<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
For the fiscal year ended December 31, 1996
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 Identification No.)
incorporation or organization)
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
London Stock Exchange
_____________________
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock, $4.50 Preferred Stock, $5.00
Series A Convertible, Series B Convertible,
par value $1 per share par value $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 27, 1997 was approximately $1,652,702,000.
_____________________
The number of shares outstanding of the Registrant's Common Stock as of
February 27, 1997 was 34,540,769.
_______________________________________________________________________________
_______________________________________________________________________________
<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
______________________________________________________________
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
(In Thousands Except Per Share Statistics)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Total income........................ $1,806,109 $1,739,552 $1,651,187 $1,600,038 $1,529,452
========== ========== ========== ========== ==========
Income from operations (a).......... $ 76,027 $ 105,414 $ 96,185 $ 97,157 $ 69,612
Cumulative effect of
accounting change (b).............. - - - - (37,990)
__________ __________ __________ __________ __________
Net income.......................... $ 76,027 $ 105,414 $ 96,185 $ 97,157 $ 31,622
========== ========== ========== ========== ==========
Income per share:(c)
Income from operations (a).......... $2.18 $3.03 $2.79 $2.83 $2.04
Cumulative effect of
accounting change (b).............. - - - - (1.12)
_____ _____ _____ _____ _____
Net income.......................... $2.18 $3.03 $2.79 $2.83 $ .92
===== ===== ===== ===== =====
Number of shares used in income
per share calculations............. 34,877 34,811 34,530 34,307 34,085
====== ====== ====== ====== ======
Dividends Per Common Share........... $ .95 $ .91 $ .84 $ .81 $ .76
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31
______________________________________________________________
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
(In Thousands Except Per Share Statistics)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (d):
Total assets....................... $7,879,586 $7,930,504 $7,004,262 $6,740,241 $6,095,272
Long-term debt..................... 299,635 349,493 349,360 349,235 349,439
Equity Capital:
Reported......................... 1,223,422 1,308,254 877,888 966,029 890,441
Before unrealized gains and
losses on securities............ 1,155,313 1,112,804 1,034,136 966,058 890,606
Equity Capital per share (c):
Reported......................... 35.05 37.47 25.43 28.07 26.07
Before unrealized gains and
losses on securities............ 33.10 31.87 29.96 28.07 26.07
Number of shares used in Equity
Capital per share calculations.. 34,905 34,918 34,515 34,413 34,158
__________
</TABLE>
(a) USLIFE's financial statements for 1996 reflect a pre-tax charge of
$49.6 million, taken during the second quarter, to recognize revised
assumptions reflecting current experience on its traditional indemnity group
major medical and related products. The charge, on an after-tax basis, amounts
to $32.3 million or 93 cents per share. Sales of these products were
discontinued in January 1996. See Note 2 of Notes to Financial Statements for
further information.
(b) Effective as of January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Company elected to recognize
the initial obligation under the Statement by means of a one-time charge to net
income for cumulative effect of the accounting change.
<PAGE>3
(c) See Note 1 of Notes to Financial Statements as to the method of
calculating income per share. Equity Capital per share was calculated by
dividing Equity Capital by the number of common and common equivalent shares
outstanding at the end of each period.
(d) 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>4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Recent Developments
On February 12, 1997, the Company entered into a definitive merger agreement
with American General Corporation pursuant to which the Company will merge into
American General 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 22 of Notes to Financial Statements for further information.
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 $265 million in 1996.
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. These guidelines are generally based on after-tax income and
equity capital as reported to regulatory authorities on the basis of statutory
accounting practices (see Note 18 of Notes to Financial Statements) and, at a
further threshold, may require payment of additional taxes under provisions of
Federal income tax law applicable to life insurance companies. 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.
Cash dividends paid by all consolidated subsidiaries to the parent company
totalled $70 million, $42 million, and $46 million in 1996, 1995 and 1994
respectively. The 1996 cash dividends included $50 million from All American
Life Insurance Company, of which $22 million exceeded the "ordinary" dividend
amount indicated by regulatory formulas based on statutory operating income and
surplus, as well as $8 million from an inactive subsidiary. These dividends
were remitted pursuant to approvals of the appropriate regulatory authorities.
The 1995 cash dividends included $6.5 million remitted by an inactive life
insurance subsidiary and then contributed to another life subsidiary in
connection with the earlier combination of the two companies' operations.
Dividends in 1995 and 1994 were limited based on the Company's analysis of
statutory capital requirements associated with the growth of individual life
insurance sales in those two years, each with an increase in new annualized
premiums of about 20% versus the preceding year. As a result, a portion of
parent company working capital requirements during 1995 and 1994 were financed
by increases in total borrowings of $27 million and $31 million, respectively.
Total parent company indebtedness decreased from $572 million at December 31,
1995 to $568 million at December 31, 1996.
<PAGE>5
Investment advisory and service fees paid by the life insurance
subsidiaries, and portfolio investment income comprise additional sources of
liquidity at the parent company. These sources totalled about $13 million in
each of the three years ended December 31, 1996. Parent company cash flows may
also be complemented by transactions such as repayment of advances by certain
subsidiaries and proceeds from investment securities sold, matured or redeemed.
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 expense charges, less depreciation, amortization, and
provisions for future retirement benefits, amounted to $73 million, $71 million
and $65 million in 1996, 1995 and 1994, respectively, while dividends totalled
$33 million, $31 million and $29 million, respectively.
During 1996 and 1995, the Company acquired approximately 329,000 and 208,000
shares of its common stock, at total cost of $10 million and $5 million
respectively. Of these amounts, approximately $7 million and $3 million
represented market repurchases, funded by sales of selected bonds in the parent
company investment portfolio, and the remainder were acquired in connection
with certain benefit plans. Substantially all of the shares acquired in 1996
and 1995 were utilized in connection with the dividend reinvestment plan and
various benefit programs.
On a consolidated basis, net cash provided by operating activities amounted
to $231 million, $180 million and $178 million in 1996, 1995 and 1994,
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 $191 million, $179 million, and $166 million in
1996, 1995 and 1994, respectively.
Cash flows from operating activities for 1996 included $94 million from the
change in liability for future policy benefits, versus $102 million in 1995.
The decrease reflected various factors including reduced sales of single
premium immediate annuities in 1996. Most of the reduction of the liability
for future policy benefits resulting from attrition of traditional indemnity
group major medical business in 1996 was offset by reserve strengthening for
the remaining policies in force. See Note 2 of Notes to Financial Statements
for further information.
Interest credited to policyholder account balances amounted to $200 million
in 1996, versus $210 million in 1995. The decrease resulted primarily from
surrenders of single premium deferred annuities sold in 1991 that reached the
end of their surrender charge period in 1996, together with reductions in
credited rates of interest on the Company's deferred annuities in force. As a
result of these surrenders, which were generally consistent with expected
levels, the portion of policyholder account balances relating to individual
annuities declined $257 million, from $1.79 billion at December 31, 1995 to
$1.53 billion at December 31, 1996. The portion of policyholder account
balances relating to universal life insurance contracts increased approximately
$178 million during that same one year period. The impact of this increase in
the base of universal life insurance in force was essentially offset by
reductions in rates of interest credited that were implemented during 1995 and
continuing into 1996, as discussed under "Results of Operations".
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.
<PAGE>6
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.
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 is taken where
appropriate. If an acceleration of surrenders of these contracts 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.
As of December 31, 1996, approximately 19% 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 that year totalling approximately
$500 million, an increase in the proportion of annuity contracts beyond the
surrender charge period is anticipated during 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.
Amortization of deferred policy acquisition costs amounted to $207 million
in 1996, reflecting the impact of a charge relating to traditional indemnity
group major medical products as discussed in Note 2 of Notes to Financial
Statements. Absent the impact of this charge, net additions to deferred policy
acquisition costs amounted to $50 million in 1996 versus $67 million in 1995.
The decrease reflects various factors including a lower level of individual
life insurance sales during 1996. New annualized premiums from individual life
insurance sales amounted to $120 million for 1996 versus $137 million in 1995.
Current year Federal income tax payments amounted to $31 million, $56
million and $55 million in 1996, 1995 and 1994, respectively. The reduced
level of payments in 1996 reflected tax losses arising from disposals of
certain non-performing investments during the year, which were applied under
tax law carryback provisions to recapture capital gains taxes paid in earlier
years. As discussed under "Results of Operations," reserves had been
previously established to recognize the major portion of the reduction in value
of these investments for financial statement purposes. The application of
amounts deposited in 1995 to satisfy a portion of 1996 tax depository
requirements was also a factor in the reduced level of tax payments. The
Company and certain subsidiaries also made payments to the Internal Revenue
Service during 1994 amounting to approximately $6 million, relating to
settlement of prior year tax returns. Since the latter payments were
associated with a previously recorded liability, this settlement had no impact
on reported results of operations.
Net cash used in investing activities amounted to $129 million, $264
million, and $457 million in 1996, 1995 and 1994, respectively. The 1996 and
1995 decreases reflected reduced individual annuity sales and increases in
surrenders on these contracts, both of which affected the increase in
policyholder account balances.
<PAGE>7
Individual annuity surrenders, which have a negative impact on net funds
available to invest, amounted to $349 million in 1996 versus $208 million in
1995 and $173 million in 1994. 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. Individual annuity
gross deposits amounted to $22 million in 1996, versus $94 million in 1995 and
$245 million in 1994. The decline in individual annuity deposits subsequent to
1994 resulted from various factors including the negative impact on sales of
declining interest rates offered on these contracts.
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. Adjustments to cost for investments with a reduction in value
determined to be other than temporary are recognized by income statement
charges which are included in realized gains and losses.
The approximately $890 million, $438 million, and $1.1 billion disposals of
fixed maturity investments included in cash flows from investing activities for
1996, 1995 and 1994 included, respectively, $124 million, $115 million and $209
million (adjusted 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 and
issuer diversification, as well as sales of certain non-performing securities
for which reserves had previously been established. The major portion of the
proceeds from fixed maturities sold or redeemed and available for reinvestment
were directed to investment grade fixed maturity investments.
Purchases of fixed maturity investments in 1996, 1995 and 1994 amounted to
approximately $1.0 billion, $799 million and $1.5 billion, respectively,
reflecting both reinvestment of the proceeds from fixed maturity disposals and
investment of funds corresponding to the growth of business in force.
Net unrealized gains on the Company's fixed maturities portfolio, with
adjusted cost of $5.7 billion at December 31, 1996, amounted to $190 million at
that date. This amount reflects gross unrealized gains of $229 million and
gross unrealized losses of $39 million. Also at that date, the fixed
maturities portfolio includes defaulted securities totalling $4 million (at
fair value). The sales of selected fixed maturity investments in accordance
with the Company's asset / liability management strategies and the retention of
certain securities with current market value less than book value or currently
in non-performing status are not anticipated to result in a material adverse
impact upon the Company's net cash flows.
Net purchases of short term investments during 1996, reflecting strategies
including temporary investment of proceeds from securities sold, redeemed or
matured pending disbursement of annuity surrender proceeds, amounted to $36
million. Investing activities for 1996 also reflected the investment of
approximately $15 million in a retirement trust included in "other long-term
investments," funded by proceeds from the sale of certain securities formerly
held in a corporate portfolio.
As discussed in Note 14 of Notes to Financial Statements, the Company's
$259 million consolidated investment in mortgage loans as of December 31, 1996
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, 1996. 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.
<PAGE>8
As of December 31, 1996 and 1995, consolidated invested assets included $23
million and $18 million book value of real estate acquired through foreclosure,
respectively. Consolidated net investment income includes net earnings of
approximately $800 thousand and $1 million in 1996 and 1995, respectively,
relating to such 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 used by consolidated financing activities amounted to $142
million in 1996 versus net cash provided by financing activities of $96 million
in 1995, reflecting a variance of $200 million from policyholder account
balance activity included therein. The primary causes of this variance were
the decline in single premium deferred annuity deposits and the impact of
increased annuity surrenders in 1996 as previously discussed. The reduced
level of cash flows from financing activities in 1995 as compared to 1994
reflected a smaller increase in policyholder account balances, primarily
attributed to the reduced level of individual annuity sales.
The increase in notes payable for 1996 includes $50 million of short term
bank borrowings relating to the June 1996 redemption and refinancing of the
Company's $50 million issue of 9.15% notes due 1999. This borrowing was
partially offset by application of a portion of parent company cash flows, as
discussed earlier, to repay approximately $4 million of short term borrowings.
Cash flows from financing activities for 1995 reflect a $26 million increase in
notes payable relating to parent company working capital requirements as
discussed above.
As of December 31, 1996, 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 available
interest rates, in the aggregate amount of $69 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, which was renewed in April 1996, 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. 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.
Capital Resources
Long term debt at December 31, 1996 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, 1996, 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 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.
<PAGE>9
For the years ended December 31, 1996, 1995 and 1994, respectively,
consolidated interest expense amounted to $39 million, $40 million, and $36
million. The 1996 reduction in interest expense resulted from the refinancing
of the Company's 9.15% Notes, in June, utilizing $50 million of short term bank
borrowings under a revolving credit agreement. The 1995 increase in interest
expense came primarily from higher interest rates applicable to the Company's
short term borrowings, and also reflected the $26 million increase in notes
payable related to parent company working capital requirements as previously
discussed.
Dividends paid on the Company's outstanding stock issues for 1996, 1995, and
1994, respectively, were $33 million, $31 million, and $29 million,
substantially all relating to common stock. The increases in these dividends
reflected increases in common stock dividends per share from 84 cents in 1994
to 91 cents in 1995 and to 95 cents in 1996.
As discussed in Note 13 of Notes to Financial Statements, the Company has
outstanding Standby Letters of Credit with three banks representing contingent
obligations to fund various trusts established in connection with certain
employment contracts of management employees and retirement plans in the event
of a Change in Control (as defined in the trust agreements), totalling $122
million, and the parent company has guaranteed certain obligations of its
subsidiaries.
Results of Operations
1996 Compared to 1995
For the year ended December 31, 1996, net income amounted to $76.0 million
versus $105.4 million for 1995.
Net income for 1996 reflects a $49.6 million pre-tax charge taken during
the second quarter, equivalent to $32.3 million on an after-tax basis, to
recognize revised assumptions reflecting current experience on the Company's
traditional indemnity group major medical and related products as discussed in
Note 2 of Notes to Financial Statements. The Company's group insurance product
lines are discussed further below.
Net income for 1996 also includes net capital losses with an after-tax
impact of $3.2 million, while 1995 net income included net capital gains with
an after-tax impact of $4.2 million. The 1996 capital losses relate primarily
to a program in which the Company selectively sold lower-yielding and non-
performing investments, allowing the recapture of approximately $17 million in
previously paid capital gains taxes under tax carryback rules and permitting
the investment of proceeds in accordance with current asset/liability
management strategies. The 1995 net capital gains reflect disposal of several
fixed maturity investments pursuant to tender offers of the respective issuers,
as well as certain redemptions as discussed under "Financial Condition".
Capital gains and losses during 1996 reflect disposals of non-performing
securities with adjusted cost of approximately $2 million, as well as several
real estate properties that were acquired through foreclosure, with aggregate
cost of approximately $17 million. Capital gains and losses during 1995
reflect disposals of non-performing securities with adjusted cost of
approximately $26 million, as well as several real estate properties that were
acquired through foreclosure, with aggregate cost of approximately $24 million.
Since reserves had been previously recorded to recognize the major portion of
the reduction in value of these investments, these disposals did not have a
material impact on current reported results.
Excluding the charge relating to traditional indemnity group major medical
products, and capital gains and losses as discussed above, consolidated after-
tax income amounted to $111.5 million for 1996 versus $101.3 million for 1995.
On a similar basis, after-tax income of the life insurance subsidiaries other
than the aforementioned items was $154.7 million versus $141.9 million. Also
on a similar basis, after-tax corporate charges (including the operating
results of the Company's servicing units) amounted to $43.2 million in 1996
versus $40.6 million for 1995, resulting in a negative comparative impact of
$2.6 million on after-tax consolidated results.
<PAGE>10
The variance in corporate charges reflects an increase in the provision
for retirement expense resulting from a change in the pension plan discount
rate from 8.25% in 1995 to 7.00% in 1996. This rate is determined at the
beginning of each year based on interest rates available on highly-rated fixed
income securities as required by pension accounting standards, and is not
necessarily indicative of the actual rate of return on investments supporting
the Company's retirement obligations.
Before capital gains and losses and the pre-tax charge of $49.6 million
discussed above, the life insurance subsidiaries reported a pre-tax profit of
$235.9 million for 1996 versus $215.0 million in 1995. This comparison of
results benefited from an increase of $7.6 million in pre-tax profits from the
individual life insurance and annuity product line, which accounts for the
major portion of the life insurance subsidiaries' pre-tax income. Other
product lines include group life and health insurance, sold principally through
employers and associations, and credit life and disability products which are
sold primarily to customers of financial institutions.
Apart from the impact of the charge discussed above, results from
traditional indemnity and related products for the second, third, and fourth
quarters of 1996 were approximately at a break-even level. With the
curtailment of losses from traditional indemnity products and actions taken to
move from traditional indemnity major medical products to current generation
group products, pre-tax results of operations from the Employer/Association
Group lines had a favorable impact of $8.8 million on the latter comparison.
A discussion of the Company's various product lines, excluding the impact
of the previously discussed charge for traditional indemnity major medical and
related business and capital gains and losses, follows.
Individual life and annuity pre-tax profits, including income attributable
to capital and surplus, amounted to $213.7 million for 1996 versus $206.1
million for 1995. The increase of $7.6 million or 4% came primarily from
greater gains from investment income, reflecting reductions in rates of
interest credited on interest sensitive policies in force as well as an
increased base of individual life insurance business. Gains from investment
income 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 for certain contracts, as discussed below.
Mortality experience was favorable in 1996 and contributed to the overall pre-
tax profit reported for the year, but this contribution was to a lesser degree
than in 1995.
Written premiums from credit life insurance products increased from $74
million in 1995 to $82 million in 1996, reflecting increased sales through
financial institutions. Pre-tax profits on credit insurance products are
anticipated to be realized when currently written premiums are earned in future
periods rather than during the period of sale. A pre-tax profit of $2.0
million was reported for credit life insurance coverages for 1996, versus $907
thousand in 1995. The positive variance reflected an increased base of earned
premiums and more favorable mortality experience in 1996. It should be noted
that credit life insurance coverages are often sold in conjunction with credit
disability insurance and/or other credit-related products.
Written premiums on credit disability products increased from $75 million
in 1995 to $82 million in 1996. Pre-tax income from credit disability products
amounted to $7.6 million in 1996, versus $6.9 million in 1995, reflecting an
increased base of earned premiums as well as more favorable claims experience
during 1996.
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).
<PAGE>11
As indicated in Note 2 of Notes to Financial Statements, the Company
discontinued new sales of traditional indemnity major medical products in
January 1996 and subsequently recorded a charge as noted above 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.
The employer/association group health line reported a $1.1 million pre-tax
profit for 1996, comprised of a first quarter pre-tax loss of $1.5 million and
a pre-tax profit of $2.6 million for the second, third, and fourth quarters
(before the charge discussed above). The latter profit reflects the
contribution of continuing products included in this line. Pre-tax losses on
this line for 1995 were $5.2 million, reflecting experience on the now-
discontinued traditional indemnity products as well as expense charges of
approximately $1 million related to the closing of a claims office.
Premium revenues on employer/association group health insurance products
amounted to $359 million in 1996 versus $358 million in 1995. Although, as
anticipated, a high level of terminations from the discontinued products
negatively impacted revenues, overall revenues approximated year-ago levels as
a result of an increased contribution from non-major medical and managed care
products.
The other group health and disability coverages reported a pre-tax profit
of $708 thousand for 1996, versus $166 thousand for 1995, with the favorable
variance primarily attributed to improved results from specialty group health
and disability products marketed through retailers and financial institutions.
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 $7.6
million for 1996, versus $5.1 million in 1995, reflecting the increased profit
contribution from continuing products included in this line. Premium revenues
for this line were $124 million in 1996 versus $121 million in 1995.
The other group life insurance lines reported a pre-tax profit of $2.3
million for 1996, versus $656 thousand for 1995, with the favorable variance
reflecting improved experience on group mortgage life insurance coverages.
Total revenues of the life insurance subsidiaries in 1996 amounted to
$1.78 billion, an increase of $61 million or 4% over 1995, reflecting increases
of $50 million (or 4%) and $14 million (or 3%) 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 credit life and
disability lines.
Premiums and other considerations from individual life insurance and
annuity products amounted to $519 million in 1996, compared to $487 million in
1995, 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 credit insurance
products, reflecting increased sales through financial institution sources of
business as noted above.
<PAGE>12
The $14 million increase in net investment income of the life insurance
subsidiaries reflected a larger investment base in 1996. The pre-tax annual
yield on invested assets was 7.92% in 1996 versus 7.93% in 1995. Redemptions
of securities during 1996 totalled $124 million (at cost). These redemptions,
and an intentional shortening of maturities on investments associated with
individual annuity contracts in anticipation of annuities nearing the end of
their surrender charge period, both had a negative impact on overall portfolio
yield. However, this impact was essentially offset by reinvestment of proceeds
from disposals of lower-yielding and non-performing investments as discussed
above.
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
$101 million versus 1995, to $1.597 billion, reflecting the impact of the $49.6
million charge relating to traditional indemnity group major medical products
as previously discussed. Excluding this charge, total benefits and expenses
increased $52 million or 3%.
Benefits to policyholders and beneficiaries amounted to $773 million in
1996. The $58 million increase versus 1995 reflects the inclusion of $12
million in the 1996 amount relating to the aforementioned charge. The
remainder of the increase is attributed primarily to greater volume of
individual life insurance and credit life and disability insurance products.
Interest credited to policyholder account balances amounted to $200
million in 1996, versus $210 million in 1995. 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 as well
as reductions in rates of interest credited on interest sensitive contracts.
Interest rates credited on the Company's deferred annuity contracts,
exclusive of first year bonuses on certain products, typically ranged from 4-
3/4% to 5-1/2% during 1995, depending on type of contract and period of issue.
During the year 1995, the Company implemented a series of rate reductions on
newly issued annuities together with credited rate reductions on renewing
contracts. As a result of actions taken during the fourth quarter of 1995
affecting the major portion of the Company's deferred annuities in force,
credited rate reductions of 25 to 50 basis points were implemented on January
1, 1996 for calendar year contracts and on policy anniversary dates during 1996
for other contracts. Interest rates credited on these contracts during 1996
typically ranged from 4-1/4% to 5-1/2%.
Interest rates credited on the Company's universal life insurance
contracts typically ranged from 5-3/4% to 7% during 1995. Reductions in
credited interest rates, generally amounting to 25 basis points, were
implemented during the third quarter of 1995 with respect to the major portion
of the Company's universal life insurance policies in force as well as certain
newly issued policies. Additional rate reductions of 25 to 50 basis points
were implemented during the first quarter of 1996. Following these actions,
current credited rates on the Company's universal life insurance contracts
generally range from 5-1/4% to 6-1/2%.
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
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.
<PAGE>13
An increase in future policy benefits of $96 million was recorded for
1996, versus $112 million for 1995. The decrease reflected various factors
including reduced sales of single premium immediate annuities during 1996 as
discussed under "Financial Condition".
Amortization of deferred policy acquisition costs was $207 million for
1996, versus $162 million for 1995, with the $45 million increase primarily
attributed to inclusion of $37 million in the 1996 amount relating to the
aforementioned charge for traditional indemnity products. The remainder of the
increase reflects factors including the greater volume of individual life
insurance and credit insurance business during 1996.
Aggregate commissions, general expenses, and insurance taxes and licenses
increased from $293 million in 1995 to $318 million in 1996. The $25 million
increase is primarily associated with the 1996 increase in credit insurance
written premiums and increased volume on individual life insurance and credit
insurance related products.
At December 31, 1996, consolidated invested assets included approximately
$238 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 3 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.
1995 Compared to 1994
For the year ended December 31, 1995, net income amounted to $105.4
million versus $96.2 million for 1994.
Net income for 1995 included net capital gain transactions with an after-
tax impact of $4.2 million, while 1994 net income included net capital losses
with an after-tax impact of $902 thousand. The 1995 net capital gains reflect
disposals of several fixed maturity investments pursuant to tender offers of
the respective issuers, as well as certain redemptions as discussed under
"Financial Condition". The 1994 net capital losses came primarily from
disposal of certain real estate investments.
Capital gains and losses during 1995 reflect disposals of non-performing
securities with adjusted cost of approximately $26 million, as well as several
real estate properties that were acquired through foreclosure, with aggregate
cost of approximately $24 million. Since reserves had been previously recorded
to recognize the reduction in value of these investments, these disposals did
not have a material impact on current reported results.
Excluding the capital gains and losses discussed above, consolidated
after-tax income amounted to $101.3 million for 1995 versus $97.1 million for
1994, an increase of $4.2 million or 4%. On a similar basis, after-tax income
of the life insurance subsidiaries increased $7.7 million or 6%. Also on a
similar basis, after-tax corporate charges (including the operating results of
the Company's servicing units) amounted to $40.6 million in 1995 versus $37.1
million for 1994, resulting in a negative comparative impact of $3.5 million on
after-tax consolidated results that partially offset the improvement in life
insurance subsidiary results.
The improvement in life insurance subsidiary results came primarily from
an increase in pre-tax profits from the individual life and annuity product
line, partially offset by unfavorable results from the employer/association
group health insurance line.
<PAGE>14
The negative variance in corporate charges reflected increased interest
expense at the corporate level. The Company's consolidated interest expense,
which increased to $39.7 million in 1995 from $35.6 million in 1994, relates to
borrowings at the parent company level for general corporate purposes. As
discussed under "Financial Condition," the 1995 increase in interest expense
came primarily from higher interest rates applicable to the Company's short
term borrowings, and also reflected a $26.4 million increase in notes payable
related to parent company working capital requirements.
Pre-tax income of the life insurance subsidiaries, excluding the
previously discussed capital gains and losses, was $215.0 million in 1995
versus $204.7 million in 1994. The major portion of the life insurance
subsidiaries' pre-tax income is attributed to the individual life insurance and
annuity product line. Other product lines include group life and health
insurance, sold principally through employers and associations, and credit life
and disability products which are sold primarily to customers of financial
institutions. A discussion of the Company's various product lines, excluding
the impact of capital gains and losses, follows.
Individual life and annuity pre-tax profits, including income attributable
to capital and surplus, amounted to $206.1 million for 1995 versus $186.3
million for 1994. The increase of $19.8 million or 11% reflected contributions
from major sources of profit including mortality experience, investment income,
and voluntary policy termination experience ("persistency"). Gains from
investment income 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 for certain contracts, as discussed
below.
A pre-tax profit of approximately $900 thousand was reported for credit
life insurance coverages for 1995, versus $1.1 million in 1994. The negative
variance of $200 thousand came primarily from somewhat less favorable mortality
experience during 1995. Written premiums from credit life insurance products
increased $8.0 million or 12% versus 1994.
Pre-tax profits from the Company's group life insurance lines of business
amounted to $5.8 million for 1995, versus $5.5 million for 1994, for a positive
variance of approximately $300 thousand. These lines include
employer/association group life insurance, mortgage life insurance, and certain
specialty coverages. The positive variance came primarily from the group
mortgage life insurance line, reflecting more favorable mortality experience.
Pre-tax income from employer/association group life insurance products amounted
to $5.1 million in 1995, approximating the $5.2 million reported in 1994.
The Company's group health insurance lines of business reported a pre-tax
loss of approximately $5 million for 1995 versus a pre-tax profit of $6 million
for 1994. The negative variance of $11 million was primarily attributed to the
employer/association group health insurance line, which reported a pre-tax loss
of $5.2 million for 1995 versus a pre-tax profit of $5.6 million a year
earlier.
Premium revenues on employer/association group health insurance products
declined from $397 million in 1994 to $358 million in 1995, with the decline
primarily attributed to traditional indemnity major medical cases associated
with a shift in market emphasis toward managed care products. This change in
market emphasis resulted both in a reduction of new sales of the Company's
indemnity major medical products as well as erosion of business in force, over
a period of several years.
Although a significant portion of the Company's 1995 major medical sales
came from managed care products, historically the majority of its group
insurance premium revenues were derived from indemnity major medical coverages.
As a result, about 60% of employer/association group health and disability
premium in force at year end 1995 related to traditional indemnity products.
The Company took a number of actions to address the decline in revenues,
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, and introduced new managed care
products in several states (using provider networks made available through
unrelated companies).
<PAGE>15
The Company also initiated expense reduction measures to alleviate the
impact of reduced group health revenues. Despite these measures, the revenue
decline outpaced reductions in overhead and other expenses during 1995. This
revenue shortfall, together with expense charges of approximately $1 million
related to the closing of a claims office, resulted in the reported pre-tax
loss for 1995. The claims office closing represented the substantial
completion of a program to consolidate these offices in order to achieve future
economies.
Pre-tax income from credit disability products amounted to $6.9 million in
1995, versus $5.2 million in 1994, reflecting an increased base of earned
premiums and more favorable claims experience in 1995.
Total revenues of the life insurance subsidiaries in 1995 amounted to
$1.72 billion, an increase of $88 million or 5% over 1994, primarily on
increases of $47 million (or 4%) and $27 million (or 6%) 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 credit life and
disability lines, with declining employer/association group health premiums a
partial offset as previously discussed.
Premiums and other considerations from individual life insurance and
annuity products amounted to $487 million in 1995, compared to $434 million in
1994, with the increase from both interest sensitive and traditional products
and reflecting a larger base of in-force business as well as increased sales
during 1995.
Net premium income on credit life and disability products increased $17
million to $149 million in 1995, reflecting increased written premium for both
credit life and credit disability products. The increased written premium is
attributed to various factors including increased sales through bank sources of
business.
Net investment income of the life insurance subsidiaries increased $27
million, as noted above, reflecting a larger investment base in 1995. The pre-
tax annual yield was 7.93% in 1995 versus 7.92% in 1994.
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. Credited rate actions are discussed below.
Total benefits and expenses of the life insurance subsidiaries increased
$70 million or 5% over 1994.
Benefits to policyholders and beneficiaries amounted to $715 million in
1995, a decrease of $13 million versus the $728 million reported for 1994. A
$39 million decrease in employer/association group health benefits, reflecting
the decline in volume on that line, was the primary cause of the overall
decrease in benefits. Volume related increases in benefits on various product
lines, including increases of $10 million in death benefits on individual life
insurance products and $4 million in credit life and disability benefits,
partially offset the impact of the decline in employer/association group health
benefits.
Interest credited to policyholder account balances increased $16 million
(or 8%) over 1994. This increase reflected the greater volume of universal
life-type contracts in 1995 as well as credited interest rate adjustments on
individual annuities initiated in late 1994. Recognizing the rise in available
interest rates during the second half of 1994, credited interest rates offered
on substantially all of the Company's deferred annuities were increased during
that period, with the amount of increase varying based on type of contract.
Increases in credited renewal rates of interest on these contracts were
effective either at contract anniversary or January 1, 1995 based on type of
contract.
Interest rates credited on the Company's deferred annuity contracts,
exclusive of first year bonuses on certain products, typically ranged from 4-
1/2% to 4-3/4% during 1994. Giving effect to the late 1994 rate actions, the
rates credited on these contracts as of January 1, 1995 and during 1995 (on a
similar basis) typically ranged from 4-3/4% to 5-1/2%, with a weighted average
(based on account value) of about 5%. In 1995, a series of reductions in
interest rates offered on newly issued deferred annuity contracts were
implemented, together with various adjustments of credited interest rates on
renewing contracts.
<PAGE>16
Interest rates credited on the Company's universal life insurance
contracts typically ranged from 6% to 7% during 1994 and during the first half
of 1995. Reductions in credited rates, generally amounting to 25 basis points,
were implemented during the third and fourth quarters of 1995 with respect to
the major portion of the Company's universal life insurance policies in force
as well as substantially all of its currently offered universal life insurance
policies. Further credited rate reductions of 25 to 50 basis points were
implemented on January 1, 1996. As a result of these actions, credited rates
on the Company's universal life insurance contracts generally ranged from 5-
1/4% to 6-3/4% commencing January 1, 1996.
An increase in future policy benefits of $112 million was recorded for
1995, versus $79 million for 1994, with the $33 million variance primarily
associated with the increase in premiums on traditional individual life
insurance and credit insurance coverages.
Aggregate commissions, general expenses, and insurance taxes and licenses
increased from $262 million in 1994 to $293 million in 1995. The $31 million
increase reflects approximately $7 million volume related expenses which are
directly associated with premiums from a specialty group insurance product
marketed in conjunction with a consumer retailer, as well as expenses of about
$1 million from closing of a group claims office as previously discussed. The
remainder of the increase is primarily attributed to increased volume in the
individual life insurance and annuity product line and greater credit insurance
written premiums.
Information Concerning Forward-Looking Statements
Certain of the statements contained in this Annual Report may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, 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
belief presented in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Forward-looking statements are made
based upon management's current expectations and belief 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. There are certain important factors that could
cause actual results to differ materially from estimates or expectations
reflected in such forward-looking statements including without limitation,
changes in general economic conditions, including the performance of financial
markets and interest rates; customer responsiveness to both new products and
distribution channels; competitive, regulatory or tax changes that affect the
cost of or demand for the Company's products; and adverse litigation results.
While the Company reassesses material trends and uncertainties affecting the
Company's financial condition and results of operations, in connection with its
preparation of management's discussion and analysis of financial condition and
results of operations contained in its quarterly and annual reports, the
Company does not intend to review or revise any particular forward-looking
statement referenced in this Annual Report in light of future events. The
information referred to above should be considered by readers when reviewing
any forward-looking statements contained in this Annual Report, in any of the
Company's public filings or press releases or in any oral statements made by
the Company or any of its officers or other persons acting on its behalf. By
means of this cautionary note, the Company intends to avail itself of the safe
harbor from liability with respect to forward-looking statements that is
provided by Section 27A and Section 21E referred to above.
<PAGE>17
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. USLIFE operates
nationwide and offers, through its subsidiaries, a broad portfolio of
individual life insurance and annuity policies as well as group and credit
insurance. 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 2 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
__________________________________________________________________________________________________________
1996 1995 1994 1993 1992
___________________ _____________________ ____________________ ___________________ ___________________
Income Income Income Income Income
Total Before Total Before Total Before Total Before Total Before
Income Taxes Income Taxes Income Taxes Income Taxes Income Taxes (a)
______ ________ ______ _______ ______ _______ ______ ________ ______ ________
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life Insurance........ $1,778,616 $181,325 $1,717,519 $221,455 $1,629,968 $203,424 $1,583,197 $206,011 $1,514,233 $159,301
Realty and
Securities Investment 13,971 (383) 10,184 (321) 12,254 (214) 10,622 (2,542) 11,149 (59)
Corporate Services (b) 13,522 (65,137) 11,849 (61,209) 8,965 (56,213) 6,219 (51,898) 4,070 (54,905)
__________ ________ __________ ________ __________ ________ __________ ________ __________ ________
Consolidated........ $1,806,109 $115,805 $1,739,552 $159,925 $1,651,187 $146,997 $1,600,038 $151,571 $1,529,452 $104,337
========== ======== ========== ======== ========== ======== ========== ======== ========== ========
_____________________
</TABLE>
(a) Before cumulative effect of accounting change relating to
postretirement benefits other than pensions.
(b) Reflects corporate interest expense and overhead. Also includes
operations of USLIFE Systems Corporation, USLIFE Insurance Services
Corporation, USLIFE Agency Services, Inc., and USLIFE Financial
Institution Marketing Group, Inc., as well as consolidating adjustments.
Total income and income before taxes for the product groups included in the
Life Insurance segment are shown in Note 2 of Notes to Financial Statements.
Life Insurance
General
In 1996, 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").
<PAGE>18
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 40% of its business in 1996 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,
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., securities 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, 1996, 7% of individual life insurance in force was participating
and premiums on participating policies represented 12% of individual life
insurance premium income in 1996. 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 15% 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 1992 through 1996.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Life Insurance in Force at December 31:
Individual life...................... $110,877,717 $ 99,466,568 $ 85,884,409 $ 75,850,909 $ 70,215,988
Credit life.......................... 9,424,011 8,935,598 8,401,213 7,905,294 8,124,861
Group life........................... 36,474,822 32,470,190 30,595,715 26,793,165 25,621,722
Reinsurance assumed(a)............... 21,199,565 18,765,435 16,800,790 14,462,410 11,037,473
____________ ____________ ____________ ____________ ____________
Total in force (a)(b)........... $177,976,115 $159,637,791 $141,682,127 $125,011,778 $115,000,044
============ ============ ============ ============ ============
New Life Insurance:
Individual life...................... $ 23,508,557 $ 24,286,963 $ 19,875,925 $ 15,094,027 $ 13,842,145
Credit life.......................... 5,856,429 5,816,836 5,517,215 4,698,246 3,327,816
Group life........................... 5,456,182 4,308,945 2,739,075 2,474,122 2,433,088
____________ ____________ ____________ ____________ ____________
Total direct new business written... 34,821,168 34,412,744 28,132,215 22,266,395 19,603,049
Reinsurance assumed.................. - 355 111,630 5,060 3,644
____________ ____________ ____________ ____________ ____________
Total new business...... $ 34,821,168 $ 34,413,099 $ 28,243,845 $ 22,271,455 $ 19,606,693
============ ============ ============ ============ ============
</TABLE>
<PAGE>19
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Premium Income:
Life Insurance:
Individual(c)................... $ 303,185 $ 274,623 $ 243,817 $ 220,686 $ 207,822
Credit life..................... 82,477 74,308 66,269 56,778 53,555
Group life...................... 197,351 193,069 185,482 178,302 165,897
____________ ____________ ____________ ___________ ___________
Total life.................. 583,013 542,000 495,568 455,766 427,274
____________ ____________ ____________ ___________ ___________
Health Insurance:
Credit disability............... 81,518 75,165 66,423 55,040 52,099
Group health.................... 375,366 375,265 406,688 438,075 452,306
Other (d)....................... 579 767 1,024 1,302 1,308
____________ ____________ ____________ ___________ ___________
Total health................ 457,463 451,197 474,135 494,417 505,713
____________ ____________ ____________ ___________ ___________
Total premium income.... $ 1,040,476 $ 993,197 $ 969,703 $ 950,183 $ 932,987
============ ============ ============ =========== ===========
</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 $8.0 billion at the end of
1992, $7.5 billion at the end of 1993, $7.8 billion at the end of 1994, $9.3
billion at the end of 1995, and $14.3 billion at the end of 1996.
(c) Under the method of accounting required by Statement No. 97 of the
Financial Accounting Standards Board 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.
(d) Includes individual health policies issued upon conversion of group
health coverages.
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, 1996:
<TABLE>
<CAPTION>
Individual Group and Credit
_______________________________________ ______________________________________
Year Ended December 31 Year Ended December 31
_______________________________________ ______________________________________
1996 1995 1994 1996 1995 1994
____ ____ ____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
In force, January 1............... $ 99,513,448 $85,925,752 $75,885,903 $60,124,343 $55,756,375 $49,125,875
____________ ___________ ___________ ___________ ___________ ___________
Issued......................... 23,492,498 24,271,424 19,859,084 11,312,611 10,125,781 8,256,290
Reinsurance assumed............ - 355 11,545 - - 100,085
Revived........................ 169,197 186,713 142,934 3,404 1,491 -
Additions by dividend.......... 16,059 15,539 16,841 - - -
Increase, net.................. - - - - - 1,846,201
____________ ___________ ___________ ___________ ___________ ___________
Total................. 23,677,754 24,474,031 20,030,404 11,316,015 10,127,272 10,202,576
____________ ___________ ___________ ___________ ___________ ___________
Terminated by:
Death.......................... 231,538 206,378 189,130 182,660 174,817 164,735
Maturity....................... 2,231 2,238 2,403 - - -
Expiry......................... 43,186 52,654 66,936 1,023,716 1,411,915 1,486,517
Surrender...................... 1,530,281 1,524,627 1,302,168 5,099 5,833 2,887
Lapse.......................... 9,220,829 7,722,925 6,946,802 2,301,292 2,769,018 1,917,937
Conversion..................... 990,499 1,061,801 1,060,175 - - -
Decrease, net.................. 287,145 315,712 422,941 836,969 1,397,721 -
____________ ____________ ___________ ___________ ___________ ___________
Total................. 12,305,709 10,886,335 9,990,555 4,349,736 5,759,304 3,572,076
____________ ___________ ___________ ___________ ___________ ___________
Increase.......................... 11,372,045 13,587,696 10,039,849 6,966,279 4,367,968 6,630,500
____________ ___________ ___________ ___________ ___________ ___________
In force, December 31............. $110,885,493 $99,513,448 $85,925,752 $67,090,622 $60,124,343 $55,756,375
============ =========== =========== =========== =========== ===========
</TABLE>
<PAGE>20
Individual Life Insurance and Annuities
For the last three years, premiums and considerations and income before
taxes (including income from capital and surplus) for the Individual Life
Insurance and Annuity product line were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Premiums and considerations................. $ 518,826 $ 486,518 $ 434,240
========= ========= =========
Pre-tax income:
Before capital gains and losses............ $ 213,721 $ 206,113 $ 186,274
Capital gains (losses)..................... (3,172) 9,759 (3,217)
_________ _________ _________
Total...................................... $ 210,549 $ 215,872 $ 183,057
========= ========= =========
</TABLE>
Universal life insurance represents approximately 33%, 34% and 36% of
total individual life insurance in force at December 31, 1996, 1995 and 1994,
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.
Profitability of universal life insurance is dependent on the Company's
ability to earn a spread between the income on investments supporting these
contracts and the rates of interest credited to policyholders, as well as
underwriting results and actual experience in voluntary policy terminations
("persistency") and expenses in relation to levels assumed in setting premium
rates.
Profitability of non-interest sensitive life insurance coverages is
dependent on underwriting results, the Company's ability to earn investment
income in excess of the amounts required for accumulation of reserves for
ultimate payment of policy benefits, and actual experience in persistency and
expenses in relation to levels assumed in setting premium rates.
The individual annuities that have been sold by the Life Insurance
Subsidiaries are primarily single premium deferred annuity contracts that
provide fixed interest rates which can be adjusted by the Company either on a
calendar year or contract anniversary basis. Profitability of these products
is primarily dependent on the Company's ability to earn a spread between the
income on investments supporting these contracts and the rates of interest
credited to the policyholders. These annuities are offered through financial
institutions as well as general agencies who also offer life insurance
products. Total policyholder account balances for the Company's individual
single premium deferred annuities were $1.5 billion, $1.8 billion and $1.8
billion at December 31, 1996, 1995 and 1994, respectively. Gross deposits for
single premium annuities amounted to $22 million, $94 million and $245 million
in 1996, 1995 and 1994, respectively.
<PAGE>21
The decline in individual annuity gross deposits subsequent to 1994
resulted from various factors including the negative impact on sales of
declining interest rates offered on these contracts.
The 1996 decline in face value of individual life insurance policies sold
came primarily from decreases in sales of both universal life insurance
products and term insurance products, for which new annualized premiums
declined 12% and 11%, respectively, versus 1995. The universal life sales
decrease reflected factors including competition from alternative investments
resulting from the combination of a strong equity market and a relatively low
interest rate environment, coupled with a disruptive impact on sales arising
from the adoption, in certain states, of new model regulations covering
illustration of these policies. The term insurance sales decline is associated
with various factors including a transition to new products in response to
competitive developments and the restructuring of an independent marketing
organization specializing in these products. Future sales results for the
Company's individual life insurance products will depend upon factors including
market acceptance of its product portfolio, competition for investment funds by
other insurers and alternative investments, and public perception of financial
strength of the Life Insurance Subsidiaries. The 1995 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 1995 as compared to the preceding year. The face
amount of individual life insurance terminated, in the aggregate, by lapse and
surrender amounted to $10.8 billion, $9.2 billion, and $8.2 billion in 1996,
1995 and 1994, respectively. The relative consistency of these terminations as
a percentage of beginning of year in-force business reflected a continuation of
favorable persistency experience.
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 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 period or during the later portion thereof. 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.
As discussed under "Asset / Liability Management; Investments and
Investment Results," the Company's investment portfolios are continually
monitored to determine whether the distribution of investment maturities is
considered appropriate for expected cash flows from policy liabilities,
including policy surrenders.
Credit Life and Disability Insurance
For the last three years, premiums and income before taxes for the Credit
Life and Disability product lines were as follows:
<PAGE>22
<TABLE>
<CAPTION>
1996 1995 1994
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Premium income:
Credit life................................ $ 82,477 $ 74,308 $ 66,269
Credit disability.......................... 81,518 75,165 66,423
_________ _________ _________
Total...................................... $ 163,995 $ 149,473 $ 132,692
========= ========= =========
Pre-tax income, before capital gains
and losses:
Credit life.............................. $ 1,997 $ 907 $ 1,136
Credit disability........................ 7,612 6,883 5,230
Capital gains............................... 138 353 1,099
_________ _________ _________
Total....................................... $ 9,747 $ 8,143 $ 7,465
========= ========= =========
</TABLE>
Credit life insurance, generally similar to decreasing term life
insurance, is issued on the lives of borrowers to cover payment of loan
balances in case of death. 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. These
products are primarily marketed through financial institutions and automobile
dealers.
Profitability of these products is dependent upon various factors,
including actual mortality and morbidity experience. Profitability is also
affected by premium rate limitations imposed by regulatory authorities in
various states and by competitive factors, which may affect both premium rates
and levels of compensation provided by the Company to its sources of credit
insurance business.
Group Life and Health Insurance
For the last three years, premiums and income before taxes for the Group
Life and Health product lines were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Premium income:
Group life................................. $ 197,351 $ 193,069 $ 185,482
Group health............................... 375,366 375,265 406,688
_________ _________ _________
Total...................................... $ 572,717 $ 568,334 $ 592,170
========= ========= =========
Pre-tax income (loss), before capital gains
and losses:
Group life............................... $ 3,791 $ 5,775 $ 5,519
Group health............................. (41,640) (5,031) 5,866
Capital gains (losses)...................... (1,899) (3,698) 774
_________ _________ _________
Total....................................... $ (39,748) $ (2,954) $ 12,159
========= ========= =========
</TABLE>
The major portion of the Company's group life and health business consists
of coverages sold through employers to their employees and coverages sold
through associations to their members. The Company also offers group mortgage
life and disability products and specialty group insurance products that are
often marketed through financial institutions.
<PAGE>23
During 1996, the Company recorded a pre-tax charge of $49.6 million to
recognize revised assumptions reflecting current experience on its traditional
indemnity group major medical and related products, including group life
insurance cases sold in tandem with these major medical policies. The impact
of this charge on 1996 pre-tax results of the Group Life and Group Health lines
was $6.2 million and $43.4 million, respectively.
Profitability of group insurance products is dependent on various factors
including underwriting results and, particularly in the case of employer and
association group health insurance products, 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. 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 is also dependent on the
Company's ability to generate sufficient premium volume to recover expenses
necessary to support the business.
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 several years. As a consequence, premium revenues on employer /
association group health insurance products declined from $397 million in 1994
to $358 million in 1995. Despite expense reduction measures initiated by the
Company to alleviate the impact of group health revenues, the revenue decline
outpaced reductions in overhead and other expenses during 1995. This revenue
shortfall, together with expense charges of approximately $1 million relating
to the closing of a claims office, resulted in the reported pre-tax loss
reported for 1995. The claims office closing represented the substantial
completion of a program to consolidate these offices in order to achieve future
economies.
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). As indicated in
Note 2 of Notes to Financial Statements, the Company discontinued new sales of
traditional indemnity major medical products in January 1996 and subsequently
recorded a charge of $49.6 million, as noted above, 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 amounted to approximately $300 million in the final three quarters of
1996, more than 75% of total employer / association group premiums for the
portion of the year following the quarter when traditional indemnity major
medical sales were discontinued.
In addition to the profitability factors indicated above, future results
from the Company's group insurance product lines will be dependent on market
acceptance of the recently introduced managed care and ancillary products and
the degree to which the above strategies result in premium volume that is
commensurate with continuing expense levels.
Asset / Liability Management; 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. Certain 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.
<PAGE>24
The investment management policies of the Company include continual
evaluation of securities market conditions and circumstances relating to
particular investment holdings which may result in sale of fixed maturity or
other investments 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. Additionally,
the Company's investment portfolios are continually monitored to determine
whether the distribution of investment maturities is considered appropriate for
expected cash flows, including surrenders, relating to policy liabilities.
These cash flows are sensitive to various factors including available interest
rates. Securities may be sold prior to maturity in order to rebalance the
distribution of investment maturities based on this evaluation of expected cash
flows. Consequently, the Company's entire portfolio of fixed maturity
investments has been 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 adjusted cost and fair value
of the Company's debt security investments, by contractual maturity, are set
forth in Note 3 of Notes to Financial Statements.
The fixed maturities portfolios of the Life Insurance Subsidiaries at
December 31, 1996 were predominantly comprised of investment grade securities
(based on ratings assigned by recognized rating agencies and insurance
regulatory authorities). At December 31, 1996, invested assets of the Life
Insurance Subsidiaries included approximately $223 million (adjusted cost) of
less than investment grade fixed maturity securities, based on these ratings.
The latter investments had an aggregate fair value of approximately $224
million as of December 31, 1996 and based on fair value, represent
approximately 3% of total assets of the Life Insurance Subsidiaries at that
date. 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 results of operations of the Life Insurance
Subsidiaries historically have not reflected a material adverse impact from
retention of such securities. Certain bonds, representing less than one half
of 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, 1996
with respect to each National Association of Insurance Commissioners ("NAIC")
credit classification are as follows:
Fixed Maturities Available for Sale
________________________________________________________________
NAIC Class Adjusted Cost Fair Value
___________ _____________ ____________
(Amounts in Thousands)
1....................... $3,438,199 $3,556,532
2....................... 1,994,092 2,065,274
__________ __________
Total investment grade....... 5,432,291 5,621,806
__________ __________
3....................... 198,105 199,394
4....................... 17,487 15,979
5....................... 4,510 4,159
6....................... 3,349 4,141
__________ __________
Total non-investment grade... 223,451 223,673
__________ __________
Total........................ $5,655,742 $5,845,479
========== ==========
<PAGE>25
The mortgage portfolio of the Life Insurance Subsidiaries at December 31,
1996 had an aggregate principal amount of approximately $260 million and
consisted of approximately 250 loans. The mortgage portfolio is characterized
by a broad geographical distribution, with approximately 5% of total book value
at December 31, 1996 relating to the New England region of the United States,
18% from the middle-Atlantic states, 20% from the north-central states, 18%
from the south-Atlantic states, 13% from the south-central states, 10% from the
mountain states, and 16% from the Pacific states. Based on book value,
approximately 34% of these mortgage loans at that date are secured by office
buildings, 20% by industrial / warehouse properties, 35% retail, and the
remainder secured by apartments, one to four family residential, hotel / motel,
medically oriented, or other specialty properties. At December 31, 1996, the
average principal balance of mortgage loans contained in the portfolio was $1
million, with a weighted average yield of 9.4% on principal balance. The
average maturity was approximately 7 years. The largest principal balance of
any single mortgage loan at that date was $10 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 0.3% and 1.8% of the mortgage loan
portfolio at December 31, 1996 and 1995, respectively. On December 31, 1996
property held as a result of foreclosure of loans amounted to $23 million.
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. Securities with a
reduction in value determined to be other than temporary are adjusted to net
realizable value through income statement charges. Mortgage loans that are
more than 60 days delinquent or in foreclosure are carried at the lower of
amortized cost or estimated net realizable value of the underlying collateral.
Adjustments to cost for mortgage loans, real estate, and other investments with
other than temporary reductions in value are also recognized by income
statement charges which are included in realized gains and losses.
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)
___________ ____ ________ _____ __________ _________ ___________
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
1996.......... $13,915 $6,330,701 $6,344,616 $489,387 7.92% $(4,915)
1995.......... 51,444 6,204,247 6,255,691 475,839 7.93 6,413
1994.......... 38,789 5,934,178 5,972,967 448,712 7.92 (1,322)
________
</TABLE>
(1) Does not include adjustments for net unrealized gains and losses on
securities. See Notes 1 and 3 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 NAIC which
computes the yield on the mean asset values during the year.
The Company's liability for policyholder account balances, amounting to
$3.7 billion and $3.8 billion at December 31, 1996 and 1995, respectively,
relates to interest sensitive life insurance and annuity contracts that are
subject to periodic adjustment of credited interest rates by the Company.
Credited interest rates for these products are determined by management based
on factors including available market interest rates and portfolio rates of
return, and accordingly are sensitive to changes in interest rates earned on
the Company's investments and generally follow the pattern of yields on assets
supporting the related liabilities. Credited rates of interest for these
products are discussed in Management's Discussion and Analysis of "Results of
Operations" herein. Traditional contracts (such as permanent and term
insurance) are not subject to credited interest rate adjustments.
<PAGE>26
As discussed under "Regulation" herein, the Life Insurance Subsidiaries
have complied for statement years 1996, 1995 and 1994 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 Note 15 of Notes to Financial Statements.
Employees and Agents
At December 31, 1996, 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 650 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
United States Life leases a portion of a building at 125 Maiden Lane, New
York, New York 10038 which houses 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 2006. Present annual base rent for all such
companies is $1.7 million, subject to adjustment, tax and escalation clauses.
The lease provides for two consecutive five year renewal options, 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.
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. See Note
12 of Notes to Financial Statements for further information regarding the
Company's lease commitments.
<PAGE>27
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 "Basis of
Presentation" in Note 1 of Notes to Financial Statements), capital, surplus,
reserve requirements and the types of investments which may be made. The NAIC
has recommended certain 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 "Asset / Liability Management; Investments and
Investment Results," the Life Insurance Subsidiaries have satisfactorily
complied with these requirements for statement years 1996, 1995 and 1994. The
risk-based capital requirements 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, 1996, each
of the Life Insurance Subsidiaries had a risk-based capital ratio (as defined)
in excess of the required ratio, as follows:
<TABLE>
<CAPTION>
All Old United USLIFE
American Line States Credit
Life Life Life Life
________ ________ ________ ________
<S> <C> <C> <C> <C>
December 31, 1996
Ratio of Adjusted Capital
to Authorized Control
Level Risk-Based Capital......... 787% 759% 425% 389%
</TABLE>
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 1996. 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 NAIC, 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.
<PAGE>28
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
NAIC 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 Note
18 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
cannot 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
1,700 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 about 35%
of the life insurance in force in the United States and hold a similar
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 18th among the companies listed in surveys contained in the July 8, 1996
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 "Asset /
Liability Management; Investments and Investment Results."
<PAGE>29
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 $600 thousand at December 31, 1996), 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, 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 $4 million at December 31, 1996.
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 $57 million at December 31,
1996. 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 1996, Advisers earned fees of $387 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 Securities 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 by licensed
registered representatives who also sell the life insurance products of the
Life Insurance Subsidiaries.
Approximately 800 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. Equity Sales works with the Life
Insurance Subsidiaries to recruit their agents to become registered
representatives of Equity Sales. Emphasis is placed on the joint marketing of
securities and insurance products.
<PAGE>30
Corporate Services
The "Corporate Services" category includes the operations of USLIFE
Systems Corporation, USLIFE Agency Services, Inc., USLIFE Insurance Services
Corporation, and USLIFE Financial Institution Marketing Group, Inc., 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. USLIFE Financial
Institution Marketing Group, Inc., formed in 1995, coordinates the activities
of all USLIFE Companies in connection with marketing through banks and other
financial institutions.
Employees
USLIFE and its subsidiaries employed approximately 2,100 persons at
December 31, 1996.
Item 2. Properties.
Descriptions of properties of USLIFE and its subsidiaries are set forth in
Item 1.
Item 3. Legal Proceedings.
As previously reported in the Company's Report on Form 10-Q for the
quarter ended September 30, 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 has petitioned the
California Supreme Court for review which if rejected, will result in the case
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.
<PAGE>31
As previously reported in the Company's Report on Form 10-K for the year
ended December 31, 1995, on November 17, 1994, a purported class action (Smith,
et al. v. USLIFE Credit Life Insurance Company, et al.) was filed against three
subsidiaries of the Company 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 second 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. On July 27,
1995, the parties filed a Stipulation of Dismissal of plaintiffs' claims
against USLIFE Credit Life Insurance Company and Security of America Life
Insurance Company, leaving the matter pending against only All American Life
Insurance Company. The parties have agreed to a settlement of all claims
asserted and the settlement was given tentative approval by the Court on
December 20, 1995. Under the terms of the Settlement Agreement, class members
will be notified of their right to file claims for partial premium refunds.
The settlement would resolve all claims against the Company's subsidiaries in
this lawsuit as well as the claims asserted by plaintiffs in two cases
previously reported in the Company's Report on Form 10-Q for the quarter ended
September 30, 1995, which have been terminated without prejudice (Hoban v.
USLIFE Credit Life Insurance Company, All American Life Insurance Company and
Security of America Life Insurance Company, and Grant, et al. v. USLIFE Credit
Life Insurance Company and Security of America Life Insurance Company). A list
of potential class members is being compiled. In the opinion of management,
the ultimate resolution of this action in accordance with the terms of the
Settlement Agreement will not result in a material additional liability on the
part of the Company.
As previously reported in the Company's Report on Form 10-K for the year
ended December 31, 1995, on March 16, 1995, a purported class action (Dana
Galloway v. USLIFE Credit Life Insurance Company) was filed in the Circuit
Court of Fayette County, Alabama. The complaint alleges that defendant, a
subsidiary of the Company, issued insurance contracts in an amount sufficient
to cover the gross amount of indebtedness, rather than the net amount of
indebtedness, contrary to Alabama law. The complaint contains claims of fraud
and breach of contract based on allegations that defendant misrepresented the
amount of insurance needed. Plaintiffs seek compensatory and punitive damages.
In a similar case, McCullar v. Universal Underwriters, the Alabama Supreme
Court recently ruled that as a matter of law, providing gross credit life
insurance coverage was at most, an innocent fraud and would not support an
award of punitive damages. Defendant contends that its sale of insurance
covering the gross amount of indebtedness was done in reliance on regulations
promulgated by the Insurance Department of the State of Alabama and is
aggressively defending the case. No contingent loss has been accrued for this
litigation because the amount of loss, if any, cannot be reasonably estimated.
In March, 1997, a purported 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.
Two purported class action lawsuits have recently been filed against the
Company or its subsidiaries. The first lawsuit filed against the Company and a
subsidiary asserts claims related to sales practices of certain life insurance
products. The second lawsuit filed against two subsidiaries (and 28 other
insurance companies) asserts claims related to policy issuance procedures.
These lawsuits are in their very early stages, it is premature to evaluate
their materiality and these cases are being vigorously defended.
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.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>32
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
USLIFE's Common Stock is traded on the New York, Chicago, Pacific and
London Stock Exchanges. Dividends for the years ended December 31, 1996 and
1995 have been declared and paid quarterly to Common Stockholders at the annual
rates of $.95 and $.91 respectively. As of February 27, 1997 there were
approximately 8,100 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)
1996 1995
____ ____
First quarter...... 29.00 - 33.25 22.58 - 25.58
Second quarter..... 26.88 - 33.25 24.67 - 27.67
Third quarter...... 28.88 - 32.88 26.17 - 31.58
Fourth quarter..... 29.63 - 33.50 26.88 - 32.00
See Note 18 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.
During the quarter ended December 31, 1996, the Company issued 126 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 8. Financial Statements and Supplementary Data.
See separate Index to Financial Statements and Financial Statement
Schedules on page 66. See Note 21 of Notes to Financial Statements as to
condensed quarterly results of operations.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
<PAGE>33
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.
<TABLE>
<CAPTION>
Served as
Name Office Age such since
_____ ______ ____ __________
<S> <C> <C> <C>
Gordon E. Crosby, Jr. Chairman of the Board; Chairman, USLIFE 76 (1)
Corporation Subsidiaries and USLIFE Income
Fund, Inc.
Greer F. Henderson Vice Chairman and Chief Executive Officer; 65 2-28-96
Director, USLIFE Income Fund, Inc.
Christopher S. Ruisi President and Chief Operating 47 2-28-96
Officer; Director
William A. Simpson President and Chief Executive Officer, 58 4-23-96
Old Line Life; Director
James M. Schlomann.. Senior Executive Vice President-Chief 48 11-19-96
Financial Officer
James P. Addiego Executive Vice President-Financial Actuary 55 2-12-97
A. Scott Bushey Executive Vice President-Corporate Planning 66 4-26-88
Arnold A. Dicke Executive Vice President-Product Actuary 55 4-28-92
Wesley E. Forte Executive Vice President-General Counsel 63 5-21-85
John D. Gavrity Executive Vice President-Chief Actuary 56 2-12-97
Michael LeFante Executive Vice President-Administration 42 2-29-96
Neal M. Stern Executive Vice President-Controller 45 2-12-97
Richard G. Hohn..... Senior Vice President - Investor Relations, 60 10-25-94
Secretary and Counsel
Richard J. Chouinard Chief Investment Officer; President and 64 4-26-88
Director, USLIFE Income Fund, Inc.
Frank J. Auriemmo, Jr. Senior Vice President & Treasurer 55 5-3-95
James A. Bickler President and Chief Executive Officer, All 55 5-2-95
American Life
Ralph J. Cargiulo President and Chief Executive Officer, 62 5-18-93
United States Life
Phillip G. Faulkner President and Chief Executive Officer, 60 6-1-74
USLIFE Real Estate Services Corporation
Thomas L. Hendricks President and Chief Executive Officer, 56 4-1-91
USLIFE Systems Corporation and USLIFE
Insurance Services Corporation
William M. Keeler President and Chief Executive Officer, 52 5-1-95
USLIFE Credit Life
__________
</TABLE>
(1) Mr. Crosby has served as Chairman of USLIFE Corporation since March
21, 1967 and as Chief Executive Officer from June 6, 1971 to December 31, 1994.
Mr. Crosby served as President of USLIFE Corporation 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.
All of USLIFE's executive officers devote their full time to the business
of USLIFE or its subsidiaries.
<PAGE>34
Messrs. Bushey, Forte, Chouinard, Faulkner, and Hendricks have served in
their present positions for more than five years.
Mr. Henderson was elected Vice Chairman and Chief Executive Officer in
February 1996. He previously served as Vice Chairman and Chief Financial
Officer since 1983.
Mr. Ruisi was elected President and Chief Operating Officer in February
1996. He previously served as Vice Chairman and Chief Administrative Officer
from May 1993 until that date and has been a Director since November 1992.
Prior to May 1993, he served as Senior Executive Vice President -
Administration since 1990.
Mr. Simpson was elected President and Chief Executive Officer of Old Line
Life in April 1996. He previously served as President and Chief Executive
Officer of USLIFE Corporation from January 1995 until February 1996 and as
President-Life Insurance Division from that date to April 1996, serving 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.
Mr. Schlomann was elected Senior Executive Vice President-Chief Financial
Officer in November 1996. He previously served as Executive Vice President-
Finance from February 1996. Prior to that date, he served as Executive Vice
President-Financial Operations since joining USLIFE Corporation in October
1993. Previously, he served as Senior Vice President and Controller with Frank
B. Hall & Co., Inc. since 1986.
Mr. Addiego was elected Executive Vice President - Financial Actuary in
February 1997. He previously served as Senior Vice President - Financial
Actuary since May 1994, and prior to that date as Vice President - Financial
Actuary since joining USLIFE in September 1992. Prior to joining USLIFE, Mr.
Addiego was Vice President - Actuary with Mutual Benefit Life Insurance Company
since 1990.
Mr. Dicke has served as Executive Vice President - Product Actuary since
April 1992. He previously 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 1988 to 1991.
Mr. Gavrity was elected Executive Vice President - Chief Actuary in
February 1997. He previously served as Executive Vice President - Financial
Actuary since 1991.
Mr. LeFante was elected Executive Vice President - Administration in
February 1996. He previously served as Senior Vice President - Audit and
Control since September 1991. Prior to that date, he served as Vice President
- - Audit and Control since 1990.
Mr. Stern was elected Executive Vice President - Controller in February
1997. He previously served as Senior Vice President - Controller since January
1996, as Senior Vice President Accounting since May 1993 and as Vice President
- - Accounting since 1984.
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 1990.
Mr. Auriemmo has served as Senior Vice President and Treasurer since May
1995. He previously served as Vice President and Treasurer since 1984.
Mr. Bickler has served as President and Chief Executive Officer of All
American Life since May 1995. He previously served as President - Chief
Operating Officer of All American Life since October 1994. Prior to that date,
he served as Executive Vice President - Marketing with that subsidiary since
1990.
<PAGE>35
Mr. Cargiulo has served as President and Chief Executive Officer of United
States Life since May 1993. He previously 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 1990.
Mr. Keeler has served as President and Chief Executive Officer of USLIFE
Credit Life since May 1995. He previously served as Senior Executive Vice
President - Marketing of that subsidiary since May 1994. Prior to joining
USLIFE Credit Life at that time, he served as President - Chief Operating
Officer of Consolidated Insurance Group of America, Inc. from August 1992. He
previously served as Executive Vice President - Chief Operating Officer of
Domestic Insurance Operations and a member of the board of directors of AVCO
Financial Services from 1989 to 1992.
Directors of the Registrant
Information regarding directors of the Registrant is set forth below.
NAME, PRINCIPAL OCCUPATION(S)
DURING THE PAST FIVE YEARS DIRECTOR
AND OTHER INFORMATION, AGE SINCE
________________________________ __________
DR. KENNETH BLACK, JR. 11/30/73
Regents' Professor Emeritus of Insurance and Dean Emeritus,
College of Business Administration, Georgia State
University, Atlanta, GA; Vice Chairman, International
Insurance Society, Inc., Tuscaloosa, AL; Director, SwissRe
America, SwissRe Life Company America, Swiss Reinsurance
America Corporation, NY, NY, reinsurance; Trustee, Scudder
Variable Life Investment Fund, Boston, MA, investment
company. Former Director: Haverty Furniture Companies,
Inc., Atlanta, GA, retail furniture stores; Alexander and
Alexander Services, Inc., insurance broker; Computone
Systems, Inc., Atlanta, GA, computer systems and services;
Paul Manners & Associates, Inc., Atlanta, GA, management
consultants; Cousins Properties, Inc., Atlanta, GA, real
estate developers. Age 72. (1)
<PAGE>36
DR. WILLIAM J. CATACOSINOS 5/17/94
Chairman of the Board and Chief Executive Officer, Long
Island Lighting Company, Hicksville, NY, public utility.
Director: First National Bank of Long Island, Glen Head,
NY, commercial bank; Edison Electric Institute, Washington,
DC, electric utility company trade association; Long Island
Association, Commack, NY, regional chamber of commerce;
Business Alliance for a New, New York Inc., NY, NY. Member:
Advisory Committee, Leadership Huntington, Huntington, NY,
non-profit civic program for existing and emerging leaders;
Engineering 2000 Industrial Advisory Board, Stony Brook,
NY, advancement of SUNY College of Engineering. Age 66. (2)
GORDON E. CROSBY, JR. 11/15/66
Chairman of the Board and Chairman of the Executive
Committee, USLIFE Corporation; Chairman of the Board,
USLIFE Corporation subsidiaries; Chairman of the Board,
USLIFE Income Fund, Inc., NY, NY, diversified, closed-end
management investment company. Member: Tax Data Base
Subcommittee of the Steering Committee on Federal Taxation,
American Council of Life Insurance, Washington, DC.
Formerly, Chairman of the Board, President and Chief
Executive Officer, USLIFE Corporation; Former Member,
National Advisory Board, Chase Manhattan Bank, NY, NY,
commercial bank; Former Director: Thomas J. Lipton, Inc.,
Englewood Cliffs, NJ, manufacturer of food products; The
United Kingdom Fund, Inc., NY, NY, diversified, closed-end
management investment company; Health Insurance Association
of America, Washington, DC; American Council of Life
Insurance, Washington, DC; Life Insurance Council of New
York, Inc., NY, NY. Former Trustee, Pace University, NY,
NY. Age 76. (3)(4)
AUSTIN L. D'ALTON 2/26/91
Retired Executive Vice President, Leland Distributing Co.,
St. Louis, MO, Seiko watches. Formerly: Executive Vice
President, Renfield Corporation, NY, NY, liquor importer;
Vice President, Sheaffer Pen Co., Ft. Madison, IA, writing
instruments; Executive Vice President, the Marschalk
Company, advertising agency, part of the Interpublic Group,
NY, NY; Director, The United States Life Insurance Company
In the City of New York, NY, NY, insurance. Age 70. (2)
<PAGE>37
CHARLES A. DAVIS 5/17/94
Senior Director and Limited Partner, Goldman, Sachs & Co.,
NY, NY, investment banking; Director and Member of the
Executive Committee, Lechters, Inc., Harrison, NJ, retailer
of kitchenware; Director and Chairman of the Audit
Committee, Media General, Inc., Richmond, VA, diversified
communications company; Director, Merchants Bancshares,
Inc., Burlington, VT, retail bank; Trustee: Charles and
Marna Davis Foundation, NY, NY, private charitable
foundation; Boys and Girls Club of Greenwich, CT; Director
and Member of the Executive Committee, Heilig-Meyers,
Richmond, VA, home furnishings retailer; Director and
Member of the Audit Committee, The Progressive Corporation,
Mayfield, OH, insurance; Former General Partner, Goldman,
Sachs & Co. Age 48.
(1)(4)
DR. WILLIAM C. FREUND 3/26/96
New York Stock Exchange Professor of Economics and Director
of the Center for the Study of Equity Markets, Lubin
Graduate School of Business, Pace University, NY, NY; Chief
Economist Emeritus, New York Stock Exchange, Inc., NY, NY.
Formerly: Chief Economist and Director of Investment
Research, The Prudential Insurance Company of America,
Newark, NJ, insurance; Director, Ecogen, Inc., Langhorne,
PA, agricultural biotechnology research and development;
Economic Adviser (pro bono) to four Governors of the State
of New Jersey. Age 70. (1)
JOHN R. GALVIN 2/28/95
Dean, Fletcher School of Law & Diplomacy, Tufts University,
Medford, MA; Director: Raytheon Company, Lexington, MA,
high technology; J & W Seligman & Co., NY, NY, investment
banking; Chairman of the American Council on Germany;
Member of the Board: the Atlantic Council; the Center for
Creative Leadership and the National Committee on United
States-China Relations. Member, Board of Trustees,
Institute for Defense Analyses. Formerly: Distinguished
Policy Analyst, The Mershon Center, The Ohio State
University, Columbus, OH; Four-Star General, U.S. Army and
Supreme Allied Commander, Europe, NATO: Brussels, Belgium
and Commander-in-Chief, United States European Command,
Stuttgart, Germany; U.S. Ambassador and Envoy to assist
with peace negotiations in Bosnia; Olin Distinguished
Professor of National Security, United States Military
Academy, West Point, NY; Former Consultant to several
corporations, including Grumman Aerospace and Thomson CSF.
Age 67. (1)
<PAGE>38
ROBERT E. GRANT 2/28/95
Retired Chairman of the Executive Committee and Former
Director, American Bakeries Company, Chicago, IL, wholesale
baking company; Director, The Northland Company, St. Paul,
MN, casualty insurance. Formerly: President, Grant Capital
Management Corporation, Providence, RI, venture capital;
Group Vice President, Textron, Inc., Providence, RI,
diversified manufacturer; Financial Vice President, Plough,
Inc. (now Schering-Plough, Inc.), Memphis, TN,
pharmaceuticals manufacturer. Former Director: The Outlet
Company, Providence, RI, retailer with broadcast
properties; Pyle-National, Chicago, IL, electronic parts
company; Interstate United, Chicago, IL, food service
company. Consultant to various companies, Lake Placid, NY.
Age 72. (2)
GREER F. HENDERSON 2/22/83
Vice Chairman and Chief Executive Officer, USLIFE
Corporation; Director: The United States Life Insurance
Company In the City of New York, NY, NY, insurance; other
USLIFE Corporation subsidiaries; USLIFE Income Fund, Inc.,
NY, NY, diversified, closed-end management investment
company. Formerly, Vice Chairman and Chief Financial
Officer, USLIFE Corporation. Age 65. (3)
ROBERT H. OSBORNE 2/28/95
Retired President and Chief Executive Officer, Osborne,
Post & Kurtz, Inc., a division of Minet International
Professional Indemnity Group, NY, NY, professional
liability insurance. Formerly: Member of Minet London --
International Management Committee; Senior Vice President,
Minet Professional Indemnity Corporation, London, England,
professional liability insurance. Age 65. (1)
JOHN W. RIEHM 11/22/77
Chairman, R/G Ventures, Inc., Fort Lee, NJ, investments and
venture capital; Retired Director: The United States Life
Insurance Company In the City of New York, NY, NY,
insurance; Unilever United States, Inc., NY, NY,
manufacturer of consumer products; Retired Senior Vice
President-Administration, Secretary and Director, Thomas J.
Lipton, Inc., Englewood Cliffs, NJ, manufacturer of food
products. Age 76. (1)(3)
CHRISTOPHER S. RUISI 11/17/92
President and Chief Operating Officer, USLIFE Corporation;
Executive Vice President-Administration and Director, The
United States Life Insurance Company In the City of New
York, NY, NY, insurance. Formerly: Vice Chairman and Chief
Administrative Officer, USLIFE Corporation; Senior
Executive Vice President-Administration, USLIFE
Corporation; Senior Vice President-Administration, The
United States Life Insurance Company In the City of New
York. Age 47.
<PAGE>39
FRANKLIN R. SAUL 10/23/90
Director and Retired President, Emigrant Savings Bank, NY,
NY, savings bank; Former Director: The United States Life
Insurance Company In the City of New York, NY, NY,
insurance; USLIFE Income Fund, Inc., NY, NY, diversified,
closed-end management investment company. Treasurer and
Chairman of the Investment Committee, The Children's Aid
Society. Age 67. (2)
ROBERT L. SHAFER 3/24/87
Former Vice President-Public Affairs, Pfizer Inc., NY, NY,
manufacturer of pharmaceuticals and chemicals; Director:
Seligman Capital Fund, Inc.; Seligman Cash Management Fund,
Inc.; Seligman Common Stock Fund, Inc.; Seligman Growth
Fund, Inc.; Seligman Income Fund, Inc.; Liberty Cash
Management Fund, Inc.; Seligman Communications and
Information Fund, Inc.; Seligman Frontier Fund, Inc.;
Seligman Tax-Exempt Fund Series, Inc., open-end investment
companies; Tri-Continental Corporation, closed-end
investment fund. Trustee: Seligman California Tax-Exempt
Fund Series; Seligman High Income Fund Series, open-end
investment funds. Member, Nomination Committee and
Executive Committee, The Seligman Funds. Age 64. (2)(5)(3)
DR. WILLIAM G. SHARWELL 5/17/77
Director: American Biogenetic Sciences, Inc., Notre Dame,
IN, genetic engineering and biochemical research and
development; Equitable Capital Partners, L.P. and Equitable
Capital Partners (Retirement Fund) L.P., NY, NY, business
development and investments; TII Industries, Inc.,
Copiague, NY, manufacturer of telecommunications equipment
and specialized electronic devices. Formerly: President,
Chief Executive Officer and Trustee, Pace University, NY,
NY; Senior Vice President, American Telephone & Telegraph
Co., NY, NY, electronic communications; Director, The
United States Life Insurance Company In the City of New
York, NY, NY, insurance. Age 76. (2)(5)(3)
WILLIAM A. SIMPSON 3/28/90
President and Chief Executive Officer, The Old Line Life
Insurance Company of America, Milwaukee, WI, insurance;
Director: The United States Life Insurance Company In the
City of New York, NY, NY, insurance; Life Insurance
Marketing and Research Association, Hartford, CT. Formerly:
President -- Life Insurance Division, USLIFE Corporation;
President and Chief Executive Officer, USLIFE Corporation;
Vice Chairman and Chief Executive Officer, All American
Life Insurance Company, Chicago, IL, insurance; President
and Chief Operating Officer -- Life Insurance Division,
USLIFE Corporation; President, Chief Executive Officer and
Director, All American Life Insurance Company; Director,
USLIFE Income Fund, Inc., NY, NY, diversified, closed-end
management investment company. Age 58.
<PAGE>40
DR. BERYL W. SPRINKEL 1/24/89
Consulting economist, B.W. Sprinkel Economics; Former
Chairman, Council of Economic Advisers and Cabinet Member
under President Ronald W. Reagan; Currently: Board of
Senior Advisors, Novecon Corp., Washington, DC, business
development and investments for Eastern and Central
European countries; Consultant, Financial Investors, Inc.,
NY, NY, registered investment adviser; Board of Directors,
Duff & Phelps Utilities Income Inc., Chicago, IL, closed-
end diversified management investment company. Formerly:
Under Secretary of the Treasury for Monetary Affairs;
Executive Vice President and Economist, Harris Trust and
Savings Bank, Chicago, IL; Chairman, Economic Advisory
Committee of the American Bankers Association; Member of
the Board of Directors, United States Chamber of Commerce;
Member of the Board of Economists, Time Magazine;
Consultant to various government agencies and congressional
committees. Age 73. (2)
(1) Member of the Audit Committee.
(2) Member of the Executive Compensation and Nominating Committee.
(3) Member of the Executive Committee.
(4) Committee Chairman.
(5) Committee Co-Chairman.
Section 16(a) Beneficial Ownership Reporting Compliance
The Corporation notes that James A. Griffin, formerly President and Chief
Executive Officer of The Old Line Life Insurance Company of America, sold
shares of common stock in four separate transactions in 1996 but inadvertently
failed to timely file a report on Form 4 for the transactions as required by
Section 16(a).
Item 11. Executive Compensation.
Directors' Compensation
Directors who are also officers of the Corporation or its subsidiaries
serve on the Board and committees thereof without additional compensation. The
other members of the Corporation's Board of Directors receive $750 for each
Board meeting attended in addition to an annual retainer of $20,000, of which
$5,000 is paid in shares of common stock. Committee members receive $750 for
each committee meeting attended and committee chairmen receive $850 for each
committee meeting attended. Directors may elect to receive all or part of the
cash portion of their compensation in shares of the Corporation's common stock.
Pursuant to the Non-Employee Directors' Stock Option Plan, which was approved
by the shareholders at the 1994 Annual Meeting, each year non-employee
directors are automatically granted options to purchase 3,000 shares of the
Corporation's common stock (as adjusted for the Corporation's 3-for-2 stock
split effective September 1, 1995) at a purchase price equal to 100% of the
stock's fair market value on the grant date. Only non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended ("Code"), may be granted under the Plan. The full
purchase price must be paid in cash when an option is exercised. Options vest
and become exercisable one year after the date of their grant and expire 10
years after such date. An option may not be transferred except by will, the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act or the rules thereunder. All options contain special provisions
limiting the time during which they may be exercised following the death of the
optionee or termination of the optionee's service as a director under certain
circumstances.
<PAGE>41
The Corporation provides each non-employee director with Group Life,
Accidental Death and Dismemberment and Business Travel Accident insurance. The
coverage for each of these benefits is $50,000. The estimated average cost per
director is $1,000 per year. Upon retirement the $50,000 coverage is reduced
to $45,000 and remains at that level for the first year of retirement,
thereafter declining $5,000 a year in the next four years to a minimum of
$25,000 in the fifth retirement year, with said minimum $25,000 coverage to
continue for the director's lifetime. Non-employee directors are also eligible
to participate in the Corporation's Individual Discount Insurance Program, and
in the Corporation's Matching Gift Program, whereby the Corporation matches
gifts by directors to educational institutions and certain charities of up to
$1,000 per year.
Under the Corporation's Non-Employee Directors' Deferred Compensation
Plan, non-employee directors may elect to defer payment of all or part of their
annual compensation until termination of their services as directors. Deferred
amounts currently accrue an interest equivalent calculated at the rate of
1.4375% quarterly, unless the director has elected to have his deferred amounts
treated as though invested in the Company's common stock. Such rate is
reviewed annually by the Board of Directors and is subject to change by a vote
thereof. Participating directors may elect to receive distribution of deferred
fees and accrued interest in one payment or in equal annual installments (not
to exceed ten) after ceasing to be a director of the Corporation. Payment of
any such distribution (either the first installment or the single payment,
and/or share distribution if so elected) is to be made on or about the first
business day of the month following the month in which a director ceases to be
a director of the Corporation with any subsequent installments to be paid on or
about the first business day of each succeeding calendar year.
Amounts deferred under the plan, plus accumulated interest, together with
all shares of common stock deferred thereunder shall be immediately payable to
each participating director (or his beneficiary or estate, as the case may be)
in a single lump sum in the event of a Change in Control, which means (i) a
merger or consolidation to which USLIFE is a party and for which the approval
of any shareholders of USLIFE is required; (ii) certain parties becoming the
beneficial owner of securities of USLIFE representing 25% or more of the
combined voting power of USLIFE's outstanding securities; (iii) a sale or
transfer of substantially all of the assets of USLIFE; (iv) a liquidation or
reorganization of USLIFE; or (v) the occurrence of any Flip Over Transaction or
Event, as defined in the Amended and Restated Rights Agreement (hereinafter,
"Change in Control"). The Corporation, to meet its obligations under the Non-
Employee Directors' Deferred Compensation Plan, including any payments
thereunder resulting from a Change in Control, has entered into a trust
agreement with Chase Manhattan Bank, which has been funded with a standby
letter of credit with a bank, currently in the amount of $3,000,000.
Notwithstanding the establishment of the trust, the Corporation continues to be
primarily liable for the benefits payable under the Non-Employee Directors'
Deferred Compensation Plan and will be obligated to make such payments to the
extent the trust does not.
Under the Retirement Plan for Outside Directors ("Directors' Retirement
Plan") non-employee directors with at least five years of Board service and who
are at least age 65 receive benefits payable on retirement from the Board equal
to 5% of the director's last annual retainer multiplied by the number of years
of the director's Board service (not to exceed 20). Payments are made for a
period of years equal to the number of years of Board service up to a maximum
of ten. Retirement benefits cease upon the death of a director. The
Corporation, to meet its obligations under the Directors' Retirement Plan,
including any increases in accrued benefits resulting from a Change in Control,
has entered into a trust agreement with Chase Manhattan Bank which has been
funded with a standby letter of credit with a bank, currently in the amount of
$1,200,000. Notwithstanding the establishment of the trust, the Corporation
continues to be primarily liable for the benefits payable under the Directors'
Retirement Plan and will be obligated to make such payments to the extent the
trust does not.
<PAGE>42
Executive Compensation and Other Information
The following tables set forth information concerning all compensation
paid to the Chief Executive Officer and each of the four most highly
compensated executive officers of the Corporation during the 1994, 1995 and
1996 fiscal years for services rendered in all capacities to the Corporation
and its subsidiaries. All stock and stock-based figures in the following tables
have been adjusted, where applicable, for the Corporation's 3-for-2 split on
its common stock effective September 1, 1995.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
_______________________________________
Annual Compensation Awards Payouts
_________________________________ _________________________ _________
Restricted Securities
Stock Underlying LTIP All Other
Award(s) Options/ Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($)(1) SARs (#) ($) ($)(2)
_______________________________ ____ __________ _________ ______ ________ _________ ___________
<S> <C> <C> <C> <C> <C> <C> <C>
Gordon E. Crosby, Jr........... 1996 1,070,000 802,500 -- -- 665,859 232,293
Chairman of the Board and 1995 1,070,000 802,500 -- -- 1,166,994 251,733
Chairman of the Executive 1994 1,014,615 1,429,000 (3) -- -- -- 222,148
Committee
Greer F. Henderson............. 1996 685,192 182,700 -- 27,756 408,375 34,194
Vice Chairman and 1995 580,577 244,000 -- -- 643,596 28,146
Chief Executive Officer 1994 502,500 172,000 -- -- -- 22,126
Christopher S. Ruisi........... 1996 597,115 170,100 -- 21,507 302,973 24,879
President and Chief 1995 411,923 180,000 -- -- 367,497 16,585
Operating Officer 1994 336,538 125,200 -- -- -- 12,013
William A. Simpson............. 1996 667,308 163,800 -- -- 465,310 32,469
President and Chief Executive 1995 700,000 280,000 -- -- 433,515 28,746
Officer, The Old Line Life 1994 440,000 168,200 -- -- -- 18,398
Insurance Company of
America
Richard J. Chouinard........... 1996 467,884 120,960 -- 8,750 317,625 25,694
Chief Investment Officer 1995 420,769 178,000 -- -- 404,747 21,959
1994 375,000 145,000 -- -- -- 18,348
</TABLE>
(1) The number and market value of the aggregate restricted stock holdings of
the named executive officers at December 31, 1996 were: Mr. Crosby -- 66,945
shares ($2,225,921); Mr. Henderson -- 48,281 shares ($1,605,343); Mr. Ruisi -
- 33,668 shares ($1,119,461); Mr. Simpson -- 65,308 shares ($2,171,491); and
Mr. Chouinard -- 37,800 shares ($1,256,850).
(2) Amounts listed as All Other Compensation are attributable to: (a)
mandatory distributions under the Corporation's Retirement Plan ("Retirement
Plan"), (b) premiums paid by the Corporation for group life insurance ("life
insurance"), and (c) deferred matching contributions by USLIFE under the
Corporation's Employee Savings and Investment Plan ("SIP") and Supplemental
Employee Savings and Investment Plan ("SSIP"), as follows:
<PAGE>43
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Crosby............... 1996: Retirement Plan, $ 158,227;
life insurance, $ 17,891; SIP, $ 4,500; SSIP, $ 51,675.
1995: Retirement Plan, $ 177,399;
life insurance, $ 19,764, SIP; $ 4,500; SSIP, $ 50,070.
1994: Retirement Plan, $ 151,291;
life insurance, $ 20,019; SIP, $ 4,500; SSIP, $ 46,338.
Mr. Henderson................. 1996: life insurance, $ 6,318; SIP, $ 4,500; SSIP, $ 23,375.
1995: life insurance, $ 6,318; SIP, $ 4,500; SSIP, $ 17,327.
1994: life insurance, $ 6,301; SIP, $ 4,500; SSIP, $ 11,325.
Mr. Ruisi..................... 1996: life insurance, $ 1,566; SIP, $ 4,500; SSIP, $ 18,813.
1995: life insurance, $ 1,371; SIP, $ 4,500; SSIP, $ 10,714.
1994: life insurance, $ 1,017; SIP, $ 4,500; SSIP, $ 6,496.
Mr. Simpson................... 1996: life insurance, $ 4,050; SIP, $ 4,500; SSIP, $ 23,919.
1995: life insurance, $ 4,050; SIP, $ 4,500; SSIP, $ 20,196.
1994: life insurance, $ 3,848; SIP, $ 4,500; SSIP, $ 10,050.
Mr. Chouinard................. 1996: life insurance, $ 6,318; SIP, $ 4,500; SSIP, $ 14,876.
1995: life insurance, $ 6,186; SIP, $ 4,500; SSIP, $ 11,273.
1994: life insurance, $ 5,898; SIP, $ 4,500; SSIP, $ 7,950.
</TABLE>
(3) $680,000 of Mr. Crosby's bonus was paid to him in 1994 pursuant to his
employment contract with the Corporation in respect of his performance in
1993 and the remaining $749,000 was paid to him in 1995 under the
Corporation's Annual Incentive Plan based on the profitability of the
Corporation's core individual lines of business in 1994. For 1995 and all
subsequent years, Mr. Crosby is only eligible to receive a bonus under the
Annual Incentive Plan.
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
______________ ______________
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
_____ _______________ ____________ ______________ ______________
<S> <C> <C> <C> <C>
Gordon E. Crosby, Jr................. 5,157 46,985 228,860 3,347,742
11,250 93,746
Greer F. Henderson................... 33,284 436,153 147,466 2,284,846
32,256 133,572
Christopher S. Ruisi................. 16,779 170,877 0 0
25,258 104,183
William A. Simpson................... 0 0 19,729 226,179
3,188 26,566
Richard J. Chouinard................. 13,500 142,839 8,101 85,461
12,500 67,343
</TABLE>
<PAGE>44
<TABLE>
Long Term Incentive Plans -- Awards in Last Fiscal Year
<CAPTION>
Estimated Future
Payouts under
Non-Stock
Price-Based
Performance or Plans (3)
Number of Other Period Until _______________
Shares, Units or Maturation or
Name Other Rights (#)(1) Payout (2) Target ($ or #)
____ ___________________ __________________ _______________
<S> <C> <C> <C>
Gordon E. Crosby, Jr. .................. 1,719 Shares 3 years #1,719
Greer F. Henderson...................... 6,656 Shares 3 years #6,656
40,000 Units 5 years $503,200 (4)
Christopher S. Ruisi.................... 1,062 Shares 3 years #1,062
2,425 Shares 3 years #2,425
30,000 Units 5 years $377,400 (4)
William A. Simpson...................... -- -- --
Richard J. Chouinard.................... 2,100 Shares 3 years #2,100
2,400 Shares 3 years #2,400
17,500 Units 5 years $220,150 (4)
</TABLE>
(1) The number of Shares represents shares of stock awarded under the USLIFE
Restricted Stock Plan. Shares awarded under the Plan are generally
subject to forfeiture 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 as of
the vesting date of the awards. Threshold earnings per share is defined as
the average of the Company's earnings per share from continuing operations
for the three preceding calendar years. Dividends for each calendar year
paid on the Restricted Shares listed in the table above are held by the
Company on account for the Plan participant until (a) the Executive
Compensation and Nominating Committee certifies the attainment of the
performance goal and (b) the shares begin to vest, and are subject to
forfeiture in the event the performance goal is not met. All shares vest,
regardless of the level of earnings per share, upon a Change in Control or
retirement.
The number of Units represents units awarded under the USLIFE Book Unit
Plan. The value of each unit is the amount by which the book value per
share of the Corporation's common stock as of its award date has increased
or decreased between the award date of a unit and the unit's valuation
date. Book Units have a valuation date of the earlier of: (a) a five-year
period, or (b) the December 31st preceding the occurrence of certain
events, such as retirement or certain circumstances involving a change in
control of the Corporation. Upon the latter occurrence, the value of all
units awarded shall be paid to each plan Participant or his beneficiaries
as soon as practicable thereafter. The Corporation has established a trust
with Chase Manhattan Bank to assist in meeting its obligations under the
Book Unit Plan, which has been funded with a standby letter of credit with
a bank, currently in the amount of $5,000,000. Notwithstanding the
establishment of the trust, the Corporation continues to be primarily
liable for the amounts payable under the Book Unit Plan and will be
obligated to make such payments to the extent the trust does not.
(2) The performance periods for Shares listed in the table above reflect the
aggregate vesting period for each grant. Shares listed in the table above
vest over a three-year period, or upon the occurrence of certain events,
such as retirement or a Change in Control. Individual vesting periods,
and the number of shares vesting at the end of each period, are as
follows:
Mr. Crosby -- 1,719 shares awarded July 1, 1996 vest 1,146 shares on July
1, 1998 and 573 shares on July 1, 1999.
<PAGE>45
Mr. Henderson -- 6,656 shares awarded July 1, 1996 vest 4,437 shares on
July 1, 1998 and 2,219 shares on July 1, 1999.
Mr. Ruisi -- 1,062 shares awarded April 1, 1996 vest 708 shares on April
1, 1998 and 354 shares on April 1, 1999; 2,425 shares awarded July 1, 1996
vest 1,616 shares on July 1, 1998 and 809 shares on July 1, 1999.
Mr. Chouinard -- 2,100 shares awarded July 1, 1996 vest 1,400 shares on
July 1, 1998 and 700 shares on July 1, 1999; 2,400 shares awarded on
October 1, 1996 vest 1,600 shares on October 1, 1998 and 800 shares on
October 1, 1999.
(3) Neither the Book Unit Plan nor the Restricted Stock Plan includes
thresholds or maximum payouts.
(4) Actual target amounts for Units are not determinable until the valuation
date of the awards. The amounts listed are representative amounts based
on the book unit value as of December 31, 1996.
<TABLE>
Option / SAR Grants in Last Fiscal Year
<CAPTION>
Individual Grants
___________________________________________________________________________________________________________
Number of % of Total Exercise Grant
Securities Options/SARS or Base Date
Underlying Granted to Price Present
Options/SARS Employees ($ Per Expiration Value
Name Granted (#) (1)(2) in Fiscal Year Share) Date ($) (3)
_______________________________ __________________ ______________ ________ __________ _________
<S> <C> <C> <C> <C> <C>
Gordon E. Crosby, Jr........... 0 0.0% n/a n/a n/a
Greer F. Henderson............. 20,000 12.9 $29.125 04/23/06 $144,734
7,756 5.0 31.500 06/24/02 62,844
Christopher S. Ruisi........... 3,367 2.2 32.875 01/26/02 25,236
15,000 9.7 29.125 04/23/06 108,551
659 0.4 28.750 05/09/02 4,824
2,481 1.6 30.500 05/24/02 18,951
William A. Simpson............. 0 0.0 n/a n/a n/a
Richard J. Chouinard........... 8,750 5.7 29.125 04/23/06 63,321
</TABLE>
(1) All options listed in the Option/SAR Grants table were granted under the
Corporation's 1991 Stock Option Plan ("Plan"), which provides for the
automatic grant of a reload option to a participant upon exercise of an
option provided the participant uses previously-owned shares to pay for
the option shares. A reload option will be for the number of previously-
owned shares delivered upon exercise of the original option and the option
price of a reload option is the fair market value per share of the common
stock on the exercise date of the original option. Reload options vest
three years from the date of their grant and thereafter are exercisable
for three years.
(2) Options listed in the table above vest as follows:
Greer F. Henderson: 20,000 shares granted 4/23/96 vest 25% per year over
four years on the anniversary of grant date; 7,756 shares granted 6/24/96
vest 100% on third anniversary of grant date.
Christopher S. Ruisi: 3,367 shares granted 1/26/96 vest 100% on third
anniversary of grant date; 15,000 shares granted 4/23/96 vest 25% per year
over four years on anniversary of grant date; 659 shares granted 5/9/96
vest 100% on third anniversary of grant date; 2,481 shares granted 5/24/96
vest 100% on third anniversary of grant date.
Richard J. Chouinard: 8,750 shares granted 4/23/96 vest 25% per year over
four years on the anniversary of grant date.
<PAGE>46
Upon an individual's retirement after age 65, and before age 65 with the
consent of the Compensation Committee, any requirement of additional
service is waived and options can be exercised as though the participant
remained in the employ of the Company.
The Plan also provides that in the event of a Change in Control, as that
term is defined under the section entitled "Directors Compensation," all
outstanding options which have been held by the optionee for at least six
months from the date of their grant shall vest and become immediately
exercisable.
(3) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value realized
by an executive will be at or near the value estimated by the Black-Scholes
model. The estimated values under that model are based on the following
assumptions:
- Stock Price: Grants expiring 4/23/06 - $29.125, grant expiring 6/24/02 -
$31.50, grant expiring 1/26/02 - $32.875, grant expiring 5/9/02 - $28.75,
grant expiring 5/24/02 - $30.50; equal to the stock's fair market value at
date of grant.
- Exercise price: Grants expiring 4/23/06 - $29.125, grant expiring
6/24/02 - $31.50, grant expiring 1/26/02 - $32.875, grant expiring 5/9/02
- $28.75, grant expiring 5/24/02 - $30.50; equal to the stock's fair
market value at date of grant.
- Volatility: 22.48; based on the monthly closing stock prices from
1/31/90 to 12/31/96 (applicable to all grants).
- Risk free interest rate: Grants expiring 4/23/06 - 6.39%, equal to the
asking yield of a U.S. Treasury Strip maturing May, 2002; grant expiring
6/24/02 - 6.79%, equal to the asking yield of a U.S. Treasury Strip
maturing August, 2002; grant expiring 1/26/02 - 5.44%, equal to the asking
yield of a U.S. Treasury Strip maturing February, 2002; grant expiring
5/9/02 - 6.67%, equal to the asking yield of a U.S. Treasury Strip
maturing May, 2002; grant expiring 5/24/02 - 6.48%, equal to the asking
yield of a U.S. Treasury Strip maturing May, 2002;
- Dividend yield: 3.10%; equal to the annualized dividends at the date of
grant divided by the exercise or base price (applicable to all grants).
- No adjustments were made for non-transferability.
- Term: assumes a six year option term (applicable to all grants).
A high dividend yield decreases the Black-Scholes model's estimated value since
high dividends are often accompanied by lower rates of stock price
appreciation. An increase in the term of the option would increase the model's
estimated value since a ten year option is viewed as more valuable than a five
year option. A highly volatile stock would also have a higher Black-Scholes'
value than a more stable stock since the probability of an increase in stock
price would be greater with a volatile stock.
<PAGE>47
Pension Plan Table
The following table sets forth the estimated annual retirement benefits
(exclusive of social security payments) payable to participants in the
specified compensation and years-of-service categories, assuming continued
active service until normal retirement age and assuming that the USLIFE
Corporation Retirement Plan ("Retirement Plan") is in effect at such time. The
Retirement Plan provides retirement benefits based upon the individual
participant's years of service and final average annual earnings as defined by
the Retirement Plan. Final average annual compensation is the average annual
compensation (subject to an earnings limitation imposed by the Internal Revenue
Code of 1986, as amended ("Internal Revenue Code"), currently $160,000) for the
three highest complete consecutive calendar years prior to termination of
employment. Participants in the Retirement Plan will have a fully vested and
nonforfeitable interest in their accrued retirement benefits in the event of a
Change in Control as defined under the section entitled "Directors'
Compensation." The Corporation, to meet its obligations under the Retirement
Plan with respect to any increases in accrued benefits resulting from a Change
in Control, has entered into a trust agreement with Chase Manhattan Bank that
has been funded with a standby letter of credit with a bank.
<TABLE>
<CAPTION>
Years of Service
____________________________________________________________________________________
Remuneration 15 20 25 30 35 40
____________ ________ __________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C> <C>
$ 300,000 $ 82,643 $ 113,940 $ 145,238 $ 176,536 $ 207,833 $ 229,381
500,000 139,643 192,440 245,238 298,036 350,833 387,381
700,000 196,643 270,940 345,238 419,536 493,833 545,381
900,000 253,643 349,440 445,238 541,036 636,833 703,381
1,100,000 310,643 427,940 545,238 662,536 779,833 861,381
1,300,000 367,643 506,440 645,238 784,036 922,833 1,019,381
1,500,000 424,643 584,940 745,238 905,536 1,065,833 1,177,381
1,700,000 481,643 663,440 845,238 1,027,036 1,208,833 1,335,381
1,900,000 538,643 741,940 945,238 1,148,536 1,351,833 1,493,381
2,100,000 595,643 820,440 1,045,238 1,270,036 1,494,833 1,651,381
2,300,000 652,643 898,940 1,145,238 1,391,536 1,637,833 1,809,381
2,500,000 709,643 977,440 1,245,238 1,513,036 1,780,833 1,967,381
2,700,000 766,643 1,055,940 1,345,238 1,634,536 1,923,833 2,125,381
2,900,000 823,643 1,134,440 1,445,238 1,756,036 2,066,833 2,283,381
</TABLE>
The credited years of service for the Chief Executive Officer and each of
the four most highly compensated executive officers of the Corporation are:
G.E. Crosby, Jr., 38; G.F. Henderson, 22; C.S. Ruisi, 23; W.A. Simpson, 7; and
R.J. Chouinard, 23.
The Internal Revenue Code limits the maximum annual retirement benefits
payable to a participant under the Retirement Plan. Currently, the limit is
$120,000 per person. Annual retirement benefits in excess of such limit (and
those attributable to compensation in excess of the annual limit referred to
above) are provided under the USLIFE Corporation Supplemental Retirement Plan
and not under the Retirement Plan. The benefits provided under the
Corporation's Supplemental Retirement Plan are included in the amounts shown in
the above table. Participation in the Supplemental Retirement Plan is limited
to certain highly compensated individuals, including the named executive
officers. The Supplemental Retirement Plan provides that benefits shall fully
vest in the event of the occurrence of a Change in Control. During the 1996
plan year, the Supplemental Retirement Plan was amended among other things, to
change the definition of the term Change in Control appearing therein to that
set forth under the section entitled "Directors' Compensation", to count all
service from a participant's date of hire as credited service, and to provide
for a lump sum settlement provision. The Corporation, to meet its obligations
under the Supplemental Retirement Plan, including any increases in accrued
benefits resulting from a Change in Control, has entered into a trust agreement
with Chase Manhattan Bank which has been funded with standby letters of credit
with a bank, currently in the amount of $66,000,000. In addition, the
Corporation also entered into an Investment Management and Custody Agreement
with The Bank of Boston to provide funds to meet its Supplemental Retirement
Plan obligations. This agreement was also designed to operate as a "rabbi
trust" and contained assets totaling approximately $16,200,000 as of December
31, 1996. Notwithstanding the establishment of the trust, the Corporation
continues to be liable for the benefits payable under the Supplemental
Retirement Plan and will be obligated to make such payments to the extent the
trusts do not.
Compensation Committee Interlocks and Insider Participation
There are none.
<PAGE>48
Employment Agreements, Termination of Employment and Change in Control
Arrangements
On April 1, 1989, Messrs. Crosby, Henderson and Ruisi entered into five-
year employment contracts with the Corporation which provide for automatic one-
year extensions thereafter occurring on each anniversary of the contract unless
one party has given prior notice to the contrary. Effective April 16, 1990, Mr.
Simpson entered into a similar contract with the Corporation. Effective May 1,
1996, the minimum annual compensation as set forth in these employment
contracts was as follows: Mr. Crosby, $1,070,000; Mr. Henderson, $725,000; Mr.
Ruisi, $675,000; and Mr. Simpson, $650,000. In addition, these contracts
provide for the payment of a bonus under the Annual Incentive Plan for Selected
Key Officers of the Corporation ("Annual Incentive Plan") if certain
performance goals based on levels of income attributable to the Corporation's
core life insurance businesses are satisfied, such bonus not to exceed 75% of
base salary in the case of Mr. Crosby nor 40% of such salary in the case of
Messrs. Henderson, Ruisi and Simpson. The term "base salary" is defined in
these contracts as the officer's actual base salary in effect on January 1,
1996.
On November 14, 1995 the Board of Directors approved and the Corporation
entered into Key Executive Employment Protection Agreements ("KEEPAs") with
Messrs. Crosby, Henderson, Ruisi, and Simpson which are in addition to the
employment contracts described above and which become effective in the event of
a Change of Control defined as (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 or (iii) a sale or transfer of substantially all of the
assets of the Corporation. These Key Executive Employment Protection Agreements
provide protection for three years following a Change of Control and a lump sum
severance benefit equal to three times the sum of (i) the executive's then
current annual base salary, and (ii) the greater of (x) the highest annual
bonus payable to the executive with respect to either of the last two fiscal
years of the Corporation ended immediately prior to a Change of Control or (y)
the executive's target bonus for the year in which the Change of Control
occurs, if the executive is terminated without Cause, or terminates his
employment for Good Reason, as set forth in the Agreement. In addition, these
executive officers may voluntarily terminate their employment, within 180 days
of the Change of Control and receive this severance benefit. On November 14,
1995, the Board of Directors also approved and the Corporation entered into a
Key Executive Employment Protection Agreement with Mr. Chouinard which provides
for a lump sum severance benefit equal to twice the sum of this executive's (i)
then current base salary and (ii) highest annual bonus actually paid in respect
of either of the prior two fiscal years of the Corporation ended immediately
prior to a Change of Control, if he is terminated without Cause or terminates
his employment for Good Reason, as set forth in the Agreement, within one year
after the occurrence of a Change of Control. This Key Executive Employment
Protection Agreement with Mr. Chouinard as well as the other Key Executive
Employment Protection Agreements with Messrs. Crosby, Henderson, Ruisi and
Simpson also provide such additional payments as are necessary to compensate
the executive officer for the effects of any Federal excise and related tax
resulting from the severance payments.
In the event of a Change in Control (as defined in the section entitled
"Directors' Compensation"), the employment contracts are suspended and the
rights of the covered executives are determined pursuant to the terms and
conditions of the KEEPAs described above. The Corporation has established a
trust with Chase Manhattan Bank to assist in making any payments due under
KEEPAs, which has been funded with two standby letters of credit with certain
banks, currently in the aggregate amount of $43,800,000. Notwithstanding the
establishment of the trust, the Corporation continues to be primarily liable
for the benefits payable under the KEEPAs and will be obligated to make such
payments to the extent the trust does not.
Under the Deferred Compensation Plan, each of the named executive officers
may elect to defer up to a maximum of 25% of such officers' annual base salary
and all or a portion of any bonus awarded under the Annual Incentive Plan or
book unit award under the Corporation's Book Unit Plan until the date of their
retirement or such earlier date as they may elect. Deferred amounts currently
accrue an interest equivalent calculated at the rate of 1.4375% quarterly.
Such rate is reviewed annually by the Executive Compensation and Nominating
Committee and is subject to change by a vote thereof. Participating officers
may elect to receive distribution of amounts deferred under the Deferred
Compensation Plan plus accumulated interest in a single lump sum payment or in
a number of approximately equal annual installments. Amounts deferred under the
Deferred Compensation Plan plus accumulated interest shall be immediately paid
to each participating officer (or his beneficiary or estate, as the case may
be) in a single lump sum in the event of a Change in Control of the
Corporation, as defined in the section entitled "Directors' Compensation." The
Corporation, to meet its obligations under the Deferred Compensation Plan,
including any payments thereunder resulting from a Change in Control, has
entered into a trust agreement with Chase Manhattan Bank. This trust, commonly
known as a "rabbi trust," may be funded with Corporation funds or a standby
letter of credit with a bank, currently in the amount of $900,000.
Notwithstanding the establishment of the trust, the Corporation continues to be
primarily liable for the benefits payable under the Deferred Compensation Plan
and will be obligated to make such payments to the extent the trust does not.
<PAGE>49
The Corporation's severance allowance policy which applies in cases
involving a company-prompted termination of the Chief Executive Officer and/or
the four most highly compensated executive officers provides for the payment of
an enhanced severance allowance (two weeks pay for every year of service not
exceeding 30 weeks) in connection with any company-prompted termination which
either (i) results from, and occurs within 18 months after, the discontinuance
of division or company operations, the relocation of departments or divisions
of the Corporation or a subsidiary, reductions in the workforce or the sale of
a subsidiary, or, (ii) which occurs within 18 months after the occurrence of
certain circumstances involving a change in control of the Corporation. An
enhanced severance allowance will also be paid in connection with any
termination, whether initiated by the Corporation or the officer, after the
occurrence of such circumstances if (a) the termination occurs within 18 months
after the expiration of the officer's employment contract or Key Executive
Employment Protection Agreement, or, (b) the officer receives any payment in
connection with his employment contract or Key Executive Employment Protection
Agreement. In all cases, severance allowances are in addition to compensation
owed for any unused earned vacation or compensation owed or paid in connection
with an employment contract or Key Executive Employment Protection Agreement
and an officer who receives a payment under any such agreement will also be
paid an enhanced severance allowance. On January 23, 1996 the Corporation's
severance allowance policy was amended so that a change in control of the
Corporation means the occurrence of a Change in Control as defined in the
section entitled "Directors' Compensation".
Under the Corporation's Employee Savings and Investment Plan that was
adopted in 1981 and which now includes 401(k) provisions, the Chief Executive
Officer and the four most highly compensated executive officers as well as all
other Corporation and subsidiary employees may contribute up to 12% of their
annual base salary and any annual incentive bonus to an investment trust and
the Corporation will match up to 3% of such salary and bonus amounts on a pre-
tax basis in the form of USLIFE common stock. The officer contributions vest
immediately while the Corporation's contributions vest 20% for each year of
employment so as to be fully vested after five years of employment; provided,
however, that the Corporation's contributions will be 100% vested in the event
of a Change in Control as defined in the section entitled "Directors'
Compensation".
On January 1, 1993, the Corporation adopted the Supplemental Employee
Savings and Investment Plan in order to enable officers of the Corporation who
were participating in the Corporation's Employee Savings and Investment Plan
but were not receiving the full company matching contribution under such plan
due to the $150,000 earnings limitation imposed by Section 401(a)(17) of the
Code to receive the full matching contribution. The Supplemental Employee
Savings and Investment Plan which is in the form of an unfunded deferred
compensation plan is intended to make up for the loss in company matching
contributions under the Corporation's Employee Savings and Investment Plan to
officers earning in excess of $150,000 a year because of said limitation and
provides that such contributions fully vest after the occurrence of certain
events involving a Change in Control. The Corporation, to meet its obligations
under the Supplemental Employee Savings and Investment Plan, including any
increases in accrued benefits resulting from a Change in Control, entered into
a trust agreement with Chemical Bank, (now known as Chase Manhattan Bank) on
March 1, 1994. Upon a Change in Control this trust, commonly known as a "rabbi
trust", may be funded with Corporation funds or a standby letter of credit with
a bank, currently in the amount of $2,100,000. Notwithstanding the
establishment of the trust, the Corporation continues to be liable for the
benefits payable under the Supplemental Employee Savings and Investment Plan
and will be obligated to make such payments to the extent the trust does not.
On January 23, 1996 the trust agreement was amended to change the definition of
the term Change in Control therein to that set forth in the section entitled
"Directors' Compensation".
<PAGE>50
USLIFE has adopted the above-described change of control provisions and
policies to minimize the uncertainty created by a change of control of the
Corporation which might result in the loss or distraction of its executive
officers to the detriment of the Corporation and its shareholders. The Board of
Directors considers the avoidance of such loss and distraction to be essential
to protecting and enhancing the best interests of USLIFE and its shareholders.
The Board also believes that when a change of control is perceived as imminent,
or is occurring, the Corporation should be able to receive and rely on
disinterested service from senior executive officers regarding the best
interests of the Corporation and its shareholders, without concern that such
officers might be distracted or concerned by the personal uncertainties and
risks created by the perception of an imminent or occurring change of control.
In addition, the Board believes that it is consistent with USLIFE's employment
practices and policies and in the best interests of the Corporation and its
shareholders to treat fairly its employees whose employment terminates in
connection with or following a change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Management
Directors and officers, as a group, beneficially owned 2,212,356 shares or
6.4% of USLIFE common stock and USLIFE preferred stock on February 27, 1997.
This number includes options to purchase 571,952 shares currently exercisable
or exercisable within 60 days. This number also includes 288,208 shares of
common stock granted under the Corporation's Restricted Stock Plan, which
shares have not vested under the terms of the Plan as of February 27, 1997. No
director, officer or nominee has the right to acquire beneficial ownership of
USLIFE stock except as described in the Summary Compensation Table, the Option
/ SAR Grants Table, the Aggregated Option / SAR Exercises Table and the section
entitled "Directors' Compensation" under Item 11.
The following table sets forth information relating to any class of
USLIFE's voting securities beneficially owned by the Chief Executive Officer,
each of the four most highly compensated executive officers of the Corporation
and all directors and nominees as of February 27, 1997.
<TABLE>
<CAPTION>
AMOUNT
AND
NATURE
OF
TITLE OF NAME OF BENEFICIAL PERCENT
CLASS BENEFICIAL OWNER OWNERSHIP* OF CLASS**
_______________ _________________ __________ ___________
<S> <C> <C> <C>
Common Stock Gordon E. Crosby, Jr. 767,175 (1) 2.22%
Chairman of the Board and Chairman of
the Executive Committee
Greer F. Henderson 339,549 (2)
Vice Chairman and Chief Executive
Officer and Director
Christopher S. Ruisi 112,938 (3)
President and Chief Operating Officer
and Director
William A. Simpson 170,406 (4)
President and Chief Executive Officer,
The Old Line Life Insurance
Company of America, and Director
<PAGE>51
Richard J. Chouinard 207,040 (5)
Chief Investment Officer
Kenneth Black, Jr. 11,204 (6)
Director
William J. Catacosinos 7,061 (7)
Director
Austin L. D'Alton 13,047 (8)
Director
Charles A. Davis 8,905 (9)
Director
William C. Freund 2,563
Director
John R. Galvin 3,498 (10)
Director
Robert E. Grant 5,357 (11)
Director
Robert H. Osborne 3,357 (12)
Director
John W. Riehm 14,529 (13)
Director
Franklin R. Saul 9,991 (14)
Director
Robert L. Shafer 9,097 (15)
Director
William G. Sharwell 15,461 (16)
Director
Beryl W. Sprinkel 11,056 (17)
Director
</TABLE>
* Unless otherwise indicated, each executive officer and director has direct
ownership of, and sole voting and investment power with respect to, the
shares indicated.
** With the exception of Mr. Crosby, no percentages of share ownership are
indicated since the number of shares owned by individual executive
officers and directors constitutes less than 1% of the class outstanding.
<PAGE>52
(1) Mr. Crosby's share holdings include options currently exercisable or
exercisable within 60 days under the Corporation's Stock Option Plans to
purchase 228,860 shares. Also included are 66,945 shares awarded pursuant
to the USLIFE Restricted Stock Plan which have not yet vested pursuant to
the terms of the Plan, 22,327 shares held pursuant to the Corporation's
Employee Savings and Investment Plan, 437,971 shares held by the Gordon E.
Crosby, Jr. Trust of which Mr. Crosby is a trustee and 5,170 shares held
by Mr. Crosby's wife, as to which shares he disclaims beneficial
ownership.
(2) Mr. Henderson's share holdings include options currently exercisable or
exercisable within 60 days under the Corporation's Stock Option Plans to
purchase 152,466 shares. Also included are 48,281 shares awarded pursuant
to the USLIFE Restricted Stock Plan which have not yet vested pursuant to
the terms of the Plan and 26,250 shares held pursuant to the Corporation's
Employee Savings and Investment Plan.
(3) Mr. Ruisi's share holdings include options currently exercisable or
exercisable within 60 days under the Corporation's Stock Option Plans to
purchase 3,750 shares. Also included are 39,156 shares awarded pursuant to
the USLIFE Restricted Stock Plan which have not yet vested pursuant to the
terms of the Plan, 5,382 shares held pursuant to the Corporation's
Employee Savings and Investment Plan, and 2,028 shares held by Mr. Ruisi
as custodian for his minor children, as to which shares he disclaims
beneficial ownership.
(4) Mr. Simpson's share holdings include options currently exercisable or
exercisable within 60 days under the Corporation's Stock Option Plans to
purchase 19,729 shares. Also included are 65,308 shares awarded pursuant
to the USLIFE Restricted Stock Plan which have not yet vested pursuant to
the terms of the Plan, 2,962 shares held pursuant to the Corporation's
Employee Savings and Investment Plan, and 79,442 shares held by the
Simpson Family Trust of which Mr. Simpson is a trustee.
(5) Mr. Chouinard's share holdings include options currently exercisable or
exercisable within 60 days under the Corporation's Stock Option Plans to
purchase 2,187 shares. Also included are 40,800 shares awarded pursuant to
the USLIFE Restricted Stock Plan which have not yet vested pursuant to the
terms of the Plan, and 5,622 shares held pursuant to the Corporation's
Employee Savings and Investment Plan.
(6) Dr. Black's share holdings include 3,404 stock units which were credited
pursuant to the Non-Employee Directors' Deferred Compensation Plan and
which do not confer any voting rights. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 6,000 shares and 1,801 shares held by the
Kenneth & Mabel Black Revocable Trust of which Dr. Black is a trustee.
(7) Dr. Catacosinos' share holdings include 1,061 stock units which were
credited pursuant to the Directors' Deferred Compensation Plan and which
do not confer any voting rights. Also included are options exercisable
within 60 days under the Corporation's Non-Employee Directors' Stock
Option Plan to purchase 6,000 shares.
(8) Mr. D'Alton's share holdings include 401 shares held by his wife, as to
which shares he disclaims beneficial ownership, and 3,777 stock units
which were credited pursuant to the Non-Employee Directors' Deferred
Compensation Plan and which do not confer any voting rights. Also included
are options exercisable within 60 days under the Corporation's Non-
Employee Directors' Stock Option Plan to purchase 6,000 shares.
(9) Mr. Davis' share holdings include 2,905 stock units which were credited
pursuant to the Non-Employee Directors' Deferred Compensation Plan and
which do not confer any voting rights. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 6,000 shares.
(10) General Galvin's share holdings include 498 stock units which were
credited pursuant to the Non-Employee Directors' Deferred Compensation
Plan and which do not confer any voting rights. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 3,000 shares.
<PAGE>53
(11) Mr. Grant's share holdings include 500 shares held by his wife, as to
which shares he disclaims beneficial ownership and 357 stock units which
were credited pursuant to the Non-Employee Directors' Deferred
Compensation Plan and which do not confer any voting rights. Also included
are options exercisable within 60 days under the Corporation's Non-
Employee Directors' Stock Option Plan to purchase 3,000 shares.
(12) Mr. Osborne's share holdings include 357 stock units which were credited
pursuant to the Non-Employee Directors' Deferred Compensation Plan and
which do not confer any voting rights. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 3,000 shares.
(13) Mr. Riehm's share holdings include options exercisable within 60 days
under the Corporation's Non-Employee Directors' Stock Option Plan to
purchase 6,000 shares.
(14) Mr. Saul's share holdings include 2,437 shares held by his wife, as to
which shares he disclaims beneficial ownership. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 6,000 shares.
(15) Mr. Shafer's share holdings include 747 stock units which were credited
pursuant to the Non-Employee Directors' Deferred Compensation Plan and
which do not confer any voting rights. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 6,000 shares.
(16) Dr. Sharwell's share holdings include 7,337 stock units which were
credited pursuant to the Non-Employee Directors' Deferred Compensation
Plan and which do not confer any voting rights. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 6,000 shares.
(17) Dr. Sprinkel's share holdings include 3,909 stock units which were
credited pursuant to the Non-Employee Directors' Deferred Compensation
Plan and which do not confer any voting rights. Also included are options
exercisable within 60 days under the Corporation's Non-Employee Directors'
Stock Option Plan to purchase 6,000 shares and 955 shares held by the
Beryl W. Sprinkel Trust of which Dr. Sprinkel is a trustee.
Security Ownership of Certain Beneficial Holders
The following table sets forth information relating to 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 February 5, 1997, except that
the securities holdings for Sanford C. Bernstein & Co., Inc. are as of January
30, 1997.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
TITLE OF NAME AND ADDRESS BENEFICIAL PERCENT
CLASS OF BENEFICIAL OWNER OWNERSHIP* OF CLASS
_________ ____________________ ____________________ ________
<S> <C> <C> <C>
Common Stock Sanford C. Bernstein & Co., Inc. 3,128,883 shares(1) 9.05%
One State Street Plaza
New York, NY 10004-1545
Series A Convertible Lorelle Shumway Parsons 518 shares 12.24%
Preferred Stock 80 Saxton Avenue
Sayville, NY 11782-2603
</TABLE>
<PAGE>54
* Unless otherwise indicated, each beneficial owner, to the best knowledge
of the Corporation, has direct ownership of, and sole voting and
investment power with respect to, the shares indicated.
(1) Sanford C. Bernstein & Co., Inc. has sole voting power with respect to
1,456,059 of these shares and its clients have appointed an independent
voting agent with instructions to vote 494,421 of these shares in the same
manner as Sanford C. Bernstein & Co., Inc. Sanford C. Bernstein & Co.,
Inc. exercises sole investment power with respect to all 3,128,883 shares.
USLIFE knows of no other person owning beneficially 5% or more of any class of
its outstanding voting securities.
Item 13. Certain Relationships and Related Transactions.
In 1986, a condominium apartment was purchased in an arm's length
transaction from The Landings, Ltd. by John W. Riehm, a director of the
Corporation. The purchase price of $233,780 was financed by a $200,000 first
mortgage loan from USLIFE Realty Corporation bearing an 8.5% interest rate for
the initial 12-month period of the mortgage, adjusted annually thereafter to a
rate equal to the previous 12-month average of the United States 1-year
Treasury bill rate plus 2.5%. As of February 1, 1997, the balance of the loan
was $176,744, with an annual rate of interest of 8.375%. The purchase of this
unit and its financing were on the same terms as were offered to all eligible
buyers at the time of purchase.
Goldman, Sachs & Co. serves as a financial advisor to USLIFE. Charles A.
Davis, a director of the Corporation, is a senior director and limited partner
of Goldman, Sachs & Co.
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 66.
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 the 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>55
(a) 3. Exhibits.
3 (i) (a) - Restated Certificate of Incorporation, as amended,
incorporated herein by reference to USLIFE's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996,
SEC File No. 1-5683.
(i) (b) - Certificate of Amendment of the Certificate of
Incorporation, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, SEC File No. 1-5683.
(ii) - By-laws, as amended and restated, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, SEC File No. 1-5683.
4 (i) - See Exhibit 3(i).
(ii) - Indenture dated as of October 1, 1982 (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, as amended February 13, 1997, between
USLIFE Corporation and Chase Manhattan Bank, formerly known
as 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 and USLIFE's Report on Form 8-K
dated February 21, 1997, SEC File No. 1-5683.
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, SEC File No. 1-
5683.
* (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, SEC File No. 1-5683.
* (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, SEC File No. 1-
5683.
* (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, SEC File No. 1-
5683.
<PAGE>56
* (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, SEC File No. 1-
5683.
* (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, SEC File
No. 1-5683.
* (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, SEC File No. 1-
5683.
* (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,
SEC File No. 1-5683.
* (ix) - Eighth Amendment dated as of May 1, 1995 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, 1995, SEC File No. 1-
5683.
* (x) - Ninth Amendment dated as of May 1, 1996 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, 1996, SEC File No. 1-
5683.
* (xi) - 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, SEC File No. 1-
5683.
* (xii) - 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, SEC File No. 1-5683.
* (xiii) - 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, SEC File No. 1-
5683.
* (xiv) - 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, SEC File No. 1-
5683.
* (xv) - 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, SEC File No. 1-
5683.
<PAGE>57
* (xvi) - 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, SEC File No. 1-
5683.
* (xvii) - 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, SEC File No. 1-
5683.
* (xviii) - Seventh Amendment dated as of May 1, 1995 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, 1995,
SEC File No. 1-5683.
* (xix) - Eighth Amendment dated as of May 1, 1996 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, 1996, SEC File No. 1-
5683.
* (xx) - 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, SEC File No. 1-
5683.
* (xxi) - 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, SEC File No. 1-5683.
* (xxii) - 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, SEC File No. 1-
5683.
* (xxiii) - 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, SEC File No. 1-
5683.
* (xxiv) - 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, SEC File No. 1-
5683.
* (xxv) - 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, SEC File No. 1-
5683.
* (xxvi) - 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, SEC File No. 1-
5683.
<PAGE>58
* (xxvii) - Seventh Amendment dated as of May 1, 1995 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, 1995,
SEC File No. 1-5683.
* (xxviii) - Eighth Amendment dated as of May 1, 1996 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, 1996,
SEC File No. 1-5683.
* (xxix) - 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, SEC File No. 1-
5683.
* (xxx) - 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, SEC File No. 1-5683.
* (xxxi) - 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, SEC File No. 1-
5683.
* (xxxii) - 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, SEC File No. 1-5683.
* (xxxiii) - 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, SEC File No. 1-
5683.
* (xxxiv) - 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, SEC File No. 1-
5683.
* (xxxv) - Fifth Amendment dated as of January 1, 1995 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, 1995,
SEC File No. 1-5683.
* (xxxvi) - Sixth Amendment dated as of May 1, 1995 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, 1995, SEC File No. 1-
5683.
* (xxxvii) - Seventh Amendment dated as of May 1, 1996 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, 1996,
SEC File No. 1-5683.
<PAGE>59
* (xxxviii) - Form of Key Executive Employment Protection Agreement
dated November 14, 1995, between USLIFE Corporation and
Gordon E. Crosby, Jr., Greer F. Henderson, Christopher S.
Ruisi, and William A. Simpson, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1995, SEC File No. 1-5683.
* (xxxix) - Form of Employment and Key Executive Employment
Protection Agreement dated November 14, 1995, between
USLIFE Corporation and Wesley E. Forte, A. Scott Bushey,
Arnold A. Dicke, James M. Schlomann and John D. Gavrity,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1995, SEC File
No. 1-5683.
* (xl) - Form of Key Executive Employment Protection Agreement
dated November 14, 1995, between USLIFE Corporation and
Frank J. Auriemmo, Jr., Richard J. Chouinard, and Richard
G. Hohn, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1995, SEC File No. 1-5683.
* (xli) - Form of Key Executive Employment Protection Agreement
dated November 27, 1995, between All American Life
Insurance Company and James A. Bickler, USLIFE Real Estate
Services Corporation and Philip G. Faulkner, USLIFE
Insurance Services Corporation and Thomas L. Hendricks,
USLIFE Credit Life Insurance Company and William M. Keeler,
and dated January 24, 1996, between The United States Life
Insurance Company In the City of New York and Ralph J.
Cargiulo, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1995, SEC File No. 1-5683.
* (xlii) - Employment and Key Executive Employment Protection
Agreement dated May 1, 1996 between USLIFE Corporation and
Michael LeFante, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, SEC File No. 1-5683.
* (xliii) - Key Executive Employment Protection Agreement dated
May 23, 1996 between USLIFE Corporation and Ronald M.
Chernoff, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, SEC File No. 1-5683.
* (xliv) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, 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, 1996, SEC File No. 1-5683.
* (xlv) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and Arnold A. Dicke, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, SEC File No. 1-5683.
* (xlvi) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, 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, 1996, SEC File No. 1-5683.
* (xlvii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, 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, 1996, SEC File No. 1-5683.
<PAGE>60
* (xlviii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and James M. Schlomann, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, SEC File No. 1-5683.
(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, SEC File No. 1-5683.
(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, SEC File No. 1-5683.
(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, SEC File No. 1-5683.
(lii) - Third Amendment to Lease dated May 10, 1989 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 Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, SEC File No. 1-5683.
(liii) - Fourth Amendment to Lease dated April 14, 1995 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 Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, SEC File No. 1-5683.
(liv) - Fifth Amendment to Lease dated as of December 26, 1995
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, 1995, SEC File No. 1-5683.
(lv) - Sixth Amendment to Lease dated as of December 26, 1995
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, 1995, SEC File No. 1-5683.
(lvi) - 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, SEC File No. 1-5683.
<PAGE>61
(lvii) - 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, SEC File No. 1-5683.
* (lviii) - 1981 Stock Option Plan, as amended, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, SEC File No.
1-5683.
* (lix) - USLIFE Corporation Non-Employee Directors' Deferred
Compensation Plan, as amended January 28, 1997.
* (lx) - USLIFE Corporation Book Unit Plan, as amended
effective September 1, 1995, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, SEC File No. 1-5683.
* (lxi) - USLIFE Corporation Retirement Plan for Outside
Directors (as amended January 23, 1996), incorporated
herein by reference to USLIFE's Annual Report on Form 10-K
for the year ended December 31, 1995, SEC File No. 1-5683.
* (lxii) - USLIFE Corporation Restricted Stock Plan, as amended
effective February 13, 1997.
* (lxiii) - USLIFE Corporation 1991 Stock Option Plan, as amended
effective September 1, 1995, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, SEC File No. 1-5683.
* (lxiv) - 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.
* (lxv) - Annual Incentive Plan, as amended October 25, 1994,
for Selected Key Officers of USLIFE Corporation and its
Subsidiaries, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1994, SEC File No. 1-5683.
* (lxvi) - USLIFE Corporation Executive Officer Deferred
Compensation Plan (as amended January 23, 1996),
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1995, SEC File
No. 1-5683.
* (lxvii) - USLIFE Corporation 1993 Long-Term Incentive Award
Guidelines, as amended, incorporated herein by reference to
USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1994, SEC File No. 1-5683.
* (lxviii) - USLIFE Corporation Supplemental Employee Savings and
Investment Plan (as amended January 23, 1996), incorporated
herein by reference to USLIFE's Annual Report on Form 10-K
for the year ended December 31, 1995, SEC File No. 1-5683.
* (lxix) - USLIFE Corporation Supplemental Retirement Plan (as
amended October 22, 1996).
<PAGE>62
* (lxx) - Trust Agreement made as of November 22, 1996, among
USLIFE Corporation, Chase Manhattan Bank and KPMG Peat
Marwick LLP (as independent contractor) establishing a
trust to fund certain employment contracts, the Book Unit
Plan and the USLIFE Corporation Deferred Compensation Plan.
* (lxxi) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation,
Chemical Bank (now known as Chase Manhattan Bank) and KPMG
Peat Marwick LLP (as independent contractor) establishing a
trust to fund the USLIFE Corporation Supplemental
Retirement Plan and the Supplemental Employee Savings and
Investment Plan, incorporated herein by reference to
USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1995, SEC File No. 1-5683.
* (lxxii) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation,
Chemical Bank (now known as Chase Manhattan Bank) and KPMG
Peat Marwick LLP (as independent contractor) establishing a
trust to fund the USLIFE Corporation Retirement Plan for
Outside Directors and the USLIFE Corporation Deferred
Compensation Plan for Outside Directors, incorporated
herein by reference to USLIFE's Annual Report on Form 10-K
for the year ended December 31, 1995, SEC File No. 1-5683.
* (lxxiii) - Form of Employment and Key Executive Employment
Protection Agreement dated March 14, 1997 between USLIFE
Corporation and James Addiego and Neal M. Stern.
(lxxiv) - Agreement and Plan of Merger by and among American
General Corporation, Texas Stars Corporation and USLIFE
Corporation, dated as of February 12, 1997, incorporated
herein by reference to USLIFE's Report on Form 8-K dated
February 21, 1997, SEC File No. 1-5683.
12 - Computations of ratios of earnings to fixed charges.
21 - List of Subsidiaries, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1995, SEC File No. 1-5683.
23 - Consent of Independent Certified Public Accountants
(see page 63).
27 - Financial Data Schedule (electronic filing only).
99 (i) - Annual Report on Form 11-K of USLIFE Corporation
Employee Savings and Investment Plan for the plan year
ended December 31, 1996 (to be filed within 180 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, now known as Chase Manhattan
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, SEC File No. 1-5683.
99 (iii) - Amendment, effective January 23, 1996, to the Trust
Agreement made as of December 6,1990 among USLIFE
Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank, now known as Chase Manhattan
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, 1995, SEC File No. 1-5683.
* Indicates a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No Current Report on Form 8-K has been filed for the last quarter of the
fiscal year ended December 31, 1996.
<PAGE>63
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. 33-8489, 33-58944, 33-29934, 33-17126, 33-67344 and 33-9159 on Form S-3
relative to Debt Securities and common stock; 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 12, 1997, relating to the consolidated
balance sheets of USLIFE Corporation and subsidiaries as of December 31, 1996
and 1995 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,
1996 which report appears in this December 31, 1996 Annual Report on Form 10-K
of USLIFE Corporation. Our report refers to a change in accounting 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".
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
March 18, 1997
345 Park Avenue
New York, New York
<PAGE>64
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 18, 1997
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
____________________________________
(Gordon E. Crosby, Jr.)
Vice Chairman of the
Board and Chief Executive Officer
/s/ Greer F. Henderson (Principal Executive Officer)
____________________________________
(Greer F. Henderson)
President and Chief Operating
/s/ Christopher S. Ruisi Officer; Director
____________________________________
(Christopher S. Ruisi)
March 18, 1997
President and Chief Executive
Officer, The Old Line Life Insurance
/s/ William A. Simpson Company of America; Director
____________________________________
(William A. Simpson)
Senior Executive Vice President -
Chief Financial Officer (Principal
/s/ James M. Schlomann Financial Officer)
____________________________________
(James M. Schlomann)
Executive Vice President -
Controller (Principal
/s/ Neal M. Stern Accounting Officer)
____________________________________
(Neal M. Stern)
</TABLE>
<PAGE>65
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
/s/ Kenneth Black, Jr. Director
____________________________________
(Kenneth Black, Jr.)
/s/ William J. Catacosinos Director
____________________________________
(William J. Catacosinos)
/s/ Austin L. D'Alton Director
____________________________________
(Austin L. D'Alton)
Director
____________________________________
(Charles A. Davis)
/s/ William C. Freund Director
____________________________________
(William C. Freund)
/s/ John R. Galvin Director
____________________________________
(John R. Galvin)
/s/ Robert E. Grant Director
____________________________________
(Robert E. Grant)
/s/ Robert H. Osborne Director
____________________________________
(Robert H. Osborne)
/s/ John W. Riehm Director
____________________________________
(John W. Riehm) March 18, 1997
/s/ Franklin R. Saul Director
____________________________________
(Franklin R. Saul)
/s/ Robert L. Shafer Director
____________________________________
(Robert L. Shafer)
Director
____________________________________
(William G. Sharwell)
/s/ Beryl W. Sprinkel Director
____________________________________
(Beryl W. Sprinkel)
</TABLE>
<PAGE>66
<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, 1996....................... 2
Independent Auditors' Report............................................................. 67
Consolidated balance sheets as of December 31, 1996 and 1995............................. 68
Statements of consolidated income for the three years ended December 31, 1996............ 70
Statements of consolidated cash flows for the three years ended December 31, 1996........ 71
Statements of consolidated Equity Capital for the three years ended December 31, 1996.... 72
Notes to financial
statements............................................................................... 73
Schedule of the Registrant:
(A) Schedule II - Condensed Financial Information of Registrant
(incorporated in Note 20 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 3 of Notes to Financial Statements)....................
(B) Schedule III - Supplementary insurance information (incorporated in Note 19 of
Notes to Financial Statements)..............................................
(C) Schedule IV - Reinsurance (incorporated in Note 15 of Notes to Financial
Statements)..................................................................
</TABLE>
<PAGE>67
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, 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."
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
February 12, 1997
345 Park Avenue
New York, New York
<PAGE>68
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
<CAPTION>
December 31
____________________________
1996 1995
____ ____
(Amounts in Thousands)
<S> <C> <C>
Cash:
On hand and in demand accounts..................... $ 24,462 $ 63,914
Restricted funds held in escrow, etc. ............. 2,512 1,821
__________ __________
26,974 65,735
__________ __________
Invested assets:
Fixed maturities available for sale, at fair value
(adjusted cost, 1996: $5,674,366; 1995:
$5,559,322)................................... 5,864,687 6,006,864
Equity securities, at fair value (adjusted cost,
1996: $3,997; 1995: $4,918)...................... 3,786 4,717
Mortgage loans..................................... 258,723 296,045
Real estate........................................ 27,948 29,205
Policy loans....................................... 283,442 282,179
Other long-term investments........................ 18,720 6,241
Short-term investments............................. 105,129 69,560
__________ __________
Total invested assets................. 6,562,435 6,694,811
__________ __________
Total cash and invested assets........ 6,589,409 6,760,546
__________ __________
Other amounts receivable:
Due and uncollected premiums....................... 67,465 63,679
Investment income due and accrued.................. 127,063 126,116
Reinsurance receivables - paid claims.............. 8,534 8,568
Other reinsurance recoverable amounts.............. 144,818 138,146
Other receivables.................................. 57,185 37,146
__________ __________
405,065 373,655
Less: Reserve for uncollectible receivables........ 4,956 23,062
__________ __________
Net other amounts receivable...... 400,109 350,593
__________ __________
Property and equipment:
Land............................................... 50 50
Buildings and improvements......................... 5,248 5,166
Furniture and equipment............................ 38,956 43,974
__________ __________
44,254 49,190
Less: Accumulated depreciation..................... 34,266 38,695
__________ __________
Net property and equipment........ 9,988 10,495
__________ __________
Deferred policy acquisition costs...................... 785,128 718,439
Other assets........................................... 94,952 90,431
__________ __________
Total assets...................... $7,879,586 $7,930,504
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>69
<TABLE>
<CAPTION>
LIABILITIES AND EQUITY CAPITAL
December 31
___________________________
1996 1995
____ ____
LIABILITIES (Amounts in Thousands)
<S> <C> <C>
Future policy benefits:
Life....................................................... $1,403,968 $1,324,395
Accident and health........................................ 337,602 314,032
Policyholder account balances.................................. 3,709,191 3,787,546
Supplementary contracts without life contingencies............. 46,888 28,775
Policyholder dividend accumulations............................ 20,606 20,419
Policy and contract claims..................................... 196,022 177,739
Other policy and contract liabilities.......................... 36,812 32,435
Current federal income taxes................................... (5,438) (3,820)
Deferred federal income taxes.................................. 64,126 122,776
Notes payable.................................................. 268,600 222,900
Long-term debt................................................. 299,635 349,493
Accounts payable and accrued liabilities....................... 272,811 239,642
__________ __________
Total liabilities......................... 6,650,823 6,616,332
__________ __________
Deferred income................................................ 5,341 5,918
__________ __________
Contingent liabilities and commitments (Note 13)
NON-REDEEMABLE PREFERRED STOCKS, COMMON STOCK, and
OTHER SHAREHOLDERS' EQUITY
Preferred stock-Series A (authorized and outstanding, 1996:
4,332 shares; 1995: 4,480 shares)............................. 433 448
Preferred stock-Series B (authorized and outstanding, 1996:
1,689 shares; 1995: 1,852 shares)............................. 84 93
Preferred stock-undesignated................................... - -
Common stock (1996: authorized, 120,000,000 shares, issued,
57,472,605 shares; 1995: authorized, 60,000,000 shares,
issued 57,468,882 shares)..................................... 57,473 57,469
Paid-in surplus................................................ 120,702 117,512
Net unrealized gains on securities............................. 68,109 195,450
Retained earnings.............................................. 1,327,748 1,284,306
__________ __________
1,574,549 1,655,278
Less: Treasury stock, at cost.................................. 346,117 339,662
Deferred compensation.................................... 5,010 7,362
__________ __________
Total non-redeemable preferred stocks, common stock,
and other shareholders' equity ("Equity Capital")...... 1,223,422 1,308,254
__________ __________
Total liabilities and Equity Capital.................. $7,879,586 $7,930,504
========== ==========
</TABLE>
<PAGE>70
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Three Years Ended December 31, 1996
<CAPTION>
Year Ended December 31
__________________________________________
1996 1995 1994
____ ____ ____
(Amounts in Thousands except Per Share Data)
<S> <C> <C> <C>
Premiums:
Life insurance.................................................... $ 582,235 $ 541,266 $ 494,908
Accident and health............................................... 456,002 449,555 470,570
Consideration for supplementary contracts and immediate annuities..... 18,999 33,445 29,786
Other consideration................................................... 203,118 186,399 166,063
Net investment income................................................. 501,692 488,479 461,494
Realized gains (losses) on investments................................ (4,993) 6,388 (1,380)
Other income.......................................................... 49,056 34,020 29,746
__________ __________ __________
Total income............................................. 1,806,109 1,739,552 1,651,187
__________ __________ __________
Death and other benefits.............................................. 773,827 715,648 727,611
Increase in future policy benefits.................................... 95,637 112,104 79,268
Interest credited to policyholder account balances.................... 200,388 209,788 194,036
Amortization of deferred policy acquisition costs..................... 206,570 162,038 159,702
Commissions........................................................... 170,832 153,491 138,373
General expenses...................................................... 165,225 147,306 133,225
Insurance taxes and licenses.......................................... 34,887 35,966 32,697
Interest on notes payable............................................. 17,394 15,303 11,239
Interest on long term debt............................................ 21,914 24,396 24,388
Dividends to policyholders............................................ 3,630 3,587 3,651
__________ __________ __________
Total benefits and expenses.............................. 1,690,304 1,579,627 1,504,190
__________ __________ __________
Income from operations before related income taxes................ 115,805 159,925 146,997
Federal income taxes:
Current........................................................... 29,859 49,449 63,649
Deferred.......................................................... 9,919 5,062 (12,837)
__________ __________ __________
39,778 54,511 50,812
__________ __________ __________
Net income............................................................ $ 76,027 $ 105,414 $ 96,185
========== ========== ==========
Net income per share.................................................. $ 2.18 $ 3.03 $ 2.79
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>71
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Three Years Ended December 31, 1996
<CAPTION>
Year Ended December 31
___________________________________________
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 76,027 $ 105,414 $ 96,185
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in liability for future policy benefits........ 94,121 102,348 73,048
Interest credited to policyholder account balances.... 200,388 209,788 194,036
Amounts assessed from policyholder account balances... (178,405) (162,999) (144,726)
Additions to deferred policy acquisition costs........ (219,439) (229,079) (205,099)
Amortization of deferred policy acquisition costs..... 206,570 162,038 159,702
Additions to deferred charges......................... (8,564) (5,865) (6,876)
Deferred federal income taxes (net)................... 9,919 5,063 (12,836)
Depreciation and amortization......................... 12,254 13,705 12,706
Change in amounts due policyholders................... 43,595 38,531 5,212
Change in other liabilities and amounts receivable.... (2,898) (37,529) 6,799
Net realized capital losses (gains)................... 4,993 (6,388) 1,380
Change in restricted cash............................. (691) (168) (613)
Other, net............................................ (6,387) (14,518) (1,057)
__________ __________ __________
Total adjustments................................ 155,456 74,927 81,676
__________ __________ __________
Net cash provided by operating activities......... 231,483 180,341 177,861
__________ __________ __________
Cash flows from investing activities:
Change in policy loans.................................. (1,263) 909 (998)
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................... 890,081 437,683 1,071,521
Equity securities................................... 719 988 1,602
Mortgage loan principal receipts.................... 49,289 50,380 47,587
Real estate......................................... 10,784 10,517 14,371
Other long term investments......................... 2,520 1,814 266
Expenditures for property and equipment................. (4,369) (4,797) (4,608)
Cost of investments purchased:
Fixed maturities.................................... (1,007,302) (798,527) (1,507,082)
Mortgage loans...................................... (18,743) (24,652) (17,769)
Real estate......................................... (1,760) (743) (1,487)
Other long term investments......................... (14,978) (36) (131)
Net (purchases) or sales of short term investments.. (35,569) 59,775 (61,211)
Other, net............................................ 1,366 2,363 1,193
__________ __________ __________
Net cash used in investing activities............. (129,225) (264,326) (456,746)
__________ __________ __________
Cash flows from financing activities:
Borrowings under credit facility...................... - - 150,000
Increase (decrease) in notes payable.................. 45,700 26,400 (19,000)
Dividends to shareholders............................. (32,585) (31,186) (28,801)
Acquisition of treasury stock......................... (9,679) (5,334) (7,230)
Repayment of long term debt........................... (50,000) - (100,000)
Change in policyholder account balances............... (100,819) 98,858 269,465
Other, net............................................ 5,673 7,283 6,008
__________ __________ __________
Net cash provided (used) by financing activities.. (141,710) 96,021 270,442
__________ __________ __________
Net change in cash.................................. (39,452) 12,036 (8,443)
Cash at beginning of year............................. 63,914 51,878 60,321
__________ __________ __________
Cash at end of year................................... $ 24,462 $ 63,914 $ 51,878
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>72
<TABLE>
USLIFE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EQUITY CAPITAL
For the Three Years Ended December 31, 1996
<CAPTION>
Year Ended December 31
______________________________________________________________________
Number of Shares Amounts
__________________________________ _________________________________
1996 1995 1994 1996 1995 1994
____ ____ ____ ____ ____ ____
(Number of Shares and Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-redeemable preferred stocks, common stock, and
other shareholders' equity:
Preferred stock, Series A:
Issued, beginning of year....................... 4 5 5 $ 448 $ 465 $ 482
Shares converted................................ - (1) - (15) (17) (17)
_______ _______ _______ __________ __________ __________
Issued, end of year............................. 4 4 5 433 448 465
======= ======= ======= ========== ========== ==========
Preferred stock, Series B:
Issued, beginning of year....................... 2 2 2 93 100 103
Shares converted................................ - - - (9) (7) (3)
_______ _______ _______ __________ __________ __________
Issued, end of year............................. 2 2 2 84 93 100
======= ======= ======= ========== ========== ==========
Common stock:
Issued, beginning of year....................... 57,469 38,310 38,309 57,469 38,310 38,309
Options exercised and preferred shares converted 4 3 1 4 3 1
Three-for-two split of common stock............. - 19,156 - - 19,156 -
_______ _______ _______ __________ __________ __________
Issued, end of year............................. 57,473 57,469 38,310 57,473 57,469 38,310
======= ======= ======= ========== ========== ==========
Paid-in surplus:
Balance, beginning of year...................... 117,512 131,823 125,268
Options, conversions, and restricted stock plan. 251 231 358
Utilization of treasury shares.................. 2,939 4,659 6,197
Three-for-two split of common stock............. - (19,201) -
__________ __________ __________
Balance, end of year............................ 120,702 117,512 131,823
========== ========== ==========
Net unrealized gains (losses) on securities:
Balance, beginning of year...................... 195,450 (156,248) (29)
Impact of adoption of SFAS 115, January 1, 1994. - - 171,436
Net change during year.......................... (127,341) 351,698 (327,655)
__________ __________ __________
Balance, end of year............................ 68,109 195,450 (156,248)
========== ========== ==========
Retained earnings:
Balance, beginning of year...................... 1,284,306 1,210,078 1,142,694
Net income...................................... 76,027 105,414 96,185
Cash dividends declared:
Preferred stock:
Series A ($4.50 per share)......... (20) (20) (22)
Series B ($5.00 per share)......... (9) (9) (10)
Common stock ($.95, $.91 and $.84 per
share in 1996, 1995, and 1994,
respectively.......................... (32,556) (31,157) (28,769)
__________ __________ __________
Balance, end of year............................ 1,327,748 1,284,306 1,210,078
========== ========== ==========
Treasury stock:
Balance, beginning of year...................... 22,998 15,493 15,650 339,662 339,972 339,825
Three-for-two split of common stock............. - 7,747 - - - -
Shares acquired during year .................... 329 208 219 9,679 5,334 7,230
Shares utilized for employee, officer
and director benefit plans and
dividend reinvestment plan..................... (257) (450) (376) (3,224) (5,644) (7,083)
_______ _______ _______ __________ __________ __________
Balance, end of year............................ 23,070 22,998 15,493 346,117 339,662 339,972
======= ======= ======= ========== ========== ==========
Deferred compensation:
Balance, beginning of year...................... 7,362 6,668 973
Deferred compensation arising from awards under
restricted stock plan during year, less
forfeitures.................................... 863 3,318 7,736
Amortization.................................... (3,215) (2,624) (2,041)
__________ __________ __________
Balance, end of year............................ 5,010 7,362 6,668
========== ========== ==========
Total non-redeemable preferred stocks, common stock,
and other shareholders' equity ("Equity Capital")...... $1,223,422 $1,308,254 $ 877,888
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>73
USLIFE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") and include the accounts
of USLIFE Corporation and all of its subsidiaries (the "Company"). GAAP
differs from the statutory accounting practices used by the Company's operating
subsidiaries to report to insurance regulatory authorities. All subsidiaries
are wholly owned. All material intercompany accounts and transactions have
been eliminated.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Changes in Accounting and Reporting Standards
Effective as of January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, entitled "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that long-lived assets such as property and equipment, and
certain intangible assets, be reviewed for impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable. When
recoverability standards specified in the Statement are not met, a writedown of
the covered assets may be required. The Statement does not apply to various
classes of assets including the Company's investment securities and deferred
policy acquisition costs, which will continue to be evaluated based on
previously established accounting standards. The adoption of this Statement
did not have a material impact on the Company's reported financial position or
results of operations.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123") entitled
"Accounting for Stock-Based Compensation." The Statement introduced standards
for computing the "fair value" of stock options using a mathematical model, as
well as expense charges over the related service period based on this
calculated value. However, as permitted by SFAS 123, the Company has elected
to continue to use the "intrinsic value" approach specified by Accounting
Principles Board Opinion No. 25 ("APB 25"), the previous accounting standard,
for financial statement purposes. Under APB 25 standards, stock options such
as those granted by the Company (with option price set equal to market price at
date of grant) do not require income statement charges, although the
outstanding options are considered in earnings per share calculations. As a
result, the implementation of SFAS 123 had no impact on the Company's reported
financial position or results of operation. In accordance with SFAS 123,
supplemental disclosure is provided to show the pro-forma effect of using the
new measurement standards.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 ("SFAS 114"), entitled "Accounting by Creditors
for Impairment of a Loan," as modified by SFAS 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." These
Statements require a writedown, as defined by SFAS 114, for certain mortgage
loans and similar investments where impairment results in a change in repayment
terms. The adoption of these Statements did not have a material impact on the
Company's reported financial position or results of operations.
<PAGE>74
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 fair
value in the Consolidated Balance Sheets, 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 fair value pursuant to
previous accounting standards. The Company's equity securities portfolio had
been carried at fair value in accordance with previous accounting standards
prior to the adoption of SFAS 115 and continues to be carried at fair value as
required by the Statement.
As required by SFAS 115, the net impact of the initial adjustment to fair
value of these securities, less corresponding adjustments to deferred policy
acquisition costs (required where fair 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 (including
the required adjustments of deferred policy acquisition costs, certain
policyholder liabilities, and deferred income taxes) 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 fair
value of the Company's investments in securities are presented in Note 3.
<PAGE>75
Future Accounting Changes
In June 1996, FASB issued Statement of Financial Accounting Standards No.
125, entitled "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." The Statement establishes standards for
determining whether transfers of "financial assets" such as securities are to
be accounted for as sales, or alternatively, as secured borrowings. The
Statement, which applies to transactions in 1997 and thereafter, is not
expected to have a material impact on the Company's financial position or
results of operations.
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. Fair values for
fixed maturities and equity securities are based on quoted market prices or
dealer quotes.
Mortgage loans are carried at the aggregate of unpaid principal balances,
net of unamortized discount and applicable reserves and writedowns. Mortgage
loans are considered impaired when it is determined to be probable that the
Company will not collect all amounts due under the contractual terms of the
loan agreement, and are evaluated based on present value of estimated future
cash flows discounted at the contractual rate of the loan. Mortgage loans that
are more than 60 days delinquent or in foreclosure are carried at the lower of
amortized cost or estimated net realizable value of the underlying collateral.
Real estate is carried at the lower of depreciated cost or estimated net
realizable value. Depreciation is calculated on a straight line basis with
useful lives varying based on the type of building.
Policy loans 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
their 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. Short term investments are carried at
cost, which approximates fair value.
Realized gains and losses are included in net income based on specific
identification of investments disposed.
Securities with a reduction in value determined to be other than temporary
are adjusted to net realizable value through income statement charges which are
included in realized gains or losses. Adjustments to cost for mortgage loans,
real estate, and other investments with other than temporary reductions in
value are also recognized by income statement charges included in realized
gains and losses.
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 and credits to Equity Capital.
<PAGE>76
Life Insurance
Traditional Individual Contracts; Group and Credit Insurance
The Company's traditional individual life insurance products, including
term insurance, whole life insurance, and immediate annuities, generally
provide fixed premiums and guaranteed benefits. Premiums on these policies, as
well as group and credit life and health insurance contracts, are recognized
when due. Appropriate provisions are made for future policy benefits or
unearned premiums. Policy claims are charged to expense when incurred.
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 6-
3/4 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
Universal life insurance policies permit the policyholder to vary the
timing and amount of premium payments, within contractual limits. 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. These charges are subject to periodic adjustment by the
Company. 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.
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 most policies other than universal life-type contracts, 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 contracts, 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. Additionally, as
required by SFAS 115, the carrying amount of these costs is adjusted at each
balance sheet date as if the unrealized gains or losses on securities
associated with these contracts had been realized and included in the gross
profits used to determine required amortization.
Deferred policy acquisition costs are reviewed at least annually to
determine that the unamortized portion of such costs does not exceed
recoverable amounts, after considering anticipated investment income.
<PAGE>77
Participating Policies
Participating policies subject to profit limitations approximate 7.2
percent of the individual life insurance in force at December 31, 1996 and 12.1
percent of individual life insurance premium income in 1996. 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 7.3 percent of the total individual
life insurance in force at December 31, 1996 and 12.2 percent of individual
life insurance premium income in 1996. 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.
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.
Reinsurance
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.
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, 1996.
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.
<PAGE>78
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
Consolidated Income 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. Fully diluted income per share is
the same as income per share data indicated.
Standby and Permanent Financing Commitments
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 at December 31, 1996.
Note 2. Nature of Operations and Segment Information
USLIFE Corporation is a life insurance-based holding company whose
principal subsidiaries engage in the life insurance business. USLIFE operates
nationwide through four life insurance companies and offers a broad portfolio
of individual life insurance and annuity policies as well as group and credit
insurance. The individual life and annuity product line, which includes
universal life, term life, whole life, and deferred annuity products as well as
income attributed to capital and surplus, accounts for the major portion of
USLIFE's pre-tax income and total revenues. These individual products are sold
primarily through independent general agencies who are compensated on a
commission basis and usually sell products of other companies in addition to
those of USLIFE. Other product lines include group life and health insurance,
sold principally through employers and associations, and credit life and
disability products which are sold primarily to customers of financial
institutions through USLIFE's credit insurance group.
The only reportable industry segment of the Company is "Life Insurance"
and the related information is presented below:
<PAGE>79
<TABLE>
<CAPTION>
Year Ended December 31, 1996
_______________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,785,331 $ 20,778 $1,806,109
Intersegment transfers......................... (6,715) 6,715 0
__________ __________ __________
Total income..................... $1,778,616 $ 27,493 $1,806,109
========== ========== ==========
Income before taxes............................ $ 181,325 $ (65,520) $ 115,805
========== ========== ==========
Identifiable assets at December 31............. $7,749,784 $ 129,802 $7,879,586
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
_____________________________________________
Non-reportable
segments and
Life consolidating
Insurance adjustments Consolidated
___________ ______________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Total income from unaffiliated sources......... $1,723,971 $ 15,581 $1,739,552
Intersegment transfers......................... (6,452) 6,452 0
__________ __________ __________
Total income...................... $1,717,519 $ 22,033 $1,739,552
========== ========== ==========
Income before taxes............................ $ 221,455 $ (61,530) $ 159,925
========== ========== ==========
Identifiable assets at December 31............. $7,798,309 $ 132,195 $7,930,504
========== ========== ==========
</TABLE>
<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>
<PAGE>80
Supplementary information for product groups included in the Life
Insurance industry segment is presented below:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
_____________________ _____________________ _____________________
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>
Product line results,
before capital gains and losses:
Individual life and annuity (a).. $ 965,386 $213,721 $ 926,087 $206,113 $ 849,841 $186,274
Credit life...................... 92,365 1,997 82,772 907 74,316 1,136
Employer/association group life.. 128,313 1,446 125,059 5,119 123,886 5,238
Other life ...................... 87,982 2,345 88,038 656 78,007 281
Credit disability................ 97,164 7,612 89,780 6,883 80,146 5,230
Employer/association group health 367,146 (42,348) 364,380 (5,197) 403,718 5,639
Other health and disability...... 45,175 1,467 34,990 561 21,376 948
__________ ________ __________ ________ __________ ________
1,783,531 186,240 1,711,106 215,042 1,631,290 204,746
Capital gains (losses)............. (4,915) (4,915) 6,413 6,413 (1,322) (1,322)
__________ ________ __________ ________ __________ ________
$1,778,616 $181,325 $1,717,519 $221,455 $1,629,968 $203,424
========== ======== ========== ======== ========== ========
</TABLE>
(a) Includes income from capital and surplus.
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.
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 disclosed that persistency on this business
deteriorated to a point that a revision in assumptions was necessary.
During the second quarter of 1996, the Company recorded a pre-tax charge
of $49.6 million to recognize revised assumptions reflecting current experience
on its traditional indemnity group major medical and related products,
including group life insurance cases sold in tandem with these major medical
policies. The charge includes a $37.2 million writedown of deferred policy
acquisition costs on this block of business and a related adjustment of the
reserve for policy benefits amounting to $12.4 million which is included in
"Benefits to policyholders and beneficiaries" in the accompanying statements of
consolidated income. The charge, on an after-tax basis, amounts to $32.3
million or 93 cents per share. The impact of this charge on 1996 pre-tax
results of the Employer / association group life and Employer / association
group health lines was $6.2 million and $43.4 million, respectively.
<PAGE>81
Note 3. Investments
The investments of the Company at December 31, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
Fair Carrying
Type of Investment Cost Value Value
__________________ ____ __________ ____________
(Amounts in Thousands)
<S> <C> <C> <C>
Bonds and notes:
United States Government and government
agencies and authorities........................... $ 86,233 $ 87,976 $ 87,976
States, municipalities and political sub-divisions.. 32,954 33,548 33,548
Foreign government.................................. 199,055 209,465 209,465
Public utilities.................................... 1,385,643 1,422,944 1,422,944
All other corporate................................. 3,965,265 4,101,289 4,101,289
__________ __________ __________
Total bonds and notes............................. 5,669,150 5,855,222 5,855,222
Redeemable preferred stocks.............................. 9,140 9,465 9,465
__________ __________ __________
Total fixed maturities............................ 5,678,290 5,864,687 5,864,687
__________ __________ __________
Common stocks............................................ 357 76 76
Non-redeemable preferred stocks.......................... 3,871 3,710 3,710
__________ __________ __________
Total equity securities........................... 4,228 3,786 3,786
__________ __________ __________
Total fixed maturities and equity securities...... 5,682,518 $5,868,473 5,868,473
__________ ========== __________
Mortgage loans on real estate............................ 262,607 258,723
__________ __________
Real estate:
Investment properties............................... 6,678 5,145
Acquired in satisfaction of debt.................... 32,512 22,803
__________ __________
Total real estate................................. 39,190 27,948
__________ __________
Policy loans............................................. 283,442 283,442
Other long term investments.............................. 17,798 18,720
Short term investments................................... 105,129 105,129
__________ __________
Total invested assets............................. 6,390,684 6,562,435
Cash on hand and in demand accounts...................... 24,462 24,462
Restricted funds held in escrow, etc. ................... 2,512 2,512
__________ __________
Total cash and invested assets.................... $6,417,658 $6,589,409
========== ==========
</TABLE>
Based on balance sheet carrying value, assets categorized as "non-income
producing" for the 12 months ended December 31, 1996 included in fixed
maturities, mortgage loans, real estate investment properties, and real estate
acquired in satisfaction of debt amounted to $3.8 million, $300 thousand, $1.7
million and $1.5 million, respectively.
At December 31, 1996, consolidated invested assets included approximately
$237 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 fair value
of approximately $238 million at December 31, 1996 and, based on fair value,
represent approximately 3% of consolidated total assets at that date.
Approximately $4 million (at fair value) of these investments (adjusted cost,
$3 million) represented securities in default at December 31, 1996. Also at
December 31, 1996, the carrying value of mortgage loans included in
consolidated total assets which were 60 days or more delinquent or in
foreclosure was approximately $700 thousand, and the book value of property
acquired through foreclosure of mortgage loans was approximately $23 million.
<PAGE>82
The adjusted cost and fair value of the Company's consolidated investments
in equity securities and debt securities at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
December 31, 1996
___________________________________________________
Gross Gross
Adjusted Unrealized Unrealized Fair
Cost Gains Losses Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Equity securities.................................. $ 3,997 $ 149 $ 360 $ 3,786
========== ======== ======== ==========
Debt securities available for sale:
U. S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 86,233 $ 2,974 $ 1,231 $ 87,976
Obligations of states and political subdivisions.. 32,954 869 275 33,548
Debt securities issued by foreign governments..... 199,055 11,524 1,114 209,465
Corporate securities.............................. 5,452,113 213,358 36,109 5,629,362
Redeemable preferred stocks....................... 9,140 368 43 9,465
__________ ________ ________ __________
Total fixed maturities and short term investments
("debt securities").......................... $5,779,495 $229,093 $ 38,772 $5,969,816
========== ======== ======== ==========
Amounts shown in balance sheet:
Fixed maturities.................................. $5,864,687
Short term investments............................ 105,129
__________
Total............................................. $5,969,816
==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
___________________________________________________
Gross Gross
Adjusted Unrealized Unrealized Fair
Cost Gains Losses Value
__________ __________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Equity securities.................................. $ 4,918 $ 366 $ 567 $ 4,717
========== ======== ======== ==========
Debt securities available for sale:
U. S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 123,061 $ 6,446 $ 309 $ 129,198
Obligations of states and political subdivisions.. 31,187 1,464 57 32,594
Debt securities issued by foreign governments..... 205,946 21,307 11 227,242
Corporate securities.............................. 5,246,738 427,001 9,616 5,664,123
Redeemable preferred stocks....................... 21,950 1,329 12 23,267
__________ ________ ________ __________
Total fixed maturities and short term investments
("debt securities").......................... $5,628,882 $457,547 $ 10,005 $6,076,424
========== ======== ======== ==========
Amounts shown in balance sheet:
Fixed maturities.................................. $6,006,864
Short term investments............................ 69,560
__________
Total............................................. $6,076,424
==========
</TABLE>
<PAGE>83
Equity Capital at December 31, 1996 and 1995 includes net unrealized gains
and losses on available-for-sale securities as follows:
December 31
________________________
1996 1995
__________ __________
(Amounts in Thousands)
Fixed maturities:
Fair value........................................ $5,864,687 $6,006,864
Adjusted cost..................................... 5,674,366 5,559,322
__________ __________
Unrealized gain ............................... 190,321 447,542
__________ __________
Equity securities:
Fair value........................................ 3,786 4,717
Adjusted cost..................................... 3,997 4,918
__________ __________
Unrealized loss................................ (211) (201)
__________ __________
Unrealized gain on securities in
retirement trust.................................. 922 --
__________ __________
Total unrealized gain............................... 191,032 447,341
__________ __________
Related adjustments:
Deferred policy acquisition costs................. (82,106) (135,926)
Policyholder liabilities.......................... (4,140) (10,721)
Deferred federal income tax liability............. (36,677) (105,244)
__________ __________
(122,923) (251,891)
__________ __________
Net unrealized gain on securities included in
Equity Capital.................................... $ 68,109 $ 195,450
========== ==========
Changes in net unrealized gains and losses on available-for-sale
securities were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
__________ __________ __________
(Amounts in Thousands)
<S> <C> <C> <C>
Unrealized gain (loss) on
available for sale securities:
Beginning of year............................... $ 447,341 $ (253,124) $ 380,314
End of year..................................... 191,032 447,341 (253,124)
__________ __________ __________
Net change..................................... (256,309) 700,465 (633,438)
Change in related adjustments
of balance sheet accounts:
Deferred policy acquisition costs............... 53,820 (141,747) 105,710
Policyholder liabilities........................ 6,581 (17,642) 23,627
Deferred federal income taxes................... 68,567 (189,378) 176,446
__________ __________ __________
Change in net adjustment to
Equity Capital during the year.................... (127,341) 351,698 (327,655)
Impact of implementation of
SFAS 115 on January 1, 1994....................... -- -- 171,436
Net unrealized gain (loss) on
securities at beginning of year................... 195,450 (156,248) (29)
__________ __________ __________
Net unrealized gain (loss) on
securities at end of year......................... $ 68,109 $ 195,450 $ (156,248)
========== ========== ==========
</TABLE>
<PAGE>84
Realized gains and losses on the Company's consolidated investments in
fixed maturities and equity securities for the three years ended December 31,
1996 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>
1996................... $ (7,526) $ (202) $ (1,258) $ (2,264) $ (4,206)
========= ========= ======== ======== =========
1995................... 3,629 262 (380) 1,495 2,776
========= ========= ======== ======== =========
1994................... (630) (923) 784 (818) (1,519)
========= ========= ======== ======== =========
</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.
Pre-tax realized gains and losses on fixed maturities and equity
securities are reconciled to consolidated realized gains and losses on
investments as follows:
1996 1995 1994
__________ __________ __________
(Amounts in Thousands)
Realized gains (losses):
Fixed maturities.............. $ (7,526) $ 3,629 $ (630)
Equity securities............. (202) 262 (923)
__________ __________ __________
(7,728) 3,891 (1,553)
Real estate, mortgage loans,
and other investments....... 2,735 2,497 173
__________ __________ __________
Total......................... $ (4,993) $ 6,388 $ (1,380)
========== ========== ==========
The adjusted cost and fair value of debt securities at December 31, 1996,
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.
December 31, 1996
______________________
Adjusted Fair
Cost Value
__________ __________
(Amounts in Thousands)
Due in one year or less...................... $ 245,215 $ 247,436
Due after one year through five years........ 1,320,522 1,359,472
Due after five years through ten years....... 1,462,075 1,509,899
Due after ten years.......................... 2,751,683 2,853,009
__________ __________
Total debt securities........................ $5,779,495 $5,969,816
========== ==========
Proceeds from disposals of investments in debt securities (excluding short
term investments) during 1996, 1995 and 1994 were $890.1 million, $437.7
million, and $1.072 billion, respectively. During 1996, gross gains of $11.2
million and gross losses of $18.7 million were realized on such disposals.
During 1995, gross gains of $12.5 million and gross losses of $8.9 million were
realized on such disposals. During 1994, gross gains of $31.3 million and
gross losses of $31.9 million were realized on such disposals.
<PAGE>85
The details of consolidated net investment income for the three years
ended December 31, 1996 follow:
<TABLE>
<CAPTION>
Year Ended December 31
_____________________________
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Investment income:
Fixed maturities and short term investments... $455,289 $438,948 $408,127
Mortgage loans................................ 26,515 31,208 33,905
Policy loans.................................. 18,977 18,939 18,875
Real estate and other investments............. 8,933 8,303 10,467
________ ________ ________
Total investment income................... 509,714 497,398 471,374
Investment expenses....................... 8,022 8,919 9,880
________ ________ ________
Net investment income................... $501,692 $488,479 $461,494
======== ======== ========
</TABLE>
Note 4. Deferred Policy Acquisition Costs
Details with respect to consolidated deferred policy acquisition costs for
the three years ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
___________________________________
1996 1995 1994
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Excluding adjustment relating to net
unrealized gains and losses on
securities ("SFAS 115 adjustment"):
Balance at January 1......................... $ 854,365 $787,324 $ 741,927
Additions................................. 219,439 229,079 205,099
Amortization.............................. (206,570) (162,038) (159,702)
_________ ________ _________
Balance at December 31,
before SFAS 115 adjustment.................. 867,234 854,365 787,324
SFAS 115 adjustment............................ (82,106) (135,926) 5,821
_________ ________ _________
Balance at December 31, as
reported in consolidated
balance sheet................................ $ 785,128 $718,439 $ 793,145
========= ======== =========
</TABLE>
<PAGE>86
The balance of deferred policy acquisition costs is allocated to product
lines as follows:
<TABLE>
<CAPTION>
December 31
___________________________________
1996 1995 1994
_________ __________ _________
(Amounts in Thousands)
<S> <C> <C> <C>
Individual life and annuities:
Before SFAS 115 adjustment................ $ 700,443 $ 670,778 $ 615,420
SFAS 115 adjustment....................... (82,106) (135,926) 5,821
_________ _________ _________
618,337 534,852 621,241
Credit life................................. 51,488 46,262 41,570
Employer/association group life............. 14,275 20,165 22,410
Other life.................................. 5,742 5,665 5,132
_________ _________ _________
689,842 606,944 690,353
_________ _________ _________
Credit disability........................... 61,128 57,450 52,553
Employer/association group health........... 31,371 51,495 48,637
Other health and disability................. 2,787 2,550 1,602
_________ _________ _________
95,286 111,495 102,792
_________ _________ _________
Total................................... $ 785,128 $ 718,439 $ 793,145
========= ========= =========
</TABLE>
Note 5. Notes Payable
Notes payable at December 31, 1996 includes $150 million borrowings under
a revolving credit agreement between the Company and The Bank of New York (as
agent) which expires in April 1999, at which time all borrowings thereunder
must mature. 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 $53 million with 4
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.
<PAGE>87
The following table sets forth summary information with respect to short
term borrowings of the Company for the three years ended December 31, 1996.
<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>
1996............... $ 268,600 5.9% $ 330,400 $ 279,762 6.1%
============ ==== ============ =========== ====
1995............... $ 222,900 6.3% $ 253,000 $ 225,954 6.3%
============ ==== ============ =========== ====
1994............... $ 196,500 6.2% $ 283,500 $ 205,115 5.5%
============ ==== ============ =========== ====
</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.
Note 6. Long Term Debt
At December 31, 1996 and 1995, consolidated long term debt consists of the
following:
<TABLE>
<CAPTION>
December 31
_________________________
1996 1995
___________ ___________
(Amounts in Thousands)
<S> <C> <C>
9.15 percent nonsubordinated notes due 1999......................... $ - $ 50,000
6.75 percent nonsubordinated notes due 1998, less unamortized
discount of $72 thousand and $139 thousand at December 31, 1996
and 1995, respectively; effective interest rate 6.80 percent...... 149,928 149,861
6.375 percent nonsubordinated notes due 2000, less unamortized
discount of $293 thousand and $368 thousand at December 31, 1996
and 1995, respectively; effective interest rate 6.44 percent...... 149,707 149,632
________ ________
Total long term debt................................................ $299,635 $349,493
======== ========
</TABLE>
The contractual maturities of the Company's long term debt are as follows:
Parent Company and Consolidated
_______________________________
December 31, December 31,
1996 1995
____________ ____________
(Amounts in Thousands)
1998....................... $149,928 $149,861
1999....................... - 50,000
2000....................... 149,707 149,632
________ ________
Total............... $299,635 $349,493
======== ========
None of the Company's debt issues are or have been in default.
<PAGE>88
Note 7. Federal Income Taxes
Federal income tax expense relating to operations of the Company for 1996,
1995 and 1994 is comprised of the following components:
<TABLE>
<CAPTION>
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Current tax expense........................................ $ 29,859 $ 49,449 $ 63,649
Deferred tax expense....................................... 9,919 5,062 (12,837)
________ ________ ________
$ 39,778 $ 54,511 $ 50,812
======== ======== ========
</TABLE>
Total tax expense differs from the amount computed by applying the Federal
income tax rate of 35 percent in 1996, 1995 and 1994, to income before tax
for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
____________________ _____________________ _____________________
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... $ 40,532 35.0 $ 55,974 35.0 $ 51,449 35.0
Tax exempt interest and dividends
received deduction................ (325) (0.3) (414) (0.3) (508) (0.3)
Other, net.......................... (429) (0.4) (1,049) (0.6) (129) (0.1)
_________ ____ _________ ____ _________ ____
Actual tax expense.............. $ 39,778 34.3 $ 54,511 34.1 $ 50,812 34.6
========= ==== ========= ==== ========= ====
</TABLE>
<PAGE>89
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1996 and 1995 are presented below:
December 31
______________________
1996 1995
____ ____
(Amounts in Thousands)
Deferred Tax Assets:
Future policy benefits.......................... $ 149,827 $ 152,158
Tax net operating loss carryforward............. 28,652 26,161
Capital gains and losses........................ 21,001 40,211
Capitalization of policy acquisition costs,
net of amortization, for tax return purposes.. 77,323 66,859
Sale and leaseback transactions................. 175 873
Allowance for uncollectible receivables......... 75 2,496
Resisted claim liability........................ 4,000 2,840
Employee retirement benefits.................... 30,782 29,740
Unearned interest............................... 1,390 1,451
Accrual of interest payable..................... 3 353
Differences between tax and accounting
for reinsurance............................... -- 926
Other........................................... 1,952 2,510
_________ _________
Total gross deferred tax assets................. 315,180 326,578
Total valuation allowance....................... (16,368) (16,368)
_________ _________
Net deferred tax assets......................... 298,812 310,210
_________ _________
Deferred Tax Liabilities:
_________________________
Deferral of policy acquisition costs, net of
amortization, for accounting purposes......... (303,533) (299,028)
Net unrealized gain on securities............... (36,675) (105,244)
Basis differences between tax and accounting
for joint ventures............................ (2,599) (4,499)
Basis differences between tax and accounting
for securities................................ (4,962) (4,920)
Depreciation.................................... (5,615) (5,387)
Prepaid expenses................................ (2,938) (3,055)
Differences between tax and accounting
for reinsurance............................... (1,143) --
Other........................................... (5,473) (10,853)
_________ _________
Total gross deferred tax liabilities............ (362,938) (432,986)
_________ _________
Net deferred tax asset (liability).............. $ (64,126) $(122,776)
========= =========
Federal income tax returns have been examined and settled for all years
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, 1996 become taxable, the tax computed at present rates would be
approximately $47.8 million.
At December 31, 1996, the Company has nonlife net operating loss
carryforwards for Federal income tax purposes of approximately $81.9 million
which are available to offset future Federal taxable income, if any, through
2011.
<PAGE>90
Note 8. Liability for Unpaid Claims
Activity in the liability for unpaid claims and claim adjustment expenses
for the Company's health and disability coverages is summarized as follows:
1996 1995 1994
________ ________ ________
(Amounts in Thousands)
Balance at January 1................. $ 77,840 $ 73,627 $ 81,638
Less: reinsurance recoverables....... 5,107 4,115 4,021
________ ________ ________
Net balance at January 1............. 72,733 69,512 77,617
________ ________ ________
Amount incurred (a).................. 318,548 301,344 334,699
Amount paid, related to:
Prior years (b).................. 119,472 102,099 94,083
Current year..................... 186,972 196,024 248,721
________ ________ ________
Total...................... 306,444 298,123 342,804
________ ________ ________
Net balance at December 31........... 84,837 72,733 69,512
Plus: reinsurance recoverables....... 4,859 5,107 4,115
________ ________ ________
Balance at December 31............... $ 89,696 $ 77,840 $ 73,627
======== ======== ========
(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.
Note 9. 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 $5.2 million, $4.2 million and $4.5
million were made for the years ended December 31, 1996, 1995 and 1994,
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 factors including
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. The unfunded Supplemental Retirement Plan was
amended during the 1996 plan year to provide for a lump sum payment provision.
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.
<PAGE>91
Pension expense for all of the above pension plans amounted to $12.625
million, $7.724 million and $7.848 million in 1996, 1995 and 1994,
respectively. The net periodic pension cost for these plans in 1996, 1995 and
1994 included the following components:
<TABLE>
<CAPTION>
Year Ended December 31
___________________________________
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period.... $ 7,403 $ 5,155 $ 5,672
Interest cost on projected benefit obligation....... 10,611 9,114 8,129
Actual return on Plan assets........................ (6,626) (7,642) (7,272)
Net amortization and deferral....................... 1,237 1,097 1,319
_______ _______ _______
Net pension cost.................................... $12,625 $ 7,724 $ 7,848
======= ======= =======
</TABLE>
The funded status is reconciled to accrued pension cost included in the
Company's consolidated balance sheets as of December 31, 1996 and 1995 as
follows:
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plans
_____________________ ____________________
1996 1995 1996 1995
____ ____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ (86,636) $ (83,716) $ (35,165) $ (26,977)
========== ========= ========== =========
Accumulated benefit obligation....................... $ (88,408) $ (85,540) $ (35,415) $ (27,044)
Effect of projected future compensation levels....... (26,955) (28,457) (5,862) (4,383)
__________ _________ __________ _________
Projected benefit obligation for service rendered
to date............................................ (115,363) (113,997) (41,277) (31,427)
Plan assets at fair value................................ 104,541 97,849 -- --
__________ _________ __________ _________
Funded status............................................ (10,822) (16,148) (41,277) (31,427)
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions 12,275 20,073 9,603 9,045
Unrecognized portion of initial net (asset) obligation... (4,332) (5,415) 3 4
Unrecognized prior service cost.......................... 218 271 10,373 6,734
Additional minimum balance sheet liability............... -- -- (14,242) (11,425)
__________ _________ __________ _________
Accrued pension cost..................................... $ (2,661) $ (1,219) $ (35,540) $ (27,069)
========== ========= ========== =========
</TABLE>
The unrecognized net asset relating to the qualified pension plan is being
recognized over a 14 year period which began January 1, 1987. Under Statement
of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions,"
an additional minimum pension liability is required 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.
Statement No. 87 also permits offsetting of this liability with an intangible
asset, based on provisions of the Statement. 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:
<TABLE>
<CAPTION>
December 31
________________________
1996 1995 1994
____ ____ ____
<S> <C> <C> <C>
Discount rate..................................... 7.6% 7.0% 8.25%
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
</TABLE>
<PAGE>92
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. Additionally, the Plan provides for a maximum
dollar cap on amounts to be paid by the Company for future increases in the
cost of retiree health benefits. 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.
Net periodic postretirement benefit cost for 1996, 1995 and 1994 included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the year........ $ 1,159 $ 887 $ 1,044
Interest cost on accumulated postretirement
benefit obligation.................................. 1,886 1,943 2,010
Net amortization and deferral......................... (1,791) (1,995) (1,704)
_______ _______ _______
Net periodic postretirement benefit cost.............. $ 1,254 $ 835 $ 1,350
======= ======= =======
</TABLE>
The funded status of the non-pension postretirement benefit program as of
December 31, 1996 and 1995 is reconciled to accrued postretirement benefit cost
as follows:
<TABLE>
<CAPTION>
December 31
_________________________
1996 1995
____ ____
(Amounts in Thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................. $(15,722) $(16,692)
Fully eligible active plan participants.. (5,161) (4,238)
Other active plan participants........... (7,124) (8,129)
________ ________
Total................................. (28,007) (29,059)
Plan assets.............................. -- --
________ ________
Funded status......................... (28,007) (29,059)
Unrecognized net (gain) or loss.......... (17,040) (15,204)
Unrecognized prior service cost.......... (11,991) (12,940)
________ ________
Accrued postretirement benefit cost...... $(57,038) $(57,203)
======== ========
</TABLE>
Excess gains or losses and unrecognized changes in prior service cost
resulting from Plan amendments are being amortized over the average remaining
service period to full eligibility for benefits of the active participants.
For measurement purposes, an 8 percent annual rate of increase in the per-
capita cost of covered health benefits (ie., health care cost trend rate) was
assumed for 1996; the rate was assumed to decrease to 6 percent in the year
1997 and remain at that level thereafter. A 7 percent annual rate of increase
in claims reimbursed by Medicare for retirees over age 65 was assumed for 1996;
the rate was assumed to decrease to 6 percent in 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 of
Financial Accounting Standards No. 106 ("Employers' Accounting for
Postretirement Benefits Other Than Pensions") due to the maximum dollar cap
noted above. 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, 1996 by approximately $192
thousand and the aggregate of the service and interest cost components of 1996
net periodic postretirement benefit cost by $13 thousand. The discount rate
used in determining the accumulated postretirement benefit obligation was 7.6%
at December 31, 1996, 7.0% at December 31, 1995 and 8.25% at December 31, 1994.
<PAGE>93
Note 10. 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, 1996, 4,332 shares; December 31, 1995,
4,480 shares; December 31, 1994, 4,653 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, 1996 was
$8.33 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, 1996, 1,689 shares; December 31, 1995,
1,852 shares; December 31, 1994, 2,003 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, 1996 was
$8.34 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, 1996, 10,793,979 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, 1996, 120,000,000 shares; December 31, 1995 and
1994, 60,000,000 shares; issued, including treasury shares, as of December 31,
1996, 57,472,605 shares; December 31, 1995, 57,468,882 shares; December 31,
1994, 57,465,735 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, 1996,
72,235 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, 1996, participant interests relating to 40,136 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 Chase Manhattan Bank,
formerly known as 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
$107. 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 $150 worth of the Common Stock for $75. As
of December 31, 1996, the Rights had not become exercisable. See Note 22
relating to subsequent event.
<PAGE>94
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 1996,
1995 and 1994, respectively, 32,955, 37,208 and 39,861 shares of the Common
Stock had been sold pursuant to the Dividend Reinvestment and Stock Purchase
Plan.
Treasury Stock
At December 31, 1996, there were 23,070,016 shares of Common Stock held in
treasury. During 1996, 329,251 Common shares were acquired (including 232,000
shares purchased under a repurchase program and 97,251 shares relating to
benefit plans), at an aggregate cost of $9.7 million, and 256,928 Common
shares, with an aggregate cost of $3.2 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, 1995, treasury
stock consisted of 22,997,693 Common shares. Common shares outstanding, net of
treasury shares, as of December 31, 1996 and 1995 are as follows:
December 31
________________________
1996 1995
____ ____
Common shares issued.............. 57,472,605 57,468,882
Treasury shares................... 23,070,016 22,997,693
__________ __________
Net outstanding common shares..... 34,402,589 34,471,189
========== ==========
Note 11. 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 1,575,000 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. The Plan
limits the number of options that may be granted to any one individual during
any one-year period to 112,500. 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 on the
date of each Annual Meeting of Shareholders, each eligible director will
automatically be granted options to purchase 3,000 shares of USLIFE common
stock. A maximum of 375,000 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>95
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. Common shares may be issued under
the Company's stock option plans from shares in treasury or authorized but
unissued shares.
A summary of activity under all stock option plans for the three years
ended December 31, 1996 is presented below:
Number
Average
of Option Price
Shares Per Share
______ ___________
Outstanding, December 31, 1993........ 1,557,667 $ 20.73
Granted.......................... 117,000 25.47
Exercised........................ 128,823 17.91
Terminated....................... 41,625 23.68
_________ ________
Outstanding, December 31, 1994........ 1,504,219 21.26
Granted.......................... 108,456 25.71
Exercised........................ 214,028 19.18
Terminated....................... 6,547 24.69
_________ ________
Outstanding, December 31, 1995........ 1,392,100 21.91
Granted.......................... 193,648 29.71
Exercised........................ 167,063 20.44
Terminated....................... 5,250 24.92
_________ ________
Outstanding, December 31, 1996........ 1,413,435 $ 23.15
========= ========
Exercise prices for options outstanding at December 31, 1996, range from a
minimum of approximately $16 per share to a maximum of approximately $33 per
share. The average remaining maximum term of options outstanding is
approximately 5 years.
As of December 31, 1996, 1995 and 1994, options for 984,515 shares,
904,525 shares and 1,386,657 shares were exercisable under all stock option
plans, respectively, at average prices of $21.32, $20.28 and $18.92 per share.
As of December 31, 1996, up to 2,241,573 common shares could be issued under
the Company's stock option plans.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), introduced standards for computing
"fair value" of stock options using a mathematical model, as well as expense
charges over the related service period based on this calculated value.
However, as permitted by SFAS 123, the Company has elected to continue to use
the "intrinsic value" approach specified by Accounting Principles Board Opinion
No. 25 ("APB 25"), the previous accounting standard, for financial statement
purposes. Under APB 25 standards, stock options such as those granted by the
Company (with option price set equal to market price at date of grant) do not
require income statement charges, although the outstanding options are
considered in earnings per share calculations.
If the Company had elected to recognize compensation based on the fair value of
the options granted at grant date as prescribed by SFAS 123, net income and net
income per share would have been reduced to the pro forma amounts indicated in
the table below:
<PAGE>96
1996 1995
__________ __________
(Amounts in thousands except
per share data)
Net income - as reported................. $ 76,027 $105,414
Net income - pro forma................... 75,774 105,351
Net income per share - as reported....... 2.18 3.03
Net income per share - pro forma......... 2.17 3.03
Stock-based compensation costs reduced pro-forma net income in the above
calculations by $253 thousand and $63 thousand in 1996 and 1995, respectively.
The pro-forma effect on net income for 1996 and 1995 is not representative of
the pro-forma effect of stock options on net income in future years because it
considers only options granted in 1995 and thereafter as required by SFAS 123.
Since stock options are generally awarded each year, their impact on pro-forma
net income for future years would be expected to increase as more stock options
are included in these calculations.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:
1996 1995
__________ __________
Expected life (years).................... 6 6
Interest rate............................ 6.40% 6.58%
Volatility............................... 22.48% 22.34%
Dividend Yield........................... 3.10% 3.41%
The weighted average fair value of options granted was $7.39 and $6.21 in
1996 and 1995, respectively.
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 900,000 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 the award date, has been increased or decreased
by (a) the sum of the increases or decreases in the book value per share of the
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 the 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 112,500 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 $1.6
million, $1.3 million, and $1.7 million were charged to expense in 1996, 1995
and 1994, respectively.
<PAGE>97
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>
1992............................. 184,500 January 1, 1992 December 31, 1996
1993............................. 255,750 January 1, 1993 December 31, 1997
1994............................. 11,250 January 1, 1994 December 31, 1998
1995............................. 23,250 January 1, 1995 December 31, 1999
1996............................. 196,500 January 1, 1996 December 31, 2000
_______
Outstanding, December 31, 1996... 671,250
=======
</TABLE>
The Company also has a Restricted Stock Plan for selected 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
1,575,000 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 the event of a Change in Control, as defined in the
Plan, restrictions would terminate as to previously awarded but unvested
shares. The Plan limits the number of shares that may be granted to any one
individual during any one-year period to 112,500, and provides 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 1996, a total of 27,393 shares were
awarded under the plan. During 1995, a total of 126,699 shares were awarded
under the Plan. During 1994, a total of 306,411 shares were awarded under the
Plan, and 7,998 previously awarded shares were forfeited pursuant to the terms
of the Plan. As of December 31, 1996, there were 278,247 previously awarded
shares outstanding under the Plan as to which the restrictions had not yet
lapsed. Expense charges recognized in 1996, 1995 and 1994 relating to these
awards amounted to approximately $3.2 million, $2.6 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>98
Note 12. Leases
A subsidiary of the Company leases a portion of a building located at 125
Maiden Lane, New York, New York, which houses the subsidiary's principal
executive offices as well as the headquarters of the Company and several other
subsidiaries. The lease expires in 2006 and provides a renewal option based on
fair rental value at time of renewal. 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, 1996 approximate $11.8 million
in 1997, $11.2 million in 1998, $10.1 million in 1999, $9.5 million in 2000,
$8.9 million in 2001, and a total of $29.7 million from 2002 to 2007. Total
rental expense amounted to approximately $10.9 million, $12.5 million and $13.1
million for the years ended December 31, 1996, 1995 and 1994, respectively.
Note 13. Contingent Liabilities and Commitments
The Company has entered into Key Executive Employment Protection
Agreements with selected key employees, which provide for certain contingent
severance benefits, based on compensation, in the event of a Change in Control
(as defined in the agreements). The Company has outstanding Standby Letters of
Credit with three banks representing contingent obligations to fund various
trusts established in connection with certain employment contracts of
management employees, inclusive of the Key Executive Employment Protection
Agreements, as well as certain employee and Director benefit plans, in the
event of a Change in Control (as defined in the trust agreements), totalling
$122 million as of December 31, 1996. See Note 22 relating to subsequent
event. 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, 1996) for a ten year period commencing at the effective date of
such license. The Company has also agreed to guarantee the payment and
performance of two real estate leases which expire December 31, 2006 and June
30, 2007, respectively, for two of its subsidiaries, which represent gross
minimum rents for the remaining term of the leases totalling, as of December
31, 1996, $17.6 million and $14.9 million, respectively, plus additional rents
representing any increase in operating expenses and real estate taxes over the
base year (defined in the leases as calendar year 1995 and 1997, respectively).
As of December 31, 1996, the life insurance subsidiaries had outstanding
an aggregate $25.6 million of permanent financing commitments for investments
in mortgage loans based on the credit policies and terms typically utilized for
these investments. The major portion of these commitments are anticipated to
be funded within 120 days of that date.
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 included a claim for
malicious prosecution. In 1993 a judgment was rendered in favor of the Company
on this claim, which was the only remaining claim in the former officer's
lawsuit. That judgment was appealed and in November, 1996, the Court of
Appeals reversed the trial court's dismissal of the claim. The Company has
petitioned the California Supreme Court for review which if rejected, will
result in the case 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.
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. The parties have agreed to a settlement of all claims asserted
and the settlement was given tentative approval by the Court in December, 1995.
Under the terms of the Settlement Agreement, class members will be notified of
their right to file claims for partial premium refunds. In the opinion of
management, the ultimate resolution of this action in accordance with the terms
of the Settlement Agreement will not result in a material additional liability
on the part of the Company.
<PAGE>99
In March, 1995, a purported class action was filed alleging that a
subsidiary of the Company issued insurance contracts in an amount sufficient to
cover the gross amount of indebtedness, rather than the net amount of
indebtedness, contrary to Alabama law. The complaint contains claims of fraud
and breach of contract based on allegations that defendant misrepresented the
amount of insurance needed. In a similar case, the Alabama Supreme Court
recently granted a motion to dismiss all punitive damage claims. Defendant is
continuing to aggressively defend the lawsuit. Plaintiffs seek compensatory
and punitive damages. No contingent loss has been accrued for this litigation
because the amount of loss, if any, cannot be reasonably estimated.
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 14. Financial Instruments and Concentrations of Credit Risk
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
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.
<PAGE>100
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
_______________________ _______________________
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.......... $ 24,462 $ 24,462 $ 63,914 $ 63,914
Restricted funds held in escrow, etc. .. 2,512 2,512 1,821 1,821
Short-term investments.................... 105,129 105,129 69,560 69,560
Fixed maturities.......................... 5,864,687 5,864,687 6,006,864 6,006,864
Equity securities......................... 3,786 3,786 4,717 4,717
Mortgage loans............................ 258,723 265,270 296,045 308,343
Financial Liabilities:
Policyholder account balances
relating to investment contracts.......... 1,532,021 1,541,676 1,788,794 1,800,825
Long-term debt............................ 299,635 299,313 349,493 357,161
</TABLE>
In accordance with the requirements of Statement No. 107 of the Financial
Accounting Standards Board ("Disclosures about Fair Value of Financial
Instruments"), 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.
The estimated fair values of the Company's policy loan assets at December
31, 1996 and 1995 are not materially different from the respective carrying
values at those dates.
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.
Concentrations of Credit Risk
The Company's investments in fixed maturities and equity securities are
comprised of a diverse portfolio represented by approximately 600 issuers, with
no issuer accounting for more than 1% of the Company's total investment in
these securities, based on fair value, at December 31, 1996.
<PAGE>101
The geographical distribution of the collateral for the Company's mortgage
loans at December 31, 1996, by United States region and based on book value, is
as follows:
New England.......................... 5%
Middle Atlantic states............... 18
North-central states................. 20
South Atlantic states................ 18
South-central states................. 13
Mountain states...................... 10
Pacific states....................... 16
_____
100%
=====
The distribution of the Company's mortgage loans at December 31, 1996 by
type of collateral, based on book value, is as follows:
Office buildings..................... 34%
Industrial / warehouse properties.... 20
Retail............................... 35
Apartments........................... 1
One to four family residential....... 2
Hotel / motel, medical, and other.... 8
_____
100%
=====
The Company's reinsurance receivables and other recoverable amounts at
December 31, 1996 relate to approximately 130 reinsurers. Two major United
States insurance companies, rated "A+" (superior) and "A" (excellent)
respectively by A. M. Best Company, a recognized insurance rating agency, each
account for approximately 15% of the total reinsurance receivable and
recoverable amount at that date. Other than these companies, no single
reinsurer accounts for more than 6% of the total reinsurance receivable and
recoverable amount at December 31, 1996. The Company monitors the financial
condition of its reinsurers in order to minimize its exposure to loss from
reinsurer insolvencies.
Note 15. 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, $14.3 billion, representing 8 percent of total life insurance in
force as of December 31, 1996, 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.
<PAGE>102
The effect of reinsurance on premiums, other considerations, and benefits
to policyholders and beneficiaries, is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
____________________________________
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Premiums, before reinsurance ceded......... $1,117,195 $1,067,480 $1,043,958
Premiums ceded............................. 78,958 76,659 78,480
__________ __________ __________
Net premiums............................... $1,038,237 $ 990,821 $ 965,478
========== ========== ==========
Other considerations, before reinsurance
ceded................................... $ 222,313 $ 203,136 $ 180,954
Other considerations ceded................. 19,195 16,737 14,891
__________ __________ __________
Net other considerations................... $ 203,118 $ 186,399 $ 166,063
========== ========== ==========
Benefits to policyholders and beneficiaries,
before reinsurance recoveries............ $ 827,819 $ 778,868 $ 782,415
Reinsurance recoveries..................... 53,992 63,220 54,804
__________ __________ __________
Benefits to policyholders and beneficiaries,
net of reinsurance recoveries............ $ 773,827 $ 715,648 $ 727,611
========== ========== ==========
</TABLE>
A summary of reinsurance activity for the three years ended December 31,
1996 is presented below:
<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, 1996
Life insurance in force.............. $156,776,550 $14,268,859 $21,199,565 $163,707,256 12.9%
============ =========== =========== ============ ====
Premiums:
Life insurance.................... $ 566,411 $ 39,683 $ 55,507 $ 582,235 9.5%
Accident and health insurance..... 493,068 39,275 2,209 456,002 0.5
____________ ___________ __________ ____________ ___
Total premiums............... $ 1,059,479 $ 78,958 $ 57,716 $ 1,038,237 5.6%
============ ========== ========== ============ ===
<PAGE>103
Year Ended December 31, 1995
Life insurance in force.............. $140,872,356 $9,270,244 $18,765,435 $150,367,547 12.5%
============ ========== =========== ============ ====
Premiums:
Life insurance.................... $ 529,639 $ 37,513 $ 49,140 $ 541,266 9.1%
Accident and health insurance..... 487,064 39,146 1,637 449,555 0.4
____________ __________ ___________ ____________ ____
Total premiums............... $ 1,016,703 $ 76,659 $ 50,777 $ 990,821 5.1%
============ ========== =========== ============ ====
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%
============ ========== =========== ============ ====
</TABLE>
The estimated amounts of reinsurance recoverable on paid and unpaid claims
included in the Consolidated Balance Sheets as of December 31, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>
December 31
__________________________________________________________
1996 1995
_____________________________ ___________________________
Paid Unpaid Paid Unpaid
Claims Claims Claims Claims
______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Life insurance.................... $ 6,749 $ 9,258 $ 5,994 $ 11,487
Accident and health insurance..... 1,785 4,859 2,574 5,107
_________ _________ _________ _________
Total........................ $ 8,534 $ 14,117 $ 8,568 $ 16,594
========= ========= ========= =========
</TABLE>
The amount included in the consolidated balance sheets at December 31,
1996 and 1995 for "Other reinsurance recoverable" includes the estimated
amounts recoverable on unpaid claims as indicated above as well as prepaid
reinsurance premiums.
Note 16. Income Per Share
The following table sets forth the computations of income per share for
the three years ended December 31, 1996:
<PAGE>104
<TABLE>
<CAPTION>
Year Ended December 31
_______________________________
1996 1995 1994
____ ____ ____
(Shares and Amounts in Thousands
except Per Share Data)
<S> <C> <C> <C>
Net income............................................. $ 76,027 $105,414 $96,185
======= ======== =======
Weighted average common shares outstanding,
net of treasury shares............................... 34,373 34,363 34,238
Add-Common share equivalents of:
Preferred Stock - Series A.......................... 53 54 57
Preferred Stock - Series B.......................... 21 23 24
Outstanding stock options-treasury stock method..... 430 371 211
_______ ________ _______
Total common shares and common equivalent shares....... 34,877 34,811 34,530
======= ======== =======
Net income per share................................... $ 2.18 $ 3.03 $ 2.79
======= ======== =======
</TABLE>
Note 17. Statement of Cash Flows Information
For the years ended December 31, 1996, 1995 and 1994, respectively,
interest paid amounted to $39.4 million, $38.2 million, and $34.8 million, and
Federal income taxes paid amounted to $31.3 million, $55.7 million and $60.5
million. The major portion of the disposals of fixed maturity investments
relate to securities sold or redeemed prior to their maturity dates. The $890
million disposals of fixed maturity investments by the Company for the year
ended December 31, 1996 included approximately $124 million (adjusted cost) of
securities which were called for redemption by the respective issuers prior to
maturity. On a similar basis, redemptions of fixed maturities included in
total disposals amounted to $115 million and $209 million in 1995 and 1994,
respectively.
Note 18. Statutory Financial Information; Dividend Paying Capability of Life
Insurance Subsidiaries
Net income and equity capital of the life insurance subsidiaries, as
reported on a regulatory basis and as included in USLIFE's consolidated
financial statements in accordance with GAAP, are as follows:
<TABLE>
<CAPTION>
As Reported As Included in the Company's
on a Consolidated Financial Statements
Regulatory Basis (a) in Accordance with GAAP
______________________________ __________________________________
1996 1995 1994 1996 1995 1994
______ ______ ______ ______ ______ ______
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net income for the year
ended December 31 (b)............... $ 83,729 $ 40,626 $ 31,368 $ 119,264 $ 146,058 $ 133,352
======== ======== ======== ========== ========== ==========
Equity capital at December 31......... $592,267 $574,757 $572,691 $1,707,921 $1,786,106 $1,326,922
======== ======== ======== ========== ========== ==========
______
</TABLE>
(a) Statutory accounting practices require acquisition costs on new business
(including commissions and underwriting and issue costs) to be charged to
expense when incurred. Regulatory net income includes income (loss) attributed
to participating policyholders of approximately $(14) million, $(21) million,
and $200 thousand in 1996, 1995, and 1994, respectively, with the 1995 and 1996
losses primarily a result of higher levels of sales of participating term
insurance products. Regulatory equity capital includes capital attributed to
participating policyholders of approximately $5 million, $20 million, and $30
million at December 31, 1996, 1995 and 1994, respectively. Capital attributed
to participating policyholders is not available for payment of dividends to
shareholders.
<PAGE>105
(b) Regulatory net income includes after-tax capital losses of $9 million, $8
million, and $10 million in 1996, 1995, and 1994, respectively. GAAP net
income includes after-tax capital gains (losses) of $(3) million, $4 million
and $(1) million in those years, respectively.
The dividend paying capability of the life insurance subsidiaries is
generally limited by after-tax income and equity capital as reported on a
regulatory basis. As a result of the appropriate adjustments, including
deferral and amortization of policy acquisition costs and fair value accounting
for fixed maturities under GAAP, equity capital of the life insurance
subsidiaries prepared in accordance with GAAP exceeds regulatory equity capital
as indicated above. 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,
1996, the portion of the aggregate $1.708 billion GAAP 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
regulatory approval ("Restricted Net Assets"), as a result of insurance laws
and regulations, amounted to $1.643 billion. Cash dividends paid by all
consolidated subsidiaries to the parent company totalled $70 million, $42
million and $46 million in 1996, 1995 and 1994, respectively. The 1995 cash
dividends included $6.5 million remitted by an inactive life insurance
subsidiary and then contributed to another life subsidiary in connection with
the earlier combination of the two companies' operations.
<PAGE>106
Note 19. Supplementary Insurance Information
Supplementary data relating to the life insurance industry segment of the
Company for the three years ended December 31, 1996 is presented below.
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Year Ended December 31, 1995 Year Ended December 31, 1994
__________________________________ _____________________________________ ___________________________________
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........ $ 785,128 $ - $ 785,128 $ 718,439 $ - $ 718,439 $ 793,145 $ - $ 793,145
========== ========= ========== ========== ========= ========== ========== ========= ==========
Future policy
benefits:
Life........... $1,403,968 $ - $1,403,968 $1,324,395 $ - $1,324,395 $1,254,879 $ - $1,254,879
Accident and
health........ 337,602 - 337,602 314,032 - 314,032 277,117 - 277,117
__________ _________ __________ __________ _________ __________ __________ _________ __________
Total......... $1,741,570 $ - $1,741,570 $1,638,427 $ - $1,638,427 $1,531,996 $ - $1,531,996
========== ========= ========== ========== ========= ========== ========== ========= ==========
Policyholder
account balances
for universal
life-type and
investment
contracts....... $3,709,191 $ - $3,709,191 $3,787,546 $ - $3,787,546 $3,641,393 $ - $3,641,393
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other policy
claims and
benefits
payable......... $ 299,928 $ 400 $ 300,328 $ 259,135 $ 233 $ 259,368 $ 215,102 $ (282) $ 214,820
========== ========= ========== ========== ========= ========== ========== ========= ==========
Premium income:
Life........... $ 583,013 $ (778) $ 582,235 $ 542,000 $ (734) $ 541,266 $ 495,568 $ (660) $ 494,908
Accident and
health....... 457,463 (1,461) 456,002 451,197 (1,642) 449,555 474,135 (3,565) 470,570
__________ _________ __________ __________ _________ __________ __________ _________ __________
Total........ $1,040,476 $ (2,239) $1,038,237 $ 993,197 $ (2,376) $ 990,821 $ 969,703 $ (4,225) $ 965,478
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other consider-
ation.......... $ 203,118 $ - $ 203,118 $ 186,399 $ - $ 186,399 $ 166,063 $ - $ 166,063
========== ========= ========== ========== ========= ========== ========== ========= ==========
Net investment
income......... $ 489,387 $ 12,305 $ 501,692 $ 475,839 $ 12,640 $ 488,479 $ 448,712 $ 12,782 $ 461,494
========== ========= ========== ========== ========= ========== ========== ========= ==========
Realized gains
(losses)....... $ (4,915) $ (78) $ (4,993) $ 6,413 $ (25) $ 6,388 $ (1,322) $ (58) $ (1,380)
========== ========= ========== ========== ========= ========== ========== ========= ==========
Benefits, claims,
losses and
settlement
expenses........ $1,069,452 $ 400 $1,069,852 $1,037,307 $ 233 $1,037,540 $1,001,197 $ (282) $1,000,915
========== ========= ========== ========== ========= ========== ========== ========= ==========
Amortization of
deferred policy
acquisition
costs........... $ 206,570 $ - $ 206,570 $ 162,038 $ - $ 162,038 $ 159,702 $ - $ 159,702
========== ========= ========== ========== ========= ========== ========== ========= ==========
Other operating
expenses ...... $ 321,269 $ 92,613 $ 413,882 $ 296,719 $ 83,330 $ 380,049 $ 265,645 $ 77,928 $ 343,573
========== ========= ========== ========== ========= ========== ========== ========= ==========
</TABLE>
<PAGE>107
<TABLE>
Note 20. Condensed Financial Information of Parent Company
CONDENSED BALANCE SHEETS
PARENT COMPANY
ASSETS
<CAPTION>
December 31
______________________
1996 1995
____ ____
(Amounts in Thousands)
<S> <C> <C>
Cash and invested assets:
Cash and certificates of deposit................................................. $ 5,475 $ 8,060
Fixed maturities available for sale, at fair value............................... 21,358 42,745
Equity securities, at fair value................................................. 76 82
Other long term investments...................................................... 17,220 1,000
Short term investments........................................................... 778 741
__________ __________
Total cash and invested assets........................................... 44,907 52,628
Other receivables (net).......................................................... 642 1,114
Property and equipment (net)..................................................... 581 662
Prepaid expenses, deferred charges and other assets.............................. 42,637 45,091
Investment in life insurance subsidiaries........................................ 1,707,921 1,786,106
Investment in non-life insurance subsidiaries.................................... 33,839 30,112
__________ __________
Total assets.............................................................. $1,830,527 $1,915,713
========== ==========
LIABILITIES AND EQUITY CAPITAL
LIABILITIES:
Federal income taxes (current and deferred)...................................... $ (30,938) $ (25,534)
Notes payable.................................................................... 268,675 222,975
Long-term debt................................................................... 299,635 349,493
Accounts payable and accrued liabilities......................................... 69,733 60,525
__________ __________
Total liabilities........................................................ 607,105 607,459
__________ __________
NON-REDEEMABLE PREFERRED STOCKS, COMMON STOCK, AND OTHER SHAREHOLDERS' EQUITY
("EQUITY CAPITAL"):
Preferred stock - Series A....................................................... 433 448
Preferred stock - Series B....................................................... 84 93
Preferred stock-undesignated..................................................... - -
Common stock..................................................................... 57,473 57,469
Paid-in surplus.................................................................. 120,702 117,512
Net unrealized gain on securities................................................ 68,109 195,450
Retained earnings................................................................ 1,327,748 1,284,306
__________ __________
1,574,549 1,655,278
Less: Treasury stock, at cost.................................................... 346,117 339,662
Deferred compensation...................................................... 5,010 7,362
__________ __________
Total Equity Capital......................................................... 1,223,422 1,308,254
__________ __________
Total liabilities and Equity Capital..................................... $1,830,527 $1,915,713
========== ==========
</TABLE>
<PAGE>108
<TABLE>
CONDENSED STATEMENTS OF INCOME
PARENT COMPANY
<CAPTION>
Year Ended December 31
____________________________________
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Net investment income................................................... $ 3,328 $ 4,035 $ 4,661
Dividends from subsidiaries (eliminated in consolidation)............... 70,316 42,312 45,702
Realized losses on investments.......................................... (78) (28) (86)
Other income............................................................ 9,353 8,980 8,414
_______ _______ _______
Total income................................................... 82,919 55,299 58,691
_______ _______ _______
General expenses........................................................ 45,040 40,051 36,782
Interest on notes payable............................................... 17,394 15,303 11,239
Interest on long term debt.............................................. 21,914 24,396 24,388
_______ _______ _______
Total expenses................................................. 84,348 79,750 72,409
_______ _______ _______
Income from operations before related income taxes...................... (1,429) (24,451) (13,718)
Provision for income taxes.............................................. (24,781) (22,820) (19,643)
_______ _______ _______
Income (loss) before equity in undistributed net income of subsidiaries. 23,352 (1,631) 5,925
Equity in undistributed net income of subsidiaries...................... 52,675 107,045 90,260
_______ _______ _______
Net income.............................................................. $76,027 $105,414 $96,185
======== ======== =======
</TABLE>
<PAGE>109
<TABLE>
STATEMENTS OF CASH FLOWS
PARENT COMPANY
<CAPTION>
Year Ended December 31
_________________________________
1996 1995 1994
____ ____ ____
(Amounts in Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 76,027 $ 105,414 $ 96,185
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed net income of subsidiaries.................. (52,675) (107,045) (90,260)
Deferred federal income taxes....................................... (3,674) (1,875) (1,063)
Depreciation and amortization....................................... 2,107 2,096 2,044
Change in other liabilities and amounts receivable.................. 9,680 11,760 2,146
Change in current federal income tax liability...................... (1,618) (6,467) 2,894
Net realized capital losses......................................... 78 28 86
Other, net.......................................................... 3,810 2,755 2,555
_________ _________ _________
Total adjustments.............................................. (42,292) (98,748) (81,598)
_________ _________ _________
Net cash provided by operating activities................. 33,735 6,666 14,587
_________ _________ _________
Cash flows from investing activities:
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................................. 22,789 7,071 12,640
Expenditures for property and equipment............................... (190) (271) (271)
Capital contributions to subsidiaries................................. - (6,645) (18,000)
Cost of investments purchased:
Fixed maturities.................................................. (2,697) (4,545) (6,444)
Other long term investments....................................... (15,298) - -
Net purchases of short term investments........................... (37) (731) -
Other, net............................................................ 4 3 -
_________ _________ _________
Net cash provided (used) in investing activities.......... 4,571 (5,118) (12,075)
_________ _________ _________
Cash flows from financing activities:
Borrowings under credit facility.................................... - - 150,000
Increase (decrease) in notes payable................................ 45,700 26,400 (19,000)
Dividends to shareholders........................................... (32,585) (31,186) (28,801)
Acquisition of treasury stock....................................... (9,679) (5,334) (7,230)
Repayment of long-term debt......................................... (50,000) - (100,000)
Other, net.......................................................... 5,673 7,283 5,998
_________ _________ _________
Net cash provided (used) by financing activities.......... (40,891) (2,837) 967
_________ _________ _________
Net change in cash................................................ (2,585) (1,289) 3,479
Cash at beginning of year........................................... 8,060 9,349 5,870
_________ _________ _________
Cash at end of year................................................. $ 5,475 $ 8,060 $ 9,349
========= ========= ==========
</TABLE>
<PAGE>110
Note 21. Condensed Quarterly Results of Operations (Unaudited)
The quarterly results of consolidated operations for the two
years ended December 31, 1996 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, 1996 30, 1996 30, 1996 31, 1996 31, 1995 30, 1995 30, 1995 31, 1995
________ ________ _________ ________ ________ ________ _________ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total income............................... $435,402 $460,163 $451,508 $459,036 $418,829 $443,191 $432,558 $444,974
Total benefits and expenses................ 395,883 466,531 410,094 417,796 382,060 403,176 392,007 402,384
________ ________ ________ ________ ________ ________ ________ ________
Income from operations
before related income taxes............... 39,519 (6,368) 41,414 41,240 36,769 40,015 40,551 42,590
Provision for income taxes................. 13,328 (2,298) 14,367 14,381 12,479 13,848 13,908 14,276
________ ________ ________ ________ ________ ________ ________ ________
Net income (loss)........................ $ 26,191 $ (4,070) $ 27,047 $ 26,859 $ 24,290 $ 26,167 $ 26,643 $ 28,314
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss) per share.......... $ .75 $ (.12) $ .78 $ .77 $ .70 $ .76 $ .76 $ .81
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>111
Note 22. Subsequent Events
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. The exchange
ratio will be based on an average trading price of American General common
stock prior to closing, subject to a minimum of approximately 1.09 shares and a
maximum of approximately 1.29 shares of American General common stock. 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.
In connection with this transaction, also in February 1997, the Company
amended its Amended and Restated Rights Agreement under which it has issued
Common Stock Purchase Rights as described in Note 10. This amendment will
effectively prevent the Rights from becoming exercisable as a result of the
merger with American General or other transactions contemplated by the merger
agreement, and provides that all outstanding Rights will expire immediately
prior to the effective time of the merger.
In connection with the merger, USLIFE plans to call for redemption of all
outstanding shares of Series A Preferred Stock and Series B Preferred Stock.
It is anticipated that the merger, upon consummation, will satisfy the
definitions of Change in Control contained in certain employment contracts of
management employees and retirement plans as described in Note 13.
American General Corporation is a diversified financial services
organization. Its principal businesses are life insurance, retirement
services, and consumer finance.
Note 23. Events Subsequent to Date of Auditors' Report
Subsequent to February 12, 1997, the Company and its subsidiaries were
notified of certain litigation matters, as follows.
Two purported class action lawsuits have recently been filed against the
Company or its subsidiaries. The first lawsuit filed against the Company and a
subsidiary asserts claims related to sales practices of certain life insurance
products. The second lawsuit filed against two subsidiaries (and 28 other
insurance companies) asserts claims related to policy issuance procedures.
These lawsuits are in their very early stages, it is premature to evaluate
their materiality and these cases are being vigorously defended.
In March, 1997, a purported 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.
<PAGE>1
Exhibit 99 - Exhibit Index
__________________________
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, 1996
_____________________________________________
USLIFE Corporation
<PAGE>2
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
3 (i) (a) - Restated Certificate of Incorporation, as amended,
incorporated herein by reference to USLIFE's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996,
SEC File No. 1-5683.
(i) (b) - Certificate of Amendment of the Certificate of
Incorporation, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, SEC File No. 1-5683.
(ii) - By-laws, as amended and restated, incorporated herein
by reference to USLIFE's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, SEC File No. 1-5683.
4 (i) - See Exhibit 3(i).
(ii) - Indenture dated as of October 1, 1982 (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, as amended February 13, 1997, between
USLIFE Corporation and Chase Manhattan Bank, formerly known
as 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 and USLIFE's Report on Form 8-K
dated February 21, 1997, SEC File No. 1-5683.
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, SEC File No. 1-
5683.
* (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, SEC File No. 1-5683.
* (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, SEC File No. 1-
5683.
* (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, SEC File No. 1-
5683.
<PAGE>3
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
* (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, SEC File No. 1-
5683.
* (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, SEC File
No. 1-5683.
* (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, SEC File No. 1-
5683.
* (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,
SEC File No. 1-5683.
* (ix) - Eighth Amendment dated as of May 1, 1995 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, 1995, SEC File No. 1-
5683.
* (x) - Ninth Amendment dated as of May 1, 1996 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, 1996, SEC File No. 1-
5683.
* (xi) - 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, SEC File No. 1-
5683.
* (xii) - 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, SEC File No. 1-5683.
* (xiii) - 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, SEC File No. 1-
5683.
* (xiv) - 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, SEC File No. 1-
5683.
* (xv) - 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, SEC File No. 1-
5683.
<PAGE>4
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
* (xvi) - 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, SEC File No. 1-
5683.
* (xvii) - 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, SEC File No. 1-
5683.
* (xviii) - Seventh Amendment dated as of May 1, 1995 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, 1995,
SEC File No. 1-5683.
* (xix) - Eighth Amendment dated as of May 1, 1996 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, 1996, SEC File No. 1-
5683.
* (xx) - 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, SEC File No. 1-
5683.
* (xxi) - 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, SEC File No. 1-5683.
* (xxii) - 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, SEC File No. 1-
5683.
* (xxiii) - 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, SEC File No. 1-
5683.
* (xxiv) - 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, SEC File No. 1-
5683.
* (xxv) - 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, SEC File No. 1-
5683.
* (xxvi) - 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, SEC File No. 1-
5683.
<PAGE>5
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
* (xxvii) - Seventh Amendment dated as of May 1, 1995 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, 1995,
SEC File No. 1-5683.
* (xxviii) - Eighth Amendment dated as of May 1, 1996 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, 1996,
SEC File No. 1-5683.
* (xxix) - 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, SEC File No. 1-
5683.
* (xxx) - 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, SEC File No. 1-5683.
* (xxxi) - 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, SEC File No. 1-
5683.
* (xxxii) - 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, SEC File No. 1-5683.
* (xxxiii) - 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, SEC File No. 1-
5683.
* (xxxiv) - 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, SEC File No. 1-
5683.
* (xxxv) - Fifth Amendment dated as of January 1, 1995 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, 1995,
SEC File No. 1-5683.
* (xxxvi) - Sixth Amendment dated as of May 1, 1995 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, 1995, SEC File No. 1-
5683.
* (xxxvii) - Seventh Amendment dated as of May 1, 1996 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, 1996,
SEC File No. 1-5683.
<PAGE>6
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
* (xxxviii) - Form of Key Executive Employment Protection Agreement
dated November 14, 1995, between USLIFE Corporation and
Gordon E. Crosby, Jr., Greer F. Henderson, Christopher S.
Ruisi, and William A. Simpson, incorporated herein by
reference to USLIFE's Annual Report on Form 10-K for the
year ended December 31, 1995, SEC File No. 1-5683.
* (xxxix) - Form of Employment and Key Executive Employment
Protection Agreement dated November 14, 1995, between
USLIFE Corporation and Wesley E. Forte, A. Scott Bushey,
Arnold A. Dicke, James M. Schlomann and John D. Gavrity,
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1995, SEC File
No. 1-5683.
* (xl) - Form of Key Executive Employment Protection Agreement
dated November 14, 1995, between USLIFE Corporation and
Frank J. Auriemmo, Jr., Richard J. Chouinard, and Richard
G. Hohn, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1995, SEC File No. 1-5683.
* (xli) - Form of Key Executive Employment Protection Agreement
dated November 27, 1995, between All American Life
Insurance Company and James A. Bickler, USLIFE Real Estate
Services Corporation and Philip G. Faulkner, USLIFE
Insurance Services Corporation and Thomas L. Hendricks,
USLIFE Credit Life Insurance Company and William M. Keeler,
and dated January 24, 1996, between The United States Life
Insurance Company In the City of New York and Ralph J.
Cargiulo, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1995, SEC File No. 1-5683.
* (xlii) - Employment and Key Executive Employment Protection
Agreement dated May 1, 1996 between USLIFE Corporation and
Michael LeFante, incorporated herein by reference to
USLIFE's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, SEC File No. 1-5683.
* (xliii) - Key Executive Employment Protection Agreement dated
May 23, 1996 between USLIFE Corporation and Ronald M.
Chernoff, incorporated herein by reference to USLIFE's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, SEC File No. 1-5683.
* (xliv) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, 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, 1996, SEC File No. 1-5683.
* (xlv) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and Arnold A. Dicke, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, SEC File No. 1-5683.
* (xlvi) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, 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, 1996, SEC File No. 1-5683.
* (xlvii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, 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, 1996, SEC File No. 1-5683.
<PAGE>7
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
* (xlviii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and James M. Schlomann, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, SEC File No. 1-5683.
(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, SEC File No. 1-5683.
(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, SEC File No. 1-5683.
(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, SEC File No. 1-5683.
(lii) - Third Amendment to Lease dated May 10, 1989 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 Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, SEC File No. 1-5683.
(liii) - Fourth Amendment to Lease dated April 14, 1995 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 Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, SEC File No. 1-5683.
(liv) - Fifth Amendment to Lease dated as of December 26, 1995
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, 1995, SEC File No. 1-5683.
(lv) - Sixth Amendment to Lease dated as of December 26, 1995
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, 1995, SEC File No. 1-5683.
(lvi) - 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, SEC File No. 1-5683.
<PAGE>8
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
(lvii) - 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, SEC File No. 1-5683.
* (lviii) - 1981 Stock Option Plan, as amended, incorporated
herein by reference to USLIFE's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, SEC File No.
1-5683.
* (lix) - USLIFE Corporation Non-Employee Directors' Deferred
Compensation Plan, as amended January 28, 1997.
* (lx) - USLIFE Corporation Book Unit Plan, as amended
effective September 1, 1995, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, SEC File No. 1-5683.
* (lxi) - USLIFE Corporation Retirement Plan for Outside
Directors (as amended January 23, 1996), incorporated
herein by reference to USLIFE's Annual Report on Form 10-K
for the year ended December 31, 1995, SEC File No. 1-5683.
* (lxii) - USLIFE Corporation Restricted Stock Plan, as amended
effective February 13, 1997.
* (lxiii) - USLIFE Corporation 1991 Stock Option Plan, as amended
effective September 1, 1995, incorporated herein by
reference to USLIFE's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, SEC File No. 1-5683.
* (lxiv) - 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.
* (lxv) - Annual Incentive Plan, as amended October 25, 1994,
for Selected Key Officers of USLIFE Corporation and its
Subsidiaries, incorporated herein by reference to USLIFE's
Annual Report on Form 10-K for the year ended December 31,
1994, SEC File No. 1-5683.
* (lxvi) - USLIFE Corporation Executive Officer Deferred
Compensation Plan (as amended January 23, 1996),
incorporated herein by reference to USLIFE's Annual Report
on Form 10-K for the year ended December 31, 1995, SEC File
No. 1-5683.
* (lxvii) - USLIFE Corporation 1993 Long-Term Incentive Award
Guidelines, as amended, incorporated herein by reference to
USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1994, SEC File No. 1-5683.
* (lxviii) - USLIFE Corporation Supplemental Employee Savings and
Investment Plan (as amended January 23, 1996), incorporated
herein by reference to USLIFE's Annual Report on Form 10-K
for the year ended December 31, 1995, SEC File No. 1-5683.
* (lxix) - USLIFE Corporation Supplemental Retirement Plan (as
amended October 22, 1996).
<PAGE>9
USLIFE Corporation
Index To Exhibits
Exhibit
Number Exhibit
_______ _______
* (lxx) - Trust Agreement made as of November 22, 1996, among
USLIFE Corporation, Chase Manhattan Bank and KPMG Peat
Marwick LLP (as independent contractor) establishing a
trust to fund certain employment contracts, the Book Unit
Plan and the USLIFE Corporation Deferred Compensation Plan.
* (lxxi) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation,
Chemical Bank (now known as Chase Manhattan Bank) and KPMG
Peat Marwick LLP (as independent contractor) establishing a
trust to fund the USLIFE Corporation Supplemental
Retirement Plan and the Supplemental Employee Savings and
Investment Plan, incorporated herein by reference to
USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1995, SEC File No. 1-5683.
* (lxxii) - Trust Agreement made as of March 1, 1994, as amended,
effective January 23, 1996, among USLIFE Corporation,
Chemical Bank (now known as Chase Manhattan Bank) and KPMG
Peat Marwick LLP (as independent contractor) establishing a
trust to fund the USLIFE Corporation Retirement Plan for
Outside Directors and the USLIFE Corporation Deferred
Compensation Plan for Outside Directors, incorporated
herein by reference to USLIFE's Annual Report on Form 10-K
for the year ended December 31, 1995, SEC File No. 1-5683.
* (lxxiii) - Form of Employment and Key Executive Employment
Protection Agreement dated March 14, 1997 between USLIFE
Corporation and James Addiego and Neal M. Stern.
(lxxiv) - Agreement and Plan of Merger by and among American
General Corporation, Texas Stars Corporation and USLIFE
Corporation, dated as of February 12, 1997, incorporated
herein by reference to USLIFE's Report on Form 8-K dated
February 21, 1997, SEC File No. 1-5683.
12 - Computations of ratios of earnings to fixed charges.
21 - List of Subsidiaries, incorporated herein by reference
to USLIFE's Annual Report on Form 10-K for the year ended
December 31, 1995, SEC File No. 1-5683.
23 - Consent of Independent Certified Public Accountants
(see page 63).
27 - Financial Data Schedule (electronic filing only).
99 (i) - Annual Report on Form 11-K of USLIFE Corporation
Employee Savings and Investment Plan for the plan year
ended December 31, 1996 (to be filed within 180 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, now known as Chase Manhattan
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, SEC File No. 1-5683.
99 (iii) - Amendment, effective January 23, 1996, to the Trust
Agreement made as of December 6,1990 among USLIFE
Corporation, Manufacturers Hanover Trust Company
(predecessor to Chemical Bank, now known as Chase Manhattan
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, 1995, SEC File No. 1-5683.
* Indicates a management contract or compensatory plan or arrangement.
<PAGE>1
Exhibit 10(lix)
_______________
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
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).
<PAGE>2
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
3(A) Deferred Cash Compensation Accounts
(a) All deferred cash compensation accounts shall be 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, (ii) who 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, or (iii) who elects to have
the balance in his deferred cash compensation account
converted into deferred stock units in accordance
with said formula.
(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
<PAGE>3
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
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. The number of stock units credited under
item (a) (iii) above will be calculated by dividing
the total amount held in the Director's cash
compensation account, or such lesser amount as may be
specified by the Director, by the closing price per
share of USLIFE common stock reported as New York
Stock Exchange-Composite Transactions on the next
trading day falling at least thirty days after the
date the Director elects to make the conversion.
Notwithstanding the foregoing, a Director may not
under any circumstances elect to convert deferred
stock units into deferred cash compensation and such
units shall remain in the Director's deferred stock
unit account until distributed in accordance with the
provisions of Paragraph 4 below.
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 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
<PAGE>4
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
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 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
<PAGE>5
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
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
<PAGE>6
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
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 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 canceled 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 a "Change In Control" which means (i) a
merger
<PAGE>7
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
or consolidation to which USLIFE is a party and
for which the approval of any shareholders of
USLIFE 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 USLIFE representing
25% or more of the combined voting power of
USLIFE's then outstanding securities; (iii) a
sale or transfer of substantially all of the
assets of USLIFE; (iv) a liquidation or
reorganization of USLIFE; or (v) the occurrence
of any Flip Over Transaction or Event, as
defined in Section 1.1(j) of the Amended and
Restated Rights Agreement, as amended from time
to time prior to the occurrence of any such
transaction or event that otherwise would have
previously been considered a Flip Over
Transaction or Event.
5. Miscellaneous
(a) No cash compensation, fees or interest thereon
or 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
<PAGE>8
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
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(d) 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 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
<PAGE>9
USLIFE CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
(AS AMENDED JANUARY 28, 1997)
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
Exhibit 10(lxii)
________________
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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 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.
(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,
<PAGE>2
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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-operations items into 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 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 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.
<PAGE>3
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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, with limitation, any Restricted Share Agreement
(as 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 1,575,000 shares of Common Stock in the
aggregate (as adjusted for the September 1995 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 112,500 Restricted Shares in the aggregate (as adjusted
for the September 1995 3-for-2 stock split) 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.
<PAGE>4
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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
Section 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 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,
<PAGE>5
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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 to 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.
(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' 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
<PAGE>6
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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(e)
hereof. If a Participant ceases to be an employee
prior to the end of the applicable Restricted Period
for any other reason, such Participant shall
immediately forfeit, in accordance with the provisions
of 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.
<PAGE>7
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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 Common Stock available for issuance under the
Plan, (b) the number of shares of Common Stock subject to or
reserved for issuance under outstanding Restricted Shares
grants, and (c) the maximum number of Restricted Shares
which may be granted in the aggregate under the Plan to a
Participant during any one-year period. 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 Committee or the 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 the descent and distribution.
<PAGE>8
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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. A Participant may request that 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 be satisfied in whole or in part 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 and if any
Participant makes such a request, the Corporate Secretary
shall arrange for the withholding of Restricted Shares
sufficient to satisfy such tax obligations.
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.
<PAGE>9
USLIFE CORPORATION
RESTRICTED STOCK PLAN
(AS AMENDED EFFECTIVE FEBRUARY 13, 1997)
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
Exhibit 10(lxix)
________________
USLIFE CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
(AS AMENDED OCTOBER 22, 1996)
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 a 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.
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.
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 Participant's
normal, early or vested retirement benefit to
which he would be entitled under Article IV of the
Retirement Plan and as otherwise provided under
this Plan upon his termination of employment
without the application of Code Sections
401(a)(17) and 415 reduced by the annual
<PAGE>2
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
Participants who retire after their normal
retirement date, the benefit to which the
Participant 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 shall only reflect continued
benefit accruals beyond normal retirement date and
shall ignore the actuarially increased normal
retirement benefit.
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") including, among
other things, payments to which the Employee is
entitled under any employment contract, Restricted
Stock Plan, Book Unit Plan and Annual Incentive
Plan, all as amended from time to time before a
Change-In-Control 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,
Earnings also includes any regular or enhanced
severance paid to the Employee to which the
Employee is entitled as a result of any
termination of employment initiated by the Company
or the Participant if the Participant is not
terminated by the Company for cause (which for
Participants employed under Key Executive
Employment Protection Agreements shall be limited
to"Cause" as defined in such Agreement) occurring
within three years after a Change In Control or
three years after the expiration of any employment
contract, whichever is later and which severance
shall be included as a part of the
<PAGE>3
Employee's Earnings for his final full year of
employment unless its inclusion in the Earnings
for the final year of employment or part thereof
produces a higher Final Average Earnings.
Notwithstanding anything to the contrary herein,
in the event of a Change In Control, Earnings
shall not include (1) the "Severance Amount" and
"Tax Reimbursement Payment" paid or payable to a
Participant under a Key Executive Employment
Protection Agreement; or (2) the value of any
Restricted Shares under the USLIFE Corporation
Restricted Stock Plan which may become free of
restrictions solely as the result of a Change In
Control. For Participants providing an Hour of
Service after November 1, 1994, in the event of a
Participants voluntary or involuntary termination
of employment after 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 if the Participant has not
been terminated for cause as described above,
Earnings also includes any regular or enhanced
severance paid to the Employee. For Participants
providing an Hour of Service after November 1,
1994, in the event of a Participant's voluntary or
involuntary termination of employment after 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, if the Participant has not been
terminated by the Company for cause as described
above, Final Average Earnings includes any regular
or enhanced severance paid to the Employee, and
the final year of employment 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.
For the purpose of the benefit calculation, Years
of Participation Service shall also include the
Participant's total years of employment, counting
as a full Year of Participation Service (1) all
completed Plan Years and (2) any and all partial
Plan Years (each and every partial Plan Year being
treated as a full Year of Participation) from the
Participant's date of hire through and including
the date upon which the Participant's employment
terminates or, if the Participant's employment is
involuntarily terminated by the Company, the date
upon which the Participant's employment is
projected to terminate under any employment
contract, whichever is longer.
4. Method of Payment
_________________
Unless a Participant receives a lump sum payment
in accordance with Section 8, 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
<PAGE>4
termination of employment or death, 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, such payments shall be made to the
Participant, or in the case of the Participant's
death to his spouse or beneficiary, as the case
may be, through the month when the Participant
would have reached his actual 80th birthday, or
for 180 months (15 years) from the date that the
benefits commence to the Participant, his spouse
or beneficiary, whichever is later ("Guaranteed
Period"). Those 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 or upon his death after attaining
age 55 if he is fully vested 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 a Change In
Control which means (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;
(iv) a liquidation or reorganization of the
Company; or (v) the occurrence of any Flip Over
Transaction or Event, as defined in Section 1.1(j)
of the Amended and Restated Rights Agreement, as
amended from time to time prior to the occurrence
of any such transaction or event that otherwise
would have previously been considered a Flip Over
Transaction or Event, 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
<PAGE>5
Retirement Plan as per the first clause of Section
3 of this Plan, his Final Average Earnings, his
Years of Participation Service and his age will be
redefined to include service (treating any and all
partial Plan Years as full Years of Participation
Service) with USLIFE through the projected end of
his key executive employment protection agreement
with the Company then in effect, as well as any
regular or enhanced 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, based upon his hypothetical age, to be
paid to the Participant as provided in Section 4
of the Plan, 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 and Section 3 of this 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
or Early 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 was not married,
will be entitled to receive the monthly
payments for the duration of the Guaranteed
Period that were being paid or would have
been 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
<PAGE>6
lump sum (determined using the GAM 1983 Male
Mortality Table and the interest discount
rate described in Section 8(f)(iii), except
that the rate is to be determined based on
the said yield on the last business day of
the month preceding the date of death), or
the installments over the remaining
Guaranteed Period shall continue, as the
Company, in its discretion decides.
C. 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), (B) or (C) above or in
Section 4, no death benefit shall be payable under this
Plan.
8. Lump Sum Payment
________________
a. If the lump sum value of a benefit payable to
a Participant, his spouse or beneficiary is
less than $25,000 (as determined in
accordance with paragraph (f) hereof) the
Company may direct that such benefit be paid
as such lump sum.
b. Notwithstanding anything else to the contrary
herein, effective for benefits payable on or
after October 22, 1996, a Participant may
also elect to receive his benefits payable
under the Plan in the form of a lump sum
payment, by filing a written election with
the Administrative Committee. No such
election shall be valid unless: (i) it is
made at least twelve months prior to the date
that benefits would otherwise be payable in
accordance with Section 4 of the Plan, or
(ii) the election is made within the 12-month
period following the adoption of this
restated plan to provide for lump sum
payments under this Plan and the
Administrative Committee approves the
election, or (iii) the election is made
subsequent to the Participant's termination
of employment by the Company and the
Administrative Committee approves the
election. A Participant may revoke or change
his election any number of times, but only if
such revocation or change is made at least
twelve months prior to the date that benefits
would otherwise be payable.
<PAGE>7
c. The maximum lump sum payable in accordance
with this Section is $2,000,000.
d. The Plan will pay the elected lump sum in the
December which is coincident with or next
following the date of the Participant's 55th
birthday or his termination of employment or
death, if later, unless the aggregate lump
sum payments of all Participants entitled to
receive payments in the same Plan Year exceed
the sum of the service cost and interest cost
components of the Plan's pension expense,
resulting in "plan settlement" accounting
under SFAS 88 (the "threshold sum"). If the
aggregate lump sum payments exceed the
threshold sum, then the lump sum payment of
the Participants (after payment of any
Participant whose lump sum is less than
$25,000) shall be reduced on a pro-rata basis
so that the aggregate lump sum payments do
not exceed the threshold sum.
e. If any Participant cannot be paid the full
lump sum benefit because of the limitations
under paragraphs (c) or (d) and the lump sum
value of the balance of a Participant's
Accrued Benefit is $25,000 or less, then such
lump sum value, adjusted for interest, shall
be paid in the December of the year following
the date on which the first lump sum payment
was made. If the balance of the Accrued
Benefit exceeds $25,000, it shall be payable
as otherwise provided under this Plan with
the first monthly payment being made on the
January 1st following the date on which the
lump sum payment is made.
f. The lump sum value of a Participant's Accrued
Benefit shall be determined using the
following assumptions:
(i) Mortality shall be determined using
the 1983 GAM Male Mortality Table.
(ii) The assumed retirement age shall be
the greater of age 55 or the
employee's age on the date benefits
are payable.
(iii) The interest discount rate
shall be 65% of the sum of (A) the
yield on Treasury Bonds as
published under the caption "Lehman
Brothers Long T-Bond" in the Wall
Street Journal on the September
30th (or the first business day
thereafter) preceding the date on
which the lump sum is scheduled to
be paid and (B) two percent.
<PAGE>8
g. Effective on and after October 22, 1996, in
the event of a Change In Control, all
Participants, whether or not an election has
been filed, are to be paid their total
Accrued Benefit on an immediate lump sum
basis. In the event benefits are payable
under Section 6, the assumed retirement age
shall be the Employee's age on the date that
monthly benefits would have been payable
under Section 6.
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 GAM 1983 Male Mortality
Table and the interest discount rate described in
Section 8(f)(iii), except that the rate is to be
determined based on the said yield on the last
business day of the month preceding the date on
which Federal income tax is determined to be due.
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.
<PAGE>9
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 GAM 1983
Male Mortality Table and the interest discount
rate described in Section 8(f)(iii), except that
the rate is to be based upon the said yield on the
last business day of the month preceding the
event).
(c) 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
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
<PAGE>10
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 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
<PAGE>11
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.
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
Exhibit 10(lxx)
_______________
THIS AGREEMENT, made as of the 22nd day of
November, 1996, among USLIFE Corporation, a New York
corporation (the "Company"), The Chase Manhattan Bank, a New
York corporation (the "Trustee") and KPMG Peat Marwick
("Independent Contractor").
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has entered into certain
written employment contracts and Key Executive Employment
Protection Agreements (referred to collectively herein as
the "Contracts") with a select group of its management
employees (referred to herein as "Contract Holders");
WHEREAS, the Company has awarded certain book
units ("Units") to select key officers (referred to herein
as "Participants") under its Book Unit Plan;
WHEREAS, the Company has provided select
executives with the opportunity to become participants
(referred to herein as "Participants") in the USLIFE
Corporation Deferred Compensation Plan (the "Deferred
Compensation Plan");
WHEREAS, the Company desires to provide additional
assurance to some or all such management employees that
their unfunded contractual rights under the Contracts, Units
and the Deferred Compensation Plan will in the future be met
or substantially met by application of the procedures set
forth herein;
WHEREAS, the Company wishes to establish separate
accounts (hereinafter the "Accounts") with respect to some
or all of the Contract Holders and Participants as
determined by the Company prior to a Change in Control (as
hereinafter defined in Section 2.3(d)(iv)) in order to
provide a source of payments as such may be required under
the terms of the agreements between the Company and each of
the Contract Holders and under the Book Unit Plan and the
Deferred Compensation Plan;
<PAGE>2
WHEREAS, except as may be expressly provided in
this Agreement, amounts allocated to each separate Account,
as determined by the Company from time to time in its sole
discretion, and the earnings attributed thereto shall be
used by the Trustee solely in satisfaction of the
liabilities of the Company with respect to the Contract
Holder or Participant for whom such separate Account has
been established and the expenses of administering the
trust, established herein, and such utilization shall be in
accordance with the procedures set forth herein;
WHEREAS, the Company wishes to establish a
separate account with respect to all amounts that are
contributed hereunder by the Company which are not allocated
by the Company at the time of such contribution to the
Account of an individual Contract Holder or Participant (the
"General Account");
WHEREAS, the Trust is intended to be a "grantor
trust" with the corpus and income of the Trust treated as
assets and income of the Company for federal income tax
purposes pursuant to Sections 671 through 678 of the
Internal Revenue Code of 1986 (the "Code"); as amended;
WHEREAS, the Company intends that the assets of
the Trust will be subject to the claims of creditors of the
Company as provided in Article II;
WHEREAS, the Trustee is not a party to any of the
Contracts, the Book Unit Plan or the Deferred Compensation
Plan and makes no representations with respect thereto, and
all representations and recitals with respect to the
Contracts, the Book Unit Plan or the Deferred Compensation
Plan shall be deemed to be those of the Company.
NOW, THEREFORE, in consideration of the premises
and mutual and independent promises herein, the parties
hereto covenant and agree as follows:
<PAGE>3
ARTICLE I
_________
1.1 The Company hereby establishes with the
Trustee a trust consisting of such sums of money and such
property acceptable to the Trustee as shall from time to
time be paid or delivered to the Trustee and the earnings
and profits thereon. All such money and property, all
investments made therewith and proceeds thereof, less the
payments or other distributions which, at the time of
reference, shall have been made by the Trustee, as
authorized herein, are referred to herein as the "Fund" and
shall be held by the Trustee, IN TRUST, in accordance with
the provisions of this Agreement.
1.2 The Trustee shall hold, manage, invest and
otherwise administer the Fund pursuant to the terms of this
Agreement. The Trustee shall be responsible only for
contributions actually received by it hereunder. The amount
of each contribution by the Company to the Fund shall be
determined in the sole discretion of the Company and the
Trustee shall have no duty or responsibility with respect
thereto.
1.3 The Independent Contractor (as hereinafter in
Section 3.1 defined) shall maintain in an equitable manner a
separate Account for each Contract Holder and Participant in
which it shall keep a separate record of the amount of the
fund allocated to such Contract Holder or Participant. The
Company shall certify to the Trustee and the Independent
Contractor at the time of each contribution to the Fund the
amount of such contribution to be allocated to each Account.
Provided, however, that following a Change in Control, the
Company may only allocate contributions to either the
General Account or to Accounts which were established prior
to the Change in Control. Any amount contributed by the
Company that is not so certified shall be allocated to the
General Account.
1.4 The Company may contribute to the Fund an
irrevocable letter of credit (hereinafter referred to as a
"L/C"). The following provisions shall be applicable to any
such L/C:
<PAGE>4
(a) the L/C shall expire no sooner than one
(1) year from the date of issuance,
(b) the Company shall continue to maintain
such L/C in effect until it is replaced by cash or another
irrevocable L/C or this Agreement terminates pursuant to
Article IX, whichever occurs first,
(c) the Company shall renew or replace such
L/C at least thirty (30) days before its expiration for an
additional period of one (1) year,
(d) if such L/C, or any renewal thereof, is
not renewed or replaced by a L/C delivered to the Trustee at
least thirty (30) days before the expiration of the
predecessor L/C, the Trustee may draw down the full amount
of such L/C and hold the proceeds pursuant to the terms of
this Agreement; provided, however, that in the event the
Company is unable to renew such L/C at least thirty (30)
days prior to the expiration of the predecessor L/C at a
cost equal to or less than twenty-five (25) basis points
over the current annual cost of such L/C, and the Trustee
with reasonable diligence is unable to identify a bank
(within the definition of Section 1.4(h)) that will replace
such L/C at a cost equal to or less than twenty-five (25)
basis points over the current annual cost of such L/C, then
the Trustee shall not draw down the amount of such L/C as
provided in this Section 1.4(d),
(e) the Trustee may also draw down on such
L/C at any time the Trustee determines the proceeds of such
L/C are necessary to allow the Trustee to fulfill its
obligations under this Agreement,
(f) the proceeds of such L/C shall be
available to the Trustee upon the Trustee's presentation of
its sight draft,
<PAGE>5
(g) the Company may, at any time, replace
such L/C with another irrevocable L/C having substantially
similar terms, or with an equal amount of cash, or any
combination thereof,
(h) any L/C shall be issued by a bank
(including the Trustee) with assets in excess of $2 billion
and net worth in excess of $100 million, shall be reasonably
acceptable to the Trustee, and shall be in a form as shall
be reasonably acceptable to the Trustee.
1.5 The Trustee, for investment purposes only,
may commingle all of the assets of the Fund and treat them
as a single fund, but the records of the Independent
Contractor at all times shall show the percentages of the
Trust allocable to each Account and to the General Account.
The Fund shall be revalued by the Trustee as of the last
business day of each calendar quarter at current market
values, as determined by the Trustee. The Independent
Contractor shall allocate any increase or decrease in the
current market value of the Fund, as determined by the
Trustee, pro-rata to all of the Accounts and to the General
Account in proportion to the balance of the assets allocated
thereto as of the last business day of the previous calendar
quarter.
ARTICLE II
__________
2.1 Notwithstanding any provision in this
Agreement to the contrary, if at any time while the Trust is
still in existence the Company becomes insolvent (as defined
herein), the Trustee shall upon written notice thereof from
the Company's Board of Directors, Chairman of the Board or
Chief Executive Officer suspend the payment of all amounts
from the Fund and shall thereafter hold the Fund in suspense
for the benefit of the creditors of the Company until it
receives a court order directing the disposition of the
Fund; provided, however, the Trustee may deduct or continue
to deduct its fees and expenses and other expenses of the
Trust, including taxes and the Independent Contractor's fees
and expenses, pending the receipt of such court order. The
<PAGE>6
Company shall be considered to be insolvent if (a) a final
judicial determination is entered that the Company is unable
to pay its debts as such debts mature or (b) there shall
have been filed by or against the Company in any court or
other tribunal either of the United States or of any State
or of any other authority now or hereafter exercising
jurisdiction, a petition in bankruptcy or insolvency
proceedings or for reorganization or for the appointment of
a receiver or trustee of all or substantially all of the
Company's property under the present or any future Federal
bankruptcy code or any other present or future applicable
Federal, State or other bankruptcy or insolvency statute or
law. By its approval and execution of this Agreement, the
Company represents and agrees that its Board of Directors,
Chairman of the Board, Vice Chairman or President, as from
time to time acting, shall have the fiduciary duty and
responsibility on behalf of the Company's creditors to give
to the Trustee prompt written notice of any event of the
Company's insolvency and the Trustee shall be entitled to
rely thereon to the exclusion of all directions or claims to
make payments thereafter made. Absent such notice, the
Trustee shall have no responsibility for determining whether
or not the Company has become insolvent.
2.2 The Company represents and agrees that the
Trust established under this Agreement does not fund and is
not intended to fund its obligations under the Contracts,
the Book Unit Plan, the Deferred Compensation Plan or any
other employee benefit plan or program of the Company. Such
Trust is and is intended to be a depository arrangement with
the Trustee for the setting aside of cash and other assets
of the Company as and when it so determines in its sole
discretion for the meeting of part or all of its future
contractual obligations to some or all of the Contract
Holders and Participants. Contributions by the Company to
the Trust shall be in amounts determined solely by the
Company and shall be in respect of only those Contract
Holders and Participants selected prior to a Change in
Control by the Company from time to time as it determines.
The purpose of this Trust is to provide a fund from which
the Company's obligations under the Contracts, the Book Unit
Plan and Deferred Compensation Plan may be payable and as to
which Contract Holders and Participants with Accounts
hereunder may, by exercising the procedures set forth
herein, have access to some or all of the amounts due them
<PAGE>7
under the Contracts, the Book Unit Plan and the Deferred
Compensation Plan as such become due without having the
payment of such amounts subject to the administrative
control of the Company unless the Company becomes insolvent
as defined in Section 2.1. The Company further represents
that neither the Contracts, the Book Unit Plan nor the
Deferred Compensation Plan are part of and do not constitute
a qualified plan under Section 401(a) of the United States
Internal Revenue Code and therefore the Contracts, the Book
Unit Plan and Deferred Compensation Plan are not subject to
any of the Code requirements applicable to tax-qualified
plans.
2.3 Amounts paid or delivered by the Company to
the Trustee pursuant to Section 1.1 shall not revert to the
Company except as provided below:
(a) Upon the satisfaction of all liabilities
of the Company to Contract Holders and Participants for whom
Accounts have been established, any assets of the Fund then
remaining may be distributed to the Company as per its
instructions as provided in Section 3.6 or
(b) Upon termination of the Trust as
provided in Section 9.1, the Fund may be distributed to the
Company in accordance with Section 9.2.; or
(c) Upon the insolvency of the Company (as
determined in Section 2.1), the assets of the Fund shall be
distributed in accordance with the provisions of Section
2.1; or
(d) Within six (6) months after the payment
or delivery by the Company of any amounts to the Trustee
pursuant to Section 1.1, the Company may request that any
portion of such amounts be returned to the Company (whether
affecting the Accounts of all or any specified Contract
Holders or Participants). Such a request shall be honored
by the Trustee only if at the date of such request, the
Board of Directors of the Company is made up of "Continuing
Directors" (as defined below). Further, within the original
<PAGE>8
six (6) month period during which the Continuing Directors
may request a return to the Company of amounts paid or
delivered to the Trustee pursuant to Section 1.1, the
Continuing Directors may request a one time extension of
such period for an additional six months.
For purposes of this Agreement, the following terms have the
meaning indicated:
(i) "Acquiring Person" shall mean any person
who is a Beneficial Owner of 20% or more of the
outstanding shares of Common Stock or 20% or more
of the outstanding shares of Voting Stock of the
Company; provided, however, that the term
"Acquiring Person" shall not include the Company
or any wholly-owned subsidiary of the Company or
any employee benefit plan established by any of
them and either in effect on the date of this
Agreement or hereafter approved by the Continuing
Directors. For purposes of this subsection (i) in
determining the percentage of the outstanding
shares of Common Stock or Voting Stock of the
Company with respect to which a person is the
Beneficial Owner, all shares as to which such
person is deemed the Beneficial Owner shall be
deemed outstanding.
(ii) "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in
Rule 12b-2 under the Securities Exchange Act of
1934, as in effect on the date of this Agreement;
provided, however, that the Company shall, for
purposes of this definition, be deemed to be the
"registrant", as such term is used in such Rule.
(iii) A person shall be deemed the
"Beneficial Owner", and to have "Beneficial
Ownership", of any securities as to which such
person or any of such person's Affiliates or
Associates is or may be deemed to be the
beneficial owner pursuant to Rule 13d-3 under the
<PAGE>9
Securities Exchange Act of 1934, as in effect on
the date of this Agreement, as well as any
securities as to which such person or any of such
person's Affiliates or Associates has the right to
become Beneficial Owner (whether such right is
exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion
rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a
person shall not be deemed the "Beneficial Owner",
or to have "Beneficial Ownership", of any security
(A) solely because such security has been tendered
pursuant to a tender or exchange offer made by
such person or any of such person's Affiliates or
Associates until such tendered security is
accepted for purchase or exchange, (B) solely
because such person or any of such person's
Affiliates or Associates has or shares the power
to vote or direct the voting of such security
pursuant to a revocable proxy given in response to
a public proxy or consent solicitation made
pursuant to, and in accordance with, the
applicable rules and regulations of the Securities
Exchange Act of 1934, except if such power (or the
arrangements relating thereto) is then reportable
under Item 6 of Schedule 13D under the Securities
Exchange Act of 1934 ( or any similar provision of
a comparable or successor report) or (C) held for
or pursuant to the terms of any employee stock
ownership or other employee benefit plan of the
Company or a wholly-owned subsidiary of the
Company and either in effect on the date of this
Agreement or hereafter approved by the Continuing
Directors.
(iv) "Change in Control" means (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 Section 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
<PAGE>10
power of the Company's then outstanding
securities; (iii) a sale or transfer of
substantially all of the assets of the Company;
(iv) a liquidation or reorganization of the
Company; or (v) the occurrence of any Flip Over
Transaction or Event, as defined in Section 1.1(j)
of the Amended and Restated Rights Agreement, as
amended from time to time prior to the occurrence
of any such transaction or event that otherwise
would have previously been considered a Flip Over
Transaction or Event. Provided, however, that an
event described above shall not constitute a
Change in Control if within 10 days of such event
the Continuing Directors provide the Trustee with
a resolution expressly stating that such event
shall not constitute a Change In Control for the
purposes of this Agreement.
(v) "Continuing Directors" shall mean those
individuals who constitute the Board of Directors
of the Company on the date of this Agreement and
any individual becoming a director subsequent to
the date of this Agreement whose election or
nomination for election by the Company's
shareholders is approved by a vote of at least six
Continuing Directors who constitute not less than
three-quarters of the directors comprising the
then Continuing Directors, either by a specific
vote or by approval of the proxy statement of the
Company in which such individual is named as a
nominee for director, without objection to such
nomination, provided that no person shall under
any circumstances be considered a Continuing
Director from and after such time as such person
is an Acquiring Person, an Affiliate or Associate
of an Acquiring Person, or a nominee or
representative of any thereof. References to an
approval or other act of Continuing Directors
shall mean approvals given or actions authorized
and/or taken both (A) by the Board of Directors of
the Company (or any legal successor thereto) of
which at the time not less than eight directors
constituting not less than two-thirds of the
<PAGE>11
members are Continuing Directors and (B) by not
less than six Continuing Directors constituting at
least three-fourths of all then Continuing
Directors.
(vi) "Voting Stock" shall mean shares of
capital stock of the Company entitled to vote
generally in the election of the directors of the
Company.
ARTICLE III
___________
3.1 By its acceptance of this Trust the Trustee
hereby agrees to the designation by the Company of KPMG Peat
Marwick as the Company's independent contractor (the
"Independent Contractor") under this Agreement. Provided,
however, that the Trustee conditions its acceptance of such
Independent Contractor upon the Independent Contractor's
execution of the Form of Acknowledgment and Acceptance, or a
similar form acceptable to both the Company and the Trustee,
set forth in Exhibit A of this Agreement. It is herein
recognized that said Independent Contractor is also acting
as the independent consulting actuary of the Company and
that the Trustee shall have no responsibility hereunder for
the continued retention of KPMG Peat Marwick and/or any
responsibility assigned to said Independent Contractor or
its performance thereof so long as said firm continues to be
the Company's independent consulting actuary. In the event
the Company replaces or no longer uses said firm as its
independent consulting actuary, the Trustee in its sole
discretion may, but need not, designate a new Independent
Contractor from the list set forth in Exhibit B of this
Agreement or may continue to use the same Independent
Contractor; or in the event said firm does not accept its
designation as Independent Contractor or accepts said
designation and subsequently resigns, the Trustee shall
designate another entity from the list set forth in Exhibit
B of this Agreement to be the Independent Contractor,
provided however, that any Independent Contractor appointed
by the Trustee shall be independent of the Company. The
Company shall pay or reimburse the Trustee for all fees and
expenses of any Independent Contractor appointed by the
Trustee. The Company shall indemnify and hold the Trustee
harmless for any actions or omissions of any Independent
Contractor and shall indemnify and hold the Independent
<PAGE>12
Contractor harmless for any actions or omissions of the
Trustee. The Independent Contractor shall be paid for its
services on an hourly basis at rates comparable to the rates
that the Independent Contractor charges for comparable
services to its other clients.
3.2 Except for the records dealing solely with
the Fund and its investment, which shall be maintained by
the Trustee, the Independent Contractor shall maintain all
the records of Contract Holders and Participants
contemplated by this Agreement, including the maintenance of
the separate Accounts of each Contract Holder and
Participant under this Agreement and the maintenance of the
General Account. All such records shall be made available
promptly on request of the Trustee of the Company. In the
event of a Change in Control the Independent Contractor
shall also be responsible for information with respect to
payments, if any, to Contract Holders and Participants and
shall perform such other duties and responsibilities as the
Company or the Trustee determines is necessary or advisable
to achieve the objectives of this Agreement.
3.3 Upon the establishment of this Trust or as
soon thereafter as practicable, the Company shall furnish to
the Independent Contractor and to the Trustee all of the
information necessary to determine the amounts payable to or
with respect to each Contract Holder or Participant
(hereinafter referred to as the "Contract Holder and
Participant Data"). Notwithstanding the occurrence of a
Change in Control, the Company shall regularly, at least
annually, furnish revised updated Contract Holder and
Participant Data to the Independent Contractor. In the
event the Company refuses or neglects to provide updated
Contract Holder or Participant information, as contemplated
herein, the Independent Contractor shall be entitled to rely
upon the most recent information furnished to it by the
Company.
3.4 Prior to a Change in Control, upon the
direction of the Company the Independent Contractor shall
prepare a certification (a "Payment Certification") to the
Trustee that the Company's obligations to a Contract Holder
<PAGE>13
or Participant have become payable. Notwithstanding any
other provisions of this Agreement, after a Change in
Control upon the proper application of a Contract Holder or
Participant, the Independent Contractor shall, without
direction from the Company, prepare a Payment Certification
to the Trustee, based upon the most recent Contract Holder
and Participant Data furnished to the Independent Contractor
prior to the Change in Control and any supplemental
information furnished to the Independent Contractor by a
Contract Holder or Participant upon which the Independent
Contractor may reasonably rely, that the Company's
obligations to the Contract Holder or Participant have
become payable. In the event that the Trustee (a) suspends
payments from the Fund pursuant to Section 2.1, and (b)
pursuant to a court order as required by Section 2.1,
subsequently resumes all of its duties and responsibilities
under this Agreement, the Independent Contractor shall
prepare a certification (an "Accrued Payment Certification")
of all amounts that would otherwise have been payable to
each Contract Holder or Participant from the Fund during
such period of time as the Trustee suspended payments
pursuant to Section 2.1. Each Payment Certification and
each Accrued Payment Certification shall include the amount
of such payments, the manner of payment and the name,
address and social security number of the recipient. Each
Payment Certification shall be updated annually. The
Trustee shall be entitled to rely on any Payment
Certification or any Accrued Payment Certification provided
by the Independent Contractor, and shall have no duty to
verify the accuracy thereof. Upon the receipt of a Payment
Certification or an Accrued Payment Certification and
appropriate federal, state and local tax withholding
information, the Trustee shall commence cash distributions
from the Trust Fund in accordance therewith to the person or
persons so indicated and to the Company with respect to
taxes required to be withheld and the Independent Contractor
shall charge the Account established hereunder for the
Contract Holder or Participant. The Independent Contractor
shall furnish a copy of each Payment Certification and each
Accrued Payment Certification to the Contract Holder, the
Participant or the Participant's beneficiary for which such
certification has been prepared. The Company shall have
full responsibility for the payment of all withholding taxes
to the appropriate taxing authority and shall furnish each
<PAGE>14
Contract Holder, Participant, beneficiary of the Participant
and the Independent Contractor with the appropriate tax
information form evidencing such payment and the amount
thereof.
3.5 Notwithstanding any provision in this
Agreement to the contrary, in the event the Trustee in its
sole discretion reasonably disagrees with the accuracy or
propriety of any Payment Certification or any Accrued
Payment Certification, the Trustee, if unable to resolve
such disagreement with the Independent Contractor, may apply
to a court of appropriate jurisdiction for judicial review
of such Payment Certification or Accrued Payment
Certification. Pending the resolution of any disagreement
with the Independent Contractor with regard to the accuracy
or propriety of any Payment Certification or any Accrued
Payment Certification, the Trustee shall not distribute any
amount from the Fund pursuant to such Payment Certification
or Accrued Payment Certification. The Trustee shall use its
reasonable best efforts to promptly resolve any such
disagreement that it may have with the Independent
Contractor.
3.6 All amounts payable from the Fund to a
Contract Holder or Participant shall be paid solely from the
account of such Contract Holder or Participant. Upon the
satisfaction of all Company liabilities to a Contract Holder
or Participant for whom an Account has been established
hereunder, the Independent Contractor shall prepare a
certification to the Trustee and to the Company showing the
balance, if any, remaining in such Contract Holder's or
Participant's Account. Such balance from a Participant's
Account shall be allocated first among Participant Accounts
within the same Plan, and, if the liability of the Company
to all Participants within the same Plan, has been
satisfied, the balance, if any, shall be allocated among the
Contract Holders' Accounts and Participant Accounts under
the other Plan. Similarly, any Balance from a Contract
Holder's Account shall be allocated first among the Accounts
of Contract Holders and, if the liability of the Company to
all Contract Holders has been satisfied, the balance, if
any, shall be allocated among the Participants' Accounts in
the Book Unit Plan and Deferred Compensation Plan. Such
balance, whether divided among the Contract Holders, the
Participants or both the Contract Holders and Participants,
<PAGE>15
shall be reallocated ratably by the Independent Contractor
(using the information set forth on the most recent
estimated statement of amounts payable under the Contracts,
the Book Unit Plan or the Deferred Compensation Plan
prepared by the Independent Contractor pursuant to Section
3.3) to the Accounts of Contract Holders and/or Participants
who at such time have Contracts in effect or interests in
the Book Unit Plan or Deferred Compensation Plan (including
Accounts which may have previously been reduced to a zero
balance) in the ratio that liabilities in respect of each
such Contract Holder under the Contracts or Participant
under the Book Unit Plan or Deferred Compensation Plan bear
to the total liabilities to all such Contract Holders or
Participants. Upon the satisfaction of all liabilities of
the Company to all Contract Holders and Participants for
whom Accounts have been established hereunder, the
Independent Contractor shall prepare a certification to the
Trustee and to the Company, and the Trustee upon receipt of
such certification shall transfer all of the assets of the
Fund to the trust established between the Company and
Trustee, dated September 25, 1990, with regard to the
Company's Supplemental Retirement Plan and as amended with
regard to its Supplemental Employee Savings and Investment
Plan (the "SRIP Trust"). Provided, however, that if the
SRIP Trust has been terminated, upon receiving the
certification referred to in the previous sentence, the
Trustee shall thereupon hold or distribute the Fund in
accordance with the written instructions of the Company.
The Trustee and the Independent Contractor shall have no
responsibility for determining whether any Contract Holder
or Participant has died and shall be entitled to rely upon
information furnished by the Company.
3.7 The Company reserves the right to transfer to
the Fund paid-up life insurance, retirement income or
annuity policies or contracts on or for the life of any
Contract Holder or Participant for whom an Account has been
established hereunder or, prior to a Change in Control, to
direct the Trustee to purchase any such policies or
contracts on or for the life of any such Contract Holder or
Participant out of the amounts allocated to his or her
Account. Any such policy or contract shall be an asset of
the Fund subject to the claims of the Company's creditors in
the event of insolvency, as specified in Section 2.1. The
proceeds of any life insurance policy shall upon the death
<PAGE>16
of the insured Contract Holder be credited to the General
Account. The proceeds of any life insurance policy on a
Participant in the Book Unit Plan or Deferred Compensation
Plan shall be distributed to Participant's beneficiary or
estate to the extent of any Company liability under the Book
Unit Plan or the Deferred Compensation Plan, and thereafter
to the General Account.
3.8 Nothing provided in this Agreement shall
relieve the Company of its liabilities to pay the amounts
due under the Contracts or the Book Unit Plan and Deferred
Compensation Plan except to the extent such liabilities are
met by application of Fund assets. It is the intent of the
Company to have each Account established hereunder treated
as a separate trust designed to satisfy in whole or in part
the Company's legal liability under the Contracts in respect
of the Contract Holder for whom such Account has been
established, or the Company's legal liability to each
Participant under the Book Unit Plan and the Deferred
Compensation Plan. The Company, therefore, agrees that all
income, deductions and credits of each such Account belong
to it as owner for income tax purposes and will be included
on the Company's income tax returns.
ARTICLE IV
__________
4.1 The Company shall provide the Trustee and the
Independent Contractor with a certified copy of each of the
Contracts, the Book Unit award letters, the Book Unit Plan,
the Deferred Compensation Plan and all amendments thereto
and of the resolutions of the Board of Directors of the
Company approving each of the Contracts, the Book Unit
awards, the Book Unit Plan, the Deferred Compensation Plan
and all amendments thereto, promptly upon their adoption.
After the execution of this Agreement, the Company shall
promptly file with the Trustee and the Independent
Contractor a certified list of the names and specimen
signatures of the directors and officers of the Company and
any delegee authorized to act for it. The Company shall
promptly notify the Trustee and the Independent Contractor
of the addition or deletion of any person's name to or from
such list, respectively. Until receipt by the Trustee
<PAGE>17
and/or the Independent Contractor of notice that any person
is no longer authorized so to act, the Trustee or the
Independent Contractor may continue to rely on the authority
of the person. All certifications, notices and directions
by any such person or persons to the Trustee or the
Independent Contractor shall be in writing signed by such
person or persons. The Trustee and the Independent
Contractor may rely on any such certification, notice or
direction purporting to have been signed by or on behalf of
such person or persons that the Trustee or the Independent
Contractor believes to have been signed thereby. The
Trustee and the Independent Contractor may also rely on any
certification, notice or direction of the Company that the
Trustee or the Independent Contractor believes to have been
signed by a duly authorized officer or agent of the Company.
The Company shall be responsible for keeping accurate books
and records with respect to the employees of the Company,
their compensation and their rights and interests under the
Contracts, the Book Unit Plan and the Deferred Compensation
Plan.
4.2 The Company shall make its contributions to
the Trust in accordance with appropriate corporate action
and the Trustee shall have no responsibility with respect
thereto, except to add such contributions to the Fund.
4.3 The Company shall indemnify and hold harmless
the Trustee for any liability or expenses, including without
limitation advances for or prompt reimbursement of
reasonable fees and expenses of counsel and other agents
retained by it, incurred by the Trustee with respect to
holding, managing, investing or otherwise administering the
Fund, other than by its negligence or willful misconduct.
4.4 The Company shall indemnify and hold harmless
the Independent Contractor for any liability or expenses,
including without limitation advances for or prompt
reimbursement of reasonable fees and expenses of counsel and
other agents retained by it, incurred by the Independent
Contractor with respect to keeping the records for Contract
Holders' and Participants' Accounts, reporting thereon to
Contract Holders and Participants, certifying payment
information to the Trustee, determining the status of
<PAGE>18
Accounts and payments hereunder and otherwise carrying out
its obligations under this Agreement, other than those
resulting from the Independent Contractor's negligence or
willful misconduct.
ARTICLE V
_________
5.1 The Trustee shall not be liable in
discharging its duties hereunder, including without
limitation its duty to invest and reinvest the Fund, if it
acts in good faith and in accordance with the terms of this
Agreement and any applicable Federal or state laws, rules or
regulations.
5.2 Subject to investment guidelines agreed to in
writing from time to time prior to a Change in Control, by
the Company and the Trustee, the Trustee shall have the
power in investing and reinvesting the Fund in its sole
discretion:
(a) To invest and reinvest in any property,
real, personal or mixed, wherever situated and whether or
not productive of income or consisting of wasting assets,
including without limitation, common and preferred stocks,
bonds, notes, debentures (including convertible stocks and
securities but not including any stock or security of the
Trustee, the Company or any affiliate thereof), leaseholds,
mortgages, certificates of deposit or demand or time
deposits (including any such deposits with the Trustee),
shares of investment companies and mutual funds, interests
in partnerships and trusts, insurance policies and annuity
contracts, and oil, mineral or gas properties, royalties,
interests or rights, without being limited to the classes of
property in which trustees are authorized to invest by any
law or any rule of court of any state and without regard to
the proportion any such property may bear to the entire
amount of the Fund;
(b) To invest and reinvest all or any
portion of the Fund collectively through the medium of any
common, collective or commingled trust fund that may be
established and maintained by the Trustee, subject to the
<PAGE>19
instrument or instruments establishing such trust fund or
funds and with the terms of such instrument or instruments,
as from time to time amended, being incorporated into this
Agreement to the extent of the equitable share of the Fund
in any such common, collective or commingled trust fund;
(c) To retain any property at any time
received by the Trustee;
(d) To sell or exchange any property held by
it at public or private sale, for cash or on credit, to
grant and exercise options for the purchase or exchange
thereof, to exercise all conversion or subscription rights
pertaining to any such property and to enter into any
covenant or agreement to purchase any property in the
future;
(e) To participate in any plan of
reorganization, consolidation, merger, combination,
liquidation or other similar plan relating to property held
by it and to consent to or oppose any such plan or any
action thereunder or any contract, lease, mortgage,
purchase, sale or other action by any person;
(f) To deposit any property held by it with
any protective, reorganization or similar committee, to
delegate discretionary power thereto, and to pay part of the
expenses and compensation thereof and any assessments levied
with respect to any such property so deposited;
(g) To extend the time of payment of any
obligation held by it;
(h) To hold uninvested any moneys received
by it, without liability for interest thereon, until such
moneys shall be invested, reinvested or disbursed;
(i) To exercise all voting or other rights
with respect to any property held by it and to grant
proxies, discretionary or otherwise;
<PAGE>20
(j) For the purposes of the Trust, to borrow
money from others, to issue its promissory note or notes
therefor, and to secure the repayment thereof by pledging
any property held by it;
(k) To manage, administer, operate, insure,
repair, improve, develop, preserve, mortgage, lease or
otherwise deal with, for any period, any real property or
any oil, mineral or gas properties, royalties, interests or
rights held by it directly or through any corporation,
either alone or by joining with others, using other Trust
assets for any such purposes, to modify, extend, renew,
waive or otherwise adjust any provision of any such mortgage
or lease and to make provision for amortization of the
investment in or depreciation of the value of such property;
(l) To employ suitable agents and counsel,
who may be counsel to the Company or the Trustee, and to pay
their reasonable expenses and compensation from the Fund to
the extent not paid by the Company;
(m) To cause any property held by it to be
registered and held in the name of one or more nominees,
with or without the addition of words indicating that such
securities are held in a fiduciary capacity, and to hold
securities in bearer form;
(n) To settle, compromise or submit to
arbitration any claims, debts or damages due or owing to or
from the Trust, respectively, to commence or defend suits or
legal proceedings to protect any interest of the Trust, and
to represent the Trust in all suits or legal proceedings in
any court or before any other body or tribunal; provided,
however, that the Trustee shall not be required to take any
such action unless it shall have been indemnified by the
Company to its reasonable satisfaction against liability or
expenses it might incur therefrom;
<PAGE>21
(o) To organize under the laws of any state
a corporation or trust for the purpose of acquiring and
holding title to any property which it is authorized to
acquire hereunder and to exercise with respect thereto any
or all of the powers set forth herein; and
(p) Generally, to do all acts, whether or
not expressly authorized, that the Trustee may deem
necessary or desirable for the protection of the Fund.
Notwithstanding the foregoing, the Trustee
shall upon the written direction of the Company prior to a
Change in Control, invest all or part of the amount to the
credit of any Contract Holder's or Participant's Account in
a commercial annuity, retirement income or life insurance
policy or contract selected by the Company and the Trustee
shall have no responsibility for any such investment other
than as owner and custodian thereof.
Notwithstanding the foregoing, after a Change
in Control, the Trustee shall follow the investment
guidelines agreed to by the Company and the Trustee as in
effect immediately prior to the Change in Control.
5.3 No person dealing with the Trustee shall be
under any obligation to see to the proper application of any
money paid or property delivered to the Trustee or to
inquire into the Trustee's authority as to any transaction.
The Independent Contractor's obligations are limited solely
to those explicitly set forth herein and the Independent
Contractor shall have no responsibility, authority or
control, direct or indirect, over the maintenance or
investment of the Fund and shall have no obligation in
respect of the Trustee or the Trustee's compliance with the
Independent Contractor's certifications to the Trustee.
<PAGE>22
5.4 The Trustee shall distribute cash or property
from the Fund in accordance with Article III hereof.
The Trustee may make any distribution
required hereunder by mailing its check for the specified
amount, or delivering the specified property, to the person
to whom such distribution or payment is to be made, at such
address as may have been last furnished to the Trustee, or
if no such address shall have been so furnished, to such
person in care of the Company, or (if so directed by the
Company) by crediting the account of such person or by
transferring funds to such person's account by bank or wire
transfer.
<PAGE>23
ARTICLE VI
__________
6.1 The Company shall pay any Federal, state or
local taxes on the Fund, or any part thereof, and on the
income therefrom.
6.2 The Company shall pay to the Trustee its
reasonable expenses for the management and administration of
the Fund, including without limitation advances for or
prompt reimbursement of reasonable expenses and compensation
of counsel and other agents employed by the Trustee, all
other reasonable and necessary expenses of managing and
administering the Trust that are not paid by the Company
including, but not limited to, investment management fees,
computer time charges, data retrieval and input costs, and
charges for time expended by personnel of the Trustee in
fulfilling the Trustee's duties. The Company shall also pay
to the Trustee reasonable compensation for its services as
Trustee hereunder, the amount of which shall be agreed upon
from time to time by the Company and the Trustee in writing;
provided, however, that if the Trustee forwards an amended
compensation schedule to the Company requesting its
agreement thereto and the Company fails to object thereto
within thirty (30) days of its receipt, the amended
compensation schedule shall be deemed to be agreed upon by
the Company and the Trustee. Such expenses and compensation
shall be a charge on the Fund and shall constitute a lien in
favor of the Trustee until paid by the Company. All such
expenses and compensation charged to the Fund, unless
otherwise paid by the Company, shall be applied against the
General Account. In the event that the assets allocated to
the General Account are entirely depleted, all such expenses
and compensation charged to the Fund shall be applied pro-
rata against all Accounts in proportion to the assets
allocated thereto. Notwithstanding any other provision of
this Section 6.2, to the extent that the Trustee, in its
discretion, decides that an expense is specifically
attributable to one or more specified Accounts such expense
shall be charged to such specified Accounts in such
proportion as the Trustee decides. Prior to allocating any
particular expense to a specific Account, the Trustee shall
provide notice of its intention to so allocate to the
<PAGE>24
Company, the Independent Contractor and the Contract Holder
or Participant for whom such Account was established.
ARTICLE VII
___________
7.1 The Trustee shall maintain records with
respect to the Fund that show all its receipts and
disbursements hereunder. The records of the Trustee with
respect to the Fund shall be open to inspection by the
Company, or its representatives, at all reasonable times
during normal business hours of the Trustee and may be
audited not more frequently than once each fiscal year by an
independent certified public accountant engaged by the
Company; provided, however, the Trustee shall be entitled to
additional compensation from the Company in respect of
audits or auditors' requests which the Trustee determines to
exceed the ordinary course of the usual scope of such
examinations of its records.
7.2 Within a reasonable time after the close of
each fiscal year of the Company (or, in the Trustee's
discretion, at more frequent intervals), or of any
termination of the duties of the Trustee hereunder, the
Trustee shall prepare and deliver to the Company a statement
of transactions reflecting its acts and transactions as
Trustee during such fiscal year, portion thereof or during
such period from the close of the last fiscal year or last
statement period to the termination of the Trustee's duties,
respectively, including a statement of the then current
value of the Fund. The Independent Contractor shall also
prepare and furnish to the Company a statement of the then
current value of each Account and of the General Account.
Any such statement shall be deemed an account stated and
accepted and approved by the Company, and the Trustee shall
be relieved and discharged, as if such account had been
settled and allowed by a judgment or decree of a court of
competent jurisdiction, unless protested by written notice
to the Trustee within sixty (60) days of receipt thereof by
the Company.
<PAGE>25
The Trustee shall have the right to apply at any
time to a court of competent jurisdiction for judicial
settlement of any account of the Trustee not previously
settled as herein provided or for the determination of any
question of construction or for instructions regarding this
Agreement. In any such action or proceeding it shall be
necessary to join as parties only the Trustee and the
Company (although the Trustee may also join such other
parties as it may deem appropriate), and any judgment or
decree entered therein shall be conclusive.
ARTICLE VIII
____________
8.1 Prior to a Change in Control the Trustee may
resign at any time by delivering written notice thereof to
the Company; provided, however, that no such resignation
shall take effect until the earlier of (i) sixty (60) days
from the date of delivery of such notice to the Company or
(ii) the appointment of a successor trustee. Following a
Change in Control, the Trustee may resign only under one of
the following circumstances:
(a) The Trustee is no longer in the
business, or is actively in the process of
removing itself from the business, of acting as
trustee for employee benefit plans.
(b) The Trustee determines that a conflict
of interest exists which would prohibit it from
fulfilling its duties under this Agreement in an
ethically proper manner, and a law firm (appointed
by the President of the Association of the Bar of
the City of New York, or by the American
Arbitration Association, if the President of the
Association of the Bar of the City of New York
fails to so appoint within thirty days of a
request for such appointment, or notifies the
Trustee that it is unable to make such
appointment) concurs with the Trustee. The
Trustee shall use its best efforts to avoid the
creation of such a conflict. The decision of such
<PAGE>26
law firm shall be binding, but may be appealed in
the same manner, and under the same conditions, as
if it were made by an arbitrator. All costs
incurred by the Trustee in connection with
obtaining or appealing such a decision shall be
reimbursable expenses pursuant to Article VI
hereof.
(c) The assets of the Fund have been
exhausted or are insufficient to pay accrued and
reasonably anticipated fees and expenses of the
Trustee hereunder, the Company has refused
voluntarily to pay the Trustee's accrued fees and
expenses as required pursuant to Section 6.2 and
the Trustee has been unsuccessful in obtaining a
court order requiring the Company to make such
payments or has been unable to collect on a
judgment for such fees and expenses.
Notwithstanding the above, the Trustee may resign
for reasons set forth in (a) or (b) only if it has obtained
the agreement of a bank with assets in excess of $2 billion
and net worth in excess of $100 million to replace it as
trustee under the terms of this Agreement. The decision
rendered under (b), if that is the reason for the Trustee's
resignation, may expressly excuse the Trustee from this
requirement. In any event, the Trustee shall continue to be
custodian of the Trust assets until the new trustee is in
place, and the Trustee shall be entitled to expenses and
fees through the later of the effective date of its
resignation as Trustee and the end of its custodianship of
the assets of the Fund.
8.2 Prior to a Change in Control the Trustee may
be removed at any time by the Company, pursuant to a
resolution of the Board of Directors of the Company, upon
delivery to the Trustee of a certified copy of such
resolution and sixty (60) days' written notice of such
removal, unless such notice period is waived in whole or in
part by the Trustee. Following a Change in Control the
Trustee may be removed at any time by the affirmative vote
of two-thirds of the Contract Holders and Participants
voting together on a per capita basis who were Contract
<PAGE>27
Holders or Participants on the date of the occurrence of the
Change in Control, and sixty (60) days' written notice of
such removal, unless such notice period is waived in whole
or in part by the Trustee.
8.3 Upon the resignation or removal of the
Trustee, U.S. Trust Company shall be appointed as successor
trustee. In the event that U.S. Trust Company refuses to
accept its appointment as successor trustee pursuant to this
Section 8.3, a successor trustee shall be appointed pursuant
to Section 8.4. The appointment of a successor trustee
pursuant to this Section 8.3 shall take effect upon the
delivery to the Trustee of a written acceptance by such
successor trustee, duly executed thereby. Any successor
trustee shall have all the rights, powers and duties granted
the Trustee hereunder.
8.4 Subject to the provisions of Section 8.3,
prior to a Change in Control, upon the resignation or
removal of the Trustee, a successor trustee shall be
appointed by the Company. Subject to the provisions of
Section 8.3, following a Change in Control, upon the
resignation of the Trustee, a successor trustee shall be
appointed by the Trustee, and upon the removal of the
Trustee a successor trustee shall be appointed by the
affirmative vote of two-thirds of the Contract Holders and
Participants voting on a per capita basis who held Contracts
or participated in the Book Unit Plan or Deferred
Compensation Plan on the date of the occurrence of the
Change in Control. Any successor trustee appointed under
this Section 8.4 shall be chosen from the list of potential
successor trustees set forth in Exhibit C. In the event
that all of the potential successor trustees set forth in
Exhibit C refuse to accept an appointment as successor
trustee, then the successor trustee shall be appointed as
otherwise provided in this Section 8.4, and shall be a bank
or trust company established under the laws of the United
States or a State within the United States with assets in
excess of $2 billion and net worth in excess of $100
million. The appointment of a successor trustee pursuant to
this Section 8.4 shall take effect upon the delivery to the
Trustee of (a) a written appointment of such successor
trustee, duly executed by the Company, the Trustee, or two-
thirds of the Contract Holders and Participants, as provided
for in this Section 8.4, and (b) a written acceptance by
<PAGE>28
such successor trustee, duly executed thereby. Any
successor trustee shall have all the rights, powers and
duties granted the Trustee hereunder.
8.5 If, within sixty (60) days of the delivery of
the Trustee's written notice of resignation, a successor
trustee shall not have been appointed, the Trustee may apply
to any court of competent jurisdiction for the appointment
of a successor trustee.
8.6 Upon the resignation or removal of the
Trustee and the appointment of a successor trustee, and
after the acceptance and approval of its account, the
Trustee shall transfer and deliver the Fund to such
successor. Under no circumstances shall the Trustee
transfer or deliver the Fund to any successor which is not a
bank or trust company established under the laws of the
United States or a State within the United States with
assets in excess of $2 billion and net worth in excess of
$100 million.
ARTICLE IX
__________
9.1 Prior to a Change in Control, the Trust
established pursuant to this Agreement may only be
terminated by the affirmative vote of two-thirds of the
Contract Holders and Participants voting on a per capita
basis. Following a Change in Control, the Trust established
pursuant to this Agreement may not be terminated by the
Company prior to the satisfaction of all liabilities with
respect to all Contract Holders and Participants. Following
a Change in Control, upon receipt of a written certification
from the Independent Contractor that all liabilities have
been satisfied with respect to all Contract Holders and
Participants, the Company pursuant to a resolution of its
Board of Directors may terminate the Trust upon delivery to
the Trustee of (a) a certified copy of such resolution, (b)
an original certification of the Independent Contractor that
all such liabilities have been satisfied and (c) a written
instrument of termination duly executed and acknowledged in
the same form as this Agreement.
9.2 Prior to a Change in Control, upon the
termination of the Trust in accordance with Section 9.1, the
Trustee shall, after the acceptance and approval of its
<PAGE>29
account, distribute the Fund to the Company. After a Change
in Control, upon the termination of the Trust in accordance
with Section 9.1, the Trustee shall, after the acceptance
and approval of its account, transfer all of the assets of
the Fund to the SRIP Trust. Provided, however, that if
after a Change in Control the SRIP Trust has been
terminated, upon the termination of the Trust in accordance
with Section 9.1 the Trustee shall distribute the Fund to
the Company. Upon completing such distribution, the Trustee
shall be relieved and discharged. The powers of the Trustee
shall continue as long as any part of the Fund remains in
its possession.
ARTICLE X
_________
10.1 This Agreement may be amended, in whole or in
part, at any time and from time to time, by the Company,
pursuant to a resolution of the Board of Directors thereof
by delivery to the Trustee of a certified copy of such
resolution and a written instrument duly executed and
acknowledged in the same form as this Agreement, except that
the duties and responsibilities of the Trustee shall not be
increased without the Trustee's written consent; provided,
however, any such amendment affecting any Account or the
procedures for distribution thereof shall not become
effective until sixty (60) days after a copy of such
amendment has been delivered by registered mail by the
Company or the Independent Contractor to each Contract
Holder or Participant for whom an Account is maintained
under this Agreement. In the event the Company, Trustee or
Independent Contractor receives written objections to such
amendment from such person within such sixty (60) day
period, such amendment shall be ineffective and void in
respect of the Contract Holder or Participant so objecting
to the amendment.
<PAGE>30
ARTICLE XI
__________
11.1 This Agreement shall be construed and
interpreted under, and the Trust hereby created shall be
governed by, the laws of the State of New York insofar as
such laws do not contravene any applicable Federal laws,
rules or regulations. Nothing in this Agreement shall be
construed to subject either the Trust created hereunder or
the Contracts, the Book Unit Plan or the Deferred
Compensation Plan to the Employee Retirement Income Security
Act of 1974, as amended.
11.2 Neither the gender nor the number (singular
or plural) of any word shall be construed to exclude another
gender or number when a different gender or number would be
appropriate.
11.3 No right or interest of any Contract Holder
or Participant in the Fund shall be transferable or
assignable or shall be subject to alienation, anticipation
or encumbrance, and no right or interest of any Contract
Holder in any Contract or any Participant under the Book
Unit Plan or the Deferred Compensation Plan, or in the Fund
shall be subject to any garnishment, attachment or
execution. Notwithstanding the foregoing, the Fund shall at
all times remain subject to claims of creditors of the
Company in the event the Company becomes insolvent as
provided in Section 2.1.
11.4 The Company agrees that by the establishment
of this Trust it hereby foregoes any judicial review of
certifications by the Independent Contractor as to the
amounts payable to any persons hereunder. If a dispute
arises as to the amounts or timing of any such payments or
the persons entitled thereto under the Contracts, the Book
Unit Plan, the Deferred Compensation Plan or this Agreement,
the Company agrees that such dispute shall be resolved by
binding arbitration proceedings initiated in accordance with
the rules of the American Arbitration Association and that
the results of such proceedings shall be conclusive and
shall not be subject to judicial review. It is expressly
understood that pending the resolution of any such dispute
<PAGE>31
payments shall be made and continued by the Trustee in
accordance with the certification of the Independent
Contractor and that the Trustee and the Independent
Contractor shall have no liability with respect to such
payments. Provided, however, that the provisions of this
Section 11.4 are subject to the provisions of Section 3.5.
The Company also agrees to pay the entire cost of any
arbitration or legal proceeding initiated by it including
the legal fees of the Trustee, the Independent Contractor
and the Contract Holder or Participant regardless of the
outcome of any such proceeding and until so paid the
expenses thereof shall be a charge on and lien against the
Fund.
11.5 This Agreement 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 Trustee in writing of its successorship
and furnish the Trustee and the Independent Contractor with
the information specified in Section 4.1 of this Agreement.
In no event shall any such transaction described herein
suspend or delay the rights of Contract Holders or
Participants hereunder.
11.6 This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an
original, but all of which shall together constitute only
one Agreement.
11.7 Communications to the Trustee shall be sent
to it at its office at 450 West 33rd Street, New York, New
York 10001, or to such other address as the Trustee may
specify in writing. No communication shall be binding upon
the Trustee until it is received by the Trustee.
Communications to the Company shall be sent to the Company's
principal offices or to such other address as the Company
may specify in writing.
<PAGE>32
11.8 In the event any Contract Holder or
Participant is determined to be subject to Federal income
tax on any amount to the credit of his Account under this
Agreement prior to the time of payment hereunder, the entire
amount determined to be so taxable shall be distributed by
the Trustee to such Contract Holder or Participant. An
amount to the credit of a Contract Holder's or Participant's
Account 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
Contract Holder or Participant which is not appealed to the
courts; (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 and the Trustee, that, by reason of Treasury
Regulations, amendments to the Internal Revenue Code,
published Internal Revenue Service rulings, court decisions
or other substantial precedent, amounts to the credit of the
Accounts of Contract Holders or Participants hereunder 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 authorities of any State or
locality against any Contract Holder, Participant or his or
her spouse, 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 authority of any
State or locality or by any court. The Company agrees to
reimburse any Contract Holder or Participant or his or her
spouse for any interest or penalties in respect of Federal,
state or local tax claims hereunder upon receipt of
documentation of same. Any distributions from the Trust
Fund to a Contract Holder or Participant under this Section
11.8 shall be applied in an equitable manner to reduce
Company liabilities to such Contract Holder or Participant;
provided, however, that in no event shall any Contract
Holder or Participant have any obligation to return all or
any part of such distribution to the Company if such
distribution exceeds the amount payable under the applicable
agreement between the Company and the Contract Holder or
under the Book Unit Plan or the Deferred Compensation Plan.
<PAGE>33
IN WITNESS WHEREOF, the parties hereto have caused
this Trust Agreement to be duly executed and their
respective corporate seals to be hereto affixed this 22nd
day of November, 1996.
Attest: THE CHASE MANHATTAN BANK
/s/ Peter J. Coghill
____________________
Trust Officer
By /s/ Catherine E. Kidder
________________________
Attest: USLIFE CORPORATION
By /s/ Christopher S. Ruisi
________________________
/s/ Richard G. Hohn
___________________
Secretary Christopher S. Ruisi
President and Chief
Operating Officer
<PAGE>34
EXHIBIT A
_________
ACKNOWLEDGEMENT
AND
ACCEPTANCE
The undersigned hereby acknowledges its receipt of
an agreement made as of the 22nd day of November, 1996
between the USLIFE Corporation and The Chase Manhattan Bank
relating to certain employment contracts and Key Exectuive
Employment Protection Agreements entered into between USLIFE
Corporation and a select group of its management employees,
the USLIFE Corporation Book Unit Plan and the USLIFE
Corporation Deferred Compensation Plan (the "Agreement").
In addition, the undersigned hereby accepts its appointment
as Independent Contractor under the terms set forth in the
Agreement.
Attest: KPMG PEAT MARWICK
By./s/ Jennifer Mebes
__________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 4th day of December, before me personally
came Jennifer Mebes, to me known, who, being by me duly
sworn, did depose and say that she is one of the partners of
the firm of KPMG Peat Marwick, the firm described in and
which executed the foregoing instrument, and that she signed
her name thereto for and on behalf of said firm.
/s/ Bonnie R. Trotman
_________________
Notary Public
<PAGE>35
STATE OF NEW JERSEY )
: SS.:
COUNTY OF MONMOUTH )
On this 26th day of November, before me personally
came Christopher S. Ruisi, to me known, who, being by me
duly sworn, did depose and say that he resides at 168 Dahlia
Street, Staten Island, New York and that he is President and
Chief Operating Officer of USLIFE CORPORATION, one of the
corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by
like order.
/s/ Susan C. Pappas
___________________
Notary Public
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this 24th day of January, 1997, before me
personally came Catherine E. Kidder, to me, known, who,
being by me duly sworn, did depose and say that he resides
at 770 Broadway, N.Y., N.Y., and that he is a Assistant Vice
President of The Chase Manhattan Bank, one of the
corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that
the seal affixed to said instruments is such corporate seal;
that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by
like order.
/s/ Doris A. Paetow
_______________
Notary Public
<PAGE>36
EXHIBIT B
Buck Consultants Inc.
Two Pennsylvania Plaza
New York, New York 10121
A. Foster Higgins & Co. Inc.
125 Broad Street
New York, New York 10004
William M. Mercer, Inc.
1166 Avenue of the Americas
New York, New York 10036-2708
TPF&C/Towers Perrin
245 Park Avenue
New York, New York 10167
The Wyatt Company
1500 'K' Street NW
Washington, D.C. 20005
<PAGE>37
EXHIBIT C
Bankers Trust Company
280 Park Avenue
New York, New York 10017
The Bank of New York
One Wall Street
New York, New York 10286
<PAGE>1
Exhibit 10(lxxiii)
__________________
EMPLOYMENT AND KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT
____________________________________________________________
THIS AGREEMENT between USLIFE Corporation, a New
York corporation (the "Company"), and _____________(the
"Executive"), dated as of this 14th day of March, 1997.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company has employed the Executive in
an officer position;
WHEREAS, to assure itself of the Executive's
services during the period in which it is confronting a
situation which could result in a change in ownership or
control of the Company, and to provide the Executive with
certain financial assurances to enable the Executive to
perform the responsibilities of his position without undue
distraction and to exercise his judgment without bias due to
his personal circumstances in such a situation, the Company
entered into an agreement with the Executive to provide him
with certain benefits in the event of his involuntary
termination of employment following such a change in
ownership or control of the Company;
WHEREAS, the Company has promoted the Executive to
a key executive officer position;
WHEREAS, under the Company's practices, the
Executive is entitled to the benefit of certain other
benefits and protections from the Company, including,
without limitation, to become a party to an employment
agreement with the Company;
WHEREAS, to make provision for the availability to
the Company, its subsidiaries and their respective successor
and assigns in the future of the Executive's services, the
Company desires to enter into this Agreement with the
Executive in accordance with its usual practices for
individuals at his level of employment, but subject to the
modifications therein required pursuant to the Agreement and
Plan of Merger, dated as of February 12, 1997, by and among
the Company, American General Corporation and Texas Stars
Corporation;
<PAGE>2
NOW, THEREFORE, in consideration of the premises
and mutual covenants herein contained, it is hereby agreed
by and between the Company and the Executive as follows:
1. Agreement to Employ. Except as otherwise
expressly provided herein, the Company agrees to employ the
Executive and the Executive agrees to perform services as an
employee of the Company or one of its subsidiaries for an
initial period commencing on the date hereof (the
"Commencement Date") and ending on the day immediately
preceding the third anniversary of the Commencement Date.
Upon each anniversary of the Commencement Date, the term of
this Agreement will be extended for one (1) additional year
without any action by the Company or the Executive, unless
either the Company or the Executive delivers written notice
(the "Notice") to the other party, during the 90 day period
immediately prior to any such anniversary date, stating that
it or he does not want the term of this Agreement further
extended; provided that, except as provided in the next
following sentence, if a Change of Control (as defined
below) occurs during the term of this Agreement, this
Agreement shall in all events continue in effect until the
third anniversary of the date upon which such Change of
Control occurs (the "Change of Control Date").
Notwithstanding the foregoing, if, prior to the occurrence
of a Potential Change of Control (as defined below) or a
Change of Control, the Executive is demoted to a lower
position than the position of Senior Vice President, the
additional protection afforded by this Agreement in respect
of a Change of Control shall be without force and effect.
2. Duties and Responsibilities. Executive shall
be initially employed as an Executive Vice President, and
shall serve in such other executive capacity or capacities
with the Company or its subsidiaries as its Board of
Directors from time to time may determine at any time prior
to the Change of Control Date. During the term of this
Agreement the Executive will devote all of his business time
and attention to the business and affairs of the Company and
its subsidiaries; provided that the Executive will not be
deemed to have violated his commitment hereunder by reason
<PAGE>3
of periods of vacation, sick leave and other leave to which
he is entitled.
Without limiting the generality of the foregoing,
following a Change of Control, the Executive's position
(including titles, authority and responsibilities) shall be
at least commensurate with those held, exercised and
assigned immediately prior to the Change of Control Date.
Following a Change of Control, the Executive's services
shall be performed at the location where the Executive was
employed immediately preceding the Change of Control Date.
3. Annual Compensation. (a) Base Salary. The
Company will pay Executive for his services hereunder at the
rate in effect on the date hereof, in equal monthly
installments, plus any lump sum bonus payments, plus such
periodic salary increases and such additional compensation
(if any) as may from time to time be voted by the Company's
Board of Directors and/or the Executive Compensation
Committee or its successor, in the sole and absolute
discretion of said Board and/or Committee. Nothing in this
Agreement shall be construed as precluding merit increases
in salary or barring the Executive from such fringe benefits
as the Company may grant. During the term hereof, the
Executive shall be eligible to participate in each employee
benefit plan or program sponsored or maintained by the
Company and in other Company perquisites to the extent that
he is eligible to participate therein in accordance with the
terms and conditions generally applicable thereto. The
Executive's base salary, as it may be increased from time to
time, shall hereafter be referred to as "Base Salary".
Without limiting the generality of the foregoing,
following a Change of Control Date, the Executive shall
receive a Base Salary at a monthly rate at least equal to
the monthly salary paid to the Executive by the Company and
any of its affiliated companies immediately prior to such
Change of Control Date. Neither the Base Salary nor any
increase in Base Salary after the Change of Control Date
shall serve to limit or reduce any other obligation of the
Company hereunder.
<PAGE>4
(b) Annual Bonus. Following a Change of Control,
for each fiscal year of the Company ending during the term
of this Agreement, the Executive shall receive a bonus at
least equal to the greater of (i) the highest bonus amount
payable to the Executive in respect of either of the last
two fiscal years of the Company ending immediately prior to
the Change of Control Date or (ii) the amount, if any, that
would have been payable to the Executive as a target bonus
for the year in which the Change of Control occurs. Any
amount payable hereunder as an annual bonus shall be paid as
soon as practicable following the year for which the amount
is payable, unless electively deferred by the Executive
pursuant to any deferral programs or arrangements that the
Company may make available to the Executive.
4. Definitions. (a) Change of Control. For
the purposes of this Agreement, a "Change of 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 or (iii) a sale or
transfer of substantially all of the assets of the Company.
(b) Potential Change of Control. For the
purposes of this Agreement, a Potential Change of Control
shall be deemed to have occurred if (i) any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) commences a
tender offer for securities, which if consummated, would
result in such person owning 20% or more of the combined
voting power of the Company's then outstanding securities;
(ii) the Company enters into an agreement the consummation
of which would constitute a Change of Control; (iii) proxies
for the election of directors of the Company are solicited
by anyone other than the Company; or (iv) any other event
occurs which is deemed to be a Potential Change of Control
by the Board.
<PAGE>5
5. Termination. (a) Death, Disability or
Retirement. This Agreement shall terminate automatically
upon the Executive's death, termination due to "Disability"
(as defined below) or voluntary retirement under any of the
Company's retirement plans as in effect from time to time.
For purposes of this Agreement, Disability shall mean the
Executive's inability to perform the duties of his position,
as determined in accordance with the policies and procedures
applicable with respect to the Company's long-term
disability plan, as in effect from time to time, except
that, following a Change of Control, disability shall be
determined based on the policies and procedures in effect
immediately prior to the Change of Control Date.
(b) Voluntary Termination. Notwithstanding
anything in this Agreement to the contrary, following a
Change of Control the Executive may, upon not less than 30
days' written notice to the Company, voluntarily terminate
his employment for any reason (including early retirement
under the terms of any of the Company's retirement plans as
in effect from time to time), provided that any termination
by the Executive pursuant to Section 5(d) on account of Good
Reason (as defined therein) shall not be treated as a vol-
untary termination under this Section 5(b).
(c) Cause. The Company may terminate the Exec-
utive's employment for Cause. For purposes of this Agree-
ment, "Cause" means (i) the Executive's conviction or plea
of nolo contendere to a felony; (ii) an act or acts of
extreme dishonesty or gross misconduct on the Executive's
part which result or are intended to result in material
damage to the Company's business or reputation; or (iii)
repeated material violations by the Executive of his
obligations under Section 2 of this Agreement, provided
that, following a Change of Control Date, Cause shall not
exist due to such violations of his obligations unless such
violations are demonstrably willful and deliberate on the
Executive's part and result in material damage to the
Company's business or reputation.
(d) Good Reason. Following the occurrence of a
Change of Control, the Executive may terminate his
employment for Good Reason. For purposes of this Agreement,
<PAGE>6
"Good Reason" means the occurrence of any of the following,
without the express written consent of the Executive, after
the occurrence of a Change of Control:
(i) (A) the assignment to the Executive of any
duties inconsistent in any material adverse respect
with the Executive's position, authority or
responsibilities as contemplated by Section 2 of this
Agreement, or (B) any other material adverse change in
such position, including titles, authority or re-
sponsibilities;
(ii) any failure by the Company to comply with
any of the provisions of Section 3 of this Agreement,
other than an insubstantial or inadvertent failure
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location more than 50 miles from
that location at which he performed his services
specified under the provisions of Section 2 immediately
prior to the Change of Control, except for travel
reasonably required in the performance of the Ex-
ecutive's responsibilities;
(iv) the failure by the Company to permit the
Executive (and, to the extent applicable, his
dependents) to participate in or be covered under all
pension, retirement, deferred compensation, savings,
medical, dental, health, disability, group life,
accidental death and travel accident insurance plans
and programs of the Company and its affiliated
companies at a level that is commensurate with the
Executive's participation in such plans immediately
prior to the Change of Control Date (or, if more
favorable to the Executive, at the level made available
to the Executive or other similarly situated officers
at any time thereafter); or
(v) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 11(b).
<PAGE>7
In no event shall the mere occurrence of a Change of
Control, absent any further impact on the Executive, be
deemed to constitute Good Reason.
(e) Notice of Termination. Any termination by
the Company for Cause or by the Executive for Good Reason
shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 12(f). For
purposes of this Agreement, a "Notice of Termination" means
a written notice given, in the case of a termination for
Cause, within 10 business days of the Company's having
actual knowledge of the events giving rise to such ter-
mination, and in the case of a termination for Good Reason,
within 180 days of the Executive's having actual knowledge
of the events giving rise to such termination, and which (i)
indicates the specific termination provision in this Agree-
ment relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the pro-
vision so indicated, and (iii) if the termination date is
other than the date of receipt of such notice, specifies the
termination date of this Agreement (which date shall be not
more than 15 days after the giving of such notice). The
failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
(f) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the
case of a termination for which a Notice of Termination is
required, the date of receipt of such Notice of Termination
or, if later, the date specified therein, as the case may
be, and (ii) in all other cases, the actual date on which
the Executive's employment terminates during the Employment
Period.
6. Obligations of the Company upon Termination.
(a) Death or Disability. If the Executive's employment is
terminated during the term hereof by reason of the
Executive's death or Disability, this Agreement shall
<PAGE>8
terminate without further obligations to the Executive or
the Executive's legal representatives under this Agreement
other than those obligations accrued hereunder at the Date
of Termination, and the Company shall pay to the Executive
(or his beneficiary or estate) (i) the Executive's full Base
Salary through the Date of Termination (the "Earned
Salary"), (ii) any vested amounts or benefits owing to the
Executive under the Company's otherwise applicable employee
compensation and benefit plans and programs, including any
compensation previously deferred by the Executive (together
with any accrued earnings thereon) and not yet paid by the
Company and any accrued vacation pay not yet paid by the
Company (the "Accrued Obligations"), and (iii) any other
benefits payable due to the Executive's death or Disability
under the Company's plans, policies or programs (the
"Additional Benefits").
Any Earned Salary shall be paid in cash in a
single lump sum as soon as practicable, but in no event more
than 10 business days (or at such earlier date required by
law), following the Date of Termination. Accrued
Obligations and Additional Benefits shall be paid in
accordance with the terms of the applicable plan, program or
arrangement.
(b) Cause and Voluntary Termination. If, during
the Employment Period, the Executive's employment shall be
terminated for Cause or voluntarily terminated by the Execu-
tive in accordance with Section 5(b), the Company shall pay
the Executive (i) the Earned Salary in cash in a single lump
sum as soon as practicable, but in no event more than 10
days, following the Date of Termination, and (ii) the
Accrued Obligations in accordance with the terms of the
applicable plan, program or arrangement.
(c) Termination by the Company Without Cause
Prior to a Change of Control. Except as otherwise expressly
provided in Section 6(d), in the event that the Company
terminates the Executive's employment during the term of
this Agreement without Cause prior to the occurrence of a
Change of Control, the Company's only obligation to the
Executive shall be to pay the Executive an amount equal to
his Base Salary (at the same time as the Executive would
<PAGE>9
have received his Base Salary had he continued to be
employed) for the period ending on the first to occur of
(i) the date on which the Executive obtains other
employment, (ii) the date on which the term of this
Agreement would have expired (but for such termination)
pursuant to Section 1 hereof, assuming that no further
renewals of such term occur after the Executive's Date of
Termination, and (iii) the date on which Executive breaches
any of the provisions of Section 9.
(d) Certain Terminations In Connection With a
Change of Control.
(i) Lump Sum Payments. If, following a Change of
Control, (x) the Company terminates the Executive's em-
ployment other than for Cause or (y) the Executive
terminates his employment at any time for Good Reason,
then the Company shall pay to the Executive the
following amounts:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Severance Amount") equal
to (x) two times, in the case of a
termination of employment occurring prior to
the first anniversary of the Change of
Control Date, and (y) one and one-half times,
in the case of a termination of employment
occurring on or after the first anniversary
of the Change of Control Date and on or prior
to the third anniversary of such Change of
Control Date, the sum of
(1) the Executive's annual Base Salary; and
(2) the highest bonus amount payable to the
Executive in respect of either of the
last two fiscal years of the Company
ending immediately prior to the Change
of Control Date; and
(C) the Accrued Obligations.
<PAGE>10
Notwithstanding the limitations contained in the
preceding sentence, if (i) the Executive's employment
is terminated by the Company without Cause after the
occurrence of a Potential Change of Control and prior
to the occurrence of a Change of Control and (ii) a
Change of Control occurs within one year of such
termination, the Executive shall be deemed, solely for
purposes of determining his rights under this
Agreement, to have remained employed until the date
such Change of Control occurs and to have been
terminated by the Company without Cause immediately
after the Change of Control Date.
The Earned Salary and Severance Amount shall
be paid in cash in a single lump sum as soon as practi-
cable, but in no event more than 10 business days (or
at such earlier date required by law), following the
later of the Change of Control Date or the Date of
Termination. Accrued Obligations shall be paid in
accordance with the terms of the applicable plan,
program or arrangement.
(ii) Continuation of Benefits. If, the Executive
is entitled to receive the Severance Amount, the
Executive (and, to the extent applicable, his
dependents) shall be entitled, after the Date of
Termination until the earlier of (1) the second
anniversary of the Date of Termination (the "End Date")
or (2) the date the Executive becomes eligible for
comparable benefits under a similar plan, policy or
program of a subsequent employer, to continue
participation in all of the Company's Executive and
executive welfare and fringe benefit plans (the
"Benefit Plans") and to receive such perquisites as
were generally provided to the Executive in accordance
with the Company's policies and practices immediately
prior to the Change of Control Date. To the extent any
such benefits or perquisites cannot be provided under
the terms of the applicable plan, policy or program,
the Company shall provide a comparable benefit under
another plan or from the Company's general assets. The
Executive's participation in the Benefit Plans and
eligibility for perquisites will be on the same terms
<PAGE>11
and conditions that would have applied had the
Executive continued to be employed by the Company
through the End Date.
(e) Discharge of the Company's Obligations.
Except as expressly provided in the last sentence of this
Section 6(e), the amounts payable to the Executive pursuant
to this Section 6 (whether or not reduced pursuant to
Section 6(f)) following termination of his employment shall
be in full and complete satisfaction of the Executive's
rights under this Agreement and any other claims he may
have in respect of his employment by the Company or any of
its subsidiaries. Such amounts shall constitute liquidated
damages with respect to any and all such rights and claims
and, upon the Executive's receipt of such amounts, the
Company shall be released and discharged from any and all
liability to the Executive in connection with this Agreement
or otherwise in connection with the Executive's employment
with the Company and its subsidiaries. Nothing in this
Section 6(e) shall be construed to release the Company from
its commitment to indemnify the Executive and hold the
Executive harmless from and against any claim, loss or cause
of action arising from or out of the Executive's performance
as an officer, director or Executive of the Company or any
of its subsidiaries or in any other capacity, including any
fiduciary capacity, in which the Executive served at the
request of the Company to the maximum extent permitted by
applicable law and the Governing Documents.
(f) Certain Further Payments by the Company.
(i) In the event that any amount or benefit paid
or distributed to the Executive pursuant to this Agree-
ment, taken together with any amounts or benefits
otherwise paid or distributed to the Executive by the
Company or any affiliated company (collectively, the
"Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"),
or any similar tax that may hereafter be imposed, the
Company shall pay to the Executive at the time
specified in Section 6(f)(v) below an additional amount
(the "Tax Reimbursement Payment") such that the net
<PAGE>12
amount retained by the Executive with respect to such
Covered Payments, after deduction of any Excise Tax on
the Covered Payments and any Federal, state and local
income or employment tax and Excise Tax on the Tax
Reimbursement Payment provided for by this Section
6(f), but before deduction for any Federal, state or
local income or employment tax withholding on such
Covered Payments, shall be equal to the amount of the
Covered Payments.
(ii) For purposes of determining whether any of
the Covered Payments will be subject to the Excise Tax
and the amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of
Section 280G of the Code, and all "parachute
payments" in excess of the "base amount" (as
defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise
Tax, unless, and except to the extent that,
in the good faith judgment of the Company's
independent certified public accountants
appointed prior to the Change of Control Date
or tax counsel selected by such accountants
(the "Accountants"), the Company has a
reasonable basis to conclude that such
Covered Payments (in whole or in part) either
do not constitute "parachute payments" or
represent reasonable compensation for
personal services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the
Code) in excess of the "base amount," or such
"parachute payments" are otherwise not
subject to such Excise Tax, and
(B) the value of any non-cash benefits or any
deferred payment or benefit shall be deter-
mined by the Accountants in accordance with
the principles of Section 280G of the Code.
<PAGE>13
(iii) For purposes of determining the amount of
the Tax Reimbursement Payment, the Executive shall be
deemed to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income
taxation for the calendar year in which the
Tax Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes
at the highest applicable marginal rate of
taxation for the calendar year in which the
Tax Reimbursement Payment is to be made, net
of the maximum reduction in Federal income
taxes which could be obtained from the
deduction of such state or local taxes if
paid in such year.
(iv) In the event that the Excise Tax is subse-
quently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal
Revenue Service to be less than the amount taken into
account hereunder in calculating the Tax Reimbursement
Payment made, the Executive shall repay to the Company,
at the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have
been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment,
plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion
of the Tax Reimbursement Payment to be refunded to the
Company has been paid to any Federal, state or local
tax authority, repayment thereof shall not be required
until actual refund or credit of such portion has been
made to the Executive, and interest payable to the
Company shall not exceed interest received or credited
to the Executive by such tax authority for the period
it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be
pursued (and the method of allocating the expenses
<PAGE>14
thereof) if the Executive's good faith claim for refund
or credit is denied.
In the event that the Excise Tax is later
determined by the Accountants or pursuant to any
proceeding or negotiations with the Internal Revenue
Service to exceed the amount taken into account
hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any
payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus
any interest or penalty payable with respect to such
excess) at the time that the amount of such excess is
finally determined.
(v) The Tax Reimbursement Payment (or portion
thereof) provided for in Section 6(f)(i) above shall be
paid to the Executive not later than 10 business days
following the payment of the Covered Payments; pro-
vided, however, that if the amount of such Tax Reim-
bursement Payment (or portion thereof) cannot be final-
ly determined on or before the date on which payment is
due, the Company shall pay to the Executive by such
date an amount estimated in good faith by the Ac-
countants to be the minimum amount of such Tax Re-
imbursement Payment and shall pay the remainder of such
Tax Reimbursement Payment (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code)
as soon as the amount thereof can be determined, but in
no event later than 45 calendar days after payment of
the related Covered Payment. In the event that the
amount of the estimated Tax Reimbursement Payment
exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth business day
after written demand by the Company for payment (to-
gether with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
7. Non-exclusivity of Rights. Except as
expressly provided herein, nothing in this Agreement shall
<PAGE>15
prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other
plan, program or perquisite provided by the Company or any
of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise
prejudice such rights as the Executive may have under any
other agreements with the Company or any of its affiliated
companies, including employment agreements or stock option
agreements. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or
program of the Company or any of its affiliated companies at
or subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
8. Full Settlement. Following a Change of
Control, the Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or
otherwise.
9. Noncompetition. The Executive agrees that in
the event his employment is terminated, whether by him or by
the Company, prior to the Change of Control Date he will not
for a period of one (1) year after the Date of Termination
(i) acting alone or in conjunction with others, directly or
indirectly engage (either as owner, partner, stockholder,
employer or employee) in any business in which he has been
directly engaged during the last two (2) years prior to such
termination and which is directly in competition with a
business conducted by the Company or any of its
subsidiaries; (ii) acting alone or in conjunction with
others, directly or indirectly induce any customers of the
Company or any of its subsidiaries with whom the Executive
has had contacts or relationships, directly or indirectly,
during and within the scope of his employment with the
Company, to curtail or cancel their business with such
companies or any of them; (iii) acting alone or in
conjunction with others, directly or indirectly disclose to
any person, firm or corporation the names of any customers
<PAGE>16
of the Company or any of its subsidiaries; (iv) acting alone
or in conjunction with others, solicit or canvass business
from any person who was a customer of the Company or any of
its subsidiaries at or prior to termination of the
Executive's employment; or (v) acting alone or in
conjunction with others, directly or indirectly induce, or
attempt to influence, any executive of the Company or any of
its subsidiaries to terminate their employment. The
provisions of clauses (i), (ii), (iii), (iv), and (v) above
are separate and distinct commitments independent of each of
the other clauses. It is agreed that the ownership of not
more than 2% of the equity securities of any company having
securities listed on a registered exchange or regularly
traded in the over-the-counter market shall not, of itself,
be deemed inconsistent with cause (i).
10. Legal Fees and Expenses. If following a
Change of Control, the Executive asserts any claim in any
contest (whether initiated by the Executive or by the
Company) as to the validity, enforceability or inter-
pretation of any provision of this Agreement, the Company
shall pay the Executive's legal expenses (or cause such
expenses to be paid) including, without limitation, his
reasonable attorney's fees, on a quarterly basis, upon
presentation of proof of such expenses, provided that the
Executive shall reimburse the Company for such amounts, plus
simple interest thereon at the 90-day United States Treasury
Bill rate as in effect from time to time, compounded
annually, if the Executive shall not prevail, in whole or in
part, as to any material issue as to the validity, en-
forceability or interpretation of any provision of this
Agreement.
11. Successors. (a) This Agreement is personal
to the Executive and, without the prior written consent of
the Company, shall not be assignable by the Executive other-
wise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be en-
forceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors. The
Company shall require any successor to all or substantially
<PAGE>17
all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form
and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would be re-
quired to perform if no such succession had taken place.
12. Miscellaneous. (a) Applicable Law. This
Agreement shall be governed by and construed in accordance
with the laws of the State of New York, applied without
reference to principles of conflict of laws.
(b) Arbitration. Following the occurrence of a
Change of Control, any dispute or controversy arising under
or in connection with this Agreement shall be resolved by
binding arbitration. The arbitration shall be held in New
York, New York and except to the extent inconsistent with
this Agreement, shall be conducted in accordance with the
Expedited Employment Arbitration Rules of the American
Arbitration Association then in effect at the time of the
arbitration, and otherwise in accordance with principles
which would be applied by a court of law or equity. The
arbitrator shall be acceptable to both the Company and the
Executive. If the parties cannot agree on an acceptable
arbitrator, the dispute shall be heard by a panel of three
arbitrators, one appointed by each of the parties and the
third appointed by the other two arbitrators.
(c) Expenses. During the term hereof, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in
accordance with its usual policies and procedures as in
effect from time to time. Notwithstanding the foregoing,
after the Change of Control Date, such policies and
procedures shall be no less favorable to the Executive than
those in effect immediately prior to the Change of Control
Date.
(d) Indemnification. During and after the term
hereof, the Company shall indemnify the Executive and hold
the Executive harmless from and against any claim, loss or
cause of action arising from or out of the Executive's
<PAGE>18
performance as an officer, director or Executive of the
Company or any of its subsidiaries or in any other capacity,
including any fiduciary capacity, in which the Executive
serves at the request of the Company to the maximum extent
permitted by applicable law and the Company's Certificate of
Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection afforded to
the Executive hereunder following a Change of Control be
less than that afforded under the Governing Documents as in
effect immediately prior to the Change of Control Date.
(e) Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto with respect
to the matters referred to herein and expressly supersedes
the Key Executive Employment Protection Agreement between
the Company and the Executive dated as of November 14, 1995.
No other agreement relating to the terms of the Executive's
employment by the Company, oral or otherwise, shall be
binding between the parties unless it is in writing and
signed by the party against whom enforcement is sought.
There are no promises, representations, inducements or
statements between the parties other than those that are
expressly contained herein. This Agreement may not be
amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective succes-
sors and legal representatives. In the event any provision
of this Agreement is invalid or unenforceable, the validity
and enforceability of the remaining provisions hereof shall
not be affected. The Executive acknowledges that he is
entering into this Agreement of his own free will and
accord, and with no duress, that he has read this Agree-
ment and that he understands it and its legal
consequences.
(f) Notices. All notices and other communica-
tions hereunder shall be in writing and shall be given by
hand-delivery to the other party or by registered or cer-
tified mail, return receipt requested, postage prepaid,
addressed as follows:
<PAGE>19
If to the Executive: at the home address of the
Executive noted on the records
of the Company
If to the Company: USLIFE Corporation
125 Maiden Lane
New York, New York 10038
Attn.: Executive Vice
President - General Counsel
or to such other address as either party shall have fur-
nished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually
received by the addressee.
IN WITNESS WHEREOF, the Executive has hereunto set
his hand and the Company has caused this Agreement to be
executed in its name on its behalf, all as of the day and
year first above written.
USLIFE CORPORATION
_______________________
By: Christopher S. Ruisi
Title: President and Chief
Operating Officer
EXECUTIVE:
_________________________
<PAGE>1
<TABLE>
EXHIBIT 12
Computations of Ratios of Earnings to Fixed Charges
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31
________________________________________________________
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
1. Excluding interest credited to
policyholder account balances:
Income before taxes on income (1) $115,805 $159,925 $146,997 $151,571 $104,337
Fixed charges:
Interest expense 39,308 39,699 35,627 32,392 33,805
One-third of all rent expense 3,626 4,179 4,365 4,497 4,123
Total fixed charges (A) 42,934 43,878 39,992 36,889 37,928
Total income before taxes on income
and fixed charges (B) 158,739 203,803 186,989 188,460 142,265
Ratio of earnings to fixed charges (B)/(A) 3.70 4.64 4.68 5.11 3.75
2. Including interest credited to
policyholder account balances
Income before taxes on income (1) $115,805 $159,925 $146,997 $151,571 $104,337
Fixed charges:
Interest credited to policyholder
account balances 200,388 209,788 194,036 183,737 173,538
Interest expense 39,308 39,699 35,627 32,392 33,805
One-third of all rent expense 3,626 4,179 4,365 4,497 4,123
Total fixed charges (A) 243,322 253,666 234,028 220,626 211,466
Total income before taxes on income
and fixed charges (B) 359,127 413,591 381,025 372,197 315,803
Ratio of earnings to fixed charges (B)/(A) 1.48 1.63 1.63 1.69 1.49
(1) Before cumulative effect of accounting change relating to non-pension
postretirement benefits recorded in first quarter of 1992.
</TABLE>
<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, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 5,864,687
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 3,786
<MORTGAGE> 258,723
<REAL-ESTATE> 27,948
<TOTAL-INVEST> 6,562,435
<CASH> 26,974
<RECOVER-REINSURE> 8,534
<DEFERRED-ACQUISITION> 785,128
<TOTAL-ASSETS> 7,879,586
<POLICY-LOSSES> 5,450,761
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 232,834
<POLICY-HOLDER-FUNDS> 67,494
<NOTES-PAYABLE> 568,235
0
517
<COMMON> 57,473
<OTHER-SE> 1,165,432
<TOTAL-LIABILITY-AND-EQUITY> 7,879,586
1,038,237
<INVESTMENT-INCOME> 501,692
<INVESTMENT-GAINS> (4,993)
<OTHER-INCOME> 271,173
<BENEFITS> 1,069,852<F1>
<UNDERWRITING-AMORTIZATION> 206,570<F2>
<UNDERWRITING-OTHER> 410,252
<INCOME-PRETAX> 115,805
<INCOME-TAX> 39,778
<INCOME-CONTINUING> 76,027
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,027
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.18
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Includes $12.441 million relating to charge discussed in Note 2 of Notes to
Financial Statements.
<F2>Includes $37.198 million relating to charge discussed in Note 2 of Notes to
Financial Statements.
</FN>
</TABLE>
