The increase in earnings was primarily due to increases in realized investment gains and insurance revenues, as well as reduced amortization of deferred acquisition costs (DAC) and lower operating expenses. These improvements were partially offset by an increase in policyholder benefits and income tax expense.
Net income for the twelve months was $39.9 million or $3.59 per share, an increase of $13.7 million or $1.30 per share compared to 2011. This increase was largely due from an increase in realized investment gains of $15.3 million. Other significant factors for the year included an increase in insurance revenues, a reduction in interest credited to policyholder account balances, and a decrease in amortization of DAC. These were partially offset by increases in operating expenses, policyholder benefits, and income tax expense.
Total investment revenues, which combines net investment income and net realized gains, increased $1.0 million or 2% for the fourth quarter and $14.2 million or 8% for the year. These increases were the result of realized gains that the Company earned during the year, as several real estate properties were sold during both the fourth quarter and earlier in the year. Net investment income was flat for the fourth quarter but decreased $1.0 million or 1% for the year, as the decrease in yields more than offset an increase in average invested assets. Both the quarter and twelve months were negatively affected by lower yields on fixed-rate investments.
Insurance revenues combine both premiums, net of reinsurance ceded, and contract charges for the Company’s insurance products. Net premiums increased 19% for the fourth quarter, primarily reflecting improvements in both immediate annuity and traditional insurance products. Immediate annuity sales increased $3.9 million in the fourth quarter and $5.3 million for the year, compared with the same periods one year earlier. The traditional products continue to reflect positive sales results from Old American Insurance Company, which increased sales 7% in the fourth quarter and 5% for the twelve months, compared with the prior year.
New deposits from the Company’s interest sensitive products increased 15% in the fourth quarter. However, these deposits decreased 3% for the year. New variable annuity sales increased $2.4 million and more than doubled in the fourth quarter, and new universal life sales increased $1.0 million or 47% in the same period. New variable annuity and universal life sales each increased 11% for the year, while new fixed deferred annuity deposits decreased 8% versus the prior year.
Policyholder benefits increased $7.8 million or 24% in the fourth quarter and $4.4 million or 3% for the year. The largest factor in the change was an increase in immediate annuity sales for both the fourth quarter and year. The sale of immediate annuity products requires the corresponding establishment of policy reserves on a virtual one-for-one basis. Also contributing to the increases was a reduction in reserves in the fourth quarter of 2011, related to the release of reserves for non-guaranteed interest on certain products. These unfavorable changes in policyholder benefits were partially offset in both periods by reduced reserves on the Company’s guaranteed minimum withdrawal benefits, associated with variable annuity products, and reduced death benefits paid, net of reinsurance.
The amortization of DAC decreased $4.2 million or 35% in the fourth quarter and $5.9 million or 17% for the twelve months. These decreases were primarily the result of changes in 2011 for refinements in estimates and unlocking of assumptions regarding universal life and traditional products.
Finally, operating expenses decreased $1.0 million or 3% in the quarter but increased $4.0 million or 4% for the year. The decrease in operating expenses in the fourth quarter was largely due to a decrease in employee benefits and the reduction in the allowance for uncollectible receivables. However, operating expenses increased for the year, reflecting higher depreciation expense, increased employee salary and benefit costs, and increased legal fees.
On January 28, 2012, the Kansas City Life Board of Directors declared a quarterly dividend of $0.27 per share that was paid on February 13, 2013 to stockholders of record on February 7, 2013.