y en con-tinuar invirtiendo nuestrainversión en tecnología y lagente en personal. El 2001fue un año de progreso mien-
tras continuamos a la ejecu-ción de nuestra estrategia encada una de esos renglones alenfatizar productos de base yde administración de capital,atrayendo nuevas fuentes dedistribución, y expandiendonuestra presencia en diversosmercados.
NacionalmenteDomesticamente, logramosconseguir certificados deautorización autoridad en tresestados más (Massachusetts,New Jersey y Vermont), ele-vando a cuarenta y seis elnúmero de estados en loscuales tenemos autorizaciónpara conducir negocios acuarenta y seis.Distribuyendo productos porintermedio de compañías yagentes de mercadeo inde-pendientes, activamentereclutamos y atraimos veinti-dos organizaciones de mer-cadeo nacionales nuevas(NMO) en el 2001 para rep-resentar a National Western ysus productos, llevando elnúmero de NMOs a casinoventa. Estos NMOs tienenredes de distribución biendesarrolladas y comprobadoéxito comprobado en el mer-cadeo de productos de segurode vida y anualidades.
Internacionalmente, la rep-utación de National Westernpor sus productos y servicio alos residentes de Centro y SurAmérica, el Caribe, y laCuenca del Pacífico produ-jeron dividendos al atraer a laCompañía a un númeroimportante de nuevos corre-dores-agentes independientesnuevos. El número deagentes bajo contrato conNational Western aumentó de1.600 al final del año 2000, acasi 2.600 al final del año2001, siendo la gran mayoríade este aumento las adicionesen el último trimestre delaño. Muchos de estos agentesestaban produciendo grandescantidades de negocios conotras empresas.
Durante 2001, tomamos ini-ciativas de desarrollo de pro-ductos a nuevos mercados
Ross R. Moody
President and Chief Operating OfficerPresidente y Funcionario Operativo Principal
especializados donde laCompañía no había tenidopresencia. NacionalmenteDomésticamente, introduci-mos un nuevo seguro a tér-mino hipotecario dandocobertura que paga cancela lahipoteca de un asegurado si elasegurado fallece o reembolsalas primas al final del períodohipotecario si el aseguradoaún vive. Suplementos adi-cionales para la incapacidad,el desempleo, y enfermedadescríticas le permiten al asegu-rado y al agente adaptar laprotección necesaria para lasituación de cada individuo.Internacionalmente, desarrol-lamos nuestra primera pólizade vida universal indexadaque le dáa la oportunidad alasegurado de participar en lael potencial de subida delIndice de Standard and Poor’s500 mientras mantiene lacobertura de protección deseguro.
Logramos avances impor-tantes en nuestros recursos detecnología informativa pormedio de la inversión ennuevas tecnologías y alcomenzar la migración desdelos sistemas “legacy”. En el2001, implementamos proce-sos automatizados del flujo detrabajo a nuestras áreasadministrativas en las oficinasdepartamentales para lle-varnos hacia un ambiente “sinpapeles” donde la docu-mentación que hasta ahorapasaba de área en área,escritorio a escritorio, ahorase mueve electrónicamemte através del área de proce-samiento correspondiente pormedio de imágenesescaneadas y encaminadas acomputadoras personales deescritorio. Tales tecnologíasnos permiten ser más flexiblesy competitivos ya que sereducen los costos operativospor unidad. Ultimadamentenuestro objetivo es el deaumentar nuestra habilidad deproveer servicio personal yrápido a nuestros dueños depólizas y agentes independi-entes.
Construyendo para elFuturo
Reconocemos que los cam-bios causados por las consoli-dacioónes, la reputaciónempañada indefinición de losproveedores de serviciosfinancieros, los adelantos entecnología, las fuerzaseconómicas, legislación y reg-ulación se combinan todaspara hacer que el esquemaoperativo del futuro sea difícilde predecir o controlar.Nuestra intención es de seguircreciendo eficientemente yrentablemente aprovechandonuestras fuerzas financieras yventajas competitivas en mer-cados especializados. Pormedio de la atracción y reten-ción de individuos talentososy de proveerles las herramien-tas y tecnologías adecuadas,tenemos la confianza quepodremos mejorar nuestrosprocesos de negocios paralograr cumplir con las necesi-dades de nuestros clientes conprontitud y de manera efi-ciente económica.
Nuestras gracias y apre-cioación van a nuestra JuntaDirectiva, a nuestra gerencia ypersonal, y a nuestras organi-zaciones de mercadeo inde-pendientes y agentes por suarduo trabajo y apoyo queestán detrás del éxito deNational Western. Sus conbi-nados esfuerzos y talentoscombinados nos han puestoen una buena posición para elfuturo.
OO
Financial MFinancial Management
6 NATIONAL WESTERN LIFE INSURANCE COMPANY 2001 ANNUAL REPORT
Allocation of Investments89.1% Debt Securities 5.6% Mortgage Loans 2.9% Policy Loans 2.4% Other
Securities Credit Quality30.8% AAA ratings and
U.S. Government 6.9% AA ratings 28.5% A ratings 29.8% BBB ratings 4.0% BB ratings and below
In order to achieve theseobjectives, we invest primarilyin investment grade debt secu-rities with lesser amountsapplied to mortgage loans andother investments. These hold-ings, coupled with strongasset/liability matching strate-gies, provide safety and finan-cial strength for the Company.
The Company maintains ahigh quality and diversifiedportfolio of fixed incomesecurities whose credit qualityis actively monitored throughcontinual analysis of companycredit, industry outlook,financial strength, effective-ness of management, andevent risks. This past yeardemonstrated how critical thisoversight function is given thenumber and magnitude ofcompany defaults in the U.S.during 2001. While we didexperience some impairmentwritedowns in our corporatebond portfolio, our exposurewas minimized due to ourstrong credit risk managementdisciplines. Over 66% of ourinvestment portfolio atDecember 31, 2001 was still
rated “A” quality or better bynationally recognized creditrating organizations with only4% rated below investmentgrade quality.
Capitalization
Capital strength is importantfor the protection of stock-holders and policyholders. Italso ensures that the Companymaintains its strong credit rat-ings while allowing us to takeadvantage of profitable oppor-tunities. Although sufficientcapital is necessary to meet therequirements of regulators, wehave taken the approach ofmaximizing our capital posi-tion substantially above theamounts prescribed by regula-tors in order to provide thestability and reliability that ourstockholders and policyholdershave come to expect fromNational Western.
Growth in Stockholders’ Equity ($ mil)
1995
312
1996
353
1997
401
1998
438
1999
476
2000
500
2001
559
ur financial managementstyle is illustrated by our com-mitment to a conservativeinvestment approach and util-ization of operating strategiesthat produce superior capital-ization. These disciplines serveto provide reliable protectionfor our policyholders in meet-ing our benefit obligations andenhanced value for our stock-holders. Independent ratingagencies have recognized ourprudent perspective on finan-cial management and haveshown their agreementthrough their financialstrength ratings of NationalWestern. Standard & Poor’shas rated National Western“A+ (Strong)” and A.M. BestCompany has conveyed an “A-(Excellent)” rating on theCompany.
Investments
Our investment managementstrategy emphasizes the pru-dent handling of stockholders’and policyholders’ funds:
• to achieve security of principal
• to maximize yield, and
• to maintain adequate liq-uidity for cash flow needs.
Financial Management
FINANCIAL MANAGEMENT / MARKETING 7
Distribution of Life InsuranceIn Force
51% Latin America29% U.S.8% Caribbean12% Pacific Rim
2001 Premiums andDeposits by Market
77% Annuities16% International Life Insurance7% Domestic Life Insurance
Contracted AgentsDomestic International
International Operations
For approximately thirty-fiveyears, National Western hasaccepted applications fromforeign nationals around theglobe. Many of the indepen-dent broker-agents in thesecountries have been associatedwith the Company for twentyor more years. Our reputationfor commitment and servicein international markets wasnever more evident than dur-ing 2001 when the number ofindependent agents contractedwith National Westernincreased over 60%. Brandrecognition of the Companyhas become particularly strongin many of these countries.
Our marketing strategy forinternational operations incor-porates traditional and univer-sal life insurance products thatappeal to foreign nationalswith substantial financialresources who desire the sta-bility of the U.S. dollar overtheir local currency.Substantially all of theCompany’s products stipulatepayment of premiums andpolicy benefits in U.S. dollars.The demographics of this endmarket results in larger policysizes with very favorable per-sistency characteristics.
We ended 2001 with strongmomentum in submitted poli-cy applications from our inter-
Marketing
AA
s a global provider oflife insurance products,National Western maintains ahome office staff possessingmulti-lingual skills to effi-ciently and effectively serve itsindependent agents and poli-cyholders around the world.Given the specialization need-ed to service such a diversepopulation, operations areorganized along geographicmarketing areas directed bydomestic and internationaldivisions within NationalWestern. The Company’s mar-keting expanse covers overtwenty different countrieswhich allows us to diversifyour business risks and balanceoperating results as marketconditions vary from region toregion around the world. AtDecember 31, 2001, wemaintained over $10 billion oflife insurance in force distrib-uted as shown in the follow-ing graph:
Domestic Operations
National Western’s domesticoperations focus on marketingannuities, universal life insur-
national markets and havecontinued to add home officestaff with the requisite skills,ensuring that our agents andpolicyholders continue toreceive the service to whichthey have come to expect.With the release of our firstequity-indexed universal lifeproduct early in 2002, weexpect that the year-endmomentum of the interna-tional operations will continueinto the foreseeable future.
ance, and traditional life insur-ance (term and whole lifeproducts) on an individualbasis. The majority of domes-tic sales have historically beenthe Company’s annuity prod-ucts which include single andflexible premium deferredannuities, single premiumimmediate annuities, andequity-indexed annuities onboth a tax qualified or non-qualified basis.
Domestic products are market-ed and distributed throughnational marketing organiza-tions (NMO) who recruit andcontract independent agentswith National Western andprovide ongoing supervisionand sales support. During2001, the Company placed anemphasis upon increasing salesof life insurance in order tobuild up this segment of theCompany’s operations. Inorder to attract life insurancedistributors, we developed anew mortgage protection lifeinsurance product and revital-ized existing universal lifeproducts by adding innovativefeatures. Even though substan-tial attention was directedtoward developing life insur-ance business, we continue tomanufacture new fixed andindexed annuity products toprovide the choices and fea-tures required by our distribu-tion and policyholders.
Dec. 1999 7130 1640
Dec. 2000 5770 1600
Dec. 2001 6060 2570
Marketing
(In thousands except per share data) 2001 2000 1999 1998 1997
Income Statement
Revenues
Life and annuity premiums $ 14,013 17,615 18,423 19,685 20,968Universal life and investment annuity
contract revenues 75,026 82,742 76,655 76,649 75,094Net investment income 234,866 210,654 242,980 233,844 217,446Other income 6,247 946 8,944 1,052 354Realized gains (losses) on investments (27,046) (19,242) 4,481 2,384 (1,588)
Total Revenues 303,106 292,715 351,483 333,614 312,274
Expenses
Policyholder benefits 31,715 35,078 32,456 32,441 35,285Amortization of deferred policy
acquisition costs 27,424 47,948 39,148 40,415 39,934Universal life and investment annuity
contract interest 144,516 137,711 162,302 158,889 145,200Other operating expenses 31,681 29,427 27,764 35,504 27,560
Total Expenses 235,336 250,164 261,670 267,249 247,979
Earnings before Federal income taxes, cumulative effect of change in accounting principle and discontinued operations 67,770 42,551 89,813 66,365 64,295
Federal income taxes 23,185 14,011 30,588 17,347 21,723
Earnings from continuing operations 44,585 28,540 59,225 49,018 42,572Cumulative effect of change in
accounting principle 2,134 _ _ _ _Losses from discontinued operations – – – (14,125) (1,000)
Net Earnings $ 46,719 28,540 59,225 34,893 41,572
Diluted Earnings Per Share
Earnings from continuing operations $ 12.59 8.11 16.78 13.87 12.09Cumulative effect of change in
accounting principle 0.60 – – – –Losses from discontinued operations – – – (4.00) (0.28)
Net Earnings $ 13.19 8.11 16.78 9.87 11.81
Balance Sheet
Total assets $ 3,809,472 3,693,820 3,678,738 3,513,601 3,220,590Total liabilities 3,250,084 3,193,714 3,203,216 3,075,236 2,819,727Stockholders’ equity 559,388 500,106 475,522 438,365 400,863
Financial Strength Ratings
Standard & Poor’s A+ A+ A+ A+ A+
A.M. Best Company A- A- A- A- A-
8 NATIONAL WESTERN LIFE INSURANCE COMPANY 2001 ANNUAL REPORT
Summary of Selected Financial DataSummary of Selected Financial Data
SUMMARY OF SELECTED FINANCIAL DATA / DIRECTORS 9
DirectorsDirectors
Robert L. MoodyChairman of the Board, ChiefExecutive Officer, National WesternLife Insurance CompanyGalveston, TexasNWL Director1963 to present
Ross R. MoodyPresident, Chief Operating Officer,National Western Life InsuranceCompanyAustin, TexasNWL Director1981 to present
Arthur O. Dummer President, The Donner Company
Salt Lake City, Utah
NWL Director
1980 to present
Harry L. EdwardsRetired, Former President and ChiefOperating Officer, National WesternLife Insurance CompanyAustin, TexasNWL Director1969 to present
E. Douglas McLeodDirector of Development, The Moody FoundationGalveston, TexasNWL Director1979 to present
Charles D. MilosSenior Vice President – Investment Analyst, National Western Life InsuranceCompanyGalveston, TexasNWL Director1981 to present
Frances A. MoodyExecutive Director, The Moody FoundationDallas, TexasNWL Director1990 to present
Russell S. MoodyInvestmentsAustin, TexasNWL Director1988 to present
Louis E. Pauls, Jr.President, Louis Pauls & Company Galveston, TexasNWL Director1971 to present
E.J. PedersonExecutive Vice President, The University of Texas Medical BranchGalveston, TexasNWL Director1992 to present
Directors
OfficersOfficers
10 NATIONAL WESTERN LIFE INSURANCE COMPANY 2001 ANNUAL REPORT
Robert L. MoodyChairman of the Board and Chief Executive Officer
Ross R. MoodyPresident and ChiefOperating Officer
Charles P. Baley, FLMI, CLUSenior Vice President –Information Services
Robert L. Busby, III, CPA, FLMI,CLU, ChFCSenior Vice President
Richard M. EdwardsSenior Vice President –International Marketing
Paul D. Facey, FSA, MAAA, FCIA, FLMISenior Vice President – Chief Actuary
Rodney K. FosterSenior Vice President – Chief Marketing Officer
Charles D. MilosSenior Vice President –Investment Analyst
James P. Payne, JDSenior Vice President – Secretary
Brian M. Pribyl, CPA, FLMISenior Vice President – Chief Financial & AdministrativeOfficer and Treasurer
Patricia L. Scheuer, CFASenior Vice President – Chief Investment Officer
Scott E. ArendaleVice President – International Sales Development
Jay C. Bugg, CLU, ChFC, LLIFVice President – Marketing
Mark K. FisherVice President – Marketing
Mark D. Gulas, FSA, MAAAVice President – Associate Actuary
Carol JacksonVice President – Human Resources
Doris Kruse, ALHC, ACS, UNDVice President – Policy Benefits
Jo Nell Morris, FLMI, ACS, AAPAVice President – Policyowner Services
James R. Naiser, FLMIVice President – Systems Development
Al R. Steger, FLMI, CLU, ChFC, FALU,FLHC
Vice President – Risk Selection
B. Ben Taylor, ASA, MAAAVice President – Actuarial Services
Larry D. White, FLMI, AAPAVice President – Policyowner Services
Larry E. Carson, CPA, FLMI, ACSAssistant Vice President – Assistant Controller
Linda J. Diliplane, FLMI, ACS, CLUAssistant Vice President – Risk Selection AdministrativeManager
Robin R. Hulsey, FLMI, ACSAssistant Vice President –Administrative Services
Miguel A. Laborde, FLMI, CLU, ChFCAssistant Vice President –International Sales Development
Ellen C. OtteAssistant Secretary
Donna L. Richardson, FLMI, AIAA,ACS, SILAFAssistant Vice President – Agent Contracting & Licensing
Lura L. Rogers, ACSAssistant Vice President – Domestic Marketing
Margaret M. Simpson, ACSAssistant Secretary
Officers
Corporate Information
OFFICERS / CORPORATE INFORMATION 11
Executive OfficesNational Western Life Insurance Company, 850 East Anderson Lane, Austin, Texas 78752-1602,Telephone: (512) 836-1010.
AccountantsDeloitte & Touche LLP, 301 Commerce Street, Suite 2950, Fort Worth,Texas 76102.
General CounselWill D. Davis, Heath Davis & McCalla, Attorneys at Law, Austin, Texas.
Subsidiaries NWL 806 Main, Inc., Austin,Texas.NWL Investments, Inc.,Austin, Texas.NWL Properties, Inc., Austin,Texas.NWL Services, Inc., Reno,Nevada.NWL Financial, Inc., Austin,Texas.The Westcap Corporation, Austin, Texas.
Stock Transfer AgentContinental Stock Transfer &Trust Company, 17 BatteryPlace – 8th Floor, New York,NY 10004 Telephone: (212) 509-4000.Communications regardingstock transfer requirements,lost certificates, and change ofaddress should be directed tothe Transfer Agent or to theOffice of the CorporateSecretary of National WesternLife Insurance Company.
Stock InformationShares of National WesternLife Insurance Company aretraded on The Nasdaq StockMarket under the symbolNWLIA.
Annual Stockholders’MeetingThe annual meeting of stock-holders will be at 9:30 a.m.(CDT) on June 21, 2002, atNational Western LifeInsurance Company’s execu-tive offices.
Form 10-KNational Western Life InsuranceCompany’s 2001 AnnualReport on Form 10-K, as filedwith the Securities andExchange Commission, isincluded in this annual report.Additional copies are availableupon request without charge.
Investor RelationsDirect inquiries to ChiefFinancial Officer, 850 EastAnderson Lane, Austin, Texas78752-1602, Telephone:(512) 719-2230.
Information on theInternetInformation about NationalWestern Life InsuranceCompany is available on the internet. Visit our home page at: www.nationalwesternlife.com
Corporate Information
12 NATIONAL WESTERN LIFE INSURANCE COMPANY 2001 ANNUAL REPORT
Mission StatementMission Statement
National Western provides high quality insuranceproducts on a global basis to meet the financialsecurity needs of well-defined market segments.We provide professional, friendly service to ourpolicyholders and agents and are responsive to theneeds of our employees, shareholders and thecommunity.
Statement of PrinciplesNational Western Life Insurance Company:
• Develops and distributes customer-driven lifeand annuity products on a global basis throughagents, brokers and independent marketingorganizations.
• Seeks to – in all ways and at all times – serve ourclients and communities at a level of integrityand enthusiasm consistent with our position asone of the world’s premier providers of personalfinancial security.
• Provides professional, friendly service to ourpolicyholders and sales representatives.
• Recognizes the extraordinary stewardshipresponsibilities we bear for policyholder assetsand stockholder resources placed in our care.
• Respects the dignity and appreciates the contribution of each employee-member ofthe NWL family.
Mission Statement