<PAGE>
FILE NO. 333-08859
811-07727
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
/ /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 8 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
AMENDMENT NO. 9
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS VARIABLE ANNUITY)
(Exact Name of Registrant)
ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
1 SUNAMERICA CENTER
LOS ANGELES, CALIFORNIA 90067-6022
(Address of Depositor's Principal Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (310) 772-6000
SUSAN L. HARRIS, ESQ.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
1 SUNAMERICA CENTER
LOS ANGELES, CALIFORNIA 90067-6022
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 2000 pursuant to paragaph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on [ ], pursuant to paragraph (a) of Rule 485
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VARIABLE ANNUITY ACCOUNT FIVE
CROSS REFERENCE SHEET
PART A -- PROSPECTUS
Incorporated herein by reference to Post-Effective Amendment No. 6 under
Securities Act of 1933 (the 33 Act) and No. 7 under the Investment Company Act
of 1940 (the 40 Act) to Registration Statement file No. 333-08859 and 811-07727
on Form N-4 filed on July 12, 1999.
<PAGE>
PART B -- STATEMENT OF ADDITIONAL INFORMATION
Incorporated herein by reference to Post-Effective Amendment No. 6 under
Securities Act of 1933 (the 33 Act) and No. 7 under the Investment Company Act
of 1940 (the 40 Act) to Registration Statement file No. 333-08859 and 811-07727
on Form N-4 filed on July 12, 1999.
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
[LOGO]
PROFILE
December 29, 1999
Incorporated herein by reference to Post-Effective Amendment No. 6 under
Securities Act of 1933 (the 33 Act) and No. 7 under the Investment Company
Act of 1940 (the 40 Act) to Registration Statement file No. 333-08859 and
811-07727 on Form N-4 filed on July 12, 1999.
<PAGE>
[LOGO]
PROSPECTUS
ALLOCATED FIXED AND VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY ACCOUNT FIVE
and
ANCHOR NATIONAL LIFE INSURANCE COMPANY
December 29, 1999
Incorporated herein by reference to Post-Effective Amendment No. 6 under
Securities Act of 1933 (the 33 Act) and No. 7 under the Investment Company
Act of 1940 (the 40 Act) to Registration Statement file No. 333-08859 and
811-07727 on Form N-4 filed on July 12, 1999.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FIXED AND VARIABLE GROUP DEFERRED
ANNUITY CONTRACTS ISSUED BY
VARIABLE ANNUITY ACCOUNT FIVE
DEPOSITOR: ANCHOR NATIONAL LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus; it should be
read with the prospectus dated May 1, 2000, relating to the annuity contracts
described above, a copy of which may be obtained without charge by calling
800/445-SUN2 or by written request addressed to:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS MAY 1, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Separate Account.......................................................... 3
General Account........................................................... 3
Performance Data.......................................................... 4
Annuity Payments.......................................................... 4
Annuity Unit Values....................................................... 5
Taxes..................................................................... 7
Distribution of Contracts................................................. 10
Financial Statements...................................................... 11
</TABLE>
2
<PAGE>
SEPARATE ACCOUNT
Variable Annuity Account Five was originally established by Anchor National Life
Insurance Company (the "Company") on July 3, 1996 pursuant to the provisions of
Arizona law, as a segregated asset account of the Company. The separate account
meets the definition of a "separate account" under the federal securities laws
and is registered with the SEC as a unit investment trust under the Investment
Company Act of 1940. This registration does not involve supervision of the
management of the separate account or the Company by the SEC.
The assets of the separate account are the property of the Company. However, the
assets of the separate account, equal to its reserves and other contract
liabilities, are not chargeable with liabilities arising out of any other
business the Company may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to the
separate account are credited to or charged against the separate account without
regard to other income, gains, or losses of the Company.
The separate account is divided into STRATEGIES, with the assets of each
STRATEGY invested in the shares of one or more underlying investment portfolios.
The Company does not guarantee the investment performance of the separate
account, its STRATEGIES or the underlying investment portfolios. Values
allocated to the separate account and the amount of variable annuity payments
will vary with the values of shares of the underlying investment portfolios, and
are also reduced by insurance charges and fees.
The basic objective of a variable annuity contract is to provide variable
annuity payments which will be to some degree responsive to changes in the
economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The contract is designed to
seek to accomplish this objective by providing that variable annuity payments
will reflect the investment performance of the separate account with respect to
amounts allocated to it both before and after the Annuity Date. Since the
separate account is always fully invested in shares of the underlying investment
portfolios, its investment performance reflects the investment performance of
those entities. The values of such shares held by the separate account fluctuate
and are subject to the risks of changing economic conditions as well as the risk
inherent in the ability of the underlying funds' managements to make necessary
changes in their STRATEGIES to anticipate changes in economic conditions.
Therefore, the owner bears the entire investment risk that the basic objectives
of the contract may not be realized, and that the adverse effects of inflation
may not be lessened. There can be no assurance that the aggregate amount of
variable annuity payments will equal or exceed the Purchase Payments made with
respect to a particular account for the reasons described above, or because of
the premature death of an Annuitant.
Another important feature of the contract related to its basic objective is the
Company's promise that the dollar amount of variable annuity payments made
during the lifetime of the Annuitant will not be adversely affected by the
actual mortality experience of the Company or the actual expenses incurred by
the Company in excess of expense deductions provided for in the contract
(although the Company does not guarantee the amounts of the variable annuity
payments).
GENERAL ACCOUNT
The General Account is made up of all of the general assets of the Company other
than those allocated to the separate account or any other segregated asset
account of the Company. A Purchase Payment may be allocated to the one, three,
five, seven or ten year fixed investment option or the one year or six month
dollar cost averaging fixed accounts available in connection with the general
account, as elected by the owner purchasing a contract (subject to state
availability). Assets supporting amounts allocated to a fixed investment option
become part of the Company's general account assets and are available to fund
the claims of all classes of customers of the Company, as well as of its
creditors. Accordingly, all of the Company's assets held in the general account
will be available to fund the Company's obligations under the contracts as well
as such other claims.
3
<PAGE>
The Company will invest the assets of the general account in the manner chosen
by the Company and allowed by applicable state laws regarding the nature and
quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
The Separate Account may advertise "total return" data for its STRATEGIES. Total
return figures are based on historical data and are not intended to indicate
future performance. The "total return" for a STRATEGY is a computed rate of
return that, when compounded annually over a stated period of time and applied
to a hypothetical initial investment in a contract funded by that STRATEGY made
at the beginning of the period, will produce the same contract value at the end
of the period that the hypothetical investment would have produced over the same
period (assuming a complete redemption of the contract at the end of the
period.) The effect of applicable Withdrawal Charges due to the assumed
redemption will be reflected in the return figures, but may be omitted in
additional return figures given for comparison.
P(1+T) to the power of n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year period as of the end of the
period (or fractional portion thereof).
The total return figures reflect the effect of both non-recurring and recurring
charges. The applicable Withdrawal Charge (if any) is deducted as of the end of
the period, to reflect the effect of the assumed complete redemption. Total
return figures are derived from historical data and are not intended to be a
projection of future performance.
TOTAL ANNUAL RETURN (IN PERCENT) FOR PERIOD ENDING ON MARCH 31, 2000
(RETURN WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
INCEPTION 1 YEAR RETURN SINCE INCEPTION
STRATEGIES DATE W W/O W W/O
- ------------------------------------------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Growth........................................... 4/15/97 27.00 34.00 27.82 29.06
Moderate Growth.................................. 4/15/97 22.09 29.09 23.92 25.24
Balanced Growth.................................. 4/15/97 11.68 18.68 17.35 18.82
Conservative Growth.............................. 4/15/97 5.68 12.68 12.77 14.35
</TABLE>
INCOME PAYMENTS
INITIAL INCOME PAYMENT
The initial income payment is determined by taking the contract value, less
any premium tax, less any Market Value Adjustment that may apply in the case of
a premature annuitization of certain guarantee amounts, and then applying it to
the annuity table specified in the contract. Those tables are based on a set
amount per $1,000 of proceeds applied. The appropriate rate must be determined
by the sex (except where, as in the case of certain Qualified contracts and
other employer-sponsored retirement plans, such classification is not permitted)
and age of the Annuitant and designated second person, if any.
The dollars applied are then divided by 1,000 and the result multiplied by the
appropriate annuity factor appearing in the table to compute the amount of the
first monthly annuity payment. In the case of a variable annuity, that amount is
divided by the value of an Annuity Unit as of the Annuity Date to establish the
number of Annuity Units representing each variable annuity payment. The number
of Annuity Units determined for the first variable annuity payment remains
constant for the second and subsequent monthly variable annuity payments,
assuming that no reallocation of contract values is made.
4
<PAGE>
SUBSEQUENT MONTHLY PAYMENTS
For a fixed annuity, the amount of the second and each subsequent monthly income
payment is the same as that determined above for the first monthly payment.
The amount of the second and each subsequent monthly variable income payment is
determined by multiplying the number of Annuity Units, as determined in
connection with the determination of the initial monthly payment, above, by the
Annuity Unit Value as of the day preceding the date on which each annuity
payment is due.
INCOME PAYMENTS UNDER THE INCOME PROTECTOR PROGRAM
If contract holders elect to begin Income Payments using the Income Protector
Program, the income benefit base is determined as described in the prospectus.
The initial Income Payment is determined by applying the income benefit BASE to
the annuity table specifically designated for use in conjunction with the Income
Protector Program, either in the contract or in the endorsement to the contract.
Those tables are based on a set amount per $1,000 of income benefit BASE
applied. Income proceeds applied. The appropriate rate must be determined by the
sex (except where, as in the case of certain Qualified contracts and other
employer-sponsored retirement plans, such classifications is not permitted) and
age of the Annuitant and designated second person, if any, and the Income Option
selected.
The income benefit BASE is applied and then divided by 1,000 and the result
multiplied by the appropriate annuity factor appearing in the table to compute
the amount of the first monthly Income Payment. The amount of the second and
each subsequent income payment is the same as that determined above for the
first monthly payment.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each STRATEGY.
The annuity tables contained in the contract are based on a 3.5% per annum
assumed investment rate. If the actual net investment rate experienced by a
STRATEGY exceeds 3.5%, variable annuity payments derived from allocations to
that STRATEGY will increase over time. Conversely, if the actual rate is less
than 3.5%, variable annuity payments will decrease over time. If the net
investment rate equals 3.5%, the variable annuity payments will remain constant.
If a higher assumed investment rate had been used, the initial monthly payment
would be higher, but the actual net investment rate would also have to be higher
in order for annuity payments to increase (or not to decrease).
The payee receives the value of a fixed number of Annuity Units each month. The
value of a fixed number of Annuity Units will reflect the investment performance
of the STRATEGIES elected, and the amount of each annuity payment will vary
accordingly.
For each STRATEGY, the value of an Annuity Unit is determined by multiplying the
Annuity Unit value for the preceding month by the Net Investment Factor for the
month for which the Annuity Unit value is being calculated. The result is then
multiplied by a second factor which offsets the effect of the assumed net
investment rate of 3.5% per annum which is assumed in the annuity tables
contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the net
investment performance of a STRATEGY from one month to the next. The NIF may be
greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the same.
The NIF for any STRATEGY for a certain month is determined by dividing (a) by
(b) where:
(a) is the Accumulation Unit value of the STRATEGY determined as of the end
of that month, and
5
<PAGE>
(b) is the Accumulation Unit value of the STRATEGY determined as of the end
of the preceding month.
The NIF for a STRATEGY for a given month is a measure of the net investment
performance of the STRATEGY from the end of the prior month to the end of the
given month. A NIF of 1.000 results from no change; a NIF greater than 1.000
results from an increase; and a NIF less than 1.000 results from a decrease. The
NIF is increased (or decreased) in accordance with the increases (or decreases,
respectively) in the value of the shares of the underlying investment portfolios
in which the STRATEGY invests; it is also reduced by separate account asset
charges.
ILLUSTRATIVE EXAMPLE
Assume that one share of a given STRATEGY had an Accumulation Unit value of
$11.46 as of the close of the New York Stock Exchange ("NYSE") on the last
business day in September; that its Accumulation Unit value had been $11.44 at
the close of the NYSE on the last business day at the end of the previous month.
The NIF for the month of September is:
NIF = ($11.46/$11.44)
= 1.00174825
ILLUSTRATIVE EXAMPLE
The change in Annuity Unit value for a STRATEGY from one month to the next is
determined in part by multiplying the Annuity Unit value at the prior month end
by the NIF for that STRATEGY for the new month. In addition, however, the result
of that computation must also be multiplied by an additional factor that takes
into account, and neutralizes, the assumed investment rate of 3.5 percent per
annum upon which the annuity payment tables are based. For example, if the net
investment rate for a STRATEGY (reflected in the NIF) were equal to the assumed
investment rate, the variable annuity payments should remain constant (i.e., the
Annuity Unit value should not change). The monthly factor that neutralizes the
assumed investment rate of 3.5 percent per annum is:
1/[(1.035)^(1/12)] = 0.99713732
In the example given above, if the Annuity Unit value for the STRATEGY was
$10.103523 on the last business day in August, the Annuity Unit value on the
last business day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
VARIABLE ANNUITY PAYMENTS
ILLUSTRATIVE EXAMPLE
Assume that a male owner, P, owns a contract in connection with which P has
allocated all of his contract value to a single STRATEGY. P is also the sole
Annuitant and, at age 60, has elected to annuitize his contract as a life
annuity with 120 monthly payments guaranteed. As of the last valuation preceding
the Annuity Date, P's Account was credited with 7543.2456 Accumulation Units
each having a value of $15.432655, (i.e., P's Account Value is equal to
7543.2456 x $15.432655 = $116,412.31). Assume also that the Annuity Unit value
for the STRATEGY on that same date is $13.256932, and that the Annuity Unit
value on the day immediately prior to the second annuity payment date is
$13.327695.
P's first variable annuity payment is determined from the annuity rate tables in
P's contract, using the information assumed above. From the tables, which supply
monthly annuity payments for each $1,000 of applied contract value, P's first
variable annuity payment is determined by multiplying the monthly installment of
$5.42 (Option 4 tables, male Annuitant age 60 at the Annuity Date) by the result
of dividing P's account value by $1,000:
First Payment = $5.42 x ($116,412.31/$1,000) = $630.95
6
<PAGE>
The number of P's Annuity Units (which will be fixed; i.e., it will not change
unless he transfers his Account to another Account) is also determined at this
time and is equal to the amount of the first variable annuity payment divided by
the value of an Annuity Unit on the day immediately prior to annuitization:
Annuity Units = $630.95/$13.256932 = 47.593968
P's second variable annuity payment is determined by multiplying the number of
Annuity Units by the Annuity Unit value as of the day immediately prior to the
second payment due date:
Second Payment = 47.593968 x $13.327695 = $634.32
The third and subsequent variable annuity payments are computed in a manner
similar to the second variable annuity payment.
Note that the amount of the first variable annuity payment depends on the
contract value in the relevant STRATEGY on the Annuity Date and thus reflects
the investment performance of the STRATEGY net of fees and charges during the
Accumulation Phase. The amount of that payment determines the number of Annuity
Units, which will remain constant during the Annuity Phase (assuming no
transfers from the STRATEGY). The net investment performance of the STRATEGY
during the Annuity Phase is reflected in continuing changes during this phase in
the Annuity Unit value, which determines the amounts of the second and
subsequent variable annuity payments.
TAXES
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. A contract owner is not taxed on
increases in the value of a contract until distribution occurs, either in the
form of a non-annuity distribution or as annuity payments under the annuity
payment option elected. For a lump sum payment received as a total surrender
(total redemption), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the contract. For a payment received as a withdrawal
(partial redemption), federal tax liability is determined on a last-in,
first-out basis, meaning taxable income is withdrawn before the cost basis of
the contract is withdrawn. For contracts issued in connection with Non-qualified
plans, the cost basis is generally the Purchase Payments, while for contracts
issued in connection with Qualified plans there may be no cost basis. The
taxable portion of the lump sum payment is taxed at ordinary income tax rates.
Tax penalties may also apply.
For annuity payments, the taxable portion is determined by a formula which
establishes the ratio that the cost basis of the contract bears to the total
value of annuity payments for the term of the annuity contract. The taxable
portion is taxed at ordinary income tax rates. Contract owners, Annuitants and
Beneficiaries under the contracts should seek competent financial advice about
the tax consequences of distributions under the retirement plan under which the
contracts are purchased.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the separate account is not a separate entity from the
Company and its operations form a part of the Company.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from contracts
issued under certain types of Qualified plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct "trustee to trustee" transfer. This
requirement is mandatory and cannot be waived by the owner. Withholding on other
types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of any
amount received by a covered employee from a plan qualified under Section 401(a)
or 403(a) of the Code, or from a tax-sheltered annuity qualified under Section
403(b) of the Code (other than (1) annuity payments for the life (or life
7
<PAGE>
expectancy) of the employee, or joint lives (or joint life expectancies) of the
employee and his or her designated Beneficiary, or for a specified period of ten
years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a contract other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
DIVERSIFICATION -- SEPARATE ACCOUNT INVESTMENTS
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts such as the contracts meet the diversification
requirements if, as of the close of each calendar quarter, the underlying assets
meet the diversification standards for a regulated investment company, and no
more than 55% of the total assets consist of cash, cash items, U.S. government
securities and securities of other regulated investment companies.
The Treasury Department has issued regulations which establish diversification
requirements for the investment portfolios underlying annuity variable contracts
such as the contracts. The regulations amplify the diversification requirements
for variable annuity contracts set forth in the Code and provide an alternative
to the safe harbor provision described above. Under the regulations an
investment portfolio will be deemed adequately diversified if (1) no more than
55% of the value of the total assets of the portfolio is represented by any one
investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments. For purposes of determining
whether or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government agency or instrumentality shall be treated as a separate
issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to the same
contract owner by one company or its affiliates are treated as one annuity
contract for purposes of determining the tax consequences of any distribution.
Such treatment may result in adverse tax consequences including more rapid
taxation of the distributed amounts from such multiple contracts. The Company
believes that Congress intended to affect the purchase of multiple deferred
annuity contracts which may have been purchased to avoid withdrawal income tax
treatment. Owners should consult a tax adviser prior to purchasing more than one
annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
8
<PAGE>
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable for use
under various types of Qualified plans. Taxation of owners in each Qualified
plan varies with the type of plan and terms and conditions of each specific
plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued pursuant to the
plan.
Following are general descriptions of the types of Qualified plans with which
the contracts may be used. Such descriptions are not exhaustive and are for
general information purposes only. The tax rules regarding Qualified plans are
very complex and will have differing applications depending on individual facts
and circumstances. Each purchaser should obtain competent tax advice prior to
purchasing a contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this prospectus. Generally, contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified contracts.
(a) H.R. 10 PLANS
Section 401 of the Code permits self-employed individuals to establish Qualified
plans for themselves and their employees, commonly referred to as "H.R. 10" or
"Keogh" Plans. Contributions made to the plan for the benefit of the employees
will not be included in the gross income of the employees until distributed from
the plan. The tax consequences to owners may vary depending upon the particular
plan design. However, the Code places limitations and restrictions on all plans
on such items as: amounts of allowable contributions; form, manner and timing of
distributions; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. Purchasers of contracts for use with an H.R. 10 Plan
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
(b) TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, education and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employee until the
employee receives distributions from the contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, non-discrimination and withdrawals. Any employee
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
(c) INDIVIDUAL RETIREMENT ANNUITIES
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. Sales of contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Purchasers of contracts to be qualified as IRAs should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
(d) ROTH IRAS
Section 408A of the Code permits an individual to contribute to an individual
retirement program called a Roth IRA. Unlike contributions to a regular IRA
under Section 408(b) of the Code, contributions to a Roth IRA are not made on a
tax deferred basis, but distributions are tax-free if certain requirements are
satisfied. Like regular IRAs, Roth IRAs are subject to limitations on the amount
that may be contributed, those who may be eligible and the time when
distributions may commence without tax penalty. Certain
9
<PAGE>
persons may be eligible to convert a regular IRA into a Roth IRA, and the
resulting income tax may be spread over four years if the conversion occurs
before January 1, 1999. If and when Contracts are made available for use with
Roth IRAs they may be subject to special requirements imposed by the Internal
Revenue Service. Purchasers of the Contracts for this purpose will be provided
with such supplementary information as may be required by the Internal Revenue
Service or other appropriate agency.
(e) CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the contracts to provide benefits under the plan.
Contributions to the plan for the benefit of employees will not be includible in
the gross income of the employee until distributed from the plan. The tax
consequences to owners may vary depending upon the particular plan design.
However, the Code places limitations on all plans on such items as amount of
allowable contributions; form, manner and timing of distributions; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Purchasers of contracts for use with corporate pension or profit
sharing plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
(f) DEFERRED COMPENSATION PLANS -- SECTION 457
Under Section 457 of the Code, governmental and certain other tax-exempt
employers may establish, for the benefit of their employees, deferred
compensation plans which may invest in annuity contracts. The Code, as in the
case of Qualified plans, establishes limitations and restrictions on
eligibility, contributions and distributions. Under these plans, contributions
made for the benefit of the employees will not be includible in the employees'
gross income until distributed from the plan. However, under a 457 plan all the
plan assets shall remain solely the property of the employer, subject only to
the claims of the employer's general creditors until such time as made available
to an owner or a Beneficiary. As of January 1, 1999 all 457 plans of state
and local governments must hold assets and income in trust (or custodial
accounts or an annuity contract) for the exclusive benefit of participants
and their beneficiaries.
DISTRIBUTION OF CONTRACTS
The contracts are offered through SunAmerica Capital Services, Inc., located at
733 Third Avenue, 4th Floor, New York, New York 10017. SunAmerica Capital
Services, Inc. is registered as a broker-dealer under the Securities Exchange
Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc. The Company and SunAmerica Capital Services, Inc. are
each an indirect wholly owned subsidiary of SunAmerica Inc. No Underwriting
fees are paid in connection with the distribution of the Contracts.
Contracts are offered on a continuous basis.
10
<PAGE>
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company as of December
31, 1999, December 31, 1998 and September 30, 1998 and for the year ended
December 31, 1999, and for the three months ended December 31, 1998, and for
each of the two fiscal years in the period ended September 30, 1998 are
presented in this Statement of Additional Information. Effective December 31,
1999, the Company changed its fiscal year end from September 30, to December
31. The financial statements of the Company should be considered only as
bearing on the ability of the Company to meet its obligation under the
contracts. The financial statements of Variable Annuity Account Five (Portion
Relating to the SEASONS Variable Annuity) as of March 31, 1999 and for the
year then ended and for the period from inception to March 31, 1998 are
incorporated herein by reference to Post-Effective Amendment No. 8 under the
Securities Act of 1933 ("33 Act") and No. 7 under the Investment Company Act
of 1940 ("40 Act") to this Registration Statement file No. 333-08859 and
811-7727 filed on form N-4 on July 12, 1999.
Documents incorporated by reference for filing purposes will still appear at the
end of this document when it is distributed upon request.
PricewaterhouseCoopers LLP, 400 South Hope Street, Los Angeles, California
90071, serves as the independent accountants for the Separate Account and the
Company. The financial statements referred to above have been so included in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
11
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder of
Anchor National Life Insurance Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and comprehensive income and of cash flows
present fairly, in all material respects, the financial position of Anchor
National Life Insurance Company and its subsidiaries (the "Company") at December
31, 1999, December 31, 1998, and September 30, 1998, and the results of their
operations and their cash flows for the year ended December 31, 1999, for the
three months ended December 31, 1998 and for each of the two fiscal years in the
period ended September 30, 1998, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
January 31, 2000
F-2
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
--------------- --------------- --------------
<S> <C> <C> <C>
ASSETS
Investments:
Cash and short-term investments $ 475,162,000 $ 3,303,454,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks available for sale,
at fair value (amortized cost:
December 1999, $4,155,728,000;
December 1998, $4,252,740,000;
September 1998, $1,934,863,000) 3,953,169,000 4,248,840,000 1,954,754,000
Mortgage loans 674,679,000 388,780,000 391,448,000
Policy loans 260,066,000 320,688,000 11,197,000
Separate account seed money 141,499,000 --- ---
Common stocks available for sale,
at fair value (cost: December 1999,
$0; December 1998, $1,409,000;
September 1998, $115,000) --- 1,419,000 169,000
Partnerships 4,009,000 4,577,000 4,403,000
Real estate 24,000,000 24,000,000 24,000,000
Other invested assets 19,385,000 15,185,000 15,036,000
--------------- --------------- ---------------
Total investments 5,551,969,000 8,306,943,000 2,734,742,000
Variable annuity assets held in separate
accounts 19,949,145,000 13,767,213,000 11,133,569,000
Accrued investment income 60,584,000 73,441,000 26,408,000
Deferred acquisition costs 1,089,979,000 866,053,000 539,850,000
Receivable from brokers for sales of
securities 54,760,000 22,826,000 23,904,000
Income taxes currently receivable --- --- 5,869,000
Deferred income taxes 53,445,000 --- ---
Other assets 114,612,000 109,857,000 85,926,000
--------------- --------------- ---------------
TOTAL ASSETS $26,874,494,000 $23,146,333,000 $14,550,268,000
=============== =============== ===============
</TABLE>
See accompanying notes
F-3
<PAGE>
<TABLE>
<CAPTION>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET (Continued)
December 31, December 31, September 30,
1999 1998 1998
--------------- --------------- --------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts $ 3,254,895,000 $ 5,500,157,000 $ 2,189,272,000
Reserves for universal life insurance
contracts 1,978,332,000 2,339,194,000 ---
Reserves for guaranteed investment
contracts 305,570,000 306,461,000 282,267,000
Payable to brokers for purchases of
securities 139,000 --- 50,957,000
Income taxes currently payable 23,490,000 11,123,000 ---
Modified coinsurance deposit liability 140,757,000 --- ---
Other liabilities 249,224,000 160,020,000 106,594,000
--------------- --------------- ---------------
Total reserves, payables
and accrued liabilities 5,952,407,000 8,316,955,000 2,629,090,000
--------------- --------------- ---------------
Variable annuity liabilities related to
separate accounts 19,949,145,000 13,767,213,000 11,133,569,000
--------------- --------------- ---------------
Subordinated notes payable to affiliates 37,816,000 209,367,000 39,182,000
--------------- --------------- ---------------
Deferred income taxes --- 105,772,000 95,758,000
--------------- --------------- ---------------
Shareholder's equity:
Common Stock 3,511,000 3,511,000 3,511,000
Additional paid-in capital 493,010,000 378,674,000 308,674,000
Retained earnings 551,158,000 366,460,000 332,069,000
Accumulated other comprehensive
income (loss) (112,553,000) (1,619,000) 8,415,000
--------------- --------------- ---------------
Total shareholder's equity 935,126,000 747,026,000 652,669,000
--------------- --------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $26,874,494,000 $23,146,333,000 $14,550,268,000
=============== =============== ===============
</TABLE>
See accompanying notes
F-4
<PAGE>
<TABLE>
<CAPTION>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
Years Ended September 30,
Year Ended Three Months Ended -----------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Investment income $ 521,953,000 $ 54,278,000 $ 221,966,000 $ 210,759,000
------------- ------------ ------------- -------------
Interest expense on:
Fixed annuity contracts (231,929,000) (22,828,000) (112,695,000) (109,217,000)
Universal life insurance
contracts (102,486,000) --- --- ---
Guaranteed investment
contracts (19,649,000) (3,980,000) (17,787,000) (22,650,000)
Senior indebtedness (199,000) (34,000) (1,498,000) (2,549,000)
Subordinated notes payable
to affiliates (3,474,000) (853,000) (3,114,000) (3,142,000)
------------- ------------ ------------- -------------
Total interest expense (357,737,000) (27,695,000) (135,094,000) (137,558,000)
------------- ------------ ------------- -------------
NET INVESTMENT INCOME 164,216,000 26,583,000 86,872,000 73,201,000
------------- ------------ ------------- -------------
NET REALIZED INVESTMENT
GAINS (LOSSES) (19,620,000) 271,000 19,482,000 (17,394,000)
------------- ------------ ------------- -------------
Fee income:
Variable annuity fees 306,417,000 58,806,000 200,867,000 139,492,000
Net retained commissions 51,039,000 11,479,000 48,561,000 39,143,000
Asset management fees 43,510,000 8,068,000 29,592,000 25,764,000
Universal life insurance
fees 23,290,000 --- --- ---
Surrender charges 17,137,000 3,239,000 7,404,000 5,529,000
Other fees 13,999,000 1,738,000 3,938,000 3,218,000
------------- ------------ ------------- -------------
TOTAL FEE INCOME 455,392,000 83,330,000 290,362,000 213,146,000
------------- ------------ ------------- -------------
GENERAL AND ADMINISTRATIVE
EXPENSES (154,665,000) (21,993,000) (96,102,000) (98,802,000)
------------- ------------ ------------- -------------
AMORTIZATION OF DEFERRED
ACQUISITION COSTS (116,840,000) (27,070,000) (72,713,000) (66,879,000)
------------- ------------ ------------- -------------
ANNUAL COMMISSIONS (40,760,000) (6,624,000) (18,209,000) (8,977,000)
------------- ------------ ------------- -------------
PRETAX INCOME 287,723,000 54,497,000 209,692,000 94,295,000
Income tax expense (103,025,000) (20,106,000) (71,051,000) (31,169,000)
------------- ------------ ------------- -------------
NET INCOME 184,698,000 34,391,000 138,641,000 63,126,000
------------- ------------ ------------- -------------
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses)
on debt and equity securities
available for sale:
Net unrealized gains
(losses) identified in
the current period (118,669,000) (10,249,000) (4,027,000) 16,605,000
Less reclassification
adjustment for net
realized (gains) losses
included in net income 7,735,000 215,000 (5,963,000) 7,321,000
------------- ------------ ------------- -------------
OTHER COMPREHENSIVE INCOME
(LOSS) (110,934,000) (10,034,000) (9,990,000) 23,926,000
------------- ------------ ------------- -------------
COMPREHENSIVE INCOME $ 73,764,000 $ 24,357,000 $ 128,651,000 $ 87,052,000
============= ============ ============= =============
</TABLE>
See accompanying notes
F-5
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 184,698,000 $ 34,391,000 $ 138,641,000 $ 63,126,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Interest credited to:
Fixed annuity contracts 231,929,000 22,828,000 112,695,000 109,217,000
Universal life insurance
contracts 102,486,000 --- --- ---
Guaranteed investment
contracts 19,649,000 3,980,000 17,787,000 22,650,000
Net realized investment
losses (gains) 19,620,000 (271,000) (19,482,000) 17,394,000
Amortization (accretion) of
net premiums (discounts)
on investments (18,343,000) (1,199,000) 447,000 (18,576,000)
Universal life insurance
fees (23,290,000) --- --- ---
Amortization of goodwill 776,000 356,000 1,422,000 1,187,000
Provision for deferred
income taxes (100,013,000) 15,945,000 34,087,000 (16,024,000)
Change in:
Accrued investment income 9,155,000 (1,512,000) (4,649,000) (2,084,000)
Deferred acquisition costs (208,228,000) (34,328,000) (160,926,000) (113,145,000)
Other assets (5,661,000) (21,070,000) (19,374,000) (14,598,000)
Income taxes currently
payable 12,367,000 16,992,000 (38,134,000) 10,779,000
Other liabilities 49,504,000 5,617,000 (2,248,000) 14,187,000
Other, net 15,087,000 5,510,000 (5,599,000) 418,000
--------------- -------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 289,736,000 47,239,000 54,667,000 74,531,000
--------------- -------------- --------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of:
Bonds, notes and redeemable
preferred stocks (4,130,682,000) (392,515,000) (1,970,502,000) (2,566,211,000)
Mortgage loans (331,398,000) (4,962,000) (131,386,000) (266,771,000)
Other investments, excluding
short-term investments (227,268,000) (1,992,000) --- (75,556,000)
Sales of:
Bonds, notes and redeemable
preferred stocks 2,660,931,000 265,039,000 1,602,079,000 2,299,063,000
Other investments, excluding
short-term investments 65,395,000 142,000 42,458,000 6,421,000
Redemptions and maturities of:
Bonds, notes and redeemable
preferred stocks 1,274,764,000 37,290,000 424,393,000 376,847,000
Mortgage loans 46,760,000 7,699,000 80,515,000 25,920,000
Other investments, excluding
short-term investments 33,503,000 853,000 67,213,000 23,940,000
Cash and short-term investments
acquired in coinsurance
transaction with MBL Life
Assurance Corporation --- 3,083,211,000 --- ---
Short-term investments
transferred to First
SunAmerica Life Insurance
Company in assumption
reinsurance transaction with
MBL Life Assurance Corporation (371,634,000) --- --- ---
--------------- -------------- --------------- ---------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (979,629,000) 2,994,765,000 114,770,000 (176,347,000)
--------------- -------------- --------------- ---------------
</TABLE>
F-6
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Premium receipts on:
Fixed annuity contracts $ 2,016,851,000 $ 351,616,000 $ 1,512,994,000 $1,097,937,000
Universal life insurance
contracts 78,864,000 --- --- ---
Guaranteed investment
contracts --- --- 5,619,000 55,000,000
Net exchanges from the fixed
accounts of variable annuity
contracts (1,821,324,000) (448,762,000) (1,303,790,000) (620,367,000)
Withdrawal payments on:
Fixed annuity contracts (2,232,374,000) (41,554,000) (191,690,000) (242,589,000)
Universal life insurance
contracts (81,634,000) --- --- ---
Guaranteed investment
contracts (19,742,000) (3,797,000) (36,313,000) (198,062,000)
Claims and annuity payments on:
Fixed annuity contracts (46,578,000) (9,333,000) (40,589,000) (35,731,000)
Universal life insurance
contracts (158,043,000) --- --- ---
Net receipts from (repayments
of) other short-term
financings (129,512,000) 9,545,000 (10,944,000) 34,239,000
Net receipt/(payment) related
to a modified coinsurance
transaction 140,757,000 (170,436,000) 166,631,000 ---
Receipts from issuance of
subordinated note payable
to affiliate --- 170,436,000 --- ---
Net of capital contributions
and return of capital 114,336,000 70,000,000 --- 28,411,000
Dividends paid --- --- (51,200,000) (25,500,000)
--------------- -------------- --------------- --------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (2,138,399,000) (72,285,000) 50,718,000 93,338,000
--------------- -------------- --------------- --------------
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS (2,828,292,000) 2,969,719,000 220,155,000 (8,478,000)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 3,303,454,000 333,735,000 113,580,000 122,058,000
--------------- -------------- --------------- --------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 475,162,000 $3,303,454,000 $ 333,735,000 $ 113,580,000
=============== ============== =============== ==============
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid on indebtedness $ 3,787,000 $ 1,169,000 $ 3,912,000 $ 7,032,000
=============== ============== =============== ==============
Net income taxes paid
(refunded) $ 190,126,000 $ (12,302,000) $ 74,932,000 $ 36,420,000
=============== ============== =============== ==============
</TABLE>
See accompanying notes
F-7
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company, including its wholly owned
subsidiaries, (the "Company") is an Arizona-domiciled life insurance
company which conducts its business through three segments: annuity
operations, asset management operations and broker-dealer operations.
Annuity operations include the sale and administration of deposit-type
insurance contracts, including fixed and variable annuities, universal
life contracts and guaranteed investment contracts. Asset management
operations, which include the distribution and management of mutual
funds, are conducted by SunAmerica Asset Management Corp. Broker-dealer
operations include the sale of securities and financial services
products, and are conducted by Royal Alliance Associates, Inc.
The Company is an indirect wholly owned subsidiary of American
International Group, Inc. ("AIG"), an international insurance and
financial services holding company. At December 31, 1998, the Company
was a wholly owned indirect subsidiary of SunAmerica Inc., a Maryland
Corporation. On January 1, 1999, SunAmerica Inc. merged with and into
AIG in a tax-free reorganization that has been treated as a pooling of
interests for accounting purposes. Thus, SunAmerica Inc. ceased to
exist on that date. However, immediately prior to the date of the
merger, substantially all of the net assets of SunAmerica Inc. were
contributed to a newly formed subsidiary of AIG named SunAmerica
Holdings, Inc., a Delaware Corporation. SunAmerica Holdings, Inc.
subsequently changed its name to SunAmerica Inc. ("SunAmerica").
The operations of the Company are influenced by many factors, including
general economic conditions, monetary and fiscal policies of the
federal government, and policies of state and other regulatory
authorities. The level of sales of the Company's financial products is
influenced by many factors, including general market rates of interest,
the strength, weakness and volatility of equity markets, and terms and
conditions of competing financial products. The Company is exposed to
the typical risks normally associated with a portfolio of fixed-income
securities, namely interest rate, option, liquidity and credit risk.
The Company controls its exposure to these risks by, among other
things, closely monitoring and matching the duration of its assets and
liabilities, monitoring and limiting prepayment and extension risk in
its portfolio, maintaining a large percentage of its portfolio in
highly liquid securities, and engaging in a disciplined process of
underwriting, reviewing and monitoring credit risk. The Company also is
exposed to market risk, as market volatility may result in reduced fee
income in the case of assets managed in mutual funds and held in
separate accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and include the accounts of the Company and all
of its wholly owned subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation. Certain items have
been reclassified to conform to the current period's presentation.
F-8
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Under generally accepted accounting principles, premiums collected on
the non-traditional life and annuity insurance products, such as those
sold by the Company, are not reflected as revenues in the Company's
statement of earnings, as they are recorded directly to policyholders
liabilities upon receipt.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the amounts reported in the financial
statements and the accompanying notes. Actual results could differ from
those estimates.
INVESTED ASSETS: Cash and short-term investments primarily include
cash, commercial paper, money market investments, repurchase agreements
and short-term bank participations. All such investments are carried at
cost plus accrued interest, which approximates fair value, have
maturities of three months or less and are considered cash equivalents
for purposes of reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and
common stocks are carried at aggregate fair value and changes in
unrealized gains or losses, net of tax, are credited or charged
directly to shareholder's equity. Bonds, notes and redeemable preferred
stocks are reduced to estimated net realizable value when necessary for
declines in value considered to be other than temporary. Estimates of
net realizable value are subjective and actual realization will be
dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of
provisions for estimated losses. Policy loans are carried at unpaid
balances. Separate account seed money consists of seed money for mutual
funds used as investment vehicles for the Company's variable annuity
separate accounts and is valued at market. Limited partnerships are
accounted for by the cost method of accounting. Real estate is carried
at cost, reduced by impairment provisions. Other invested assets
include collateralized bond obligations.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined by using the specific
cost identification method. Premiums and discounts on investments are
amortized to investment income by using the interest method over the
contractual lives of the investments.
INTEREST RATE SWAP AGREEMENTS: The net differential to be paid or
received on interest rate swap agreements ("Swap Agreements") entered
into to reduce the impact of changes in interest rates is recognized
over the lives of the agreements, and such differential is classified
as Investment Income or Interest Expense in the income statement.
Initially, Swap Agreements are designated as hedges and, therefore, are
not marked to market. However, when a hedged asset/liability is sold or
repaid before the related Swap Agreement matures, the Swap Agreement is
marked to market and any gain/loss is classified with any gain/loss
realized on the disposition of the hedged asset/liability.
Subsequently, the Swap Agreement is marked to market and the resulting
change in fair value is included in Investment Income in the income
F-9
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
statement. When a Swap Agreement that is designated as a hedge is
terminated before its contractual maturity, any resulting gain/loss is
credited/charged to the carrying value of the asset/liability that it
hedged and is treated as a premium/discount for the remaining life of
the asset/liability.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and
amortized, with interest, in relation to the incidence of estimated
gross profits to be realized over the estimated lives of the annuity
contracts. Estimated gross profits are composed of net interest income,
net realized investment gains and losses, variable annuity fees,
universal life insurance fees, surrender charges and direct
administrative expenses. Costs incurred to sell mutual funds are also
deferred and amortized over the estimated lives of the funds obtained.
Deferred acquisition costs ("DAC") consist of commissions and other
costs that vary with, and are primarily related to, the production or
acquisition of new business.
As debt and equity securities available for sale are carried at
aggregate fair value, an adjustment is made to DAC equal to the change
in amortization that would have been recorded if such securities had
been sold at their stated aggregate fair value and the proceeds
reinvested at current yields. The change in this adjustment, net of
tax, is included with the change in accumulated other comprehensive
income/(loss) that is credited or charged directly to shareholder's
equity. DAC has been increased by $29,400,000 at December 31, 1999,
increased by $1,400,000 at December 31, 1998, and decreased by
$7,000,000 at September 30, 1998 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities
resulting from the receipt of variable annuity premiums are segregated
in separate accounts. The Company receives administrative fees for
managing the funds and other fees for assuming mortality and certain
expense risks. Such fees are included in Variable Annuity Fees in the
income statement.
GOODWILL: Goodwill, amounting to $22,206,000 at December 31, 1999, is
amortized by using the straight-line method over periods averaging 25
years and is included in Other Assets in the balance sheet. Goodwill is
evaluated for impairment when events or changes in economic conditions
indicate that the carrying amount may not be recoverable.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity
contracts, universal life insurance contracts and guaranteed investment
contracts are accounted for as investment-type contracts in accordance
with Statement of Financial Accounting Standards No. 97, "Accounting
and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of
Investments," and are recorded at accumulated value (premiums received,
plus accrued interest, less withdrawals and assessed fees).
MODIFIED COINSURANCE DEPOSIT LIABILITY: Cash received as part of the
modified coinsurance transaction described in Note 8 is recorded as a
deposit liability.
F-10
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FEE INCOME: Variable annuity fees, asset management fees, universal
life insurance fees and surrender charges are recorded in income as
earned. Net retained commissions are recognized as income on a trade
date basis.
INCOME TAXES: The Company files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Its federal income tax
return is consolidated with those of its direct parent, SunAmerica Life
Insurance Company (the "Parent"), and its affiliate, First SunAmerica
Life Insurance Company. Income taxes have been calculated as if the
Company filed a separate return. Deferred income tax assets and
liabilities are recognized based on the difference between financial
statement carrying amounts and income tax bases of assets and
liabilities using enacted income tax rates and laws.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the FASB issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging
activities. SFAS 133 was postponed by SFAS 137, and now will be
effective for the Company as of January 1, 2001. Therefore, it is not
included in the accompanying financial statements. The Company has not
completed its analysis of the effect of SFAS 133, but management
believes that it will not have a material impact on the Company's
results of operations, financial condition or liquidity.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," was adopted for the
year ended December 31, 1999 and is included in Note 14 of the
accompanying financial statements.
3. FISCAL YEAR CHANGE
Effective December 31, 1998, the Company changed its fiscal year end
from September 30 to December 31. Accordingly, the consolidated
financial statements include the results of operations and cash flows
for the three-month transition period ended December 31, 1998. Such
results are not necessarily indicative of operations for a full year.
The consolidated financial statements as of and for the three months
ended December 31, 1998 were originally filed as the Company's
unaudited Transition Report on Form 10-Q.
Results for the comparable prior year period are summarized below.
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1997
------------------
<S> <C>
Investment income 59,855,000
Net investment income 26,482,000
Net realized investment gains 20,935,000
Total fee income 63,984,000
Pretax income 67,654,000
Net income 44,348,000
==========
</TABLE>
F-11
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITION
On December 31, 1998, the Company acquired the individual life business
and the individual and group annuity business of MBL Life Assurance
Corporation ("MBL Life") ("the Acquisition"), via a 100% coinsurance
transaction, for a cash purchase price of $128,420,000. As part of this
transaction, the Company acquired assets having an aggregate fair value
of $5,718,227,000, composed primarily of invested assets totaling
$5,715,010,000. Liabilities assumed in this acquisition totaled
$5,831,266,000, including $3,460,503,000 of fixed annuity reserves,
$2,308,742,000 of universal life reserves and $24,011,000 of guaranteed
investment contract reserves. The excess of the purchase price over the
fair value of net assets received amounted to $104,509,000 at December
31, 1999, after adjustment for the transfer of the New York business to
First SunAmerica Life Insurance Company (see below), and is included in
Deferred Acquisition Costs in the accompanying consolidated balance
sheet. The income statement for the year ended December 31, 1999
includes the impact of the Acquisition. On a pro forma basis, assuming
the Acquisition had been consummated on October 1, 1996, the beginning
of the prior-year periods discussed within, investment income would
have been $517,606,000 and net income would have been $158,887,000 for
the year ended September 30, 1998. For the year ended September 30,
1997, investment income would have been $506,399,000 and net income
would have been $83,372,000.
Included in the block of business acquired from MBL Life were policies
whose owners are residents of New York State ("the New York Business").
On July 1, 1999, the New York Business was acquired by the Company's
New York affiliate, First SunAmerica Life Insurance Company ("FSA"),
via an assumption reinsurance agreement, and the remainder of the
business converted to assumption reinsurance in the Company, which
superseded the coinsurance agreement. As part of this transfer,
invested assets equal to $678,272,000, life reserves equal to
$282,247,000, group pension reserves equal to $406,118,000, and other
net assets of $10,093,000 were transferred to FSA.
The $128,420,000 purchase price was allocated between the Company and
FSA based on the estimated future gross profits of the two blocks of
business. The portion allocated to FSA was $10,000,000.
As part of the Acquisition, the Company received $242,473,000 from MBL
to pay policy enhancements guaranteed by the MBL Life rehabilitation
agreement to policyholders meeting certain requirements. A primary
requirement was that annuity policyholders must have converted their
MBL Life policy to a policy type currently offered by the Company or
one of its affiliates by December 31, 1999. The enhancements are to be
credited in four installments on January 1, 2000, June 30, 2001, June
30, 2002 and June 30, 2003, to eligible policies still active on each
of those dates. On December 31, 1999, the enhancement reserve for such
payments totaled $223,032,000, which includes interest accredited at
6.75% on the original reserve. Of this amount, $69,836,000 was credited
to policyholders in February 2000 for the January 1, 2000 installment.
F-12
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by major category
follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 24,688,000 $ 22,884,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
Securities of public utilities 114,933,000 107,596,000
Corporate bonds and notes 1,676,006,000 1,596,469,000
Redeemable preferred stocks 4,375,000 4,547,000
Other debt securities 829,997,000 809,539,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 6,033,000 $ 6,272,000
Mortgage-backed securities 546,790,000 553,990,000
Securities of public utilities 208,074,000 205,119,000
Corporate bonds and notes 2,624,330,000 2,616,073,000
Redeemable preferred stocks 6,125,000 7,507,000
Other debt securities 861,388,000 859,879,000
-------------- --------------
Total $4,252,740,000 $4,248,840,000
============== ==============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 84,377,000 $ 88,239,000
Mortgage-backed securities 569,613,000 584,007,000
Securities of public utilities 108,431,000 106,065,000
Corporate bonds and notes 883,890,000 884,209,000
Redeemable preferred stocks 6,125,000 6,888,000
Other debt securities 282,427,000 285,346,000
-------------- --------------
Total $1,934,863,000 $1,954,754,000
============== ==============
</TABLE>
F-13
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by contractual maturity,
as of December 31, 1999, follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
Due in one year or less $ 199,679,000 $ 199,198,000
Due after one year through
five years 552,071,000 530,289,000
Due after five years through
ten years 1,243,298,000 1,187,044,000
Due after ten years 654,951,000 624,504,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above due to prepayments and redemptions.
F-14
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
5. INVESTMENTS (Continued)
Gross unrealized gains and losses on bonds, notes and redeemable
preferred stocks available for sale by major category follow:
Gross Gross
Unrealized Unrealized
Gains Losses
----------- --------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 47,000 $ (1,852,000)
Mortgage-backed securities 3,238,000 (96,832,000)
Securities of public utilities 13,000 (7,350,000)
Corporate bonds and notes 10,222,000 (89,758,000)
Redeemable preferred stocks 172,000 ---
Other debt securities 4,275,000 (24,734,000)
----------- -------------
Total $17,967,000 $(220,526,000)
=========== =============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 239,000 $ ---
Mortgage-backed securities 9,398,000 (2,198,000)
Securities of public utilities 926,000 (3,881,000)
Corporate bonds and notes 22,227,000 (30,484,000)
Redeemable preferred stocks 1,382,000 ---
Other debt securities 2,024,000 (3,533,000)
----------- -------------
Total $36,196,000 $ (40,096,000)
=========== =============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 3,862,000 $ ---
Mortgage-backed securities 15,103,000 (709,000)
Securities of public utilities 2,420,000 (4,786,000)
Corporate bonds and notes 31,795,000 (31,476,000)
Redeemable preferred stocks 763,000 ---
Other debt securities 5,235,000 (2,316,000)
----------- -------------
Total $59,178,000 $ (39,287,000)
=========== =============
</TABLE>
There were no gross unrealized gains on equity securities available for
sale at December 31, 1999. Gross unrealized gains on equity securities
available for sale aggregated $10,000 and $54,000 at December 31, 1998
and September 30, 1998, respectively. There were no unrealized losses
at December 31, 1999, December 31, 1998, or September 30, 1998.
F-15
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
Gross realized investment gains and losses on sales of investments are
as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ----------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
BONDS, NOTES AND
REDEEMABLE PREFERRED
STOCKS:
Realized gains $ 8,333,000 $ 6,669,000 $ 28,086,000 $ 22,179,000
Realized losses (26,113,000) (5,324,000) (4,627,000) (25,310,000)
COMMON STOCKS:
Realized gains 4,239,000 12,000 337,000 4,002,000
Realized losses (11,000) (9,000) --- (312,000)
OTHER INVESTMENTS:
Realized gains --- 573,000 8,824,000 2,450,000
IMPAIRMENT WRITEDOWNS (6,068,000) (1,650,000) (13,138,000) (20,403,000)
------------- ----------- ------------ ------------
Total net realized
investment gains
and losses $(19,620,000) $ 271,000 $ 19,482,000 $(17,394,000)
============ =========== ============ ============
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ----------------------------------
December 31,1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
Short-term investments $ 61,764,000 $ 4,649,000 $ 12,524,000 $ 11,780,000
Bonds, notes and
redeemable preferred
stocks 348,373,000 39,660,000 156,140,000 163,038,000
Mortgage loans 47,480,000 7,904,000 29,996,000 17,632,000
Common stocks 7,000 --- 34,000 16,000
Real estate (525,000) 13,000 (467,000) (296,000)
Cost-method partnerships 6,631,000 352,000 24,311,000 6,725,000
Other invested assets 58,223,000 1,700,000 (572,000) 11,864,000
------------ ----------- ------------ ------------
Total investment
income $521,953,000 $54,278,000 $221,966,000 $210,759,000
============ =========== ============ ============
</TABLE>
Expenses incurred to manage the investment portfolio amounted to
$10,014,000 for the year ended December 31, 1999, $500,000 for the
three months ended December 31, 1998, $1,910,000 for the year ended
September 30, 1998 and $2,050,000 for the year ended September 30,
1997, and are included in General and Administrative Expenses in the
income statement. Investment expenses have increased significantly
because the size of the portfolio increased as a result of the
Acquisition.
F-16
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
At December 31, 1999, the following investments exceeded 10% of the
Company's consolidated shareholder's equity of $935,126,000:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
Provident Institutional Funds Inc.
Del Treasury Trust Fund 113,000,000 113,000,000
Salomon Smith Barney Repurchase
Agreement 97,000,000 97,000,000
------------ ------------
Total $210,000,000 $210,000,000
============ ============
</TABLE>
At December 31, 1999, mortgage loans were collateralized by properties
located in 29 states, with loans totaling approximately 36% of the
aggregate carrying value of the portfolio secured by properties located
in California and approximately 11% by properties located in New York.
No more than 8% of the portfolio was secured by properties in any other
single state.
At December 31, 1999, bonds, notes and redeemable preferred stocks
included $377,149,000 of bonds and notes not rated investment grade.
The Company had no material concentrations of non-investment-grade
assets at December 31, 1999.
At December 31, 1999, the carrying value of investments in default as
to the payment of principal or interest was $1,529,000, composed of
$870,000 of bonds and $659,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $872,000.
As a component of its asset and liability management strategy, the
Company utilizes Swap Agreements to match assets more closely to
liabilities. Swap Agreements are agreements to exchange with a
counterparty interest rate payments of differing character (for
example, variable-rate payments exchanged for fixed-rate payments)
based on an underlying principal balance (notional principal) to hedge
against interest rate changes. The Company typically utilizes Swap
Agreements to create a hedge that effectively converts floating-rate
assets and liabilities to fixed-rate instruments. At December 31, 1999,
the Company had one outstanding Swap Agreement with a notional
principal amount of $21,538,000, which matures in December 2024. The
net interest paid amounted to $215,000 for the year ended December 31,
1999, $54,000 for the three months ended December 31, 1998, $278,000
for the year ended September 30, 1998, and $125,000 for the year ended
September 30, 1997, and is included in Interest Expense on Guaranteed
Investment Contracts in the income statement.
At December 31, 1999, $7,418,000 of bonds, at amortized cost, were on
deposit with regulatory authorities in accordance with statutory
requirements.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to
F-17
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
reasonable estimates of the fair value of only the Company's financial
instruments. The disclosures do not address the value of the Company's
recognized and unrecognized nonfinancial assets (including its real
estate investments and other invested assets except for cost-method
partnerships) and liabilities or the value of anticipated future
business. The Company does not plan to sell most of its assets or
settle most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Selling expenses
and potential taxes are not included. The estimated fair value amounts
were determined using available market information, current pricing
information and various valuation methodologies. If quoted market
prices were not readily available for a financial instrument,
management determined an estimated fair value. Accordingly, the
estimates may not be indicative of the amounts the financial
instruments could be exchanged for in a current or future market
transaction.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
CASH AND SHORT-TERM INVESTMENTS: Carrying value is considered to be a
reasonable estimate of fair value.
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based
principally on independent pricing services, broker quotes and other
independent information.
MORTGAGE LOANS: Fair values are primarily determined by discounting
future cash flows to the present at current market rates, using
expected prepayment rates.
SEPARATE ACCOUNT SEED MONEY: Carrying value is the market value of the
underlying securities.
COMMON STOCKS: Fair value is based principally on independent pricing
services, broker quotes and other independent information.
COST-METHOD PARTNERSHIPS: Fair value of limited partnerships accounted
for by using the cost method is based upon the fair value of the net
assets of the partnerships as determined by the general partners.
VARIABLE ANNUITY ASSETS HELD IN SEPARATE ACCOUNTS: Variable annuity
assets are carried at the market value of the underlying securities.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts are
assigned a fair value equal to current net surrender value. Annuitized
contracts are valued based on the present value of future cash flows at
current pricing rates.
RESERVES FOR UNIVERSAL LIFE INSURANCE CONTRACTS: Universal life and
F-18
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
single life premium life contracts are assigned a fair value equal to
current net surrender value.
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on
the present value of future cash flows at current pricing rates and is
net of the estimated fair value of a hedging Swap Agreement, determined
from independent broker quotes.
RECEIVABLE FROM/PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such
obligations represent transactions of a short-term nature for which the
carrying value is considered a reasonable estimate of fair value.
MODIFIED COINSURANCE DEPOSIT LIABILITY: Fair value is based on
discounting the liability by the appropriate cost of funds, and
therefore approximates carrying value.
VARIABLE ANNUITY LIABILITIES RELATED TO SEPARATE ACCOUNTS: Fair values
of contracts in the accumulation phase are based on net surrender
values. Fair values of contracts in the payout phase are based on the
present value of future cash flows at assumed investment rates.
SUBORDINATED NOTES PAYABLE TO AFFILIATES: Fair value is estimated based
on the quoted market prices for similar issues.
F-19
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Company's financial instruments at
December 31, 1999, December 31, 1998 and September 30, 1998 compared
with their respective carrying values, are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
DECEMBER 31, 1999:
ASSETS:
Cash and short-term investments $ 475,162,000 $ 475,162,000
Bonds, notes and redeemable
preferred stocks 3,953,169,000 3,953,169,000
Mortgage loans 674,679,000 673,781,000
Separate account seed money 141,499,000 141,499,000
Common stocks --- ---
Cost-method partnerships 4,009,000 9,114,000
Variable annuity assets held in
separate accounts 19,949,145,000 19,949,145,000
Receivable from brokers for sales
of securities 54,760,000 54,760,000
LIABILITIES:
Reserves for fixed annuity contracts 3,254,895,000 3,053,660,000
Reserves for universal life insurance
contracts 1,978,332,000 1,853,442,000
Reserves for guaranteed investment
contracts 305,570,000 305,570,000
Payable to brokers for purchases
of securities 139,000 139,000
Modified coinsurance deposit
liability 140,757,000 140,757,000
Variable annuity liabilities related
to separate accounts 19,949,145,000 19,367,834,000
Subordinated notes payable to
affiliates 37,816,000 38,643,000
=============== ===============
DECEMBER 31, 1998:
ASSETS:
Cash and short-term investments $ 3,303,454,000 $ 3,303,454,000
Bonds, notes and redeemable
preferred stocks 4,248,840,000 4,248,840,000
Mortgage loans 388,780,000 411,230,000
Separate account seed money --- ---
Common stocks 1,419,000 1,419,000
Cost-method partnerships 4,577,000 12,802,000
Variable annuity assets held in
separate accounts 13,767,213,000 13,767,213,000
Receivable from brokers for sales
of securities 22,826,000 22,826,000
LIABILITIES:
Reserves for fixed annuity contracts 5,500,157,000 5,437,045,000
Reserves for universal life
insurance contracts 2,339,194,000 2,339,061,000
Reserves for guaranteed investment
contracts 306,461,000 306,461,000
Variable annuity liabilities related
to separate accounts 13,767,213,000 13,287,434,000
Subordinated notes payable to
affiliates 209,367,000 211,058,000
=============== ===============
</TABLE>
F-20
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
SEPTEMBER 30, 1998:
ASSETS:
Cash and short-term investments $ 333,735,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks 1,954,754,000 1,954,754,000
Mortgage loans 391,448,000 415,981,000
Separate account seed money --- ---
Common stocks 169,000 169,000
Cost-method partnerships 4,403,000 12,744,000
Variable annuity assets held in
separate accounts 11,133,569,000 11,133,569,000
Receivable from brokers for sales
of securities 23,904,000 23,904,000
LIABILITIES:
Reserves for fixed annuity contracts 2,189,272,000 2,116,874,000
Reserves for guaranteed investment
contracts 282,267,000 282,267,000
Payable to brokers for purchases
of securities 50,957,000 50,957,000
Variable annuity liabilities related
to separate accounts 11,133,569,000 10,696,607,000
Subordinated notes payable to
affiliates 39,182,000 41,272,000
=============== ===============
</TABLE>
7. SUBORDINATED NOTES PAYABLE TO AFFILIATES
At December 31, 1998, Subordinated Notes Payable to Affiliates included
a surplus note (the "Note") payable to its immediate parent, SunAmerica
Life Insurance Company (the "Parent"), for $170,436,000. On June 30,
1999, the Parent cancelled the Note and forgave the interest earned.
Funds received were reclassified to Additional Paid-in Capital in the
accompanying consolidated balance sheet.
Subordinated notes and accrued interest payable to affiliates totaled
$37,816,000 at interest rates ranging from 8% to 9% at December 31,
1999, and require principal payments of $5,400,000 in 2000, $10,000,000
in 2001 and $22,060,000 in 2002.
8. REINSURANCE
The business which was assumed from MBL Life is subject to existing
reinsurance ceded agreements. At December 31, 1998, the maximum
retention on any single life was $2,000,000, and a total credit of
$5,057,000 was taken against the life insurance reserves, representing
predominantly yearly renewable term reinsurance. In order to limit even
further the exposure to loss on any single insured and to recover an
additional portion of the benefits paid over such limits, the Company
entered into a reinsurance treaty effective January 1, 1999 under which
the Company retains no more than $100,000 of risk on any
F-21
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. REINSURANCE (Continued)
one insured life. At December 31, 1999, a total reserve credit of
$3,560,000 was taken against the life insurance reserves. With respect
to these coinsurance agreements, the Company could become liable for
all obligations of the reinsured policies if the reinsurers were to
become unable to meet the obligations assumed under the respective
reinsurance agreements. The Company monitors its credit exposure with
respect to these agreements. However, due to the high credit ratings of
the reinsurers, such risks are considered to be minimal.
On August 1, 1999, the Company entered into a modified coinsurance
transaction, approved by the Arizona Department of Insurance, which
involved the ceding of approximately $6,000,000,000 of variable
annuities to ANLIC Insurance Company (Hawaii), a non-affiliated stock
life insurer. The transaction is accounted for as reinsurance for
statutory reporting purposes. As part of the transaction, the Company
received cash in the amount of $150,000,000 and recorded a
corresponding deposit liability. As payments are made to the reinsurer,
the deposit liability is relieved. The cost of this program, $3,621,000
in 1999, is classified as General and Administrative Expenses in the
income statement.
On August 11, 1998, the Company entered into a similar modified
coinsurance transaction, approved by the Arizona Department of
Insurance, which involved the ceding of approximately $6,000,000,000 of
variable annuities to ANLIC Insurance Company (Cayman), a Cayman
Islands stock life insurance company, effective December 31, 1997. As a
part of this transaction, the Company received cash amounting to
approximately $188,700,000, and recorded a corresponding reduction of
DAC related to the coinsured annuities. As payments were made to the
reinsurer, the reduction of DAC was relieved. Certain expenses related
to this transaction were charged directly to DAC amortization in the
income statement. The net effect of this transaction in the income
statement was not material.
On December 31, 1998, the Company recaptured this business. As part of
this recapture, the Company paid cash of $170,436,000 and recorded an
increase in DAC of $167,202,000 with the balance of $3,234,000 being
recorded as DAC amortization in the income statement.
9. CONTINGENT LIABILITIES
The Company has entered into four agreements in which it has provided
liquidity support for certain short-term securities of municipalities
and non-profit organizations by agreeing to purchase such securities in
the event there is no other buyer in the short-term marketplace. In
return the Company receives a fee. The maximum liability under these
guarantees is $359,400,000. The Company's Parent currently shares in
the liabilities and fees of two of these agreements. The Parent's share
in these liabilities will increase by $150,000,000 subsequent to
December 31, 1999, and the Company's share will decrease to
$209,400,000. Management does not anticipate any material future losses
with respect to these liquidity support facilities.
F-22
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CONTINGENT LIABILITIES (Continued)
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based
on reports of counsel, management believes that provisions made for
potential losses relating to such litigation are adequate and any
further liabilities and costs will not have a material adverse impact
upon the Company's financial position, results of operations or cash
flows.
The Company's current financial strength and counterparty credit
ratings from Standard & Poor's are based in part on a guarantee (the
"Guarantee") of the Company's insurance policy obligations by American
Home Assurance Company ("American Home"), a subsidiary of AIG, and a
member of an AIG intercompany pool, and the belief that the Company is
viewed as a strategically important member of AIG. The Guarantee is
unconditional and irrevocable, and policyholders have the right to
enforce the Guarantee directly against American Home.
The Company's current financial strength rating from Moody's is based
in part on a support agreement between the Company and AIG (the
"Support Agreement"), pursuant to which AIG has agreed that AIG will
cause the Company to maintain a policyholder's surplus of not less than
$1 million or such greater amount as shall be sufficient to enable the
Company to perform its obligations under any policy issued by it. The
Support Agreement also provides that if the Company needs funds not
otherwise available to it to make timely payment of its obligations
under policies issued by it, AIG will provide such funds at the request
of the Company. The Support Agreement is not a direct or indirect
guarantee by AIG to any person of any obligation of the Company. AIG
may terminate the Support Agreement with respect to outstanding
obligations of the Company only under circumstances where the Company
attains, without the benefit of the Support Agreement, a financial
strength rating equivalent to that held by the Company with the benefit
of the support agreement. Policyholders have the right to cause the
Company to enforce its rights against AIG and, if the Company fails or
refuses to take timely action to enforce the Support Agreement or if
the Company defaults in any claim or payment owed to such policyholder
when due, have the right to enforce the Support Agreement directly
against AIG.
American Home does not publish financial statements, although it files
statutory annual and quarterly reports with the New York State
Insurance Department, where such reports are available to the public.
AIG is a reporting company under the Securities Exchange Act of 1934,
and publishes annual reports on Form 10-K and quarterly reports on Form
10-Q, which are available from the Securities and Exchange Commission.
F-23
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value
Common Stock. At December 31, 1999, December 31, 1998 and September 30,
1998, 3,511 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ----------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
ADDITIONAL PAID-IN
CAPITAL:
Beginning balances $ 378,674,000 $308,674,000 $308,674,000 $280,263,000
Reclassification of
Note by the Parent 170,436,000 --- --- ---
Return of capital (170,500,000) --- --- ---
Capital contributions
received 114,250,000 70,000,000 --- 28,411,000
Contribution of
partnership
investment 150,000 --- --- ---
------------- ------------ ------------ ------------
Ending balances $ 493,010,000 $378,674,000 $308,674,000 $308,674,000
============= ============ ============ ============
RETAINED EARNINGS:
Beginning balances $ 366,460,000 $332,069,000 $244,628,000 $207,002,000
Net income 184,698,000 34,391,000 138,641,000 63,126,000
Dividends paid --- --- (51,200,000) (25,500,000)
------------- ------------ ------------ ------------
Ending balances $ 551,158,000 $366,460,000 $332,069,000 $244,628,000
============= ============ ============ ============
ACCUMULATED OTHER
COMPREHENSIVE INCOME
(LOSS):
Beginning balances $ (1,619,000) $ 8,415,000 $ 18,405,000 $ (5,521,000)
Change in net
unrealized gains
(losses) on debt
securities
available for sale (198,659,000) (23,791,000) (23,818,000) 57,463,000
Change in net
unrealized gains
(losses) on equity
securities
available for sale (10,000) (44,000) (950,000) (55,000)
Change in adjustment
to deferred
acquisition costs 28,000,000 8,400,000 9,400,000 (20,600,000)
Tax effects of net
changes $ 59,735,000 5,401,000 5,378,000 (12,882,000)
------------- ------------ ------------ ------------
Ending balances $(112,553,000) $ (1,619,000) $ 8,415,000 $ 18,405,000
============= ============ ============ ============
</TABLE>
F-24
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY (Continued)
Dividends that the Company may pay to its shareholder in any year
without prior approval of the Arizona Department of Insurance are
limited by statute. The maximum amount of dividends which can be paid
to shareholders of insurance companies domiciled in the state of
Arizona without obtaining the prior approval of the Insurance
Commissioner is limited to the lesser of either 10% of the preceding
year's statutory surplus or the preceding year's statutory net gain
from operations less equity in undistributed income or loss of
subsidiaries included in net investment income if, after paying the
dividend, the Company's capital and surplus would be adequate in the
opinion of the Arizona Department of Insurance. No dividends were paid
in the year ended December 31, 1999 or the three months ended December
31, 1998. Dividends in the amounts of $51,200,000 and $25,500,000 were
paid on June 4, 1998 and April 1, 1997, respectively. Dividends of
$69,000,000 were paid on March 1, 2000.
Under statutory accounting principles utilized in filings with
insurance regulatory authorities, the Company's net income for the year
ended December 31, 1999 was $261,539,000. The statutory net loss for
the year ended December 31, 1998 was $98,766,000. The statutory net
income for the year ended December 31, 1997 totaled $74,407,000. The
Company's statutory capital and surplus totaled $694,621,000 at
December 31, 1999, $443,394,000 at December 31, 1998 and $537,542,000
at September 30, 1998.
On June 30, 1999, the Parent cancelled the Company's surplus note
payable of $170,436,000 and funds received were reclassified to
Additional Paid-in Capital in the accompanying consolidated balance
sheet. On September 9, 1999, the Company paid $170,500,000 to its
Parent as a return of capital. On September 14, 1999 and October 25,
1999, the Parent contributed additional capital to the Company in the
amounts of $54,250,000 and $60,000,000, respectively. Also on December
31, 1999, the Parent made a $150,000 contribution of partnership
investments.
F-25
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES
The components of the provisions for federal income taxes on pretax
income consist of the following:
<TABLE>
<CAPTION>
Net Realized
Investment
Gains (Losses) Operations Total
-------------- ---------- -------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Currently payable $ 6,846,000 $196,192,000 $ 203,038,000
Deferred (13,713,000) (86,300,000) (100,013,000)
------------ ------------ -------------
Total income tax expense
(benefit) $ (6,867,000) $109,892,000 $ 103,025,000
============ ============ =============
THREE MONTHS ENDED DECEMBER 31, 1998:
Currently payable $ 740,000 $ 3,421,000 $ 4,161,000
Deferred (620,000) 16,565,000 15,945,000
------------ ------------ -------------
Total income tax expense $ 120,000 $ 19,986,000 $ 20,106,000
============ ============ =============
YEAR ENDED SEPTEMBER 30, 1998:
Currently payable $ 4,221,000 $ 32,743,000 $ 36,964,000
Deferred (550,000) 34,637,000 34,087,000
------------ ------------ -------------
Total income tax expense $ 3,671,000 $ 67,380,000 $ 71,051,000
============ ============ =============
YEAR ENDED SEPTEMBER 30, 1997:
Currently payable $ (3,635,000) $ 50,828,000 $ 47,193,000
Deferred (2,258,000) (13,766,000) (16,024,000)
------------ ------------ -------------
Total income tax expense
(benefit) $ (5,893,000) $ 37,062,000 $ 31,169,000
============ ============ =============
</TABLE>
F-26
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
Income taxes computed at the United States federal income tax rate of
35% and income taxes provided differ as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Amount computed at
statutory rate $100,703,000 $19,074,000 $73,392,000 $33,003,000
Increases (decreases)
resulting from:
Amortization of
differences between
book and tax bases
of net assets
acquired 609,000 146,000 460,000 666,000
State income taxes,
net of federal tax
benefit 7,231,000 1,183,000 5,530,000 1,950,000
Dividends-received
deduction (3,618,000) (345,000) (7,254,000) (4,270,000)
Tax credits (1,346,000) (1,296,000) (318,000)
Other, net (554,000) 48,000 219,000 138,000
------------ ----------- ----------- -----------
Total income tax
expense $103,025,000 $20,106,000 $71,051,000 $31,169,000
============ =========== =========== ===========
</TABLE>
For United States federal income tax purposes, certain amounts from
life insurance operations are accumulated in a memorandum
policyholders' surplus account and are taxed only when distributed to
shareholders or when such account exceeds prescribed limits. The
accumulated policyholders' surplus was $14,300,000 at December 31,
1999. The Company does not anticipate any transactions which would
cause any part of this surplus to be taxable.
F-27
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
------------- ------------- -------------
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Investments $ 23,208,000 $ 18,174,000 $ 17,643,000
Deferred acquisition costs 272,697,000 222,943,000 223,392,000
State income taxes 5,203,000 3,143,000 2,873,000
Other liabilities 18,658,000 13,906,000 144,000
Net unrealized gains on debt
and equity securities
available for sale --- --- 4,531,000
------------- ------------- -------------
Total deferred tax liabilities $ 319,766,000 258,166,000 248,583,000
------------- ------------- -------------
DEFERRED TAX ASSETS:
Contractholder reserves (261,781,000) (148,587,000) (149,915,000)
Guaranty fund assessments (2,454,000) (2,935,000) (2,910,000)
Deferred income (48,371,000) --- ---
Other assets --- --- ---
Net unrealized losses on
debt and equity securities
available for sale (60,605,000) ( 872,000) ---
------------- ------------- -------------
Total deferred tax assets (373,211,000) (152,394,000) (152,825,000)
------------- ------------- -------------
Deferred income taxes $ (53,445,000) $ 105,772,000 $ 95,758,000
============= ============= =============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
reporting purposes. The significant components of the liability for
Deferred Income Taxes are as follows:
12. COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") which requires the reporting of comprehensive income in addition
to net income from operations. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income. The adoption of SFAS 130 did not have an
impact on the Company's results of operations, financial condition or
liquidity. Comprehensive income amounts for the prior years are
disclosed to conform to the current year's presentation.
F-28
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. COMPREHENSIVE INCOME (Continued)
The before tax, after tax, and tax benefit (expense) amounts for each
component of the increase or decrease in unrealized losses or gains on
debt and equity securities available for sale for both the current and
prior periods are summarized below:
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
----------- ----------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1999:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(217,259,000) $ 76,041,000 $(141,218,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 34,690,000 (12,141,000) 22,549,000
------------- ------------ -------------
Subtotal (182,569,000) 63,900,000 (118,669,000)
------------- ------------ -------------
Reclassification adjustment for:
Net realized losses included
in net income 18,590,000 (6,507,000) 12,083,000
Related change in deferred
acquisition costs (6,690,000) 2,342,000 (4,348,000)
------------- ------------ -------------
Total reclassification
adjustment 11,900,000 (4,165,000) 7,735,000
------------- ------------ -------------
Total other comprehensive
loss $(170,669,000) $ 59,735,000 $(110,934,000)
============= ============ =============
THREE MONTHS ENDED DECEMBER 31,
1998:
Net unrealized losses on debt
and equity securities available
for sale identified in the
current period $ (24,345,000) $ 8,521,000 $ (15,824,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 8,579,000 (3,004,000) 5,575,000
------------- ------------ -------------
Subtotal (15,766,000) 5,517,000 (10,249,000)
------------- ------------ -------------
Reclassification adjustment for:
Net realized losses included
in net income 510,000 (179,000) 331,000
Related change in deferred
acquisition costs (179,000) 63,000 (116,000)
------------- ------------ -------------
Total reclassification
adjustment 331,000 (116,000) 215,000
------------- ------------ -------------
Total other comprehensive loss $ (15,435,000) $ 5,401,000 $ (10,034,000)
============= ============ =============
</TABLE>
F-29
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. COMPREHENSIVE INCOME (Continued)
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
1998:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(10,281,000) $ 3,598,000 $(6,683,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 4,086,000 (1,430,000) 2,656,000
------------ ------------ -----------
Subtotal (6,195,000) 2,168,000 (4,027,000)
------------ ------------ -----------
Reclassification adjustment for:
Net realized losses included
in net income (14,487,000) 5,070,000 (9,417,000)
Related change in deferred
acquisition costs 5,314,000 (1,860,000) 3,454,000
------------ ------------ -----------
Total reclassification
adjustment (9,173,000) 3,210,000 (5,963,000)
------------ ------------ -----------
Total other comprehensive loss $(15,368,000) $ 5,378,000 $(9,990,000)
============ ============ ===========
YEAR ENDED SEPTEMBER 30,
1997:
Net unrealized gains on debt
and equity securities available
for sale identified in the
current period $ 40,575,000 $(14,201,000) $26,374,000
Decrease in deferred acquisition
cost adjustment identified in
the current period (15,031,000) 5,262,000 (9,769,000)
------------ ------------ -----------
Subtotal 25,544,000 (8,939,000) 16,605,000
------------ ------------ -----------
Reclassification adjustment for:
Net realized losses included
in net income 16,832,000 (5,891,000) 10,941,000
Related change in deferred
acquisition costs (5,569,000) 1,949,000 (3,620,000)
------------ ------------ -----------
Total reclassification
adjustment 11,263,000 (3,942,000) 7,321,000
------------ ------------ -----------
Total other comprehensive
income $ 36,807,000 $(12,881,000) $23,926,000
============ ============ ===========
</TABLE>
F-30
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RELATED-PARTY MATTERS
The Company pays commissions to five affiliated companies: SunAmerica
Securities, Inc.; Advantage Capital Corp.; Financial Services Corp.;
Sentra Securities Corp.; and Spelman & Co. Inc. Commissions paid to
these broker-dealers totaled $37,435,000 in the year ended December 31,
1999, $6,977,000 in the three months ended December 31, 1998, and
$32,946,000 in the year ended September 30, 1998 and $25,492,000 in the
year ended September 30, 1997. These broker-dealers, when combined with
the Company's wholly owned broker-dealer, represent a significant
portion of the Company's business, amounting to approximately 35.6% of
premiums in the year ended December 31, 1999 and the three months ended
December 31, 1998, 33.6% in the year ended September 30, 1998 and 36.1%
in the year ended September 30, 1997.
The Company purchases administrative, investment management,
accounting, marketing and data processing services from its Parent and
SunAmerica, an indirect parent. Amounts paid for such services totaled
$105,059,000 for the year ended December 31, 1999, $21,593,000 for the
three months ended December 31, 1998, $84,975,000 for the year ended
September 30, 1998 and $86,116,000 for the year ended September 30,
1997. The marketing component of such costs during these periods
amounted to $53,385,000, $9,906,000, $39,482,000 and $31,968,000,
respectively, and are deferred and amortized as part of Deferred
Acquisition Costs. The other components of such costs are included in
General and Administrative Expenses in the income statement.
At December 31, 1999 and 1998, the Company held bonds with a fair value
of $50,000 and $84,965,000, respectively, which were issued by its
affiliate, International Lease Finance Corp. The amortized cost of
these bonds is equal to the fair value. At September 30, 1998 and 1997,
the Company held no investments issued by any of its affiliates.
During the year ended December 31, 1999, the Company transferred
short-term investments and bonds to FSA with an aggregate fair value of
$634,596,000 as part of the transfer of the New York Business from the
Acquisition (See Note 4). The Company recorded a net realized loss of
$5,144,000 on the transfer of these assets.
During the year ended December 31, 1999, the Company purchased certain
invested assets from SunAmerica for cash equal to their current market
value of $161,159,000.
For the three months ended December 31, 1998, the Company made no
purchases or sales of invested assets from or to the Parent or its
affiliates.
During the year ended September 30, 1998, the Company sold various
invested assets to SunAmerica for cash equal to their current market
value of $64,431,000. The Company recorded a net gain aggregating
$16,388,000 on such transactions.
During the year ended September 30, 1998, the Company purchased certain
invested assets from SunAmerica, the Parent and CalAmerica Life
Insurance Company ("CalAmerica"), a wholly-owned subsidiary of the
Parent that has since merged into the Parent, for cash equal to their
current market value which aggregated $20,666,000, $10,468,000
F-31
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. RELATED-PARTY MATTERS (Continued)
and $61,000, respectively.
During the year ended September 30, 1997, the Company sold various
invested assets to the Parent and CalAmerica for cash equal to their
current market value of $15,776,000 and $15,000, respectively. The
Company recorded a net gain aggregating $276,000 on such transactions.
During the year ended September 30, 1997, the Company purchased certain
invested assets from the Parent and CalAmerica for cash equal to their
current market value of $8,717,000 and $284,000, respectively.
14. BUSINESS SEGMENTS
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information," which requires the reporting
of certain financial information by business segment. For the purpose
of providing segment information, the Company has three business
segments: annuity operations, asset management operations and
broker-dealer operations. The annuity operations focus primarily on the
marketing of variable annuity products and the administration of the
universal life business acquired from MBL Life in 1998 (See Note 4).
The Company's variable annuity products offer investors a broad
spectrum of fund alternatives, with a choice of investment managers, as
well as guaranteed fixed-rate account options. The Company earns fee
income on investments in the variable options and net investment income
on the fixed-rate options. The asset management operations are
conducted by the Company's registered investment advisor subsidiary,
SunAmerica Asset Management Corp. ("SunAmerica Asset Management"), and
its related distributor. SunAmerica Asset Management earns fee income
by distributing and managing a diversified family of mutual funds, by
managing certain subaccounts within the Company's variable annuity
products and by providing professional management of individual,
corporate and pension plan portfolios. The broker-dealer operations are
conducted by the Company's broker-dealer subsidiary, Royal Alliance
Associates, Inc. ("Royal"), which sells proprietary annuities and
mutual funds, as well as a full range of non-proprietary investment
products.
F-32
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
Asset Broker
Annuity Management Dealer
Operations Operations Operations Total
--------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Total assets $26,649,310,000 $150,966,000 $74,218,000 $26,874,494,000
Expenditures for long-
lived assets --- 2,563,000 2,728,000 5,291,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 790,697,000 54,652,000 41,185,000 886,534,000
Intersegment revenue --- 62,998,000 8,193,000 71,191,000
--------------- ------------ ----------- ---------------
Total revenue 790,697,000 117,650,000 49,378,000 957,725,000
=============== ============ =========== ===============
Investment income 511,914,000 9,072,000 967,000 521,953,000
Interest expense (354,263,000) (3,085,000) (389,000) (357,737,000)
Depreciation and
amortization expense (95,408,000) (23,249,000) (3,234,000) (121,891,000)
Income from unusual
transactions --- --- --- ---
Pretax income 199,333,000 67,779,000 20,611,000 287,723,000
Income tax expense (65,445,000) (28,247,000) (9,333,000) (103,025,000)
Income from extraordinary
items --- --- --- ---
Net income $ 133,888,000 $ 39,532,000 $11,278,000 $ 184,698,000
=============== ============ =========== ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ =========== ===============
</TABLE>
F-33
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED
DECEMBER 31, 1998:
Total assets $22,982,323,000 $104,473,000 $59,537,000 $23,146,333,000
Expenditures for long-
lived assets --- 328,000 1,005,000 1,333,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 103,626,000 11,103,000 9,605,000 124,334,000
Intersegment revenue --- 11,871,000 1,674,000 13,545,000
--------------- ------------ ----------- ---------------
Total revenue 103,626,000 22,974,000 11,279,000 137,879,000
=============== ============ =========== ===============
Investment income 53,149,000 971,000 158,000 54,278,000
Interest expense (26,842,000) (752,000) (101,000) (27,695,000)
Depreciation and
amortization expense (23,236,000) (4,204,000) (561,000) (28,001,000)
Income from unusual
transactions --- --- --- ---
Pretax income 36,961,000 13,092,000 4,444,000 54,497,000
Income tax expense (12,978,000) (5,181,000) (1,947,000) (20,106,000)
Income from extraordinary
items --- --- --- ---
Net income $ 23,983,000 $ 7,911,000 $ 2,497,000 $ 34,391,000
=============== ============ =========== ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ =========== ===============
</TABLE>
F-34
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations TOTAL
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1998:
Total assets $14,389,922,000 $104,476,000 $ 55,870,000 $14,550,268,000
Expenditures for long-
lived assets --- 477,000 5,289,000 5,766,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 410,011,000 34,396,000 39,729,000 484,136,000
Intersegment revenue --- 40,040,000 7,634,000 47,674,000
--------------- ------------ ------------ ---------------
Total revenue 410,011,000 74,436,000 47,363,000 531,810,000
=============== ============ ============ ===============
Investment income 218,044,000 2,839,000 1,083,000 221,966,000
Interest expense (131,980,000) (2,709,000) (405,000) (135,094,000)
Depreciation and
amortization expense (60,731,000) (14,780,000) (1,770,000) (77,281,000)
Income from unusual
transactions --- --- --- ---
Pretax income 148,084,000 39,207,000 22,401,000 209,692,000
Income tax expense (44,706,000) (15,670,000) (10,675,000) (71,051,000)
Income from extraordinary
items --- --- --- ---
Net income $ 103,378,000 $ 23,537,000 $ 11,726,000 $ 138,641,000
=============== ============ ============ ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ ============ ===============
</TABLE>
F-35
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997:
Total assets $12,440,311,000 $ 81,518,000 $51,400,000 $12,573,229,000
Expenditures for long-
lived assets --- 804,000 4,527,000 5,331,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 317,061,000 28,655,000 31,678,000 377,394,000
Intersegment revenue --- 22,790,000 6,327,000 29,117,000
--------------- ------------ ----------- ---------------
Total revenue 317,061,000 51,445,000 38,005,000 406,511,000
=============== ============ =========== ===============
Investment income 208,382,000 1,445,000 932,000 210,759,000
Interest expense (134,416,000) (2,737,000) (405,000) (137,558,000)
Depreciation and
amortization expense (55,675,000) (16,357,000) (689,000) (72,721,000)
Income from unusual
transactions --- --- --- ---
Pretax income 58,291,000 19,299,000 16,705,000 94,295,000
Income tax expense (16,318,000) (7,850,000) (7,001,000) (31,169,000)
Income from extraordinary
items --- --- --- ---
Net income $ 41,973,000 $ 11,449,000 $ 9,704,000 $ 63,126,000
=============== ============ =========== ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ =========== ===============
</TABLE>
Substantially all of the Company's revenues are derived from the United
States.
The accounting policies of the segments are as described in the summary
of significant accounting policies (Note 2). The Parent makes
expenditures for long-lived assets for the annuity operations segment
and allocates depreciation of such assets to the annuity operations
segment. The annuity operations and asset management operations pay
commissions to Royal for sales of their proprietary products.
Approximately 90% of these commission payments are in turn paid to
registered representatives of Royal, with the remainder of the revenue
reflected in Net Retained Commissions. In addition, premiums from
variable annuity policies sold by the Company are held in trusts that
are owned by the Company, although the assets directly support
policyholder obligations. SunAmerica Asset Management is the Investment
Advisor for all of the subaccounts of these trusts, for which service
it receives fees which are direct expenses of the trusts. Such fees are
reported as Variable Annuity Fees in the consolidated income statement
and are shown as intersegment revenues in the business segments
disclosure above, although there is no corresponding expense on the
books of any segment.
The annuity operations segment's products are marketed through over 800
independent broker-dealers, full-service securities firms and financial
institutions, in addition to the Company's affiliated broker-dealers.
Those independent selling organizations
F-36
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
responsible for over 10% of sales represented 12.0% of sales in the
year ended December 31, 1999, 14.7% in the three months ended December
31, 1998, 16.8% in the year ended September 30, 1998, and 18.4% and
10.2% in the year ended September 30, 1997. Registered representatives
sell products for the Company's asset management operations and sell
products offered by the broker-dealer operations. Revenue from any
single registered representative or group of registered representatives
do not compose a material percentage of total revenues in either the
asset management operations or the broker-dealer operations.
15. SUBSEQUENT EVENTS
On March 1, 2000, the Company paid dividends of $69,000,000 to the
Parent.
F-37
<PAGE>
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements are included in Part B of the
Registration Statement:
Audited Consolidated Financial Statements of Anchor National Life
Insurance Company as of December 31, 1999, December 31, 1998 and
September 30, 1998, and for the year ended December 31, 1999, and for the
three months ended December 31, 1998, and for each of the two fiscal years
in the period ended September 30, 1998.
Audited Financial Statements of Variable Annuity Account Five (Portion
Relating to the SEASONS Variable Annuity) as of March 31, 1999 and for the
year then ended and for the period from inception to March 31, 1998.
[INCORPORATED BY REFERENCE]
(B) EXHIBITS
<TABLE>
<S> <C> <C>
(1) Resolutions Establishing Separate Account............................. ***
(2) Custody Agreements.................................................... ***
(3) (a) Form of Distribution Contract..................................... ***
(b) Form of Selling Agreement......................................... ***
(4) (a) Seasons Variable Annuity Contract................................. ***
(b) Seasons Endorsement............................................... **
(5) (a) Seasons Application for Contract.................................. ***
(b) Seasons/Participation Enrollment Form............................. ***
(6) Depositor -- Corporate Documents
(a) Certificate of Incorporation...................................... ***
(b) By-Laws........................................................... ***
(7) Reinsurance Contract.................................................. Not Applicable
(8) Seasons Series Trust Fund Participation Agreement..................... ***
(9) Opinion of Counsel.................................................... ***
Consent of Counsel.................................................... ***
(10) Consent of Independent Accountants.................................... ****
(11) Financial Statements Omitted from Item 23............................. Not Applicable
(12) Initial Capitalization Agreement...................................... Not Applicable
(13) Performance Computations.............................................. Not Applicable
(14) Diagram and Listing of All Persons Directly or Indirectly Controlled
By or Under Common Control with Anchor National Life Insurance
Company, the Depositor of Registrant................................. ****
(15) Powers of Attorney.................................................... *
</TABLE>
- ------------------------
* Filed with Variable Annuity Account Five and Anchor National Life Insurance
Company (Anchor National) Initial Registration Statement 333-08859,
811-7727 on July 25, 1996.
** Filed with Variable Annuity Account Five and Anchor National Registration
Statement 333-08859, 811-7727, Post-Effective Amendment 2 & 3 on
July 27, 1998.
*** Filed with Variable Annuity Account Five and Anchor National
Registration Statement 333-08859, 811-7727, Pre-Effective Amendment 1 on
March 11, 1997.
**** Filed Herewith
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The officers and directors of Anchor National Life Insurance Company are
listed below. Their principal business address is 1 SunAmerica Center, Los
Angeles, California 90067-6022, unless otherwise noted.
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Eli Broad Chairman, President and Chief Executive Officer
Jay S. Wintrob Director and Executive Vice President
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Jana W. Greer Director and Senior Vice President
James R. Belardi Director and Senior Vice President
Susan L. Harris Director, Senior Vice President and Secretary
N. Scott Gillis Director and Senior Vice President
Edwin R. Raquel Senior Vice President and Chief Actuary
Marc H. Gamsin Director and Senior Vice President
David R. Bechtel Vice President and Treasurer
J. Franklin Grey Vice President
Edward P. Nolan* Vice President
Gregory M. Outcalt Senior Vice President and Controller
Scott H. Richland Vice President
P. Daniel Demko, Jr. Vice President
Kevin J. Hart Vice President
Stewart R. Polakov Vice President
Lawrence M. Goldman Assistant Secretary
Christine A. Nixon Assistant Secretary
</TABLE>
- ------------------------
*88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
The Registrant is a separate account of Anchor National Life Insurance
Company (Depositor). Depositor is a subsidiary of American International Inc.
("AIG"). For a complete listing and diagram of all persons directly or
indirectly controlled by or under common control with the Depositor or
Registrant, see Exhibit 14 of the Initial Registration Statement of Variable
Annuity Account Seven and Anchor National Life Insurance Company, (File Nos.
333-65965 and 811-09003) (N-4) and (333-65965) (S-1) filed on October 21,
1998, which is incorporated herein by reference. As of January 4, 1999,
Anchor National became an indirect wholly-owned subsidiary of American
International Group, Inc. ("AIG"). An organizational chart for AIG can be
found in Form 10-K, SEC file number 001-08787 filed March 30, 2000.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 2000, the number of contracts funded by Variable Annuity
Account Five (portion relating to the SEASONS Variable Annuity) of Anchor
National Life Insurance was 7,798; 3,102 of which were qualified contracts and
4,696 of which were non-qualified contracts.
ITEM 28. INDEMNIFICATION
None.
ITEM 29. PRINCIPAL UNDERWRITER
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant, Variable Annuity Account Five, Presidential Variable Account One,
FS Variable Separate Account, Variable Annuity Account One, FS Variable
Annuity Account One, Variable Annuity Account Four and Variable Annuity
Account Seven. SunAmerica Capital Services, Inc. also serves as the
underwriter to the SunAmerica Income Funds, SunAmerica Equity Funds,
SunAmerica Money Market Funds, Inc., Style Select Series, Inc. and the
SunAmerica Strategic Investment Series, Inc., all issued by Sunamerica Asset
Management Corp.
<PAGE>
Its principal business address is 733 Third Avenue, 4th Floor, New York, New
York 10017. The following are the directors and officers of SunAmerica Capital
Services, Inc.
<TABLE>
<CAPTION>
NAME POSITION WITH DISTRIBUTOR
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Peter A. Harbeck Director
J. Steven Neamtz Director & President
Robert M. Zakem Director, Executive Vice President, General Counsel
& Assistant Secretary
Susan L. Harris Secretary
James Nichols Vice President
Debbie Potash-Turner Controller
</TABLE>
<TABLE>
<CAPTION>
NET DISTRIBUTION COMPENSATION ON
DISCOUNTS AND REDEMPTION OR BROKERAGE
NAME OF DISTRIBUTOR COMMISSIONS ANNUITIZATION COMMISSIONS COMMISSIONS*
- ------------------------------------------------- ----------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
SunAmerica Capital Services, Inc. None None None None
</TABLE>
- ------------------------
*Distribution fee is paid by Anchor National Life Insurance Company.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Anchor National Life Insurance Company, the Depositor for the Registrant, is
located at 1 SunAmerica Center, Los Angeles, California 90067-6022. SunAmerica
Capital Services, Inc., the distributor of the Contracts, is located at 733
Third Avenue, New York, New York 10017. Each maintains those accounts and
records required to be maintained by it pursuant to Section 31(a) of the
Investment Company Act and the rules promulgated thereunder.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02100, maintains certain accounts and records pursuant to the
instructions of the Registrant.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
Registrant undertakes to (1) file post-effective amendments to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are
<PAGE>
never more than 16 months old for so long as payments under the variable annuity
Contracts may be accepted; (2) include either (A) as part of any application to
purchase a Contract offered by the prospectus forming a part of the Registration
Statement, a space that an applicant can check to request a Statement of
Additional Information, or (B) a postcard or similar written communication
affixed to or included in the Prospectus that the Applicant can remove to send
for a Statement of Additional Information; and (3) deliver a Statement of
Additional Information and any financial statements required to be made
available under this Form N-4 promptly upon written or oral request.
ITEM 33. REPRESENTATION
a) The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been
complied with:
1. Include appropriate disclosure regarding the redemption restrictions imposed
by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions imposed
by Section 403(b)(11) in any sales literature used in connection with the
offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
b) REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF
1940: The Company represents that the fees and charges to be deducted under
the variable annuity contract described in the prospectus contained in this
registration statement are, in the aggregate, reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed in connection with the contract.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485 for effectiveness of this Post-Effective Amendment to the Registration
Statement and has caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf, in the City of Los Angeles, and the State
of California, on this 7th day of April, 2000.
VARIABLE ANNUITY ACCOUNT FIVE
(Registrant)
ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
-------------------------------------------
Jay S. Wintrob
EXECUTIVE VICE PRESIDENT
ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
-------------------------------------------
Jay S. Wintrob
EXECUTIVE VICE PRESIDENT
As required by the Securities Act of 1933, this Post-Effective Amendment to
the Registration Statement has been signed by the following persons in the
capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<S> <C> <C>
President, Chief Executive
ELI BROAD* Officer and Chairman of the
------------------------------------------- Board (Principal Executive April 7, 2000
Eli Broad Officer)
MARC H. GAMSIN* Senior Vice President and
------------------------------------------- Director (Principal Financial
Marc H. Gamsin Officer)
N. SCOTT GILLIS* Senior Vice President and
------------------------------------------- Director (Principal Accounting
N. Scott Gillis Officer)
JAMES R. BELARDI*
------------------------------------------- Director
James R. Belardi
JANA W. GREER*
------------------------------------------- Director
Jana W. Greer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<S> <C> <C>
/s/ SUSAN L. HARRIS
------------------------------------------- Director
Susan L. Harris
/s/ JAY S. WINTROB*
------------------------------------------- Director
Jay S. Wintrob
*By: /s/ SUSAN L. HARRIS
------------------------------------------- Attorney in Fact
Susan L. Harris
</TABLE>
** KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints SUSAN L. HARRIS AND CHRISTINE A. NIXON or
each of them, as his true and lawful attorneys-in fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, as fully
to all intents as he might or could do in person, including specifically, but
without limiting the generality of the foregoing, to (i) take any action to
comply with any rules, regulations or requirements of the Securities and
Exchange Commission under the federal securities laws; (ii) make application for
and secure any exemptions from the federal securities laws; (iii) register
additional annuity contracts under the federal securities laws, if registration
is deemed necessary. The undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents or any of them, or their substitutes, shall do or
cause to be done by virtue thereof.
Date: April 7, 2000
**/s/ GREGORY M. OUTCALT
----------------------------------- Senior Vice President April 7, 2000
Gregory M. Outcalt and Controller
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ----------------------------------------------------------------
<C> <S> <C>
(10) Consent of Independent Accountants
(14) Diagram and Listing of All Persons Directly or Indirectly
Controlled By or Under Common Control with Anchor National Life
Insurance Company, the Depositor of Registrant
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Registration Statement on Form N-4 for Variable
Annuity Account Five (Portion Relating to the SEASONS Variable Annuity) of
Anchor National Life Insurance Company of our report dated January 31, 2000,
relating to the financial statements of Anchor National Life Insurance Company,
and the incorporation by reference of our report dated June 22, 1999, relating
to the financial statements of Variable Annuity Account Five (Portion Relating
to the SEASONS Variable Annuity). We also consent to the incorporation by
reference of our report dated November 9, 1998, relating to the financial
statements of Anchor National Life Insurance Company, into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
incorporation by reference in such Prospectus of our report dated March 11,
1999, relating to the statement of assets acquired and liabilities assumed in
the MBL Life Assurance Corporation transaction at December 31, 1998, appearing
on page 8 of Anchor National Life Insurance Company's Current Report on Form
8-K/A dated March 12, 1999. We also consent to the reference to us under the
heading "Financial Statements" in such Statement of Additional Information and
to the reference to us under the heading "Independent Accountants" in such
Prospectus.
PricewaterhouseCoopers LLP
Los Angeles, California
April 7, 2000
<PAGE>
EXHIBIT 99.14
DIAGRAM AND LISTING OF ALL PERSONS DIRECTLY OR INDIRECTLY
CONTROLLED BY OR UNDER COMMON CONTROL WITH ANCHOR NATIONAL LIFE
INSURANCE COMPANY, THE DEPOSITOR OF REGISTRANT
For a complete listing and diagram of all persons directly or
indirectly controlled by or under common control with the Depositor or
Registrant, see Exhibit 14 of the Initial Registration Statement of Variable
Annuity Account Seven and Anchor National Life Insurance Company, (File Nos.
333-65965 and 811-09003) (N-4) and (333-65965) (S-1) filed on October 21,
1998, which is incorporated herein by reference. As of January 4, 1999,
Anchor National became an indirect wholly-owned subsidiary of American
International Group, Inc. ("AIG"). An organizational chart for AIG can be
found in Form 10-K, SEC file number 001-08787 filed March 30, 2000.
