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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 1996
____________
USLIFE Corporation
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
New York 1-5683 13-2578598
________________________________________________________________________________
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
125 Maiden Lane, New York, New York 10038
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 709-6000
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NONE
________________________________________________________________________________
(Former name or former address, if changed since last report.)
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Item 5. Other Events
______ ____________
On May 22, 1996, USLIFE Corporation (the "Company") announced that its
financial statements for the second quarter of 1996 will reflect a
special pre-tax charge of $49.6 million to recognize revised
assumptions reflecting current experience on its traditional indemnity
group major medical products. The charge, on an after-tax basis,
amounts to $32.3 million or approximately 93 cents per share. The
charge includes a writedown of deferred policy acquisition costs on
this block of business and a related adjustment of the reserve for
policy benefits.
On January 29, 1996, the Company announced that its subsidiary, The
United States Life Insurance Company, would discontinue new sales of
traditional indemnity major medical products. Further, it would only
offer major medical coverage through managed care plans in selected
markets where it has both a significant presence and an appropriate
managed care network in place, while continuing to provide full
support and service to all existing indemnity customers regardless of
location. Concurrently, the Company announced that it would carefully
monitor persistency experience of its group insurance lines in order
to determine whether financial statement adjustments would become
necessary, with particular attention directed to major medical
indemnity products as well as the states in which all major medical
sales were discontinued.
Recoverability of deferred policy acquisition costs depends on future
revenues and gross profits from the business to which it relates.
Evaluation of this asset, as well as the reserve for policy benefits,
requires assumptions as to the amount and timing of these future
revenues and gross profits. The Company's continuing study has
disclosed that the persistency on this block of business has
deteriorated to a point that a revision in assumptions is necessary,
resulting in the adjustments mentioned above.
Item 7. Financial Statements and Exhibits
______ _________________________________
(c) Exhibits.
99 Press Release dated May 22, 1996.
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SIGNATURES
__________
Pursuant to the requirements 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)
May 28, 1996 By /s/ James M. Schlomann
__________________ ___________________________________
Date James M. Schlomann
Executive Vice President - Finance
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EXHIBIT INDEX
_____________
Exhibit
Number Description
______ ___________
99 Press Release dated May 22, 1996.
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Exhibit 99
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FOR IMMEDIATE RELEASE
USLIFE CORPORATION TO RECORD ONE-TIME CHARGE
RELATING TO TRADITIONAL INDEMNITY
MAJOR MEDICAL PRODUCTS
NEW YORK, NY, May 22, 1996 -- USLIFE Corporation (NYSE:USH) announced today
that its financial statements for the second quarter of 1996 will reflect a
special pre-tax charge of $49.6 million to recognize revised assumptions
reflecting current experience on its traditional indemnity group major medical
products. The charge, on an after-tax basis, amounts to $32.3 million or
approximately 93 cents per share. The charge includes a writedown of deferred
policy acquisition costs on this block of business and a related adjustment of
the reserve for policy benefits.
On January 29, 1996, the Company announced that its subsidiary, The United
States Life Insurance Company, would discontinue new sales of traditional
indemnity major medical products. Further, it would only offer major medical
coverage through managed care plans in selected markets where it has both a
significant presence and an appropriate managed care network in place, while
continuing to provide full support and service to all existing indemnity
customers regardless of location. Concurrently, the Company announced that it
would carefully monitor persistency experience of its group insurance lines in
order to determine whether financial statement adjustments would become
necessary, with particular attention directed to major medical indemnity
products as well as the states in which all major medical sales were
discontinued.
Recoverability of deferred policy acquisition costs depends on future revenues
and gross profits from the business to which it relates. Evaluation of this
asset, as well as the reserve for policy benefits, requires assumptions as to
the amount and timing of these future revenues and gross profits. Our
continuing study has disclosed that the persistency on this block of business
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has deteriorated to a point that a revision in assumptions is necessary,
resulting in the adjustments mentioned above.
In making this announcement, Gordon E. Crosby, Jr., chairman of the board of
USLIFE, commented: "USLIFE Corporation has adapted to changes over the past
several years in the group insurance market by moving from its historical focus
on traditional indemnity products to a portfolio of non-major medical group
products. This strategic shift includes managed care products offered in
selected markets. We are encouraged by the initial market acceptance of our
current product line, and particularly by the significant growth in revenues
from our non-major medical products. It is our expectation that these strategies
will alleviate the negative financial impact associated with major medical
indemnity business, permitting a reallocation of surplus and risk-based capital
resources to more profitable products. This approach should result in a
contribution to future growth of USLIFE's consolidated return on equity and
earnings per share. Additionally, we believe our actions will lessen the
negative perception associated with our indemnity business and result in the
appropriate focus on our core line of business which is life insurance."
Questions and Answers re:
One Time Charge For Traditional Indemnity Major Medical and Related Products
Q. Why is the charge being recorded at this time?
A. When we made our announcement in January 1996 to discontinue the sale of
indemnity products, we were aware that this action might have an adverse impact
on our persistency results. In line with this, we have carefully monitored and
analyzed results from that date through May. We have concluded that there has
in fact been a deterioration in the persistency of this business and that there
is a need to change the assumptions that are used to evaluate the deferred
policy acquisition cost asset and the reserve for policy benefits.
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Q. What are the expected future financial results for the indemnity business
after the accounting adjustment?
A. Adjustments such as this are based on "recoverability" and are intended to
essentially produce a break-even financial result over the runoff period.
Q. Are further charges relating to this business expected?
A. We believe the assumptions used to determine the current adjustment
appropriately reflect the expected persistency and claims experience for this
block of business.
Q. Why are policy reserves affected by the charge as well as deferred policy
acquisition costs?
A. Policy reserves are established based on assumptions as to the average
claims experience expected on the business over its anticipated life. Based on
recent claims experience, it is apparent that the quality of this block of
business has deteriorated and hence an adjustment to increase reserve levels is
required.
Q. Do you anticipate a need for further increases in policy reserves?
A. Prospectively, the Company can adjust premium rates to reflect any further
deviations.
Q. What is the current contribution to Employer / Association Group total
premium revenues from the "continuing" group lines of business?
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A. It is estimated that the "continuing" business constitutes more than half of
premiums in force as of March 31, 1996. The "continuing" business includes the
following products: long term disability, accidental death and dismemberment,
dental, standalone life, association group life and health, and managed care
major medical.
Note to the Editor:
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USLIFE Corporation is a life insurance-based holding company comprised of eleven
wholly owned subsidiaries. With more than $162 billion of life insurance in
force and nearly $8 billion in assets, USLIFE Corporation operates nationwide
through three ordinary life insurance companies, a credit insurance group, and
six other companies that provide investment advisory, broker-dealer, marketing,
real estate, data processing and administrative services. USLIFE Corporation
common stock is traded under the symbol "USH" on the New York, Chicago, Pacific
and London stock exchanges.
USLIFE 29-Year Annual Compound Growth Rates:
Assets...................................14%
Life Insurance in Force..................15%
Annualized Premiums (Individual).........14%
Capital & Surplus........................14%
After-Tax Net Gain.......................12%
Contact:
Richard G. Hohn
Senior Vice President
Investor Relations,
Secretary and Counsel
(212)709-6415
