<PAGE>1
_______________________________________________________________________________
_______________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to ____________________
Commission file number 1-5683
USLIFE Corporation
(Exact name of Registrant as specified in its charter)
New York 13-2578598
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Maiden Lane, New York, N. Y. 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 709-6000
_____________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
___________________ ______________________
New York Stock Exchange
Common Stock, par value $1 per share Chicago Stock Exchange
Common Stock Purchase Rights Pacific Stock Exchange
_____________________
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock, $4.50 Series A Preferred Stock, $5.00 Series B
Convertible, par value Convertible, par value
$1 per share $1 per share
_____________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes....X.... No.......
_____________________
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated herein by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of February 24, 1995 was approximately $876,000,000.
_____________________
The number of shares outstanding of the Registrant's Common Stock as of
February 24, 1995 was 22,839,390.
_______________________________________________________________________________
_______________________________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Specified information in USLIFE Corporation's definitive proxy statement
to be filed within 120 days after the end of USLIFE's fiscal year ended
December 31, 1994 for use in connection with the Annual Meeting of Shareholders
to be held on May 16, 1995, is incorporated by reference in Part III hereof.
<PAGE>2
Items 1, 6 and 7. - Business; Selected Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations
USLIFE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following Selected Financial Data of USLIFE Corporation and
subsidiaries should be read in conjunction with the related notes thereto and
with the financial statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31
______________________________________________________________
1994 1993 1992 1991 1990
____ ____ ____ ____ ____
(Amounts in Thousands except Per Share Statistics)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Total income........................ $1,651,187 $1,600,038 $1,529,452 $1,382,906 $1,235,575
========== ========== ========== ========== ==========
Income from operations.............. $ 96,185 $ 97,157 $ 69,612 $ 74,672 $ 68,714
Cumulative effect of
accounting change (a).............. - - (37,990) - -
__________ __________ __________ __________ __________
Net income.......................... $ 96,185 $ 97,157 $ 31,622 $ 74,672 $ 68,714
========== ========== ========== ========== ==========
Income per share:(b)
Income from operations.............. $4.18 $4.25 $3.05 $3.21 $2.85
Cumulative effect of
accounting change (a).............. - - (1.67) - -
_____ _____ _____ _____ _____
Net income.......................... $4.18 $4.25 $1.38 $3.21 $2.85
===== ===== ===== ===== =====
Dividends Per Common Share........... $1.26 $1.21 $1.14 $1.07 $ .99
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31
______________________________________________________________
1994 1993 1992 1991 1990
____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (c):
Total assets....................... $7,004,262 $6,740,241 $6,095,272 $5,329,269 $4,573,347
========== ========== ========== ========== ==========
Long-term debt..................... $ 349,360 $ 349,235 $ 349,439 $ 249,229 $ 349,326
========== ========== ========== ========== ==========
Redeemable preferred stock......... $ - $ - $ - $ 2,833 $ 3,778
========== ========== ========== ========== ==========
Equity Capital..................... $ 877,888 $ 966,029 $ 890,441 $ 884,436 $ 843,346
========== ========== ========== ========== ==========
</TABLE>
__________
(a) Effective as of January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." See Notes 1 and 5 of Notes to
Financial Statements for further information.
(b) See Note 1 of Notes to Financial Statements as to calculations of
income per share.
(c) Effective as of January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." See Note 1 of Notes to Financial Statements for
further information.
<PAGE>3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
Liquidity
The liquidity requirements of the Company are met primarily by cash flows
from operations of the life insurance subsidiaries and accumulated funds at the
subsidiary level. These internal sources of liquidity are complemented by such
external sources as available bank lines of credit and revolving credit
agreements and the ability of the Company to utilize capital markets for
intermediate and long-term financing.
Premium and investment income as well as maturities and sales of invested
assets provide the primary sources of cash available at the life insurance
subsidiaries, while cash is applied by such subsidiaries to payment of policy
benefits and loans, costs of acquiring new business (principally commissions),
and operating expenses, as well as purchases of new investments. Net cash
provided from operating activities of the life insurance subsidiaries amounted
to approximately $205 million in 1994. Cash dividends paid by all consolidated
subsidiaries to the parent company amounted to $45.7 million, $61.2 million and
$47.7 million in 1994, 1993, and 1992, respectively. Additionally, during
1993, securities with market value of $21.6 million were transferred from a
life insurance subsidiary to the parent company and subsequently contributed to
another life insurance subsidiary in connection with the combination of the two
subsidiaries' operations. In addition to the 1992 cash dividends, securities
with market value of $26.3 million were transferred from a life insurance
subsidiary to the parent company following the combination of operations of two
of the Company's life insurance subsidiaries. All of the aforementioned cash
dividends to the parent company came from the life insurance subsidiaries. The
greater amount of cash dividends received in 1993 versus the preceding and
following year reflected capital made available at the subsidiary level from
the combination of operations of certain life insurance subsidiaries, and a
portion of the incremental amount received in 1993 was applied to repay
corporate borrowings. It should be noted that payment of dividends from the
life insurance subsidiaries for application toward liquidity needs at the
parent company level (including overhead costs, interest on indebtedness and
dividends on preferred and common stocks) may require regulatory approval in
cases where such dividends exceed certain guidelines generally based on income
before capital gains and losses and Equity Capital as reported to regulatory
authorities on the basis of statutory accounting practices ("Regulatory
Operating Income" and "Regulatory Equity Capital") and, at a further threshold,
may require payment of additional taxes under provisions of federal income tax
law applicable to life insurance companies. The life insurance subsidiaries
reported Regulatory Operating Income of $41.9 million, $88.9 million, and $56.6
million in 1994, 1993 and 1992, respectively and Regulatory Equity Capital of
$542.7 million, $549.4 million, and $525.3 million as of December 31, 1994,
1993 and 1992, respectively. The 1994 decrease in Regulatory Operating Income
resulted primarily from the statutory financial statement impact of a 44%
increase in term insurance sales in 1994, as indicated in Note 1 of Notes to
Financial Statements. In determining the timing and amount of such dividend
payments, management considers, among other factors, insurance industry rating
agency criteria which are based primarily upon the statutory financial position
of life insurance companies. Historically, these self imposed criteria have
been more restrictive in terms of dividend availability than the aforementioned
regulatory or tax considerations. Investment advisory and service fees paid by
the life insurance subsidiaries, and portfolio investment income, which
totalled $8.3 million and $4.6 million respectively in 1994, comprise
additional sources of liquidity at the parent company.
In addition to the liquidity factors at the subsidiary level previously
discussed, cash requirements at the parent company for interest on
indebtedness, dividends on preferred and common stocks, and overhead costs are
a key factor in the Company's overall liquidity situation. On a pre-tax basis,
interest and overhead amounted to $70.6 million, $66.1 million and $68.1
million in 1994, 1993 and 1992, respectively, while dividends totalled $28.8
million, $27.4 million and $25.8 million, respectively. The major portion of
the 1994 increase in interest and overhead was attributed to interest expense
and came primarily from higher interest rates applicable to short term
corporate borrowings. The Company's common stock repurchase program, which was
<PAGE>4
reactivated during the fourth quarter of 1994, was also a factor in its cash
requirements. In October 1994, the Board of Directors extended this program
through November 1995 and authorized repurchase of up to one million common
shares. During the fourth quarter of 1994, 170,700 shares were repurchased by
the Company at a total cost of $5.4 million, for an average cost of $31.64 per
share.
On a consolidated basis, net cash provided by operating activities amounted
to $177.9 million, $98.3 million and $62.5 million in 1994, 1993 and 1992
respectively. These reported amounts reflect fluctuations in accounts payable
and receivable and amounts due to policyholders that result from random timing
differences in securities transaction settlements, claims payments, and similar
matters. Excluding the impact of these fluctuations, net cash provided by
operating activities would be approximately $166 million, $152 million, and $59
million in 1994, 1993 and 1992, respectively. The 1994 increase reflects
various factors including increased premium income associated with greater
sales of individual life insurance products and written premiums on credit
insurance products. Factors in the 1993 increase include the growth of
investment income that year arising from a $546 million increase in annuity
account balances during 1992, and the negative impact on 1992 cash flows of
approximately $18 million net payments to the Internal Revenue Service relating
to settlement of prior year tax returns.
Cash flows from operating activities for 1994 included $73.0 million from
the change in liability for future policy benefits, versus $53.0 million in
1993, with increased sales of traditional individual life insurance products
and written premiums on credit insurance coverages the major contributing
factors. Interest credited to policyholder account balances increased to
$194.0 million in 1994 versus $183.7 million in 1993, reflecting the increase
in policyholder account balances relating to individual annuities and universal
life insurance contracts. The impact of previous reductions in credited rates
of interest on certain contracts, primarily during 1993, was a partial
offsetting factor. As discussed under "Results of Operations," credited rates
of interest on substantially all of the Company's individual annuity products
were increased during the second half of 1994. The portion of policyholder
account balances relating to individual annuities was approximately $1.8
billion at December 31, 1994 versus $1.7 billion at December 31, 1993, with the
remainder relating to universal life insurance contracts. Interest rates
credited on these universal life and individual annuity contracts may be
adjusted periodically by the Company. Subject to any applicable surrender
charges, the Company's universal life insurance products and individual
annuities may be surrendered by the holder. A cash surrender value, based on
contractual terms, is also available to the policyholder upon surrender of many
of the Company's traditional individual life insurance policies under which
cash values are accumulated. Such surrenders are influenced by various factors
including economic conditions, available alternative investment returns,
competition for investment and insurance funds, and perceived financial
strength of the insurer. These contracts are generally supported by the
Company's investment portfolios, which are primarily comprised of investment
grade, publicly traded corporate bonds. Substantially all of the Company's
interest sensitive life insurance and annuity contracts provide for imposition
of a surrender charge in the event of policy surrender during a specified
initial period commencing with contract inception, typically ten to fifteen
years for universal life insurance and five to seven years for individual
annuities, with the significance of this charge often subject to reduction over
the applicable period or during the later portion thereof. As of December 31,
1994, approximately 9% of the Company's deferred annuity contracts and 16% of
its universal life insurance policies, based on policyholder account balances,
were beyond the contractual period during which a significant charge could be
imposed in the event of termination. The Company's investment portfolios are
continually monitored to determine whether the distribution of investment
maturities is considered appropriate for expected levels of policy surrenders.
The Company's fixed maturity investments may be sold prior to maturity as part
of the Company's asset / liability management strategy and are classified as
"available for sale" as discussed in Note 1 of Notes to Financial Statements.
Adjustments to the investment maturity distribution, if necessary, may also be
accomplished by actions concerning the investment of incoming funds and/or
reinvestment of the proceeds of securities matured or redeemed. The Company
monitors its surrenders on a monthly basis. Any material deviation or emerging
trend is traced to the product line and agency of record, and remedial action
<PAGE>5
is taken where appropriate. If an acceleration of surrenders of these
contracts were experienced, the cash flow requirements associated with such
surrenders could conceivably require the Company to liquidate a portion of the
underlying security investments prior to maturity, at then-prevailing market
prices. Any additional cash flow requirements would be met through the sources
of liquidity described earlier.
Current year Federal income tax payments amounted to $54.5 million, $60.7
million and $57.3 million in 1994, 1993 and 1992, respectively. The Company
and certain subsidiaries also made payments to the Internal Revenue Service
during 1994 and 1992 amounting to approximately $6 million and $18 million,
respectively, relating to settlement of prior year tax returns. Since the
latter payments were associated with previously recorded liabilities, these
settlements had no impact on reported results of operations.
Net cash used in investing activities amounted to $456.7 million, $492.8
million, and $705.6 million in 1994, 1993 and 1992, respectively. The 1994 and
1993 decreases resulted primarily from declines in individual annuity sales
which, as discussed below, also resulted in reduced levels of increase in
policyholder account balances. The Company's investment management policies
include continual evaluation of securities market conditions and circumstances
relating to particular investment holdings which may result in selection of
fixed maturity or other investments for sale prior to maturity. Securities may
also be sold as part of the Company's asset/liability management strategy as
indicated above in response to changes in interest rates, resultant prepayment
risk, and similar factors. The approximately $1.1 billion, $1.2 billion, and
$800 million disposals of fixed maturity investments included in cash flows
from investing activities for 1994, 1993 and 1992 included, respectively, $209
million, $928 million and $497 million (adjusted cost) of securities which were
called for redemption by the respective issuers prior to maturity. The
majority of the 1994 redemptions were experienced during the first quarter.
The remainder of the 1994 disposals of fixed maturities came primarily from
sales of certain lower yielding securities with the objective of reinvestment
of proceeds in securities of similar quality, with higher available interest
rates, and sales of certain securities in accordance with asset / liability
management strategies to maintain an appropriate relationship between the
maturity distribution of investment securities and prospective future cash
flows relating to policyholder account balances. Substantially all of the
proceeds from fixed maturities sold or redeemed were directed to investment
grade fixed maturity investments. The net impact of these transactions is not
anticipated to result in a material adverse impact on consolidated net
investment income of the Company. Purchases of fixed maturity investments in
1994, 1993 and 1992 amounted to approximately $1.5 billion, $1.8 billion and
$1.6 billion, respectively, reflecting both reinvestment of the proceeds from
fixed maturity disposals and investment of funds corresponding to the increases
in policyholder account balances. Valuation reserves are maintained for
investments with a reduction in value determined to be other than temporary.
As indicated in Note 1 of Notes to Financial Statements, net unrealized losses
on the Company's fixed maturities portfolio, with adjusted cost of $5.2 billion
as of December 31, 1994, amount to approximately $252 million at that date.
This amount reflects gross unrealized gains of $39 million and gross unrealized
losses of $291 million. Based on current evaluation of the paying status of
the Company's fixed maturity investments and anticipated continuation of the
aforementioned investment policies, the sales of selected fixed maturity
investments and retention of certain securities with current market value less
than book value are not anticipated to result in a material adverse impact upon
the Company's net cash flows. As discussed in Note 1 of Notes to Financial
Statements, the Company's $319.6 million consolidated investment in mortgage
loans as of December 31, 1994 is characterized by a broad geographical
distribution. The Company invests principally in commercial mortgages which
comprise substantially all of the total investment in mortgages at December 31,
1994. Commercial mortgage investments are generally made with a loan-to-value
ratio not in excess of 75% and emphasize fully occupied general purpose retail,
office and industrial real estate having broad user appeal on a diversified
national basis. Investment in real estate is limited typically to selected
commercial real estate which is substantially pre-leased or where the prospects
of finding a user upon completion are unusually attractive. As of December 31,
1994 and 1993, consolidated invested assets included $30.4 million and $25.0
million book value of real estate acquired through foreclosure, respectively.
Consolidated net investment income included a net credit of $465 thousand and a
net charge of $1.2 million in 1994 and 1993, respectively, relating to such
<PAGE>6
properties. It is the Company's general policy to determine the estimated net
realizable value of foreclosed real estate based upon appraisals relating to
the underlying mortgage loans which are continually reviewed and/or updated by
management based upon market conditions furnished by third party property
managers or brokers. The Company maintains reserves so that these assets are
carried at the lower of cost or estimated net realizable value. Based on
current evaluation of real estate properties held as a result of foreclosure
and anticipated continuation of the Company's policies relating to disposal of
such properties, the retention of these properties until disposal at terms
believed to reflect their estimated net realizable values is not anticipated to
result in a material adverse impact upon consolidated net investment income or
the liquidity of the Company.
Net cash flows provided by consolidated financing activities amounted to
$270.4 million, $380.3 million, and $641.2 million in 1994, 1993 and 1992,
respectively. The reduced levels of cash flows from financing activities in
1994 and 1993 reflect the impact of decreased individual annuity sales on
changes in policyholder account balances as well as a volume-related increase
in the dollar amount of surrenders of individual annuity contracts, which are
charged to these balances. The increase in policyholder account balances
amounted to $269.5 million, $416.7 million, and $647.5 million in 1994, 1993
and 1992, with gross premiums on single premium annuities of $244.8 million,
$344.7 million and $524.8 million in those years, respectively. The decline in
annuity sales reflects previous management actions with objectives including
diversification of sales mix and production sources. Gross surrender benefits
on individual deferred annuities amounted to approximately $173 million and
$119 million in 1994 and 1993, respectively. Sales of interest sensitive
permanent life insurance policies, with new annualized premiums of $60.2
million, $55.8 million and $55.0 million in 1994, 1993, and 1992, respectively,
and the increase in accumulated values on contracts in force were also factors
in the growth in policyholder account balances. Premium receipts for
substantially all of the Company's interest sensitive individual life and
annuity contracts are not included in reported revenues but are instead
directly credited to the liability for policyholder account balances as
required by FASB Statement No. 97.
Cash flows from financing activities for 1994 reflect a refinancing
transaction in which the Company borrowed $100 million in May 1994, classified
as notes payable, under a revolving credit agreement commenced at that time
with The Bank of New York (as agent) which provides for term loan borrowings of
up to $150 million. The proceeds of this borrowing were utilized to repay $100
million "current maturities of long-term debt" under a previous two-year
revolving credit facility which expired in May 1994. Subsequently, the Company
borrowed the remaining $50 million available under this agreement and utilized
these proceeds to repay a similar amount of short-term variable rate bank
borrowings. See Note 2 of Notes to Financial Statements for further
information. The aggregate 1994 increase of approximately $31 million in
outstanding long-term and short-term debt relates primarily to working capital
requirements. Cash flows from financing activities for 1993 include
refinancing transactions in which the Company issued a total of $300 million
principal amount of debt securities under shelf registration statements and
utilized the proceeds to repay $200 million long term debt and $100 million
short term variable rate bank debt. The $112.4 million decrease in notes
payable included in 1993 cash flows from financing activities reflects the
noted refinancing of short term variable rate bank debt as well as the
application of a portion of dividends received from the life insurance
subsidiaries by the parent company to repay short term bank borrowings as
discussed earlier.
As of December 31, 1994, the Company had lines of credit with seven banks
amounting to $60 million, all of which was unused. However, at that date, the
Company had outstanding short-term borrowings with three banks, negotiated
independently of such lines to take advantage of more favorable available
interest rates, in the aggregate amount of $46.5 million, as well as $150
million borrowings under a revolving credit agreement with The Bank of New York
as discussed above. Also at that date, the Company had available a revolving
credit agreement with Chemical Bank which provides short term borrowing
facilities up to $100 million, under which no borrowings were outstanding. The
Company's short term borrowings were utilized primarily for working capital
requirements.
<PAGE>7
Capital Resources
Long term debt at December 31, 1994 includes a $150 million non-callable
issue of 6.75% Notes due 1998 and a $150 million non-callable issue of 6.375%
Notes due 2000, both issued in early 1993 under shelf registration statements.
The Company has filed an additional shelf registration statement which, as of
December 31, 1994, permits the issuance of up to $150 million principal amount
of debt securities subject to management's discretion as to timing and amount
of issues thereunder. The Company's remaining long term debt at December 31,
1994 consists of a $50 million issue of 9.15% Notes due 1999 which permits
repayment at the option of the Company prior to maturity, commencing in 1996.
While it is currently anticipated that the major portion of the long term debt
will be repaid using the net proceeds of debt and/or equity or combination
securities to be issued at future dates, determination of the timing and amount
of such repayments and securities issues will be dependent upon future market
conditions, future cash flows, and other unforeseen circumstances.
For the years ended December 31, 1994, 1993 and 1992, respectively,
consolidated interest expense amounted to $35.6 million, $32.4 million, and
$33.8 million, with $24.4 million, $26.7 million, and $25.9 million of such
interest expense relating to long term debt. Dividends paid on the Company's
outstanding stock issues for such years were $28.8 million, $27.4 million, and
$25.8 million, substantially all relating to common stock. The increases in
such dividends reflected increases in common stock dividends per share from
$1.14 in 1992 to $1.21 in 1993 and $1.26 in 1994. The 1994 increase in
interest expense came primarily from higher interest rates applicable to short-
term borrowings. The decrease in consolidated interest expense in 1993 as
compared to 1992 resulted primarily from more favorable interest rates
applicable to short-term borrowings in 1993 and long-term debt refinancing
transactions early that year.
The Company has outstanding Standby Letters of Credit with two banks
representing contingent obligations to fund various trusts established in
connection with certain employment contracts of management employees, the
Company's Supplemental Retirement Plan, Retirement Plan for Outside Directors,
and Retirement Plan, in the event of a Change in Control (as defined in the
trust agreements), totalling $88 million. Additionally, in connection with the
application by a life insurance subsidiary for an additional state license to
transact business, USLIFE Corporation has agreed to guarantee that subsidiary's
maintenance of the state's minimum capital and surplus requirements (amounting
to $4.4 million as of December 31, 1994) for a ten year period commencing at
the effective date of such license.
Results of Operations
1994 Compared to 1993
For the year ended December 31, 1994, net income amounted to $96.2 million
versus $97.2 million for 1993. The $96.2 million net income for 1994 included
net capital loss transactions with an after-tax impact of $902 thousand, while
1993 results included net capital gains with an after-tax impact of $5.5
million. The 1994 net capital losses came primarily from disposal of certain
real estate investments. The net capital gains reported for 1993 reflected
$54.5 million pre-tax gains on disposals of fixed maturity investments, which
were partially offset by pre-tax losses of approximately $10.7 million on
disposal of certain real estate, mortgage and joint venture investments and by
additions to valuation reserves for certain investments with loss exposure. As
discussed under "Financial Condition," the major portion of disposals of fixed
maturity investments during 1993 related to securities which were called for
redemption by the respective issuers prior to maturity. Consolidated net
income for 1993 also includes a gain of $1.5 million (after applicable taxes)
<PAGE>8
from sale of a subsidiary's home office property and a charge of $2.0 million
to recognize the cumulative impact of the change in corporate Federal income
tax rates enacted in August 1993 as required by FASB Statement No. 109.
Excluding the transactions discussed above (capital gains and losses, 1993
recognition of cumulative impact of income tax rate change, and 1993 home
office property sale), consolidated after-tax income amounted to $97.1 million
for 1994 versus $92.1 million for 1993, an increase of $5.0 million or 5.4%.
On a similar basis, after-tax income of the life insurance subsidiaries
increased $7.6 million or 6.0%. The improvement in life insurance subsidiary
results came primarily from an increase in pre-tax profits from the individual
life and annuity product line, accompanied by alleviation of certain expenses
that negatively impacted 1993 group health results from "association" business
as discussed below. Also on a similar basis, after-tax corporate charges
(including the operating results of USLIFE's servicing units) amounted to $37.1
million in 1994 versus $34.5 million for 1993, resulting in a negative
comparative impact of $2.6 million on after-tax consolidated results. Higher
interest rates applicable to short term corporate borrowings in 1994 were the
primary cause of this negative variance. Corporate charges reflect, among
other factors, interest expense associated with financing of repurchases of the
Company's common stock under the treasury stock repurchase program.
Pre-tax income of the life insurance subsidiaries, excluding capital gains
and losses and the 1993 home office sale as discussed above, was $204.7 million
in 1994 versus $192.9 million in 1993. The major portion of the life insurance
subsidiaries' pre-tax income is attributed to the individual life insurance
and annuity product line. The life insurance subsidiaries also offer credit
and group life insurance products, including mortgage life insurance. The
indicated pre-tax income includes a pre-tax profit of $11.8 million attributed
to all health insurance coverages in 1994, versus $9.3 million in 1993.
Employer / association group health insurance, primarily consisting of
employer-employee cases that are often written in conjunction with group life
insurance, accounted for approximately 84% and 87% of total health insurance
premiums in 1994 and 1993, respectively. The remainder of the Company's health
insurance business consists of credit disability insurance, "other group
health" insurance (primarily mortgage disability coverages), and individual
health and disability coverages including specialty products and cases issued
on group conversions. A discussion of the Company's various product lines,
excluding the impact of capital gains and losses and the 1993 subsidiary home
office property sale which are previously discussed, follows.
Individual life and annuity pre-tax profits, including income attributable
to capital and surplus, amounted to $186.3 million in 1994 versus $177.1
million in 1993. The increase of approximately $9 million or 5% reflected
improved mortality experience, gains from investment income margins, and
voluntary policy termination (persistency) experience. Investment income
margins are affected by changes in rates of return available to the Company on
portfolio investments, and adjustments that may be made by the Company on
credited rates of interest on certain contracts, as discussed below.
A pre-tax profit of $1.1 million was reported for credit life insurance
coverages for 1994, versus $1.3 million for 1993, as less favorable mortality
experience in 1994 offset the impact of increased premium income.
Pre-tax profits from the Company's group life insurance lines of business
amounted to $5.5 million in 1994 versus $5.2 million in 1993. Pre-tax income
from employer / association life insurance products increased approximately
$650 thousand, from $4.6 million in 1993 to $5.2 million in 1994, reflecting
improved mortality experience and reduced expense levels. A negative variance
of about $300 thousand from the Company's other group life insurance lines,
including mortgage life insurance and specialty coverages, partially offset the
improved employer / association group life results.
The individual health and disability product line reported a pre-tax
profit of $721 thousand for 1994, versus a pre-tax loss of $290 thousand for
1993. This product line consists primarily of certain specialty products and
coverages issued upon conversion of certain group health insurance products.
<PAGE>9
The improved results in 1994 came primarily from more favorable morbidity
experience on certain specialty products included in this line.
Pre-tax profits from the credit disability product line amounted to $5.2
million for 1994, versus $5.0 million in 1993, reflecting more favorable
morbidity experience during 1994.
Pre-tax profits from the Company's group health insurance lines of
business amounted to $5.9 million in 1994 versus $4.6 million in 1993. Pre-tax
income from employer / association health insurance products increased from
$4.6 million in 1993 to $5.6 million in 1994. The favorable variance of $1.0
million came primarily from a decrease in legal and other expenses relating to
an association group health marketing organization which had declared
bankruptcy. These expenses, which were the major contributing factor in a $4.3
million pre-tax loss for 1993 ascribed to "association" products included in
the employer / association group health line, were subsequently mitigated.
Residual expenses relating to this matter are not expected to have a material
adverse impact on consolidated results of operations. The benefit from
mitigation of these expenses was offset by the impact of a decline in premium
revenues on employer / association health insurance products from $429 million
in 1993 to $397 million in 1994, primarily attributed to small group major
medical lines. Since the major portion of the Company's major medical business
has consisted primarily of "indemnity" coverages, a shift in market emphasis to
managed care products arising from legislation in New York and New Jersey
resulted in a reduction in new sales as well as erosion of business in force.
The Company's decision in late 1993 to restrict major medical sales to states
where it has a significant amount of in-force business also contributed to the
decline in revenues. The Company has initiated expense reduction measures to
alleviate the impact of reduced group health revenues on pre-tax profits from
these lines. Additionally, the Company has refined its "ancillary" group
products, such as long-term disability and dental insurance, with goals
including an increase in the proportion of group business from non-major
medical lines, and is introducing new managed care products and networks in
several states with the objective of improving its competitive position.
Profitability of the Company's group health insurance lines is dependent upon
various factors including the ability of the Company to match premiums charged
to benefit costs and to maintain underwriting standards so that premium charged
is consistent with risk assumed on an overall basis, as well as market
acceptance of products currently offered and those being introduced.
Total revenues of the life insurance subsidiaries in 1994 amounted to
$1.630 billion, an increase of $46.8 million or 3.0% over 1993, primarily on
increases of $43.4 million (or 3.9%) and $16.8 million (or 3.9%) in premiums
and considerations and net investment income, respectively. Other income
decreased $1.3 million to $17.0 million in 1994, reflecting the inclusion in
1993 results of $2.3 million income from the sale of a subsidiary's home office
property. The increase in premiums and considerations came primarily from the
individual life insurance and annuity product line and from increased written
premiums on the Company's credit insurance products. A decrease of $31.0
million in employer / association group insurance premiums, reflecting reduced
sales and erosion of in-force business on major medical products as discussed
above, was a partial offset. Premiums and other considerations from individual
life insurance and annuity products amounted to $434.2 million in 1994,
compared to $388.1 million in 1993, with the increase from both interest
sensitive and traditional products and reflecting a larger base of in-force
business as well as increased sales of traditional life insurance products in
1994. Net investment income of the life insurance subsidiaries increased $16.8
million, as noted above, reflecting a larger investment base in 1994. The pre-
tax annual yield declined from 8.35% in 1993 to 7.92% in 1994, as a decline in
market interest rates resulted in redemptions of higher yielding securities out
of the Company's investment portfolio particularly during 1993 and into the
first quarter of 1994, and the reinvestment of proceeds from these securities,
as well as funds provided from operations, at lower available interest rates.
In this connection, it should be noted that the Company's interest sensitive
life insurance and annuity contracts are subject to periodic adjustment of
credited interest rates which are determined by management based on available
market interest rates and portfolio rates of return. Investment income gains
represent the spread between interest earned on the investment portfolio and
interest credited to policyholders. These gains, on certain products,
<PAGE>10
benefited during 1993 as reductions in credited rates of interest were
implemented as contractually permitted while reductions in investment income
arising from redemptions by the respective issuers were experienced over the
course of the year. These gains tended to stabilize rather than increase
during most of 1994 due to realization of the full impact of the investment
income reductions associated with the earlier redemptions. Although available
interest rates on securities investments have risen during the latter portion
of 1994, the impact on yields has not yet been fully realized. During 1993,
interest rates credited on the Company's universal life insurance contracts
typically ranged from 6.5% to 7.5% at the beginning of the year and from 6.0%
to 7.0% at the end of the year, reflecting periodic rate decreases during that
year. Rates were essentially unchanged on these policies during 1994. In
1993, interest rates credited on the Company's deferred annuity contracts,
exclusive of first year increments on certain products, typically ranged from
4.5% to 5.0%. Credited rates of interest on the Company's deferred annuities
at the beginning of 1994, on a similar basis, typically ranged from 4.5% to
4.8% . Recognizing the rise in available interest rates during the second half
of 1994, first year credited interest rates offered on substantially all of the
Company's deferred and immediate annuity contracts were increased during that
period, with the amount of increase varying based on the type of contract.
Credited renewal rates of interest were also increased on these contracts, with
effective dates either at contract anniversary or January 1, 1995 based on type
of contract. At January 1, 1995, giving effect to the various rate
adjustments, the rates offered on these contracts typically ranged from 4.8% to
5.5% excluding first year increments. The prospective impact of these rate
adjustments on reported results will be dependent upon various factors
including future sales, surrender levels, and investment portfolio yield. In
the event of future general increases in market interest rates, the market
value of certain of the Company's investments including its fixed maturity
portfolio would be expected to decrease, and the contribution to the Company's
earnings from the difference between interest earned on investments and
interest credited on these products could be adversely affected, depending on
the timing and extent of adjustments in credited rates of interest on in-force
business and in the investment portfolio in response to such changes.
Total benefits and expenses of the life insurance subsidiaries increased
$49.4 million or 3.6% over 1993. Benefits to policyholders and beneficiaries
amounted to $727.9 million in 1994, versus $737.7 million in 1993. The
decrease came primarily from reduced group health insurance volume,
particularly in major medical business, relating to policy lapses and a reduced
level of sales as previously discussed. Interest credited to policyholder
account balances increased $10.3 million (or 5.6%), reflecting the increased
volume of universal life-type and individual annuity contracts in 1994 with the
impact of earlier reductions in credited rates of interest on certain contracts
a partial offsetting factor. An increase in future policy benefits of $79.3
million was recorded for 1994, versus $39.8 million for 1993, with the $39.4
million variance primarily associated with the increases in premiums on
traditional individual life and credit insurance coverages. Amortization of
deferred policy acquisition costs amounted to $159.7 million in 1994 versus
$151.9 million in 1993, reflecting various factors including the increased
volume of individual life and annuity business in force during 1994.
Commissions, insurance taxes and licenses, and general expenses totalled $261.9
million in 1994, approximating the $260.4 million recorded in 1993, as volume
related increases in commissions and expenses on the individual life and credit
insurance product lines were essentially offset by expense reductions relating
to group health insurance products as previously discussed.
At December 31, 1994, consolidated invested assets included approximately
$232 million (adjusted cost) of less than investment grade corporate
securities, based on ratings assigned by recognized rating agencies and
insurance regulatory authorities. Such investments had an aggregate market
value of approximately $228 million at December 31, 1994 and, based on market
value, represent approximately 3% of consolidated total assets at that date.
See Note 1 of Notes to Financial Statements for further information. These
securities generally provide higher yields and involve greater risk of loss
from borrower default than investment grade securities because their issuers
typically have higher levels of indebtedness and are more vulnerable to adverse
economic conditions than other issuers. The Company's results of operations
historically have not reflected a material adverse impact from investments in
such securities.
<PAGE>11
1993 Compared to 1992
For the year ended December 31, 1993, net income amounted to $97.2 million
versus $69.6 million (before a $38.0 million charge for "cumulative effect of
accounting change" as discussed in Note 1 of Notes to Financial Statements) for
1992. The $97.2 million net income for 1993 included net capital gain
transactions with an after-tax impact of $5.5 million, while 1992 results
included an after-tax charge of $1.7 million from similar transactions. The
net capital gains reported for 1993 reflected $54.5 million pre-tax gains on
disposals of fixed maturity investments, which were partially offset by pre-tax
losses of approximately $10.7 million on disposal of certain real estate,
mortgage and joint venture investments and by additions to valuation reserves
for certain investments with loss exposure. The net capital losses reported
for 1992 reflected the disposal of certain real estate investments and
additions to valuation reserves for certain investments with loss exposure
which, together, more than offset pre-tax capital gains of approximately $23.2
million from disposals of fixed maturity investments. As discussed under
"Financial Condition," the major portion of disposals of fixed maturity
investments during 1993 and 1992 related to securities which were called for
redemption by the respective issuers prior to maturity. Consolidated net
income for 1993 also includes a gain of $1.5 million (after applicable taxes)
from sale of a subsidiary's home office property and a charge of $2.0 million
to recognize the cumulative impact of the change in corporate Federal income
tax rates enacted in August 1993 as required by FASB Statement No. 109. In
addition to this charge, it is estimated that the increased rates negatively
impacted second half 1993 net income by approximately $850 thousand. Net
income for 1992 reflects a charge equivalent to $10.6 million on an after-tax
basis to establish a reserve for amounts receivable from an Association Group
Health marketing organization which declared bankruptcy.
Excluding the transactions discussed above (capital gains and losses, 1993
recognition of cumulative impact of income tax rate change and home office
property sale, and 1992 charges for "cumulative effect of accounting change"
and receivables), consolidated after-tax income amounted to $92.1 million for
1993 versus $81.9 million for 1992, an increase of $10.2 million or 12.5%. On
a similar basis, after-tax income of the life insurance subsidiaries other than
the aforementioned items increased $8.1 million or 6.9%. The improvement in
life insurance subsidiary results came primarily from an increase in pre-tax
profits from the individual life and annuity product line and a reduction in
pre-tax losses from "other group health" coverages, as discussed below. Also
on a similar basis, after-tax corporate charges (including the operating
results of USLIFE's servicing units) amounted to $34.5 million in 1993 versus
$36.6 million for 1992, resulting in a positive comparative impact of
approximately $2 million on after-tax consolidated results. Results for 1993
benefited from lower interest costs attributable to refinancings of long term
debt and more favorable interest rates applicable to short term corporate
borrowings, as well as capital made available at the corporate level as a
result of the combination of operations of certain life insurance subsidiaries.
In June 1993 the Company utilized the proceeds of its $150 million issue of
6.375% Notes due 2000 to repay short term variable rate bank debt which, at the
time of repayment, had a weighted average interest rate of approximately 3.6%.
The impact of the latter refinancing partially offset the reductions in
interest expense from long term debt refinancing transactions. Corporate
charges reflect, among other factors, interest expense associated with
financing of repurchases of the Company's common stock under the treasury stock
repurchase program.
Pre-tax income of the life insurance subsidiaries for 1993, excluding
capital gains and losses and the subsidiary home office sale as previously
discussed, was $192.9 million. For 1992, pre-tax income of the life insurance
subsidiaries excluding capital gains and losses and the charge for "cumulative
effect of accounting change" was $161.4 million, reflecting the $16.0 million
pre-tax impact of the aforementioned receivables charge. The major portion of
the life insurance subsidiaries' pre-tax income is attributed to the individual
life insurance and annuity product line. A pre-tax profit of $9.3 million was
attributed to all health insurance coverages in 1993, versus a pre-tax loss of
$19.3 million in 1992 which resulted primarily from the receivables charge.
Employer-employee group health insurance coverages, which are generally written
as a corollary to employer-employee group life insurance, accounted for
<PAGE>12
approximately 86% and 87% of total health insurance premiums in 1993 and 1992,
respectively. Employer-employee group insurance coverages are discussed
further below. The remainder of the Company's health insurance business
consists of credit disability insurance, "other group health" insurance
(primarily association group health), and individual health and disability
coverages. As indicated above, the increase in life insurance subsidiary
after-tax income for 1993 versus 1992 is primarily attributed to an increase in
pre-tax profits from the individual life and annuity product line and a
reduction in pre-tax losses from "other group health" coverages. A discussion
of the Company's various product lines, excluding the impact of capital gains
and losses and the 1993 subsidiary home office property sale which are
previously discussed, follows.
Individual life and annuity pre-tax profits, including income attributable
to capital and surplus, amounted to $177.1 million for 1993 versus $169.3
million for 1992. The increase of $7.8 million or 4.6% reflected favorable
mortality experience during the first nine months of 1993 and a continuation of
gains from investment income margins.
A pre-tax profit of $1.3 million was reported for credit life insurance
coverages for 1993, versus $3.2 million in 1992, reflecting unfavorable
mortality experience during the second and third quarters of 1993. Credit life
insurance business in three key states, Maryland, New York, and Pennsylvania,
contributed to this unfavorable mortality experience. Since these states
require rate modifications based on experience over a three-year interval, it
is anticipated that the rating formulas should permit rate adjustments over the
next several years that take into account the current year experience.
Pre-tax profits from the Company's group life insurance lines of business
amounted to $5.2 million for 1993 versus $8.2 million for 1992, a decrease of
$3.0 million. The negative variance was attributed primarily to less favorable
results from association group life insurance coverages and certain specialty
coverages, such as mortgage life insurance, included in the "other group life"
line. Pre-tax profits from employer-employee group life insurance products
were $4.1 million for 1993 versus $4.6 million in 1992, reflecting less
favorable mortality experience in 1993.
The individual health and disability product line reported a pre-tax loss
of $290 thousand for 1993, versus a pre-tax loss of $461 thousand for 1992.
This product line consists primarily of certain specialty products and
coverages issued upon conversion of certain group health insurance products.
Pre-tax profits from the credit disability product line amounted to $5.0
million for 1993, versus $1.9 million in 1992, reflecting more favorable
morbidity experience during 1993.
Total pre-tax income from group health insurance coverages amounted to
$4.6 million for 1993, consisting of a pre-tax profit of $8.9 million from
employer-employee group health insurance products and a pre-tax loss of $4.3
million from "other group health" products, primarily association group health
insurance. For 1992, a pre-tax loss of approximately $4.8 million was reported
for group health insurance coverages (in addition to the aforementioned $16.0
million receivables charge), consisting of a pre-tax profit of $7.3 million
from employer-employee group health insurance products and a pre-tax loss of
$12.0 million from "other group health" products. The increase in pre-tax
income from employer-employee group health insurance coverages reflected more
favorable morbidity experience in 1993 which more than offset the impact of
terminations on a certain block of business affected by recent legislation as
discussed below. Premium income from employer-employee group health insurance
coverages amounted to approximately $425 million for 1993 versus $437 million
for 1992. Premiums charged for these products are subject to periodic rate
adjustments by the Company which considers, among other factors, trends in the
costs of benefits provided in setting such rates. Profitability of these
products is dependent upon various factors including the ability of the Company
to match premiums charged to increases in benefit costs through periodic rate
adjustments and to maintain underwriting standards so that premium charged is
consistent with risk assumed on an overall basis. New York State "community
rating - open enrollment" legislation applicable to insured group medical plans
with less than fifty employees, which became effective as of April 1, 1993,
prohibits the use of individual underwriting techniques for group major medical
<PAGE>13
business, which is included in the Company's employer-employee group health
product line. The legislation permits carriers to use pre-existing condition
exclusions to protect against adverse selection, but prohibits the use of age
and sex factors in rating, and requires that average rates be used for the
aforementioned plans. All affected in-force business had to be renewed in
accordance with the new requirements as of April 1, 1993, and consequently the
Company suspended new business sales of these products in New York State during
the first quarter to prepare for the renewal process and resumed such sales
effective on the latter date. This process resulted in an unusually high level
of policy lapses and negative impact on premium income during 1993 for the
affected coverages in New York State. Since group life insurance is often sold
in conjunction with these medical sales, there was a similar impact on
employer-employee group life insurance products. In response to current and
anticipated health insurance reform, the Company announced in December 1993
that it would restrict its sales of new major medical business to 21 states,
including New York, in which it has a significant amount of in-force business,
while continuing renewals of this business in all states. The decrease in the
pre-tax loss for "other group health" products (primarily association group
health) from $12.0 million in 1992 to $4.3 million in 1993 reflected a decline
in expenses attributed to this line as well as improved morbidity experience.
Legal and other expenses relating to the aforementioned marketing organization
bankruptcy was the major contributing factor in the 1993 pre-tax loss,
primarily incurred during the first half of the year, and a significant factor
in the 1992 loss. The 1992 loss for this product line also reflected legal
expenses relating to a reinsurance dispute concerning certain group medical
insurance programs previously written by a subsidiary of the Company, in which
settlements were subsequently reached with the reinsurers involved.
Total revenues of the life insurance subsidiaries in 1993 amounted to
$1.583 billion, an increase of $69.0 million or 4.6% over 1992, primarily on
increases of $25.0 million (or 2.3%) and $29.3 million (or 7.3%) in premiums
and considerations and net investment income, respectively. Other income
increased $1.7 million to $18.3 million in 1993, reflecting $2.3 million income
from the sale of a subsidiary's home office property during the third quarter
of 1993. The increase in premiums and considerations came primarily from the
individual life insurance and annuity product line and from increased written
premiums on the Company's credit insurance products. A decrease of $12.8
million in employer-employee group insurance premiums, reflecting the impact of
recent state legislation as discussed above, was a partial offset. Premiums
and other considerations from individual life insurance and annuity products
amounted to $388.1 million in 1993, compared to $366.7 million in 1992, with
the increase from both interest sensitive and traditional products and
reflecting a larger base of in-force business. Although the pre-tax annual
yield on investments declined from 8.76% in 1992 to 8.35% in 1993, net
investment income increased $29.3 million as noted above with a larger
investment base in 1993. This decrease in pre-tax annual yield reflects a
continuing decline in market interest rates which has resulted in calls of
higher yielding securities out of the investment portfolio and the reinvestment
of proceeds from these securities, as well as funds provided from operations,
at lower available current rates. In this connection, it should be noted that
the Company's liability for policyholder account balances, amounting to $3.3
billion at December 31, 1993, relates to interest sensitive life insurance and
annuity contracts that are subject to periodic adjustment of credited interest
rates. Credited interest rates are determined by management based on factors
including available market interest rates and portfolio rates of return.
Interest rates credited on the Company's deferred annuity contracts, exclusive
of first year increments on certain products, typically ranged from 6.8% to
5.0% during 1992 and from 5.0% to 4.5% in 1993. Interest rates credited on the
Company's universal life insurance contracts typically ranged from 8.5% to 6.5%
in 1992 and from 7.5% to 6.0% in 1993, reflecting periodic decreases in these
credited rates during both 1993 and 1992.
Total benefits and expenses of the life insurance subsidiaries increased
$22.3 million or 1.6% over 1992, reflecting the inclusion of the $16.0 million
receivables charge in 1992 results. Benefits to policyholders and
beneficiaries amounted to $737.7 million in 1993, versus $740.6 million in
1992. The decrease reflects various factors including reduced volume in the
employer-employee group health line relating to policy lapses attributed to the
impact of recent state legislation as previously discussed and the impact of
favorable mortality and voluntary policy termination experience on individual
life coverages. Interest credited to policyholder account balances increased
<PAGE>14
$10.2 million (or 5.9%), reflecting the increased volume of universal life-type
and individual annuity contracts in 1993 with the impact of reductions in
credited rates of interest on certain contracts a partial offsetting factor.
An increase in future policy benefits of $39.8 million was recorded for 1993,
versus $34.8 million for 1992, with the $5.0 million variance primarily
associated with the increase in written premiums on credit insurance coverages
as noted above. Amortization of deferred policy acquisition costs amounted to
$151.9 million in 1993 versus $131.8 million in 1992, reflecting various
factors including the increased volume of individual life and annuity business
in force during 1993. Excluding the impact of the 1992 receivables charge, an
aggregate increase of $6.2 million or 2.5% in commissions, insurance taxes and
licenses, and general expenses reflected the increased individual life and
annuity volume, with reduced legal and other expenses relating to the "other
group health" product line a partial offset.
<PAGE>15
BUSINESS
Lines of Business
USLIFE Corporation ("USLIFE" or "the Company"), a New York business
corporation formed in 1966, is a life insurance-based holding company whose
principal subsidiaries engage in the life insurance business. Other
subsidiaries of USLIFE, engaged in investment advisory, broker-dealer,
marketing, real estate, data processing and administrative operations, provide
services to the life insurance companies. Only life insurance is a reportable
industry segment, and the related information is presented in Note 1 of Notes
to Financial Statements.
The following table sets forth total income and income before taxes of the
operations of USLIFE for the indicated subsidiary groups and "corporate
services" for the past five years.
<TABLE>
<CAPTION>
Year Ended December 31
__________________________________________________________________________________________________________
1994 1993 1992 1991 1990
___________________ _____________________ ____________________ ___________________ ___________________
Income Income Income Income Income
Total Before Total Before Total Before Total Before Total Before
Income Taxes Income Taxes Income Taxes (a) Income Taxes Income Taxes
______ ________ ______ _______ ______ _________ ______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life Insurance........ $1,629,968 $203,424 $1,583,197 $206,011 $1,514,233 $159,301 $1,368,592 $171,487 $1,225,047 $168,376
Realty and
Securities Investment 12,254 (214) 10,622 (2,542) 11,149 (59) 9,364 429 8,001 (167)
Corporate Services (b) 8,965 (56,213) 6,219 (51,898) 4,070 (54,905) 4,950 (60,897) 2,527 (64,739)
__________ ________ __________ ________ __________ ________ __________ ________ __________ ________
Consolidated........ $1,651,187 $146,997 $1,600,038 $151,571 $1,529,452 $104,337 $1,382,906 $111,019 $1,235,575 $103,470
========== ======== ========== ======== ========== ======== ========== ======== ========== ========
</TABLE>
_________
(a) Before cumulative effect of accounting change relating to
postretirement benefits other than pensions. See Notes 1 and 5 of
Notes to Financial Statements for further information.
(b) Reflects corporate interest expense and overhead, and
corporate services to subsidiaries by USLIFE Corporation, USLIFE
Systems Corporation, USLIFE Insurance Services Corporation, and
USLIFE Agency Services, Inc. as well as consolidating adjustments.
Life Insurance
General
In 1994, USLIFE's life insurance business was conducted by four operating
life insurance subsidiaries (the "Life Insurance Subsidiaries"): The United
States Life Insurance Company In The City of New York ("United States Life"),
All American Life Insurance Company ("All American Life"), The Old Line Life
Insurance Company of America ("Old Line Life"), and USLIFE Credit Life
Insurance Company ("USLIFE Credit Life").
The Life Insurance Subsidiaries are all domestic stock insurance
corporations with strong regional identifications. United States Life is the
oldest stock life insurance company in America, having been incorporated in New
York in February, 1850. While authorized to do business in all fifty states
and the District of Columbia, its business is heavily concentrated in New York
and adjacent eastern states. All American Life was incorporated in Illinois in
1950, and is licensed to do business in all states, except New York, and in the
District of Columbia. Approximately 36% of its business in 1994 was derived
from the central and southwestern regions of the United States. Old Line Life,
incorporated in Wisconsin in 1910, is authorized to do business in all states,
<PAGE>16
except New York, and in the District of Columbia; its business is concentrated
heavily in Wisconsin, California, New Jersey and the north central region of
the United States. USLIFE Credit Life, whose predecessors date from 1890,
derives most of its business from its home state of Illinois and other
midwestern and northwestern states.
Types of Insurance Written
The Life Insurance Subsidiaries offer a broad portfolio of individual life
insurance and annuity policies. Also, through United States Life, part of the
sales forces of the Life Insurance Subsidiaries offer group life and health
insurance policies with particular emphasis on small groups. Group life and
health insurance policies are also offered to associations. Several of the
Life Insurance Subsidiaries also offer products designed for funding pension,
profit-sharing and other qualified plans. In addition, through USLIFE Equity
Sales Corp., equity products are available for the noninsurance portion of
these plans. Credit insurance is offered principally through USLIFE Credit
Life.
Individual life policies are offered by all of the Life Insurance
Subsidiaries, except USLIFE Credit Life, on a non-participating and
participating basis. Participating insurance is insurance whereby the
policyholder is entitled to receive policy dividends reflecting the difference
between the premium charged and actual experience, the premium being calculated
to provide a margin over the anticipated cost of insurance protection. On
December 31, 1994, 2% of individual life insurance in force was participating
and premiums on participating policies represented 7% of individual life
insurance premium income in 1994. See "Participating Policies" in Note 1 of
Notes to Financial Statements. All group business, other than credit life
insurance, is on a non-participating basis but approximately 12% of such
business is subject to experience ratings under which the policyholder may
receive refund credits depending on experience. Substantially all of the
credit life insurance in force is non-participating.
Development
The following tabulations set forth the classes of life insurance in force
at December 31, and the amount of new life insurance paid for and premium
income in each of the years 1990 through 1994.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Life Insurance in Force at December 31:
Individual life...................... $ 85,884,409 $ 75,850,909 $ 70,215,988 $ 65,363,964 $60,517,878
Credit life.......................... 8,401,213 7,905,294 8,124,861 8,811,313 9,461,784
Group life........................... 30,595,715 26,793,165 25,621,722 23,374,748 20,288,967
Reinsurance assumed(a)............... 16,800,790 14,462,410 11,037,473 10,318,427 8,509,733
____________ ____________ ____________ ____________ ___________
Total in force (a)(b)........... $141,682,127 $125,011,778 $115,000,044 $107,868,452 $98,778,362
============ ============ ============ ============ ===========
New Life Insurance:
Individual life...................... $ 19,875,925 $ 15,094,027 $ 13,842,145 $ 13,657,209 $11,093,989
Credit life.......................... 5,517,215 4,698,246 3,327,816 3,192,498 3,714,637
Group life........................... 2,739,075 2,474,122 2,433,088 6,628,972 2,361,956
____________ ____________ ____________ ____________ ___________
Total direct new business written... 28,132,215 22,266,395 19,603,049 23,478,679 17,170,582
Reinsurance assumed.................. 111,630 5,060 3,644 18,046 10,418
____________ ____________ ____________ ____________ ___________
Total new business...... $ 28,243,845 $ 22,271,455 $ 19,606,693 $ 23,496,725 $17,181,000
============ ============ ============ ============ ===========
</TABLE>
<PAGE>17
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Premium Income:
Life Insurance:
Individual(c)................... $ 243,817 $ 220,686 $ 207,822 $ 199,968 $ 191,889
Credit life..................... 66,269 56,778 53,555 54,546 64,334
Group life...................... 185,482 178,302 165,897 154,582 140,641
____________ ____________ ____________ ___________ ___________
Total life.................. 495,568 455,766 427,274 409,096 396,864
____________ ____________ ____________ ___________ ___________
Health Insurance:
Individual health............... 1,024 1,302 1,308 1,198 1,075
Credit disability............... 66,423 55,040 52,099 49,407 59,296
Group health.................... 406,688 438,075 452,306 386,373 309,299
____________ ____________ ____________ ___________ ___________
Total health................ 474,135 494,417 505,713 436,978 369,670
____________ ____________ ____________ ___________ ___________
Total premium income.... $ 969,703 $ 950,183 $ 932,987 $ 846,074 $ 766,534
============ ============ ============ =========== ===========
</TABLE>
_______
(a) Substantially all of the reinsurance assumed represents Servicemen's
Group Life Insurance and Federal Employees' Group Life Insurance.
(b) Includes ceded reinsurance of approximately $8.4 billion at the end of
1990, $8.0 billion at the end of 1991 and 1992, $7.5 billion at the end of
1993, and $7.8 billion at the end of 1994.
(c) Under the method of accounting required by Statement No. 97 of the
Financial Accounting Standards Board ("SFAS 97") for universal life-type
products and certain annuity contracts, including the Company's deferred
annuity products, premium receipts are not recorded as revenues and,
consequently, are excluded from the premium income data presented herein. See
Note 1 of Notes to Financial Statements for further information.
Additions and Terminations
There follows a tabulation of the Life Insurance Subsidiaries' additions
and terminations by cause for both individual and group and credit life for the
three years ended December 31, 1994:
<PAGE>18
<TABLE>
<CAPTION>
Individual Group and Credit
_______________________________________ ______________________________________
Year Ended December 31 Year Ended December 31
_______________________________________ ______________________________________
1994 1993 1992 1994 1993 1992
____ ____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
In force, January 1............... $75,885,903 $70,247,455 $65,388,140 $49,125,875 $44,752,589 $42,480,312
___________ ___________ ___________ ___________ ___________ ___________
Issued......................... 19,859,084 15,064,328 13,820,341 8,256,290 7,172,368 5,760,904
Reinsurance assumed............ 11,545 5,060 3,644 100,085 - -
Revived........................ 142,934 139,475 121,706 - - -
Additions by dividend.......... 16,841 29,699 21,804 - - -
Increase, net.................. - - - 1,846,201 812,904 710,679
___________ ___________ ___________ ___________ ___________ ___________
Total................. 20,030,404 15,238,562 13,967,495 10,202,576 7,985,272 6,471,583
___________ ___________ ___________ ___________ ___________ ___________
Terminated by:
Death.......................... 189,130 174,448 146,775 164,735 154,281 149,995
Maturity....................... 2,403 2,748 2,576 - - -
Expiry......................... 66,936 64,116 52,860 1,486,517 1,969,555 3,021,682
Surrender...................... 1,302,168 1,290,923 1,284,035 2,887 7,421 1,466
Lapse.......................... 6,946,802 6,657,464 6,390,931 1,917,937 1,480,729 1,026,163
Decrease, net.................. 422,941 477,916 390,023 - - -
Conversion..................... 1,060,175 932,499 840,980 - - -
___________ ____________ ___________ ___________ ___________ ___________
Total................. 9,990,555 9,600,114 9,108,180 3,572,076 3,611,986 4,199,306
___________ ___________ ___________ ___________ ___________ ___________
Increase.......................... 10,039,849 5,638,448 4,859,315 6,630,500 4,373,286 2,272,277
___________ ___________ ___________ ___________ ___________ ___________
In force, December 31............. $85,925,752 $75,885,903 $70,247,455 $55,756,375 $49,125,875 $44,752,589
=========== =========== =========== =========== =========== ===========
</TABLE>
Universal life insurance represents approximately 36%, 37% and 37% of
total individual life insurance in force at December 31, 1994, 1993 and 1992,
respectively. Universal life insurance policies permit the policyholder to
vary the timing and amount of premium payments, within contractual limits.
Premium payments under these policies are credited to the policyholder's
account balance, from which amounts are assessed for risk and administrative
charges. These charges are subject to periodic adjustment by the Company.
Interest is credited to the policyholder's account balance at rates which are
subject to periodic adjustment by the Company. The remainder of the Company's
individual life insurance in force consists primarily of whole life insurance
and term insurance coverages. These contracts generally provide for fixed
premium payments and death benefits. Whole life policies provide insurance
over the entire life of the insured, with the face amount payable only upon the
death of the insured, and typically provide for the accumulation of a surrender
value based on contractual terms which may be payable to the policyholder or
utilized to purchase a different form of insurance in the event that the policy
is terminated prior to death of the insured. Term insurance policies provide
insurance over a specified period of time, with the face amount payable if the
insured dies during the policy term. Inasmuch as term policies generally do
not provide for maturity benefits or accumulation of significant cash surrender
values, premiums per dollar of death benefit are often initially lower than
those of whole life policies. The 1994 increase in face value of individual
insurance issued came primarily from increased term insurance sales. Sales of
universal life insurance and traditional permanent life insurance also
increased in 1994 as compared to 1993. The 1993 increase in face value of
individual insurance issued reflects increased sales of both universal and
traditional products as compared to the prior year. The face amount of
individual life insurance terminated, in the aggregate, by lapse and surrender
amounted to $8.2 billion, $7.9 billion, and $7.7 billion in 1994, 1993 and
1992, respectively. The relative consistency of these terminations as a
percentage of beginning of year in-force business reflected a continuation of
favorable voluntary policy termination ("persistency") experience. Subject to
any applicable surrender charges, the Company's universal life insurance
products and individual annuities may be surrendered by the holder. A cash
surrender value, based on contractual terms, is also available to the
policyholder upon surrender of many of the Company's traditional individual
life insurance policies under which cash values are accumulated. Such
surrenders are influenced by various factors including economic conditions,
available alternative investment returns, competition for investment and
insurance funds, and perceived financial strength of the insurer. These
contracts are generally supported by the investment portfolios of the Life
Insurance Subsidiaries, which are primarily comprised of investment grade,
publicly traded corporate bonds. Substantially all of the Company's interest
sensitive life insurance and annuity contracts provide for imposition of a
surrender charge in the event of policy surrender during a specified initial
period commencing with contract inception, typically ten to fifteen years for
universal life insurance and five to seven years for individual annuities, with
the significance of this charge often subject to reduction over the applicable
<PAGE>19
period or during the later portion thereof. The Company's investment
portfolios are continually monitored to determine whether the distribution of
investment maturities is considered appropriate for expected levels of policy
surrenders. The adjusted cost and estimated market value of the Company's debt
security investments, by contractual maturity, are set forth in Note 1 of Notes
to Financial Statements. As discussed in Management's Discussion and Analysis
of Financial Condition and Results of Operations herein, the Company's fixed
maturity investments may be sold prior to maturity as part of the Company's
asset / liability management strategy and are classified as "available for
sale." Adjustments to the investment maturity distribution, if necessary, may
also be accomplished by actions concerning the investment of incoming funds
and/or reinvestment of the proceeds of securities matured or redeemed. The
Company monitors its surrenders on a monthly basis. Any material deviation or
emerging trend is traced to the product line and agency of record, and remedial
action is taken where appropriate. The 1994 and 1993 increases in aggregate
volume of group and credit insurance issued were primarily attributed to credit
life insurance and reflected various factors including new credit insurance
accounts and new volume on certain cases transferred to USLIFE Credit Life from
another subsidiary. The greater amount of group and credit insurance volume
attributed to "increase, net" in 1994 versus 1993 relates primarily to net
increases in face amount of employer/association business on previously written
cases.
Accident and Health Insurance
For the last three years, accident and health insurance operations
produced premium income and income before taxes (including capital gains and
losses) as follows:
<TABLE>
<CAPTION>
Premium Income Income Before Taxes
______________________________ _______________________________
1994 1993 1992 1994 1993 1992
____ ____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Group................. $406,688 $438,075 $452,306 $ 6,148 $ 5,314 $(19,811)
Individual............ 1,024 1,302 1,308 743 (107) (408)
Credit Disability..... 66,423 55,040 52,099 5,964 7,551 3,423
</TABLE>
Group health business is often written as a corollary to the sale of group
life insurance. Premiums charged for group health insurance products are
subject to periodic rate adjustments by the Company which considers, among
other factors, trends in the costs of benefits provided in setting such rates.
Profitability of these products is dependent upon various factors including the
ability of the Company to match premiums charged to increases in benefit costs
through periodic rate adjustments and to maintain underwriting standards so
that premium charged is consistent with risk assumed on an overall basis. The
1994 increase in pre-tax income from the group health insurance lines came
primarily from a decrease in legal and other expenses relating to an
association group health marketing organization which had declared bankruptcy.
The benefit from mitigation of these expenses was offset by the impact of a
decline in premiums on employer/association health products as discussed below.
The 1992 loss from group health insurance coverages reflects a pre-tax charge
of $16.0 million to establish a reserve for amounts receivable from the
aforementioned marketing organization. The remainder of the loss from these
coverages in 1992 resulted primarily from charges to reflect the impact of
settlement of a reinsurance dispute concerning certain group medical insurance
programs previously written by a subsidiary of the Company as well as legal
expenses and other costs relating both to the reinsurance dispute and the
marketing organization in bankruptcy.
Premium revenues from the group accident and health line have been
declining since 1992. This decline is primarily attributed to state
legislation in New York and New Jersey and the Company's decision, announced in
December 1993, to withdraw from group major medical business in approximately
30 states where the amount of in-force business was judged insufficient to
<PAGE>20
justify the expense of continued presence. The aforementioned state
legislation has required the Company to redesign its portfolio of medical
coverage products in the affected states as well as seek out managed care
partners in order to offer competitive products. In late 1994 and in early
1995 the Company introduced two managed care products in the New York market
which, management believes, will facilitate resumption of its sales efforts and
alleviate the premium erosion. A similar product is awaiting approval in New
Jersey. During 1993 and 1994, a number of modifications and improvements were
made to the Company's "stand-alone" group life, long term disability and dental
insurance products, with goals including an increase in the proportion of group
insurance business from non-major-medical lines. Several product enhancements
were also introduced for products sold through associations. In general, these
initiatives have resulted in increasing sales of non-major-medical business in
both the employer and association markets. However, premium growth to date in
these areas has not been sufficient to fully compensate for the reduced volume
of major medical business.
The individual accident and health product line consists primarily of
certain specialty products and coverages issued upon conversion of certain
group health insurance products. The pre-tax loss recorded in 1992 reflected
poor morbidity experience on specialty products included in this line. The
1993 loss was primarily attributed to results on coverages issued upon group
health conversions. The improved results in 1994 came primarily from more
favorable morbidity experience on certain specialty products included in this
line.
Credit disability insurance is written in conjunction with credit life
insurance and covers the continuation of loan payments to a lender in the event
the borrower becomes disabled. The credit disability pre-tax profits reported
above include net capital gains of approximately $700 thousand, $2.5 million,
and $1.5 million in 1994, 1993, and 1992, respectively. Excluding these
transactions, pre-tax income increased from $1.9 million in 1992 to $5.0
million in 1993 and $5.2 million in 1994 with more favorable morbidity
experience in the latter two years the primary factor.
Investments and Investment Results
Investments are subject to the direction and control of the Boards of
Directors or Executive Committees of each of the respective Life Insurance
Subsidiaries. Many investments are made upon the recommendation of USLIFE
Realty Corporation or USLIFE Real Estate Services Corporation (see "Realty
Investment" below) with respect to real estate and mortgages, and upon the
recommendation of the parent company with respect to securities, all of which
furnish such investment advice to the Life Insurance Subsidiaries. All
investments must comply with applicable insurance laws and regulations, which
prescribe the nature, quality and percentages of various types of investments
which may be made by insurance companies. The major portion of funds available
for investment in recent years has been invested in bonds and redeemable
preferred stocks ("fixed maturities"), and in short term investments, including
corporate commercial paper and money market instruments.
Commencing December 31, 1992, fixed maturities which may be sold prior to
maturity as a result of the Company's investment strategies were classified as
available for sale and carried at the lower of aggregate adjusted cost or
market value as of the balance sheet date. As discussed below, valuation
reserves are maintained for fixed maturities and other investments with a
reduction in value determined to be other than temporary. Effective January 1,
1994, the Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," which
requires the Company's fixed maturity investments to be carried at market
value. Common stocks and non-redeemable preferred stocks ("equity securities")
are carried at market. See Note 1 of Notes to Financial Statements for further
information.
The mortgage portfolios of the Life Insurance Subsidiaries at December 31,
1994 had an aggregate principal amount of approximately $330 million and
consisted of approximately 300 loans. The mortgage portfolio of the Life
<PAGE>21
Insurance Subsidiaries is characterized by a broad geographical distribution,
with approximately 7% of total book value at December 31, 1994 relating to the
New England region of the United States, 18% from the middle-Atlantic states,
20% from the north-central states, 16% from the south-Atlantic states, 11% from
the south-central states, 13% from the mountain states, and 15% from the
Pacific states. Based on book value, approximately 39% of these mortgage loans
at that date are secured by office buildings, 24% by industrial / warehouse
properties, 25% retail, and the remainder secured by apartments, one to four
family residential, hotel / motel, medically oriented, or other specialty
properties. At December 31, 1994, the average principal balance of mortgage
loans contained in the portfolio was $1.1 million, with a weighted average
yield of 10.1% on principal balance. The average maturity was approximately 7
years. The largest principal balance of any single mortgage loan at that date
was $12.1 million. The Company regards delinquent mortgage loans to be those
on which interest due is unpaid for 60 days or more or the loan is in
foreclosure. The book value of delinquent mortgage loans amounted to
approximately 2.9% and 7.3% of the mortgage loan portfolio at December 31, 1994
and 1993, respectively. On December 31, 1994 property held as a result of
foreclosure of loans amounted to $30 million.
The fixed maturities portfolios of the Life Insurance Subsidiaries at
December 31, 1994 were predominantly comprised of investment grade securities
(based on ratings assigned by recognized rating agencies and insurance
regulatory authorities). At December 31, 1994, invested assets of the Life
Insurance Subsidiaries included approximately $215 million (adjusted cost) of
less than investment grade fixed maturity securities, based on these ratings.
The latter investments had an aggregate market value of approximately $212
million as of December 31, 1994 and based on market value, represent
approximately 3% of total assets of the Life Insurance Subsidiaries at that
date. These securities generally provide higher yields and involve greater
risk of loss from borrower default than investment grade securities because
their issuers typically have higher levels of indebtedness and are more
vulnerable to adverse economic conditions than other issuers. The results of
operations of the Life Insurance Subsidiaries historically have not reflected a
material adverse impact from investment in such securities. Certain bonds,
representing less than 1% of the total fixed maturities portfolio for the Life
Insurance Subsidiaries, have defaulted in interest. Quality ratings of the
fixed maturities portfolio of the Life Insurance Subsidiaries at December 31,
1994 with respect to each National Association of Insurance Commissioners
(NAIC) credit classification are as follows:
Fixed Maturities Available for Sale
________________________________________________________________
NAIC Class Adjusted Cost Market Value
___________ _____________ ____________
(Amounts in Thousands)
1....................... $3,382,682 $3,193,946
2....................... 1,555,292 1,497,002
__________ __________
Total investment grade....... 4,937,974 4,690,948
__________ __________
3....................... 160,321 157,409
4....................... 29,478 29,687
5....................... 4,753 4,357
6....................... 20,844 21,021
__________ __________
Total non-investment grade... 215,396 212,474
__________ __________
Total........................ $5,153,370 $4,903,422
========== ==========
The Company's management of the investment portfolios of the Life
Insurance Subsidiaries includes identification and evaluation of holdings which
are non-performing or have otherwise indicated performance which could imperil
future investment income or recovery of invested amounts. A valuation reserve
(established through income statement charges) is maintained for those
investments where a reduction of value is determined to be other than
temporary. In 1994, net additions to the valuation reserve for securities
investments (on a pre-tax basis) were $2.6 million, and a total of $6.4 million
was released from the reserves for real estate, mortgage loans and other
investments due to disposal of certain investments for which reserves were
<PAGE>22
previously established. In 1993, net additions to the valuation reserve for
securities investments (on a pre-tax basis) amounted to $7.6 million, and $25.0
million was added to such reserves relating to real estate, mortgage loans, and
other long term investments. In 1992, net additions to the valuation reserve
for securities investments (on a pre-tax basis) amounted to $153 thousand, and
$23.0 million was added to such reserves relating to real estate, mortgage
loans, and other long term investments. Total pre-tax portfolio reserves for
the Life Insurance Subsidiaries amounted to $121.4 million at December 31,
1994. The Company believes that adequate reserves for losses have been
established.
The following table shows the investment results of the Life Insurance
Subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
Cash and Invested Assets Net Yield
At End of Period(1) on Cash Pre-tax
___________________________________ Net and Realized
Year Ended Invested Investment Invested Gains
December 31 Cash Assets Total Income(2) Assets(3) (Losses)(4)
___________ ____ ________ _____ __________ _________ ___________
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
1994.......... $38,789 $5,934,178 $5,972,967 $448,712 7.92% $(1,322)
1993.......... 52,179 5,475,671 5,527,850 431,923 8.35 10,835
1992.......... 64,769 4,966,327 5,031,096 402,579 8.76 (2,100)
</TABLE>
________
(1) Does not include adjustments for net unrealized gains and losses on
securities. See Note 1 of Notes to Financial Statements for further
information.
(2) Net investment income is after deduction of investment expenses but
before realized capital gains or losses and federal income taxes.
(3) Calculated on the basis of a formula prescribed by the National
Association of Insurance Commissioners which computes the yield on the mean
asset values during the year.
(4) The 1992 net realized loss reflected the disposal of certain real
estate properties and additions to the valuation reserves for certain
investments which, in the aggregate, more than offset $23.3 million gross pre-
tax capital gains from disposals of fixed maturity investments.
The investment management policies of the Life Insurance Subsidiaries include
continual evaluation of securities market conditions and circumstances relating
to particular investment holdings which may result in selection of fixed
maturity or other investments for sale prior to maturity. Securities may also
be sold as part of the Company's asset / liability management strategy in
response to changes in interest rates, resultant prepayment risk, and similar
factors. The net yield on cash and invested assets declined from 8.76% in 1992
to 8.35% in 1993 and 7.92% in 1994, as a decline in market interest rates
during 1992 and 1993 resulted in calls of higher yielding securities out of the
investment portfolio and the reinvestment of proceeds from these securities, as
well as funds provided from operations, at lower available interest rates.
These security redemptions prior to maturity substantially abated following the
first quarter of 1994, with increases in market interest rates on debt
securities prevailing during the latter portion of the year. In this
connection, it should be noted that the Company's liability for policyholder
account balances, amounting to $3.6 billion and $3.3 billion at December 31,
1994 and 1993, respectively, relates to interest sensitive life insurance and
annuity contracts that are subject to periodic adjustment of credited interest
rates. Credited interest rates are determined by management based on factors
including available market interest rates and portfolio rates of return.
Interest rates credited on the Company's interest sensitive products are
sensitive to changes in interest rates earned on the Company's investments. As
discussed in Management's Discussion and Analysis of "Results of Operations"
herein, the interest rates credited on the Company's deferred annuity and
universal life products declined in 1992 and 1993, and interest rates credited
on the major portion of the Company's deferred annuity contracts were increased
<PAGE>23
beginning during the latter portion of 1994. Credited rates of interest on
interest-sensitive contracts generally follow the pattern of yields on the
assets supporting the related liabilities, while traditional contracts (such as
permanent and term coverages) are not subject to credited interest rate
adjustments. As discussed under "Regulation" herein, the Life Insurance
Subsidiaries have complied for statement years 1994 and 1993 with valuation
actuary testing requirements, promulgated by the NAIC, which apply specified
rules to assess the impact of various interest rate scenarios on the adequacy
of assets to meet policyholder liabilities. These tests did not disclose any
failure of the Company's assets to support its policy liabilities under the
NAIC specified testing scenarios.
Reserves and Reinsurance
In accordance with applicable law, the Life Insurance Subsidiaries have
set up and carry actuarial reserves to meet their obligations on their various
policies. These reserves are amounts which, together with additions from
premiums to be received and interest on such reserves compounded annually at
certain assumed rates, are calculated to be sufficient to meet the Life
Insurance Subsidiaries' policy obligations as they mature. The liability for
policy benefits relating to cash values of interest sensitive products is
accumulated based on credited rates of interest which are subject to periodic
adjustment. The statutory reserves of the Life Insurance Subsidiaries are
certified by internal actuaries as permitted by state insurance departments and
are not specifically examined by independent actuaries. The Life Insurance
Subsidiaries generally reinsure risks over $1.5 million as well as selected
risks of lesser amounts. See Notes 1 and 10 of Notes to Financial Statements.
Employees and Agents
At December 31, 1994, the Life Insurance Subsidiaries had approximately
1,500 regular employees at their home and regional offices, and individual life
insurance policies were sold principally through approximately 500 active
general agencies located throughout the United States. As discussed below,
services are also furnished to the Life Insurance Subsidiaries by the Company's
Realty Investment, Securities Investment, and Corporate Services subsidiaries,
and by USLIFE Corporation.
With few exceptions, the general agents and producers of the Life
Insurance Subsidiaries are independent contractors and are compensated on a
commission basis within limitations set by applicable insurance laws. Service
fees and expense reimbursement allowances are paid to general agents, also
within the limitations of applicable insurance laws. A large percentage of
producers also sell for other companies.
Home Offices
The home office of United States Life is located in a portion of a
building at 125 Maiden Lane, New York, New York 10038. In December 1986 United
States Life sold this building and leased back portions of the premises which
are utilized as its principal executive offices as well as the principal
executive offices of USLIFE, USLIFE Equity Sales Corporation, USLIFE Realty
Corporation, USLIFE Advisers, Inc. and an office of USLIFE Systems Corporation.
The leases for space occupied by United States Life and other USLIFE companies
expire in 1996. Present annual base rent for all such companies is $3.7
million, subject to adjustment, tax and escalation clauses. Certain of these
leases provide for renewal options for two successive ten year terms, based on
fair rental value at the time of renewal. The group insurance operations of
United States Life, certain other clerical and administrative units which
provide support services for that company and certain other Life Insurance
Subsidiaries, and several corporate units are located in a building at 3600
Route 66, Neptune, New Jersey 07754. This building is rented under a lease
expiring in 2003 with renewal options for two additional five year terms and a
further option relating to rental of additional office space. The annual base
rent under this lease is approximately $2.3 million, subject to adjustment, tax
and escalation clauses. See Note 8 of Notes to Financial Statements for
further information regarding the Company's lease commitments.
In addition, subsidiaries of USLIFE own or lease other properties which house
insurance and related service operations. Management believes its facilities
are adequate for present needs in all material respects.
<PAGE>24
Regulation
The Life Insurance Subsidiaries are subject to regulation and supervision
by the supervisory agency of each state or other jurisdiction in which they are
licensed to do business. These supervisory agencies have broad administrative
powers relating to the granting and revocation of licenses to transact
business, the licensing of agents, the approval of policy forms, premium
levels, the form and content of mandatory financial statements (see "Insurance
Accounting" in Note 1 of Notes to Financial Statements), capital, surplus,
reserve requirements and the types of investments which may be made. The
National Association of Insurance Commissioners ("NAIC") recommended in 1992
certain new regulatory reporting requirements for insurance companies,
including "valuation actuary" and "risk-based capital" requirements. Under the
valuation actuary requirement, the company must provide an actuary's
certification of the adequacy of reserves for future liabilities, taking
account of the assets that support them, under various possible economic
scenarios. As indicated under "Investments and Investment Results," the Life
Insurance Subsidiaries have satisfactorily complied with these requirements for
statement years 1994, 1993 and 1992. The risk-based capital requirements,
effective with statement year 1993, require the company to demonstrate that
capital and surplus meet or exceed formula-driven standards based on exposure
to specific categories of risk. Companies that do not meet a standard of at
least a 200% ratio of "Total Adjusted Capital" to "Authorized Control Level
Risk-Based Capital," as defined by regulatory authorities, are identified as
candidates for various levels of regulatory action, ranging from increased
surveillance to state insurance department control. At December 31, 1994, each
of the Life Insurance Subsidiaries exceeded the required risk-based capital
ratios, with each ratio (as defined) in excess of 400%. The Life Insurance
Subsidiaries have not experienced and do not anticipate an adverse impact on
their operations as a consequence of the valuation actuary and risk-based
capital requirements. As specified by the NAIC, Insurance Regulatory
Information System ("IRIS") ratios of certain key statutory data are computed
for the Life Insurance Subsidiaries on an annual basis. These ratios revealed
no material exceptions for statement year 1994. The Life Insurance
Subsidiaries may be required, under the solvency or guaranty laws of the
various states in which they are licensed, to pay assessments up to prescribed
limits to fund policyholder losses or liabilities of insolvent insurance
companies. The Life Insurance Subsidiaries are required to file detailed
reports with each supervisory agency, and their books and records are subject
to examination by each. In accordance with the insurance codes in the states
in which they are domiciled and the rules and practices of the National
Association of Insurance Commissioners, the Life Insurance Subsidiaries are
examined periodically by examiners of the states in which they are domiciled
and by representatives (on an "association" or "zone" basis) of the other
states in which they are licensed to do business. All of the Life Insurance
Subsidiaries have been examined at least as of December 31, 1990.
Annual financial statements prepared in accordance with statutory
accounting practices for each of the Company's Life Insurance Subsidiaries,
filed with insurance departments in the states where the Company's Life
Insurance Subsidiaries are domiciled or licensed to do business, require the
inclusion of an interest maintenance reserve ("IMR") and an asset valuation
reserve ("AVR"), according to regulations prescribed by the NAIC. These
regulations apply to all invested assets and require that investment gains and
losses resulting from changes in interest rates be distinguished from gains and
losses resulting from changes in creditworthiness. The IMR captures all
investment gains and losses resulting from changes in interest rates and
provides for subsequent amortization of such amounts into statutory net income
on a basis reflecting the remaining lives of the assets sold. The AVR captures
investment gains and losses related to changes in creditworthiness and is
adjusted each year based on a formula related to the quality and loss
experience of the Company's investment portfolio. The AVR requires reserves
for mortgage loans, other invested assets and short-term investments as well as
fixed maturity and equity security investments. The AVR and IMR are not
recorded under generally accepted accounting principles and consequently have
no impact on reported financial position or results of operations of the
Company. The Company has not experienced any significant adverse impact on its
overall operations as a result of these regulatory accounting requirements and,
based on the current composition of the investment portfolios of the Life
Insurance Subsidiaries, the Company does not currently anticipate significant
adverse impact.
Most states have enacted legislation or adopted administrative regulations
covering such matters as the acquisition of control of insurance companies and
transactions between insurance companies and the persons controlling them. The
<PAGE>25
National Association of Insurance Commissioners has recommended model
legislation on these subjects which has been adopted, with variations, by many
states. The nature and extent of the legislation and administrative
regulations now in effect vary from state to state, and in most states they
require administrative approval of the acquisition of control of an insurance
company incorporated in the state, whether by tender offer, exchange of
securities, merger or otherwise, and require the filing of detailed information
regarding the acquiring parties and the plan of acquisition. Every insurance
company which is authorized to do business in the state and is a member of an
"insurance holding company system," other than a company incorporated in
another state subject to substantially similar disclosure requirements and
standards, is generally required to register as such with the insurance
regulatory authorities and file periodic reports concerning its relationships
with the insurance holding company and other affiliates of the holding company.
Material transactions between registered insurance companies and members of the
holding company system are required to be "fair and reasonable" and in some
cases are subject to administrative approval, and the books, accounts and
records of each party are required to be so maintained as to clearly and
accurately disclose the precise nature and details of the transactions. Notice
to or approval by regulatory authorities is frequently required for dividends
paid by insurance companies, and their surplus following any dividend is
required to be reasonable in relation to outstanding liabilities and adequate
for financial needs. See "Insurance Accounting" in Note 1 of Notes to
Financial Statements for further information regarding dividends. Broad
examination and enforcement powers are conferred on regulatory authorities.
Each of the Life Insurance Subsidiaries is required to register as a member of
an insurance holding company system with the insurance supervisory authorities
in at least one state. USLIFE does not presently anticipate that legislation
and regulation such as that described above will materially restrict its
activities.
Acquired Immune Deficiency Syndrome (AIDS), which has received wide
publicity because of its serious public health implications, presents special
concerns to the life insurance industry. Morbidity and mortality risks are
accepted by insurers based on methods of classification designed to
appropriately relate premiums charged to such risks and, in this connection,
steps have been taken toward strengthening the Company's underwriting and
selection process. The Company's own mortality and morbidity experience
reflects no significant adverse impact as a result of any acceleration of AIDS
claims. The Company is continuing to monitor developments in this area but is
necessarily unable to predict the long term impact of this problem on the life
insurance industry generally or on the Company.
Competition
The insurance business is highly competitive, and there are approximately
1,800 stock and mutual companies some of which are larger than the Life
Insurance Subsidiaries (individually and in the aggregate). Although most
insurance companies are stock companies, mutual companies account for nearly
40% of the life insurance in force in the United States and hold a still larger
percentage of the admitted assets. The Life Insurance Subsidiaries believe
that their premium rates and policies are generally competitive with those of
other life insurance companies.
If the aggregate volume of insurance in force of the Life Insurance
Subsidiaries were considered to be that of one company, such company would have
ranked 19th among the companies listed in surveys contained in the June 27,
1994 edition of the National Underwriter, Life and Health Insurance Edition.
In addition to competition among life insurance companies, the Life Insurance
Subsidiaries also compete increasingly with other financial institutions such
as commercial banks and securities brokerage organizations. Competition from
such financial institutions as well as other insurance companies is considered
by the Life Insurance Subsidiaries in determining the rates of return to be
offered on interest sensitive products. See discussion under "Additions and
Terminations."
<PAGE>26
Realty Investment
USLIFE Realty Corporation; USLIFE Real Estate Services Corporation
USLIFE Realty Corporation ("Realty") was incorporated in 1954. Realty
manages a portfolio of real estate, mortgage loan, and joint venture
investments (approximately $1 million at December 31, 1994), enters into
mortgage and real estate standby commitments for fees which may include the
receipt of equity interests and participates in real estate joint ventures
relating to properties being built for investment or sale.
USLIFE Real Estate Services Corporation ("Services") was incorporated in
1969. Services, a subsidiary of Realty, is an approved mortgagee for placement
and servicing of FHA insured mortgages. Services provides investment advice
and management services for the combined mortgage and real estate portfolios of
the Life Insurance Subsidiaries as well as certain other services for the Life
Insurance Subsidiaries, such as originating mortgage loans, arranging standby
commitments for fees and participations in real estate equity developments
which frequently include participation in the profits or ownership of the
underlying enterprises. Investment decisions, both as to overall investment
objectives such as diversification, yield and risk, and as to the specific
investment, remain the responsibility of the individual Life Insurance
Subsidiaries. USLIFE Real Estate Services Corporation also provides services
relating to mortgage portfolios of non-affiliated companies amounting to
approximately $5 million at December 31, 1994.
Securities Investment
USLIFE Advisers, Inc.
USLIFE Advisers, Inc. ("Advisers"), a wholly-owned subsidiary of USLIFE,
was incorporated in October 1972 to be the adviser to USLIFE Income Fund, Inc.
("Income Fund"), a closed-end mutual fund sponsored by USLIFE. Income Fund's
primary investment objective is to provide a high level of current income to
its shareholders. Income Fund made a public offering of its securities in
December 1972 and had net assets of approximately $52 million at December 31,
1994. Advisers' services to Income Fund are furnished under an investment
advisory contract which, as required by the Investment Company Act of 1940,
provides that its continuance is subject to specific approval at least annually
by a majority of the directors of Income Fund, including a majority of its
directors who are not parties to such agreement or interested persons of any
such party, or by vote of the holders of a majority of the outstanding voting
securities of Income Fund, and to termination by either party on 60 days'
notice. In 1994, Advisers earned fees of $375 thousand pursuant to this
contract.
USLIFE Equity Sales Corp.
USLIFE Equity Sales Corp. ("Equity Sales") was incorporated in 1968 as a
wholly-owned subsidiary of USLIFE. It is a member of the National Association
of Securities Dealers, Inc., and Security Investors Protection Corporation and
is registered as a broker-dealer in all 50 states and the District of Columbia.
Its principal business is the sale of securities in combination with the life
insurance products of the Life Insurance Subsidiaries.
Approximately 740 registered representatives, almost all of whom are also
licensed insurance agents, are affiliated with Equity Sales and are supervised
by its main office in New York City and by branch offices. Equity Sales works
with the Life Insurance Subsidiaries to recruit and train their agents to
become registered representatives of Equity Sales. Emphasis is placed on the
joint marketing of securities and insurance products.
<PAGE>27
Corporate Services
The "Corporate Services" category includes the operations of USLIFE
Systems Corporation, USLIFE Agency Services, Inc. and USLIFE Insurance Services
Corporation, each of which furnish services to USLIFE's subsidiaries.
USLIFE Systems Corporation, formed in 1971, provides data processing
support and related services to USLIFE and its subsidiaries. USLIFE Agency
Services, Inc., originally established in 1983, arranges for specialty
coverages not underwritten by the Life Insurance Subsidiaries to be marketed in
conjunction with the products of those companies, and provides other marketing-
related services to the Life Insurance Subsidiaries. USLIFE Insurance Services
Corporation, formed in 1986, develops and implements standard administrative
procedures for certain Life Insurance Subsidiaries.
Employees
USLIFE and its subsidiaries employed approximately 2,100 persons at
December 31, 1994.
Item 2. Properties.
Descriptions of properties of USLIFE and its subsidiaries are set forth in
Item 1.
Item 3. Legal Proceedings.
Reference is made to Part II, Item I, Legal Proceedings, in Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 for a
description of a federal court action entitled USLIFE Savings and Loan
Association v. Louis Wilcox, et al., which is incorporated by reference herein.
There have been no material developments in this matter since the date of that
report.
Reference is made to Part II, Item I, Legal Proceedings, in Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 for a
description of a purported class action entitled Hoban v. USLIFE Credit Life
Insurance Company, All American Life Insurance Company and Security of America
Life Insurance Company, which is incorporated by reference herein. There have
been no material developments in this matter since the date of that report.
On November 17, 1994, a purported class action (Smith et al. v. USLIFE Credit
Life Insurance Company, et al.) was filed in the United States District Court
for the Northern District of Illinois. The Complaint alleges that in
connection with purchases by plaintiffs of single premium term life insurance
from mortgage lenders in connection with mortgage loans, defendants
misrepresented the type of insurance offered as credit life insurance and sold
the term life insurance at premiums in excess of those permitted for credit
life insurance. The Complaint further alleges that upon prepayment of mortgage
loans plaintiffs did not receive refunds of unearned premiums, which they would
have been entitled to receive had they purchased credit life insurance. The
Complaint contains claims for damages for breach of contract, breach of
fiduciary duty, unfair and deceptive acts and practices, fraud, restitution and
unjust enrichment and civil claims under the Federal RICO statute. On January
10, 1995, defendants filed motions to dismiss the Complaint for, among other
reasons, failure to state a legally cognizable claim.
At this point in time the outcome of these suits is not predictable.
However, in the opinion of management, the ultimate resolution of these suits
is not likely to have a material adverse affect on the consolidated Equity
Capital of the Company.
<PAGE>28
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
USLIFE's Common Stock is traded on the New York, Chicago (formerly
Midwest), Pacific and London Stock Exchanges. Dividends for the years ended
December 31, 1994 and 1993 have been declared and paid to Common Stockholders
at the annual rates of $1.26 and $1.21 respectively (paid quarterly in 1994 and
1993). As of February 24, 1995 there were approximately 7,800 record holders
of the Common Stock. The following table sets forth the high and low sales
prices for the Common Stock as reported in the consolidated transaction system
for each quarterly period during the years indicated.
MARKET PRICE RANGES
(low to high)
1994 1993
____ ____
First quarter...... 37 1/2 - 41 3/8 36 1/8 - 42 5/8
Second quarter..... 34 7/8 - 39 5/8 35 3/4 - 41 1/2
Third quarter...... 33 1/8 - 37 3/4 39 3/4 - 43 7/8
Fourth quarter..... 30 7/8 - 35 7/8 36 1/2 - 45 3/4
See "Insurance Accounting" in Note 1 of Notes to Financial Statements and
Management's Discussion and Analysis of "Liquidity" herein, for information
concerning regulatory restrictions upon payment of dividends by the Life
Insurance Subsidiaries to the Company.
Item 8. Financial Statements and Supplementary Data.
See separate Index to Financial Statements and Financial Statement
Schedules on page 42. See Note 15 of Notes to Financial Statements as to
condensed quarterly results of operations.
<PAGE>29
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 10. Directors and Executive Officers of the Registrant.
Executive Officers of the Registrant
The executive officers of USLIFE are listed below. The executive
officers, after their initial election, are elected at USLIFE's annual Board of
Directors meeting to serve, unless removed, until the next such annual meeting,
scheduled for May 1995.
<TABLE>
<CAPTION>
Served as
Name Office Age such since
_____ ______ ____ __________
<S> ..... <C> <C> <C>
Gordon E. Crosby, Jr. Chairman of the Board; Chairman, USLIFE 74 (1)
Corporation Subsidiaries and USLIFE Income
Fund, Inc.
William A. Simpson President and Chief Executive Officer; 56 1-1-95
Director
Greer F. Henderson Vice Chairman and Chief Financial Officer 63 2-22-83
Christopher S. Ruisi Vice Chairman and Chief Administrative 45 5-18-93
Officer
A. Scott Bushey Executive Vice President-Corporate Planning 64 4-26-88
Arnold A. Dicke Executive Vice President-Product Actuary 53 4-28-92
Wesley E. Forte Executive Vice President-General Counsel 61 5-21-85
John D. Gavrity Executive Vice President-Financial Actuary 54 10-23-91
James M. Schlomann.. Executive Vice President-Financial Operations 46 10-18-93
Richard G. Hohn..... Senior Vice President - Investor Relations, 58 10-25-94
Secretary and Counsel
James B. Lynch, Jr. Senior Vice President-Controller 62 4-2-84
George W. McQueen Senior Vice President-Financial Operations 62 9-28-82
Richard J. Chouinard Chief Investment Officer; President and 62 4-26-88
Director, USLIFE Income Fund, Inc.
Frank J. Auriemmo, Jr. Vice President & Treasurer 53 9-25-84
James A. Bickler.. President - Chief Operating Officer, All 53 10-25-94
American Life
Ralph J. Cargiulo President and Chief Executive Officer, 60 5-18-93
United States Life
Phillip G. Faulkner President and Chief Executive Officer, 58 6-1-74
USLIFE Real Estate Services Corporation
James A. Griffin President and Chief Executive Officer, 55 10-1-88
Old Line Life
Thomas L. Hendricks President and Chief Executive Officer, 54 4-1-91
USLIFE Systems Corporation and USLIFE
Insurance Services Corporation
James E. Lee President and Chief Executive Officer, 62 1-1-80
USLIFE Credit Life
__________
</TABLE>
(1) Served as Chairman since March 21, 1967 and as Chief Executive Officer
from June 6, 1971 to December 31, 1994. Served as President from November 1966
to June 1971; from October 1974 to March 1976; from January 1984 to November
1987; from December 1988 to May 1993; and from April 1994 to December 1994.
<PAGE>30
All of USLIFE's executive officers devote their full time to the business
of USLIFE or its subsidiaries. With the exception of Messrs. Dicke, Hohn, and
Schlomann, all of the executive officers of USLIFE have been employed by USLIFE
or one of its subsidiaries or one of their predecessors for at least five
years. Mr. Simpson has served as President and Chief Executive Officer of
USLIFE Corporation since January 1995 and has served as a Director since March
1990. He served as President and Chief Executive Officer of All American Life
from April 1990 to October 1994 and as President - Chief Operating Officer of
the life insurance division of USLIFE Corporation from April 1994 to December
1994. Prior to his employment with USLIFE, Mr. Simpson served as President and
Chief Operating Officer, and a member of the board of directors of Transamerica
Occidental Life Insurance Company since at least January 1990. Mr. Henderson
has served as Vice Chairman and Chief Financial Officer and a Director since at
least January 1990. Mr. Ruisi has served as Vice Chairman and Chief
Administrative Officer since May 1993 and has been a Director since November
1992. Previously, Mr. Ruisi served as Senior Executive Vice President-
Administration since March 1990 and as Executive Vice President-Administration
since at least January 1990. Mr. Bushey has served as Executive Vice
President-Corporate Planning since at least January 1990. Mr. Dicke has served
as Executive Vice President - Product Actuary since April 1992. Previously, he
served as Vice President and Actuary for The Equitable Life Assurance Society
since April 1991, and as Consultant and Actuary with Tillinghast, a Towers
Perrin Company, from at least January 1990. Mr. Forte has served as Executive
Vice President-General Counsel since at least January 1990. Mr. Gavrity has
served as Executive Vice President-Financial Actuary since October 1991 and
previously served as Executive Vice President - Chief Actuary since at least
January 1990. Mr. Schlomann has served as Executive Vice President - Financial
Operations since October 1993. He previously served as Senior Vice President
and Controller with Frank B. Hall & Company, Inc. since at least January 1990.
Mr. Hohn has served as Senior Vice President - Investor Relations, Secretary
and Counsel since October 1994. He previously served as Senior Vice President
- Corporate Secretary and Counsel since May 1993, and as Vice President -
Corporate Secretary since April 1991. Prior to that date, he served as
consultant to the Life Insurance Council of New York, Inc., a trade association
of New York life insurance companies, since April 1990; and as an attorney in
private practice since at least January 1990. Mr. Lynch has served as Senior
Vice President-Controller since at least January 1990. Mr. McQueen has served
as Senior Vice President-Financial Operations since at least January 1990. Mr.
Chouinard, who has served as Chief Investment Officer of USLIFE since at least
January 1990, also serves as President and Chief Executive Officer of Advisers
and President and a Director of Income Fund. Mr. Auriemmo has served as Vice
President and Treasurer since at least January 1990. Mr. Bickler has served as
President - Chief Operating Officer of All American Life since October 1994.
He previously served as Executive Vice President - Marketing with that
subsidiary since March 1990. Mr. Cargiulo has served as President and Chief
Executive Officer of United States Life since May 1993. Previously, he served
as President- Chief Operating Officer of United States Life since October 1991.
Prior to that date, he served as Executive Vice President for individual
underwriting and insurance services of that subsidiary since November 1990 and
as Senior Vice President - Individual Insurance Services of United States Life
since at least January 1990. Mr. Faulkner has served as President and Chief
Executive Officer of USLIFE Real Estate Services Corporation since at least
January 1990. Mr. Griffin has served as President and Chief Executive Officer
of Old Line Life since at least January 1990. Mr. Hendricks has served as
President and Chief Executive Officer of USLIFE Systems Corporation since at
least January 1990 and as President and Chief Executive Officer of USLIFE
Insurance Services Corporation since April 1991. Mr. Lee has served as
President and Chief Executive Officer of USLIFE Credit Life since at least
January 1990.
Information regarding directors of the Registrant is incorporated by
reference to USLIFE Corporation's definitive proxy statement to be filed within
120 days after the end of USLIFE's fiscal year ended December 31, 1994 for use
in connection with the Annual Meeting of Shareholders to be held on May 16,
1995.
<PAGE>31
Item ll. Executive Compensation.
Information regarding executive compensation is incorporated by reference
to USLIFE Corporation's definitive proxy statement to be filed within 120 days
after the end of USLIFE's fiscal year ended December 31, 1994 for use in
connection with the Annual Meeting of Shareholders to be held on May 16, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information regarding beneficial ownership of USLIFE's voting securities
by directors, officers, and persons who, to the best knowledge of USLIFE, are
known to be the beneficial owners of more than 5% of any class of USLIFE's
voting securities as of March 31, 1995, is incorporated by reference to USLIFE
Corporation's definitive proxy statement to be filed within 120 days after the
end of USLIFE's fiscal year ended December 31, 1994 for use in connection with
the Annual Meeting of Shareholders to be held on May 16, 1995.
Item 13. Certain Relationships and Related Transactions.
Information regarding certain relationships and related transactions is
incorporated by reference to USLIFE Corporation's definitive proxy statement to
be filed within 120 days after the end of USLIFE's fiscal year ended December
31, 1994 for use in connection with the Annual Meeting of Shareholders to be
held on May 16, 1995.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1 and 2. Financial Statements and Financial Statement Schedules of
USLIFE and Subsidiaries.
See separate Index to Financial Statements and Financial Statement
Schedules on page 42.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration Statements on Form S-8
Nos. 33-40793 (filed June 23, 1991), 33-13999 (filed May 11, 1987) and 2-77278
(filed April 30, 1982):
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>32
(a) 3. Exhibits.
3 (i) - Restated Certificate of Incorporation, as amended,
incorporated herein by reference to USLIFE's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993.
3 (ii) - By-laws, as amended and restated.
4 (i) - See Exhibit 3(i).
(ii) - Indenture dated as of October 1, 1982 (9.15% Notes due
June 15, 1999, 6.75% Notes due January 15, 1998, and 6.375%
Notes due June 15, 2000) incorporated herein by reference
to USLIFE's Registration Statement No. 2-79559 on Form S-3.
Agreements or instruments with respect to long-term debt
which are not filed as exhibits hereto do not in total
exceed 10% of USLIFE's consolidated total assets and USLIFE
agrees to furnish a copy thereof to the Commission upon
request.
(iii) - Amended and Restated Rights Agreement, dated as of
September 27, 1994, between USLIFE Corporation and Chemical
Bank (successor by merger to Manufacturers Hanover Trust
Company), as Rights Agent, relating to Common Stock
Purchase Rights issued by USLIFE on July 10, 1986,
incorporated herein by reference to USLIFE's Report on Form
8-K dated October 12, 1994.
10 * (i) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1989.
* (ii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1989.
* (iii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (iv) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991.
* (v) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
* (vi) - Fifth Amendment dated as of February 1, 1993 to
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Gordon E. Crosby, Jr.,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1992.
<PAGE>33
* (vii) - Sixth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (viii) - Seventh Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
* (ix) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1989.
* (x) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xi) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (xii) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991.
* (xiii) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
* (xiv) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (xv) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
* (xvi) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1989.
* (xvii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and Wesley E. Forte, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xviii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990.
* (xix) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1993.
<PAGE>34
* (xx) - Fourth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993.
* (xxi) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994.
* (xxii) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1989.
* (xxiii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and John D. Gavrity, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xxiv) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990.
* (xxv) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1991.
* (xxvi) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1992.
* (xxvii) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993.
* (xxviii) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994.
* (xxix) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1989.
* (xxx) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1989.
* (xxxi) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (xxxii) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991.
<PAGE>35
* (xxxiii) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
* (xxxiv) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (xxxv) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
* (xxxvi) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1989.
* (xxxvii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and A. Scott Bushey, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xxxviii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990.
* (xxxix) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1991.
* (xl) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992.
* (xli) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993.
* (xlii) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994.
* (xliii) - Employment contract dated as of April 16, 1990 between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (xliv) - First Amendment dated as of May 1, 1991 to employment
contract dated as of April 16, 1990 between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991.
* (xlv) - Second Amendment dated as of May 1, 1992 to employment
contract dated as of April 16, 1990, as amended, between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
<PAGE>36
* (xlvi) - Third Amendment dated as of October 1, 1992 to
employment contract dated as of April 16, 1990, as amended,
between USLIFE Corporation and William A. Simpson,
incorporated herein by reference to USLIFE's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1992.
* (xlvii) - Third Amendment dated as of May 1, 1993 to employment
contract dated as of April 16, 1990, as amended, between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (xlviii) - Fourth Amendment dated as of May 1, 1994 to employment
contract dated as of April 16, 1990, as amended, between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
(il) - Lease dated as of December 30, 1986 between The United
States Life Insurance Company In the City of New York and
RREEF USA Fund-III for the lease of a portion of 125 Maiden
Lane, New York, New York, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1986.
(l) - Amendment to Lease dated August 31, 1988 to Lease dated
as of December 30, 1986 between The United States Life
Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New
York, New York, incorporated herein by reference to
USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1988.
(li) - Second Amendment to Lease dated November 16, 1988 to
Lease dated as of December 30, 1986 between The United
States Life Insurance Company In the City of New York and
RREEF USA Fund-III for the lease of a portion of 125 Maiden
Lane, New York, New York, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1988.
(lii) - Lease dated May 21, 1987 between The United States Life
Insurance Company In the City of New York and Commercial
Realty & Resources Corp. for the lease of premises at the
Jumping Brook Corporate Office Park in Neptune, New Jersey,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1988.
(liii) - February 9, 1989 Amendment to Lease dated May 21, 1987
between The United States Life Insurance Company In the
City of New York and Commercial Realty & Resources Corp.
for the lease of premises at the Jumping Brook Corporate
Office Park in Neptune, New Jersey, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1988.
* (liv) - 1981 Stock Option Plan, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1981.
* (lv) - 1978 Stock Option Plan, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1980.
* (lvi) - USLIFE Corporation Deferred Compensation Plan, as
amended February 28, 1995.
* (lvii) - Book Unit Plan, as amended.
* (lviii) - USLIFE Corporation Retirement Plan for Outside Directors
(as amended September 25, 1990).
* (lix) - USLIFE Corporation Restricted Stock Plan, as amended
September 27, 1994.
<PAGE>37
* (lx) - USLIFE Corporation 1991 Stock Option Plan, as amended.
* (lxi) - USLIFE Corporation Non-Employee Directors' Stock Option
Plan, incorporated herein by reference to Exhibit 4(a) to
USLIFE's Registration Statement No. 33-53265 on Form S-8
dated April 25, 1994.
* (lxii) - Annual Incentive Plan, as amended October 25, 1994, for
Selected Key Officers of USLIFE Corporation and its
Subsidiaries.
* (lxiii) - USLIFE Corporation Deferred Compensation Plan (as
amended November 16, 1993).
* (lxiv) - USLIFE Corporation 1993 Long-Term Incentive Award
Guidelines, as amended.
* (lxv) - USLIFE Corporation Supplemental Employee Savings and
Investment Plan.
* (lxvi) - USLIFE Corporation Supplemental Retirement Plan.
* (lxvii) - Trust Agreement made as of September 25, 1990 among
USLIFE Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank) and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
certain employment contracts, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1990.
* (lxviii) - Trust Agreement made as of September 25, 1990 among
USLIFE Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank) and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
the USLIFE Corporation Supplemental Retirement Plan,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1990.
* (lxix) - Trust Agreement made as of September 25, 1990 among
USLIFE Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank) and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
the USLIFE Corporation Retirement Plan for Outside
Directors, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1990.
12 - Computations of ratios of earnings to fixed charges.
21 - List of Subsidiaries.
23 - Consent of Independent Certified Public Accountants (see
page 39).
27 - Financial Data Schedule.
99 (i) - Annual Report on Form 11-K of USLIFE Corporation
Employee Savings and Investment Plan for the plan year
ended December 31, 1994 (to be filed within 120 days of
fiscal year end of Plan).
99 (ii) - Trust Agreement made as of December 6, 1990 among USLIFE
Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank), and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
the USLIFE Corporation Retirement Plan, incorporated herein
by reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1990.
* Indicates a management contract or compensatory plan or arrangement.
<PAGE>38
(b) Reports on Form 8-K.
A Report on Form 8-K was filed on behalf of the Registrant on October 12,
1994, reporting the Board of Directors' approval of the By-Laws of USLIFE
Corporation, as amended and restated on May 17, 1994 and September 27, 1994,
and the Amended and Restated Rights Agreement, dated September 27, 1994,
between USLIFE Corporation and Chemical Bank, the successor by merger to
Manufacturers Hanover Trust Company, as Rights Agent.
<PAGE>39
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
USLIFE Corporation:
We consent to the incorporation by reference in Registration Statements
Nos. 33-18287, 33-8489, 33-58944, 33-29934, 33-17126, 33-67344 and 33-9159 on
Form S-3 relative to Debt Securities, and common stock, respectively; the post
effective amendment to Registration Statement No. 33-29934 on Form S-3 relative
to Debt Securities; the post effective amendment to Registration Statement No.
33-9159 on Form S-3 relative to common stock; the post effective amendments to
Registration Statement Nos. 2-93655 and 33-11019 on Form S-3 relative to the
General Agents Incentive Compensation Plan; Registration Statement No. 33-45377
on Form S-3 relative to the United States Life Insurance Company Retirement
Plan for General Agents and Producers; the post effective amendments to
Registration Statement No. 33-17126 relative to Debt Securities; Registration
Statement No. 33-40793 on Form S-3 relative to the 1991 Stock Option Plan;
Registration Statement No. 33-53265 on Form S-8 relative to the USLIFE
Corporation Non-Employee Directors' Stock Option Plan; and the post effective
amendment to Registration Statement Nos. 2-63159, 2-32606 and 2-77278 on Form
S-8 relative to the Stock Option Plans and Registration Statement Nos. 2-75011
and 33-13999 on Form S-8 relative to the Employee Savings and Investment Plan
of USLIFE Corporation of our report dated February 28, 1995, relating to the
consolidated balance sheets of USLIFE Corporation and subsidiaries as of
December 31, 1994 and 1993 and the related statements of consolidated income,
equity capital, and cash flows for each of the years in the three-year period
ended December 31, 1994 which report appears in this December 31, 1994 Annual
Report on Form 10-K of USLIFE Corporation. Our report refers to changes in
accounting to adopt the provisions of the Financial Accounting Standards
Board's Statements of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" and No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions."
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
March 28, 1995
345 Park Avenue
New York, New York
<PAGE>40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
USLIFE Corporation
(Registrant)
Dated: March 28, 1995
By: /s/ Gordon E. Crosby, Jr.
_____________________________
(Gordon E. Crosby, Jr.,
Chairman of the Board)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
/s/ Gordon E. Crosby, Jr. Chairman of the Board March 28, 1995
____________________________________
(Gordon E. Crosby, Jr.)
/s/ William A. Simpson President - Chief Executive
____________________________________ Officer; Director (Principal March 28, 1995
(William A. Simpson) Executive Officer)
Vice Chairman of the
/s/ Greer F. Henderson Board and Chief
____________________________________ Financial Officer March 28, 1995
(Greer F. Henderson)
Vice Chairman of the
/s/ Christopher S. Ruisi Board and Chief Administrative
____________________________________ Officer March 28, 1995
(Christopher S. Ruisi)
Senior Vice President -
/s/ James B. Lynch, Jr. Controller (Principal
____________________________________ Accounting Officer) March 28, 1995
(James B. Lynch, Jr.)
</TABLE>
<PAGE>41
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
/s/ Kenneth Black, Jr.
____________________________________ Director March 28, 1995
(Kenneth Black, Jr.)
/s/ William J. Catacosinos
____________________________________ Director March 28, 1995
(William J. Catacosinos)
/s/ Austin L. D'Alton
____________________________________ Director March 28, 1995
(Austin L. D'Alton)
____________________________________ Director March 28, 1995
(Charles A. Davis)
/s/ John R. Galvin
____________________________________ Director March 28, 1995
(John R. Galvin)
/s/ Robert E. Grant
____________________________________ Director March 28, 1995
(Robert E. Grant)
/s/ Thomas H. Lenagh
____________________________________ Director March 28, 1995
(Thomas H. Lenagh)
/s/ Robert H. Osborne
____________________________________ Director March 28, 1995
(Robert H. Osborne)
/s/ Eben W. Pyne
____________________________________ Director March 28, 1995
(Eben W. Pyne)
/s/ John W. Riehm
____________________________________ Director March 28, 1995
(John W. Riehm)
/s/ Franklin R. Saul
____________________________________ Director March 28, 1995
(Franklin R. Saul)
/s/ Robert L. Shafer
____________________________________ Director March 28, 1995
(Robert L. Shafer)
/s/ William G. Sharwell
____________________________________ Director March 28, 1995
(William G. Sharwell)
/s/ Beryl W. Sprinkel
____________________________________ Director March 28, 1995
(Beryl W. Sprinkel)
/s/ Pinkney C. Walker
____________________________________ Director March 28, 1995
(Pinkney C. Walker)
</TABLE>
<PAGE>42
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<CAPTION>
Page
____
<S> <C>
Selected Financial Data for the five years ended December 31, 1994...................... 2
Independent Auditors' Report............................................................ 43
Consolidated balance sheets as of December 31, 1994 and 1993............................ 44
Statements of consolidated income for the three years ended December 31, 1994........... 46
Statements of consolidated cash flows for the three years ended December 31, 1994....... 47
Statements of consolidated Equity Capital for the three years ended December 31, 1994 48
Notes to financial statements........................................................... 49
Schedule of the Registrant:
(A) Schedule II - Condensed Financial Information of Registrant
(incorporated in Note 14 of Notes to Financial Statements).................
Schedules of the Registrant and Consolidated Subsidiaries:
(A) Schedule I - Summary of investments-other than investments in related parties
(incorporated in Note 11 of Notes to Financial Statements)..................
(B) Schedule III - Supplementary insurance information (incorporated in Note 13 of
Notes to Financial Statements).............................................
(C) Schedule IV - Reinsurance (incorporated in Note 10 of Notes to Financial
Statements)................................................................
</TABLE>
<PAGE>43
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
USLIFE Corporation:
We have audited the accompanying consolidated balance sheets of USLIFE
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
statements of consolidated income, equity capital, and cash flows for each of
the years in the three-year period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of USLIFE
Corporation and subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for debt and equity securities in 1994
to adopt the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." As discussed in Notes 1 and 5 to the
consolidated financial statements, the Company changed its method of accounting
for postretirement benefits other than pensions in 1992 to adopt the provisions
of the Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions."
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
February 28, 1995
345 Park Avenue
New York, New York
<PAGE>44
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
<CAPTION>
December 31
____________________________
1994 1993
____ ____
(Amounts in Thousands)
<S> <C> <C>
Cash:
On hand and in demand accounts..................... $ 51,878 $ 60,321
Restricted funds held in escrow, etc. ............. 1,653 1,040
__________ __________
53,531 61,361
__________ __________
Invested assets (Notes 1 and 11):
Fixed maturities available for sale:
At market (adjusted cost, $5,190,230)............ 4,937,867 -
At lower of aggregate adjusted cost or market
(market, $5,132,024)........................... - 4,751,681
Equity securities, at market (adjusted cost,
1994: $5,344; 1993: $ 9,234)..................... 4,583 9,205
Mortgage loans..................................... 319,618 361,095
Real estate........................................ 41,688 43,434
Policy loans....................................... 283,088 282,090
Other long-term investments........................ 7,400 7,534
Short-term investments............................. 129,335 68,124
__________ __________
Total invested assets................. 5,723,579 5,523,163
__________ __________
Total cash and invested assets........ 5,777,110 5,584,524
__________ __________
Other amounts receivable:
Due and uncollected premiums....................... 53,678 52,283
Investment income due and accrued.................. 126,143 117,036
Reinsurance receivables - paid claims (Note 10).... 8,865 11,914
Other reinsurance recoverable amounts (Note 10).... 128,252 123,009
Other receivables.................................. 37,227 29,448
__________ __________
354,165 333,690
Less: Reserve for uncollectible receivables........ 23,130 23,117
__________ __________
Net other amounts receivable...... 331,035 310,573
__________ __________
Property and equipment:
Land............................................... 50 50
Buildings and improvements......................... 7,913 8,037
Furniture and equipment............................ 41,357 40,113
__________ __________
49,320 48,200
Less: Accumulated depreciation..................... 37,367 34,444
__________ __________
Net property and equipment........ 11,953 13,756
__________ __________
Deferred policy acquisition costs (Note 1)............. 793,145 741,927
Other assets (Note 1).................................. 91,019 89,461
__________ __________
Total assets...................... $7,004,262 $6,740,241
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>45
<TABLE>
LIABILITIES AND EQUITY CAPITAL
<CAPTION>
December 31
___________________________
1994 1993
____ ____
LIABILITIES (Amounts in Thousands)
<S> <C> <C>
Future policy benefits (Note 1):
Life....................................................... $1,254,879 $1,196,265
Accident and health........................................ 277,117 257,192
Policyholder account balances (Note 1)......................... 3,641,393 3,322,265
Supplementary contracts without life contingencies............. 8,329 6,385
Policyholder dividend accumulations............................ 20,178 20,106
Policy and contract claims..................................... 155,048 155,629
Other policy and contract liabilities.......................... 31,265 28,992
Current federal income taxes (Notes 1 and 4)................... 2,647 (247)
Deferred federal income taxes (Notes 1 and 4).................. (71,665) 25,305
Notes payable (Note 2)......................................... 196,500 65,500
Current maturities of long-term debt (Note 3).................. - 100,000
Long-term debt (Note 3)........................................ 349,360 349,235
Accounts payable and accrued liabilities....................... 250,577 234,577
__________ __________
Total liabilities......................... 6,115,628 5,761,204
__________ __________
Deferred income................................................ 10,746 13,008
__________ __________
Contingent liabilities and commitments (Note 9)
NON-REDEEMABLE PREFERRED STOCKS, COMMON STOCK, and
OTHER SHAREHOLDERS' EQUITY (Notes 1, 4, 6, and 7)
Preferred stock-Series A (authorized and outstanding, 1994:
4,653 shares; 1993: 4,815 shares)............................. 465 482
Preferred stock-Series B (authorized and outstanding, 1994:
2,003 shares; 1993: 2,050 shares)............................. 100 103
Preferred stock-undesignated................................... - -
Common stock (authorized, 60,000,000 shares; issued, 1994:
38,310,490 shares; 1993: 38,308,823 shares)................... 38,310 38,309
Paid-in surplus................................................ 131,823 125,268
Net unrealized loss on securities (Note 1)..................... (156,248) -
Net unrealized loss on marketable equity securities (Note 1)... - (29)
Retained earnings.............................................. 1,210,078 1,142,694
__________ __________
1,224,528 1,306,827
Less: Treasury stock, at cost.................................. 339,972 339,825
Deferred compensation (Note 7)........................... 6,668 973
__________ __________
Total non-redeemable preferred stocks, common stock,
and other shareholders' equity ("Equity Capital")...... 877,888 966,029
__________ __________
Total liabilities and Equity Capital.................. $7,004,262 $6,740,241
========== ==========
</TABLE>
<PAGE>46
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Three Years Ended December 31, 1994
(Amounts in Thousands except Per Share Data)
<CAPTION>
Year Ended December 31
__________________________________________
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Premiums:
Life and annuities................................................ $ 494,908 $ 455,170 $ 426,621
Accident and health............................................... 470,570 489,136 499,773
Consideration for supplementary contracts and immediate annuities..... 29,786 18,397 24,755
Other consideration................................................... 166,063 153,539 139,383
Net investment income (Note 12)....................................... 461,494 444,646 414,436
Realized gains (losses) on investments................................ (1,380) 8,516 (2,580)
Other income.......................................................... 29,746 30,634 27,064
__________ __________ _________
Total income............................................. 1,651,187 1,600,038 1,529,452
__________ __________ _________
Death and other benefits.............................................. 727,611 737,331 740,926
Increase in future policy benefits.................................... 79,268 39,830 34,792
Interest credited to policyholder account balances.................... 194,036 183,737 173,538
Amortization of deferred policy acquisition costs..................... 159,702 151,851 131,840
Commissions........................................................... 138,373 129,822 125,448
General expenses...................................................... 133,225 134,829 150,298
Insurance taxes and licenses.......................................... 32,697 35,124 30,602
Interest on notes payable............................................. 11,239 5,716 7,897
Interest on long term debt............................................ 24,388 26,676 25,908
Dividends to policyholders............................................ 3,651 3,551 3,866
__________ __________ _________
Total benefits and expenses.............................. 1,504,190 1,448,467 1,425,115
__________ __________ _________
Income from operations before related income taxes................ 146,997 151,571 104,337
Federal income taxes (Note 4):
Current........................................................... 63,649 74,053 63,420
Deferred.......................................................... (12,837) (19,639) (28,695)
__________ __________ _________
50,812 54,414 34,725
__________ __________ _________
Income before cumulative effect of accounting change.................. 96,185 97,157 69,612
Cumulative effect of accounting change for years prior to 1992, net
of applicable income taxes (Notes 1 and 5)........................ - - (37,990)
__________ __________ _________
Net income............................................................ 96,185 97,157 31,622
Dividends on Series C Preferred Stock................................. - - 197
__________ __________ __________
Net income applicable to common and common equivalent shares.......... $ 96,185 $ 97,157 $ 31,425
========== ========== ==========
INCOME PER SHARE (Note 1):
Income before cumulative effect of accounting change.............. $ 4.18 $ 4.25 $ 3.05
Cumulative effect of accounting change............................ - - (1.67)
__________ __________ _________
Net income........................................................ $ 4.18 $ 4.25 $ 1.38
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>47
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Three Years Ended December 31, 1994
(Amounts in Thousands)
<CAPTION>
Year Ended December 31
___________________________________________
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 96,185 $ 97,157 $ 31,622
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change................ - - 57,560
Change in liability for future policy benefits........ 73,048 53,008 26,946
Interest credited to policyholder account balances.... 194,036 183,737 173,538
Amounts assessed from policyholder account balances... (144,726) (130,757) (118,813)
Additions to deferred policy acquisition costs........ (205,099) (187,924) (188,859)
Amortization of deferred policy acquisition costs..... 159,702 151,851 131,840
Additions to deferred charges......................... (6,876) (5,633) (3,077)
Deferred federal income taxes (net)................... (12,836) (19,638) (48,267)
Depreciation and amortization......................... 12,706 12,668 12,924
Change in amounts due policyholders................... 5,212 (25,584) 7,253
Change in other liabilities and amounts receivable.... 6,799 (27,694) (3,808)
Net realized capital losses (gains)................... 1,380 (8,516) 2,580
Change in restricted cash............................. (613) 393 342
Other, net............................................ (1,057) 5,225 (19,255)
__________ __________ __________
Total adjustments................................ 81,676 1,136 30,904
__________ __________ __________
Net cash provided by operating activities... 177,861 98,293 62,526
__________ __________ __________
Cash flows from investing activities:
Change in policy loans.................................. (998) 1,794 2,275
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................... 1,071,521 1,208,973 821,965
Equity securities................................... 1,602 11,328 7,445
Mortgage loan principal receipts.................... 47,587 31,751 29,357
Real estate......................................... 14,371 5,543 6,033
Other long term investments......................... 266 1,339 6,282
Expenditures for property and equipment................. (4,608) (4,393) (4,879)
Cost of investments purchased:
Fixed maturities.................................... (1,507,082) (1,751,320) (1,550,072)
Mortgage loans...................................... (17,769) (26,238) (15,006)
Real estate......................................... (1,487) (2,821) (9,578)
Other long term investments......................... (131) (1,380) (3,692)
Net (purchases) or sales of short term investments.. (61,211) 30,797 3,799
Other, net............................................ 1,193 1,812 431
__________ __________ __________
Net cash used in investing activities....... (456,746) (492,815) (705,640)
__________ __________ __________
Cash flows from financing activities:
Issuance of debt securities........................... - 300,000 -
Borrowings under credit facility (Note 2)............. 150,000 - 150,000
Increase (decrease) in notes payable.................. (19,000) (112,400) 23,900
Dividends to shareholders............................. (28,801) (27,361) (25,818)
Acquisition of treasury stock......................... (7,230) (2,621) (7,256)
Repayment of long term debt........................... (100,000) (200,000) (149,877)
Change in policyholder account balances............... 269,465 416,696 647,463
Other, net............................................ 6,008 5,955 2,756
__________ __________ __________
Net cash provided by financing activities... 270,442 380,269 641,168
__________ __________ __________
Net change in cash.................................. (8,443) (14,253) (1,946)
Cash at beginning of year............................. 60,321 74,574 76,520
__________ __________ __________
Cash at end of year................................... $ 51,878 $ 60,321 $ 74,574
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>48
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EQUITY CAPITAL
For the Three Years Ended December 31, 1994
(Number of Shares and Amounts in Thousands)
<CAPTION>
Year Ended December 31
______________________________________________________________________
Number of Shares Amounts
__________________________________ _________________________________
1994 1993 1992 1994 1993 1992
____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Non-redeemable preferred stocks, common stock, and
other shareholders' equity (Note 6):
Preferred stock, Series A:
Issued, beginning of year....................... 5 6 6 $ 482 $ 563 $ 642
Shares converted................................ - (1) - (17) (81) (79)
_______ _______ _______ _________ ________ ________
Issued, end of year............................. 5 5 6 465 482 563
======= ======= ======= ========= ======== ========
Preferred stock, Series B:
Issued, beginning of year....................... 2 2 2 103 113 120
Shares converted................................ - - - (3) (10) (7)
_______ _______ _______ _________ ________ ________
Issued, end of year............................. 2 2 2 100 103 113
======= ======= ======= ========= ======== ========
Common stock:
Issued, beginning of year....................... 38,309 38,256 25,411 38,309 38,256 25,411
Options exercised and preferred shares converted 1 53 100 1 53 100
Three-for-two split of common stock............. - - 12,745 - - 12,745
_______ _______ _______ _________ ________ ________
Issued, end of year............................. 38,310 38,309 38,256 38,310 38,309 38,256
======= ======= ======= ========= ======== ========
Paid-in surplus:
Balance, beginning of year...................... 125,268 121,491 130,141
Options, conversions, and restricted stock plan. 358 1,469 3,103
Utilization of treasury shares.................. 6,197 2,308 1,021
Three-for-two split of common stock............. - - (12,774)
_________ ________ ________
Balance, end of year............................ 131,823 125,268 121,491
========= ======== ========
Net unrealized losses on securities (Note 1):
Balance, beginning of year...................... (29) (165) (13)
Impact of adoption of SFAS 115, January 1, 1994. 171,436 - -
Net change during year.......................... (327,655) 136 (152)
_________ ________ ________
Balance, end of year............................ (156,248) (29) (165)
========= ======== ========
Retained earnings:
Balance, beginning of year...................... 1,142,694 1,072,898 1,067,094
Net income...................................... 96,185 97,157 31,622
Dividends declared:
Cash:
Preferred stock:
Series A ($4.50 per share)......... (22) (25) (28)
Series B ($5.00 per share)......... (10) (11) (10)
Series C ($3.33 per share)......... - - (197)
Common stock (1994, $1.26 per share;
1993, $1.21 per share; 1992, $1.14
per share)............................ (28,769) (27,325) (25,583)
_________ _________ _________
Balance, end of year............................ 1,210,078 1,142,694 1,072,898
========= ========= =========
Treasury stock (Note 6):
Balance, beginning of year...................... 15,650 15,753 15,592 339,825 340,382 334,606
Shares acquired during year .................... 219 66 240 7,230 2,621 7,256
Shares utilized for employee, officer
and director benefit plans and
dividend reinvestment plan..................... (376) (169) (79) (7,083) (3,178) (1,480)
_______ _______ _______ _________ _________ ________
Balance, end of year............................ 15,493 15,650 15,753 339,972 339,825 340,382
======= ======= ======= ========= ========= ========
Deferred compensation (Note 7):
Balance, beginning of year...................... 973 2,333 4,353
Deferred compensation arising from awards under
restricted stock plan during year, less
forfeitures.................................... 7,736 758 -
Amortization.................................... (2,041) (2,118) (2,020)
_________ _________ ________
Balance, end of year............................ 6,668 973 2,333
========= ========= ========
Total non-redeemable preferred stocks, common stock,
and other shareholders' equity ("Equity Capital")...... $ 877,888 $ 966,029 $890,441
========= ========= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>49
USLIFE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Changes in Accounting Principles
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), entitled "Accounting for Certain
Investments in Debt and Equity Securities." SFAS 115 requires that debt
securities which may be sold as part of the Company's asset/liability
management strategy be classified as "available for sale" and carried at market
value in the Consolidated Balance Sheet, commencing with the date of adoption
of the Statement. The Company's portfolio of debt securities had been
similarly classified as "available for sale" prior to the adoption of SFAS 115,
but was carried at lower of aggregate adjusted cost or market value pursuant to
previous accounting standards. Since the aggregate market value of these
securities exceeded their adjusted cost at December 31, 1993, this
classification had no impact on Equity Capital at that date. The Company's
equity securities portfolio had been carried at market value in accordance with
previous accounting standards prior to the adoption of SFAS 115 and continues
to be carried at market value as required by the Statement.
As required by SFAS 115, the net impact of the initial adjustment to
market value of these securities, less corresponding adjustments to deferred
policy acquisition costs (required where market value differs from cost for
certain securities), certain policyholder liabilities, and deferred income
taxes, was recorded through a direct credit to "Net unrealized gains (losses)
on securities" included in Equity Capital as follows:
(Amounts in
Thousands)
Impact of adoption of SFAS 115:
Unrealized gain on debt securities at January 1, 1994......... $380,343
Less:
Adjustment of deferred policy acquisition costs............. 99,889
Increase in certain policyholder liabilities................ 16,706
________
Adjustment to Equity Capital before federal income tax........ 263,748
Adjustment of deferred federal income tax liability........... 92,312
________
Net adjustment to Equity Capital at January 1, 1994........... $171,436
========
SFAS 115 requires that unrealized gains and losses on available-for-sale
securities, other than those relating to a reduction in value determined to be
other than temporary, be recorded as direct charges and credits to "Net
unrealized gains (losses) on securities" included in Equity Capital.
Consequently, the recognition of these unrealized gains and losses has no
impact on net income.
Under both SFAS 115 and previous accounting standards, valuation reserves
(established through income statement charges) are maintained as an adjustment
to cost for investments, including "available for sale" securities, with a
reduction in value determined to be other than temporary. The cost and market
value of the Company's investments in securities are presented under
"Investments in Securities" below.
<PAGE>50
Also in 1994, the Company adopted Statement of Financial Accounting
Standards No. 112, ("SFAS 112") entitled "Employers' Accounting for
Postemployment Benefits." SFAS 112 requires advance recognition of non-
retirement benefits such as severance pay and health insurance continuation
when certain conditions are met. The adoption of SFAS 112 did not have a
material impact on the Company's reported financial position or results of
operations. Financial statements of previous years were not restated as a
result of the adoption of SFAS 112.
Effective as of the first quarter of 1993, the Company adopted Statement
of Financial Accounting Standards No. 113 ("SFAS 113"), entitled "Accounting
and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts."
SFAS 113 requires that assets and liabilities relating to reinsured contracts
be reported on a gross basis rather than net of the impact of reinsurance as
permitted under previous accounting standards. The Statement also establishes
guidelines for determining whether risk is transferred under a reinsurance
contract and requires reinsurance contracts which do not qualify under these
guidelines to be accounted for as deposits. As a result of the implementation
of SFAS 113, reinsurance receivables amounting to approximately $137 million
and $135 million are included in consolidated total assets at December 31, 1994
and 1993, respectively, including approximately $122 million and $118 million,
respectively, which would have been offset to various liability accounts under
previous accounting standards. Other than the required gross presentation of
reinsurance assets and liabilities, SFAS 113 did not have a material impact on
the Company's reported financial position or results of operations. Financial
statements of previous years were not restated as a result of the adoption of
SFAS 113. See Note 10 of Notes to Financial Statements for further information
regarding the Company's reinsurance contracts.
Effective January 1, 1992, the Company implemented new accounting
standards for non-pension postretirement benefits required by Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), entitled "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and recognized the
initial liability required by SFAS 106 by means of a one-time charge to net
income for "cumulative effect of accounting change." As required by SFAS 106,
this charge, which amounted to $38.0 million or $1.67 per share, was
retroactively recorded in the first quarter of 1992. See Note 5 of Notes to
Financial Statements for further information regarding non-pension
postretirement benefits.
Also in 1992, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), entitled "Accounting for Income Taxes," and
restated, as appropriate, the financial statements of previous years presented
to retroactively give effect to the accounting standards required by SFAS 109.
See Note 4 of Notes to Financial Statements for further information regarding
Federal income taxes.
Future Accounting Changes
In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 114, entitled "Accounting by
Creditors for Impairment of a Loan." Certain accounting and disclosure
requirements contained in Statement No. 114 were modified by FASB Statement No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," issued in October 1994. These statements must be adopted by
calendar year enterprises no later than 1995 and will require a writedown to
fair value, as defined by Statement No. 114, for certain mortgage loans and
similar investments where impairment results in a change in repayment terms.
Based on current evaluation of the Company's investments that are covered by
these Statements, they will not have a material impact on the Company's
reported financial position or results of operations. The Company will adopt
these Statements in the first quarter of 1995.
<PAGE>51
Basis of Consolidation
The consolidated financial statements include the accounts of USLIFE and
all of its subsidiaries (the "Company"). All subsidiaries are 100 percent
owned. All material intercompany accounts and transactions have been
eliminated.
Segment Information
The only reportable industry segment of the Company is "Life Insurance"
and the related information is presented below:
<TABLE>
<CAPTION>
Year Ended December 31, 1994
_____________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,625,751 $ 25,436 $1,651,187
Intersegment transfers......................... 4,217 (4,217) 0
__________ __________ __________
Total income...................... $1,629,968 $ 21,219 $1,651,187
========== ========== ==========
Income before taxes............................ $ 203,424 $ (56,427) $ 146,997
========== ========== ==========
Identifiable assets at December 31............. $6,874,956 $ 129,306 $7,004,262
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993
______________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,581,239 $ 18,799 $1,600,038
Intersegment transfers......................... 1,958 (1,958) 0
__________ __________ __________
Total income..................... $1,583,197 $ 16,841 $1,600,038
========== ========== ==========
Income before taxes............................ $ 206,011 $ (54,440) $ 151,571
========== ========== ==========
Identifiable assets at December 31............. $6,607,606 $ 132,635 $6,740,241
========== ========== ==========
</TABLE>
<PAGE>52
<TABLE>
<CAPTION>
Year Ended December 31, 1992
______________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,512,744 $ 16,708 $1,529,452
Intersegment transfers......................... 1,489 (1,489) 0
__________ __________ __________
Total income..................... $1,514,233 $ 15,219 $1,529,452
========== ========== ==========
Income before taxes............................ $ 159,301 $ (54,964) $ 104,337
========== ========== ==========
Identifiable assets at December 31............. $5,958,638 $ 136,634 $6,095,272
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1994 December 31, 1993 December 31, 1992
_____________________ _____________________ _____________________
Income Income Income
Total Before Total Before Total Before
Income Taxes Income Taxes Income Taxes
______ ______ ______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Life insurance industry segment:
Life insurance.................. $1,004,955 $ 73,005 $ 925,697 $ 65,909 $ 853,203 $ 54,081
Accident and health............. 506,278 12,855 528,765 12,758 538,192 (16,796)
Other........................... 118,735 117,564 128,735 127,344 122,838 122,016
__________ ________ __________ ________ __________ ________
$1,629,968 $203,424 $1,583,197 $206,011 $1,514,233 $159,301
========== ======== ========== ======== ========== ========
</TABLE>
The caption "Other" above consists principally of investment income and
capital gains attributable to Equity Capital.
Investments in Securities
The Company's investment management policies include continual monitoring
and evaluation of securities market conditions and circumstances relating to
its investment holdings which may result in the selection of investments for
sale prior to maturity. Securities may also be sold as part of the Company's
asset/liability management strategy in response to changes in interest rates,
resultant prepayment risk, and similar factors. Accordingly, the Company's
entire Fixed Maturity portfolio is classified as "available for sale". These
securities are carried in the accompanying consolidated balance sheets at
market value as of December 31, 1994 and at lower of aggregate adjusted cost or
market value at December 31, 1993. The Company's investments in preferred
stocks (other than redeemable preferred stocks) and common stocks ("Equity
Securities") are carried at market value in the accompanying consolidated
balance sheets at December 31, 1994 and 1993. The cost and market value of the
Company's consolidated investments in Fixed Maturities and Equity Securities at
December 31, 1994, 1993 and 1992 are presented below:
<PAGE>53
<TABLE>
<CAPTION>
Net
Unrealized
Adjusted Gain
Cost Market (Loss)
__________ ______ ________
(Amounts in Thousands)
<S> <C> <C> <C>
December 31, 1994:
Fixed Maturities........................ $ 5,190,230 $ 4,937,867 $(252,363)
Equity Securities....................... 5,344 4,583 (761)
_________
(253,124)
Adjustment of deferred
policy acquisition costs relating
to market value adjustment for
certain fixed maturities................ 5,821
Adjustment of certain policyholder
liabilities relating to market
value adjustment for certain
fixed maturities........................ 6,921
Tax effect................................ 84,134
_________
Net unrealized loss on securities
included in Equity Capital.............. $(156,248)
=========
December 31, 1993:
Fixed Maturities........................ $4,751,681 $5,132,024 $ 380,343
=========
Equity Securities....................... 9,234 9,205 (29)
=========
Net unrealized loss on equity
securities included in Equity Capital... $ (29)
=========
December 31, 1992:
Fixed Maturities........................ $4,160,486 $4,333,898 $ 173,412
=========
Equity Securities....................... 19,665 19,500 (165)
=========
Net unrealized loss on equity
securities included in Equity Capital... $ (165)
=========
</TABLE>
The changes in unrealized gains and losses on securities for the year
ended December 31, 1994, including the initial adjustment to Equity Capital at
January 1, 1994 resulting from the implementation of "mark to market"
accounting for available-for-sale securities as required by SFAS 115, are shown
below:
<PAGE>54
<TABLE>
<CAPTION>
January 1, Net Change December 31,
1994 During Year 1994
__________ ___________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Unrealized appreciation (depreciation) on
securities available for sale (a)................... $ 380,343 $ (633,467) $ (253,124)
Impact on other balance sheet accounts:
Deferred policy acquisition costs................... (99,889) 105,710 5,821
Policyholder liabilities............................ (16,706) 23,627 6,921
__________ __________ __________
Pre-tax adjustment to Equity Capital.................. 263,748 (504,130) (240,382)
Tax effect............................................ 92,312 (176,446) (84,134)
__________ __________ __________
Impact of implementation of SFAS 115
as of January 1, 1994................................ 171,436
After-tax adjustment to Equity Capital
relating to debt securities available for sale....... (327,684) (156,248)
Net unrealized loss on marketable equity
securities (b)....................................... (29) 29 --
__________ __________ __________
Net unrealized gain (loss) on securities.............. $ 171,407 $ (327,655) $ (156,248)
========== ========== ==========
</TABLE>
_____
(a) Excluding marketable equity securities at January 1, 1994.
(b) Included in "Net unrealized loss on securities" at December 31, 1994.
The classification of the Company's Fixed Maturity portfolio as "available
for sale" had no impact on Equity Capital at December 31, 1993 or 1992, when
these securities were carried at the lower of aggregate adjusted cost or market
value, since the aggregate market value of these securities exceeded their
adjusted cost at those dates.
Valuation reserves (established through income statement charges) are
maintained as an adjustment to cost for investments, including "available for
sale" securities, with a reduction in value determined to be other than
temporary.
At December 31, 1994, consolidated invested assets included approximately
$232 million (based on adjusted cost) of less than investment grade corporate
securities, based on ratings assigned by recognized rating agencies and
insurance regulatory authorities. Such investments had an aggregate market
value of approximately $228 million at December 31, 1994 and, based on market
value, represent approximately 3% of consolidated total assets at that date.
Approximately $21 million (at market) of these investments (adjusted cost, $22
million) are classified as problem securities at that date and, of that amount,
approximately $21 million (at market) represented securities in default at
December 31, 1994. Also at December 31, 1994, the book value of mortgage loans
included in consolidated total assets which were 60 days or more delinquent or
in foreclosure was approximately $9 million, and the book value of property
acquired through foreclosure of mortgage loans was approximately $30 million.
<PAGE>55
Realized gains and losses on the Company's consolidated investments in
Fixed Maturities and Equity Securities for the three years ended December 31,
1994 are summarized as follows:
<TABLE>
<CAPTION>
Pre-tax Realized Less
Gains (Losses) Amount
________________________ Net
Allocated to Realized
Fixed Equity Participating Tax Gains
Maturities Securities Policyholders Effect (Losses)
__________ __________ _____________ ________ _________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
1994................... $ (630) $ (923) $ 784 $ (818) $ (1,519)
1993................... 46,891 897 1,458 16,216 30,114
1992................... 23,094 1,584 1,070 8,027 15,581
========= ========= ======== ======== =========
</TABLE>
Pre-tax realized gains and losses shown above reflect provisions for
valuation of certain investments with decline in value determined to be other
than temporary. The cost of securities sold for purposes of determination of
realized gains or losses included in net income is based on the specific
identification method.
Pre-tax realized gains and losses on Fixed Maturities and Equity
Securities are reconciled to consolidated realized gains and losses on
investments as follows:
1994 1993 1992
__________ __________ __________
(Amounts in Thousands)
Realized gains (losses):
Fixed Maturities.............. $ (630) $ 46,891 $ 23,094
Equity Securities............. (923) 897 1,584
__________ __________ __________
(1,553) 47,788 24,678
Real estate, mortgage loans,
and other investments (a)... 173 (39,272) (27,258)
__________ __________ __________
Total......................... $ (1,380) $ 8,516 $ (2,580)
========== ========== ==========
(a) Reflects provisions for valuation to estimated net realizable value for
certain investments.
The adjusted cost and estimated market values of the Company's
consolidated investments in equity securities and debt securities at December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
December 31, 1994
___________________________________________________
Gross Gross Estimated
Adjusted Unrealized Unrealized Market
Cost Gains Losses Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Equity Securities.................................. $ 5,344 $ 87 $ 848 $ 4,583
========== ======== ======== ==========
Debt Securities available for sale:
U. S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 121,764 $ 843 $ 8,760 $ 113,847
Obligations of states and political subdivisions.. 32,852 36 2,360 30,528
Debt securities issued by foreign governments..... 201,667 798 15,942 186,523
Corporate securities.............................. 4,919,170 35,942 263,595 4,691,517
Redeemable preferred stocks....................... 44,112 1,381 706 44,787
__________ ________ ________ __________
Total fixed maturities and short term investments
("debt securities").......................... $5,319,565 $ 39,000 $291,363 $5,067,202
========== ======== ======== ==========
Amounts shown in balance sheet:
Fixed maturities.................................. $4,937,867
Short term investments............................ 129,335
__________
Total............................................. $5,067,202
==========
</TABLE>
<PAGE>56
<TABLE>
<CAPTION>
December 31, 1993
_________________________________________________
Gross Gross Estimated
Adjusted Unrealized Unrealized Market
Cost Gains Losses Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Equity Securities.................................. $ 9,234 $ 1,009 $ 1,038 $ 9,205
========== ======== ======== ==========
Debt Securities available for sale:
U. S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 95,871 $ 4,544 $ 727 $ 99,688
Obligations of states and political subdivisions.. 24,988 821 114 25,695
Debt securities issued by foreign governments..... 178,850 11,794 626 190,018
Corporate securities.............................. 4,471,446 370,509 10,569 4,831,386
Redeemable preferred stocks....................... 48,650 4,795 84 53,361
__________ ________ ________ __________
Total fixed maturities and short term investments
("debt securities").......................... $4,819,805 $392,463 $ 12,120 $5,200,148
========== ======== ======== ==========
Amounts shown in balance sheet:
Fixed maturities.................................. $4,751,681
Short term investments............................ 68,124
__________
Total............................................. $4,819,805
==========
</TABLE>
The adjusted cost and estimated market value of debt securities at
December 31, 1994 and 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
______________________ ______________________
Estimated Estimated
Adjusted Market Adjusted Market
Cost Value Cost Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Due in one year or less........................... $ 158,412 $ 167,173 $ 103,855 $ 110,109
Due after one year through five years............. 1,193,662 1,161,539 598,737 625,571
Due after five years through ten years............ 1,665,353 1,572,737 1,588,909 1,710,259
Due after ten years............................... 2,302,138 2,165,753 2,528,304 2,754,209
__________ __________ __________ __________
Total debt securities............................. $5,319,565 $5,067,202 $4,819,805 $5,200,148
========== ========== ========== ==========
</TABLE>
Proceeds from disposals of investments in debt securities (excluding short
term commercial paper) during 1994, 1993 and 1992 were $1.072 billion, $1.209
billion, and $824.1 million, respectively. During 1994, gross gains of $31.3
million and gross losses of $31.9 million were realized on such disposals.
During 1993, gross gains of $57.9 million and gross losses of $11.0 million
were realized on such disposals. During 1992, gross gains of $41.0 million and
gross losses of $17.9 million were realized on such disposals.
Short term investments are carried at cost, which approximates market
value.
<PAGE>57
Other Investments
Real estate is carried at the lower of depreciated cost or net realizable
value. Depreciation is calculated on a straight line basis with useful lives
varying based on the type of building. Policy loans and mortgages, other than
those with a decline in value determined to be other than temporary, are stated
at the aggregate of unpaid principal balances. Other long term investments are
stated at the lower of cost or their estimated net realizable value.
Insurance Accounting
Amounts for the life insurance subsidiaries are reported to regulatory
authorities on the basis of statutory accounting practices and have been
presented herein in conformity with generally accepted accounting principles
("GAAP").
Regulatory after-tax income and after-tax income in accordance with GAAP
of the life insurance subsidiaries for the three years ended December 31, 1994,
and regulatory Equity Capital and Equity Capital in accordance with GAAP of
such subsidiaries at December 31, 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
As Reported As Included in the Company's
on a Consolidated Financial Statements
Regulatory Basis in Accordance with GAAP
______________________________ _________________________________
1994 1993 1992 1994 1993 1992
______ ______ ______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
After-tax income for the year ended December 31 (a) $ 41,912 $ 88,850 $ 56,637 $ 134,216 $ 125,161 $ 107,939
======== ======== ======== ========== ========== ==========
Equity Capital at December 31...................... $542,672 $549,388 $525,322 $1,326,922 $1,375,920 $1,304,349
======== ======== ======== ========== ========== ==========
______
</TABLE>
(a) Amounts shown exclude after-tax capital gains (losses) of $(10.9) million,
$(1.3) million and $(15.5) million on a regulatory basis and $(0.9) million,
$7.1 million, and $(1.4) million on a GAAP basis in 1994, 1993 and 1992,
respectively. GAAP income above also excludes an after-tax charge in 1992 of
$21.5 million for "cumulative effect of accounting change" relating to the
adoption of FASB Statement No. 106 which had no impact on 1992 regulatory net
income. Both regulatory and GAAP after-tax income shown above for 1992 reflect
a charge equivalent to $10.6 million on an after-tax basis relating to
receivables from an Association Group Health marketing organization which
declared bankruptcy.
The 1994 decrease in regulatory after-tax income resulted primarily from a
44% increase in term insurance sales (based on annualized premiums). Statutory
accounting practices require acquisition costs on new business (including
commissions and underwriting and issue costs) to be charged to expense when
incurred. Additionally, statutory reserves initially established for term
policies exceed the corresponding amounts required under GAAP.
As a result of the appropriate adjustments, Equity Capital of the life
insurance subsidiaries prepared in accordance with GAAP exceeds that which was
prepared on a regulatory basis by $784.3 million, $826.5 million and $779.0
million, respectively, at December 31, 1994, 1993 and 1992. It should be noted
that the dividend paying capability of the life insurance subsidiaries is
generally limited by income before capital gains and losses and Equity Capital
as reported on a regulatory basis. Notice to or approval by regulatory
authorities is frequently required for dividends paid by insurance companies.
Loans to or advances from the life insurance subsidiaries to the parent company
may also be subject to regulatory approval requirements or limitations. At
December 31, 1994, the portion of the aggregate $1.327 billion Equity Capital
of the life insurance subsidiaries which was not available for transfer to the
parent company by dividend, loan, or advance or available for such transfer
only with approval of a third party ("Restricted Net Assets"), as a result of
the aforementioned regulatory requirements, amounted to $1.284 billion. Cash
dividends paid by all consolidated subsidiaries to the parent company totalled
$45.7 million, $61.2 million and $47.7 million for the years ended December 31,
1994, 1993 and 1992, respectively. Additionally, during 1993, securities with
market value of $21.6 million were transferred from a life insurance subsidiary
to the parent company and subsequently contributed to another life insurance
subsidiary in connection with the combination of the two subsidiaries'
operations. In addition to the 1992 cash dividends, investment securities with
market value of $26.3 million were transferred by dividend from a life
insurance subsidiary to the parent company.
<PAGE>58
Life Insurance
Deferred Policy Acquisition Costs
The costs of acquiring new business (principally commissions) and certain
costs of issuing policies (such as medical examinations and inspection reports)
and certain agency and marketing expenses, all of which vary with and are
primarily related to the production of new business, have been deferred. For
traditional life insurance policies, these costs are being amortized over the
premium-paying periods of the related policies in proportion to the ratio of
the annual premium revenue to the total anticipated premium revenue.
Anticipated premium revenue was estimated using the same assumptions which were
used for computing liabilities for future policy benefits. For universal life-
type policies, these costs are being amortized over the lives of the policies
in relation to the incidence of gross profits arising principally from
investment, mortality and expense margins. Deferred policy acquisition costs
are reviewed to determine that the unamortized portion of such costs does not
exceed recoverable amounts, after considering anticipated investment income.
Details with respect to consolidated deferred policy acquisition costs and
premium income for life insurance and annuities and accident and health
insurance for the three years ended December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Deferred Policy Acquisition Costs
___________________________________
Life and Accident
Annuities and Health Total
_________ __________ _____
(Amounts in Thousands)
<S> <C> <C> <C>
Balance, January 1, 1992...................... $557,162 $ 91,673 $648,835
Additions................................. 141,190 47,669 188,859
Amortization.............................. (88,272) (43,568) (131,840)
_______ ________ ________
Balance, December 31, 1992.................... 610,080 95,774 705,854
Additions................................. 141,416 46,508 187,924
Amortization.............................. (108,609) (43,242) (151,851)
________ ________ ________
Balance, December 31, 1993.................... 642,887 99,040 741,927
Additions................................. 157,953 47,146 205,099
Adjustment relating to net unrealized
loss on certain securities............... 5,821 - 5,821
Amortization.............................. (116,308) (43,394) (159,702)
________ ________ ________
Balance, December 31, 1994.................... $690,353 $102,792 $793,145
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Premium Income
__________________________________________
Life and Annuities Accident and Health
____________________ ____________________
First Year Renewal First Year Renewal
__________ _______ __________ _______
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Year ended December 31
1992....................................... $ 96,042 $330,579 $203,223 $296,550
1993....................................... 101,648 353,522 150,635 338,501
1994....................................... 119,482 375,426 147,096 323,474
======== ======== ======== ========
</TABLE>
<PAGE>59
Future Policy Benefits
Liabilities for future policy benefits relating to traditional life
insurance policies have been computed by the net level premium method based on
estimated future investment yield, mortality and termination experience.
Interest rate assumptions for most non-interest sensitive life insurance have
ranged from 2-1/2 to 3-1/2 percent on issues of 1959 and prior, to 5-1/2 to 5-
7/8 percent on issues of 1967 and subsequent years. (On certain products, the
rate ranges as high as 8-3/4 percent.) Mortality has been calculated
principally on an experience multiple applied to select and ultimate tables in
common usage in the industry. Estimated terminations have been determined
principally based on industry tables.
Universal Life-Type and Investment Contracts
Revenues for universal life insurance, other interest-sensitive life
insurance, and investment contracts include policy charges for administration
and cost of insurance, and surrender charges assessed against policyholder
account balances during the period. Premiums received on these products are
treated as policyholder deposits rather than revenues. The liability for
policyholder account balances represents the accumulated amounts which accrue
to the benefit of policyholders, and reflects interest credited at rates which
are subject to periodic adjustment. Charges to expense relating to these
policies and contracts include such interest credited as well as benefits
during the period in excess of related policy account balances.
Participating Policies
Participating policies subject to profit limitations approximate 2.2
percent of the individual life insurance in force at December 31, 1994 and 6.6
percent of individual life insurance premium income in 1994. The portion of
earnings therefrom that inures to the benefit of the participating
policyholders is not available to shareholders. Undistributed earnings payable
to participating policyholders are included as a liability in the Consolidated
Balance Sheets.
All participating policies approximate 2.3 percent of the total individual
life insurance in force at December 31, 1994 and 6.9 percent of individual life
insurance premium income in 1994. The provisions for dividends to
policyholders in the statements of consolidated income include dividends paid
or payable on participating policies.
Liability for Unpaid Claims
The liability for unpaid claims and claim adjustment expenses is based on
the estimated amount payable on claims reported prior to the balance sheet date
which have not yet been settled, claims reported subsequent to the balance
sheet date which have been incurred during the period then ended, and an
estimate (based on prior experience) of incurred but unreported claims relating
to such period.
Activity in the liability for unpaid claims and claim adjustment expenses
for the Company's health and disability coverages is summarized as follows:
<PAGE>60
1994 1993 1992
________ ________ ________
(Amounts in Thousands)
Balance at January 1................. $ 81,638 $104,222 $ 89,214
Less: reinsurance recoverables....... 4,021 13,831 9,809
________ ________ ________
Net balance at January 1............. 77,617 90,391 79,405
________ ________ ________
Amount incurred (a).................. 334,699 370,409 414,687
Amount paid, related to:
Prior years (b).................. 94,083 121,470 117,611
Current year..................... 248,721 261,713 286,090
________ ________ ________
Total...................... 342,804 383,183 403,701
________ ________ ________
Net balance at December 31........... 69,512 77,617 90,391
Plus: reinsurance recoverables....... 4,115 4,021 13,831
________ ________ ________
Balance at December 31............... $ 73,627 $ 81,638 $104,222
======== ======== ========
(a) Substantially all of the Company's incurred claims and claim
adjustment expenses relate to the respective current year.
(b) Includes current year incurred amount on certain claims
originating prior to respective current year.
Liability for Guaranty Fund Assessments
The Company's life insurance subsidiaries may be required, under the
solvency or guaranty laws of the various states in which they are licensed, to
pay assessments up to prescribed limits to fund policyholder losses or
liabilities of insolvent insurance companies. Certain states permit these
assessments, or a portion thereof, to be recovered as an offset to future
premium taxes. Assessments are recognized based on notification of liability
by regulatory authorities, including provision for certain future amounts
payable, and, when subject to credit against future premium taxes and judged to
be recoverable, may be capitalized and amortized on a basis consistent with the
credits to be realized under applicable state law.
Other Assets
Included in other assets is the unamortized portion of goodwill,
representing the excess of cost over the value of net assets acquired in
subsidiary acquisitions accounted for by the purchase method. Such amounts are
being amortized by straight-line basis charges to income over forty year
periods which began at the respective dates of acquisition of the acquired
subsidiaries. Amortization of goodwill amounted to approximately $2 million
for each of the three years ended December 31, 1994.
Income Taxes
Deferred income taxes arise as a result of applying enacted statutory tax
rates to the temporary differences between the financial statement carrying
value and the tax basis of assets and liabilities. Such differences result
primarily from amounts capitalized for policy acquisition costs and calculated
for future policy benefit liabilities.
The Company and its subsidiaries file a consolidated Federal income tax
return and have elected to include the life insurance and non-life insurance
subsidiaries in the consolidated tax return. Taxes on income for life
insurance and non-life insurance subsidiaries are recorded in the individual
income accounts of the subsidiaries and are remitted to the Company on a
separate return basis. The provision for taxes in the Statements of
<PAGE>61
Consolidated Income for the three years ended December 31, 1994 represents the
tax for all companies on a consolidated return basis.
Income Per Share
Income per share was computed by dividing the income applicable to common
and common equivalent shares by the weighted average number of common and
common equivalent shares outstanding during each year. The weighted average
number of common and common equivalent shares was determined by using the
average number of common shares outstanding during each year, net of reacquired
(treasury) shares from the date of acquisition; by converting the shares of the
Series A and Series B Preferred Stock to their equivalent common shares, and by
calculating the number of shares issuable on exercise of those common stock
options with exercise prices lower than the market price of the common stock,
reduced by the number of shares assumed to have been purchased with the
proceeds from the exercise of the options. Income before cumulative effect of
accounting change and net income were adjusted to deduct the dividend
requirements on Series C Preferred Stock for periods when that issue was
outstanding. Fully diluted income per share is the same as income per share
data indicated. The following table sets forth the computations of income per
share for the three years ended December 31, 1994:
<TABLE>
<CAPTION>
Year Ended December 31
_________________________________
1994 1993 1992
____ ____ ____
(Shares and Amounts in Thousands
except Per Share Data)
<S> <C> <C> <C>
Income before cumulative effect of accounting change..................... $96,185 $97,157 $69,612
Dividends on Series C Preferred Stock.................................... -- -- 197
_______ _______ _______
Income before cumulative effect of accounting change, applicable
to common and common equivalent shares................................. $96,185 $97,157 $69,415
======= ======= =======
Net income............................................................... $96,185 $97,157 $31,622
Dividends on Series C Preferred Stock.................................... -- -- 197
_______ _______ _______
Net income applicable to common and common equivalent shares............. $96,185 $97,157 $31,425
======= ======= =======
Weighted average common shares outstanding, net of treasury shares....... 22,825 22,582 22,449
Add-Common share equivalents of:
Preferred Stock - Series A............................................ 38 44 50
Preferred Stock - Series B............................................ 16 17 18
Outstanding stock options-treasury stock method....................... 141 228 206
_______ _______ _______
Total common shares and common equivalent shares......................... 23,020 22,871 22,723
======= ======= =======
Per Share:
Income before cumulative effect of accounting change.................. $ 4.18 $ 4.25 $ 3.05
Cumulative effect of accounting change................................ - - (1.67)
_______ _______ _______
Net income............................................................ $ 4.18 $ 4.25 $ 1.38
======= ======= =======
</TABLE>
Statement of Cash Flows
For the years ended December 31, 1994, 1993 and 1992, respectively,
interest paid (net of amounts capitalized) amounted to $34.8 million, $32.6
million, and $34.7 million, and Federal income taxes paid amounted to $60.5
million, $60.7 million and $75.7 million. The major portion of the disposals
of fixed maturity investments relate to securities sold or redeemed prior to
their maturity dates. The $1.1 billion disposals of Fixed Maturity investments
by the Company for the year ended December 31, 1994 included approximately $209
million (adjusted cost) of securities which were called for redemption by the
respective issuers prior to maturity. The $1.2 billion disposals of Fixed
<PAGE>62
Maturity investments in 1993 included approximately $928 million of such
redemptions. Certain prior year amounts have been reclassified to conform to
current year presentation.
Financial Instruments and Concentrations of Credit Risk
The Company's investments in Fixed Maturities and Equity Securities are
comprised of a diverse portfolio represented by approximately 500 issuers, with
no issuer accounting for more than 1% of the Company's total investment in
these securities, based on market value, at December 31, 1994.
The Company's investment in mortgage loans at December 31, 1994 is
characterized by a broad geographical distribution, with approximately 7% of
total book value relating to the New England region of the United States, 18%
from the middle-Atlantic states, 20% from the north-central states, 16% from
the south-Atlantic states, 11% from the south-central states, 13% from the
mountain states, and 15% from the Pacific states. Based on book value,
approximately 39% of the Company's mortgage loans at that date are secured by
office buildings, 24% by industrial / warehouse properties, 25% retail, 1%
apartments, 2% one to four family residential, and the remainder secured by
hotel / motel, medically oriented, or other specialty properties.
The Company's reinsurance receivables and other recoverable amounts at
December 31, 1994 relate to approximately 150 reinsurers. Two major United
States insurance companies, rated "A" (excellent) and "A+" (superior)
respectively by A. M. Best Company, a recognized insurance rating agency, each
account for approximately 10% of the reinsurance receivable and recoverable
amounts at that date. Other than these companies, no single reinsurer accounts
for more than 6% of total reinsurance receivable and recoverable amounts at
December 31, 1994. The Company monitors the financial condition of its
reinsurers in order to minimize its exposure to loss from reinsurer
insolvencies.
In the ordinary course of investment operations, the life insurance
subsidiaries may, in return for commitment fees, extend standby commitments
which represent contingent obligations to replace certain borrowings in the
event of default by unaffiliated borrowers. The life insurance subsidiaries
historically have not provided permanent financing on the major portion of such
commitments. The life insurance subsidiaries also may extend permanent
financing commitments for investments in mortgage loans, with specified closing
dates typically within 90 to 120 days after approval and interest rates and
other terms (based on the credit policies utilized for investments in mortgage
loans) determined at the commitment date. There were no outstanding standby
commitments or material permanent financing commitments at December 31, 1994.
Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of the indicated classes of financial instruments:
Cash and Short-term Investments
The carrying amounts of these assets approximate their fair value.
Fixed Maturities and Equity Securities
Fair values are based on quoted market prices or dealer quotes.
Mortgage Loans
The fair value of mortgage loans, other than those which are more than 60
days delinquent or in foreclosure, is estimated by discounting the expected
future cash flows. The rates used for this purpose are the estimated current
rates that would be applied to the loans in a purchase or sale transaction, on
an aggregate or bulk basis grouped by maturity range, considering the
<PAGE>63
creditworthiness of the borrowers and the general characteristics of the
collateral. For purposes of this calculation, the fair value of loans with
stated interest rates greater than the estimated applicable market rate was
adjusted to reflect the impact of prepayment options or other contractual terms
upon market value. For mortgage loans which are classified as delinquent or
are in foreclosure, fair value is based on estimated net realizable value of
the underlying collateral.
Policyholder Account Balances Relating to Investment Contracts
The fair value of the Company's liabilities under investment contracts,
primarily deferred annuities, is estimated using discounted cash flow
calculations based on interest rates being offered by the Company for similar
contracts at the balance sheet date.
Long-term Debt
The fair value of the Company's long-term debt is estimated based on rates
believed to be currently available to the Company for borrowings with terms
similar to the remaining maturities of the outstanding debt. For outstanding
debt securities with fixed interest rates in excess of current market rates,
repayment on call dates prior to stated maturity was assumed for purposes of
fair value estimation.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
_______________________ _______________________
Carrying Fair Carrying Fair
Amount Value Amount Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Cash:
On hand and in demand accounts.......... $ 51,878 $ 51,878 $ 60,321 $ 60,321
Restricted funds held in escrow, etc. .. 1,653 1,653 1,040 1,040
Short-term investments.................... 129,335 129,335 68,124 68,124
Fixed maturities.......................... 4,937,867 4,937,867 4,751,681 5,132,024
Equity securities......................... 4,583 4,583 9,205 9,205
Mortgage loans............................ 319,618 325,756 361,095 379,366
Financial Liabilities:
Policyholder account balances
relating to investment contracts.......... 1,834,418 1,728,122 1,692,386 (a)
Long-term debt, including current
maturities................................ 349,360 318,128 449,235 464,056
</TABLE>
(a) The estimated fair value of policyholder account balance liabilities
relating to investment contracts at December 31, 1993 is not materially
different from the carrying value at that date.
In accordance with the requirements of Statement No. 107 of the Financial
Accounting Standards Board, the financial instruments presented above exclude
accounts relating to the Company's insurance contracts and certain other
classes of assets and liabilities. The Company has not utilized derivative
financial instruments such as futures, forward, swap, or option contracts as
defined in Statement of Financial Accounting Standards No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments," for periods presented herein.
<PAGE>64
The estimated fair values of the Company's policy loan assets at December 31,
1994 and 1993 are not materially different from the respective carrying values
at those dates. No material carrying value or fair value amounts were ascribed
to the Company's outstanding standby commitments at December 31, 1993. It
should be noted that fair value estimates based on assumed discount rates and
assumptions and estimates of the timing and amount of future cash flows are
significantly affected by the assumptions used.
Note 2. Notes Payable
Notes payable at December 31, 1994 includes $150 million borrowings under
a revolving credit agreement between the Company and The Bank of New York (as
agent) which commenced on May 13, 1994. The credit agreement expires on May
12, 1995, at which time all borrowings thereunder must mature, subject to
extension of the agreement for a period of 364 days at the option of the
various participating banks and the Company. The credit agreement provides for
term borrowings in segments of up to six months with interest indexed to the
LIBOR borrowing rate or based on certain alternative interest rates at the
option of the Company. USLIFE has the option to prepay amounts borrowed under
the credit agreement, in whole or in part, and to reborrow loans thereunder
provided the total amount of outstanding borrowings does not exceed $150
million.
Also included in this item are short term borrowings against bank lines of
credit or pursuant to certain bank revolving credit agreements, and other short
term bank borrowings. The Company has lines of credit of $60.0 million with 7
banks and a revolving short term bank credit agreement which provide term loan
borrowing facilities up to a maximum of $100 million. The lines of credit
provide for annual review and renewal at the option of each bank. The interest
rates and terms of loans under the lines of credit and the revolving credit
agreements are determined bilaterally on the date of borrowing. Although there
are no formal requirements to maintain compensating balances, the Company has
carried balances which generally approximate 5 to 10 percent of the lines.
The following table sets forth summary information with respect to short
term borrowings of the Company for the three years ended December 31, 1994.
<TABLE>
<CAPTION>
As of December 31 Year Ended December 31
________________________ _______________________________________
Weighted Weighted
Average Maximum Average Average
Amount Interest Amount Amount Interest
Outstanding Rate Outstanding Outstanding(a) Rate(b)
___________ ______ ___________ ______________ _________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
1994............... $ 196,500 6.2% $ 283,500 $ 205,115 5.5%
============ ==== ============ =========== ====
1993............... $ 65,500 3.7% $ 198,900 $ 142,677 3.9%
============ ==== ============ =========== ====
1992............... $ 177,900 4.2% $ 231,850 $ 169,985 4.5%
============ ==== ============ =========== ====
</TABLE>
(a) The average amounts of short term borrowings were computed by
determining the arithmetic average of months' end short term borrowings.
(b) The weighted average interest rates were determined by dividing
interest expense related to short term borrowings by the average amounts of
such borrowings.
<PAGE>65
Note 3. Long Term Debt
At December 31, 1994 and 1993, consolidated long term debt consists of the
following:
<TABLE>
<CAPTION>
December 31
_________________________
1994 1993
___________ ___________
(Amounts in Thousands)
<S> <C> <C>
9.15 percent nonsubordinated notes due 1999......................... $ 50,000 $ 50,000
6.75 percent nonsubordinated notes due 1998, less unamortized
discount of $202 thousand and $261 thousand at December 31, 1994
and 1993, respectively; effective interest rate 6.80 percent...... 149,798 149,739
6.375 percent nonsubordinated notes due 2000, less unamortized
discount of $438 thousand and $504 thousand at December 31, 1994
and 1993, respectively; effective interest rate 6.44 percent...... 149,562 149,496
Bank borrowings under credit agreement; interest rate
4.00 percent at December 31, 1993................................. - 100,000
_________ _________
349,360 449,235
Less: Current maturities of long term debt.......................... - 100,000
_________ _________
Total long term debt................................................ $349,360 $349,235
========= =========
</TABLE>
The contractual maturities of the Company's long term debt are as follows:
Parent Company and Consolidated
_______________________________
December 31, December 31,
1994 1993
____________ ____________
(Amounts in Thousands)
1994....................... $ -- $100,000
1998....................... 149,798 149,739
1999....................... 50,000 50,000
2000....................... 149,562 149,496
________ ________
Total............... $349,360 $449,235
======== ========
None of the Company's debt issues are or have been in default.
Note 4. Federal Income Taxes
Federal income tax expense relating to operations of the Company for 1994,
1993 and 1992 is comprised of the following components:
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Current tax expense........................................ $ 63,649 $ 74,053 $ 63,420
Deferred tax expense:
Excluding Federal income tax rate cumulative adjustment... (12,837) (20,961) (28,695)
Federal income tax rate cumulative adjustment............. -- 1,322 --
________ ________ ________
(12,837) (19,639) (28,695)
________ ________ ________
$ 50,812 $ 54,414 $ 34,725
======== ======== ========
</TABLE>
<PAGE>66
The Omnibus Budget Reconciliation Act of 1993, enacted in August 1993,
increased the Federal corporate income tax rate from 34% to 35% retroactively
to January 1, 1993. This rate increase resulted in additional tax expense for
the first half of 1993 amounting to $666 thousand, and the effect of the tax
rate change upon net deferred tax liabilities as required by Statement of
Financial Accounting Standards No. 109 ("SFAS 109") was $1.322 million. In
accordance with SFAS 109, the $1.988 million aggregate catch-up impact of the
rate change was included in Federal income tax expense for the third quarter of
1993.
The significant components of deferred income tax expense for the years
ended December 31, 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Deferral of policy acquisition costs, net
of amortization, for accounting purposes....... $ 15,826 $ 12,624 $ 19,387
Adjustment of future policy benefits for
Federal income tax purposes.................... (16,525) (12,179) (23,513)
Utilization of net operating loss................ (2,416) 3,279 985
Differences in recognition of capital gains
and losses for tax return purposes and
accounting purposes............................ 2,634 (14,764) (13,708)
Capitalization of policy acquisition costs,
net of amortization, for tax return purposes (12,293) (12,951) (3,590)
Differences between amounts reported for
tax return purposes and statutory
accounting purposes............................ 129 3,270 (5,726)
Adjustment of prior years' accruals to tax return (119) (424) (2,374)
Federal income tax rate cumulative adjustment.... -- 1,322 --
Other, net....................................... (73) 184 (156)
________ ________ ________
Total deferred tax expense................ $(12,837) $(19,639) $(28,695)
======== ======== ========
</TABLE>
Total tax expense differs from the amount computed by applying the Federal
income tax rate of 35 percent in 1994 and 1993, and 34 percent in 1992, to
income before tax for the following reasons:
<TABLE>
<CAPTION>
1994 1993 1992
____________________ _____________________ _____________________
Amounts Percent Amounts Percent Amounts Percent
in of Pretax in of Pretax in of Pretax
Thousands Income Thousands Income Thousands Income
_________ _______ __________ _______ __________ _______
<S> <C> <C> <C> <C> <C> <C>
Application of Federal income tax rate... $ 51,449 35.0 $ 53,050 35.0 $ 35,475 34.0
Tax exempt interest and dividends
received deduction................ (508) (0.3) (648) (0.4) (824) (0.8)
Federal income tax rate change
cumulative adjustment............. -- -- 1,322 0.9 -- --
Other, net.......................... (129) (0.1) 690 0.4 74 0.1
_________ ____ _________ ____ _________ ____
Actual tax expense.............. $ 50,812 34.6 $ 54,414 35.9 $ 34,725 33.3
========= ==== ========= ==== ========= ====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1994 and 1993 are presented below:
<PAGE>67
December 31
______________________
1994 1993
____ ____
(Amounts in Thousands)
Deferred Tax Assets:
Future policy benefits.......................... $ 136,884 $ 129,078
Net unrealized loss on securities............... 84,134 --
Tax net operating loss carryforward............. 26,752 23,990
Capital gains and losses........................ 39,845 42,678
Capitalization of policy acquisition costs,
net of amortization, for tax return purposes.. 56,313 45,089
Sale and leaseback transactions................. 1,745 2,617
Allowance for uncollectible receivables......... 2,496 2,489
Resisted claim liability........................ 2,043 1,691
Employee retirement benefits.................... 27,930 26,534
Unearned interest............................... 1,560 1,787
Accrual of interest payable..................... 1,053 2,138
Differences between tax and accounting
for reinsurance............................... 5,333 --
Other........................................... 2,346 5,397
_________ _________
Total gross deferred tax assets................. 388,434 283,488
Total valuation allowance....................... (16,368) (16,368)
_________ _________
Net deferred tax assets......................... 372,066 267,120
_________ _________
Deferred Tax Liabilities:
Deferral of policy acquisition costs, net of
amortization, for accounting purposes......... (275,501) (259,674)
Basis differences between tax and accounting
for joint ventures............................ (6,427) (4,266)
Basis differences between tax and accounting
for securities................................ (5,145) (4,672)
Depreciation.................................... (5,502) (5,759)
Prepaid expenses................................ (1,642) (2,403)
Differences between tax and accounting
for reinsurance............................... -- (6,596)
Other........................................... (6,184) (9,055)
_________ _________
Total gross deferred tax liabilities............ (300,401) (292,425)
_________ _________
Net deferred tax asset (liability).............. $ 71,665 $ (25,305)
========= =========
Federal income tax returns have been examined and settled for all life
insurance subsidiaries and their predecessors through 1980. The consolidated
Federal income tax returns of the Company and non-life insurance subsidiaries
have been examined and settled through 1980. The life-nonlife consolidated
Federal income tax returns of the Company and all subsidiaries have been
examined and settled for 1981 through 1988. The Company believes that its
recorded income tax liabilities are adequate for all open years.
Under the provisions of prior tax law applicable to life insurance
companies, one half of the excess of the gain from operations of a life
insurance company over its taxable investment income was not taxed but was set
aside in a special "Policyholders' Surplus Account". Under provisions of the
Tax Reform Act of 1984, this account is "frozen" as of December 31, 1983 and is
subject to tax under conditions set forth pursuant to prior tax law.
Policyholder Surplus may be taxable at the time of its distribution to the
company's shareholders or under certain other specified conditions. The
Company does not believe that any significant portion of the amount in this
account will be taxed in the foreseeable future. However, should the balance
at December 31, 1994 become taxable, the tax computed at present rates would be
approximately $47.8 million.
At December 31, 1994, the Company has nonlife net operating loss
carryforwards for Federal income tax purposes of approximately $76.4 million
which are available to offset future Federal taxable income, if any, through
2009.
<PAGE>68
Note 5. Retirement Plans
The Company and its subsidiaries have a qualified noncontributory defined
benefit pension plan covering substantially all employees. Benefits are
generally based on years of service, the employee's compensation during the
last three years of employment, and an average of Social Security covered wage
bases. It is the Company's policy to fund pension costs in accordance with the
requirements of the Employee Retirement Income Security Act of 1974. Based on
such standards, contributions amounting to $4.5 million, $4.5 million and $4.2
million were made for the years ended December 31, 1994, 1993 and 1992,
respectively. Substantially all of the Plan assets are invested in the general
investment account of a life insurance subsidiary of the Company through a
deposit administration insurance contract. As a result of compensation and
benefit limitations under Federal tax law applicable to the Company's qualified
defined benefit pension plan, the "excess" portion of the pension benefits for
certain employees is provided under an unfunded Supplemental Retirement Plan
for which eligibility requirements and certain other provisions were modified
during 1993. Additionally, the Company has an unfunded Retirement Plan for
Outside Directors which provides pension benefits to non-employee Directors of
USLIFE Corporation subject to specified eligibility requirements. Benefits are
based on years of service and the annual retainer at time of retirement.
Pension expense for all of the above pension plans amounted to $7.848
million, $5.212 million and $4.774 million in 1994, 1993 and 1992,
respectively. The net periodic pension cost for these plans in 1994, 1993 and
1992 included the following components:
<TABLE>
<CAPTION>
Year Ended December 31
___________________________________
1994 1993 1992
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period.... $ 5,672 $ 4,842 $ 4,488
Interest cost on projected benefit obligation....... 8,129 6,654 6,003
Actual return on Plan assets........................ (7,272) (6,766) (6,161)
Net amortization and deferral....................... 1,319 482 444
_______ _______ _______
Net pension cost.................................... $ 7,848 $ 5,212 $ 4,774
======= ======= =======
</TABLE>
The funded status is reconciled to accrued pension cost included in the
Company's consolidated balance sheets as of December 31, 1994 and 1993 as
follows:
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plans
_____________________ ____________________
1994 1993 1994 1993
____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ (65,377) $ (64,838) $ (18,822) $ (14,406)
========== ========= ========== =========
Accumulated benefit obligation....................... $ (67,013) $ (66,777) $ (19,230) $ (14,658)
Effect of projected future compensation levels....... (21,060) (22,857) (3,303) (1,758)
__________ _________ __________ _________
Projected benefit obligation for service rendered
to date............................................ (88,073) (89,634) (22,533) (16,416)
Plan assets at fair value................................ 90,920 83,204 -- --
__________ _________ __________ _________
Funded status............................................ 2,847 (6,430) (22,533) (16,416)
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions 1,525 9,164 3,061 1,611
Unrecognized portion of initial net (asset) obligation... (6,498) (7,752) 5 177
Unrecognized prior service cost.......................... 324 1,112 7,756 8,246
Additional minimum balance sheet liability............... -- -- (7,564) (8,276)
__________ _________ __________ _________
Accrued pension cost..................................... $ (1,802) $ (3,906) $ (19,275) $ (14,658)
========== ========= ========== =========
</TABLE>
<PAGE>69
The unrecognized net asset relating to the qualified pension plan is being
recognized over a 14 year period which began January 1, 1987. As required by
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions," an additional minimum pension liability is recognized for the
Company's non-qualified plans to reflect the excess of the accumulated benefit
obligations over the liability already recognized as unfunded accrued pension
cost. Such minimum pension liability of $7.564 million and $8.276 million in
1994 and 1993, respectively, has been offset with an intangible asset in the
consolidated balance sheets. The unrecognized net loss and unrecognized prior
service cost relating to the Company's pension plans are subject to
amortization on a straight-line basis over the estimated average future service
period of active employees expected to receive benefits under the plan.
Assumptions used in the actuarial computations for the Company's pension plans
were as follows:
December 31
________________________
1994 1993 1992
____ ____ ____
Discount rate.................................... 8.25% 7.5% 7.5%
Rate of increase in compensation levels.......... 6.0 6.0 6.0
Expected long-term rate of return on assets...... 7.5 7.5 7.5
In addition to providing pension benefits, the Company and its
subsidiaries provide certain health care and life insurance benefits to retired
employees under a defined benefit plan. Employees may become eligible for
these benefits if they have accumulated ten years of service and reach normal
or early retirement age while working for the Company. The plan provides
benefits supplemental to Medicare after retirees are eligible for Medicare
benefits. The postretirement benefit plan contains cost-sharing features such
as deductibles and coinsurance, and contributions of certain retirees are
subject to annual adjustment. It is the Company's current policy to fund these
benefits, which are provided through an insurance contract with a life
insurance subsidiary of the Company, on a "pay as you go" basis.
Effective as of January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Statement No. 106 requires that
an employer's obligation for non-pension plan benefits provided after
retirement be recognized by income statement charges during the service periods
of eligible employees rather than on a cash basis as permitted by previously
established accounting standards. The Company elected to recognize the initial
obligation under the Statement, representing the present value of future
benefits attributed to service already rendered by eligible employees as of
January 1, 1992, by means of a one-time charge to net income for cumulative
effect of the accounting change. This initial obligation, and the consequent
charge, amounted to $57.6 million before applicable taxes. Excluding this one-
time charge, the cost of non-pension postretirement benefits for 1992 was
approximately $2 million.
During 1993, the Company's non-pension postretirement benefit program was
modified in several respects, including the establishment of a maximum dollar
cap on amounts to be paid by the Company for future increases in the cost of
retiree health benefits. These plan amendments resulted in an unrecognized
reduction in prior service cost, which is being amortized over the remaining
average service period to full eligibility for benefits of the active
participants. Excess gains or losses are being amortized over the average
remaining service period to full eligibility for benefits of the active
participants.
The funded status of the non-pension postretirement benefit program as of
December 31, 1994 and 1993 is reconciled to accrued postretirement benefit cost
as follows:
<PAGE>70
December 31
_________________________
1994 1993
____ ____
(Amounts in Thousands)
Accumulated postretirement benefit obligation:
Retirees................................. $(15,767) $(18,982)
Fully eligible active plan participants.. (4,414) (4,893)
Other active plan participants........... (7,309) (7,949)
________ ________
Total................................. (27,490) (31,824)
Plan assets.............................. -- --
________ ________
Funded status......................... (27,490) (31,824)
Unrecognized net (gain) or loss.......... (16,433) (11,752)
Unrecognized prior service cost.......... (13,888) (14,329)
________ ________
Accrued postretirement benefit cost...... $(57,811) $(57,905)
======== ========
Net periodic postretirement benefit cost for 1994 and 1993 included the
following components:
1994 1993
____ ____
(Amounts in Thousands)
Service cost - benefits earned during the year........ $ 1,044 $ 1,068
Interest cost on accumulated postretirement
benefit obligation.................................. 2,010 2,198
Net amortization and deferral......................... (1,704) (1,162)
_______ _______
Net periodic postretirement benefit cost.............. $ 1,350 $ 2,104
======= =======
The non-pension postretirement benefit cost for the year 1992 was
comprised primarily of "interest cost."
For measurement purposes, a 12 percent annual rate of increase in the per-
capita cost of covered health benefits (ie., health care cost trend rate) was
assumed for 1994; the rate was assumed to decrease gradually to 6 percent by
the year 1997 and remain at that level thereafter. An 11 percent annual rate
of increase in claims reimbursed by Medicare for retirees over age 65 was
assumed for 1994; the rate was assumed to decrease gradually to 6 percent by
the year 1997 and remain at that level thereafter. The assumed health care
cost trend rate does not have a significant effect on the amounts reported in
accordance with Statement No. 106 due to the maximum dollar cap adopted. For
example, increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by approximately $57 thousand and the
aggregate of the service and interest cost components of 1994 net periodic
postretirement benefit cost by $10 thousand. The discount rate used in
determining the accumulated postretirement benefit obligation was 8.25% at
December 31, 1994 and 7.5% at both December 31, 1993 and 1992.
<PAGE>71
Note 6. Capital Stock
Non-Redeemable Preferred Stocks
The $4.50 Series A Convertible Preferred Stock ($1.00 par value;
authorized and issued as of December 31, 1994, 4,653 shares; December 31, 1993,
4,815 shares; December 31, 1992, 5,627 shares) is carried at involuntary
liquidating value of $100 per share in the financial statements; is entitled to
cumulative annual dividends of $4.50 per share; may be redeemed in whole or in
part at the option of the Company at $100 per share; and is convertible at any
time into Common Stock at a conversion price which at December 31, 1994 was
$12.49 per share (each share of Series A Stock valued at $100), subject to
adjustment under a formula intended to protect against dilution in certain
events. Holders are entitled to vote together with the Common Stock and Series
B Convertible Preferred Stock as one class on the basis of one vote per share
and to vote as a class upon the election of two directors during any period in
which four quarterly dividends (whether or not consecutive) are in default.
The $5.00 Series B Convertible Preferred Stock ($1.00 par value;
authorized and issued as of December 31, 1994, 2,003 shares; December 31, 1993,
2,050 shares; December 31, 1992, 2,251 shares) is carried at involuntary
liquidating value of $50 per share in the financial statements; is entitled to
cumulative annual dividends of $5.00 per share; may be redeemed in whole or in
part at the option of the Company at $100 per share; and is convertible at any
time into Common Stock at a conversion price which at December 31, 1994 was
$12.51 per share (each share of Series B Stock valued at $100), subject to
adjustment under a formula intended to protect against dilution in certain
events. Voting rights are the same as those of holders of Series A Stock.
The Preferred Stock, undesignated ($1.00 par value; authorized as of
December 31, 1994, 10,793,344 shares, issued none), may be issued by
authorization of the Board of Directors without further approval of
shareholders. The Board has broad powers to fix the terms of such issues
subject to the limit that the aggregate of all amounts which may be paid to
holders of all of the series of Preferred Stock upon the involuntary
liquidation, dissolution or winding up of the Company cannot exceed $100 times
the number of such shares plus accrued unpaid dividends.
Common Stock
The outstanding shares of Common Stock (par value $1.00 per share;
authorized, as of December 31, 1994 and 1993: 60,000,000 shares; December 31,
1992: 40,000,000 shares; issued, including treasury shares, as of December 31,
1994, 38,310,490 shares; December 31, 1993, 38,308,823 shares; December 31,
1992, 38,255,975 shares) entitle each holder to one vote per share in the
election of directors and on all other matters submitted to a vote of
shareholders and to such dividends and distributions as may be declared by the
Board of Directors out of funds legally available. At December 31, 1994,
53,275 shares of Common Stock were reserved for issuance upon conversion of
Preferred Stock. The Company sponsors, through certain of its life insurance
subsidiaries, savings plans for selected general agents and producers (the
"Agents Plans") providing for distribution of Common shares to participants if
specified qualification and vesting requirements are satisfied. As of December
31, 1994, participant interests relating to 7,406 Common shares had vested
under the Agents Plans. On July 10, 1986 the Company issued, to shareholders
of record on that date, one Common Stock Purchase Right (a "Right") for each
share of Common Stock owned on that date. Until the Rights become exercisable
they will be represented by the stock certificates for all outstanding Common
Stock including newly issued shares. Upon the occurrence of certain events
specified in a Rights Agreement dated as of June 24, 1986 and amended and
restated as of September 27, 1994 between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company) as Rights Agent,
the Rights will become exercisable, separate certificates representing the
Rights will be issued, and each Right will entitle the holder to purchase one
half of a share of the Common Stock for $160. Under certain circumstances
specified in the Rights Agreement each Right will entitle the holder to
purchase, for one half of its then market value, publicly traded common stock
of any corporation which acquires the Company; each Right will also entitle the
holder, with certain exceptions specified in the Rights Agreement, to purchase
<PAGE>72
$150 worth of the Common Stock for $75. As of December 31, 1994 the Rights had
not become exercisable.
The Company also sponsors a Dividend Reinvestment and Stock Purchase Plan
which enables holders of the Company's Common Stock to invest cash dividends
and optional cash payments in additional shares of the Common Stock. In 1994,
1993 and 1992, respectively, 26,574, 25,689 and 29,523 shares of the Common
Stock had been sold pursuant to the Dividend Reinvestment and Stock Purchase
Plan.
Treasury Stock
At December 31, 1994, there were 15,493,148 shares of Common Stock held in
treasury. During 1994, 218,908 Common shares were acquired, at an aggregate
cost of $7.2 million, and 376,114 Common shares, with an aggregate cost of $7.1
million, were utilized for certain employee, director, and agent benefit plans
and for the Dividend Reinvestment and Stock Purchase Plan of USLIFE
Corporation. At December 31, 1993, treasury stock consisted of 15,650,354
Common shares. Common shares outstanding, net of treasury shares, as of
December 31, 1994 and 1993 are as follows:
December 31
________________________
1994 1993
____ ____
Common shares issued.............. 38,310,490 38,308,823
Treasury shares................... 15,493,148 15,650,354
__________ __________
Net outstanding common shares..... 22,817,342 22,658,469
========== ==========
Note 7. Stock Options and Long-Term Incentive Plans
In May, 1991, the Company adopted a stock option plan (the "1991 Stock
Option Plan") for key employees to replace the previous stock option plan under
which options could no longer be granted. Under the 1991 Stock Option Plan, a
maximum of 1,050,000 shares of the Company's common stock may be issued upon
the exercise of stock options which may be granted pursuant to the Plan. The
1991 Stock Option Plan also provides for "Reload" options, which are
automatically granted to a participant upon the exercise of an option if the
participant uses previously owned shares to pay for the option shares. Reload
options will be for the number of previously-owned shares delivered upon the
employee's exercise of an option. Under the 1991 Stock Option Plan, the
purchase price of shares subject to each option will be not less than 100% of
their fair market value at the time of the grant of the option. In May 1994,
the Plan was amended to limit the number of options that may be granted to any
one individual during any one-year period to 75,000. No options may be granted
under the 1991 Stock Option Plan after May 20, 2001.
In May 1994, the Company adopted a stock option plan (the "Non-Employee
Director Stock Option Plan") for directors of USLIFE who are not employees of
the Company or its subsidiaries or affiliates. The Plan provides that each
eligible director will automatically be granted options to purchase 2,000
shares of USLIFE common stock, commencing at the date of the Company's 1994
Annual Meeting of Shareholders and on the date of each subsequent Annual
Meeting. A maximum of 250,000 shares of the Company's common stock may be
issued upon the exercise of stock options which may be granted under the Non-
Employee Director Stock Option Plan. No options may be granted under this Plan
after May 17, 2004.
<PAGE>73
No option granted under the Company's stock option plans is exercisable in
whole or in part in less than six months from the date of grant. Each option
may be exercisable in one or more installments as provided therein. To the
extent such options are not exercised, installments accumulate to the total
granted and are exercisable in whole or in part at any time during the term of
the option. This term is set forth in the option but in no event is an option
exercisable, in whole or in part, after the expiration of ten years from the
date of grant. The 1991 Stock Option Plan provides that in the event of a
Change in Control (as defined in the Plan), all outstanding options granted
under that Plan which have been held for at least six months from the date of
grant shall become immediately exercisable.
As of December 31, 1994, the Company had outstanding options to its
employees (including officers) and non-employee directors for purchase of
shares of its Common Stock as follows:
<TABLE>
<CAPTION>
Average
Number of Number of Option Price
Participants Shares Expiration Dates per Share
____________ _________ ________________ ____________
<S> <C> <C> <C>
160 1,002,813 March 26, 1995 - May 17, 2004 $31.90
</TABLE>
A summary of activity under all stock option plans for the three years
ended December 31, 1994 is presented below:
<TABLE>
<CAPTION>
Number Option Prices
________________________________
of Aggregate
Shares Per Share (in Thousands)
______ _______________ ______________
<S> <C> <C> <C>
Outstanding, December 31, 1991........ 825,393 $13.75 - $29.50 $20,940
Granted.......................... 85,500 29.08 2,487
Exercised........................ 131,375 13.75 - 27.67 2,869
Terminated....................... 14,269 13.75 - 27.67 298
_________ _______
Outstanding, December 31, 1992........ 765,249 15.67 - 29.50 20,260
Granted.......................... 421,500 37.38 - 43.63 15,840
Exercised........................ 138,491 15.67 - 29.50 3,526
Terminated....................... 9,813 15.67 - 37.38 276
_________ _______
Outstanding, December 31, 1993........ 1,038,445 18.42 - 43.63 32,298
Granted.......................... 78,000 37.25 - 38.88 2,981
Exercised........................ 85,882 18.42 - 37.38 2,308
Terminated....................... 27,750 18.42 - 37.38 986
_________ _______________ _______
Outstanding, December 31, 1994........ 1,002,813 $19.75 - $43.63 $31,985
========= =============== =======
</TABLE>
As of December 31, 1994, options for 924,438 common shares were
exercisable under all stock option plans at $19.75 to $43.63 per share. At
December 31, 1994, up to 1,748,813 common shares could be issued under the
Company's stock option plans. Common shares may be issued under the Company's
stock option plans from shares in treasury or authorized but unissued shares.
The Company has a Book Unit Plan for certain key employees. Under the
terms of the Plan, the Board of Directors may award, at its sole discretion,
one or more units to employees it has selected to become participants in the
Plan. No more than 600,000 units shall be outstanding under the Plan at any
time. The value of units granted prior to 1994 shall be the amount by which
the book value per share, as of its award date, has been increased or decreased
by (a) the sum of the increases or decreases in the book value per share of the
<PAGE>74
Company's common stock, excluding the impact of "mark-to-market" adjustments
required by FASB Statement No. 115 to recognize unrealized gains and losses on
debt and equity securities, plus (b) dividend equivalents for subsequent years
up to and including its valuation date. In May 1994, the Plan was amended to
limit the number of book units that may be granted to any one individual during
a one-year period to no more than 75,000 and further, to eliminate the
inclusion of cumulative dividends paid to shareholders in calculating the value
of book units awarded in 1994 and thereafter. Accordingly, approximately $1.7
million, $2.1 million, and $1.4 million were charged to expense in 1994, 1993,
and 1992, respectively.
A summary of units outstanding under the Book Unit Plan follows:
<TABLE>
<CAPTION>
Number Award Valuation
Year of Grant of Units Date Date
_____________ ________ _____ _________
<S> <C> <C> <C>
1990............................. 143,250 January 1, 1990 December 31, 1994
1992............................. 134,250 January 1, 1992 December 31, 1996
1993............................. 184,000 January 1, 1993 December 31, 1997
1994............................. 7,500 January 1, 1994 December 31, 1998
_______
Outstanding, December 31, 1994... 469,000
=======
</TABLE>
The Company also has a Restricted Stock Plan for certain key employees.
Under the terms of the Plan, a committee of the Board of Directors may award
restricted shares of common stock of the Company, up to an aggregate maximum of
1,050,000 shares, to designated Participants. The shares, when awarded, are
initially non-transferable and subject to forfeiture in the event that the
Participant ceases to be an employee of USLIFE or any of its subsidiaries other
than by reason of death, permanent disability, retirement, or certain other
specified circumstances. These restrictions generally terminate with respect
to 20% of the number of shares awarded on March 1 of each of the five calendar
years following the year of award, at which time the appropriate number of
unrestricted shares are distributed to the Participant. For certain awards,
restrictions terminate with respect to one-third of the number of shares
awarded on the first, second, and third anniversaries of the award date, with
similar distribution. In May 1994, the Plan was amended to limit the number of
shares that may be granted to any one individual during any one-year period to
75,000, and to provide for forfeiture of awards to certain key officers under
the Plan in the event that performance goals based on the Company's "Earnings
Per Share from Continuing Operations," as defined in the Plan, are not
satisfied. Upon award of shares under the Plan, deferred compensation
equivalent to the market value of the shares on the award date is charged to
Equity Capital. Such deferred compensation is subsequently amortized by means
of charges to expense over the period during which the restrictions lapse.
During 1994, a total of 204,274 shares were awarded under the Plan, and 5,332
previously awarded shares were forfeited pursuant to the terms of the Plan.
During 1993, a total of 18,356 shares were awarded under the Plan. As of
December 31, 1994, there were 223,348 previously awarded shares outstanding
under the Plan as to which the restrictions had not yet lapsed. Expense
charges recognized in 1994, 1993 and 1992 relating to these awards amounted to
approximately $2.0 million, $2.1 million, and $2.0 million, respectively.
In May 1994, the Company adopted an Annual Incentive Plan (the "Incentive
Plan") for certain key executive officers. Under the Incentive Plan, annual
bonuses for participating key officers will depend on the attainment of
performance goals based on levels of income from the Company's core life
insurance businesses, as defined in the Plan. The Incentive Plan is
administered by the Executive Compensation and Nominating Committee, which may
authorize awards of up to 75% of a Participant's base salary based on
attainment of performance goals established by the Committee. These awards are
payable in cash no later than April 30 after each plan year, following
certification by the Committee that the performance goals have been met. The
Incentive Plan provides that in the event of a Change in Control (as defined in
the Plan), the amount of awards will be calculated as if all performance
targets have been met to produce the maximum award and payment of the awards
will be accelerated to the date on which the Change in Control occurs.
<PAGE>75
Note 8. Leases
In December, 1986 a subsidiary of the Company sold its home office
building located at 125 Maiden Lane, New York, New York, and leased back
portions of the premises which are utilized as the subsidiary's principal
executive offices as well as the headquarters of the Company and several other
subsidiaries. A $16.9 million portion of the gain arising from the sale and
leaseback transaction (net of related taxes) was deferred and is being
amortized by credits to income in proportion to rental payments made in
accordance with the lease commitments over a ten year period. Additionally,
several subsidiaries lease office space at other locations generally for
periods ranging from five to fifteen years, and certain subsidiaries utilize
leased furniture and office equipment. Certain of the operating leases for
office premises provide for renewal options for periods ranging from five to
twenty years based on fair rental value at time of renewal, and further options
relating to rental of additional office space. The minimum rental commitments
for all such non-cancelable operating leases as of December 31, 1994
approximate $13.5 million in 1995, $13.0 million in 1996, $7.2 million in 1997,
$6.1 million in 1998, $5.5 million in 1999, and a total of $13.9 million from
2000 to 2003. Total rental expense amounted to approximately $13.1 million,
$13.5 million, and $12.4 million for the years ended December 31, 1994, 1993
and 1992, respectively.
Note 9. Contingent Liabilities and Commitments
The Company has outstanding Standby Letters of Credit with two banks
representing contingent obligations to fund various trusts established in
connection with certain employment contracts of management employees, the
Company's Supplemental Retirement Plan, Retirement Plan for Outside Directors,
and Retirement Plan, in the event of a Change in Control (as defined in the
trust agreements), totalling $88 million. Additionally, in connection with the
application by a life insurance subsidiary for an additional state license to
transact business, USLIFE Corporation has agreed to guarantee that subsidiary's
maintenance of the state's minimum capital and surplus requirements (amounting
to $4.4 million at December 31, 1994) for a ten year period commencing at the
effective date of such license.
The Company and certain of its subsidiaries are involved in litigation,
which originated in 1981, with a former officer of a former subsidiary of the
Company. Allegations in the former officer's lawsuit include breach of the
covenant of good faith and fair dealing, breach of fiduciary duty, infliction
of emotional distress and malicious prosecution. Judgment was rendered in
favor of the Company. That judgment is being appealed. No contingent loss has
been accrued for this litigation because the amount of loss, if any, cannot be
reasonably estimated, nor is it probable in the opinion of management that the
ultimate outcome of this litigation will result in a liability to the Company
or any of its subsidiaries.
In June 1993, a purported class action was filed against three of the
Company's subsidiaries alleging that the class members were entitled to premium
refunds on policies of credit life and disability insurance purchased from the
three subsidiaries. In October, 1994, the case was dismissed with prejudice
with leave to reinstate after a decision is rendered by another court in a
similar case raising the same issues raised by defendants' motion to dismiss.
No contingent loss has been accrued for this litigation because the amount of
loss, if any, cannot be reasonably estimated.
In November, 1994, a purported class action was filed against three of the
Company's subsidiaries alleging that in connection with purchases by plaintiffs
of single premium term life insurance from mortgage lenders, defendants
misrepresented the type of insurance offered as credit life insurance and sold
the term life insurance at premiums in excess of those permitted for credit
life insurance. Allegations include claims for damages for breach of contract,
breach of fiduciary duty, unfair and deceptive acts and practices, fraud,
restitution and unjust enrichment and civil claims under the Federal RICO
statute. No contingent loss has been accrued for this litigation because the
amount of loss, if any, cannot be reasonably estimated.
<PAGE>76
In addition to the aforementioned legal proceedings, the Company and its
subsidiaries are parties to various routine legal proceedings incidental to the
conduct of their business. Based on currently available information, in the
opinion of management it is not probable that the ultimate resolution of these
suits will result in a material liability on the part of the Company.
Note 10. Reinsurance
The life insurance subsidiaries reinsure with other companies portions of
the risks they underwrite and assume portions of risks on policies underwritten
by other companies. The life insurance subsidiaries generally reinsure risks
over $1.5 million as well as selected risks of lesser amounts. In this
connection, $7.8 billion, representing 6 percent of total life insurance in
force as of December 31, 1994, was ceded to other carriers. Reinsurance
contracts do not relieve the Company from its obligations to policyholders, and
the Company is contingently liable with respect to insurance ceded in the event
any reinsurer is unable to meet the obligations which have been assumed.
The Company's consolidated financial statements for 1994 and 1993 reflect the
adoption of Statement of Financial Accounting Standards No. 113 ("SFAS 113"),
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts." Pursuant to the standards of SFAS 113, amounts paid for or
recoverable under reinsurance contracts, including amounts previously reported
as a reduction of various liability accounts as permitted under previous
accounting standards, are included in total assets as reinsurance receivable or
recoverable amounts. The cost of reinsurance related to long-duration
contracts is accounted for over the life of the underlying reinsured policies
using assumptions consistent with those used to account for the underlying
policies. Financial statements of previous years were not restated as a result
of the adoption of SFAS 113.
The effect of reinsurance on premiums, other considerations, and benefits to
policyholders and beneficiaries, is as follows:
Year Ended December 31
______________________
1994 1993
____ ____
(Amounts in Thousands)
Premiums, before reinsurance ceded......... $1,043,958 $1,021,694
Premiums ceded............................. 78,480 77,388
__________ __________
Net premiums............................... $ 965,478 $ 944,306
========== ==========
Other considerations, before reinsurance
ceded................................... $ 180,954 $ 166,477
Other considerations ceded................. 14,891 12,938
__________ __________
Net other considerations................... $ 166,063 $ 153,539
========== ==========
Benefits to policyholders and beneficiaries,
before reinsurance recoveries............ $ 782,415 $ 794,640
Reinsurance recoveries..................... 54,804 57,309
__________ __________
Benefits to policyholders and beneficiaries,
net of reinsurance recoveries............ $ 727,611 $ 737,331
========== ==========
A summary of reinsurance activity for the three years ended December 31,
1994 is presented below:
<PAGE>77
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of Amount
Gross Other From Other Net Assumed
Amount Companies Companies Amount to Net
______ _________ _________ ______ _________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
Life insurance in force.............. $124,881,337 $7,837,101 $16,800,790 $133,845,026 12.6%
============ ========== =========== ============ ====
Premiums:
Life insurance.................... $ 491,151 $ 42,362 $ 46,119 $ 494,908 9.3
Accident and health insurance..... 503,442 36,118 3,246 470,570 0.7
____________ __________ ___________ ____________ ____
Total premiums............... $ 994,593 $ 78,480 $ 49,365 $ 965,478 5.1%
============ ========== =========== ============ ====
Year Ended December 31, 1993
Life insurance in force.............. $110,549,368 $7,516,633 $14,462,410 $117,495,145 12.3%
============ ========== =========== ============ ====
Premiums:
Life insurance.................... $ 458,492 $ 40,728 $ 37,406 $ 455,170 8.2
Accident and health insurance..... 524,448 36,660 1,348 489,136 0.3
____________ __________ ___________ ____________ ____
Total premiums............... $ 982,940 $ 77,388 $ 38,754 $ 944,306 4.1%
============ ========== =========== ============ ====
Year Ended December 31, 1992
Life insurance in force.............. $103,962,571 $7,985,272 $11,037,473 $107,014,772 10.3%
============ ========== =========== ============ ====
Premiums:
Life insurance.................... $ 444,407 $ 46,568 $ 28,782 $ 426,621 6.7
Accident and health insurance..... 536,905 39,006 1,874 499,773 0.4
____________ __________ __________ ____________ ___
Total premiums............... $ 981,312 $ 85,574 $ 30,656 $ 926,394 3.3%
============ ========== ========== ============ ===
</TABLE>
The estimated amounts of reinsurance recoverable on paid and unpaid claims
included in the Consolidated Balance Sheets as of December 31, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
December 31
__________________________________________________________
1994 1993
_____________________________ ___________________________
Paid Unpaid Paid Unpaid
Claims Claims Claims Claims
______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Life insurance.................... $ 5,824 $ 8,508 $ 8,460 $ 7,907
Accident and health insurance..... 3,041 4,135 3,454 3,930
_________ _________ _________ _________
Total........................ $ 8,865 $ 12,643 $ 11,914 $ 11,837
========= ========= ========= =========
</TABLE>
The amount included in the consolidated balance sheets at December 31, 1994 and
1993 for "Other reinsurance recoverable" includes the estimated amounts
recoverable on unpaid claims as indicated above as well as prepaid reinsurance
premiums.
<PAGE>78
Note 11. Investment Securities
The investments of the Company at December 31, 1994 are summarized as
follows:
<TABLE>
<CAPTION>
Value based Amount
on market at which
quotations shown in the
at balance balance
Type of Investment Cost sheet date sheet
__________________ ____ __________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Bonds and notes:
United States Government and government
agencies and authorities........................... $ 121,764 $ 113,847 $ 113,847
States, municipalities and political sub-divisions.. 32,852 30,528 30,528
Foreign government.................................. 201,667 186,523 186,523
Public utilities.................................... 1,406,518 1,323,715 1,323,715
All other corporate................................. 3,411,875 3,238,467 3,238,467
__________ __________ __________
Total bonds and notes............................. 5,174,676 4,893,080 4,893,080
Redeemable preferred stocks.............................. 44,112 44,787 44,787
__________ __________ __________
Total fixed maturities............................ 5,218,788 4,937,867 4,937,867
__________ __________ __________
Common stocks............................................ 833 385 385
Non-redeemable preferred stocks.......................... 4,886 4,198 4,198
__________ __________ __________
Total equity securities........................... 5,719 4,583 4,583
__________ __________ __________
Total fixed maturities and equity securities...... 5,224,507 $4,942,450 4,942,450
__________ ========== __________
Mortgage loans on real estate............................ 331,354 319,618
__________ __________
Real estate:
Investment properties............................... 17,731 11,288
Acquired in satisfaction of debt.................... 52,255 30,400
__________ __________
Total real estate................................. 69,986 41,688
__________ __________
Policy loans............................................. 283,088 283,088
Other long term investments.............................. 66,218 7,400
Short term investments................................... 129,335 129,335
__________ __________
Total invested assets............................. 6,104,488 5,723,579
Cash on hand and in demand accounts...................... 51,878 51,878
Restricted funds held in escrow, etc. ................... 1,653 1,653
__________ __________
Total cash and invested assets.................... $6,158,019 $5,777,110
========== ==========
</TABLE>
Based on balance sheet carrying value, assets categorized as "non-income
producing" for the 12 months ended December 31, 1994 included in fixed
maturities, mortgage loans, real estate investment properties, and real estate
acquired in satisfaction of debt amounted to $15.3 million, $9.5 million, $4.3
million and $2.1 million, respectively.
<PAGE>79
Note 12. Net Investment Income
The details of consolidated net investment income for the three years
ended December 31, 1994 follow:
<TABLE>
<CAPTION>
Year Ended December 31
_____________________________
1994 1993 1992
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Investment income:
Equity securities........................ $ 513 $ 1,228 $ 1,984
Mortgage loans........................... 33,905 36,313 38,111
Real estate.............................. 6,766 6,456 6,448
Policy loans............................. 18,875 18,495 18,379
Fixed maturities, short term
investments, and other investments..... 411,315 393,181 360,449
________ ________ ________
Total investment income.............. 471,374 455,673 425,371
________ ________ ________
Investment expenses:
Salaries and wages....................... 788 818 831
Real estate depreciation................. 1,271 1,316 1,495
Real estate repairs, expenses, taxes..... 4,811 5,902 5,067
Taxes (excluding real estate), and
other expenses......................... 3,010 2,991 3,542
________ ________ ________
Total investment expenses............ 9,880 11,027 10,935
________ ________ ________
Net investment income.............. $461,494 $444,646 $414,436
======== ======== ========
</TABLE>
<PAGE>80
Note 13. Supplementary Insurance Information
Supplementary data relating to the life insurance industry segment of the
Company for the three years ended December 31, 1994 is presented below.
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993 Year Ended December 31, 1992
__________________________________ _____________________________________ ___________________________________
Non- Non- Non-
Life Reportable Life Reportable Life Reportable
Insurance Segments and Insurance Segments and Insurance Segments and
Industry Consolidating Industry Consolidating Industry Consolidating
Segment Adjustments Consolidated Segment Adjustments Consolidated Segment Adjustments Consolidated
__________ _________ __________ _________ ___________ ____________ __________ _________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deferred policy
acquisition
costs........ $ 793,145 $ - $ 793,145 $ 741,927 $ - $ 741,927 $ 705,854 $ - $ 705,854
========== ========= ========== ========== ========= ========== ========== ========= ==========
Future policy
benefits:
Life........... $1,254,879 $ - $1,254,879 $1,196,265 $ - $1,196,265 $1,110,757 $ - $1,110,757
Accident and
health........ 277,117 - 277,117 257,192 - 257,192 197,533 - 197,533
__________ _________ __________ __________ _________ __________ __________ _________ __________
Total......... $1,531,996 $ - $1,531,996 $1,453,457 $ - $1,453,457 $1,308,290 $ - $1,308,290
========== ========= ========== ========== ========= ========== ========== ========= ==========
Policyholder
account balances
for universal
life-type and
investment
contracts....... $3,641,393 $ - $3,641,393 $3,322,265 $ - $3,322,265 $2,850,037 $ - $2,850,037
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other policy
claims and
benefits
payable......... $ 215,102 $ (282) $ 214,820 $ 211,483 $ (371) $ 211,112 $ 230,235 $ (5,902) $ 224,333
========== ========= ========== ========== ========= ========== ========== ========= ==========
Premium income:
Life........... $ 495,568 $ (660) $ 494,908 $ 455,766 $ (596) $ 455,170 $ 427,274 $ (653) $ 426,621
Accident and
health....... 474,135 (3,565) 470,570 494,417 (5,281) 489,136 505,713 (5,940) 499,773
__________ _________ __________ __________ _________ __________ __________ _________ __________
Total........ $ 969,703 $ (4,225) $ 965,478 $ 950,183 $ (5,877) $ 944,306 $ 932,987 $ (6,593) $ 926,394
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other consider-
ation.......... $ 166,063 $ - $ 166,063 $ 153,539 $ - $ 153,539 $ 139,383 $ - $ 139,383
========== ========= ========== ========== ========= ========== ========== ========= ==========
Net investment
income......... $ 448,712 $ 12,782 $ 461,494 $ 431,923 $ 12,723 $ 444,646 $ 402,579 $ 11,857 $ 414,436
========== ========= ========== ========== ========= ========== ========== ========= ==========
Realized gains
(losses)....... $ (1,322) $ (58) $ (1,380) $ 10,835 $ (2,319) $ 8,516 $ (2,100) $ (480) $ (2,580)
========== ========= ========== ========== ========= ========== ========== ========= ==========
Benefits, claims,
losses and
settlement
expenses........ $1,001,197 $ (282) $1,000,915 $ 961,269 $ (371) $ 960,898 $ 948,936 $ 320 $ 949,256
========== ========= ========== ========== ========= ========== ========== ========= ==========
Amortization of
deferred policy
acquisition
costs........... $ 159,702 $ - $ 159,702 $ 151,851 $ - $ 151,851 $ 131,840 $ - $ 131,840
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other operating
expenses ...... $ 265,645 $ 77,928 $ 343,573 $ 264,066 $ 71,652 $ 335,718 $ 274,156 $ 69,863 $ 344,019
========== ========= ========== ========== ========= ========== ========== ========= ==========
</TABLE>
<PAGE>81
Note 14. Condensed Financial Information of Parent Company
<TABLE>
CONDENSED BALANCE SHEETS
PARENT COMPANY
December 31, 1994 and 1993
ASSETS
<CAPTION>
1994 1993
____ ____
(Amounts in Thousands)
<S> <C> <C>
Cash and invested assets:
Cash and certificates of deposit................................................. $ 9,349 $ 5,870
Fixed maturities available for sale:
At market...................................................................... 41,045 -
At lower of aggregate amortized cost or market................................. - 49,735
Equity securities, at market..................................................... 70 87
Other long term investments, and short term investments.......................... 1,010 1,010
__________ __________
Total cash and invested assets........................................... 51,474 56,702
Other receivables (net).......................................................... 7,544 6,014
Property and equipment (net)..................................................... 650 583
Prepaid expenses, deferred charges and other assets.............................. 47,081 49,442
Investment in life insurance subsidiaries........................................ 1,326,922 1,375,920
Investment in non-life insurance subsidiaries.................................... 26,668 24,058
__________ __________
Total assets.............................................................. $1,460,339 $1,512,719
========== ==========
LIABILITIES AND EQUITY CAPITAL
LIABILITIES:
Federal income taxes (current and deferred)...................................... $ (18,679) $ (19,639)
Notes payable.................................................................... 196,575 65,575
Current maturities of long-term debt............................................. - 100,000
Long-term debt................................................................... 349,360 349,235
Accounts payable and accrued liabilities......................................... 55,195 51,519
__________ __________
Total liabilities........................................................ 582,451 546,690
__________ __________
NON-REDEEMABLE PREFERRED STOCKS, COMMON STOCK, AND OTHER SHAREHOLDERS' EQUITY
("EQUITY CAPITAL"):
Preferred stock - Series A....................................................... 465 482
Preferred stock - Series B....................................................... 100 103
Preferred stock-undesignated..................................................... - -
Common stock..................................................................... 38,310 38,309
Paid-in surplus.................................................................. 131,823 125,268
Net unrealized loss on securities................................................ (156,248) -
Net unrealized loss on marketable equity securities.............................. - (29)
Retained earnings................................................................ 1,210,078 1,142,694
__________ __________
1,224,528 1,306,827
Less: Treasury stock, at cost.................................................... 339,972 339,825
Deferred compensation...................................................... 6,668 973
__________ __________
Total Equity Capital......................................................... 877,888 966,029
__________ __________
Total liabilities and Equity Capital..................................... $1,460,339 $1,512,719
========== ==========
</TABLE>
<PAGE>82
<TABLE>
CONDENSED STATEMENTS OF INCOME
PARENT COMPANY
For the Three Years Ended December 31, 1994
<CAPTION>
Year Ended December 31
____________________________________
1994 1993 1992
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Net investment income................................................... $ 4,661 $ 5,243 $ 4,201
Dividends from subsidiaries (eliminated in consolidation)............... 45,702 82,800 74,001
Realized gains (losses) on investments.................................. (86) 80 (93)
Other income............................................................ 8,414 7,760 7,396
_______ _______ _______
Total income................................................... 58,691 95,883 85,505
_______ _______ _______
General expenses........................................................ 36,782 35,506 36,097
Interest on notes payable............................................... 11,239 5,716 7,897
Interest on long term debt.............................................. 24,388 26,676 25,906
_______ _______ _______
Total expenses................................................. 72,409 67,898 69,900
_______ _______ _______
Income from operations before related income taxes...................... (13,718) 27,985 15,605
Provision for income taxes.............................................. (19,643) (18,806) (18,468)
_______ _______ _______
Income before cumulative effect of accounting change
and equity in undistributed net income of subsidiaries............... 5,925 46,791 34,073
Cumulative effect of accounting change for years prior
to 1992, net of applicable income taxes.............................. - - (12,562)
Equity in cumulative effect of accounting change relating to
subsidiaries, net of applicable income taxes......................... - - (25,428)
Equity in undistributed income from operations of subsidiaries.......... 90,260 50,366 35,539
_______ _______ _______
Net income.............................................................. $96,185 $97,157 $31,622
======= ======= =======
</TABLE>
<PAGE>83
<TABLE>
STATEMENTS OF CASH FLOWS
PARENT COMPANY
For the Three Years Ended December 31, 1994
<CAPTION>
Year Ended December 31
_________________________________
1994 1993 1992
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 96,185 $ 97,157 $ 31,622
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change.............................. - - 20,979
Equity in undistributed net income of subsidiaries.................. (90,260) (50,366) (10,111)
Dividends of securities from subsidiaries........................... - (21,603) (26,300)
Deferred federal income taxes....................................... (1,063) 2,979 (17,215)
Depreciation and amortization....................................... 2,044 2,109 2,109
Change in other liabilities and amounts receivable.................. 2,146 (14,184) 14,538
Change in current federal income tax liability...................... 2,894 13,021 (14,807)
Net realized capital losses (gains)................................. 86 (80) 93
Other, net.......................................................... 2,555 716 2,195
_________ _________ _________
Total adjustments.............................................. (81,598) (67,408) (28,519)
_________ _________ _________
Net cash provided by operating activities................. 14,587 29,749 3,103
_________ _________ _________
Cash flows from investing activities:
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................................. 12,640 18,118 8,556
Mortgage loan principal receipts.................................. - 1 8
Expenditures for property and equipment............................... (271) (232) (335)
Capital contribution to subsidiary.................................... (18,000) - -
Cost of investments purchased:
Fixed maturities.................................................. (6,444) (15,729) (1,249)
Net (purchases) or sales of short term investments................ - 5,000 (825)
Other, net............................................................ - (396) -
_________ _________ _________
Net cash provided (used) in investing activities.......... (12,075) 6,762 6,155
_________ _________ _________
Cash flows from financing activities:
Issuance of debt securities......................................... - 300,000 -
Borrowings under credit facility.................................... 150,000 - 150,000
Increase (decrease) in notes payable................................ (19,000) (112,400) 23,900
Dividends to shareholders........................................... (28,801) (27,361) (25,818)
Acquisition of treasury stock....................................... (7,230) (2,621) (7,256)
Repayment of long-term debt......................................... (100,000) (200,000) (150,000)
Other, net.......................................................... 5,998 5,959 2,966
_________ _________ _________
Net cash provided (used) in financing activities.......... 967 (36,423) (6,208)
_________ _________ _________
Net change in cash................................................ 3,479 88 3,050
Cash at beginning of year........................................... 5,870 5,782 2,732
_________ _________ _________
Cash at end of year................................................. $ 9,349 $ 5,870 $ 5,782
========= ========= =========
</TABLE>
<PAGE>84
Note 15. Condensed Quarterly Results of Operations (Unaudited)
The quarterly results of consolidated operations for the two
years ended December 31, 1994 are presented below (in thousands of
dollars except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
______________________________________ ______________________________________
March June September December March June September December
31, 1994 30, 1994 30, 1994 31, 1994 31, 1993 30, 1993 30, 1993 31, 1993
________ ________ _________ ________ ________ ________ _________ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total income............................... $390,722 $428,875 $413,787 $417,803 $382,812 $407,119 $397,445 $412,662
Total benefits and expenses................ 354,425 391,298 375,398 383,069 352,071 371,275 353,173 371,948
________ ________ ________ ________ ________ ________ ________ ________
Income from operations
before related income taxes............... 36,297 37,577 38,389 34,734 30,741 35,844 44,272 40,714
Provision for income taxes................. 12,673 13,413 12,879 11,847 10,279 12,110 17,744 14,281
________ ________ ________ ________ ________ ________ ________ ________
Net income............................... $ 23,624 $ 24,164 $ 25,510 $ 22,887 $ 20,462 $ 23,734 $ 26,528 $ 26,433
======== ======== ======== ======== ======== ======== ======== ========
Net income per share................. $ 1.03 $ 1.05 $ 1.10 $ 1.00 $ .90 $ 1.03 $ 1.16 $ 1.16
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
EXHIBITS
FILED WITH
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1994
__________________________________________________
USLIFE Corporation
<PAGE>2
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
3 (i) - Restated Certificate of Incorporation, as amended,
incorporated herein by reference to USLIFE's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993.
3 (ii) - By-laws, as amended and restated.
4 (i) - See Exhibit 3(i).
(ii) - Indenture dated as of October 1, 1982 (9.15% Notes due
June 15, 1999, 6.75% Notes due January 15, 1998, and 6.375%
Notes due June 15, 2000) incorporated herein by reference
to USLIFE's Registration Statement No. 2-79559 on Form S-3.
Agreements or instruments with respect to long-term debt
which are not filed as exhibits hereto do not in total
exceed 10% of USLIFE's consolidated total assets and USLIFE
agrees to furnish a copy thereof to the Commission upon
request.
(iii) - Amended and Restated Rights Agreement, dated as of
September 27, 1994, between USLIFE Corporation and Chemical
Bank (successor by merger to Manufacturers Hanover Trust
Company), as Rights Agent, relating to Common Stock
Purchase Rights issued by USLIFE on July 10, 1986,
incorporated herein by reference to USLIFE's Report on Form
8-K dated October 12, 1994.
10 * (i) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1989.
* (ii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and Gordon E. Crosby, Jr., incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1989.
* (iii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (iv) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991.
* (v) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
* (vi) - Fifth Amendment dated as of February 1, 1993 to
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Gordon E. Crosby, Jr.,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1992.
<PAGE>3
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (vii) - Sixth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (viii) - Seventh Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Gordon E. Crosby, Jr., incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
* (ix) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1989.
* (x) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989, between USLIFE
Corporation and Greer F. Henderson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xi) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (xii) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991.
* (xiii) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
* (xiv) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (xv) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Greer F. Henderson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
* (xvi) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1989.
* (xvii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and Wesley E. Forte, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xviii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990.
* (xix) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1993.
<PAGE>4
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (xx) - Fourth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993.
* (xxi) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Wesley E. Forte, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994.
* (xxii) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1989.
* (xxiii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and John D. Gavrity, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xxiv) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990.
* (xxv) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1991.
* (xxvi) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1992.
* (xxvii) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993.
* (xxviii) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and John D. Gavrity, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994.
* (xxix) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1989.
* (xxx) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and Christopher S. Ruisi, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1989.
* (xxxi) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (xxxii) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991.
<PAGE>5
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (xxxiii) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
* (xxxiv) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (xxxv) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and Christopher S. Ruisi, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
* (xxxvi) - Employment contract dated as of April 1, 1989 between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1989.
* (xxxvii) - First Amendment dated as of May 1, 1989 to employment
contract dated as of April 1, 1989 between USLIFE
Corporation and A. Scott Bushey, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
* (xxxviii) - Second Amendment dated as of May 1, 1990 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990.
* (xxxix) - Third Amendment dated as of May 1, 1991 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1991.
* (xl) - Fourth Amendment dated as of May 1, 1992 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992.
* (xli) - Fifth Amendment dated as of May 1, 1993 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993.
* (xlii) - Sixth Amendment dated as of May 1, 1994 to employment
contract dated as of April 1, 1989, as amended, between
USLIFE Corporation and A. Scott Bushey, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994.
* (xliii) - Employment contract dated as of April 16, 1990 between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
* (xliv) - First Amendment dated as of May 1, 1991 to employment
contract dated as of April 16, 1990 between USLIFE
Corporation and William A. Simpson, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991.
* (xlv) - Second Amendment dated as of May 1, 1992 to employment
contract dated as of April 16, 1990, as amended, between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.
<PAGE>6
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (xlvi) - Third Amendment dated as of October 1, 1992 to
employment contract dated as of April 16, 1990, as amended,
between USLIFE Corporation and William A. Simpson,
incorporated herein by reference to USLIFE's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1992.
* (xlvii) - Third Amendment dated as of May 1, 1993 to employment
contract dated as of April 16, 1990, as amended, between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
* (xlviii) - Fourth Amendment dated as of May 1, 1994 to employment
contract dated as of April 16, 1990, as amended, between
USLIFE Corporation and William A. Simpson, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
(il) - Lease dated as of December 30, 1986 between The United
States Life Insurance Company In the City of New York and
RREEF USA Fund-III for the lease of a portion of 125 Maiden
Lane, New York, New York, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1986.
(l) - Amendment to Lease dated August 31, 1988 to Lease dated
as of December 30, 1986 between The United States Life
Insurance Company In the City of New York and RREEF USA
Fund-III for the lease of a portion of 125 Maiden Lane, New
York, New York, incorporated herein by reference to
USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1988.
(li) - Second Amendment to Lease dated November 16, 1988 to
Lease dated as of December 30, 1986 between The United
States Life Insurance Company In the City of New York and
RREEF USA Fund-III for the lease of a portion of 125 Maiden
Lane, New York, New York, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1988.
(lii) - Lease dated May 21, 1987 between The United States Life
Insurance Company In the City of New York and Commercial
Realty & Resources Corp. for the lease of premises at the
Jumping Brook Corporate Office Park in Neptune, New Jersey,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1988.
(liii) - February 9, 1989 Amendment to Lease dated May 21, 1987
between The United States Life Insurance Company In the
City of New York and Commercial Realty & Resources Corp.
for the lease of premises at the Jumping Brook Corporate
Office Park in Neptune, New Jersey, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1988.
* (liv) - 1981 Stock Option Plan, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1981.
* (lv) - 1978 Stock Option Plan, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1980.
* (lvi) - USLIFE Coporation Deferred Compensation Plan, as
amended February 28, 1995.
* (lvii) - Book Unit Plan, as amended.
* (lviii) - USLIFE Corporation Retirement Plan for Outside Directors
(as amended September 25, 1990).
* (lix) - USLIFE Corporation Restricted Stock Plan, as amended
September 27, 1994.
<PAGE>7
USLIFE Corporation
Index to Exhibits
Exhibit
Number Exhibit
_______ _______
* (lx) - USLIFE Corporation 1991 Stock Option Plan, as amended.
* (lxi) - USLIFE Corporation Non-Employee Directors' Stock Option
Plan, incorporated herein by reference to Exhibit 4(a) to
USLIFE's Registration Statement No. 33-53265 on Form S-8
dated April 25, 1994.
* (lxii) - Annual Incentive Plan, as amended October 25, 1994, for
Selected Key Officers of USLIFE Corporation and its
Subsidiaries.
* (lxiii) - USLIFE Corporation Deferred Compensation Plan (as
amended November 16, 1993).
* (lxiv) - USLIFE Corporation 1993 Long-Term Incentive Award
Guidelines, as amended.
* (lxv) - USLIFE Corporation Supplemental Employee Savings and
Investment Plan.
* (lxvi) - USLIFE Corporation Supplemental Retirement Plan.
* (lxvii) - Trust Agreement made as of September 25, 1990 among
USLIFE Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank) and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
certain employment contracts, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1990.
* (lxviii) - Trust Agreement made as of September 25, 1990 among
USLIFE Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank) and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
the USLIFE Corporation Supplemental Retirement Plan,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1990.
* (lxix) - Trust Agreement made as of September 25, 1990 among
USLIFE Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank) and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
the USLIFE Corporation Retirement Plan for Outside
Directors, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1990.
12 - Computations of ratios of earnings to fixed charges.
21 - List of Subsidiaries.
23 - Consent of Independent Certified Public Accountants,
incorporated by reference to page 39 of USLIFE's Annual
Report on Form 10-K for the year ended December 31, 1994.
27 - Financial Data Schedule.
99 (i) - Annual Report on Form 11-K of USLIFE Corporation
Employee Savings and Investment Plan for the plan year
ended December 31, 1994 (to be filed within 120 days of
fiscal year end of Plan).
99 (ii) - Trust Agreement made as of December 6, 1990 among USLIFE
Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank), and KPMG Peat Marwick LLP
(as independent contractor) establishing a trust to fund
the USLIFE Corporation Retirement Plan, incorporated herein
by reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1990.
* Indicates a management contract or compensatory plan or arrangement.
<PAGE>1
USLIFE Corporation
(Formed under the laws of the State of New York)
__________________
BY-LAWS
AS AMENDED AND RESTATED FEBRUARY 28, 1995
__________________
ARTICLE I
Shareholders
SECTION 1. ANNUAL MEETING. A meeting of shareholders shall be held
annually for the election of directors and the transaction of other business on
the third Tuesday in May or on such other date as may be fixed from time to
time by the Board of Directors.
SECTION 2. Special Meetings. Special Meetings of the shareholders
may be called by the Board of Directors or, subject to the control of the
Board, by the Chairman.
SECTION 3. Place of Meetings. Meetings of shareholders shall be held
at such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at
the office of the Corporation in the State of New York.
SECTION 4. Notice of Meetings. Notice of each meeting of
shareholders shall be given in writing and shall state the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called.
Notice of a special meeting shall indicate that it is being issued by or at the
direction of the person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if
taken, entitle objecting shareholders to receive payment for their shares, the
notice shall include a statement of that purpose and to that effect.
A copy of the notice of each meeting shall be given, personally or by
first class mail, not less than ten nor more than fifty days before the
<PAGE>2
date of the meeting, to each shareholder entitled to vote at such meeting. If
mailed, such notice is given when deposited in the United States mail, with
postage thereon prepaid, directed to the shareholder at his address as it
appears on the record of shareholders, or, if he shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed to
some other address, then directed to him at such other address.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if after the adjournment the Board of Directors fixes a new record
date for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record on the new record date entitled to notice
under the preceding paragraphs of this SECTION 4.
SECTION 5. Waiver of Notice. Notice of meeting need not be given to
any shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
SECTION 6. Inspectors of Election. The Board of Directors, in
advance of any shareholders' meeting, may appoint one or more inspectors to act
at the meeting or any adjournment thereof. If inspectors are not so appointed,
the person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint two inspectors. In case
any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to
<PAGE>3
execute the duties of inspector at such meeting with strict impartiality and
according to the best of his ability.
The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, and the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
SECTION 7. List of Shareholders at Meeting. A list of shareholders
as of the record date, certified by the Secretary or any Assistant Secretary or
by a transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at
any meeting is challenged, the inspectors of election, or persons presiding
thereat, shall require such list of shareholders to be produced as evidence of
the right of the persons challenged to vote at such meeting, and all persons
who appear from such list to be shareholders entitled to vote thereat may vote
at such meeting.
SECTION 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record
date by another domestic or foreign corporation of any type or kind, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held as of the record date by the Corporation, shall not
<PAGE>4
be shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a trustee may be voted by him, either in person or by proxy, only after the
shares have been transferred into his name as trustee or into the name of his
nominee.
Shares standing in the name of another domestic or foreign
corporation of any type or kind may be voted by such officer, agent or proxy as
the by-laws of such corporation may provide, or, in the absence of such
provision, as the board of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
SECTION 9. Quorum of Shareholders. The holders of a majority of the
shares entitled to vote thereat shall constitute a quorum at a meeting of
shareholders for the transaction of any business, provided that when a
specified item of business is required to be voted on by a class or series,
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum for the transaction of such specified item of
business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are
entitled to vote may, by a majority of votes cast, adjourn the meeting despite
the absence of a quorum.
SECTION 10. Proxies. Every shareholder entitled to vote at a meeting
of shareholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy.
<PAGE>5
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided
by law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
SECTION 11. Vote or Consent of Shareholders. Directors shall, except
as otherwise required by law, be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election.
Whenever any corporate action, other than the election of directors,
is to be taken by vote of the shareholders, it shall, except as otherwise
required by law, be authorized by a majority of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
Whenever shareholders are required or permitted to take any action by
vote, such action may be taken without a meeting on written consent, setting
forth the action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. Written consent thus given by the holders of all
outstanding shares entitled to vote shall have the same effect as a unanimous
vote of shareholders.
SECTION 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment of any rights, or
for the purpose of any other action, the Board of Directors may fix, in
advance, a date as the record date for any such determination of
<PAGE>6
shareholders. Such date shall not be more than fifty nor less than ten days
before the date of such meeting, nor more than fifty days prior to any other
action.
When a determination of shareholders of record entitled to notice of
or to vote at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date for the adjourned meeting.
SECTION 13. Nomination of Directors by Shareholders. Notice of all
nominations by shareholders for the office of director shall be given in
writing to the Secretary of the Corporation at least sixty but not more than
ninety days prior to the date of the annual meeting of shareholders or any
other meeting at which directors are to be elected. Such notice shall contain
information about the nominee called for by Item 401 of Regulation S-K under
The Securities Act of 1933 and The Securities Exchange Act of 1934, as Item 401
may hereinafter provide on the date such notice is given, together with such
additional information about the nominee's background as the Secretary of the
Corporation may reasonably require. No person nominated by a shareholder for
the office of director shall be eligible for election to that office unless
nominated in accordance with this Section 13 of Article I.
SECTION 14. Shareholder Proposals. Any shareholder desiring to
submit a proposal for corporate action at an annual or special meeting of
shareholders must submit a written proposal together with a concise written
supporting statement to the Secretary of the Corporation at least sixty days
prior to the date of said meeting. No proposal submitted by a shareholder for
corporate action shall be considered at an annual or special meeting unless
such proposal is submitted in accordance with this Section 14 of Article I.
<PAGE>7
ARTICLE II
Board of Directors
SECTION 1. Power of Board and Qualification of Directors. The
business of the Corporation shall be managed by the Board of Directors. Each
director shall be at least twenty-one years of age.
SECTION 2. Number of Directors. The number of directors constituting
the entire Board of Directors shall be the number, not less than three, fixed
from time to time by a majority of the total number of directors which the
Corporation would have, prior to any increase or decrease, if there were no
vacancies, provided, however, that no decrease shall shorten the term of an
incumbent director. The number of directors constituting the entire Board
shall be 19 except that from and after May 16, 1995 the number of directors
constituting the entire Board shall be 17.
SECTION 3. Election and Term of Directors. The Board of Directors
shall be divided into three classes, designated Class I, Class II and Class
III. Such classes shall be as nearly equal in number as the then total number
of directors constituting the entire Board permits. At the 1978 Annual Meeting
of Shareholders, or any special meeting in lieu thereof, five Class I, five
Class II and six Class III directors shall be elected to initial terms expiring
at the next succeeding annual meeting, the second succeeding annual meeting and
the third succeeding annual meeting, respectively, and until their respective
successors are elected and qualified. At each annual meeting of shareholders
after 1978, the directors chosen to succeed those in the class whose terms
expire shall be elected by shareholders for terms expiring at the third
succeeding annual meeting after election and until their respective successors
are elected and qualified. Newly created directorships or any decrease in
directorships resulting from increases or decreases in the number of directors
shall be so apportioned among the classes of directors as to make all the
classes as nearly equal in number as possible.
<PAGE>8
Notwithstanding the foregoing and Section 8 of this Article II,
whenever the holders of any one or more classes or series of preferred stock
issued by the Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of shareholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by any terms of the Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section 3 unless expressly provided by
such terms.
SECTION 4. Quorum of Directors and Action by Board. A majority of
the entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided in these by-laws, the vote of a
majority of the directors present at a meeting at the time of such vote, if a
quorum is then present, shall be the act of the Board.
Any one or more members of the Board of Directors may participate in a
meeting of the Board by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time, and participation by such means shall
constitute presence in person at such meeting.
SECTION 5. Meetings of Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the Chairman of the Board or any two directors.
Meetings of the Board of Directors shall be held at such places as may
be fixed by the Board for annual and regular meetings and in the notice of
meeting for special meeting. If no place is so fixed, meetings of the Board
shall be held at the office of the Corporation in New York, New York.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third
<PAGE>9
day prior to the meeting or by telegram, written message or orally to the
director not later than noon, New York time, on the day prior to the meeting.
Notices are deemed to have been given: by mail, when deposited in the United
States mail; by telegram at the time of filing; and by messenger at the time of
delivery. Notices by mail, telegram or messenger shall be sent to each
director at the address designated by him for that purpose, or, if none has
been so designated, at his last known residence or business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any
meeting of the Board of Directors.
Unless the Board of Directors otherwise provides, each committee
designated by the Board may make, alter and repeal rules for the conduct of its
business. In the absence of a provision by the Board of Directors or a
provision in the rules of such committee to the contrary, a majority of the
entire authorized number of members of such committee shall constitute a quorum
for the transaction of business, the vote of a majority of the members present
at a meeting at the time of such vote if a quorum is then present or the
unanimous written consent of all members thereof shall be the act of such
committee, any one or more members of such committee may participate in a
meeting of such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time and participation by such means shall
constitute presence in person at such meeting, and in other respects each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these by-laws.
SECTION 6. Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Board of Directors or to the
Chairman of the Board or to the Secretary of the Corporation. Such
<PAGE>10
resignation shall take effect at the time specified therein; and unless
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 7. Removal of Directors. Any one or more of the directors
may be removed for cause by action of the Board of Directors or by vote of the
shareholders.
SECTION 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders shall be filled by vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring as a result of the removal of directors by shareholders shall be
filled by the shareholders. A director elected to fill a vacancy shall be
elected to hold office for the unexpired term of his predecessor.
SECTION 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees,
each consisting of three or more directors, and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action
that needs shareholders' approval;
(2) The filling of vacancies in the Board or in any
committee;
(3) The fixing of compensation of the directors for
serving on the Board or on any committee;
(4) The amendment or repeal of the by-laws, or the
adoption of new by-laws;
(5) The amendment or repeal of any resolution of the
Board which, by its terms, shall not be so amendable
or repealable; or
<PAGE>11
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent member or
members at any meeting of such committee.
Unless a greater proportion is required by the resolution designating
a committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such
vote, if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of
Directors.
SECTION 10. Compensation of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any
capacity.
SECTION 11. Interest of Director in a Transaction. Unless shown to
be unfair and unreasonable as to the Corporation, no contract or other
transaction between the Corporation and one or more of its directors, or
between the Corporation and any other corporation, firm, association or other
entity in which one or more of the directors are directors or officers, or are
financially interested, shall be either void or voidable, irrespective of
whether such interested director or directors are present at a meeting of the
Board of Directors, or of a committee thereof, which authorizes such contract
or transaction and irrespective of whether his or their votes are counted for
such purpose. In the absence of fraud any such contract or transaction may be
conclusively authorized or approved as fair and reasonable by:
(1) The Board of Directors, or a duly empowered committee thereof, by
a vote sufficient for such purpose without counting the vote or
votes of such interested director or directors (although he or
they may be counted in determining the presence of a quorum at the
meeting which authorizes such contract or transaction), if the
fact of such common
<PAGE>12
directorship, officership or financial interest is disclosed or
known to the Board or committee (as the case may be); or
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is
disclosed or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection
with idemnification, shall be made by the Corporation to any director unless it
is authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
SECTION 12. Indemnification. Except to the extent expressly
prohibited by the New York Business Corporation Law, the Corporation shall
indemnify each person made or threatened to be made a party to or called as a
witness in or asked to provide information in connection with any pending or
threatened action, proceeding, hearing or investigation, whether civil or
criminal, and whether judicial, quasi-judicial, administrative, or legislative,
and whether or not for or in the right of the Corporation or any other
enterprise, by reason of the fact that such person or such person's testator or
intestate is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation who also serves or served at the request
of the Corporation any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses, including
attorneys' fees, incurred in connection with such action or proceeding, or any
appeal therein, provided that no such indemnification shall be made if a
judgment or other final adjudication adverse to such person establishes that
his or her acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled, and provided further
that no such indemnification shall be required with respect to any settlement
or other nonadjudicated disposition of any threatened or
<PAGE>13
pending action or proceeding unless the Corporation has given its prior consent
to such settlement or other disposition.
The Corporation shall advance or promptly reimburse, upon request of
any person entitled to indemnification hereunder, all expenses, including
attorneys' fees, reasonably incurred in defending any action or proceeding in
advance of the final disposition thereof upon receipt of a written undertaking
by or on behalf of such person to repay such amount if such person is
ultimately found not to be entitled to indemnification or, where
indemnification is granted, to the extent the expenses so advanced or
reimbursed exceed the amount to which such person is entitled, provided,
however, that such person shall cooperate in good faith with any request by the
Corporation that common counsel be utilized by the parties to an action or
proceeding who are similarly situated unless to do so would be inappropriate
due to actual or potential differing interests between or among such parties.
Nothing herein shall limit or affect any right of any person otherwise
than hereunder to indemnification or expenses, including attorneys' fees, under
any statute, rule, regulation, certificate of incorporation, by-law, insurance
policy, contract or otherwise.
No elimination of this by-law, and no amendment of this by-law
adversely affecting the right of any person to indemnification or advancement
of expenses hereunder shall be effective until the 60th day following notice to
such person of such action, and no elimination of or amendment to this by-law
shall deprive any person of his or her rights hereunder arising out of alleged
or actual occurrences, acts or failures to act prior to such 60th day. The
provisions of this paragraph shall supersede anything to the contrary in these
by-laws.
The Corporation shall not, except by elimination or amendment of this
by-law in a manner consistent with the preceding paragraph, take any corporate
action or enter into any agreement which prohibits, or otherwise limits the
rights of any person to, indemnification in accordance with the provisions of
this by-law. The indemnification of any person provided by this
<PAGE>14
by-law shall continue after such person has ceased to be a director or officer
of the Corporation and shall inure to the benefit of such person's heirs,
executors, administrators and legal representatives.
The Corporation is authorized to enter into agreements with any of its
directors, officers or employees extending rights to indemnification and
advancement of expenses to such person to the fullest extent permitted by
applicable law, but the failure to enter into any such agreement shall not
affect or limit the rights of such person pursuant to this by-law. It is
hereby expressly recognized that all directors and officers of the Corporation,
by serving as such after the adoption hereof, are acting in reliance hereon and
that the Corporation is estopped to contend otherwise. Additionally, it is
hereby expressly recognized that all persons who serve or served as directors,
officers or employees of corporations which are subsidiaries or affiliates of
the Corporation (or other entities controlled by the Corporation) and are
directors or officers of the Corporation are conclusively presumed to serve or
have served as such at the request of the Corporation and, to the extent
permitted by law, are entitled to indemnification hereunder, but that no such
person shall have any rights hereunder or in connection herewith, except to the
extent that indemnification hereunder is permitted by law.
In case any provision in this by-law shall be determined at any time
to be unenforceable in any respect, the other provisions shall not in any way
be affected or impaired thereby, and the affected provision shall be given the
fullest possible enforcement in the circumstances, it being the intention of
the Corporation to afford indemnification and advancement of expenses to its
directors and officers, acting in such capacities or in the other capacities
mentioned herein, to the fullest extent permitted by law.
For purposes of this by-law, the Corporation shall be deemed to have
requested a director or officer of the Corporation to serve an employee benefit
plan where the performance by such person of his or her duties to the
Corporation also imposes duties on, or otherwise involves services by, such
<PAGE>15
person to the plan or participants or beneficiaries of the plan, and excise
taxes assessed on a person with respect to an employee benefit plan pursuant to
applicable law shall be considered indemnifiable expenses. For purposes of
this by-law, the term "Corporation" shall include any legal successor to the
Corporation, including any corporation which acquires all or substantially all
of the assets of the Corporation in one or more transactions.
A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in the first paragraph of this by-law shall be entitled to indemnification as
authorized in such paragraph. Except as provided in the preceding sentence and
unless ordered by a court, any indemnification under this by-law shall be made
by the Corporation if, and only if, authorized in the specific case:
(l) By the Board of Directors acting by a quorum consisting of directors
who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in
the first paragraph of this by-law, or,
(2) If such a quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs:
(a) By the Board of Directors upon the opinion in writing of
independent legal counsel that indemnification is proper in the
circumstances because the standard of conduct set forth in the
first paragraph of this by-law has been met by such director or
officer, or
(b) By the shareholders upon a finding that the director or officer
has met the applicable standard of conduct set forth in such
paragraph.
If any action with respect to indemnification of directors and
officers is taken by way of amendment of these by-laws, resolution of
directors, or by agreement, the Corporation shall, not later than the next
annual meeting of shareholders, unless such meeting is held within three months
from the date of such action and, in any event, within fifteen months from the
date of such action, mail to its shareholders of record at the time entitled to
vote for the election of directors a statement specifying the action taken.
SECTION 13. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or any
<PAGE>16
Committee thereof may be taken without a meeting if all members of the Board or
Committee as the case may be, consent thereto in writing, to the adoption of a
resolution authorizing the action and such resolution and the written consents
thereto are filed with the minutes of the proceedings of the Board or
Committee.
ARTICLE III
Officers
SECTION 1. Officer. The Board of Directors, as soon as may be
practicable after the annual election of directors, shall elect a Chairman of
the Board, a President, one or more Vice Presidents, a Secretary and a
Treasurer, and from time to time may elect or appoint such other officers as it
may deem advisable. Any two or more offices may be held by the same person,
except that the same person may not hold the offices of President and
Secretary.
SECTION 2. Term of Office and Removal. Each officer shall hold office
for the term for which he is elected or appointed, and until his successor has
been elected or appointed and qualified. Unless otherwise provided in the
resolution of the Board of Directors electing or appointing an officer, his
term of office shall extend to and expire at the meeting of the Board following
the next annual meeting of shareholders. Any officer may be removed by the
Board, with or without cause, at any time. Removal of an officer without cause
shall be without prejudice to his contract rights, if any, and the election or
appointment of an officer shall not of itself create contract rights.
SECTION 3. Powers and Duties. The Chairman of the Board shall preside at
all meetings of shareholders and of the Board of Directors and shall, unless
otherwise prescribed by the Board of Directors, be the Chief Executive Officer
of the Corporation. All the other officers of the Corporation shall have such
authority and perform such duties in the management of the Corporation, as may
be prescribed by the Board of Directors and, to the extent
<PAGE>17
not so prescribed, they shall have such authority and perform such duties in
the management of the Corporation, subject to the control of the Board, as
generally pertain to their respective offices. Securities of other
corporations held by the Corporation may be voted by the Chairman of the Board
or by another officer designated by the Board and, in the absence of any such
designation, by the President, any Vice President, the Secretary or the
Treasurer. The Board may require any officer, agent or employee to give
security for the faithful performance of his duties.
SECTION 4. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceeding of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors and officers and their residence addresses; and
the Corporation shall also keep at its office in the State of New York or at
the office of its transfer agent or registrar in the State of New York, if any,
a record containing the name and addresses of all shareholders, the number and
class of shares held by each and the dates when they respectively became the
owners of record thereof.
The Board of Directors may determine whether and to what extent and at
what times and places and under what conditions and regulations any accounts,
books, records or other documents of the Corporation shall be open to
inspection, and no creditor, security holder or other person shall have any
right to inspect any accounts, books, records or other documents of the
Corporation except as conferred by statute or as so authorized by the Board.
SECTION 5. Checks, Notes, etc. All checks and drafts on, and withdrawals
from, the Corporation's accounts with banks or other financial institutions,
and all bills of exchange, notes and other instruments for the payment of
money, drawn, made, endorsed, or accepted by the Corporation, shall be signed
on its behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
<PAGE>18
ARTICLE IV
Forms of Certificates and Loss and
Transfer of Shares
SECTION 1. Forms of Share Certificates. The shares of the
Corporation shall be represented by certificates, in such forms as the Board of
Directors may prescribe, signed by the Chairman or a Vice-Chairman of the Board
or the President or a Vice President and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with
the seal of the Corporation or a facsimile thereof. The signatures of the
officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
Each certificate representing shares issued by the Corporation shall
set forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one, authorized to be
issued and the designation, relative rights, preferences and limitations of
each series of any class of preferred shares authorized to be issued so far as
the same have been fixed and the authority of the Board of Directors to
designate and fix the relative rights, preferences and limitations of other
series.
Each certificate representing shares shall state upon the face
thereof:
(1) That the Corporation is formed under the laws of the State of
New York;
<PAGE>19
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the
series, if any, which such certificate represents.
SECTION 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper endorsement on the certificate or on a
separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation
or its transfer agent may require.
SECTION 3. Lost, Stolen or Destroyed Share Certificates. No
certificate for shares of the Corporation shall be issued in place of any
certificate alleged to have been lost, destroyed or wrongfully taken, except,
if and to the extent required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account
of the alleged loss, destruction or wrongful taking of the
replaced certificate or the issuance of the new certificate;
(3) Payment of the expenses of the Corporation and its agents
incurred in connection with the issuance of the certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE V
Other Matters
SECTION 1. Corporate Seal. The Board of Directors may adopt a
corporate seal, alter such seal at pleasure, and authorize it to be used by
<PAGE>20
causing it or a facsimile to be affixed or impressed or reproduced in any
other manner.
SECTION 2. Fiscal Year. The fiscal year of the Corporation shall be
the calendar year or such other period as may be fixed by the Board of
Directors.
SECTION 3. Amendments. By-Laws of the Corporation may be adopted,
amended or repealed by vote of the holders of shares at the time entitled to
vote in the election of directors, and By-Laws may also be adopted, amended or
repealed by the Board of Directors, provided that any by-law adopted by the
Board may be amended or repealed by the shareholders entitled to vote thereon
as hereinabove provided, and, provided further, that Section 3 of Article II
and this paragraph of Section 3 of Article V may not be altered, amended or
repealed, or new by-laws inconsistent therewith be adopted, except as provided
in Article Seventh of the Certificate of Incorporation of the Corporation.
If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set
forth in the notice of the next meeting of shareholders for the election of
directors the by-law so adopted, amended or repealed, together with a concise
statement of the changes made.
-----------------------------------------
<PAGE>1
USLIFE CORPORATION
DEFERRED COMPENSATION PLAN
AS AMENDED FEBRUARY 28, 1995
1.Eligibility
Each member of the Board of Directors of USLIFE Corporation
("USLIFE") who is not also an employee of USLIFE, or any of its
subsidiaries, is eligible to participate in this Deferred
Compensation Plan (the "Plan"), pursuant to the terms and
conditions as described herein.
2.Participation by Non-Employee Directors
(a) On the date of adoption of this Plan and at any time
thereafter, each non-employee Director may elect to participate
in the Plan by directing that (i) all or part of the cash
compensation which would otherwise have been payable to him for
services as a Director (including any fees payable for services
as a member of a committee of the Board) and (ii) all or any
specified percentage of the shares of USLIFE common stock which
would otherwise have been payable to him for such services shall
be credited, respectively, to a deferred cash compensation
account and a unit account subject to the terms of the Plan.
(b) An election to participate in the Plan shall be in the
form of a document executed by a non-employee Director and filed
with the Secretary of USLIFE, and such election shall continue in
effect until such non-employee Director ceases to be a Director
or is otherwise ineligible for the Plan, or until such non-
employee Director terminates such election, in whole or in part,
by written notice filed with the Secretary of USLIFE. Any such
termination, in whole or in part, shall become effective at the
close of the calendar quarter ending immediately following the
date on which the Secretary receives such notice with respect to
any and all compensation, fees and shares of common stock payable
thereafter, or at the termination of such later calendar quarter
as may be designated in the notice of termination.
(c) A non-employee Director who has filed a termination of
election may thereafter file an election to participate for any
future calendar quarters, at any time with respect to any and all
cash compensation, fees and shares of common stock payable to him
as a non-employee Director of USLIFE. Such election shall be as
provided in Paragraph 2(b).
3(A)Deferred Cash Compensation Accounts
(a) All deferred cash compensation accounts shall be
<PAGE>2
held with the general funds of USLIFE, shall be credited to an
account in the name of the individual Director and shall bear
interest, as described herein, from the date such fees were first
awarded or would otherwise have been paid.
(b) The participant's deferred compensation account
shall be credited at the end of each quarter with an interest
equivalent. The interest equivalent shall be calculated
quarterly at a rate set by the Board, which rate shall be applied
to the amounts in each participant's account at the beginning of
such quarter.
(c) The Board of Directors intends to review and set
the interest rate described in Paragraph 3A(b) annually in the
light of current economic conditions; provided, however, that in
the event that the rate is not modified the interest equivalent
shall continue to be calculated at the rate as last set forth by
the Board of Directors.
(B) Deferred Stock Unit Accounts
(a) A deferred stock unit account shall be established
in the name of each individual Director (i) who elects to defer
receipt of all or any specified percentage of the shares of
USLIFE common stock payable to him on account of his annual
retainer and/or meeting fees for his services as a Director, or
(ii) who irrevocably elects to have the interest payable under
Paragraph 3A above used to purchase stock units for crediting on
a quarterly basis to such Director's stock unit account, in
accordance with the formula described in Paragraph 3B(b) below.
(b) In the case of stock units credited under item
a(i) above, one unit for each full share of stock awarded shall
be credited thereto as of the date such share(s) would otherwise
have been paid. The number of stock units credited quarterly to
the stock unit account of an electing Director under item a(ii)
above will be calculated by dividing the dollar amount of all
interest credited to the Director's deferred compensation account
at the end of each calendar quarter by the closing price per
share of USLIFE common stock reported as New York Stock Exchange
- Composite Transactions on the first trading day of the next
succeeding calendar quarter, such stock units to be computed to
four decimal places.
Stock unit accounts shall be in the form of book
entry accounts and no actual shares of stock or certificates
therefor shall be issued or transferred to, or held under, the
Plan. Shares of stock issued and distributed pursuant to
Paragraph 4 shall be taken from shares of common stock previously
acquired by USLIFE and held in its treasury.
(c) Should the Director so elect, the deferred
compensation account described in Paragraph 3A will be credited
as of the pertinent dividend payment date with a dividend
equivalent
<PAGE>3
in the amount of any cash dividends declared and paid from time
to time in respect of USLIFE's issued and outstanding common
stock for each unit in the Director's stock unit account as of
such date and interest shall be credited thereon in the manner,
at the times and at the rate specified in Paragraph 3A(b).
Dividend equivalents with respect to any fraction of a share in
the Director's stock unit account will also be credited to his
deferred cash compensation account.
(d) In lieu of having his deferred compensation
account credited with dividend equivalents as provided in
Paragraph 3B(c) above a Director may direct that such dividend
equivalents be reinvested to create additional stock units which
will be credited to his stock unit account. In the event a
Director elects to reinvest the dividend equivalents, his stock
unit account will be credited as of the dividend payment date
with so many additional stock units (and any fractions of a unit
computed to four decimal places) as could be purchased with such
dividend equivalents based on the average of the high and low
sales price of USLIFE's common stock reported as New York Stock
Exchange-Composite Transactions on such dividend payment date or,
if no trading occurs in such stock on the dividend payment date,
on the trading day immediately preceding said date. In the event
a Director elects to reinvest dividend equivalents under this
Paragraph 3A(d), dividend equivalents on fractions of a share
will also be reinvested to create additional units.
(e) In the event a Director elects to defer the
receipt of less than 100% of the shares payable to him for his
services as a Director, any fractional share includable with the
deferred shares (computed to four decimal places) will also be
credited to his stock unit account. A certificate(s) will be
issued to the Director with respect to the non-deferred shares
but only as to full shares. In lieu of being issued a
certificate for any non-deferred fractional share, the value of
such fractional share will be credited to the Director's deferred
cash compensation account or paid to the Director in cash in the
absence of such account.
(f) In the event that the number of outstanding shares
of USLIFE common stock shall be changed by reason of split-ups,
combinations, recapitalizations, stock dividends and the like,
the Board of Directors of USLIFE shall make such adjustments as
it deems appropriate in the number of units credited to the unit
accounts of participants hereunder.
4. Distribution
(a) Each non-employee Director who elects to
participate in this Plan may make an election or may modify any
prior election with respect to the distribution of (i) the cash
amounts deferred hereunder plus accumulated interest and (ii) any
deferred shares of stock represented by the number of units in
his unit account in a single lump sum payment or in annual
installments. Elections for distribution and any designation of
beneficiary (which designation
<PAGE>4
may name an entity other than a natural person) shall first be
made by non-employee Directors at the time that they elect to
participate in the Plan. Any modification of a prior election to
receive payment and/or shares of deferred stock in a lump sum
distribution or in annual installments shall be made no later
than the end of the calendar year preceding the year in which the
non-employee Director ceases to serve as a Director. Any
beneficiary designation, change or cancellation may be made at
any time.
A Director may elect to receive payment of (1) cash amounts
deferred under the Plan plus accumulated interest and/or (2)
deferred shares of stock in one distribution or in some other
number of approximately equal annual installments (not exceeding
10). The first installment (or the single payment and/or share
distribution if so elected) shall be paid and/or distributed on
or about the first business day of the month immediately
following the month in which a non-employee Director ceases to be
a Director of the Company. Subsequent installments, if any,
shall be paid on or about the first business day of the first
(and each succeeding) calendar year, following the calendar year
in which the first installment is made, until the entire amount
credited to the individual's deferred cash and/or unit account
shall have been distributed in full. Cash amounts and/or units
held pending distribution pursuant to this paragraph shall
continue to accrue interest and/or receive dividend reinvestment
treatment, as the case may be, as provided in Paragraph 3 until
the date of distribution.
(b) The election or any modification of a prior
election with respect to the distribution of cash amounts
deferred under the Plan plus accumulated interest and/or deferred
shares of stock shall be contained in a Notice of Election in a
form provided by the Secretary of USLIFE, and shall be executed
by the Director and filed with the Secretary of USLIFE.
(c) Notwithstanding any election made by a Director,
in the event such Director becomes a proprietor, officer,
partner, employee, or otherwise affiliated with any business that
is in competition with USLIFE or any of its subsidiaries,
directly or indirectly, or becomes employed by any governmental
agency having jurisdiction over the activities of USLIFE or any
of its subsidiaries, the (i) entire balance of his deferred cash
compensation, including interest, and (ii) the deferred shares
represented by the number of stock units then in his stock unit
account shall be distributed immediately to him in a single
payment.
(d) If a Director should die before receiving (i) full
payment of all amounts credited to his deferred cash account or
(ii) distribution of all the shares represented by the total
number of stock units in his stock unit account, the balance of
such account(s) shall be paid either
(1) in a single lump sum distribution on the
tenth day of the calendar year immediately following the date of
his
<PAGE>5
death to (i) his designated beneficiary or beneficiaries, if a
single lump sum distribution has been elected for them; or (ii)
his estate, if no beneficiaries have been named or the designated
beneficiaries have predeceased the Director,
OR
(2) in approximately equal annual installments to
his designated beneficiary or beneficiaries in the number of
annual installments (not exceeding ten) elected for the
beneficiary so long as the number of any prior annual
installments paid to the Director and those elected for the
beneficiary do not exceed 10.
(e) A Director shall bear full responsibility for the
accuracy and legal sufficiency of any such beneficiary
designation. At any time, and from time to time, any such
designation may be changed or cancelled by the Director without
the consent of any beneficiary. Any such designation, change or
cancellation must be made by written notice filed with the
Secretary of USLIFE and shall not be effective until actually
received by the Secretary. If a Director designates more than
one beneficiary, any cash payments and/or share distributions to
such beneficiaries shall be made in equal shares unless the
Director has designated otherwise. In the absence of a written
notice contesting a beneficiary designation or otherwise
contesting a distribution received by the Secretary of USLIFE
before the date of distribution, distribution will be made in
accordance with the beneficiary designation of record.
(f) Notwithstanding any other provisions of this Plan,
cash amounts deferred under the Plan plus accumulated interest
together with a certificate or certificates for all deferred
shares represented by the total number of stock units then
outstanding in his stock unit account shall be immediately
distributed to each participating Director, or his designated
beneficiary or beneficiaries or his estate, as the case may be,
in a single lump sum distribution in the event of the occurrence
of either (1) a transaction which has required the affirmative
vote of holders of at least 80% of the outstanding shares of
capital stock of USLIFE Corporation regularly entitled to vote in
the election of directors by reason of Article Seventh of
USLIFE's Certificate of Incorporation, or (2) the acquisition by
any person, partnership, corporation or other organization, or by
any group of two or more thereof who are affiliates (as defined
by Rule 405 under the Securities Act of 1933) or are acting in
concert in respect of such acquisition, of more than 25% of such
outstanding shares of capital stock if USLIFE has opposed an
acquisition of shares of USLIFE by such person, partnership,
corporation or other organization or group before any insurance
regulatory authority whose approval of such acquisition was
required.
5. Miscellaneous
(a) No cash compensation, fees or interest thereon or
<PAGE>6
shares deferred pursuant to this Plan shall be subject to
assignment, attachment, lien, levy, or other creditors' rights
under any state or federal law.
(b) USLIFE shall not be required to reserve, or
otherwise set aside, funds for the payment or satisfaction of its
obligations hereunder.
(c) Copies of the Plan and any and all amendments
thereto shall be made available at all reasonable times at the
office of the Secretary of USLIFE to all non-employee Directors.
(d) This Deferred Compensation Plan may be amended
prospectively, from time to time, by the Board of Directors of
USLIFE, and the interest rate applicable hereunder may be set
prospectively by the Board as provided in Paragraph 3A(b);
provided, however, that no amendment shall, in any event, be made
to the Plan which would reduce (i) the amounts already earned by
any non-employee Director or (ii) the number of any shares
deferred hereunder and represented by the units accumulated in
such Director's stock unit account or change the date or
provisions for distribution of such amounts or shares, unless
each non-employee Director personally approves such amendment
insofar as the amendment affects him, and, further, provided that
(1) item (ii) of Paragraph 3B(a) and the provisions of Paragraph
3B(b) regarding the timing and the formula for determining the
amount and price of the stock units to be purchased and credited
to the non-employee Director's stock unit account under item (ii)
thereof as well as the provisions of Paragraph 1 on eligibility
for participation herein shall not be amended or revised more
than once every six months other than to comport with changes in
the Internal Revenue Code, as amended, the Employee Retirement
Income Security Act, or the rules and regulations thereunder, and
(2) that participation in this Plan by a Director who elects to
have the interest payable under Paragraph 3A used to purchase
stock units pursuant to Paragraphs 3B(a) and 3B(b) shall not be
voluntarily terminated by such Director before the end of the
second full calendar quarter following the effective date of such
election nor may such Director increase or decrease the amount or
percentage of his cash compensation deferred hereunder more than
once every six months, it being intended that such unit purchases
shall qualify in all respects as "formula awards" under Rule 16b-
3(c)2(ii) of Section 16(b) of the Securities Exchange Act of
1934, as such rule may hereinafter be amended from time to time.
(e) If a Director of The United States Life Insurance
Company In the City of New York with a deferred account under
that Company's Deferred Compensation Plan (the "United States
Life Plan") at any time resigns from the Board of Directors of
United States Life to become a member of the Board of Directors
of USLIFE Corporation and participate in this Plan, then upon his
election to the Board of Directors of USLIFE Corporation the
Director shall become a Participant in this Plan, the credit
balance in his deferred account under the United States Life Plan
shall
<PAGE>7
automatically be transferred and credited to the general account
of USLIFE Corporation and the elections made by the Director with
respect to the United States Life Plan shall continue in effect
under this Plan as if they had originally been made thereunder.
(f) Nothing contained herein shall prohibit USLIFE
from establishing a "Rabbi Trust" for the purpose of accumulating
funds to pay all (a) amounts deferred hereunder together with
accumulated interest and (b) shares of stock in a participant's
deferred stock unit account; provided, however, that the assets
of such Rabbi Trust shall be available to the creditors of USLIFE
if USLIFE is unable to pay its debts as they fall due, or if
bankruptcy or insolvency proceedings have been initiated by any
USLIFE creditor or USLIFE itself, or by any third party, under
the Bankruptcy Act of the United States or the bankruptcy laws of
any state, alleging that USLIFE is insolvent or bankrupt. If, in
accordance with the terms of such a Rabbi Trust, any funds held
in such trust revert back to USLIFE, such reversion shall not in
any manner reduce or diminish the obligation of USLIFE under this
Plan to any participant.
<PAGE>1
BOOK UNIT PLAN
AS AMENDED
Section 1
Purpose
1.1 This Plan shall be known as the USLIFE Corporation Book Unit Plan.
The purpose of the Plan is to provide additional compensation which is
directly related to the performance of USLIFE Corporation and its
subsidiaries for selected key officers.
Section 2
Definitions
2.1 "Award Date" shall mean the January 1 set by the Committee for the
date as of which Units are awarded to Participants.
2.2 "Beneficiary" shall include only persons who are living on the date
of Payment under the Plan, or such living person or persons as a deceased
Participant shall have designated as his or her beneficiaries by a written
instrument executed by him or her and filed with the Secretary of the
Company.
2.3 "Board of Directors" means the board of directors of USLIFE
Corporation.
2.4 "Book Value Per Share" means the book value per share of common stock
of the Company, determined on the basis of the certified financial reports
of the Company as published in the Company's annual reports to
shareholders.
2.5 "Change in Control" shall mean (i) a merger or consolidation to which
the Company is a party and for which the approval of any shareholders of
the Company is required; (ii) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) becoming the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; (iii) a sale or
transfer of substantially all of the assets of the Company; or (iv) a
liquidation or reorganization of the Company.
2.6 "Committee" means the Executive Compensation and Nominating Committee
of the Company, or such other Committee composed of members of the Board
of Directors who are not eligible to participate in this Plan as may be
designated by the Board of Directors and who meet the definition of
"outside director" under Section 162(m)(4) of the Internal Revenue Code of
1986, as hereinafter amended from time to time.
<PAGE>2
2.7 "Company" means USLIFE Corporation.
2.8 "Participant" means any key officer of the Company or its
subsidiaries selected by the Committee to participate in the Plan.
2.9 "Payment" of Units means the actual payment in cash of the then value
of Units.
2.10 "Plan" means USLIFE Corporation Book Unit Plan.
2.11 "Unit" means any Unit which has been awarded to a Participant, but
for which no Payment has been made.
2.12 "Valuation Date" means the December 31 set by the Committee or by
Section 6.5 as the date as of which the value of a Unit shall be
established for subsequent Payment.
2.13 "Year" means the calendar year 1976 and each successive calendar
year.
Section 3
Effective Date of Plan
3.1 This Plan shall be effective as of January 1, 1976.
Section 4
Administration
4.1 All matters of administration of this Plan shall be vested in the
Committee.
Section 5
Units and Valuation
5.1 No more than 600,000 Units (as adjusted for the December 1992 3-for-2
stock split in accordance with Section 8.4) shall be outstanding under the
Plan at any time. No Participant shall receive more than 75,000 Units in
the aggregate under the Plan during any one-year period.
5.2 The Committee may award, in its sole discretion, one or more Units to
key officers it has selected to become Participants in the Plan. A
Participant may be awarded additional Units subsequently. Units shall be
awarded as of an Award Date.
<PAGE>3
5.3 The value of a Unit shall be the amount by which the Book Value Per
Share as of its Award Date has been increased or decreased by the
increases (or decreases) in the Book Value Per Share for subsequent Years
up to and including its Valuation Date set pursuant to Section 6.1
Section 6
Valuation Date and Payment
6.1 The Committee shall set (by specifying at the time a Unit is awarded
to a Participant a fixed date or dates or by formula referring to the
occurrence of one or more events) the Valuation Date or Dates as of which
the value of the Units shall be determined for the purpose of Payment,
except as otherwise provided in Section 6.5.
6.2 Except as otherwise provided in Section 6.4, Payment of a Unit will
be made as soon as practicable after the Valuation Date for such Unit. If
as of the Valuation Date the Unit has no value, or a negative value, no
Payment shall be made with respect thereto.
6.3 Except as provided in Section 6.4, any Units awarded to a Participant
during his or her employment shall be forfeited upon the date such
employment terminates, and he or she shall not be entitled to any Payment
in respect thereof.
6.4 If a Participant ceases to be an employee of the Company or any of
its subsidiaries due to retirement under the USLIFE Corporation Retirement
Plan on his or her early, normal or deferred retirement date, disability
or death, or a Change in Control occurs, the value of all his or her Units
shall be paid to the Participant or his or her Beneficiary, as the case
may be, as soon as practicable after retirement, disability or death, or
the occurrence of the Change in Control, as the case may be. In the event
the person or persons designated by a Participant as his Beneficiary shall
not be living upon the date of Payment of Units, or if no designation has
been made, then the Payment of Units shall be made to the estate of the
Participant.
6.5 The Valuation Date for Units paid pursuant to Section 6.4 shall be
the December 31 of the Year prior to the Year in which the Participant's
retirement or death occurred.
6.6 A Unit which has been forfeited or whose Valuation Date has passed
shall not be deemed an outstanding Unit for purposes of the first sentence
of Section 5.l.
<PAGE>4
Section 7
No Assignment of Units
7.1 Any and all Units which a Participant or any Beneficiary claiming
under or through him or her shall have or might thereafter acquire under
the Plan shall forthwith be forfeited in the event of any sale,
assignment, transfer, hypothecation, pledge or other alienation, made or
attempted, whether voluntary or involuntary, and if involuntary whether by
process of law in any civil or criminal suit, action or proceeding,
whether in the nature of an insolvency or bankruptcy proceeding or
otherwise.
Section 8
Miscellaneous
8.1 Nothing in the Plan shall give any Participant any right to continued
employment by the Company or any subsidiary of the Company.
8.2 The Committee shall be entitled to rely on the advice of counsel,
certificates of the independent auditor of the Company, and any other
representations believed by the Committee to be genuine; and no member of
the Committee shall be liable for any action taken in reliance on any such
advice, certificates or representations.
8.3 The Plan may be terminated at any time by the Board of Directors in
which event no further Units will be awarded under the Plan, but the
provisions of the Plan with respect to Units theretofore awarded shall,
subject to the provisions of Section 6.3, continue to apply until the
value of all Units has been determined and Payment made.
8.4 In the event that the number of outstanding shares of common stock of
the Company shall be changed by reason of split-ups, combinations,
recapitalizations or stock dividends, the Committee shall make such
adjustments as it deems appropriate in the number of Units which may be
outstanding at any one time under this Plan, in the number of Units
credited to the account of Participants and in Book Value Per Share.
<PAGE>1
USLIFE CORPORATION RETIREMENT PLAN
FOR OUTSIDE DIRECTORS
(As Amended September 25, 1990)
ARTICLE I
DEFINITIONS
When used herein, the following words and phrases shall have the
following meanings unless a different meaning is clearly required
by the context of the Plan.
1.1 "Board of Directors" or "Board" means the Board of Directors
of USLIFE Corporation.
1.2 "Change in Control or Attempted Change in Control" means the
occurrence of either (1) a transaction which has required the
affirmative vote of holders of at least 80% of the outstanding
shares of capital stock of the Company regularly entitled to vote
in the election of directors by reason of Article Seven of the
Company's Certificate of Incorporation, or (2) the acquisition by
any person, partnership, corporation or other organization, or by
any group of two or more thereof who are affiliates (as defined
by Rule 405 under the Securities Act of 1933) or who are acting
in concert in respect of such acquisition of more than 25% of
such outstanding shares of such capital stock, if the Company has
opposed an acquisition of shares of the Company by such person,
partnership, corporation or other organization or group before
any insurance regulatory authority whose approval of such
acquisition was required.
1.3 "Committee" means the Executive Compensation Committee of
the Board of Directors, or such other person, committee or other
entity as shall be designated by the Chairman of the Board,
President and Chief Executive Officer of USLIFE Corporation.
1.4 "Company" means USLIFE Corporation.
1.5 "Effective Date" means February 28, 1989.
1.6 "Eligible Director" means an Outside Director of the Board
of Directors of Company serving on or after the Effective Date
who is eligible for participation in the Plan in accordance with
the terms of Article II.
1.7 "Outside Director" means a member of the Board of Directors
of Company who is neither an employee nor an officer of Company
or of any subsidiary or affiliate of Company.
1.8 "Participant" means any person who is participating in the
Plan in accordance with its terms.
1.9 "Plan" means the USLIFE Corporation Retirement Plan for
Outside Directors.
<PAGE>2
1.10 "Retirement Date" means the later of the following dates:
(a) the date on which an Eligible Director attains age 65
or
(b) the date on which an Eligible Director terminates his
service as an Outside Director as a result of his
failure to be renominated or reelected, his resignation
or his completion of the term on the Board during which
he attained age 75.
1.11 "Year of Board Service" means each twelve (12) month period
for which an Outside Director serves as a member of the Board,
regardless of the number of Board meetings attended by such
Outside Director in any such period. A Year of Board Service
shall initially commence on the date on which an Outside Director
is appointed or elected to the Board and shall thereafter
commence on each successive yearly anniversary of such date. An
Outside Director shall be deemed to have served as a member of
the Board for a full month if he serves as a member of the Board
for any portion of such month. Non-consecutive periods of
service as an Outside Director shall be aggregated for purposes
of determining an Eligible Director's total Years of Board
Service. For purposes of eligibility under Article II and
benefits under Article III, service as an Outside Director of the
Board prior to the Effective Date shall be included in
determining his Years of Board Service. If there has been a
Change in Control or Attempted Change in Control, the Outside
Directors service on the Board at that time will receive credit
on that date for additional Years of Board Service through and
including the date on which the Outside Directors' current term
of office would have otherwise expired.
ARTICLE II
ELIGIBILITY AND VESTING
2.1 Eligibility - An Outside Director shall become an Eligible
Director on the later of his attainment of age 65 or his
completion of five (5) Years of Board Service. The Committee
shall provide written notification to an Eligible Director at
such time as the Eligible Director becomes a Participant in the
Plan.
2.2 Commencement of Participation - An Outside Director shall
become a Participant on the date when he first becomes an
Eligible Director.
2.3 Benefit Entitlement - To be eligible to receive benefits, if
any, under the Plan, an Outside Director must terminate his
service on the Board of Directors after completing at least five
(5) Years of Board Service.
2.4 Special Rule - Notwithstanding anything to the contrary in
<PAGE>3
this Article, in the event of a Change in Control or Attempted
Change in Control, the Outside Directors currently serving on the
Board of Directors shall immediately become Eligible Directors
and shall be entitled to receive a benefit on their respective
Retirement Dates.
ARTICLE III
BENEFITS
3.1 Amount of Annual Retirement Benefits - Each Eligible
Director's annual retirement benefit will be equal to five
percent (5%) of his annual retainer on his Retirement Date
multiplied by the number of his Years of Board Service, but not
exceeding twenty (20) Years of Board Service. Pro-rate credit
shall be provided for any partial Year of Board Service.
3.2 Maximum Number of Annual Payments - Annual installment
payments will be payable for a period of years equal to the
number of full Years of Board Service, but not exceeding ten (10)
Years of Board Service.
3.3 Term and Frequency of Payment - Retirement benefit will be
payable to Eligible Directors in annual installments commencing
on the first business day of the calendar year following an
Eligible Director's Retirement Date and continuing on the first
business day of each successive year until the maximum number of
payments have been made or until the Eligible Director's prior
death.
3.4 Resumption of Service - If an Eligible Director who has
terminated his service as an Outside Director shall again become
an Outside Director (i) prior to the date on which his benefits
are to commence, or (ii) while receiving benefits hereunder, the
payment of his benefits shall be deferred or suspended for the
period during which he continues to serve as an Outside Director,
and shall commence or resume on the first business day of the
calendar year following his subsequent termination of service as
an Outside Director. The Eligible Director's maximum number of
annual payments shall be based on the aggregate of his Years of
Board Service completed before and after his initial termination
of service, as reduced by the number of annual payments
previously paid to him. The amount of his remaining annual
retirement benefit payments, if any, shall be based on his annual
retainer and his total service as an Outside Director on the date
of his subsequent termination of service.
ARTICLE IV
ADMINISTRATION
4.1 Power of Committee - The Plan shall be administered and
interpreted by the Committee in accordance with its terms and
purposes. The Committee shall determine the amount and manner of
<PAGE>4
payment of the benefits under the Plan. The decisions made and
the actions taken by the Committee in the administration of the
Plan and the interpretation of Plan provisions shall be final and
conclusive on all persons, and the Committee shall not be subject
to liability with respect to the Plan.
4.2 Expenses - Any expenses incurred in the management,
operation, interpretation or administration of the Plan shall be
paid by Company. In no event shall the benefits otherwise
payable under this Plan be reduced to offset the expenses
incurred in managing, operating, interpreting or administering
the Plan.
4.3 Administration - Although the Plan is intended to be an
unfunded Plan, nothing contained herein shall prohibit the
Company from establishing a "Rabbi Trust" for the purpose of
accumulating funds to pay benefits under this Plan; provided,
however, that the assets of such Rabbi Trust shall be available
to the creditors of the Company if the Company is unable to pay
its debts as they fall due, or bankruptcy or insolvency
proceedings have been initiated by the Company's creditors or the
Company itself, or by any third party, under the Bankruptcy Act
of the United States or the bankruptcy laws of any state,
alleging that the Company is insolvent or bankrupt. If, in
accordance with the terms of a Rabbi Trust, any funds held in
such trust revert back to the Company, such reversion shall not
in any manner reduce or diminish the obligation of the Company
under this Plan to any Participant.
ARTICLE V
AMENDMENT AND TERMINATION
5.1 Amendment - The Board of Directors or the Executive
Compensation Committee of the Board of Directors may amend the
Plan with respect to future periods at any time for whatever
reason it may deem appropriate.
5.2 Termination - The Board of Directors may terminate the Plan
in whole or in part with respect to future periods at any time
for whatever reason it may deem appropriate. In the event of the
complete termination of the Plan, no Participant shall be
entitled to accrue additional benefits under the Plan with
respect to any period after the effective date of termination
determined by the Board of Directors.
5.3 Preservation of Benefits on Termination or Amendment -
Neither the termination nor amendment of the Plan shall reduce
the benefits previously accrued by a Participant under this Plan.
ARTICLE VI
MISCELLANEOUS
<PAGE>5
6.1 Governing Law - The Plan shall be governed by the laws of
the State of New York.
6.2 No Right to Continued Service - Nothing contained in the
Plan shall be construed as conferring upon any Outside Director
the right to continue to serve as an Outside Director on the
Board of Directors or as imposing a limitation of any right to
terminate an outside Director's service.
6.3 Construction of Language - Wherever appropriate in the Plan,
words used in the singular may be read in the plural, words in
the plural may be read in the singular, and words importing the
masculine gender shall be deemed equally to refer to the feminine
and the neuter. Any reference to any Article or Section shall be
to an Article or Section of this Plan, unless otherwise
indicated.
6.4 Non-Alienation of Benefits - Except as provided by
applicable federal or State law, no benefit payable or any
interest under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, attachment, execution, or the
claims of creditors with respect to any Participant having an
interest in this Plan. If any Participant who is entitled to any
benefit under the Plan shall become bankrupt or attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber of
charge such benefit, or if any person shall attempt to garnish,
attach, execute or otherwise encumber a benefit payable or to
become payable under the Plan to any Participant the Committee,
in its sole discretion, may terminate the interest in such
benefit of such Participant and in that event, the Committee
shall cause such benefit, or any part thereof, to be held or
applied for the benefit of such Participant of his spouse,
children or other relatives or dependents, or all or any of them,
in such manner as the Committee shall determine, and any such
application shall be a complete discharge of all liability with
respect to such benefit.
6.5 Taxation - If a Participant is determined to be subject to
federal income tax on any benefits under the Plan prior to the
time such benefits are payable, then the entire amount of
benefits payable to such person under this Plan shall be due and
payable at once, in a single lump sum, determined using the UP
1984 Mortality Table and the Pension Benefit Guaranty Corporation
interest rates for lump sum calculations as in effect on the
first day of the Plan year in which such amount is to be paid. A
benefit shall be determined to be subject to federal income tax
upon the earliest of (a) a final determination by the United
States Internal Revenue Service addressed to the Participant
which is not appealed to the courts, or (b) a final determination
by the United States Tax Court or any other Federal court
affirming any such determination by the Internal Revenue Service,
<PAGE>6
or (c) an opinion by counsel chosen by the Company addressed to
the Company that by reason of treasury regulations, amendments to
the Internal Revenue Code, published Internal Revenue Service
Rulings, court decisions or other substantial precedents, such
benefits are subject to federal income tax prior to payment. The
Company shall undertake to defend, and bear the expense of, any
tax claims described herein which are asserted by the Internal
Revenue Service or by the taxing authority of any State or
locality against any Participant including the expense of
attorney fees and costs of appeal, and shall have the sole
authority to determine whether or not to appeal any determination
made by the Internal Revenue Service, or by any taxing
authorities of any State or locality, or by any court. The
Company agrees to reimburse any Participant for any interest or
penalties in respect of Federal, State or local tax claims
hereunder upon receipt of documentation of the same.
<PAGE>1
USLIFE Corporation Restricted Stock Plan
As Amended September 27, 1994
1. Purpose. The purpose of the USLIFE Corporation Restricted Stock Plan
(the "Plan") is to promote the growth and profitability of USLIFE
Corporation (the "Company") and its subsidiaries by providing the
incentive of long-term equity rewards consisting of the common stock of
the Company (the "Common Stock"), subject to certain restrictions as
provided herein, to those executive officers of the Company and its
subsidiaries who have had, and who are expected to continue to have, a
significant impact on the performance of the Company, to encourage such
officers to remain with the Company and to further identify their
interests with those of the Company's shareholders.
2. Definitions. For purposes of the Plan, the following terms shall
have the meanings indicated:
a) "Board of Directors" or "Board" shall mean the Board of Directors of
the Company.
b) "Cause" shall mean the existence of circumstances whereby a
termination of a Participant's employment by the Company is permitted
under applicable law and without liability under the provisions of
the employment agreement, if any, between such Participant and the
Company.
c) "Change in Control" shall mean (i) a merger or consolidation to which
the Company is a party and for which the approval of any shareholders
of the Company is required; (ii) any "person" (as such term is used
in Sections 13(d) and 14(d)(2) of the Securities Act of 1934, as
amended) becoming the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities; (iii) a
sale or transfer of substantially all of the assets of the Company;
or (iv) a liquidation or reorganization of the Company.
d) "Committee" shall mean the Executive Compensation and Nominating
Committee of the Board of Directors.
e) "Covered Employee" shall have the meaning specified in Section
162(m)(3) of the Internal Revenue Code of 1986, as amended.
f) "Earnings Per Share from Continuing Operations" shall mean the
Company's income from operations per share, before the impact of
realized gains and losses, discontinued operations, changes in
accounting principles and extraordinary items and before material
non-operational items that are beyond the control of the Company's
management, provided that the Committee may, in its sole discretion,
elect to take such material non-operational items into
<PAGE>2
account (but not for purposes of determining Threshold Earnings Per
Share from Continuing Operations) to the extent such items would
result in a reduction in the Company's income from operations.
g) "Initial Restricted Period" shall mean the Restricted Period
beginning on January 1, 1989 and ending on January 1, 1994.
h) "Participant" shall mean any executive officer of the Company or one
of its subsidiaries who has met the eligibility requirements set
forth in Section 5 hereof and to whom a grant has been made and is
outstanding under the Plan.
i) "Permanent Disability" shall mean a physical or mental condition of a
Participant that, in the judgment of the Committee, after
consultation with a duly licensed physician, permanently prevents
such Participant from being able to serve as an active employee of
the Company and its subsidiaries. For purposes of determining the
date on which a Participant becomes Permanently Disabled, the
Committee may select the day on which such Participant first becomes
eligible for long-term disability benefits under the Company's long-
term disability plan then in effect.
j) "Restricted Period" shall mean a period of 62 consecutive months,
commencing with the first day of the calendar year in which the
Restricted Shares are granted, during which restrictions on such
Restricted Shares are in effect.
k) Restricted Shares" means shares of Common Stock granted to a
Participant subject to the restrictions specified in Section 6 of the
Plan.
l) "Retirement" shall mean a Participant's cessation of employment by
reason of retirement under the USLIFE Corporation Retirement Plan.
m) "Threshold Earnings Per Share from Continuing Operations" shall mean,
with respect to any calendar year, the average of the Company's
Earnings Per Share from Continuing Operations for the three preceding
calendar years.
3. Administration. The Plan shall be administered by the Committee.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to: (i) select Participants; (ii) determine the number
of Restricted Shares subject to each grant; (iii) determine the time or
times when grants are to be made; (iv) prescribe the form or forms of the
instruments evidencing any grants made hereunder, provided that such forms
are consistent with the Plan; (v) adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable for the administration of
the Plan; (vi) construe and interpret the Plan and any related documents
including, without limitation, any Restricted Share Agreement (as
<PAGE>3
defined in Section 6(a) hereof); and (vii) make all other determinations
deemed advisable or necessary for the administration of the Plan. All
determinations by the Committee shall be final and binding.
4. Shares of Common Stock Subject to the Plan. No more than 1,050,000
shares of Common Stock in the aggregate (as adjusted for the December 1992
3-for-2 stock split) shall be issued as Restricted Shares under the Plan,
subject to adjustment as provided in Section 7 hereof. A Participant may
be granted more than one award of Restricted Shares under the Plan. No
Participant shall be granted more than 75,000 Restricted Shares in the
aggregate under the Plan during any one-year period, subject to adjustment
as provided in Section 7 hereof. Shares of Common Stock issued as
Restricted Shares under the Plan that are later forfeited pursuant to
Section 6 hereof may again be subject to grants under the Plan. All
shares of Common Stock issued as Restricted Shares hereunder shall either
be shares held by the Company in its treasury or shares previously
forfeited under the terms of the Plan.
5. Eligibility and Participation. Participation in the Plan shall be
limited to those executive officers of the Company and its subsidiaries at
the level of Senior Vice President and above (including Directors who are
officers) and such other key officers as shall be designated by the
Committee as being in positions in which they can make a significant
impact on the profitability of the Company. The Committee may at any time
designate additional executive officers as Participants or revoke any
prior designation, but such revocation shall not affect a Participant's
rights with respect to Restricted Shares granted prior to the revocation.
6. Provisions Applicable to Restricted Shares
a) Grants of Restricted Shares. The Committee may grant Restricted
Shares to Participants at any time. Subject to the provisions of Sections
6(b) and (d) hereof, a grant of Restricted Shares shall be effective for
the entire applicable Restricted Period and may not be revoked. Each
grant to a Participant shall be evidenced by a written agreement, signed
by the Participant (a "Restricted Share Agreement"), which shall state the
number of Restricted Shares granted, the Restricted Period, the
restrictions that apply to such Restricted Shares, and any other terms,
conditions, and rights with respect to such grant.
b) Restrictions. At the time Restricted Shares are granted to a
Participant, share certificates representing the appropriate number of
Restricted Shares shall be registered in the name of such Participant but
held by the Company for the account of such Participant. Such
certificates shall bear a legend restricting their transferability as
provided herein. During the Restricted Period, the Participant shall have
the right to vote such Restricted Shares. Dividends paid for any calendar
year during the Restricted Period shall be held by the Company for the
<PAGE>4
account of such Participant and shall, subject to clause (iii) of this
Section 6(b), be distributed to the Participant as soon as practicable
following the March 1 following such calendar year, with the exception of
dividends payable on grants made under the Company's Long-Term Incentive
Award Guidelines to participants who are not Covered Employees, which
shall be paid as set forth in Section 6(c). The Restricted Shares shall,
however, be subject to the following restrictions during the Restricted
Period:
(i) subject to Sections 6(c) and (d) hereof, none of the Restricted
Shares may be sold, exchanged, transferred, assigned, pledged, or
otherwise encumbered or disposed of by the Participant during the
applicable Restricted Period; provided, however, that as of March 1
(the "Vesting Date") of each of the second, third, fourth and fifth
of the five calendar years comprising such Restricted Period, and as
of March 1 following such fifth calendar year, (the "Vesting
Schedule"), such restrictions (including any restrictions under the
applicable Restricted Share Agreement) shall, subject to clause (iii)
of this Section 6(b), terminate with respect to 20% (the "Vesting
Rate") of the number of Restricted Shares granted to such Participant
for such Restricted Period and, as soon as practicable following the
relevant Vesting Date, certificates for the appropriate number of
shares of Common Stock shall be delivered for such Participant, free
of the restrictions of the Plan and the Restricted Share Agreement,
in accordance with Section 6(e) hereof;
(ii) subject to Section 6(d) hereof, if such Participant ceases to be
an employee of the Company or any of its subsidiaries prior to the
expiration of the applicable Restricted Period, any Restricted
Shares granted to such Participant which are still subject to
restriction shall be forfeited and all rights of the Participant to
such Restricted Shares shall terminate without further obligation on
the part of the Company; and
(iii) notwithstanding the provisions of clause (i) of this
Section 6(b), but subject to the last sentence of Section 6(c)
hereof, in the event that, for any calendar year during the
Restricted Period, the Company's Earnings Per Share from Continuing
Operations do not exceed the Company's Threshold Earnings Per Share
from Continuing Operations, any Restricted Shares for which the
applicable restrictions would have terminated as of the March 1
following such calendar year shall be forfeited and all rights of the
Participant to such Restricted Shares (and to any dividends paid and
held by the Company for such calendar year with respect to such
Restricted Shares or any other Restricted Shares granted to the
Participant) shall terminate without further obligation on the part
of the Company.
<PAGE>5
(c) Alternative Vesting Schedules and Rates. Notwithstanding the proviso
to Section 6(b)(i) hereof, with respect to Restricted Shares granted to a
Participant for any Restricted Period other than the Initial Restricted
Period, the Committee may, in its sole discretion, prescribe that all
restrictions on such Restricted Shares under the Plan and the applicable
Restricted Share Agreement shall terminate in accordance with a schedule
other than the Vesting Schedule and at a rate other than the Vesting Rate;
provided, however, that any such grant shall, subject to the following
sentence, be subject to the performance thresholds specified in Section
6(b)(iii). Grants made under the Company's Long-Term Incentive Award
Guidelines, as amended from time to time, to Participants who are not
Covered Employees are not subject to the forfeiture provisions contained
in Section 6(b)(iii), and dividends payable on such shares shall not be
held by the Company for the account of such Participant in accordance with
Section 6(b) hereof but shall be paid on the regular dividend payment
date.
(d) Termination of Employment or Occurrence of a Change in Control. With
respect to any Participant, if (i) such Participant ceases to be an
employee of the Company or any of its subsidiaries prior to the expiration
of the applicable Restricted Period by reason of death, Permanent
Disability, Retirement or termination by the Company without Cause or (ii)
a Change in Control occurs, all restrictions set forth in the Plan and the
applicable Restricted Share Agreement (and the provisions of Section
6(b)(iii) hereof) shall terminate as to any Restricted Shares granted to
such Participant which are still subject to restriction, and certificates
for the appropriate number of shares of Common Stock free of the
restrictions of the Plan and such Restricted Share Agreement shall be
delivered to the Participant or his or her beneficiary or estate, as the
case may be, in accordance with Section 6(b) hereof, all Restricted Shares
granted to such Participant which are still subject to restriction.
(e) Delivery of Restricted Shares. At the end of the applicable
Restricted Period or at such earlier time as provided for in accordance
with Section 6(b), (c) or (d) hereof, subject to Section 6(b)(iii) hereof,
where applicable, all restrictions contained in the Plan and the
applicable Restricted Share Agreement shall terminate as to the Restricted
Shares granted to a Participant with respect to such Restricted Period,
and certificates for the appropriate number of shares of Common Stock free
of the restrictions of the Plan and the Restricted Share Agreement,
registered in the name of the Participant, shall be delivered to the
Participant or his or her beneficiary or estate, as the case may be.
7. Changes in Capitalization. If any change shall occur in or affect
the Common Stock on account of a merger, consolidation, reorganization,
stock dividend, stock split or combination, reclassification,
recapitalization, or distribution to holders of the Common Stock (other
than regular dividends), the Committee shall make such adjustments, if
any, that it may deem, in its sole discretion, necessary or equitable in
(a) the maximum number of shares of
<PAGE>6
Common Stock available for issuance under the Plan and (b) the number of
shares of Common Stock subject to or reserved for issuance under
outstanding Restricted Share grants. In the case of any stock split or
stock dividend, such adjustments shall be self-operative and shall not
require any specific action by the Company's Board of Directors to
effectuate the same.
8. Designation of Beneficiary. A Participant may designate a person or
persons to receive, in the event of his or her death, any rights to which
he or she would be entitled under the Plan. Such a designation shall be
made in writing and filed with the Secretary of the Company. A
beneficiary designation may be changed or revoked by a Participant at any
time by filing a written statement of such change or revocation with the
Secretary of the Company. If a Participant fails to designate a
beneficiary, then his or her estate shall be deemed to be his or her
beneficiary.
9. Rights as an Employee. Neither the Plan nor any action taken
hereunder shall be construed as giving any officer or employee of the
Company or any of its subsidiaries the right to become a Participant, and
a grant under the Plan shall not be construed as giving any Participant
any right to be retained in the employ or service of the Company or any of
its subsidiaries.
10. Nontransferability. A Participant's rights under the Plan, including
the right to any amounts or Common Stock payable, may not be assigned,
pledged, or otherwise transferred except, in the event of a Participant's
death, to his or her designated beneficiary or, in the absence of such a
designation, by will or the laws of descent and distribution.
11. Withholding. The Company and its subsidiaries shall have the right,
before any payment is made or a certificate for any Common Stock is
delivered, to deduct or withhold from any payment to a Participant under
the Plan to satisfy any Federal, state, or local taxes, including transfer
taxes, required by law to be withheld or to require the Participant or his
or her beneficiary or estate, as the case may be, to pay any amount, or
the balance of any amount, required to be withheld. The Committee may, in
its discretion and subject to such rules and procedures as it may adopt,
permit a Participant to satisfy in whole or in part his or her withholding
tax obligations for Federal, state and local income taxes, including
without limitation FICA, arising in connection with the vesting of
Restricted Shares under the Plan by withholding shares of Common Stock
with a fair market value equal to such withholding obligations from the
shares that would otherwise vest and be delivered to the Participant.
<PAGE>7
12. No Trust or Fund Created. Neither the Plan nor any grant made
hereunder shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company or any of its
subsidiaries and a Participant or any other person. To the extent that
any person acquires a right to receive payments from the Company pursuant
to a grant under the Plan, such right shall be no greater than the right
of any unsecured general creditor of the Company.
13. Expenses. The expenses of administering the Plan shall be borne by
the Company.
14. Amendment and Termination. The Committee may modify, amend, or
terminate the Plan at any time; provided, however, that no modification,
amendment, or termination of the Plan shall adversely affect the rights of
a Participant under a grant previously made to him or her without the
consent of such Participant.
15. Governmental and Other Regulations. The Plan and any grant hereunder
shall be subject to all applicable Federal and state laws, rules, and
regulations and to such approvals by any regulatory or governmental agency
as may be required.
16. Governing Law. The Plan shall be construed and its provisions
enforced and administered in accordance with the laws of the State of New
York.
17. Effective Date. The Plan shall be effective as of January 1, 1989;
provided, however, that it shall be a condition to the effectiveness of
the Plan, and any grants hereunder, that the shareholders of the Company
shall approve the adoption of the Plan at the 1989 annual shareholders'
meeting. If such shareholders fail to approve the Plan, then the Plan and
any grants hereunder shall be null and void ab initio. It shall be a
condition to the effectiveness of any grants hereunder made on or after
January 1, 1994 that the shareholders of the Company shall approve at the
1994 annual shareholders' meeting the amendments to the Plan submitted to
the shareholders for their approval.
<PAGE>1
USLIFE Corporation
1991 Stock Option Plan
As Amended
The purpose of the 1991 Stock Option Plan of USLIFE
Corporation (the "Plan") is to encourage and enable selected
employees who are key officers of USLIFE Corporation (the
"Corporation") and its subsidiary corporations upon whose
judgment, initiative and efforts the Corporation is largely
dependent for its business success to acquire a proprietary
interest in the Corporation through the ownership of its
common stock. In this Plan, the terms "employees of the
Corporation", "employment by the Corporation", and "in the
employ of the Corporation", shall be deemed to include
employees of, employment by, and in the employ of, a
"subsidiary corporation" or "parent corporation" of the
Corporation, as those terms are defined in section 424 of
the Internal Revenue Code of 1986, as amended (the "Code").
1. The Stock. Options granted under the Plan shall be for
the purchase of shares of common stock, par value $1.00 per
share, of USLIFE Corporation together with any Common Stock
Purchase Rights appertaining thereto ("Common Stock").
Subject to adjustment in the number and kind of shares as
hereinafter provided, not more than 1,050,000 shares of such
stock shall be sold on exercise of options under the Plan
(as adjusted for the December 1992 3-for-2 stock split,
pursuant to paragraph 12 below). Such shares may be
authorized but unissued shares or shares acquired by the
Corporation and held in its treasury, as the Board of
Directors may determine. Any shares in respect of which an
option granted under the Plan shall have expired or
terminated may again be allotted under the Plan. Each
option granted under the Plan shall be subject to the
requirement that, if at any time the Board of Directors
shall determine that the listing, registration or
qualification of the shares subject thereto upon any
securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body,
is necessary or desirable in connection with the granting of
such option or the issue or purchase of shares subject
thereto, no such option may be exercised in whole or in part
unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any
conditions not acceptable to the Board of Directors.
2. Types of Options. The types of Original Options (as
defined in paragraph 10) that may be granted under the Plan
are incentive stock options (hereinafter "ISOs"), as defined
under section 422 of the Code, and non-qualified stock
options. Any such option, or part thereof, granted under
<PAGE>2
the Plan may be designated as an ISO or a non-qualified
stock option by the Committee and with the approval of the
Board of Directors of the Corporation.
3. Eligibility. Options shall be granted only to employees
who are key officers of the Corporation (including key
officers who are directors); provided that no options may be
granted to directors who are not employees or to persons who
are then serving on the Executive Compensation and
Nominating Committee (the "Committee").
Under the Plan, the aggregate fair market value of the
shares of Common Stock with respect to which all ISOs,
including any ISOs granted after December 31, 1986 under the
1981 USLIFE Corporation Stock Option Plan (hereinafter "1981
Plan") are first exercisable by the optionee during any
calendar year shall not exceed $100,000. Notwithstanding
any contrary provision of either the 1981 Plan or the Plan,
no ISO shall be granted to any employee who, at the time the
option is granted, owns directly or indirectly within the
meaning of section 424(d) of the Code more than ten percent
of the total combined voting power of all classes of stock
of the Corporation, unless (a) the purchase price of shares
under such option is at least 110 % of the fair market value
of a share of the Common Stock on the date the option is
granted, and (b) the expiration date of such option is a
date not later than the day preceding the fifth anniversary
of the date on which the option is granted.
4. Number of Options. No individual shall be granted more
than 75,000 options in the aggregate under the Plan during
any one-year period.
5. Price. The purchase price of shares under each option
shall not be less than 100% of the fair market value of such
shares at the time of grant of the option.
6. Option Period. The period during which each option may
be exercised shall be set forth in the option, but in no
event shall an option be exercisable in whole or in part (a)
before the end of six (6) months following the date of the
grant, or (b) after the expiration of ten (10) years from
such date; provided, however, that a Reload Option, as such
term is defined in paragraph 10, may not be exercised for a
period of three (3) years from the date of the exercise of
an Original Option. Each option may be exercisable in one
or more installments as provided therein.
7. Exercise of Option. Except as provided in paragraphs 9
and 11 below, no option may be exercised unless the optionee
is at the time of such exercise in the employ of the
Corporation and shall have been continuously so employed
since the granting of the option. Payment for shares
purchased must be made in full at the time of exercise. The
<PAGE>3
purchase price may be paid in cash; and unless the Committee
adopts a contrary resolution, the purchase price may also be
paid through the delivery of shares of Common Stock owned by
the employee or through a combination of cash and such
shares equal to the total option price. Any shares so
delivered will be valued at their fair market value on the
day preceding the day of exercise and the value thereof
shall not exceed the total option price. No fractional
shares will be issued. The Corporation may require as a
condition of the exercise of the option that the optionee
will pay to the Corporation, in cash, an amount sufficient
to satisfy the Corporation's obligation to withhold federal,
state and local taxes with respect to the exercise of the
option.
8. Non-transferability of Option. No option granted under
the Plan to an employee shall be transferable by the
employee otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title 1 of the Employee
Retirement Income Security Act, or the rules thereunder, and
such option shall be exercisable, during his or her
lifetime, only by the employee.
9. Death of Optionee. In the event of the death of an
optionee while entitled to exercise any option granted to
him or her, such option shall be exercisable up to the date
of expiration of the option period or within twelve months
next succeeding the date of death, whichever is earlier, and
then only (a) by the optionee's legal representatives or the
person or persons to whom the optionee's rights under the
option pass by the optionee's will or the laws of descent
and distribution, and (b) to the extent that he or she was
entitled to exercise the option at the date of his or her
death.
10. Reload Features. Whenever the holder of any option
(the "Original Option") outstanding under the Plan
(including any Reload Option granted under the provisions of
this paragraph 10) exercises the Original Option and makes
payment of the option purchase price in whole or in part by
delivering shares of Common Stock previously held by him or
her, then the holder of that Option shall, subject to
paragraph 4 above, receive a new option (the "Reload
Option") for that number of additional shares of Common
Stock delivered by the optionee in payment of the purchase
price for the Original Option being exercised. All such
Reload Options granted hereunder shall be non-qualified
stock options and shall be subject to all of the following
terms and conditions:
(a) the option price per share shall be the then
current fair market value per share of the Common Stock as
of the date of exercise of the Original Option;
<PAGE>4
(b) the Reload Option shall be exercisable for
three (3) years from the date it vests;
(c) any Reload Option shall vest and be
exercisable three (3) years from the date of its grant;
(d) except as set forth in subparagraph (e)
below, all other terms and conditions of Reload Options
shall be identical to the terms and conditions of the
Original Option; and
(e) any and all Reload Options granted pursuant
to this paragraph 10 shall be subject to the following
additional conditions and restrictions:
(i) no Reload Option shall be granted
unless the shares tendered upon exercise of the Original
Option in payment therefor have been held by the optionee
for a period of more than six (6) months prior to the
exercise of the Original Option; and
(ii) if any of the shares of Common
Stock which are issued upon exercise of the Original Option
are sold within three (3) years following the exercise of
the Original Option, then the Reload Option shall
immediately terminate and the optionee shall have no further
rights with respect to that Reload Option.
11. Continuation of Employment. Each option, to the extent
it shall not have been exercised, shall terminate when the
employment of the optionee terminates for any reason other
than death, disability or retirement either after age 65, or
prior thereto with the consent of the Board of Directors
under a pension, profit sharing, long-term disability or
similar plan of his or her employer. In the event of
termination of employment because of such retirement or
disability, the employee's options shall terminate on the
date of expiration of the option period and may be exercised
as though the optionee had remained in the employ of the
Corporation until the termination of the option except as
the Committee may provide. Nothing contained in the Plan or
in any option granted pursuant to the Plan shall confer on
any optionee any right to be continued in the employ of the
Corporation.
12. Dilution or Other Adjustments. In the event that the
outstanding shares of Common Stock shall be increased or
decreased or changed into or exchanged for a different
number or kind of shares of stock or other securities of the
Corporation or of another corporation, whether through
reorganization, merger, consolidation, recapitalization,
stock split, combination of shares, stock dividend or
otherwise, the Board of Directors shall make appropriate
adjustment in the number or kind of shares or securities
<PAGE>5
available for option pursuant to the Plan and subject to any
option, and the purchase price therefor. The determination
of the Board of Directors as to such adjustments shall be
conclusive. In the case of any stock split or stock
dividend, such adjustments shall be self-operative and shall
not require any specific action by the Corporation's Board
of Directors to effectuate the same.
13. Effective Date and Termination of the Plan. The Plan
was authorized by the Board of Directors effective as of May
21, 1991, subject to and conditioned upon approval of the
holders of a majority of the Corporation's then outstanding
shares of Common Stock, Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C
Cumulative Preferred Stock and any other class or series of
stock which is entitled to vote with the holders of the
Common Stock, all voting as a single class. The Board of
Directors may in its discretion terminate the Plan with
respect to any shares for which options have not theretofore
been granted. No option may be granted hereunder after May
20, 2001.
14. Effect of a Change in Control on Options. "Change in
Control" shall mean (i) a merger or consolidation to which
the Corporation is a party and for which the approval of any
shareholders of the Corporation is required; (ii) any
"person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the beneficial owner, directly or indirectly, of
securities of the Corporation representing 25% or more of
the combined voting power of the Corporation's then
outstanding securities; (iii) a sale or transfer of
substantially all of the assets of the Corporation; or (iv)
a liquidation or reorganization of the Corporation. In the
event of a Change in Control then all outstanding options,
including Original Options and Reload Options, which have
been held by the optionee for at least six (6) months from
the date of their grant shall vest and become immediately
exercisable and the restrictions contained in paragraph
10(c) and paragraph 10(e)(ii) shall no longer apply.
15. Administration and Amendment to the Plan. The Plan
shall be administered by the Committee as appointed from
time to time by the Board of Directors from among its
members, none of whom shall be eligible to be granted stock
options under the Plan and each of whom shall be (a) a
"disinterested person" within the meaning of Rule 16b-
3(c)(2)(i) under the Securities Exchange Act of 1934, as
amended (the "'34 Act") and (b) an "outside director" within
the meaning of Section 162(m)(4) of the Code. Subject to
and within the limitations provided in the Plan, the
Committee shall grant options under the Plan on such terms
and conditions as the Committee shall deem appropriate. The
Committee from time to time may adopt rules and regulations
<PAGE>6
for carrying out the Plan. The interpretation and decision
with regard to any question arising under the Plan made by
the Committee shall be final and conclusive on the
Corporation and on all participants, and other persons
eligible to participate, in the Plan. The Committee may at
any time, or from time to time, suspend or terminate the
Plan in whole or in part or amend the Plan in such respect
as the Committee may deem appropriate; provided, however,
that no such amendment shall be made, which would, without
approval of the holders of a majority of the Corporation's
outstanding shares of Common Stock, Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock and
any other class or series of stock which is entitled to vote
with the holders of the Common Stock, all voting as a single
class:
(a) materially modify the eligibility requirements
for receiving options or change the class of employees to
whom options may be granted;
(b) materially increase the number of shares of
Common Stock which may be issued pursuant to options;
(c) reduce the minimum purchase price for option
shares as set forth in paragraph 5 above;
(d) extend the period of granting options; or
(e) materially increase in any other way the benefits
accruing to optionees.
No amendment, suspension or termination of the Plan
may, without the optionee's consent, alter or impair any of
the rights or obligations under any option theretofore
granted to an optionee under the Plan. The Committee may
amend the Plan, subject to the limitations cited above, in
such manner as it deems necessary to (a) permit the granting
of options meeting the requirements of future amendments, if
any, to the Code or future regulations issued thereafter and
(b) ensure that options granted or to be granted hereunder
meet the requirements of Rule 16b-3 of the '34 Act for
exemption from the provisions of Rule 16b-3 thereunder, as
such rule may hereinafter be amended.
<PAGE>1
Annual Incentive Plan, as Amended October 25, 1994
For Selected Key Officers of USLIFE Corporation and its Subsidiaries
1. Purpose of the Plan. The purpose of this Annual Incentive Plan (the
"Plan") is to provide an incentive and reward to selected key officers of
USLIFE Corporation (the "Corporation") and its subsidiaries who have had,
and who are expected to continue to have, a significant impact on the
performance of the Corporation by making such key officers participants in
the Corporation's profits through the medium of annual incentive awards.
2. Definitions.
a) The term "Change in Control" shall mean (i) a merger or consolidation
to which the Corporation is a party and for which the approval of any
shareholders of the Corporation is required; (ii) any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) becoming the beneficial owner,
directly or indirectly, of securities of the Corporation representing
25% or more of the combined voting power of the Corporation's then
outstanding securities; (iii) a sale or transfer of substantially all
of the assets of the Corporation; or (iv) a liquidation or
reorganization of the Corporation.
b) The term "Core Life Insurance Businesses" shall mean the
Corporation's individual line of business, including individual life
and individual investment contracts.
c) The term "Income" shall mean pre-tax income, before capital gains and
losses, for the Corporation's individual line of business, including
individual life, individual investment contracts and income from
capital and surplus, before changes in accounting principles and
before material non-operational items that are beyond the control of
the Corporation's management, provided that the Committee may, in its
sole discretion, elect to take such material non-operational items
into account to the extent such items would result in a reduction in
pre-tax income.
d) The term "Permanent Disability" shall mean a physical or mental
condition of a Participant that, in the judgment of the Committee,
after consultation with a duly licensed physician, permanently
prevents such Participant from being able to serve as an active
employee of the Corporation and its subsidiaries. For purposes of
determining the day on which a Participant becomes permanently
disabled, the Committee may select the day on which such Participant
first becomes eligible for long-term disability benefits under the
Corporation's long-term disability plan then in effect.
<PAGE>2
e) The term "subsidiary" shall mean any corporation at least 50% of
whose issued and outstanding voting stock is owned, directly or
indirectly by the Corporation.
3. Administration of the Plan.
a) This plan shall be administered by the Executive Compensation and
Nominating Committee (the "Committee") of the Board of Directors of
the Corporation (the "Board") which shall consist of not less than
two members of the Board. Each member of the Committee shall be an
"outside director" within the meaning of Section 162(m)(4) of the
Internal Revenue Code of 1986, as amended (the "Code"). Service on
the Committee shall constitute service as a director of the
Corporation so that the members of the Committee shall be entitled to
indemnification and reimbursement as directors of the Corporation
pursuant to its By-laws.
b) The Committee is authorized to interpret this Plan and may from time
to time adopt such rules and regulations for carrying out this Plan
as it may deem necessary or advisable. Decisions of the Committee
shall be final, conclusive and binding upon all parties, including
the Corporation, the shareholders of the Corporation and the key
officers who participate in the Plan. The Committee shall be
entitled to rely upon the determination of the independent auditor of
the Corporation with respect to, for any given year, the calculation
of Income from the Core Life Insurance Businesses.
4. Participation in the Plan.
a) Participation in this Plan during any year shall be limited to those
key officers ("Participants") of the Corporation and its subsidiaries
who, in the opinion of the Committee, are in a position to have a
significant impact on the performance of the Corporation and who are
selected by the Committee; provided, that participation by a key
officer of a subsidiary shall be subject to the approval of the Plan
by such subsidiary's Board of Directors, which approval shall
constitute the subsidiary's agreement to pay, at the direction of the
Committee, awards directly to its key officers or to reimburse the
Corporation for the cost of such participation in accordance with
rules adopted by the Committee.
b) Unless otherwise determined by the Committee in its sole discretion,
if a Participant ceases to be employed by the Corporation or its
subsidiaries prior to the end of a year for any reason other than
Permanent Disability, Retirement (as defined in the Corporation's
Retirement Plan), or death, his or her participation in the Plan for
such year will terminate forthwith and he or she will not be entitled
to any award for such year. If, prior to the end of a
<PAGE>3
year, a Participant's employment ceases because of Permanent
Disability, Retirement or death, of if the effective date of
participation by a Participant for any year shall be after January 1
of the Plan year, the Participant shall be entitled to receive only
that proportion of the amount, if any, that he or she otherwise would
have received under the Plan for the full calendar year which the
number of calendar days of his or her employment during such year
bears to the total number of calendar days in such year.
5. Maximum Awards Under the Plan for any Year. No Participant shall be
entitled to receive an award under the Plan for any year in an amount in
excess of 75% of such Participant's base salary as in effect on January 1
of such year; provided, however, that in no event shall "base salary" for
such purposes be deemed to exceed such Participant's actual base salary as
in effect on January 1, 1994 increased at the rate of 15% per year (25%
per year in the case of a promotion), or, if such Participant is first
employed by the Corporation or one of its subsidiaries after January 1,
1994, such Participant's actual base salary as in effect on the date of
hire increased at the rate of 15% per year (25% per year in the case of a
promotion).
6. Determination of Incentive Awards.
a) The Committee may authorize awards to eligible key officers based on
the attainment by the Corporation of performance goals established by
the Committee. The performance goals shall be based on absolute
levels of Income from the Core Life Insurance Businesses. No later
than 90 days after the commencement of each Plan year, the Committee
shall establish the specific performance goals to be used to
calculate awards under this Plan for such year.
b) The Committee shall not be obligated to make awards for the maximum
amount available under Section 5 nor to make any awards at all if, in
the sole discretion of the Committee, such awards are not appropriate
in a given year. Any unawarded balance of the maximum amount
available for awards in any year shall not be carried forward or made
available for awards in any future year.
c) No later than 90 days after the commencement of each Plan year, the
Committee shall have absolute discretion to determine the
Participants who are to receive awards under this Plan for such year
and to determine the performance goals for such awards.
d) The amount determined and reported by the Corporation's independent
auditor to the Committee as Income from the Core Life Insurance
Businesses for a given year shall be final, conclusive and binding
upon all parties, including the Corporation, the shareholders of the
Corporation and the Participants,
<PAGE>4
notwithstanding any subsequent special item or surplus charge or
credit which may be considered applicable in whole or in part to such
year; provided, however, that, if the maximum amount determined and
reported to the Committee by the Corporation's accountants as the
Income from the Core Life Insurance Businesses for any year shall
later be held by final judgment of a court of competent jurisdiction
to have been more than the Income from the Core Life Insurance
Businesses for such year, the amounts subsequently available for
awards under this Plan shall be reduced by the amount of any excess
paid under the Plan as a result of the overstatement of Income from
the Core Life Insurance Businesses. Any such overstatement of Income
from the Core Life Insurance Businesses and resulting excess awards
shall be corrected exclusively by adjustment of the amounts
subsequently available for awards and not by recourse to any person.
7. Method and Time of Payment of Awards.
a) Following the completion of each Plan year, the Committee shall
certify the attainment of each Participant's performance goals in the
manner required by Section 162(m) of the Code. Awards for any year
shall be paid in cash.
b) Subject to Section 7(c) below, awards shall be paid in full no later
than April 30 of the year following the Plan year for which the award
is made.
c) In the event of a Change in Control, the payment of awards for the
Plan year in which such Change in Control occurs shall be accelerated
and shall be made on the date on which the Change in Control occurs.
The amount of such award shall be calculated as if all performance
targets have been met to produce the maximum award.
8. Modification, Suspension or Termination. The Board of Directors of
the Corporation may at any time terminate or from time to time modify or
suspend, in whole or in part, and if suspended, may reinstate, any or all
of the provisions of this Plan.
9. Miscellaneous.
a) In the event of a change in the Corporation's fiscal year, this Plan
shall apply, with pro rata adjustment in Income from the Core Life
Insurance Business to be applied, for any intermediate period not
consisting of twelve months, and shall then apply to each fiscal year
following.
b) The Plan shall be effective as of January 1, 1994; provided, however,
that it shall be a condition to the effectiveness of the Plan, and
any awards hereunder, that the shareholders of the Corporation shall
approve the adoption of the Plan at the 1994 annual shareholders'
meeting. If such shareholders fail
<PAGE>5
to approve the Plan, then the Plan and any awards hereunder shall be
null and void ab initio. Any approval by shareholders under this
Plan shall require the affirmative vote of the holders of a majority
of the outstanding voting stock of the Corporation present in person
or by proxy at the meeting and voting on the proposal.
10. Non-Assignability and Contingent Nature of Rights. No Participant,
no person claiming through him or her, nor any other person shall have any
right or interest in the Plan or its continuance, or in the payment of any
award under the Plan, unless and until all other provisions of the Plan,
the rules adopted thereunder, and restrictions and limitations on the
award itself have been fully complied with. No rights under the Plan,
contingent or otherwise, shall be transferable, assignable or subject to
any pledge or encumbrance of any nature.
11. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of New York.
12. No Contract of Employment. Nothing contained herein shall be
construed as a contract of employment between the Corporation and any
Participant, or as giving a right to any person to continue in the
employment of the Corporation or as limiting the right of the Corporation
to discharge any Participant at any time, with or without cause.
<PAGE>1
USLIFE Corporation
Deferred Compensation Plan
(As Amended November 16, 1993)
1. Purpose of Plan
The purpose of the Deferred Compensation Plan (the "Plan")
is to provide select executives of USLIFE Corporation (the
"Corporation") and its subsidiaries with the opportunity to
defer receipt of compensation, including a portion of annual
base salary and incentive award payments, until a future
date. The Corporation has adopted this program in
recognition of the valuable service performed by these
executives and the desire to provide them with additional
flexibility in their personal financial planning.
2. Eligibility
Senior vice presidents and above of the Corporation and
chief executive officers of the subsidiaries of the
Corporation are eligible to participate in the Plan.
3. Administration of the Plan
A. The Plan shall be administered by the Executive
Compensation and Nominating Committee of the Board of
Directors of the Corporation (the "Administrator").
The administrator shall have the authority in its sole
discretion to interpret and apply the provisions of the
Plan.
B. The Administrator may in its discretion delegate
responsibility for the day to day administration and
interpretation of the Plan to a committee composed of
three officers of the Corporation (the "Management
Committee") provided that any determination pertaining
to the deferred compensation of any Management
Committee member will be made solely by the
Administrator.
<PAGE>2
USLIFE Corporation
Deferred Compensation Plan
4. Election to Participate
A. An eligible employee who participates in the Plan (a
"Participant") may elect that a portion of the
compensation which would other wise be payable for
services to be performed as an employee of the
Corporation of any subsidiary be credited to a deferred
compensation account subject to the terms of the Plan.
Such election may apply to a portion of a Participant's
annual base salary at the rate in effect at the time of
the election, up to a maximum of 25%. The election may
also apply to all or a portion of a Participant's cash
incentive award and to all or a portion of a
Participant's book unit award. A newly eligible
Participant may make an election to defer compensation
under the Plan within 30 days after becoming eligible
to participate. An election shall only be valid for
the twelve month period for which it is made.
B. The election shall be made on a form (the "Election
Form") signed by a Participant and filed with the
Secretary of the Corporation. The election shall be
irrevocable, except as specified in Section 8.
C. An election to defer a portion of annual base salary
may be made at any time with respect to the salary
payable during the 12 months that begin on the first
regular payroll period after the date of the filing of
the Election Form. Such election shall end 12 months
after the date of such filing or on such earlier date
as may be specified on the Election Form.
<PAGE>3
USLIFE Corporation
Deferred Compensation Plan
D. An election to defer all or a portion of a
Participant's annul cash incentive award shall be made
by December 31st with respect to an award that is
payable during the following year.
E. An election to defer all or a portion of a
Participant's book unit award shall be made by December
31st with respect to any book unit award with a future
December 31st valuation date that is payable in the
year following the year in which such valuation date
occurs.
F. Notwithstanding 4-C, 4-D and 4-E above, for the first
12 months of the Plan, all employees who are eligible
to participate in the Plan as of the effective date
hereof shall be considered newly eligible and may make
elections within 30 days after such effective date to
defer the future receipt of all or part of their annual
base salary and any cash incentive award for the then
current year as well as all or part of any book unit
award.
5. Deferred Accounts
A. A deferred account shall be established for each
Participant in book entry form and shall be maintained
by the Administrator. Credit shall be given to a
Participant's deferred account on the same dates that
any payments would otherwise have been made to the
Participant currently, in accordance with the deferral
elections indicated on the Election Form.
B. Balances in a Participant's deferred account shall be
credited at the end of each quarter with an interest
equivalent. The interest equivalent shall be
calculated quarterly, at a rate set by the
<PAGE>4
USLIFE Corporation
Deferred Compensation Plan
Administrator, and the rate shall be applied to the
amounts accumulated in a Participant's account at the
beginning of each quarter.
C. The Administrator intends to review and set the
interest rate described in 5-B above at least annually
in light of current economic conditions, provided that
in the event the rate is not modified the interest
equivalent shall continue to be calculated at the rate
last set by the Administrator.
6. Distribution of Deferred Compensation
A. Participants shall indicate on the Election Form the
date or dates on which their deferred account balance
shall be distributed. A Participant may elect to
receive amounts deferred under the Plan plus
accumulated interest in one lump sum payment or in a
number of approximately equal annual installments. Any
tax required to be withheld by any governmental
authority shall be deducted from each distribution
under the Plan.
B. A distribution election shall be made at the time a
Participant first enrolls in the Plan. The initial
date of distribution shall either be the Participant's
actual date of retirement or an earlier date, as
specified on the Election Form. A modification of a
distribution election that changes the date of
distribution to a later date or changes the lump sum or
annual installment election shall be made no later than
12 months before the previously selected distribution
date by delivering a new signed
<PAGE>5
USLIFE Corporation
Deferred Compensation Plan
Election Form to the Secretary of the Corporation.
Distribution of deferred account balances will be made
in accordance with the latest signed Election Form on
file with the Corporate Secretary.
C. Payment of deferred account balances will begin on the
earlier of the last day of the month indicated on the
most recently filed Election Form or on the last day of
the month in which termination of employment or
retirement occurs. If a participant elects to receive
distribution of his or her deferred account balance in
annual installments, subsequent installments shall be
paid in succeeding years on or about the last business
day of the same month in which the first installment
was paid until the entire amount credited to the
Participant's account shall be paid in full. All
undistributed account balances shall continue to accrue
interest as provided in Section 5-B until the actual
date of distribution.
7. Designation of Beneficiary
Each Participant may designate one or more beneficiaries to
receive the entire account balance deferred under the Plan
together with accumulated interest thereon in the event of
death. A beneficiary designation, change or cancellation
may be made at any time. In the absence of any designated
beneficiary, the entire deferred account balance shall be
paid to the designated beneficiary under the Corporation's
group life insurance program.
8. A. Each Participant shall make a determination regarding
the distribution of his or her deferred account balance
on the Election Form. If a Participant continues in
the employ of the
<PAGE>6
USLIFE Corporation
Deferred Compensation Plan
Corporation or terminates such employment due to
retirement, distribution of the deferred account
balance together with accumulated interest shall be
made in accordance with the most recent Election Form
on file with the Corporate Secretary. In the event of
any termination of a Participant's employment for
reasons other than death, disability or retirement, the
Board of Directors, in its sole discretion, shall have
the right to pay the entire deferred account balance
and accumulated interest in one lump sum to a
Participant regardless of any specified distribution
schedule on an Election Form.
B. If a Participant's employment with the Corporation
should terminate due to death or disability before full
payment of his or her deferred account balance and
accumulated interest thereon, the Administrator in its
sole discretion shall determine whether such account
balance shall be paid in a single lump sum or in annual
installments. If the Administrator chooses to make a
lump sum distribution, the lump sum shall be paid to
the Participant's beneficiaries or the Participant on
the last day of the month in which termination occurs.
If the Administrator chooses to make the distribution
in annul installments, the Administrator in its sole
discretion shall determine the number of such
installments and payment of the installments shall
begin on the last day of the month in which termination
occurs.
C. Distribution of deferred account balances in advance of
the scheduled distribution date on a filed Election
Form shall be permitted in the sole discretion of the
Administrator but only in the event of an unanticipated
emergency caused by circumstances
<PAGE>7
USLIFE Corporation
Deferred Compensation Plan
beyond the control of the Participant which would
result in severe financial hardship to the Participant
if such distribution were not permitted. A penalty
shall be deducted from such early distribution equal to
10% of the distribution unless the Administrator in its
sole discretion waives the penalty. Such early
distribution shall in no event exceed the amount
necessary to meet the particular hardship plus the
penalty. A Participant who receives an early
distribution under this Section 8-C shall not be
permitted to participate in the Plan for a period of 12
months after receipt of the distribution.
D. Notwithstanding any other provisions of this Plan,
amounts deferred hereunder plus accumulated interest
shall be immediately payable to each Participant, or
his or her beneficiaries if applicable, in a single
lump sum in the event of the occurrence of either a
transaction which has required the affirmative vote of
the holders of at least 80% of the outstanding shares
of capital stock of the Corporation regularly entitled
to vote in the election of directors by reason of
ARTICLE Seventh of the Corporation's Certificate of
Incorporation or the acquisition by person,
partnership, corporation or other organization, or by
any group of two or more thereof who are affiliates (as
defined by Rule 405 under the Securities Act of 1933)
or are acting in concert in respect to such
acquisition, of more than 25% of such outstanding
shares of capital stock if the Corporation has opposed
an acquisition of shares of the Corporation by such
person, partnership, corporation or other organization
or group before any insurance regulatory authority
whose approval of such acquisition was required.
<PAGE>8
USLIFE Corporation
Deferred Compensation Plan
9. Rights of a Participant
Amounts accumulated in a Participant's deferred account
represent the Corporation's mere promise to pay such amounts
sometime in the future. All compensation and other amounts
deferred under this Plan shall not be segregated from the
general funds of the Corporation and no Participant shall
have any claim on any specific Corporation assets. To the
extent that any Participant acquires a right to receive
benefits under this Plan, the right shall be no greater than
the right of any unsecured general creditor of the
Corporation and is not subject to alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors. A Participant may not pledge
benefits under the Plan; any assets related to the Plan's
obligation to a Participant may only be paid out in the form
chosen for the last distribution. It is the intention of
the Corporation that arrangements under the Plan be unfunded
for tax purposes and for purposes of ERISA Title 1.
10. No Implied Contract
Neither the Plan nor the Election Form shall be construed to
constitute an employment contact between the Corporation and
any Participant or an agreement by the Corporation to employ
the Participant for a specified period of time. All
Participants shall remain subject to discharge to the same
extent as if the Plan had not been put into effect.
11. Amendment and Termination
A. The Plan may be amended from time to time by resolution
of the Board of Directors to comply with changes in the
laws and regulations of any State or the Federal
Government or any agency having supervisory or
regulatory jurisdiction over the Corporation. The
amendment or invalidation of any one or more
<PAGE>9
USLIFE Corporation
Deferred Compensation Plan
provisions of the Plan shall not affect the remaining
provisions of the Plan. No amendment shall reduce any
benefits accrued by any Participant prior to the
effective date of the amendment.
B. The Board of Directors has the right in its sole
discretion to alter the method of crediting interest to
Participants' deferred account balances or to cease
crediting future interest at any time.
C. The Board of Directors has the right in its sole
discretion to terminate the Plan at any time. All
amounts accumulated under the Plan prior to the Plan's
termination will continue to be subject to the
provisions of the Plan.
12. Arbitration of Disputes
Any disagreement, dispute, controversy or claim arising out
of or relating to this Plan or the interpretation or
validity hereof shall be settled exclusively and finally by
arbitration. The arbitration shall be conducted in
accordance with the commercial arbitration rules of the
American Arbitration Association.
13. Applicable Law
This Plan shall be governed by and interpreted solely in
accordance with the internal law of the State of New York
without regard to principles of conflict of law.
14. Administration
Nothing contained herein shall prohibit the Corporation from
establishing a "Rabbi Trust" for the purpose of accumulating
funds to
<PAGE>10
USLIFE Corporation
Deferred Compensation Plan
pay amounts deferred hereunder plus accumulated interest;
provided, however, that the assets of such Rabbi Trust shall
be available to the creditors of the Corporation if the
Corporation is unable to pay its debts as they fall due, or
if bankruptcy or insolvency proceedings have been initiated
by any of the Corporation's creditors or the Corporation
itself, or by any third party, under the Bankruptcy Act of
the United States or the bankruptcy laws of any state,
alleging that the Corporation is insolvent or bankrupt. If,
in accordance with the terms of such a Rabbi Trust, any
funds held in such trust revert back to the Corporation,
such reversion shall not in any manner reduce or diminish
the obligation of the Corporation under this Plan to any
participant.
<PAGE>1
USLIFE Corporation
1993 Long-Term Incentive Award Guidelines, As Amended
The Executive Compensation and Nominating Committee of the
Board of Directors has approved new long-term award
guidelines for senior executives. The new guidelines are
applicable to all senior vice presidents and above on Parent
Company staff and all subsidiary chief executive officers.
They are intended to encourage participants to exercise
their stock options and hold the acquired shares, thereby
creating an enhanced ownership position in USLIFE.
The following paragraphs briefly describe the principal
features of the new guidelines and illustrate the three
alternatives of stock option exercise: exercise of options
with previously acquired shares, with cash and shares, or
with cash only.
These new guidelines introduce a restricted stock component
to long-term incentive awards designed to provide an
additional incentive to exercise stock options and retain
the shares. The number of restricted shares earned by a
participant depends on how the employee funds the option
exercise.
Participants who pay for the option exercise using
<PAGE>2
previously acquired USLIFE shares will receive one
restricted share for every five options exercised. They
will also receive "reload" options (if applicable) at the
current fair market value equal to the number of shares
surrendered to the company to fund the exercise. Please
remember that shares used to exercise options must be
"mature" shares; that is, shares which the participant has
owned for at least six months.
<PAGE>3
Participants who exercise options using cash will receive
one restricted share for every three options exercised.
Share ownership is maximized to the extent cash is used to
acquire option shares. The matching restricted stock grant
is also maximized to encourage greater investment in the
company and provide a valuable incentive to participants.
Subject to the terms of USLIFE's Restricted Stock Plan, the
restricted stock vests in three equal annual installments.
However, if any shares received upon exercise of the options
are sold before the completion of the three-year vesting
period, a proportionate amount of the unvested restricted
stock is forfeited. If the participant is a "covered
employee" within the meaning of section 162(m) of the
Internal Revenue Code (generally, USLIFE's Chief Executive
Officer and the other four most highly compensated executive
officers), the restricted stock (and dividends paid on the
restricted stock) will be subject to forfeiture if the
performance goals specified in USLIFE's Restricted Stock
Plan are not satisfied.
In the case of retirement, death, permanent disability,
termination without cause, or a change in control, all
restrictions on the restricted shares will lapse and the
<PAGE>4
shares will become fully vested; termination of employment
for any other reason before the end of the restriction
period will result in a forfeiture of the unvested
restricted shares.
This program and the guidelines described above are governed
by USLIFE's Restricted Stock Plan and Stock Option Plans.
Notwithstanding the participant's exercise of options in
accordance with the guidelines, the Executive Compensation
and Nominating Committee shall in each instance review and
approve all matching restricted stock grants to the
individual participant as a pre-condition to the award of
such grant or grants. The Executive Compensation and
Nominating Committee and the Board of Directors retain the
sole discretion to administer, amend, or terminate the
program at any time.
<PAGE>1
USLIFE CORPORATION SUPPLEMENTAL
EMPLOYEE SAVINGS AND INVESTMENT PLAN
EFFECTIVE AS OF JANUARY 1, 1994
Unless otherwise required by the context, the terms
herein which are capitalized are defined in the USLIFE
Corporation Employee Savings and Investment Plan (the
"Savings Plan"), as from time to time amended and shall have
the same meaning herein as used therein.
1. Purpose of the Plan
___________________
This Supplemental Employee Savings and Investment
Plan (the "Plan") is intended to be an unfunded,
non-qualified plan of deferred compensation
covering a select group of highly compensated or
management employees for the purpose of providing
benefits in excess of the limitations on benefits
under the Savings Plan resulting from the
application of section 401(a)(17) (restricting
compensation to $150,000 per year, as adjusted)
and section 415 (limitation on annual
contributions to lesser of $30,000 or 25% of
compensation as adjusted, as well as the combined
plan limits), of the Internal Revenue code of 1986
as amended (the "Code") and is not intended to
comply with the requirements of section 401(a) of
the Code. The Plan is also intended to provide
any participants in the USLIFE Corporation
Deferred Compensation Plan ("Deferred Compensation
Plan") with the benefits they would have received
under the Savings Plan if they had not made
deferrals under the Deferred Compensation Plan.
The Plan shall be administered and construed so as
to effectuate this intent.
2. Administration of the Plan
__________________________
a) The Plan shall be administered by the
Executive Compensation and Nominating
Committee of the Board of Directors of the
Corporation (the "Committee"). The Committee
shall have the authority in its sole
discretion to interpret and apply the
provisions of the Plan. Any decision of the
Committee with respect to questions arising
as to the interpretation of this Plan,
including the severability of any or all of
the provisions thereof, shall be final,
conclusive and binding.
b) The Committee in its discretion may delegate
responsibility for the day-to-day
administration of the Plan to a committee
composed of three officers of the Corporation
(the "Management Committee").
<PAGE>2
3. Eligibility
___________
The Employees eligible to participate in the Plan
are Participants in the Savings Plan who are (a) a
participant in the Deferred Compensation Plan for
management, (b) a Vice President or above of the
Corporation or a Senior Vice President or above of
a USLIFE Corporation subsidiary so long as the
Employee's annual compensation for Savings Plan
purposes at any time is projected to exceed the
401(a)(17) earnings limitation or (c) a Vice
President and above in the subsidiaries of USLIFE
Corporation, so long as they are employed on or
after January 1, 1995 and the Employee's Annual
Compensation for Savings Plan purposes at any time
is projected to exceed the 401(a)(17) earnings
limitation, as adjusted from time to time.
4. Deferred Stock Unit Accounts
____________________________
a) A deferred stock unit account shall be
established in the name of each Participant.
The unfunded accounts of Participants are to
be credited with a Company Contribution in an
amount equal to 100% of the Participant's
Basic Contribution under the Savings Plan
times the sum of (a) the Participant's Salary
in excess of the said 401(a)(17) earnings
limitation, (b) any Salary deferred under the
USLIFE Corporation Deferred Compensation Plan
for management which otherwise would have
been the subject of a Company Contribution
under the Savings Plan, including any Salary
above or below the said 401(a)(17) earnings
limitation and (c) any other portion of
Salary that would have been the subject of a
Company Contribution under the Savings Plan
but for the application of the section 415
annual contribution limitations. The amounts
credited to these unfunded accounts are to be
equated with common stock of USLIFE
Corporation of equivalent market value as
provided in 4(b) below.
b) The number of stock units credited will be
calculated by dividing the dollar amount
credited to the Participant's deferred
compensation account at the end of each
calendar by the closing price per share of
USLIFE common stock on the first trading day
of the next succeeding calendar
, such stock units to be computed to four
decimal places. Stock unit accounts shall be
in the form of book entry accounts and no
actual shares of stock or certificates
therefor shall be issued or transferred to,
or held under, the Plan.
c) Dividends declared and paid from time to time
in respect of USLIFE 's issued and
outstanding common stock will be credited on
the dividend payment date as so many
additional stock units (and any fractions of
a
<PAGE>3
unit computed to four decimal places) as
could be purchased with such dividend
equivalents based on the average of the high
and low sales price of USLIFE's common stock
reported as New York Stock Exchange-Composite
Transactions on such dividend payment date
or, if no trading occurs in such stock on the
dividend payment date, on the trading day
immediately preceding said date. Dividend
equivalents on fractions of a share will also
be reinvested to create additional units.
d) In the event that the number of outstanding
shares of USLIFE common stock shall be
changed by reason of split-ups, combinations,
recapitalizations, stock dividends and the
like, the Committee shall make such
adjustments as it deems appropriate in the
number of units credited to the unit accounts
of Participants hereunder.
5. Vesting
_______
A Participant will become vested in the amounts
credited to his deferred stock unit account in
accordance with the schedule provided in Article
VI of the Savings Plan. In the event of a Change
in Control, a Participant who is then employed by
the Company shall fully (100%) vest immediately.
6. Distributions
_____________
Only lump-sum cash distributions are to be made.
Such distributions are to be in an amount
equivalent to the unfunded account value upon the
Participant's termination of employment, death,
retirement or disability. The amounts credited
shall qualify in all respects for exclusion from
the definition of the term "derivative securities"
pursuant to Rule 16a-1(c) of the Securities
Exchange Act of 1934 ("1934 Act") with the result
that the crediting of said amounts shall be exempt
from the operation of the Section 16(b) short-
swing profit restrictions under the 1934 Act. In
the case of the death of the Participant, the
lump-sum cash distribution shall be made in
accordance with the provisions applicable under
Article VII of the Savings Plan when death occurs,
including any beneficiary designation made under
the Savings Plan.
7. Nonassignability
________________
The benefits of a Participant (or his spouse or
beneficiary as the case may be) shall not be
transferable or assignable except by reason of the
laws of descent and distribution.
<PAGE>4
8. Taxation
________
If a Participant, his spouse or beneficiary, is
determined to be subject to Federal income tax on
any benefits under the Plan prior to the time such
benefits are payable, then the entire amount of
benefits payable to such person under this Plan
shall be due and payable at once, in a single lump
sum cash payment. A benefit shall be determined
to be subject to federal income tax upon the
earliest of (a) a final determination by the
United States Internal Revenue Service addressed
to the Participant, his spouse or his beneficiary,
as the case may be which is not appealed to the
courts, or (b) a final determination by the United
States Tax Court or any other Federal court
affirming any such determination by the Internal
Revenue Service, or (c) an opinion by counsel
chosen by the Company addressed to the Company
that by reason of treasury regulations, amendments
to the Internal Revenue Code, published Internal
Revenue Service Rulings, court decisions or other
substantial precedents, such benefits are subject
to Federal Income Tax prior to payment. The
Company shall undertake to defend, and bear the
expense of, any tax claims described herein which
are asserted by the Internal Revenue Service or by
the taxing authority of any State or locality
against any Participant, his spouse or
beneficiary, including the expense of attorney
fees and costs of appeal, and shall have the sole
authority to determine whether or not to appeal
any determination made by the State or locality,
or by any court. The Company agrees to reimburse
any Participant, his spouse or beneficiary for any
interest or penalties in respect of Federal, State
or local tax claims hereunder upon receipt of
documentation of the same.
9. Miscellaneous
_____________
a) The Board of Directors of the Company
reserves the right to modify this Plan from
time to time, or to terminate the Plan
entirely. Benefits accrued under the Plan as
of the date of any amendment or termination
shall not be reduced. The Plan shall
automatically terminate simultaneously with
the termination of the Savings Plan, in which
case all benefits shall be paid as of the
first day of the month coincident with or
next following such event in a single lump
sum cash payment.
b) Although the Plan is intended to be an
unfunded Plan, nothing contained herein shall
prohibit the Company from establishing a
"Rabbi Trust" for the purpose of accumulating
funds to pay benefits under this Plan for any
or all Participants, their spouses, or
beneficiaries; provided, however, that the
assets of such Rabbi Trust shall be available
to the creditors of the Company if the
Company is unable to pay its debts as they
fall due, or bankruptcy or insolvency
proceedings have been initiated by the
Company's creditors or the
<PAGE>5
Company itself, or by any third party, under
the Bankruptcy Act of the United States or
the bankruptcy laws of any state, alleging
that the Company is insolvent or bankrupt.
If, in accordance with the terms of a Rabbi
Trust, any funds held in such trust revert
back to the Company, such reversion shall not
in any manner reduce or diminish the
obligation of the Company under this Plan to
any Participant.
c) Any liability of the Company to any person
with respect to benefits payable under the
Plan shall be based solely upon such
contractual obligations, if any, as shall be
created by the Plan.
d) If upon the payment of any benefits to any
person under the Plan, the Company shall be
required to withhold any amounts with respect
to such payment by reason of any Federal,
State or local tax laws, rules or
regulations, then the Company shall be
entitled to deduct and withhold such amounts
from any such payments. In any event, such
person shall make available to the Company,
promptly when requested by the Company,
sufficient funds or other property to meet
the requirements of such withholding, and the
Company shall be entitled to take and
authorize such steps as it may deem advisable
in order to have the amounts required to be
withheld made available to the Company out of
any funds or property due or to become due to
such person, whether under this Plan or
otherwise.
10. Claims Procedure
________________
The Committee shall establish a procedure for the
resolution of disputes and dispositions of claims
arising under the Plan. Until modified by the
Company, this procedure is as follows:
Any Participant, former Participant, or any spouse
or other beneficiary of such Participant or former
Participant may, of he so desires, file with the
Committee a written claim for benefits under the
Plan. Within sixty (60) days after the filing of
such a claim, the Committee shall notify the
claimant whether his claim is upheld or denied.
The Committee may, under special circumstances,
extend the period of time for processing a claim
by an additional sixty (60) days. If such an
extension of time is required, written notice
shall be furnished to the claimant or his duly
authorized representative prior to the termination
of the initial sixty (60) day period. Such notice
will indicate the special circumstances requiring
an extension. In the event the claim is denied,
the Committee shall state in writing:
a. the specific reasons for the denial;
<PAGE>6
b. specific references to pertinent Plan
provisions on which the denial is based;
c. a description of any additional material
or information necessary for the claimant to
perfect the claim and an explanation of why
such material or information is necessary;
and
d. an explanation of the claim review
procedure set forth in this Section 10.
Within sixty (60) days after receipt of notice
that his claim has been denied, the claimant or
his duly authorized representative may file with
the Committee a written request for a review
hearing and may, in conjunction therewith, submit
written issues and comments. The Committee shall
then schedule, within sixty (60) days after the
filing of such request, a full and fair hearing of
the claim before the Committee. The Committee
may, under special circumstances, extend such
period of time by an additional sixty (60) days.
Prior to said hearing, the claimant or his
representative shall have a reasonable opportunity
to review a copy of the Plan and other pertinent
documents in the possession of the Committee. The
Committee shall communicate their decision in
writing to the claimant within thirty (30) days
after the hearing. Any claim for benefits and any
request for a review hearing hereunder must be
filed on forms to be furnished by the Committee
upon a claimant's request.
11. Successors
__________
This Plan shall be binding upon and inure to the
benefit of any successor to the Company or its
business as the result of merger, consolidation,
reorganization, transfer of assets or otherwise
and any subsequent successor thereto. In the
event of any such similar transaction, the
successor to the Company or its business or any
subsequent successor thereto shall promptly notify
the Participants in writing of its successorship.
In no event shall any such transaction described
herein suspend or delay the rights of
Participants, spouses or beneficiaries to receive
benefits hereunder.
12. Choice of Law
_____________
This Plan shall be construed in accordance with
the laws of the State of New York except to the
extent such laws are pre-empted by the Employee
Retirement Income Security Act of 1974, as
amended.
<PAGE>1
USLIFE CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
EFFECTIVE AS OF JANUARY 1, 1994
Unless otherwise required by the context, the terms used herein which are
capitalized are defined in the USLIFE Corporation Retirement Plan (the
"Retirement Plan"), as from time to time amended, and shall have the same
meaning herein as used therein.
1. Purpose of the Plan
___________________
This Supplemental Retirement Plan (the "Plan") is intended to be an
unfunded, non-qualified plan of deferred compensation covering a
select group of highly compensated or management employees for the
purpose of providing benefits in excess of the limitations on
benefits under the Retirement Plan resulting from the application of
Section 401(a)(17) (restricting compensation to $150,000 per year, as
adjusted), and Section 415 (limitation on annual benefits to $90,000
per year as adjusted, as well as combined plan limits) of the
Internal Revenue Code of 1986 as amended (the "Code") and benefits
that would have otherwise accrued under the Retirement Plan if
deferrals had not been made under the USLIFE Corporation Deferred
Compensation Plan for management. This Plan is not intended to
comply with the requirements of Section 401(a) of the Code. The Plan
shall be administered and construed so as to effectuate this intent.
2. Eligibility
___________
Eligible employees include (1) each Senior Vice President and above
of USLIFE Corporation ("Company"), and each Chief Executive Officer
of any wholly owned subsidiary of USLIFE Corporation, (2) all those
serving as Vice President and above of USLIFE Corporation and all
those serving as Senior Vice President and above in the subsidiaries
of USLIFE Corporation, so long as their earnings as defined for
purposes of this Plan exceeds the 401(a)(17) earnings limitation, as
adjusted from time to time, (3) all those serving as Vice President
and above in the subsidiaries of USLIFE Corporation, so long as they
provide an Hour of Service after November 1, 1994 and their earnings
as defined for purposes of this Plan exceeds the 401(a)(17) earnings
limitation, as adjusted from time to time, and (4) all Participants
in the USLIFE Corporation Deferred Compensation Plan for management,
as well as any highly compensated or management employee of USLIFE
Corporation who is selected by the Board of Directors of the Company.
<PAGE>2
3. Benefits
________
The Plan shall provide a benefit to a Participant (or his spouse or
beneficiary as the case may be) in an annual amount equal to the
difference between the annual amount of the Participant's normal,
early or vested retirement benefit to which he would be entitled
under Article IV of the Retirement Plan upon his termination of
employment if Code Sections 401(a)(17) and 415 were inapplicable, and
the annual amount of such benefit at such time under Article IV of
the Retirement Plan recognizing the effect of such Code sections. If
the Participant has not yet reached age 55 at such time, such offset
shall not occur until his 55th birthday and shall at that time be
based upon his benefit under the Retirement Plan payable at his 55th
birthday.
For all Participants providing an Hour of Service after December 31,
1993, Earnings effective from and after January 1, 1992 means wages,
as defined in section 3401(a) of the Code, and all other payments of
compensation to an employee by the Company (in the course of the
Company's trade or business) for which the Company is required to
furnish the Employee a written statement under section 6041(d) and
6051(a)(3) of the Internal Revenue Code, more commonly known as the
wages, tips and other compensation reported on Form W-2 (hereinafter
"W-2 earnings") excluding therefrom (1) employee moving or relocation
expenses, (2) any income related to the employee participation in
USLIFE Stock Option Plans, with the exception of the value of any
vested shares of restricted stock awarded as a result of a stock
option exercise, and (3) any severance payments, except as
hereinafter provided. Earnings shall be determined before (1) any
adjustments related to the USLIFE Flexible Advantage Program,
including any "vacation sell" dollars, any elections of medical or
dental options or contributions made to the USLIFE Flexible Advantage
Accounts for health or dependent care, and (2) contributions made
under the ESP Option of the USLIFE Corporation Employee Savings and
Investment Plan. Earnings shall also be increased to include any and
all deferrals under the Deferred Compensation Plan for management.
In the event of a Change in Control or Attempted Change in Control,
Earnings also includes any regular or enhanced severance paid to the
Employee which is related to his final year of employment. For
Participant's providing an Hour of Service after November 1, 1994, in
the event of a Participant's termination of employment as a result of
the bulk sale of assets, the merger of companies, discontinuance of a
company's operations, the sale or divestiture of a company, or the
relocation, consolidation or elimination of functions or positions,
Earnings also includes any regular or enhanced severance paid to the
Employee which is related to his final year of employment. For
Participant's providing an Hour of Service after November 1, 1994, in
the event of a Participant's
<PAGE>3
termination of employment as a result of the bulk sale of assets, the
merger of companies, discontinuance of a company's operations, the
sale or divestiture of a company, or the relocation, consolidation or
elimination of functions or positions, Final Average Earnings
includes any regular or enhanced severance paid to the Employee in
the final year of employment, and such year is to be included in the
three (3) year average of Final Average Earnings even if the final
year is not a complete calendar year, but only if its inclusion
produces the highest average amount.
4. Method of Payment
_________________
Benefit payments shall be payable monthly (1/12 of the annual amount)
and shall commence on the first day of the month coincident with or
next following the date of the Participant's 55th birthday or his
termination of employment, if later. Such monthly benefit payments
shall continue to the Participant for his life. In the case of those
Participants in this Plan as of December 31, 1993, upon the
Participant's death after payment of such benefits has commenced,
such payments shall continue to his spouse, or beneficiary, as the
case may be, through the month when the Participant would have
reached his 80th birthday, or for 180 months (15 years) from the date
that the benefits commenced to the Participant, whichever is later
("Guaranteed Period"). Those employees who only participate in the
Plan after December 31, 1993 are to have all of the benefit options
available under Article V of the Retirement Plan. Those employees
who participated in the Plan as of December 31, 1993 and continued to
participate thereafter are to have the Guaranteed Period option under
this section and all of the benefit options under Article V of the
Retirement Plan.
5. Vesting
_______
A Participant shall be fully vested upon his being credited with ten
Years of Service under the Retirement Plan. Except as may be
provided in Section 6 below, should a Participant terminate
employment with the Company prior to being credited with at least ten
Years of Service under the Retirement Plan, he shall forfeit all of
his benefits under this Plan and no benefit shall thereafter be
payable to such Participant, or to his spouse or beneficiary.
6. Special Rules
_____________
In the event of the occurrence of either (1) a transaction which has
required the affirmative vote of holders of at least 80% of the
outstanding shares of capital stock of the Company regularly entitled
to vote in the election of directors by reason of Article Seven of
the Company's
<PAGE>4
Certificate of Incorporation, or (2) the acquisition by any person,
partnership, corporation or other organization, or by any group of
two or more thereof who are affiliates (as defined by Rule 405 under
the Securities Act of 1933) or who are acting in concert in respect
of such acquisition, of more than 25% of such outstanding shares of
such capital stock, if the Company has opposed an acquisition of
shares of the Company by such person, partnership, corporation or
other organization or group before any insurance regulatory authority
whose approval of such acquisition was required, then (A) the benefit
under this Plan of each Participant who is then employed by the
Company shall fully (100%) vest immediately, (B) for purposes of
determining the accrued benefit to which the Participant would be
hypothetically entitled under the Retirement Plan as per the first
clause of Section 3 of this Plan, his Final Average Earnings, his
Years of Credited Service and his age will be redefined to include
earnings and service through the end of his employment contract with
the Company then in effect, as well as any severance payments (and
service reflected by such severance payments) to which he may be
entitled. In such case, the Participant's benefit under this Plan
shall be determined as of the date of such event in accordance with
Section 3 of the Plan (taking into account his additional deemed
earnings, service and severance pay and service as per the foregoing
sentence and his hypothetical age in determining any appropriate
reduction factors) and shall commence to be paid to the Participant
as provided in Section 4 of this Plan based upon his hypothetical
age, or, if later, on the first day of the first month at least
thirty (30) days after the Participant's salary is discontinued or
reduced (whether or not the Participant has terminated employment).
7. Death Benefits
______________
Should a Participant die before all benefit payments to him under
this Plan have been completed, the following shall apply:
A. If a vested, married Participant dies before his Normal
Retirement Date under the Retirement Plan and before his benefit
payments under this Plan have commenced, his spouse shall be entitled
to receive a death benefit with respect to the Participant's benefits
under this Plan determined in the same manner, and subject to the
same rules, as provided in Article V of the Retirement Plan without
regard to Code Sections 401(a)(17) and 415.
B. If a vested Participant who participated in the Plan as of
December 31, 1993 dies after benefit payments under this Plan have
commenced, or after he has reached his Normal Retirement Date under
the Retirement Plan, the Participant's spouse, if at the time of his
death the Participant was married, or the Participant's beneficiary,
if at the time of his death he
<PAGE>5
was not married, will be entitled to receive the monthly payments for
the duration of the Guaranteed Period that were being paid to the
Participant while he was alive. If such spouse or other beneficiary,
as the case may be, dies before receiving all of the monthly payments
for the duration of the Guaranteed Period, then the remaining
payments during such Guaranteed Period shall be paid to the estate of
such person as a lump sum (determined using the UP 1984 Mortality
Table and the Pension Benefit Guaranty Corporation interest rates for
lump sum calculations as in effect on the first day of the calendar
year in which such person dies), or the installments over the
remaining Guaranteed Period shall continue, as the Company, in its
discretion decides. If any vested Participant who provided an Hour
of Service after December 31, 1993 dies after benefit payments have
commenced, or after he has reached his Normal Retirement Date under
the Retirement Plan, his spouse or beneficiary, as the case may be,
will also continue to have those benefit options provided under
Article V of the Retirement Plan, with the benefit determined in the
same manner, and subject to the same rules, as provided in Article V
of the Retirement Plan without regard to Sections 401(a)(17) and 415
of the Code.
Except as provided in paragraph (A) or (B) above, no death benefit shall
be payable under this Plan.
8. Lump Sum
________
If the lump sum value of a benefit payable to a Participant, his
spouse or beneficiary is less that $25,000 (determined using the UP
1984 Mortality Table and the Pension Benefit Guaranty Corporation
interest rates for lump sum calculations as in effect on the first
day of the calendar year in which such benefit is to commence) the
Company may direct that such benefit be paid as such lump sum.
9. Nonassignability
________________
The benefits of a Participant (or his spouse or beneficiary as the
case may be) shall not be transferable or assignable except by reason
of the laws of descent and distribution.
10. Taxation
________
If a Participant, his spouse or beneficiary, is determined to be
subject to Federal income tax on any benefits under the Plan prior to
the time such benefits are payable, then the entire amount of
benefits payable to such person under this Plan shall be due and
payable at once, in a single lump sum, determined using the UP 1984
Mortality Table and the Pension Benefit Guaranty Corporation interest
rates for lump sum calculations as
<PAGE>6
in effect on the first day of the Plan year in which such amount is
to be paid. A benefit shall be determined to be subject to federal
income tax upon the earliest of (a) a final determination by the
United States Internal Revenue Service addressed to the Participant,
his spouse or his beneficiary, as the case may be which is not
appealed to the courts, or (b) a final determination by the United
States Tax Court or any other Federal court affirming any such
determination by the Internal Revenue Service, or (c) an opinion by
counsel chosen by the Company addressed to the Company that by reason
of treasury regulations, amendments to the Internal Revenue Code,
published Internal Revenue Service Rulings, court decisions or other
substantial precedents, such benefits are subject to Federal Income
Tax prior to payment. The Company shall undertake to defend, and
bear the expense of, any tax claims described herein which are
asserted by the Internal Revenue Service or by the taxing authority
of any State or locality against any Participant, his spouse or
beneficiary, including the expense of attorney fees and costs of
appeal, and shall have the sole authority to determine whether or not
to appeal any determination made by the Internal Revenue Service, or
by any taxing authorities of any State or locality, or by any court.
The Company agrees to reimburse any Participant, his spouse or
beneficiary for any interest or penalties in respect of Federal,
State or local tax claims hereunder upon receipt of documentation of
the same.
11. Miscellaneous
_____________
(a) The plan shall be administered by the Administrative Committee
("Committee") established under the Retirement Plan and any decision
of said Committee with respect to questions arising as to the
interpretation of this Plan, including the severability of any or all
of the provisions thereof, shall be final, conclusive and binding.
(b) The Board of Directors of the Company reserves the right to
modify this Plan from time to time, or to terminate the Plan
entirely. Benefits accrued under the Plan as of the date of any
amendment or termination shall not be reduced. The Plan shall
automatically terminate simultaneously with the termination of the
Retirement Plan, in which case all benefits shall be paid as of the
first day of the month coincident with or next following such event
in a single lump sum (determined using the UP 1984 Mortality Table
and the Pension Benefit Guaranty Corporation interest rates for lump
sum calculations as in effect on the first day of the calendar year
in which such event occurs).
(c) Although the Plan is intended to be an unfunded Plan, nothing
contained herein shall prohibit the Company from establishing a
"Rabbi Trust" for the purpose of accumulating funds to pay benefits
under this
<PAGE>7
Plan for any or all Participants, their spouses, or beneficiaries;
provided, however, that the assets of such Rabbi Trust shall be
available to the creditors of the Company if the Company is unable to
pay its debts as they fall due, or bankruptcy or insolvency
proceedings have been initiated by the Company's creditors or the
Company itself, or by any third party, under the Bankruptcy Act of
the United States or the bankruptcy laws of any state, alleging that
the Company is insolvent or bankrupt. If, in accordance with the
terms of a Rabbi Trust, any funds held in such trust revert back to
the Company, such reversion shall not in any manner reduce or
diminish the obligation of the Company under this Plan to any
Participant.
(d) Any liability of the Company to any person with respect to
benefits payable under the Plan shall be based solely upon such
contractual obligations, if any, as shall be created by the Plan.
(e) If upon the payment of any benefits to any person under the
Plan, the Company shall be required to withhold any amounts with
respect to such payment by reason of any Federal, State or local tax
laws, rules or regulations, then the Company shall be entitled to
deduct and withhold such amounts from any such payments. In any
event, such person shall make available to the Company, promptly when
requested by the Company, sufficient funds or other property to meet
the requirements of such withholding, and the Company shall be
entitled to take and authorize such steps as it may deem advisable in
order to have the amounts required to be withheld made available to
the Company out of any funds or property due or to become due to such
person, whether under this Plan or otherwise.
12. Claims Procedure
________________
The Committee shall establish a procedure for the resolution of
disputes and dispositions of claims arising under the Plan. Until
modified by the Company, this procedure is as follows:
Any Participant, former Participant, or any spouse or other
beneficiary of such Participant or former Participant may, if he so
desires, file with the Committee a written claim for benefits under
the Plan. Within sixty (60) days after the filing of such a claim,
the Committee shall notify the claimant whether his claim is upheld
or denied. The Committee may, under special circumstances, extend
the period of time for processing a claim by an additional sixty (60)
days. If such an extension of time is required, written notice shall
be furnished to the claimant or his duly authorized representative
prior to the termination of the initial sixty (60) day period. Such
notice will indicate the special circumstance requiring an
<PAGE>8
extension. In the event the claim is denied, the Committee shall
state in writing:
a) the specific reasons for the denial;
b) specific references to pertinent Plan provisions on which the
denial is based;
c) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and
d) an explanation of the claim review procedure set forth in this
Section 12.
Within sixty (60) days after receipt of notice that his claim has
been denied, the claimant or his duly authorized representative may
file with the Committee a written request for a review hearing and
may, in conjunction therewith, submit written issues and comments.
The Committee shall then schedule, within sixty (60) days after the
filing of such request, a full and fair hearing of the claim before
the Committee. The Committee may, under special circumstances,
extend such period of time by an additional sixty (60) days. Prior
to said hearing, the claimant or his representative shall have a
reasonable opportunity to review a copy of the Plan and other
pertinent documents in the possession of the Committee. The
Committee shall communicate their decision in writing to the claimant
within thirty (30) days after the hearing. Any claim for benefits
and any request for a review hearing hereunder must be filed on forms
to be furnished by the Committee upon a claimant's request.
13. Successors
__________
This Plan shall be binding upon and inure to the benefit of any
successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and
any subsequent successor thereto. In the event of any such merger,
consolidation, reorganization, transfer of assets or other similar
transaction, the successor to the Company or its business or any
subsequent successor thereto shall promptly notify the Participants
in writing of its successorship. In no event shall any such
transaction described herein suspend or delay the rights of
Participants, spouses or beneficiaries to receive benefits hereunder.
<PAGE>9
14. Choice of Law
_____________
This Plan shall be construed in accordance with the laws of the State
of New York except to the extent such laws are pre-empted by the
Employee Retirement Income Security Act of 1974, as amended.
<PAGE>1
<TABLE>
EXHIBIT 12
Computations of Ratios of Earnings to Fixed Charges
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31
________________________________________________________
1994 1993 1992 1991 1990
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
1. Excluding interest credited to
policyholder account balances:
Income before taxes on income (1) $146,997 $151,571 $104,337 $111,019 $103,470
Fixed charges:
Interest expense 35,627 32,392 33,805 39,209 43,092
One-third of all rent expense 4,365 4,497 4,123 4,016 3,753
Total fixed charges (A) 39,992 36,889 37,928 43,225 46,845
Total income before taxes on income
and fixed charges (B) 186,989 188,460 142,265 154,244 150,315
Ratio of earnings to fixed charges (B)/(A) 4.68 5.11 3.75 3.57 3.21
2. Including interest credited to
policyholder account balances
Income before taxes on income (1) $146,997 $151,571 $104,337 $111,019 $103,470
Fixed charges:
Interest credited to policyholder
account balances 194,036 183,737 173,538 137,580 104,724
Interest expense 35,627 32,392 33,805 39,209 43,092
One-third of all rent expense 4,365 4,497 4,123 4,016 3,753
Total fixed charges (A) 234,028 220,626 211,466 180,805 151,569
Total income before taxes on income
and fixed charges (B) 381,025 372,197 315,803 291,824 255,039
Ratio of earnings to fixed charges (B)/(A) 1.63 1.69 1.49 1.61 1.68
(1) Before cumulative effect of accounting change relating to non-pension
postretirement benefits recorded in first quarter of 1992.
</TABLE>
<PAGE>1
Exhibit 21
__________
USLIFE Corporation
LIST OF SUBSIDIARIES
Percentage
of Ownership
by Registrant
______________
USLIFE Corporation (Registrant)..........................
The United States Life Insurance Company in the
City of New York (New York) (1)....................... 100
All American Life Insurance Company
(Illinois) (1)........................................ 100
The Old Line Life Insurance Company of America
(Wisconsin) (1)........................................ 100
Security of America Life Insurance Company
(Pennsylvania) (1).................................... 100
USLIFE Credit Life Insurance Company
(Illinois) (1)........................................ 100
USLIFE Advisers, Inc. (New York) (1).................... 100
USLIFE Agency Services, Inc. (Illinois) (1)............. 100
USLIFE Equity Sales Corp. (Delaware) (1)................ 100
USLIFE Insurance Services Corporation (Texas) (1)....... 100
USLIFE Realty Corporation (Texas) (1)................... 100
USLIFE Real Estate Services Corporation (Texas) (1)...... 100 (2)
USLIFE Systems Corporation (Delaware) (1)............... 100
The foregoing list of subsidiaries does not include subsidiaries of USLIFE
or subsidiaries of subsidiaries of USLIFE which, if considered in the aggregate
as a single subsidiary, would not constitute a significant subsidiary.
(1) Included in USLIFE's consolidated financial statements.
(2) Wholly-owned subsidiary of USLIFE Realty Corporation.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED INCOME FOR
THE PERIOD ENDED DECEMBER 31, 1994 OF USLIFE CORPORATION AND
SUBSIDIARIES FILED ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<DEBT-HELD-FOR-SALE> 4,937,867
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4,583
<MORTGAGE> 319,618
<REAL-ESTATE> 41,688
<TOTAL-INVEST> 5,723,579
<CASH> 53,531
<RECOVER-REINSURE> 8,865
<DEFERRED-ACQUISITION> 793,145
<TOTAL-ASSETS> 7,004,262
<POLICY-LOSSES> 5,173,389
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 186,313
<POLICY-HOLDER-FUNDS> 28,507
<NOTES-PAYABLE> 545,860
<COMMON> 38,310
0
565
<OTHER-SE> 839,013
<TOTAL-LIABILITY-AND-EQUITY> 7,004,262
965,478
<INVESTMENT-INCOME> 461,494
<INVESTMENT-GAINS> (1,380)
<OTHER-INCOME> 225,595
<BENEFITS> 1,000,915
<UNDERWRITING-AMORTIZATION> 159,702
<UNDERWRITING-OTHER> 339,922
<INCOME-PRETAX> 146,997
<INCOME-TAX> 50,812
<INCOME-CONTINUING> 96,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,185
<EPS-PRIMARY> 4.18
<EPS-DILUTED> 4.18
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
