<PAGE>1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997 or
______________
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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, New York 10038
___________________________________ ___________________
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (212) 709-6000
_______________
NONE
______________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
Indicate by checkmark 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
_______ _______
The number of shares outstanding of the Registrant's Common Stock as
of April 30, 1997 was 34,876,803.
<PAGE>2
USLIFE Corporation
INDEX
Page No.
________
Part I - Financial Information:
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996................... 3
Summary Statements of Consolidated Net Income -
For the Three Months Ended March 31, 1997 and 1996..... 5
Statements of Consolidated Cash Flows -
For the Three Months Ended March 31, 1997 and 1996..... 6
Notes to Financial Statements.......................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 13
Part II - Other Information.............................. 24
Signatures............................................... 26
<PAGE>3
<TABLE>
USLIFE Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
March 31, 1997 and December 31, 1996
(Dollar amounts in thousands except per share data)
<CAPTION>
March 31, 1997 December 31, 1996
______________ _________________
<S> <C> <C>
Assets
______
Cash:
On hand and in demand accounts.............. $ 41,415 $ 24,462
Restricted funds held in escrow, etc. ...... 1,851 2,512
__________ __________
43,266 26,974
__________ __________
Invested assets:
Fixed maturities available for sale, at fair
value (cost, March 31, 1997, $5,722,607;
December 31, 1996, $5,674,366)............. 5,738,904 5,864,687
Equity securities, at fair value (cost,
March 31, 1997, $3,911; December
31, 1996, $3,997).......................... 3,843 3,786
Mortgage loans.............................. 257,528 258,723
Policy loans................................ 283,079 283,442
Real estate................................. 25,730 27,948
Other long term investments................. 18,771 18,720
Short term investments...................... 107,935 105,129
__________ __________
Total invested assets..................... 6,435,790 6,562,435
__________ __________
Total cash and invested assets............ 6,479,056 6,589,409
__________ __________
Deferred policy acquisition costs............. 828,452 785,128
Other receivables (net)....................... 366,397 400,109
Property and equipment (net of accumulated
depreciation of $35,077 at March 31, 1997
and $34,266 at December 31, 1996)........... 9,421 9,988
Prepaid expenses, deferred charges and
other assets............................. 93,255 94,952
__________ __________
Total assets............................. $7,776,581 $7,879,586
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>4
<TABLE>
<CAPTION>
March December
31, 1997 31, 1996
__________ __________
<S> <C> <C>
Liabilities and Equity Capital
______________________________
Liabilities:
Future policy benefits................................... $1,755,362 $1,741,570
Policyholder account balances............................ 3,634,303 3,709,191
Supplementary contracts without life contingencies....... 51,855 46,888
Policyholder dividend accumulations...................... 20,606 20,606
Policy and contract claims............................... 194,639 196,022
Other policy and contract liabilities.................... 35,251 36,812
Notes payable............................................ 293,400 268,600
Current maturities of long term debt..................... 149,946 0
Long term debt........................................... 149,726 299,635
Federal income taxes (current and deferred).............. 26,782 58,688
Accounts payable and accrued liabilities................. 298,270 272,811
__________ __________
Total liabilities................................... 6,610,140 6,650,823
__________ __________
Deferred income.......................................... 5,237 5,341
__________ __________
Equity Capital:
Preferred stock, $4.50 Series A Convertible, $1.00
par value; authorized and outstanding, 4,181
shares (December 31, 1996, 4,332 shares)........... 418 433
Preferred stock, $5.00 Series B Convertible, $1.00
par value; authorized and outstanding, 1,625
shares (December 31, 1996, 1,689 shares)........... 81 84
Preferred stock, undesignated, $1.00 par value;
authorized 10,794,194 shares, issued; none
(December 31, 1996; none).......................... 0 0
Common stock, par value $1.00 per share, authorized
120,000,000 shares, issued: 57,475,180 shares
(December 31, 1996, 57,472,605 shares)............. 57,475 57,473
Paid-in surplus.......................................... 126,657 120,702
Net unrealized gains (losses) on securities.............. (17,756) 68,109
Retained earnings........................................ 1,347,799 1,327,748
__________ __________
1,514,674 1,574,549
Less: Treasury stock, at cost - March 31, 1997:
22,859,385 Common shares; December 31, 1996:
23,070,016 Common shares........................ 347,775 346,117
Deferred compensation............................. 5,695 5,010
__________ __________
Total Equity Capital..................................... 1,161,204 1,223,422
__________ __________
Total liabilities and Equity Capital..................... $7,776,581 $7,879,586
========== ==========
Equity Capital per share................................. $33.02 $35.05
====== ======
</TABLE>
<PAGE>5
<TABLE>
USLIFE Corporation and Subsidiaries
Summary Statements of Consolidated Net Income (Unaudited)
For the Three Months Ended March 31, 1997 and 1996
(Amounts in thousands except per share)
<CAPTION>
Three Months Ended March 31
____________________________
1997 1996
______ ______
<S> <C> <C>
REVENUES:
Premiums................................................. $ 252,859 $ 244,970
Other considerations..................................... 58,025 54,701
Net investment income.................................... 125,446 124,146
Realized gains on investments............................ 913 566
Other income............................................. 12,801 11,019
__________ __________
Total revenues........................................ 450,044 435,402
__________ __________
BENEFITS AND EXPENSES:
Benefits to policyholders and beneficiaries.............. 197,290 190,473
Commissions, net of deferred expenses.................... 45,966 43,779
Other expenses and taxes, net of deferred expenses....... 52,562 48,033
Increase in liability for future policy benefits......... 10,588 13,526
Interest credited to policyholder account balances....... 48,098 50,285
Amortization of deferred policy acquisition costs........ 42,503 39,117
Interest expense......................................... 9,239 9,767
Dividends to policyholders............................... 878 903
__________ __________
Total benefits and expenses........................... 407,124 395,883
__________ __________
Income from operations before Federal income taxes.......... 42,920 39,519
Provision for income taxes.................................. 14,332 13,328
__________ __________
Net income.................................................. $ 28,588 $ 26,191
========== ==========
Net income per share........................................ $ .82 $ .75
========== ==========
Dividends per share:
Common................................................... $ .247 $ .23333
=========== ===========
Preferred Series A....................................... $ 1.125 $ 1.125
=========== ===========
Preferred Series B....................................... $ 1.25 $ 1.25
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>6
<TABLE>
USLIFE Corporation and Subsidiaries
Statements of Consolidated Cash Flows (Unaudited)
For the Three Months Ended March 31, 1997 and 1996
(Amounts in Thousands)
<CAPTION>
Three Months Ended March 31
_____________________________
1997 1996
____ ____
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 28,588 $ 26,191
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in liability for future policy benefits........ 9,373 12,002
Interest credited to policyholder account balances.... 48,098 50,285
Amounts assessed from policyholder account balances... (47,135) (43,570)
Additions to deferred policy acquisition costs........ (48,815) (52,131)
Amortization of deferred policy acquisition costs..... 42,503 39,117
Additions to deferred charges......................... (1,509) (1,431)
Deferred federal income taxes......................... (1,734) 2,232
Depreciation and amortization......................... 2,749 3,027
Change in amounts due policyholders................... 4,460 4,874
Change in other liabilities and amounts receivable.... 66,470 16,778
Net realized capital gains............................ (913) (566)
Change in restricted cash............................. 661 (1,495)
Change in current federal income tax liability........ 16,066 11,094
Other, net............................................ 823 553
___________ ___________
Total adjustments................................... 91,097 40,769
___________ ___________
Net cash provided by operating activities........ 119,685 66,960
___________ ___________
Cash flows from investing activities:
Change in policy loans.................................. 363 547
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................... 206,673 103,232
Equity securities................................... 65 467
Mortgage loan principal receipts.................... 13,039 15,044
Real estate......................................... 367 184
Other long term investments......................... 523 752
Expenditures for property and equipment................. (331) (753)
Cost of investments purchased:
Fixed maturities.................................... (252,482) (184,831)
Mortgage loans...................................... (10,650) (4,109)
Real estate......................................... (183) (199)
Other long term investments......................... (714) 0
Net purchases of short term investments............. (2,806) (41,041)
Other, net.............................................. (45) (88)
___________ ___________
Net cash used in investing activities............ (46,181) (110,795)
___________ ___________
Cash flows from financing activities:
Increase in notes payable............................. 24,800 20,500
Dividends to shareholders............................. (8,537) (8,057)
Acquisition of treasury stock......................... (4,845) (3,927)
Change in policyholder account balances............... (75,776) 16,758
Other, net............................................ 7,807 1,077
___________ ___________
Net cash provided (used) by financing activities. (56,551) 26,351
___________ ___________
Net change in cash.................................. 16,953 (17,484)
Cash at beginning of year............................. 24,462 63,914
___________ ___________
Cash at end of period................................. $ 41,415 $ 46,430
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>7
USLIFE Corporation and Subsidiaries
Notes to Financial Statements
Note 1. Basis of Presentation
The accompanying consolidated financial statements are unaudited
and have been prepared in accordance with generally accepted
accounting principles for interim reporting and in accordance
with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the disclosures
required for annual financial statements. The management of
USLIFE believes that all adjustments (consisting only of normal
recurring accruals and adjustments) necessary to present fairly
the consolidated financial position of USLIFE Corporation and
subsidiaries as of March 31, 1997 and December 31, 1996, and the
consolidated results of operations and cash flows for the three
month periods ended March 31, 1997 and 1996 have been included in
the accompanying financial statements. Operating results for the
three month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1997. These consolidated financial
statements and notes to financial statements should be read in
conjunction with the audited consolidated financial statements
and notes to financial statements included in the Annual Report
on Form 10-K of USLIFE Corporation for the year ended December
31, 1996.
Note 2. Investments
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 (bonds
and redeemable preferred stocks) is classified as "available for
sale" and is carried in the accompanying consolidated balance
sheets at fair value. The Company's investments in non-
redeemable preferred stocks and common stocks ("equity
securities") are carried at fair value in the accompanying
consolidated balance sheets. Unrealized gains and losses on
available-for-sale securities, other than those relating to a
reduction in value determined to be other than temporary, are
recorded through direct charges or credits to Equity Capital.
<PAGE>8
Equity Capital at March 31, 1997 and December 31, 1996 includes
net unrealized gains and losses on available-for-sale securities
as follows:
<TABLE>
<CAPTION>
March 31, December
1997 31, 1996
_________ __________
(Amounts in Thousands)
<S> <C> <C>
Fixed maturities:
Fair value..................................... $5,738,904 $5,864,687
Adjusted cost.................................. 5,722,607 5,674,366
__________ __________
Unrealized gain................................ 16,297 190,321
__________ __________
Equity securities:
Fair value..................................... 3,843 3,786
Adjusted cost.................................. 3,911 3,997
__________ __________
Unrealized loss................................ (68) (211)
__________ __________
Unrealized gain on securities in retirement trust 297 922
__________ __________
Total unrealized gain............................ 16,526 191,032
__________ __________
Related adjustments:
Deferred policy acquisition costs.............. (45,094) (82,106)
Policyholder liabilities....................... 1,251 (4,140)
Deferred federal income tax liability.......... 9,561 (36,677)
__________ __________
(34,282) (122,923)
__________ __________
Net unrealized gain (loss) on securities
included in Equity Capital..................... $ (17,756) $ 68,109
========== ==========
</TABLE>
Short term investments are carried at cost, which approximates
fair value. 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, except for certain securities held in a
retirement trust which is included in this category, are stated
at the lower of cost or estimated net realizable value. Fixed
maturities and equity securities included in the aforementioned
retirement trust are classified as "available for sale" and
carried at fair value.
At March 31, 1997, consolidated invested assets included $237
million (at fair value; adjusted cost $238 million) of less than
investment grade corporate securities, based on ratings assigned
by recognized rating agencies and insurance regulatory
authorities. Based on fair value, these securities represent 3%
of consolidated total assets at that date. Approximately $4
million of these investments (at fair value; adjusted cost $3
million) are in default at March 31, 1997. Also at March 31,
1997, the book value of mortgage loans included in consolidated
total assets which were 60 days or more delinquent or in
foreclosure was approximately $5 million, and the book value of
<PAGE>9
property acquired through foreclosure of mortgage loans was
approximately $21 million.
Note 3. Equity Capital Per Share
Equity Capital per share was determined by dividing total Equity
Capital by the number of common shares and common equivalent
shares outstanding at the end of the period. The number of
common shares and common equivalent shares for this purpose has
been determined on the same basis as that for income per share
(see Note 4 of Notes to Financial Statements), except amounts are
based on the number of shares outstanding at the end of the
period. As of March 31, 1997 and December 31, 1996, the number
of such shares used for this purpose was 35.166 million and
34.905 million, respectively.
Note 4. 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 period. The weighted average number of common and common
equivalent shares was determined by using the average number of
common shares outstanding during each period, 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. 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 month periods ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
March 31
__________________
1997 1996
____ ____
(Shares and Amounts in Thousands
except Per Share data)
<S> <C> <C>
Net income......................................... $ 28,588 $ 26,191
======== ========
Weighted average common shares
outstanding, net of treasury shares.............. 34,523 34,463
Add - common share equivalents of:
Preferred Stock - Series A....................... 51 53
Preferred Stock - Series B....................... 19 22
Outstanding stock options - treasury stock method 481 381
______ ______
Total common shares and common equivalent shares... 35,074 34,919
====== ======
Net income per share............................... $ .82 $ .75
====== ======
</TABLE>
<PAGE>10
Note 5. Reinsurance
The Company's 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.
Amounts paid for or recoverable under reinsurance contracts 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. 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. Reinsurance receivable and
recoverable amounts included in "Other receivables" in the
accompanying consolidated balance sheets are as follows:
March 31, December
1997 31, 1996
_________ _________
(Amounts in Thousands)
Reinsurance receivables - paid claims... $ 9,056 $ 8,534
Other reinsurance recoverable amounts... 145,716 144,818
________ ________
$154,772 $153,352
======== ========
The effect of reinsurance on premiums, other considerations, and
benefits to policyholders and beneficiaries, is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
___________________________
1997 1996
________ ________
(Amounts in Thousands)
<S> <C> <C>
Premiums, before reinsurance ceded......... $273,848 $263,140
Premiums ceded............................. 20,989 18,170
________ ________
Net premiums............................... $252,859 $244,970
======== ========
Other considerations, before reinsurance
ceded................................... $ 62,827 $ 59,325
Other considerations ceded................. 4,802 4,624
________ ________
Net other considerations................... $ 58,025 $ 54,701
======== ========
Benefits to policyholders and beneficiaries,
before reinsurance recoveries............ $208,305 $199,920
Reinsurance recoveries..................... 11,015 9,447
________ ________
Benefits to policyholders and beneficiaries,
net of reinsurance recoveries............ $197,290 $190,473
======== ========
</TABLE>
<PAGE>11
Note 6. Pending Merger Transaction
On February 12, 1997, the Company and American General
Corporation, of Houston, Texas, entered into a definitive merger
agreement. Under this agreement, USLIFE Corporation shareholders
will exchange each share of USLIFE common stock for $49 worth of
American General common stock, subject to a minimum of
approximately 1.09 shares and a maximum of approximately 1.29
shares of American General common stock. The exchange ratio will
be based on an average trading price of American General common
stock prior to closing. The merger is intended to be a tax-free
transaction and to qualify for pooling of interest accounting
treatment. The transaction, which is subject to approval by
American General and USLIFE shareholders and to requisite
regulatory approvals, is expected to close by June 30, 1997.
American General Corporation is a diversified financial services
organization. Its principal businesses are life insurance,
retirement services, and consumer finance.
Note 7. Redemption of Series A and B Preferred Stock
On April 9, 1997, USLIFE Corporation announced that it had called
for the redemption on May 9, 1997 of all outstanding shares of
its $4.50 convertible Preferred Stock, Series A (the "Preferred
Series A") and $5.00 Convertible Preferred Stock, Series B (the
"Preferred Series B") at a total redemption price of $100.87 per
share including accrued and unpaid dividends of 87 cents per
share for the Preferred Series A, and $100.96 per share including
accrued and unpaid dividends of 96 cents per share for the
Preferred Series B. In connection with such redemption, and
pursuant to its certificate of incorporation, the Company has
deposited in a special trust account with Chase Manhattan Bank
funds in an amount sufficient to pay the total redemption price
on all shares of Preferred Series A and Preferred Series B
outstanding as of April 9, 1997. At any time up to 5:00 p.m. New
York City time on May 9, 1997, each share of Preferred Series A
is convertible into 12 shares of Common Stock (the "Common
Stock") of USLIFE Corporation and each share of Preferred Series
B is convertible into 11.99 shares of Common Stock. At any time
after 5:00 p.m. New York City time on May 9, 1997, or any date
thereafter, each share of Preferred Series A and each share of
Preferred Series B will be exchangeable only for its respective
redemption price.
Note 8. Future Change in Accounting
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
<PAGE>12
entitled "Earnings Per Share." SFAS 128 will replace the
presentations of primary and fully diluted earnings per share
under current accounting standards with "basic earnings per
share" and "diluted earnings per share," respectively. Basic
earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted average
number of common shares outstanding during the period, whereas
primary earnings per share includes the impact of assumed
conversion of common stock equivalents. Diluted earnings per
share under SFAS 128 is generally similar to fully diluted
earnings per share. For calendar year enterprises, SFAS 128 must
be adopted commencing with year end 1997 financial statements,
and will then apply retroactively to both annual and interim
periods, requiring the restatement of previously presented
earnings per share data. Earlier application of SFAS 128 is not
permitted. Based on preliminary calculations, the Company does
not believe that earnings per share computed under SFAS 128 would
be materially different from the earnings per share data
presented herein.
<PAGE>13
USLIFE Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Pending Merger Transaction
__________________________
On February 12, 1997, the Company entered into a definitive
merger agreement with American General Corporation in a
transaction valued at $1.8 billion. Under the agreement, the
Company's shareholders will exchange shares of the Company's
common stock for $49 worth of American General common stock,
subject to a maximum of approximately 1.29 shares and a minimum
of approximately 1.09 shares of American General common stock.
The transaction, which is subject to shareholder and regulatory
approvals, is expected to close by June 30, 1997. See Note 6 of
Notes to Financial Statements for further information.
Financial Condition
___________________
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 for
liquidity requirements 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. Excluding the impact of changes in accounts payable
and receivable and amounts due policyholders, all of which are
subject to random fluctuations from the timing of securities
transaction settlements, claims payments and similar matters, net
cash provided by operating activities of the life insurance
subsidiaries for the first quarter of 1997 was $62 million.
On a consolidated basis, net cash provided by operating
activities amounted to $120 million for the first quarter of
1997, compared to $67 million for the corresponding period of
1996. As indicated above, these amounts reflect changes in
accounts that are subject to random timing fluctuations.
Excluding the impact of changes in these accounts, net cash
provided by consolidated operating activities amounted to $49
million in the first quarter of 1997 versus $45 million in the
corresponding 1996 period.
<PAGE>14
Cash flows from operating activities for the first quarter of
1997 included $9 million from the change in liability for future
policy benefits, versus $12 million in the corresponding 1996
period. The decrease reflected a reduced level of sales of
traditional individual life insurance products during the 1997
period.
Interest credited to policyholder account balances amounted to
$48 million in the first quarter of 1997, versus $50 million
reported for the corresponding 1996 period. The decrease
resulted primarily from surrenders of single premium deferred
annuities sold in 1991 and 1992 that reached the end of their
surrender charge period in 1996 and the first quarter of 1997.
As a result of these surrenders, which were generally consistent
with expected levels, the portion of policyholder account
balances relating to individual annuities declined $349 million,
from $1.76 billion at March 31, 1996 to $1.41 billion at March
31, 1997. The portion of policyholder account balances relating
to universal life insurance contracts increased approximately
$172 million during that same one year period.
Interest rates credited on universal life and individual deferred
annuity contracts may be adjusted periodically by the Company.
Subject to any applicable surrender charges, the Company's
universal life insurance products and individual deferred
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 generally subject to reduction over
the applicable 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 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
<PAGE>15
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. If an acceleration of surrenders were experienced,
the cash flow requirements associated with such surrenders could
require the Company to liquidate a portion of the underlying
security investments prior to maturity, at then-prevailing market
prices. The sources of liquidity described earlier would be
applied toward any further cash flow requirements.
Net additions to deferred policy acquisition costs amounted to $6
million in the first quarter of 1997 compared to $13 million in
the corresponding 1996 period. The decrease reflects various
factors including a $4 million decrease in net written premiums
on credit life and disability insurance products and a lower
level of individual life insurance sales during the 1997 period.
New annualized premiums from individual life insurance sales
amounted to $29 million for the first quarter of 1997 versus $32
million in the corresponding 1996 period.
Net cash used in investing activities amounted to $46 million in
the first quarter of 1997, compared to $111 million in the
corresponding 1996 period. Individual annuity surrenders, which
have a negative impact on net funds available to invest, amounted
to $140 million during the first quarter of 1997 versus $53
million during the corresponding 1996 period. The major portion
of these surrenders related to annuities for which deferred
policy acquisition costs were substantially amortized, or
resulted in the imposition of a surrender charge by the Company
as contractually permitted. Consequently, these surrenders did
not have an adverse impact upon consolidated results of
operations.
As of March 31, 1997, approximately 25% of the Company's deferred
annuity contracts and 24% 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. Based on the Company's
significant 1992 sales of individual annuities with five year
surrender charge periods, with gross deposits in that year
totalling approximately $500 million, an increase in the
proportion of annuity contracts beyond the surrender charge
period is anticipated during the balance of 1997. The Company's
asset / liability management strategies have contemplated the
expected surrender pattern for these annuities, and based on cash
flow testing the Company believes that its distribution of
investments is appropriate for the cash requirements associated
with the expected level of surrenders.
Disposals of fixed maturity investments included in cash flows
from investing activities for the first quarter of 1997 and 1996
<PAGE>16
totalled $207 million and $103 million, respectively. These
disposals included, respectively, $11 million and $32 million (at
cost) of securities which were called for redemption by the
respective issuers prior to maturity. Fixed maturity disposals
also reflected sales of certain securities as part of the
Company's asset/liability management strategy with objectives
including maintenance of an appropriate relationship of asset
yields and maturities to current policy liabilities. The major
portion of the proceeds from fixed maturities sold or redeemed
and available for reinvestment were directed to investment grade
fixed maturity investments.
Net cash flows used by consolidated financing activities amounted
to $57 million in the first quarter of 1997 versus net cash
provided by financing activities of $26 million in the
corresponding 1996 period, reflecting a variance of approximately
$93 million from policyholder account balance activity included
therein. The primary cause of this variance was the impact of
increased annuity surrenders in the 1997 period as previously
discussed.
During the first quarter of 1997, the Company acquired
approximately 112,000 shares of its common stock at a total cost
of $5 million in connection with various benefit plans.
Substantially all of the shares acquired were utilized for the
dividend reinvestment plan and various benefit programs.
Notes payable increased $25 million in the first quarter of 1997
and $21 million in the corresponding 1996 period. These
increases in notes payable related primarily to working capital
requirements. Historically, cash dividends have been remitted by
the life insurance subsidiaries to the parent company during the
fourth quarter, with a portion of these dividends applied toward
reduction of short term debt incurred for working capital
purposes during the earlier part of the year.
At March 31, 1997, the Company had lines of credit with four
banks amounting to $53 million, all of which was unused.
However, at that date, the Company had outstanding short term
borrowings with four banks, negotiated independently of such
lines to take advantage of more favorable interest rates, in the
aggregate amount of $93 million. The Company's short term
borrowings also include $150 million outstanding under a
revolving credit agreement with The Bank of New York (as agent)
and $50 million outstanding under a revolving credit agreement
with Chase Manhattan Bank.
The Bank of New York 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
<PAGE>17
million. All borrowings under the revolving credit agreement
must mature no later than April 10, 1999. The Chase Manhattan
Bank revolving credit agreement expires in February 1999 and
provides for borrowings up to $100 million.
The Company's short term borrowings are utilized primarily for
working capital requirements.
The Company's $150 million non-callable issue of 6.75% Notes due
January 15, 1998 has been classified as "Current maturities of
long term debt" as of March 31, 1997. Long term debt at March
31, 1997 is comprised of a $150 million non-callable issue of
6.375% Notes due 2000. The Company has filed a shelf
registration statement which 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.
While it is currently anticipated that the major portion of the
Company's outstanding debt will be repaid using bank borrowings
or 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, borrowings and securities
issues will be dependent upon future market conditions, future
cash flows, and other unforeseen circumstances.
The merger agreement discussed in Note 6 of Notes to Financial
Statements provides that on or before the date immediately prior
to the closing of the merger, subject to compliance with
applicable law, USLIFE will use reasonable efforts to cause two
of its life insurance subsidiaries to pay dividends to USLIFE of
up to $143 million in the aggregate. The application of All
American Life to pay a $78 million dividend was approved by
regulatory authorities in April 1997. The timing and amount of
payment of a dividend by Old Line Life is subject to further
discussion with regulatory authorities. The payment of these
dividends is not a condition to the merger. The proceeds of the
dividends will be used for general corporate purposes.
Dividends paid on the Company's outstanding stock issues amounted
to $9 million in the first quarter of 1997 versus $8 million in
the corresponding 1996 period, reflecting the increase in common
stock quarterly dividends per share from 23.333 cents to 24.7
cents.
<PAGE>18
Results of Operations
_____________________
Three Months Ended March 31, 1997 compared to
Three Months Ended March 31, 1996
For the three months ended March 31, 1997, net income amounted to
$28.6 million versus $26.2 million for the comparable period of
1996, an increase of $2.4 million or 9%.
Net income for the first quarter of 1997 and 1996 included net
capital gains with an after-tax impact of $593 thousand and $367
thousand, respectively. The net capital gains in both the 1997
and 1996 periods came primarily from fixed maturity investments,
reflecting securities called for redemption prior to maturity by
their respective issuers and sales of certain securities as part
of the Company's asset / liability management strategy as
discussed under "Financial Condition."
Excluding the net capital gains discussed above, consolidated
after-tax income amounted to $28.0 million for the first quarter
of 1997 versus $25.8 million for the corresponding 1996 period,
an increase of $2.2 million or 8%. On a similar basis, after-tax
income of the life insurance subsidiaries increased $2.1 million
or 6%. Also on a similar basis, after-tax corporate charges
(including the operating results of USLIFE's servicing units)
amounted to $10.7 million in both the 1997 and 1996 periods.
The improvement in life insurance subsidiary results came
primarily from improved results in the individual life insurance
and annuity product line and the employer / association group
health insurance line.
A discussion of the Company's various product lines, excluding
the impact of capital gains and losses which are previously
discussed, follows.
Individual life and annuity pre-tax profits, including income
attributable to capital and surplus, amounted to $53.8 million
for the first quarter of 1997 versus $52.3 million for the
corresponding 1996 period. The increase of approximately 3%
reflected greater gains from mortality experience and investment
income during the 1997 period.
Written premiums from credit life insurance products amounted to
$18 million during the first quarter of 1997 versus $19 million
for the corresponding 1996 period. Written premiums from credit
disability insurance products were $17 million during the first
quarter of 1997 versus $19 million for the 1996 period. These
premium income decreases reflected factors including management's
decision to curtail certain business that was determined not to
meet the Company's profitability standards, and the inclusion in
<PAGE>19
first quarter 1996 results of new premiums on a block of
automobile-related business previously written by another
carrier.
A combined pre-tax profit of $945 thousand was reported for the
credit life and disability product lines in the first quarter of
1997, versus approximately $2 million in the corresponding 1996
period. The decline was primarily attributed to less favorable
mortality and morbidity experience during the 1997 period.
The Company's group health insurance lines include
employer/association group health insurance, mortgage disability
insurance, and specialty group health and disability products.
Historically, the majority of the Company's employer /
association group insurance premium revenues were derived from
indemnity major medical coverages, which were often sold together
with group life insurance. A change in market emphasis toward
managed care products resulted both in a reduction of new sales
of the Company's indemnity major medical products and an erosion
of business in force over the past several years. The Company
has taken a number of actions to adapt to the changing market
conditions, including refinement of "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. Additionally, the Company has
introduced new managed care products in several states (using
provider networks made available through unrelated companies).
The Company discontinued new sales of traditional indemnity major
medical products in January 1996 and subsequently recorded a
charge, during the second quarter of 1996, to recognize revised
assumptions on the discontinued business. The "continuing"
employer / association group business consists of long-term
disability, accidental death and dismemberment, dental,
standalone life, association group life and health, and managed
care major medical coverages. Premiums from these "continuing"
products constitute more than 75% of total employer / association
group premiums for the second, third and fourth quarters of 1996
and about 90% of such premiums for the first quarter of 1997.
The employer / association group health line reported a $672
thousand pre-tax profit for the first quarter of 1997, versus a
$1.5 million loss for the corresponding 1996 period. The first
quarter 1997 profit reflects the contribution of continuing
products included in this line. The first quarter 1996 loss
reflected experience on the now-discontinued traditional
indemnity products.
Premium revenues on employer / association group health insurance
products amounted to $90 million in the first quarter of 1997
versus $84 million in the corresponding 1996 period. Although, as
anticipated, a high level of terminations from the discontinued
products negatively impacted revenues, overall revenues increased
<PAGE>20
as a result of a greater contribution from non-major medical and
managed care products.
The other group health and disability coverages reported a pre-
tax profit of $360 thousand for the first quarter of 1997, versus
$80 thousand for the corresponding 1996 period. The favorable
variance is primarily attributed to improved results from
specialty group health and disability products marketed through
retailers and financial institutions and group mortgage
disability products.
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. Market
acceptance of products currently offered and those being
introduced is also a key factor in the prospective profitability
of these product lines.
The Company's group life insurance lines include
employer/association group life insurance, mortgage life
insurance, and certain specialty coverages.
The employer / association group life line reported a pre-tax
profit of $1.4 million for the first quarter of 1997, versus $2.0
million in the corresponding 1996 period, reflecting less
favorable mortality experience during the 1997 period. Premium
revenues for this line were $31 million in the first quarter of
1997 versus $28 million a year ago.
The other group life insurance lines reported a pre-tax profit of
$342 thousand for the first quarter of 1997, approximately equal
to results of the corresponding 1996 period.
Total revenues of the life insurance subsidiaries in the first
quarter of 1997 amounted to $442 million, an increase of $14
million or 3% over the same period of 1996, primarily on
increases of $11 million (or 4%) and $2 million (or 1%) in
premiums and considerations and net investment income,
respectively.
The increase in premiums and considerations came primarily from
the individual life insurance and annuity product line and the
employer / association group insurance lines.
Premiums and other considerations from individual life insurance
and annuity products amounted to $132 million in the first
quarter of 1997, compared to $125 million in the 1996 period,
with the increase from both interest sensitive and traditional
products and reflecting a larger base of in-force life insurance
business. This increase was accompanied by greater written
premiums on employer / association group life and health
products, reflecting increased volume of "continuing" business.
<PAGE>21
The $2 million increase in net investment income of the life
insurance subsidiaries reflected a larger investment base in the
1997 period. The pre-tax annualized yield was 7.83% in the first
quarter of 1997 versus 7.82% for the corresponding 1996 period.
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 factors
including available market interest rates and portfolio rates of
return. Recent rate actions are discussed below.
Total benefits and expenses of the life insurance subsidiaries
increased $11 million versus the first quarter of 1996, to $384
million.
Benefits to policyholders and beneficiaries amounted to $197
million in the first quarter of 1997. The $7 million increase
versus the first quarter of 1996 is attributed primarily to
greater volume of individual life insurance and employer /
association group insurance business, as well as the less
favorable 1997 period mortality experience on employer /
association group life insurance as discussed above.
Interest credited to policyholder account balances amounted to
$48 million in the first quarter of 1997, versus $50 million in
the corresponding 1996 period. As noted under "Financial
Condition," the decrease reflects surrenders of single premium
deferred annuities that reached the end of their surrender charge
period in 1996 and the first quarter of 1997.
Interest rates credited on the Company's deferred annuity
contracts, exclusive of first year bonuses on certain products,
typically ranged from 4-1/4% to 5% during the first quarter of
1997 and from 4-1/4% to 5-1/2% during the corresponding 1996
period. Interest rates credited on the Company's universal life
insurance contracts typically ranged from 5-1/4% to 6-1/2% during
the first quarter of 1997, with a similar range during the
comparable 1996 period. Rate reductions, generally amounting to
25 basis points, are being implemented on certain universal life
insurance contracts effective as of April 1, 1997. Following
these actions, credited rates on the Company's universal life
insurance policies will typically range from 5-1/4% to 6-1/4%.
The prospective impact of rate adjustments for interest sensitive
products on reported results will be dependent upon 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 deferred annuity and universal life-type products
<PAGE>22
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.
An increase in future policy benefits of $11 million was recorded
for the first quarter of 1997, versus $14 million for the
corresponding 1996 period. The decrease reflected a reduced
level of sales of traditional individual life insurance products
during the 1997 period.
Amortization of deferred policy acquisition costs was $43 million
for the first quarter of 1997, versus $39 million for the
corresponding 1996 period. The increase reflects factors
including the greater volume of individual life insurance
business during the 1997 period.
Aggregate commissions, general expenses, and insurance taxes and
licenses increased from $78 million in the first quarter of 1996
to $84 million in the 1997 period. The $6 million increase
reflects the increased premium volume on employer / association
group life and health insurance products and the greater volume
of individual life insurance in force during the 1997 period.
At March 31, 1997, consolidated invested assets included
approximately $237 million (at fair value) of less than
investment grade corporate securities, based on ratings assigned
by recognized rating agencies and insurance regulatory
authorities. These investments represent about 3% of
consolidated total assets at that date. See Note 2 of Notes to
Financial Statements for further information. These securities
generally 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.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, entitled
"Earnings Per Share." This Statement, which must be adopted
commencing with year end 1997 financial statements, establishes
new standards for earnings per share calculations. See Note 8 of
Notes to Financial Statements for further information.
Certain of the statements contained in this Quarterly Report may
be considered forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including, without limitation,
statements concerning the Company's belief with respect to the
possible effect of certain legal proceedings on its financial
position or results of operations and other statements as to
management's expectations and beliefs presented in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and in "Legal Proceedings." Forward-looking
<PAGE>23
statements are made based upon management's current expectations
and beliefs concerning future developments and their potential
effects upon the Company. There can be no assurance that future
developments affecting the Company will be those anticipated by
management. Reference should be made to the caption entitled
"Information Concerning Forward-Looking Statements" contained in
the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996, for a
description of the factors that could cause actual results to
differ materially from those discussed herein.
<PAGE>24
Part II - Other Information
Item 1. Legal Proceedings
_________________
As previously reported in the Company's Report on Form 10-K for
the year ended December 31, 1996, in November 1981, the Company
filed a third amended complaint against Louis Wilcox and other
former officers of USLIFE Savings and Loan Association, a former
subsidiary of the Company, for indemnification, injunctive relief
and accounting (USLIFE Savings and Loan Association v. Louis
Wilcox, et al., Superior Court of the State of California for the
County of Riverside). In April 1984, defendant Louis M. Wilcox
filed a cross complaint against the Company seeking general
damages of $1 million, punitive damages of $10 million and
special damages. In 1986, Wilcox's causes of action for
malicious prosecution and abuse of process were dismissed. On
appeal, the dismissal of the cause of action for malicious
prosecution was reversed while the dismissal of the abuse of
process claim was upheld. Pursuant to the Company's request, the
case was bifurcated for trial. In July, 1993, the trial court,
after hearing evidence on the issue, without a jury, decided that
the Company had probable cause to sue Wilcox in 1981. That
ruling was dispositive of the claim for malicious prosecution
and, thus, the court dismissed Wilcox's only remaining claim
against the Company. A judgment in the Company's favor was
entered in late 1993. Wilcox appealed from this judgment and in
November 1996, the Court of Appeals issued a decision reversing
the trial court's dismissal of Wilcox's claim. The Company's
petition to the California Supreme Court for review of the Court
of Appeals' decision has been rejected and the case is being
returned to the trial court for a jury trial. No contingent loss
has been accrued for this litigation because the amount of loss,
if any, cannot be reasonably estimated.
As previously reported in the Company's Report on Form 10-K for
the year ended December 31, 1996, in February, 1997 the Company
was served with a purported class action lawsuit which was filed
against the Company and All American Life Insurance Company, a
subsidiary of the Company, in the Circuit Court of Butler County,
Kentucky. This lawsuit, which asserts claims related to sales
practices relating to the marketing of certain life insurance
policies, was removed to Federal Court for the Western District
of Kentucky on March 7, 1997, and defendants have filed an answer
denying all allegations. This lawsuit is in its very early
stages, it is premature to evaluate its materiality and it is
being vigorously defended.
As previously reported in the Company's Report on Form 10-K for
the year ended December 31, 1996, in March, 1997, a purported
<PAGE>25
class action was commenced in the Supreme Court of the State of
New York, in which USLIFE Corporation and its directors were
named defendants. The complaint generally alleges a purported
breach of fiduciary duty and other unspecified claims arising out
of the signing of a definitive merger agreement by the Company
and American General Corporation. The complaint seeks an
injunction to prevent the Company from consummating the merger,
rescission if the merger is completed, compensatory damages and
attorneys' and other fees. The defendants are not yet required to
answer the complaint but contend that this lawsuit has no merit.
Item 2. Changes in Securities
_____________________
During the quarter ended March 31, 1997, the Company issued 117
shares (in the aggregate) of its common stock, in reliance on an
exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended, to the Company's non-employee Directors
in connection with their retainer and meeting compensation.
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
27 - Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
During the quarter ended March 31, 1997, the Company filed
one Report on Form 8-K dated February 21, 1997, incorporated
herein by reference to SEC File No. 1-5683. The Report
referenced the Merger Agreement entered into on February 12,
1997 between the Company and American General Corporation
and the Amendment, effective February 13, 1997 to the
Amended and Restated Rights Agreement between the Company
and The Chase Manhattan Bank, as Rights Agent, which relates
to the transactions contemplated by the Merger Agreement.
<PAGE>26
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 8, 1997 By /s/ James M. Schlomann
____________________ ___________________________________
Date James M. Schlomann
Senior Executive Vice President -
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
USLIFE Corporation
Form 10-Q for the Quarterly Period Ended March 31, 1997
Exhibit Index
Exhibit
Number Exhibit
_______ _______
27 - Financial Data Schedule (electronic filing only)
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, SUMMARY STATEMENTS OF CONSOLIDATED NET
INCOME, AND NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH
31, 1997 OF USLIFE CORPORATION AND SUBSIDIARIES FILED ON FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
AND NOTES TO FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 5,738,904
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 3,843
<MORTGAGE> 257,528
<REAL-ESTATE> 25,730
<TOTAL-INVEST> 6,435,790
<CASH> 43,266
<RECOVER-REINSURE> 9,056<F1>
<DEFERRED-ACQUISITION> 828,452
<TOTAL-ASSETS> 7,776,581
<POLICY-LOSSES> 5,389,665
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 229,890
<POLICY-HOLDER-FUNDS> 72,461
<NOTES-PAYABLE> 593,072
0
499
<COMMON> 57,475
<OTHER-SE> 1,103,230
<TOTAL-LIABILITY-AND-EQUITY> 7,776,581
252,859
<INVESTMENT-INCOME> 125,446
<INVESTMENT-GAINS> 913
<OTHER-INCOME> 70,826
<BENEFITS> 255,976
<UNDERWRITING-AMORTIZATION> 42,503
<UNDERWRITING-OTHER> 107,767
<INCOME-PRETAX> 42,920
<INCOME-TAX> 14,332
<INCOME-CONTINUING> 28,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,588
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>See Note 5 of Notes to Financial Statements.
</FN>
</TABLE>
