<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
AMERICAN MUTUAL HOLDING COMPANY
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
IOWA 42-1459712
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
699 WALNUT STREET, SUITE 2000
DES MOINES, IOWA 50309-3948
(515) 362-3600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
JAMES A. SMALLENBERGER
SENIOR VICE PRESIDENT AND SECRETARY
AMERICAN MUTUAL HOLDING COMPANY
699 WALNUT STREET, SUITE 2000
DES MOINES, IOWA 50309-3948
PHONE: (515) 362-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with copy to:
JOSEPH K. HAGGERTY, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
AMERICAN MUTUAL HOLDING COMPANY
699 WALNUT STREET, SUITE 2000
DES MOINES, IOWA 50309-3948
PHONE: (515) 362-3600
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
---------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule
462(d)under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, no par
value.............. 14,700,000 19.125 281,137,500 0
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</TABLE>
(1) This Registration Statement is filed for up to 14,700,000 shares to be
issued or offered pursuant to the agreement and plan of merger.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, the registration fee is based on the average of the high and low
sales prices of AmerUs Life Holdings, Inc. ("AmerUs") common stock, as
reported on the NYSE on May 4, 2000 ($19.125), and computed based on the
estimated maximum number of such shares (14,700,000) that may be exchanged
for the common stock being registered.
(3) A registration fee of $138,453 was previously paid in connection with the
filing by AmerUs of preliminary proxy solicitation materials, under Section
14(g) and Rule 0-11(a)(2) of the Securities Exchange Act of 1934, as
amended, which fee, pursuant to Rule 457(b) under the Securities Act of
1933, as amended, has been credited against the registration fee of
$74,220.30 payable hereunder.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
[AMERUS LIFE HOLDINGS LOGO]
Dear Stockholders:
The board of directors of AmerUs Life Holdings, Inc. has called a special
meeting of stockholders for June 22, 2000, to ask you to consider and vote on a
merger with our parent, American Mutual Holding Company. In the merger, each
outstanding share of Class A common stock of AmerUs will be converted into one
share of AMHC common stock.
AMHC intends to list its common stock on the New York Stock Exchange under
AmerUs' current trading symbol, "AMH".
We cannot complete the merger unless our stockholders approve the merger by
voting in favor of the agreement and plan of merger at the special meeting.
AMHC, together with the directors and officers of AmerUs, have a controlling
interest in AmerUs. If AMHC and these directors and officers vote their shares
in favor of the merger agreement as they have indicated, approval of the merger
agreement will be assured.
Whether or not you plan to attend the special meeting, please take the time
to indicate your voting instructions on the enclosed proxy card and return it
promptly in the postage prepaid envelope provided for that purpose. If you
attend the special meeting in person, you may vote personally on all matters
brought before the special meeting even if you have previously submitted your
proxy.
Very truly yours,
/s/ Roger K. Brooks
Roger K. Brooks
Chairman, President and Chief
Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE IOWA INSURANCE
COMMISSIONER NOR ANY STATE SECURITIES COMMISSION OR INSURANCE COMMISSION HAS
APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS DOCUMENT OR
DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated May 15, 2000, and is first being
mailed to stockholders of AmerUs on or about that date.
<PAGE> 3
AMERUS LIFE HOLDINGS, INC.
699 WALNUT STREET, SUITE 2000
DES MOINES, IOWA 50309-3948
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 2000
---------------------
To the Stockholders:
AmerUs Life Holdings, Inc. will hold a special meeting of stockholders on
June 22, 2000, at 2:00 p.m., Central Time, at the AmerUs Conference Center, Hub
Tower, 3rd Floor, 699 Walnut Street, Des Moines, Iowa, for the following
purposes:
(1) To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated December 17, 1999, as amended, between AmerUs and
American Mutual Holding Company, pursuant to which AmerUs will merge with
and into AMHC. In the merger, each share of AmerUs' Class A common stock
outstanding on the effective date of the merger will convert into one share
of AMHC common stock. You can find a copy of the merger agreement in
Appendix A to the accompanying proxy statement/prospectus.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Please see the proxy statement/prospectus accompanying this notice for a
more complete description of these matters.
The board of directors has fixed the close of business on March 31, 2000 as
the record date for determining which stockholders are entitled to notice of,
and to vote at, the special meeting. Accordingly, only stockholders of record on
that date are entitled to vote at the special meeting or any adjournments
thereof.
Dissenters' rights are available to stockholders with respect to the merger
under Iowa law. Please see the section entitled "Dissenters' Rights" beginning
on page 21 for a discussion of the availability of dissenters' rights and the
procedures you must follow in asserting dissenters' rights in connection with
the proposed transactions.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James A. Smallenberger
James A. Smallenberger
Senior Vice President and Secretary
May 15, 2000
TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE
ENCLOSED PRE-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
<PAGE> 4
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about AmerUs and its subsidiaries that is not included in
or delivered with the document. This information is available without charge to
security holders upon written or oral request. AmerUs will provide without
charge to each person to whom this proxy statement/prospectus is delivered, upon
the written or oral request of such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Any such request should be directed to:
James A. Smallenberger
Senior Vice President and Secretary
AmerUs Life Holdings, Inc.
699 Walnut Street, Suite 2000
Des Moines, Iowa 50309-3948
(515) 362-3600
IN ORDER TO OBTAIN TIMELY DELIVERY PRIOR TO THE SPECIAL MEETING,
STOCKHOLDERS MUST REQUEST THE INFORMATION NO LATER THAN JUNE 15, 2000.
See also "Where You Can Find More Information", on page 62.
ii
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
REFERENCES TO ADDITIONAL INFORMATION........................ ii
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING............. 1
SUMMARY..................................................... 2
Who We Are............................................. 2
The Special Meeting.................................... 2
The Restructuring...................................... 3
AmerUs Selected Consolidated Historical Financial
Data.................................................. 6
Pro Forma Selected Consolidated Financial Data......... 7
INFORMATION PERTAINING TO FORWARD-LOOKING STATEMENTS........ 8
SPECIAL MEETING............................................. 9
Record Date............................................ 9
Quorum; Effect of Abstentions.......................... 9
Proxies................................................ 9
Recommendation of Board of Directors................... 10
THE RESTRUCTURING........................................... 11
General................................................ 11
Corporate Form After the Restructuring................. 11
Ownership Structure Before the Restructuring........... 12
Ownership Structure After the Restructuring............ 13
Background and Reasons for the Restructuring........... 14
Fairness Opinion....................................... 14
Consideration You and the Eligible Members will Receive
in the Restructuring.................................. 18
U.S. Federal Income Tax Considerations................. 19
AmerUs Common Stock Rights............................. 19
Conditions to the Merger............................... 19
Effective Date......................................... 20
Accounting Treatment................................... 21
Required Regulatory Approvals.......................... 21
Dissenters' Rights..................................... 21
Commission-Free Program................................ 23
MANAGEMENT OF AMHC AFTER THE MERGER......................... 24
Board of Directors..................................... 24
Executive Officers..................................... 24
Director and Executive Compensation.................... 24
DESCRIPTION OF THE BUSINESS OF AMHC......................... 25
AmerUs Home Equity, Inc. .............................. 25
AmerUs Properties, Inc. ............................... 25
Discontinued Operations................................ 25
Employees.............................................. 25
Regulation............................................. 25
Recent Developments.................................... 26
MARKET PRICES AND DIVIDENDS................................. 27
Holders................................................ 27
Dividends.............................................. 27
SELECTED CONSOLIDATED FINANCIAL DATA OF AMHC................ 29
AMHC AND AMERUS UNAUDITED PRO FORMA FINANCIAL DATA.......... 31
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION OF AMHC................ 41
Overview............................................... 41
Acquisitions........................................... 42
Discontinued Operations................................ 42
The Closed Block....................................... 42
Operating Segments..................................... 42
Results of Operations.................................. 43
Liquidity and Capital Resources........................ 49
Effects of Inflation and Interest Rate Changes......... 51
Federal Income Tax Matters............................. 52
Emerging Accounting Matters............................ 52
Year 2000 Compliance................................... 53
BENEFICIAL OWNERSHIP OF AMERUS COMMON STOCK................. 54
Principal Holders...................................... 54
Directors and Officers................................. 54
DESCRIPTION OF CAPITAL STOCK................................ 56
General................................................ 56
Common Stock........................................... 56
Preferred Stock........................................ 56
Capital Securities Series A of AmerUs Capital I........ 56
Adjustable Conversion-rate Equity Security Units of
AmerUs Capital II..................................... 56
Warrants............................................... 57
Indemnification and Limitation of Liability............ 57
Certain Provisions of the Articles of Incorporation and
Bylaws of AMHC........................................ 57
Issuance of Common Stock, Preferred Stock and Other
Rights................................................ 57
Board of Directors..................................... 58
Limitations on Calling Special Meetings of
Stockholders.......................................... 58
Advance Notice Requirements............................ 58
Amendment of Articles of Incorporation and Bylaws...... 59
State Statutory Provisions............................. 59
CERTAIN DIFFERENCES IN THE RIGHTS OF AMHC STOCKHOLDERS AND
AMERUS STOCKHOLDERS....................................... 60
CERTAIN TRANSACTIONS AND RELATIONSHIPS...................... 61
LEGAL MATTERS............................................... 61
OTHER MATTERS............................................... 61
EXPERTS..................................................... 61
WHERE YOU CAN FIND MORE INFORMATION......................... 62
AMERICAN MUTUAL HOLDING COMPANY FINANCIAL STATEMENTS........ F-1
</TABLE>
APPENDICES
Appendix A -- Agreement and Plan of Merger between AMHC and AmerUs, dated
December 17, 1999, as amended
Appendix B -- Plan of Conversion of AMHC, dated December 17, 1999, as amended
Appendix C -- Form of Amended and Restated Articles of Incorporation of AMHC
Appendix D -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
dated April 3, 2000
Appendix E -- Sections 490.1320 et seq. of the Iowa Business Corporation Act
iv
<PAGE> 7
QUESTIONS AND ANSWERS
ABOUT THE SPECIAL MEETING
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this document, complete, sign, date and mail
your proxy card in the enclosed envelope. This way the party to whom you
have given your proxy will be able to vote your shares at the special
meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. Your broker will not be able to vote your shares without instructions
from you. You should instruct your broker to vote your shares by following
the directions provided by your broker. If you fail to instruct your broker
to vote your shares, it will be the equivalent of voting against the
approval of the merger agreement.
Q: CAN I CHANGE MY VOTE AFTER I HAVE SUBMITTED MY PROXY WITH VOTING
INSTRUCTIONS?
A: Yes. There are three ways in which you may revoke your proxy and change
your vote. First, you may send a written notice to the party to whom you
submitted your proxy stating that you would like to revoke your proxy. The
notice must be received before the special meeting to be effective. Second,
you may complete and submit a new proxy card by mail. The latest proxy
actually received by AmerUs prior to the special meeting will be recorded
and any earlier proxies will be automatically revoked. Third, you may
attend the special meeting and vote in person. Simply attending the special
meeting, however, will not revoke your proxy. If you have instructed a
broker to vote your shares, you must follow directions received from your
broker to change or revoke your proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES?
A: No. You should not send in your stock certificates at this time. If the
merger is completed, we will mail to you a transmittal form with
instructions on how to exchange your AmerUs stock certificates for AMHC
stock certificates.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: Stockholders with any questions about the merger and the related
transactions should call:
James A. Smallenberger
Senior Vice President and Secretary
AmerUs Life Holdings, Inc.
699 Walnut Street, Suite 2000
Des Moines, Iowa 50309-3948
(515) 362-3600
<PAGE> 8
SUMMARY
This summary highlights selected information contained in the rest of this
document. Although we have highlighted what we believe is the most important
information about the merger and related transactions in the summary, we urge
you to read this entire document and the documents incorporated by reference
carefully to understand completely the merger and related transactions. See
"Where You Can Find More Information" on page 62.
WHO WE ARE
AmerUs.............................. AmerUs is an insurance holding company
engaged through its subsidiaries in the
business of marketing, underwriting and
distributing a broad range of
individual life insurance and annuity
products to individuals and businesses
in 49 states, the District of Columbia
and the U.S. Virgin Islands. As of
December 31, 1999, AmerUs had total
assets of $10.7 billion and total
stockholders' equity of $733.0 million.
AMHC................................ AMHC is the parent company of AmerUs
and owns approximately 49% of AmerUs'
Class A common stock and 100% of its
Class B common stock, or approximately
58% of AmerUs' total shares. AMHC also
owns real estate related and financial
services companies and holds cash and
cash equivalents. As of December 31,
1999, AMHC had consolidated assets of
approximately $11.1 billion and
members' equity of $761.4 million.
THE SPECIAL MEETING
Vote required....................... Approval of the merger agreement
requires the separate and affirmative
vote of a majority of the shares of
each of AmerUs' Class A and Class B
common stock. As of March 31, 2000,
there were 24,997,902 shares of AmerUs'
Class A common stock and 5,000,000
shares of AmerUs' Class B common stock
outstanding and entitled to vote.
Outcome of the vote is assured...... As of March 31, 2000, directors and
executive officers of AmerUs owned
beneficially approximately 2.4% of the
shares of AmerUs' Class A common stock
outstanding on such date. AMHC holds
approximately 49% of the outstanding
Class A common stock and 100% of the
outstanding Class B common stock. AMHC
intends to vote its shares of AmerUs'
Class A and Class B common stock in
favor of approval of the merger
agreement. Moreover, the directors and
executive officers intend to vote their
shares in favor of approval of the
merger agreement. If the directors and
executive officers actually vote as
they have indicated, 51.3% of the Class
A common stock and 100% of the Class B
common stock will be voted in favor of
the merger agreement. In that case,
approval of the merger agreement will
be assured.
2
<PAGE> 9
THE RESTRUCTURING
What is the restructuring........... Throughout this document we refer to
the conversion of AMHC from a mutual
insurance holding company to a publicly
held stock company and the merger
together as the "restructuring". We
will complete the restructuring in a
number of related steps. Although we
explain these steps as separate events,
effectively they all will occur at the
same time and none of the steps will be
taken without the others.
First step.......................... AMHC will liquidate AmerUs Group Co.,
which is currently the intermediate
holding company of AmerUs.
Second step......................... AMHC will convert from a mutual
insurance holding company that is owned
by its members to a publicly-held stock
holding company that is owned by
stockholders. Currently, the
individuals and entities that hold
insurance policies or annuity contracts
issued by AmerUs Life own AMHC. We
refer to these owners as "members" and
this form of organization as a "mutual
insurance holding company". In the
conversion, the AMHC members that are
eligible to participate will exchange
their membership interests in AMHC for
newly-issued AMHC common stock, cash or
policy credits. AMHC will distribute to
its members the value of its net assets
in the conversion.
Third step.......................... Simultaneously with the conversion,
AmerUs' Class B common stock held by
AMHC will convert into AmerUs' Class A
common stock on a one for one basis.
Fourth step, the merger............. AmerUs will merge with and into AMHC.
Each outstanding share of Class A
common stock of AmerUs, other than
those held by AMHC, will be converted
into one share of AMHC common stock.
The shares of AmerUs' Class A common
stock held by AMHC will be canceled in
the merger.
Final step.......................... AMHC will change its name to "AmerUs
Group Co".
Corporate form after the
restructuring....................... As a result of the steps described
above, you will hold shares of AMHC
which will own all of the assets,
liabilities and business of AmerUs.
Current AmerUs public stockholders will
own approximately 42% of AMHC's common
stock and former members who received
AMHC common stock in the conversion
will own approximately 58% of AMHC's
common stock.
Material U.S. federal income tax
consequences........................ The merger of AmerUs with and into AMHC
will be tax free to AMHC and AmerUs,
and the stockholders of AmerUs will
recognize no gain or loss from the
receipt of AMHC common stock in
exchange for
3
<PAGE> 10
their AmerUs Class A common stock. For
more instruction on the tax
consequences of the restructuring,
please see page 19.
Tax matters are complicated and the tax
consequences of the merger to you may
depend on the facts of your own
situation. We urge you to consult your
own tax advisor to understand fully the
tax consequences of the merger to you.
Dissenters' rights.................. Under Section 490.1301 et seq. of the
Iowa Business Corporation Act, AmerUs
stockholders have the right to a court
determination, in a proceeding known as
an appraisal, of the fair value of
their shares in connection with the
merger. For more information about the
dissenters' rights that are available
in the merger, please see page 21.
Reasons for the restructuring....... The board of directors of AmerUs
believes that the proposed
restructuring will facilitate growth
and enhance shareholder value. This
will be accomplished by improving the
financial flexibility, simplifying the
corporate structure and increasing the
float and liquidity of AmerUs stock.
Recommendation of the board of
directors........................... The board of directors of AmerUs has
declared the merger agreement to be
advisable and beneficial to AmerUs and
its stockholders, has unanimously
approved it and recommends that
stockholders vote "FOR" its approval.
Fairness Opinion.................... Donaldson, Lufkin & Jenrette
Securities, or DLJ, financial advisor
to the special committee of the AmerUs
board of directors, provided an opinion
to the AmerUs board of directors, dated
April 3, 2000. In its opinion, DLJ
found that, as of that date, based upon
and subject to the qualifications in
its opinion, the exchange ratio,
together with the payment by AMHC to
the eligible members of AMHC of an
amount of cash and policy credits in
respect of AMHC's non-insurance assets
as of December 17, 1999, as
contemplated by the plan, are as a
whole fair from a financial point of
view to holders of AmerUs common stock.
Conditions to the restructuring..... The restructuring cannot be completed
unless the following conditions are met
or waived:
- AMHC and AmerUs must receive the
approval of any necessary regulatory
authorities, including the Iowa
Insurance Commissioner;
- A majority of the stockholders of
each of AmerUs' Class A and Class B
common stock must approve the merger
agreement of AmerUs into AMHC;
4
<PAGE> 11
- Two-thirds of those AMHC members
voting on the plan of conversion must
vote to approve the plan; and
- AMHC and AmerUs must receive
confirmation of the legal opinion
previously received from their tax
counsel addressing the effects of the
restructuring for AmerUs and AMHC,
and the AmerUs stockholders and AMHC
members.
Effective date of restructuring..... AmerUs and AMHC are working to complete
the restructuring as soon as possible.
We expect the effective date of the
restructuring to occur early in the
third quarter of 2000.
Accounting treatment................ AMHC expects to account for the merger
as a "purchase" for accounting and
financial reporting purposes.
Regulatory approvals................ The plan of conversion is subject to
the approval of any necessary
regulatory authorities, including the
Iowa Insurance Commissioner. AMHC will
shortly submit the plan of conversion
to the Iowa Insurance Commissioner.
Recent developments................. AMHC and AmerUs entered into a
combination agreement with Indianapolis
Life Insurance Company ("ILICO"), an
Indiana mutual insurance company, and
its subsidiary, ILGOC, on February 18,
2000.
In connection with this proposed
combination, AmerUs invested $100
million in ILGOC for a 45% equity
interest in ILGOC.
The combination is subject to a number
of conditions, including regulatory and
stockholder approvals.
Throughout this document, we refer to
the combination with ILICO as the
"ILICO combination". The ILICO
combination is not the subject of this
proxy statement/ prospectus. We have
disclosed the information regarding the
ILICO combination to you in order to
help you understand AMHC, AmerUs and
the expected structure of AMHC.
This document is intended to provide
you with information relevant to the
merger between AMHC and AmerUs and the
vote on that merger. At a later date,
AMHC shareholders will be asked to
consider and vote to approve the
agreement with ILICO. The restructuring
is not contingent on the ILICO
combination. Moreover, if the
restructuring is not consummated, the
ILICO combination is not expected to
proceed.
5
<PAGE> 12
AMERUS SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
We are providing the following information to assist you in analyzing the
financial aspects of the merger. The summary consolidated financial data below
are derived from the consolidated financial statements of AmerUs, with the data
as of and for the five years ended December 31, 1999 being derived from AmerUs'
audited consolidated financial statements.
The information in the following tables is based on, and should be read
together with, the historical financial information set forth in AmerUs' prior
SEC filings. We have incorporated this material into this document by reference.
See "Where You Can Find More Information" on page 62.
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- -------- --------
(Dollars in millions, except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Total revenues.......................... $ 734.1 $ 690.6 $ 364.7 $ 505.2 $ 638.0
Benefits and expenses................... 608.6 574.9 271.3 386.1 525.1
Net income.............................. 66.7 62.8 58.1 74.2 69.3
Earnings per share:
Basic (A)............................. $ 2.20 $ 1.88 $ 2.47 $ 3.20 $ --
Diluted (B)........................... 2.20 1.86 2.46 3.20 --
Dividends declared per share of common
stock................................. 0.40 0.40 0.30 -- --
CONSOLIDATED BALANCE SHEET DATA:
Total assets............................ $10,719.4 $10,424.5 $10,254.0 $4,384.2 $4,371.9
Total liabilities....................... 9,771.6 9,357.6 9,240.0 3,926.7 3,832.0
Company-obligated mandatorily redeemable
Preferred securities.................. 214.8 216.7 86.0 -- --
Stockholders' equity.................... 733.0 850.2 928.0 457.5 539.9
</TABLE>
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(A) The December 31, 1999, 1998, 1997 and 1996 calculations reflect 30.23
million, 33.46 million, 23.54 million and 23.16 million of weighted average
common shares outstanding, respectively. AmerUs was formed in 1996 as a
holding company for AmerUs Life Insurance Co. ("AmerUs Life"), a mutual
insurance company. Therefore, prior to 1996, AmerUs had no shares of common
stock.
(B) The December 31, 1999, 1998, 1997 and 1996 calculations reflect 30.31
million, 33.70 million, 23.57 million and 23.16 million of weighted average
diluted common shares outstanding, respectively. AmerUs was formed in 1996
as a holding company for AmerUs Life, a mutual insurance company.
Therefore, prior to 1996, AmerUs had no shares of common stock.
6
<PAGE> 13
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
The following tables show financial information (which we refer to as "pro
forma" information) which gives effect to the conversion of AMHC to stock form,
the issuance of AMHC common stock to the current public stockholders of AmerUs
in the merger, which is shown in the tables as a purchase by AMHC of the
minority interest of AmerUs. AmerUs is a consolidated subsidiary of AMHC and as
such, the historical data for AMHC includes the historical results of AmerUs for
the periods indicated. In presenting the pro forma information for 1999, we
assumed that the merger occurred as of January 1, 1999. The pro forma
information gives effect to the merger under the purchase method of accounting
in accordance with generally accepted accounting principles (commonly referred
to as "GAAP"). For a full description of the pro forma adjustments presented,
see "AMHC and AmerUs Unaudited Pro Forma Financial Data" beginning on page 31.
We expect that we will incur merger and integration charges as a result of
combining our companies. The pro forma information, while helpful in
illustrating the financial characteristics of the combined company under one set
of assumptions, does not reflect these expenses and, accordingly, does not
attempt to predict or suggest future results. It also does not necessarily
reflect what the historical results of the combined company would have been had
our companies been combined.
The information in the following tables is based on, and should be read
together with, the historical financial information set forth in this proxy
statement/prospectus and in AmerUs' prior SEC filings which we have incorporated
into this document by reference. See "Where You Can Find More Information" on
page 62.
<TABLE>
<CAPTION>
AMHC
PRO FORMA FOR
RESTRUCTURING PURCHASE OF THE RESTRUCTURING
AMHC AND DISTRIBUTION MINORITY AND PURCHASE OF
HISTORICAL TO MEMBERS INTEREST MINORITY INTEREST
---------- ----------------- ----------- -----------------
AS OF OR FOR THE YEAR ENDED DECEMBER 31, 1999
----------------------------------------------------------------
(Dollars in millions, except per share data)
<S> <C> <C> <C> <C>
PRO FORMA CONSOLIDATED INCOME STATEMENT DATA:
Total revenues................................... $ 764.7 $ (18.4) $ (0.8) $ 745.5
Total benefits and expenses...................... 641.9 -- 5.5 647.4
Income from continuing operations................ 34.5 (12.0) 24.4 46.9
Income from continuing operations per share...... $ 1.56
PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
Total assets..................................... $11,097.7 $(339.7) $ (9.5) $10,748.5
Total liabilities................................ 9,829.5 -- -- 9,829.5
Minority Interest................................ 309.1 -- (309.1) --
Company obligated mandatorily redeemable
preferred securities........................... 197.7 -- -- 197.7
Total stockholders' equity....................... $ 761.4 $(339.7) $ 299.6 $ 721.3
</TABLE>
7
<PAGE> 14
INFORMATION PERTAINING TO FORWARD-LOOKING STATEMENTS
A number of matters and subject areas discussed in the documents
incorporated herein by reference and in the section of this proxy
statement/prospectus entitled "Management's Discussion and Analysis of Results
of Operations and Financial Condition of AMHC" and elsewhere in this proxy
statement/ prospectus are not limited to historical or current facts and deal
with potential future circumstances and developments.
In some cases, you can identify "forward-looking statements" by the use of
words such as "may", "will", "should", "anticipate", "estimate", "expect",
"plan", "believe", "predict", "potential", or "intend". All statements regarding
the expected benefits of the restructuring and merger and related matters are
forward-looking statements. You should be aware that these statements and any
other forward-looking statements in this document only reflect current
expectations and are not guarantees of performance.
Under the "safe harbor" of the Private Securities Litigation Reform Act of
1995, an issuer and any person acting on behalf of the issuer will not be liable
for an untrue statement of a material fact or a misleading statement because of
an omission of a material fact in any private action based on "forward-looking
statements". The safe harbor provisions only apply to companies who have
previously offered securities to the public. As AmerUs has previously offered
shares to the public, forward-looking statements related to AmerUs are intended
to be covered by the safe harbor provisions. Because this offer of AMHC common
shares constitutes AMHC's initial public offering of securities, the safe harbor
provisions do not apply to forward-looking statements concerning AMHC.
Factors that may cause actual results to differ materially from those
contemplated or projected in such forward-looking statements include, among
others, the following possibilities:
- heightened competition, including the entry of new competitors and the
development of new products by competitors
- adverse state and federal legislation and regulation, including increases
in minimum capital and reserves, and other financial viability
requirements
- failure to maintain effective distribution channels in order to obtain
new customers or failure to retain existing customers
- inability to carry out marketing and sales plans, including, among
others, changes to certain products and acceptance of the revised
products in the market
- loss of key executives
- changes in interest rates causing a reduction of investment income or a
reduction in demand for certain of AMHC's products
- reduction in income as a result of investment losses
- general economic and business conditions which are less favorable than
expected
- unanticipated changes in industry trends
- inaccuracies in assumptions regarding future persistency, mortality, and
interest rates used in calculating reserve amounts
- adverse changes in ratings assigned by rating agencies
- changes in tax laws which negatively affect demand for AMHC's products or
the applicability of certain taxes to AMHC
- the risk factors or uncertainties listed herein or listed from time to
time in any prospectus supplement or any document incorporated by
reference herein
AMHC undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
8
<PAGE> 15
SPECIAL MEETING
The AmerUs board is providing this proxy statement/prospectus to you in
connection with the solicitation of proxies for use at the special meeting of
AmerUs stockholders and at any adjournments or postponements of the special
meeting. The special meeting will be held on Thursday, June 22, 2000, at 2:00
p.m., Central Time, at the AmerUs Conference Center, Hub Tower, 3rd Floor, 699
Walnut Street, Des Moines, Iowa. At the special meeting, you will be asked to
consider and vote to approve the merger agreement which provides for the merger
of AmerUs with and into AMHC.
AMHC is also providing this proxy statement/prospectus to you as a
prospectus in connection with the offer and sale by AMHC of its shares of common
stock as a result of the merger.
RECORD DATE
The AmerUs board has fixed the close of business on March 31, 2000 as the
record date for determining AmerUs stockholders entitled to receive notice of
and to vote at the special meeting. As of the record date, there were issued and
outstanding 24,997,902 shares of AmerUs' Class A common stock and 5,000,000
shares of AmerUs' Class B common stock. Only holders of record of AmerUs common
stock as of the record date are entitled to notice of and to vote at the special
meeting.
QUORUM; EFFECT OF ABSTENTIONS
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of each of AmerUs' Class A and Class B common
stock is necessary to constitute a quorum at the special meeting. Abstentions
will be counted solely for the purpose of determining whether a quorum is
present. Abstentions will not be deemed to be cast either "FOR" or "AGAINST" the
merger. Because approval of the merger requires the affirmative vote of a
majority of the outstanding shares of each class of AmerUs common stock,
abstentions will have the same effect as a vote against approval of the merger
agreement.
The proposal to approve the merger agreement is a "non-discretionary" item,
meaning that brokerage firms may not vote shares in their discretion on behalf
of a client if the client has not given voting instructions. Accordingly, shares
held in street name that have been designated by brokers on proxy cards as not
voted with respect to that proposal ("broker non-votes") will not be counted as
votes cast on it and will have the same effect as a vote against approval of the
merger agreement.
PROXIES
Solicitation. Proxies in the form of the proxy card accompanying this proxy
statement/prospectus are being solicited by the AmerUs board. Shares represented
by properly executed proxies which are received in time and not revoked will be
voted in accordance with the instructions indicated on the proxies. Except for
broker non-votes, as explained and described above, proxies without instructions
will be voted "FOR" approval of the agreement and plan of merger and any other
matter that may come before the special meeting, including a motion to adjourn
or postpone the special meeting to another time and/or place for the purpose of
soliciting additional proxies or otherwise. However, no proxy with instructions
to vote against the proposal to approve the merger agreement will be voted in
favor of any adjournment or postponement of the special meeting.
Revocability. You may revoke your proxy at any time before its exercise at
the special meeting by:
- giving written notice of revocation to the AmerUs Corporate Secretary,
- properly submitting a duly executed proxy bearing a later date, or
- voting in person at the special meeting.
9
<PAGE> 16
You should address all written notices of revocation and other
communications with respect to revocation or proxies to AmerUs, 699 Walnut
Street, Des Moines, Iowa 50309-3948, Attention: Corporate Secretary. A proxy
appointment will not be revoked by death or supervening incapacity of the
stockholder executing the proxy unless notice of the death or incapacity is
filed with AmerUs's Corporate Secretary, or other person responsible for
tabulating votes on behalf of AmerUs, before the shares are voted.
RECOMMENDATION OF BOARD OF DIRECTORS
For the reasons described in the section of this proxy statement/prospectus
entitled "Background and Reasons for the Restructuring", the AmerUs board has
unanimously approved the merger, believes that the merger is advisable and
beneficial to AmerUs and its stockholders and recommends that you vote "FOR"
approval of the merger.
10
<PAGE> 17
THE RESTRUCTURING
The following is a summary of the merger agreement and of the plan of
conversion, which are attached to this document as Appendices A and B,
respectively, and each of which is incorporated by reference into this document.
Please see each of these documents for further information.
GENERAL
We will complete the restructuring in a number of related steps. Although
we explain these steps as separate events, effectively they all will occur at
the same time and none of the steps will be taken without the others.
In the first step, AMHC will liquidate AmerUs Group Co., which is currently
the intermediate holding company of AmerUs.
Second, AMHC will convert from a mutual insurance holding company to a
publicly-held stock holding company in accordance with Section 521A.14 (5) and
Chapter 508B of the Code of Iowa (1999). As part of the plan of conversion,
eligible AMHC members will exchange their membership interests in AMHC for AMHC
common stock, cash or policy credits. Collectively, members will receive (1)
approximately 17.4 million shares of newly issued AMHC common stock which is
equal in number to AMHC's current 58% interest in AmerUs and (2) cash and policy
credits which, in the aggregate, will equal the value of all other assets of
AMHC minus any liabilities.
Third, simultaneously with the conversion, AmerUs' Class B common stock
held by AMHC will convert into AmerUs' Class A common stock on a one for one
basis.
In the fourth step, the merger, AmerUs will merge with and into AMHC as set
forth in the merger agreement. In the merger, stockholders of AmerUs (other than
AMHC) will receive one newly issued share of AMHC common stock in exchange for
each share of AmerUs' Class A common stock that they own. The shares of AmerUs'
Class A common stock held by AMHC will be cancelled in the merger.
As a final step, AMHC will change its name to "AmerUs Group Co."
CORPORATE FORM AFTER THE RESTRUCTURING
Currently, AMHC members hold, through AMHC, approximately 58% of the
outstanding stock of AmerUs. AmerUs public shareholders hold approximately 42%
of the outstanding stock of AmerUs. Once the conversion and the merger are
completed, AMHC members who receive stock will own approximately 58% of the
ownership interest in AMHC in the form of stock after the restructuring is
completed. Similarly, AmerUs stockholders will own approximately 42% of the
outstanding stock of AMHC after the restructuring is completed.
Following conversion and the merger, AMHC will have substantially the same
assets and liabilities as AmerUs prior to the merger. At December 31, 1999, AMHC
had assets, other than cash and its investment in AmerUs, of $131.1 million,
including certain real estate interests, loans and mortgages receivables, and
liabilities of $59.3 million. These assets and liabilities will be combined with
the assets and liabilities of AmerUs. The net value of these assets will be
distributed in cash to the members as part of the restructuring. In addition, to
avoid the necessity of evaluating certain environmental and other risks, AMHC
and AmerUs have agreed to purchase insurance policies to cover risks associated
with possible environmental liabilities of AMHC and possible liabilities
associated with breaches of representations and warranties by AMHC in prior
purchase and sale agreements with third parties.
Upon the effective date of the plan of conversion, the articles of
incorporation and bylaws of AMHC will be amended. For a description of the
amended and restated articles of incorporation and bylaws of AMHC, see
"Description of Capital Stock" and "Certain Differences in the Rights of AMHC
Stockholders and AMHC Stockholders" on pages 56 and 60, respectively.
11
<PAGE> 18
The charts below illustrate the structure of AMHC and its subsidiaries
before and after the merger.
OWNERSHIP STRUCTURE BEFORE THE RESTRUCTURING*
[CHART]
- ---------------
* Each company shown is fully owned by AMHC, unless a percentage ownership is
shown.
12
<PAGE> 19
OWNERSHIP STRUCTURE AFTER THE RESTRUCTURING*
[CHART]
- ---------------
* Each company shown is fully owned by AMHC, unless a percentage ownership is
shown.
13
<PAGE> 20
BACKGROUND AND REASONS FOR THE RESTRUCTURING
The restructuring builds on a reorganization that began in 1997, when
AmerUs became a publicly-traded corporation operating within a mutual insurance
holding company structure, under the indirect control of AMHC. Early in 1999,
the board of directors of AMHC began considering alternatives to its current
structure. Among the possible alternatives reviewed were retaining its current
structure, merging with another company, creating a privately-held company and
conversion from a mutual insurance holding company to a stock holding company.
In May of 1999, the board of directors of AMHC established a special committee
of independent directors to help determine the fairness to the members of any
transaction involving the transfer of assets or the assumption of liabilities
between AMHC and AmerUs arising out of the proposed conversion. The board of
directors of AmerUs also established a special committee of independent
directors in May 1999 to consider and advise on the financial terms of the
proposed merger between AmerUs and AMHC. In August of 1999, AMHC's board of
directors authorized management to develop a plan of conversion that would
include a merger with AmerUs. On December 17, 1999, the board of directors of
AMHC adopted the plan of conversion and the boards of directors of both
companies unanimously adopted the merger agreement.
The plan of conversion and the merger agreement were subsequently amended.
The boards of directors of AMHC and AmerUs have approved and recommend the
merger agreement, as amended, to their members and stockholders, respectively.
The board of AmerUs received a fairness opinion from DLJ, as discussed below,
that addressed the merger as reflected in the amended documents.
The principal purpose of the merger is to enhance the long-term AmerUs
shareholder value by improving the financial flexibility, simplifying the
corporate structure and increasing the number of shares of the surviving company
held by the public. This will be accomplished, in part, by the elimination of
AMHC as the controlling shareholder, the removal of current statutory and AmerUs
charter limitations on the issuance of shares, the elimination of the mutual
holding company structure and the distribution of approximately 17.4 million
shares into the public market. The above changes should facilitate growth in
AMHC while maintaining financial strength and result in growth in shareholder
value.
Both the AMHC and the AmerUs boards of directors believe that the
restructuring will provide AMHC with the financial flexibility to support future
growth and financial strength. The AmerUs board, therefore, has unanimously
determined that the merger is advisable and beneficial to AmerUs and its
stockholders. Likewise, the AMHC board has unanimously determined that the
merger is advisable and in the best interests of AMHC and the plan of conversion
is fair and equitable to the members of AMHC.
FAIRNESS OPINION
The special committee of the independent directors of the AmerUs board of
directors, referred to as the AmerUs special committee, retained DLJ as
financial advisor to render an opinion to the AmerUs board of directors with
respect to the fairness from a financial point of view to the holders of AmerUs
common stock, other than AMHC, of the consideration to be received by such
holders pursuant to the terms of the merger agreement.
Pursuant to the merger agreement, each share of Class A common stock of
AmerUs not owned by AMHC will be converted into the right to receive one share
of common stock of AMHC. The ratio of this conversion is referred to as the
exchange ratio. In connection with the demutualization, the eligible members of
AMHC shall receive in exchange for their membership interests in AMHC aggregate
consideration consisting of:
(1) a number of shares of AMHC common stock equal to the number of
shares of AmerUs common stock (of any class) owned by AMHC immediately
prior to effectiveness of the plan of conversion, and
14
<PAGE> 21
(2) an amount of cash and policy credits equal to the sum of:
(a) the cash balances of AMHC immediately prior to effectiveness of
the plan of conversion after deducting expenses relating to the plan of
conversion and all other expenses and liabilities of AMHC accrued as of
such time, and
(b) the fair value as of December 17, 1999 (taking into account
liabilities), as determined jointly by the special committees of AmerUs
and AMHC and as approved by the boards of directors of AmerUs and AMHC,
of AMHC's ownership interest in its subsidiaries other than AmerUs,
including AmerUs' direct and indirect subsidiaries, and AMHC's other net
assets (collectively referred to as the non-insurance assets).
DLJ understands that the amount of cash and policy credits to be paid by AMHC in
respect of the non-insurance assets will in no event exceed $92.6 million.
On April 3, 2000, DLJ delivered its opinion to the AmerUs board of
directors that, as of that date, and with respect to the non-insurance assets as
of December 17, 1999, and based upon and subject to the assumptions, limitations
and qualifications set forth in its written opinion, the exchange ratio,
together with the payment by AMHC to the eligible members of AMHC of an amount
of cash and policy credits in respect of the non-insurance assets, as
contemplated by the plan of conversion, were, as a whole, fair from a financial
point of view to the holders of AmerUs common stock, other than AMHC.
The full text of the DLJ opinion is attached as Appendix D. We urge you to
read the opinion carefully and in its entirety for the procedures followed,
assumptions made, other matters considered and limits of the review by DLJ in
connection with its opinion.
DLJ's opinion addresses only the fairness from a financial point of view to
the holders of AmerUs common stock, other than AMHC, of the exchange ratio,
together with the payment by AMHC to eligible members of AMHC of cash and policy
credits in respect of the non-insurance assets, as a whole, based on the fair
value of the non-insurance assets as of December 17, 1999. DLJ was not requested
to address, and DLJ's opinion does not address, the fairness from a financial
point of view of all or any portion of the demutualization to AMHC or the
eligible members of AMHC.
DLJ necessarily based its opinion on economic, market, financial and other
conditions as they existed on the date of its opinion and on the information
made available to it as of that date and with respect to the non-insurance
assets, as of December 17, 1999. Although subsequent developments may affect its
opinion, DLJ does not have any obligation to update, revise or reaffirm its
opinion. DLJ expressed no opinion as to the prices at which AMHC common stock
will actually trade at any time. DLJ's opinion does not address the relative
merits of the merger or the demutualization and any other business strategies
being considered by the AmerUs board of directors, nor does it address the
board's decision to proceed with the merger. Accordingly, DLJ's opinion does not
constitute a recommendation to any AmerUs stockholder as to how such stockholder
should vote on the proposed merger.
In arriving at its opinion, DLJ performed the following analyses:
- Reviewed the merger agreement and the plan of conversion;
- Reviewed financial and other information that was publicly available
regarding AmerUs and AMHC;
- Reviewed financial and other information furnished to it by AMHC and
AmerUs, including information provided during discussions with the
managements of AMHC and AmerUs;
- Reviewed independent third party appraisals of certain real estate assets
and certain other assets of AMHC and its subsidiaries;
- Compared certain financial and securities data of AmerUs and AMHC with
various publicly traded companies;
15
<PAGE> 22
- Reviewed the historical stock prices and trading volumes of AmerUs common
stock; and
- Conducted such other financial studies, analyses and investigations as
DLJ deemed appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to it by AmerUs and AMHC or their
respective representatives, or that it otherwise reviewed. With respect to the
appraisals supplied to it, DLJ relied on representations that they were
reasonably prepared on a basis which reflects the fair market value of the
assets subject to such appraisals. DLJ has not assumed any responsibility for
making an independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by it. DLJ was not
requested to, nor did it, solicit the interest of any other party in acquiring
AmerUs.
The following is a summary of the financial and other analyses presented to
the AmerUs special committee on December 9, 1999, and re-presented to the AmerUs
board of directors on December 17, 1999, in connection with its opinion. This
summary of financial and other analyses does not constitute a complete
description of the financial and other analyses or methodologies used by DLJ.
Information presented in tabular form must be understood in light of the
analyses described in the narrative text.
For purposes of its opinion, DLJ considered a number of strategic and
financial factors relating to the restructuring, including the following:
- Effect of an increase in publicly traded shares outstanding to 30.1
million shares from the current 12.7 million shares on the float and
liquidity of AmerUs common stock
- Impact on AmerUs' stock price of removing AMHC's current majority
ownership of AmerUs common stock through the restructuring
- Enhanced strategic and financial flexibility of AmerUs after the
restructuring due to fewer restrictions on AmerUs' ability to consummate
mergers and raise equity capital
- Simplified corporate structure after the restructuring, including
elimination of two classes of common stock and two boards of directors
- Impact of the restructuring on AmerUs' earnings and financial position
- Relatively low strategic value to AmerUs of the non-insurance assets
For purposes of its opinion, DLJ developed an estimated fair value range
for AMHC's assets as summarized in the table below.
<TABLE>
<CAPTION>
DLJ FAIR VALUE RANGE
----------------------
LOW HIGH
------- -------
(Dollars in millions)
<S> <C> <C>
AmerUs common stock......................................... $409 $409
Cash........................................................ 248 248
Non-insurance assets (net).................................. 86 100
---- ----
Total AMHC Assets................................. $743 $757
==== ====
</TABLE>
The value of AmerUs common stock was calculated based on 17.4 million
shares of AmerUs common stock owned by AMHC and the $23.50 closing stock price
on December 8, 1999. The fair value of cash reflects the amount of cash and cash
equivalents represented on AMHC's balance sheet as of September 30, 1999. DLJ
developed its estimated fair value range for the non-insurance assets based on
analyses of financial information related to various assets and liabilities of
AMHC and its subsidiaries.
On December 17, 1999 the boards of directors of AmerUs and AMHC determined
that the amount of cash and policy credits that will be paid to eligible members
of AMHC in respect of the non-insurance
16
<PAGE> 23
assets will equal $92.6 million. This value is within DLJ's estimated fair value
range for the non-insurance assets of $86 million to $100 million.
AMHC's non-insurance assets include certain subsidiaries, investments, tax
assets and receivables. AMHC's subsidiaries include:
- AmerUs Properties, Inc., which holds commercial real estate and
investments in tax credit and property partnerships;
- AmerUs Land Development, Inc., which owns land held for resale and
investments in related joint ventures;
- AmerUs Home Equity, which provides home-equity products and services
through its loan servicing and loan production businesses; and
- two other subsidiaries that management plans to liquidate.
Other investments of AMHC include:
- interests in two partnerships, Financial Institutions Partnerships I and
II, which invest principally in publicly traded financial institution
stocks; and
- capital securities issued by a subsidiary of AmerUs.
For purposes of valuing AMHC's subsidiaries, DLJ:
- relied on third party appraisals for a substantial majority of the real
estate portfolio of AmerUs Properties and a majority of the land held for
resale by AmerUs Land Development;
- performed a discounted cash flow analysis of the underlying tax credits
to evaluate the tax credit partnerships of AmerUs Properties;
- based the evaluation of other assets of AmerUs Properties and AmerUs Land
Development directly on information provided by the management of AMHC;
- analyzed the loan production business of AmerUs Home Equity based on
management projections and a market valuation of selected comparable
companies; and
- evaluated the loan servicing assets of AmerUs Home Equity based upon
information provided by management.
The liabilities of AmerUs Properties and AmerUs Land Development reflected
balance sheet amounts as of September 30, 1999. The two other subsidiaries of
AMHC that management plans to liquidate were valued at their September 30, 1999
book value based on representations by management that their liquidation value
is substantially similar to their book value.
DLJ utilized the following procedures for purposes of evaluating other
investments and net assets of AMHC. DLJ:
- applied a liquidity discount to the market value of the financial
institution stocks held by Financial Institution Partnerships I and II to
determine a value for AMHC's partnership interests; and
- estimated the market value of the capital securities held by AMHC as of
December 8, 1999.
The valuation of other net assets of AMHC, including a deferred tax asset,
an airline investment and certain receivables, was based on discussions with
management, including a discussion of recoverability and timing.
The summary set forth above is not a complete description of the analyses
performed by DLJ but summarizes the material elements of its presentation to the
AmerUs special committee on December 9, 1999. In reaching its conclusion, DLJ
considered the results of the analyses in light of each other and
17
<PAGE> 24
ultimately reached its opinion based on the results of all analyses taken as a
whole. DLJ did not place particular reliance or weight on any individual
analysis. Accordingly, DLJ believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. The results of DLJ's
analyses are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses.
Pursuant to the engagement agreement dated October 14, 1999, amended
February 7, 2000, between AmerUs and DLJ, AmerUs has paid to DLJ fees totaling
$2.25 million, consisting of monthly retainer fees in the amount of $750,000 and
$1,500,000 of fees which were paid upon delivery of DLJ's opinion. In addition,
AmerUs agreed to reimburse DLJ from time to time for all out-of-pocket expenses,
including the reasonable fees and expenses of counsel, that DLJ incurs in
connection with its engagement, and to indemnify DLJ and related persons against
specified liabilities in connection with its engagement, including liabilities
under U.S. federal securities laws. DLJ and the AmerUs special committee
negotiated the terms of the fee arrangement, and the AmerUs board of directors
was aware of the arrangement. DLJ believes that the terms of this fee
arrangement are customary for transactions of this nature.
DLJ, as part of its investment banking services, is regularly engaged in
the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and for corporate and other purposes. In 1997,
DLJ acted as co-manager in the initial public offering of AmerUs common stock
and advised AmerUs in its acquisition of AmVestors Financial Corp., receiving
usual and customary compensation for its services.
CONSIDERATION YOU AND THE ELIGIBLE MEMBERS WILL RECEIVE IN THE RESTRUCTURING
The plan of conversion provides that eligible members will receive shares
of AMHC common stock, policy credits and/or cash when AMHC converts to stock
form.
The total number of shares of AMHC common stock to be distributed to all
eligible members is approximately 17.4 million. This is approximately the number
of shares equal to AMHC's current 58% interest in AmerUs.
The amount of policy credits and/or cash that AMHC will distribute will
equal the value of all of the assets of AMHC (other than its 58% ownership
interest in AmerUs) minus the liabilities and expenses associated with these
assets. As of December 31, 1999, the estimated net value of such other assets
was approximately $339.7 million, consisting of cash of $267.9 million and other
non-life assets with an estimated net value of $71.8 million. The difference
between the value agreed to by the boards of AMHC and AmerUs of $92.6 million
and the $71.8 million of non-life assets at December 31, 1999 was attributable
to sales of selected assets with the proceeds included in the cash amount. AMHC
will retain these assets and liabilities and the net value of these assets will
be distributed to its members.
In the merger, stockholders of AmerUs, other than AMHC, will receive one
newly issued share of AMHC common stock in exchange for every share of AmerUs'
Class A common stock that they own. Immediately prior to the merger, the shares
of AmerUs' Class A common stock held by AHMC will be canceled.
Special committees of the boards of AMHC and AmerUs have considered and
approved the fairness of the financial terms of the merger, including the
valuation of the AMHC assets and liabilities remaining in the combined entity
following the merger.
18
<PAGE> 25
U.S. FEDERAL INCOME TAX CONSIDERATIONS
As a condition to the effectiveness of the plan of conversion, Caplin &
Drysdale, Chartered, special tax counsel, have provided AMHC and AmerUs with an
opinion regarding the federal income tax consequences of the restructuring. The
opinion from the special tax counsel provides substantially as follows:
- Neither AMHC nor AmerUs will recognize any income, gain or loss from the
merger or the distribution by AMHC of AMHC common stock to AmerUs
stockholders in exchange for their AmerUs common stock.
- AmerUs stockholders will not recognize any income, gain or loss upon the
receipt of AMHC common stock in exchange for their AmerUs common stock as
a result of the merger.
- AMHC will not recognize any income, gain or loss as a result of AMHC's
conversion from a mutual to a stock company or the distribution by AMHC
of common stock to members in exchange for their membership interests in
AMHC.
Special tax counsel has based the opinions described above on the accuracy
of representations, statements and undertakings made by AMHC and AmerUs. The
special tax counsel has limited these opinions to the Internal Revenue Code, and
applicable Treasury regulations, administrative interpretations, and judicial
interpretations, all as in effect on the date of the opinions. Future changes in
applicable law or administrative or judicial interpretations of applicable law,
which changes may have retroactive effect, may adversely affect the tax
consequences described above. WE URGE STOCKHOLDERS OF AMERUS TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE TAX TREATMENT APPLICABLE TO THEIR SPECIFIC
CIRCUMSTANCES, INCLUDING THE POTENTIAL IMPACT OF STATE, LOCAL AND FOREIGN TAXES.
AMERUS COMMON STOCK RIGHTS
The merger agreement provides that AMHC will assume each stock option,
restricted stock award, stock warrant, stock appreciation right and similar
common stock equivalents, instruments or units outstanding at the effective time
which may be exercised for issuance of, converted into or relating to AmerUs
common stock. All of these rights will be converted into a stock option,
restricted stock award, a stock warrant or similar common stock equivalent,
instrument or unit, respectively, to purchase, convert into or relate to AMHC
common stock on the same terms and conditions as previously exercisable.
In addition, the merger agreement provides that at the effective time, AMHC
will assume and adopt the AmerUs Life Holdings, Inc. Non-Employee Director Stock
Plan, the AmerUs Life Holdings, Inc. 1999 Non-Employee Stock Option Plan, the
AmerUs Life Holdings, Inc. Stock Incentive Plan, the AmerUs Life Holdings, Inc.
2000 Stock Incentive Plan and the AmerUs Group Co. MIP Deferral Plan, as each of
these plans is maintained and administered by AmerUs at the effective time.
CONDITIONS TO THE MERGER
The obligation of AmerUs and AMHC to complete the merger is subject to the
satisfaction of a number of conditions, including the following:
- AMHC and AmerUs must receive the approval of any necessary regulatory
authority, including the Iowa Insurance Commissioner;
- a majority of the stockholders of each of AmerUs' Class A and Class B
common stock must approve the merger agreement;
- two-thirds of those AMHC members voting on the plan of conversion must
approve the plan;
- the absence of any action by any court or regulatory authority
prohibiting the completion of the merger;
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<PAGE> 26
- the continued effectiveness of the registration statement of which this
proxy statement/prospectus is a part and no stop order being issued or
threatened and receipt of all permits or authorizations under state
securities laws necessary to complete the merger;
- approval for listing on the NYSE (or other exchange) of the shares of
AMHC common stock issuable in the merger;
- the absence of any order, judgment or decree imposing materially adverse
conditions deemed to be unreasonable by AMHC or AmerUs to the merger and
the absence of any suit, action or other proceeding that would make it
inadvisable to proceed with the merger because any such suit, action or
proceeding has a significant potential to deprive the party electing not
to proceed of any of the material benefits to it of the merger;
- AMHC and AmerUs must obtain all required consents or approvals of all
third parties, and supplements to any outstanding indentures or debt
agreements, unless the failure to obtain any such consent or approval
would not have a material adverse effect on the business, assets,
financial condition, results of operations, or prospects on AMHC or
AmerUs;
- all conditions precedent to the effectiveness of the plan of conversion,
except for effectiveness of the merger, must have been satisfied or
waived;
- AMHC and AmerUs must receive a confirmation of the legal opinion
previously received from their tax counsel addressing the effects of the
restructuring for AmerUs, AMHC, AmerUs stockholders and AMHC members;
- AMHC must have purchased insurance to cover risks associated with
possible environmental liabilities of AMHC and possible liabilities
associated with breaches of representations and warranties by AMHC in
prior purchase and sale agreements with third parties.
In addition, the obligations of AmerUs and AMHC to complete the merger are
subject to the satisfaction of the following conditions which may be waived by
AmerUs and AMHC as appropriate:
- the continued truth and accuracy of the representations and warranties of
each party except for any inaccuracies which would not have a material
adverse effect on the business, assets, financial condition, results of
operations, or prospects of the party by whom such representations and
warranties were made;
- the performance by each party in all material respects of all of the
agreements and covenants required to be performed by it under the merger
agreement;
- the absence of any material adverse effect on the business, assets,
financial condition, results of operations, or prospects of the other
party;
- with respect to AmerUs only, AmerUs has received an opinion of counsel
regarding the authorization and validity of the shares to be issued in
the merger.
We cannot predict if or when the conditions precedent to the merger can or
will be satisfied or waived by the appropriate party. However, as of the date of
this proxy statement/prospectus, neither AmerUs nor AMHC has any reason to
believe that any of these conditions will not be satisfied.
EFFECTIVE DATE
The effective date of the restructuring will be the date specified in the
articles of merger filed with the Iowa Secretary of State. The restructuring
will be deemed to have become effective at 12:01 a.m. Central Time on the
effective date. We expect the effective date of the restructuring to occur early
in the third quarter of 2000.
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<PAGE> 27
ACCOUNTING TREATMENT
AMHC prepares consolidated financial statements that include AMHC, AmerUs
Group Co. and its principal subsidiaries AmerUs, AmerUs Home Equity, Inc. and
AmerUs Properties, Inc. AmerUs is a majority owned subsidiary of AMHC. As a
consolidated subsidiary, the financial position, results of operations and cash
flows for AmerUs and its subsidiaries are consolidated with the financial
position, results of operations and cash flows of AMHC. AMHC expects to account
for the merger of AmerUs into AMHC as a "purchase", as that term is used under
GAAP, for accounting and financial reporting purposes. Under purchase
accounting, the assets and liabilities of the 42% minority interest in AmerUs as
of the effective time will be recorded at their respective fair values and added
to those of AMHC. Any excess of purchase price over the fair values is
recognized as goodwill. Financial statements of AMHC issued after the effective
time would reflect these values and would not be restated retroactively to
reflect the historical financial position or results of operations of AmerUs.
REQUIRED REGULATORY APPROVALS
The plan of conversion is subject to the approval of any necessary
regulatory authorities, including the Iowa Insurance Commissioner. As required
by Sections 521A.14(5) and 508B.7 of the Code of Iowa (1999), AMHC will soon be
submitted the plan of conversion to the Iowa Insurance Commissioner. The plan
will be approved if the Iowa Insurance Commissioner finds that the plan complies
with all provisions of law, is fair and equitable to the mutual members, and
that the reorganized company will have the amount of capital and surplus deemed
by the Iowa Insurance Commissioner to be reasonably necessary for its future
solvency.
Section 508B.7 permits the Iowa Insurance Commissioner to hold a public
hearing "on the fairness and equity of the terms of the plan" after giving
written notice of the hearing to AMHC's members and other interested persons,
all of whom have the right to appear at the hearing. The Iowa Insurance
Commissioner has informed AMHC that she will hold a hearing. The hearing by the
Iowa Insurance Commissioner, which will be held at the Iowa Division of
Insurance, 330 Maple Street, Des Moines, Iowa, beginning at 1:00 p.m. on June
23, 2000, will be open to the public. AMHC and its directors, officers,
employees, members and other interested persons have the right to appear and be
heard at the public hearing.
DISSENTERS' RIGHTS
Instead of having your shares converted into shares of AMHC common stock
you have the right to receive the "fair value" of your AmerUs common stock.
These rights are known as "dissenters' rights".
The conditions necessary to secure dissenters' rights are set out in full
in Appendix E. This summary is not a complete description of Iowa law relating
to dissenters' rights. If you desire to exercise these rights, you should review
carefully Appendix E and consult a legal advisor. If you do not follow the
procedures set out below and in Appendix E, you will lose your dissenters'
rights. It is your responsibility to initiate all necessary action to exercise
your dissenters' rights according to the procedures prescribed by Iowa law.
If you exercise your dissenters' rights fully, you will not be entitled to
surrender your shares of AmerUs common stock for the shares of AMHC common stock
that AMHC would otherwise have distributed to you as a result of the merger.
Iowa law requires that AmerUs notify each of its stockholders prior to the
special meeting that they have dissenters' rights and provide stockholders with
a copy of Division XIII of the Iowa Business Corporation Act ("IBCA"). This
proxy statement/prospectus constitutes that notice.
If you wish to exercise your dissenters' rights, you must not vote for
approval of the merger agreement. Because a duly executed proxy that does not
contain voting instructions will, unless revoked, be voted for the merger, a
holder of AmerUs common stock who votes by proxy and wishes to exercise
dissenters' rights must vote against the merger agreement or abstain from voting
on the merger agreement.
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<PAGE> 28
A vote against the merger, in person or by proxy, will not in and of itself
satisfy the requirements of the IBCA. A separate written demand for payment is
also required.
If you elect to exercise your dissenters' rights, you must deliver to
AmerUs a written notice of your intent to demand payment for your AmerUs common
stock prior to the vote on the merger at the special meeting.
All written notices of your intent to demand payment should be sent or
delivered to:
AmerUs Life Holdings, Inc.
699 Walnut Street, Suite 2000
Des Moines, Iowa 50309-3948
Attention: James A. Smallenberger
If you send a notice of intent to demand payment and you refrain from
voting in favor of the merger, AmerUs will deliver a written dissenters' notice
to you within 10 days of the approval of the merger agreement.
The dissenters' notice will:
- state where you must send the payment demand and where and when you must
deposit certificates for certificated shares,
- inform holders of uncertificated shares of AmerUs common stock to what
extent transfer of the shares will be restricted after the payment demand
is received,
- supply a form for demanding payment that includes the date of the first
announcement to news media or to stockholders of the terms of the merger
and requires that the person asserting dissenters' rights certify whether
or not the person acquired beneficial ownership of the shares of AmerUs
common stock before that date,
- set a date by which AmerUs must receive the payment demand, which date
will be between thirty and sixty days after the date the dissenters'
notice is delivered, and
- be accompanied by a copy of Division XIII of the Iowa Business
Corporation Act.
Once you receive a dissenters' notice, you must demand payment, certify
whether you acquired beneficial ownership of the shares before the date of the
first announcement of the terms of the merger, as specified in the dissenters'
notice, and deposit your certificates in accordance with the terms of the
dissenters' notice.
If you demand payment and deposit your AmerUs common shares, you will
retain all other rights of a stockholder until these rights are cancelled or
modified by the merger. AmerUs may, however, restrict the transfer of
uncertificated shares from the date of the demand for their payment until the
merger goes forward or such restrictions are released.
If you demanded payment and deposited your AmerUs common shares, at the
time of the merger or upon receipt of a payment demand, whichever occurs later,
AmerUs will have to pay you the amount it estimates to be the fair value of your
AmerUs common stock, plus accrued interest.
If AmerUs does not go forward with the merger within 180 days after the
date set for demanding payment and depositing share certificates, AmerUs must
return the deposited certificates to you. A new dissenters' notice will be sent
to you if AmerUs goes forward with the merger after returning the deposited
certificates.
Under Iowa law, if you are dissatisfied with the payment or with the offer
made by AmerUs, you may notify AmerUs of your own estimate of the value of your
AmerUs common stock and demand payment within 30 days of AmerUs' payment or
offer. If you fail to demand payment within those 30 days, you will waive your
right to demand payment.
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<PAGE> 29
You may also demand payment for your AmerUs common stock if AmerUs fails to
make payment within 60 days after the date set for demanding payment or if
AmerUs does not go forward with the merger and fails to return the share
certificates or to release transfer restrictions imposed on uncertificated
shares within 60 days after the date set for demanding payment.
If a demand for payment for your AmerUs common shares remains unsettled,
AmerUs must commence a proceeding within 60 days after receiving the payment
demand and petition the court to determine the fair value of the AmerUs common
stock and accrued interest. If AmerUs fails to commence the court proceeding
within 60 days, AmerUs must pay each dissenter whose demand remains unsettled
the amount demanded.
You should be aware that the fair value of your AmerUs common stock as
determined under Iowa law could be more than, the same as or less than the value
of the AMHC common stock you would receive in the merger if you did not seek
appraisal of your AmerUs common stock.
IF YOU ELECT TO DEMAND APPRAISAL OF YOUR AMERUS COMMON STOCK BUT FAIL TO
FULLY EXERCISE OR LOSE YOUR RIGHT TO APPRAISAL AS PROVIDED UNDER IOWA LAW YOUR
AMERUS COMMON STOCK WILL CONVERT INTO AMHC COMMON STOCK IN THE MERGER.
If you have fully exercised your rights as a dissenter, you will not be
entitled to surrender your shares of AmerUs common stock for the shares of AMHC
common stock that AMHC would otherwise have distributed to you as a result of
the merger. After the merger is completed, you will not be entitled to vote your
AmerUs common stock for any purpose or be entitled to the payment of dividends
or other distributions on your AmerUs common stock. You will, however, be
entitled to dividends or other distributions payable to holders of record of
AmerUs common stock as of a record date prior to the date the merger is
completed.
COMMISSION-FREE PROGRAM
AMHC may establish a commission-free program which would begin between 6
and 12 months after the effective date of the plan of conversion. If AMHC
establishes a commission-free program it would continue for 3 months or for any
longer period of time as the AMHC board determines to be appropriate and in the
best interest of AMHC and its stockholders. Pursuant to this program, each
member who receives under the plan of conversion a number of shares of AMHC
common stock that is less than or equal to a number specified by the AMHC board
(which number would not be more than 99) would be entitled to sell at prevailing
market prices all, but not less than all, the shares of AMHC common stock
received under the plan of conversion by that member, without paying brokerage
commissions, mailing charges, registration fees, or other administrative or
similar expenses. Record holders of a number of shares of AMHC common stock that
is less than or equal to a number specified by the AMHC board (which number
would not be more than 99) would be entitled to purchase at prevailing market
prices additional shares to round-up their holdings to 100 shares, without
paying brokerage commissions, mailing charges, registration fees or other
administrative or similar expenses. If AMHC establishes a commission-free
program it will establish administrative procedures for the delivery of requests
to sell or purchase shares of AMHC common stock and for the sale or purchase of
such shares of AMHC common stock through the program. AMHC may, in its
discretion, institute one or more commission-free programs in the future, but is
not required to do so.
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<PAGE> 30
MANAGEMENT OF AMHC AFTER THE MERGER
BOARD OF DIRECTORS
Currently, AMHC's board of directors consists of 10 directors divided into
five classes. After the conversion, the board of directors of AMHC will consist
of 11 members and will be divided into three classes. Eight of these directors
are also members of the AmerUs board and information concerning these directors
is contained in AmerUs' annual proxy statement for 2000 and is incorporated in
this document by reference. For more information on how to obtain a copy of the
annual proxy statement, see "Where You Can Find More Information" on page 62.
Information concerning the three additional directors is set forth below.
Wesley H. Boldt -- West Des Moines, Iowa, President and Chief Executive
Officer of Profit Advisor Group since February 1998 and President of
Quality of Life Corporation since March 1996. Prior to that time, he was
President of Nax Corporation. Mr. Boldt has been a director of AMHC since
July 1996. He is 66 years of age.
Joseph A. Borgen, Ph.D. -- Ankeny, Iowa, President and Chief Executive
Officer of Des Moines Area Community College since 1981. Dr. Borgen has
been a director of AMHC since July 1996. He is 59 years of age.
F.A. Wittern, Jr. -- Des Moines, Iowa, Chairman and Chief Executive Officer
of The Wittern Group, a conglomerate of private companies involved in
manufacturing, financial services, equipment leasing and international
trade in the automatic merchandising industry. He is a director of Norwest
Bank Iowa, N.A. and Pan-O-Gold Baking Company. Mr. Wittern has been a
director of AMHC since February 1999. He is 62 years of age.
The eleven directors will be divided among the three classes in the
following manner: Class I will consist of Wesley H. Boldt, Roger K. Brooks and
F.A. Wittern, Jr.; Class II will be John R. Albers, Dr. Joseph A. Borgen, Thomas
F. Gaffney and Jack C. Pester; and Class III will include Malcolm Candlish, John
W. Norris, Jr., Ralph W. Laster, Jr. and John A. Wing. Class I members will
serve for one year after the effective date of the plan of conversion; Class II
members will serve for two years; and Class III members will serve a three-year
term.
EXECUTIVE OFFICERS
The executive officers of AMHC following the merger will be the executive
officers of AmerUs immediately prior to the merger. Information concerning these
executive officers is contained in AmerUs' annual proxy statement for 2000 and
is incorporated in this document by reference. For more information on how to
obtain this proxy statement, see "Where You Can Find More Information" on page
62.
DIRECTOR AND EXECUTIVE COMPENSATION
After the merger, the executive officers of AMHC will receive the same
compensation from AMHC as they do currently from AmerUs. Information concerning
compensation of directors and executive officers of AmerUs is contained in
AmerUs' annual proxy statement for 2000. For more information on how to obtain a
copy of the annual proxy statement, see "Where You Can Find More Information" on
page 62.
Following the reorganization, for their services on the board, non-employee
directors of AMHC will be paid $20,000 per year and $4,000 for each meeting
attended. The chairman of each of the Audit, Board Operations, Finance and
Strategy, Human Resources and Investment committees will receive an additional
$2,000 per year. In addition, members of the special committees of independent
directors of each of AmerUs and AMHC will receive a one-time fee of $17,500 and
$32,500, respectively, for additional meetings attended in carrying out their
duties as members of the special committees of independent directors. The fees
paid to members of AMHC's special committee are subject to the approval of the
Iowa Insurance Commissioner.
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<PAGE> 31
DESCRIPTION OF THE BUSINESS OF AMHC
AMHC is a mutual insurance holding company whose principal asset is the
stock it holds of your company, AmerUs. Information concerning the business of
AmerUs is contained in its Annual Report on Form 10-K for the year ended
December 31, 1999 and is incorporated in this document by reference. For more
information on how to obtain this report, see "Where You Can Find More
Information" on page 62.
In addition, AMHC has two other subsidiaries, AmerUs Home Equity, Inc.
("Equity"), a finance company, engaged in the business of home equity loans and
AmerUs Properties, Inc. ("Properties") engaged in the business of managing
commercial real estate and mortgage portfolios of the subsidiaries of AmerUs and
certain discontinued operations.
AMERUS HOME EQUITY, INC.
Equity engages in the origination, sale and servicing of home equity
lending. Formed in 1998, Equity has lending offices located in 20 states and
provides a full array of home equity products and services, such as first and
second mortgages, mortgage refinancing and balloon term loans. As of December
31, 1999, AMHC's equity investment in Equity was $3.0 million.
AMERUS PROPERTIES, INC.
Formed in 1982 and formerly known as Central Properties, Inc., AmerUs
Properties, Inc., a real estate company and a subsidiary of AMHC, provides
management, development, syndication and marketing services for commercial real
estate and mortgage portfolios of AMHC and its subsidiaries. As of December 31,
1999, AMHC's equity investment in Properties was $32.0 million.
DISCONTINUED OPERATIONS
In the first quarter of 1998, AMHC began implementation of a plan for the
disposition of its residential real estate operations. These operations
consisted of four subsidiaries: AmerUs Mortgage, Inc. ("AMI"), AmerUs Home
Services ("AHS"), Sunset Homes, and AmerUs Land Development ("ALD"), formerly
known as Iowa Realty Development Company. In April 1998, AMHC ceased loan
origination activity of AMI. In October, 1998, AMHC sold the mortgage servicing
rights of AMI and recorded an after tax gain of $1.7 million. AMHC plans to
complete the sale of the remaining assets of AMI and has recorded an estimated
loss of $0.3 million on these assets. In May 1998, AMHC sold AHS and recorded an
after tax gain of $19.1 million. AMHC plans to complete the liquidation of the
Sunset Homes real estate inventory and no loss is expected on the sale of this
inventory. AMHC plans to complete the liquidation of the ALD real estate
inventory and no loss is expected on the sale of this inventory. In July 1998,
AMHC completed the sale of its bank operating segment subsidiary, AmerUs Bank.
AMHC recorded an after tax gain of $54.1 million on the sale. As of December 31,
1999, discontinued operations had assets of $20.4 million and liabilities of
$2.7 million.
The consolidated statements of operations have been reclassified to present
the results of operations and gain on sale of the discontinued operations.
EMPLOYEES
As of December 31, 1999, AMHC had 790 full-time employees of which 694 were
employees of AmerUs and 96 were employees of its other subsidiaries. None of
these employees are covered by a collective bargaining agreement and AMHC
believes that its relations with employees are satisfactory.
REGULATION
Prior to the conversion, AMHC has been regulated as a mutual insurance
holding company. Following the conversion, it will be regulated as a stock
insurance holding company. Information concerning the regulation of AmerUs and
its subsidiaries is contained in AmerUs' Annual Report on Form 10-K for the year
ended December 31, 1999 and is incorporated in this document by reference. For
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<PAGE> 32
more information on how you can obtain this report, see "Where You Can Find More
Information" on page 62.
In addition, prior to and for a period of five years following the
effective date of the demutualization, the Iowa insurance laws provide that a
person, other than the reorganized company, an employee benefit plan or employee
benefit trust sponsored by the reorganized company, or as otherwise specifically
provided for in the plan of conversion, shall not directly or indirectly acquire
or offer to acquire the beneficial ownership of more than five percent of any
class of voting security of the reorganized company, and a person, other than
the reorganized company or other than an employee benefit plan or employee
benefit trust sponsored by the reorganized company, who acquires five percent or
more of any class of voting security of the reorganized company prior to the
conversion or as specifically provided for in the plan of conversion, shall not
directly or indirectly acquire or offer to acquire the beneficial ownership of
additional voting securities of the reorganized company, unless the acquisition
is approved by the Iowa Insurance Commissioner as not being contrary to the
interests of the policyholders of the reorganized company or its life insurance
company subsidiary and by the board of directors of the reorganized company.
RECENT DEVELOPMENTS
On February 18, 2000, AMHC and AmerUs entered into a Combination and
Investment Agreement with ILICO and ILGOC. Under the agreement, AMHC will
combine with ILICO. ILICO is a 95-year-old mutual life insurance and annuity
company based in Indianapolis with core competencies in product development and
alternative distribution arrangements. ILGOC is a subsidiary of ILICO that owns
the stock of three insurance subsidiaries. As of December 31, 1999, ILICO had
assets of $6.1 billion. ILICO and its subsidiaries do business in all 50 states
and the District of Columbia.
The combination of ILICO with AMHC will be effected through the conversion
of ILICO from a mutual to a stock company. In the conversion, ILICO members will
exchange their membership interests for AMHC common stock, cash and policy
credits that will have an aggregate value equal to 11.25 million AMHC shares,
although this number may be adjusted if the aggregate value is less than $215
million. As a result of the combination, ILICO will become a subsidiary of AMHC.
In addition, AmerUs purchased 105.96 shares of non-voting common stock of
ILGOC, which represents 45% of the equity in ILGOC, for $100 million.
The combination will require the approval of ILICO's members and AMHC's
shareholders, and receipt of required regulatory approvals. The combination is
expected to close after the conversion of AMHC to a stock company towards the
end of the year.
Additional information concerning the combination and financial information
relating to ILICO are contained in AmerUs' Current Report on Form 8-K dated
January 13 and February 22, 2000 and Form 8-K/A dated March 6 and 21, 2000,
which are incorporated by reference herein. See "Where You Can Find More
Information" on page 62.
The ILICO combination is not the subject of this proxy
statement/prospectus. We have disclosed the information regarding the ILICO
combination to you in order to help you understand AMHC, AmerUs and the expected
structure of AMHC going forward after the merger with AmerUs.
This document is being delivered to you for the purpose of voting on the
merger between AMHC and AmerUs and the vote on that merger. AMHC shareholders
will be able to vote on the ILICO combination at a special meeting on a date
after this vote on the restructuring. The restructuring is not contingent on the
ILICO combination. However, if the restructuring is not consummated, the ILICO
combination is not expected to proceed.
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MARKET PRICES AND DIVIDENDS
AmerUs has been publicly traded since 1997. On February 20, 1998, AmerUs'
Class A common stock was listed and trading began on the New York Stock Exchange
under the symbol "AMH". Prior to such listing, AmerUs' Class A common stock was
listed and traded on the Nasdaq National Market System under the symbol "AMRS".
The following table sets forth, for the periods indicated, the high and low
sales prices per share of AmerUs' Class A common stock as quoted on Nasdaq or
the NYSE, as applicable, and the quarterly dividends per share declared during
such quarter.
<TABLE>
<CAPTION>
AMERUS
CLASS A COMMON STOCK
---------------------------------------
HIGH LOW DIVIDENDS
----------- ----------- ---------
<S> <C> <C> <C>
1998
First Quarter............................................. 36 1/4 30 7/8 .10
Second Quarter............................................ 34 7/16 30 5/8 .10
Third Quarter............................................. 33 1/16 21 15/16 .10
Fourth Quarter............................................ 24 1/8 14 3/4 .10
1999
First Quarter............................................. 24 11/16 16 13/16 .10
Second Quarter............................................ 28 21 5/16 .10
Third Quarter............................................. 28 3/4 21 3/16 .10
Fourth Quarter............................................ 25 3/4 20 1/2 .10
2000
First Quarter............................................. 24 16 9/16 .10
Second Quarter (through May 11)........................... 20 1/8 18 --
</TABLE>
HOLDERS
As of March 31, 2000, the number of holders of record of each class of
common equity of AmerUs was as follows:
<TABLE>
<CAPTION>
NUMBER OF
HOLDERS
---------
<S> <C>
Class A common stock..................................... 2,358
Class B common stock..................................... 1
</TABLE>
DIVIDENDS
The AmerUs board has declared and paid a quarterly dividend of $0.10 per
share of common stock since the second quarter of 1997. At the meeting of the
AmerUs board of directors in February, the AmerUs board determined to pay
dividends annually rather than quarterly. After the restructuring, AMHC expects
to declare and pay dividends annually. Any payment of dividends will be subject
to the discretion of the AMHC board and be dependent upon AMHC's financial
condition, results of operations, cash requirements, future prospects,
regulatory restrictions on the payment of dividends by AMHC's life insurance
subsidiaries and other factors deemed relevant by AMHC's board.
AMHC's ability to pay dividends to its stockholders and meet its other
obligations, including operating expenses and any debt service, primarily
depends upon the receipt of sufficient funds from its life insurance
subsidiaries in the form of dividends, interest payments or loans. Based on
statutory insurance regulations and the life insurance subsidiaries' 1999
results, AMHC's life insurance subsidiaries could pay an estimated $61.1 million
in dividends in 2000 without obtaining regulatory approval.
Under its bank credit facility, AmerUs is prohibited from paying dividends
on its common stock in excess of an amount equal to 3% of the AmerUs's
consolidated net worth as of the last day of the preceding fiscal year. After
the restructuring, AMHC will be bound by these same restrictions on the payment
of dividends.
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In connection with the 8.85% Capital Securities, Series A (the "Capital
Securities"), issued in 1997 by AmerUs Capital I, AmerUs's subsidiary trust, and
the 7.00% Adjustable Conversion-Rate Equity Security Units ("ACES"), issued in
1998 by AmerUs Capital II, AmerUs' subsidiary trust, AmerUs has agreed not to
declare or pay any dividends on AmerUs' capital stock (including the Class A
common stock) during any period for which AmerUs elects to extend interest
payments on its junior subordinated debentures, except for stock dividends paid
by AmerUs where the dividend stock is the same stock as that on which the
dividend is being paid. Dividends on AmerUs's capital stock cannot be paid until
all accrued interest on the Capital Securities and ACES has been paid. After the
restructuring, AMHC will be bound by these same restrictions on the payment of
dividends.
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SELECTED CONSOLIDATED FINANCIAL DATA OF AMHC
The following table sets forth certain financial and operating data of
AMHC. AmerUs is a consolidated subsidiary of AMHC, and as such, the financial
position and results of operation of AmerUs are included in the consolidated
financial statements of AMHC. The selected consolidated financial data below for
each of the five years ending December 31, 1999 are derived from the
Consolidated Financial Statements of AMHC, which financial statements have been
audited by KPMG LLP, independent auditors.
The information in the following tables is based on, and should be read
together with, the historical financial information set forth in this proxy
statement/prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997(A) 1996(B) 1995
--------- --------- --------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues:
Insurance premiums.................... $ 89.5 $ 81.2 $ 48.1 $ 138.5 $ 244.1
Product charges....................... 74.7 73.0 47.3 52.2 57.4
Net investment income................. 557.5 505.2 226.9 235.3 286.7
Realized gains on investments......... 2.5 1.1 11.9 64.5 51.4
Other income.......................... 15.3 13.0 13.8 15.8 12.9
Contribution from the Closed
Block(B)........................... 25.2 31.5 31.0 19.9 --
--------- --------- --------- -------- --------
Total revenues................ 764.7 705.0 379.0 526.2 652.5
--------- --------- --------- -------- --------
Benefits and expenses:
Total policyholder benefits........... 442.4 430.8 196.0 264.7 374.6
Total insurance and other expenses.... 195.0 165.0 91.2 113.4 123.8
Dividends to policyholders............ 4.5 2.6 1.6 26.3 49.4
--------- --------- --------- -------- --------
Total benefits and expenses... 641.9 598.4 288.8 404.4 547.8
--------- --------- --------- -------- --------
Income from continuing operations....... 122.8 106.6 90.2 121.8 104.7
Interest expense........................ 28.9 27.8 16.9 11.7 7.2
--------- --------- --------- -------- --------
Income before tax expense, minority
interest, and equity in earnings of
unconsolidated subsidiary............. 93.9 78.8 73.3 110.1 97.5
Income tax expense...................... 32.8 24.8 19.3 41.6 38.3
Minority interest....................... 28.1 26.9 16.2 -- --
--------- --------- --------- -------- --------
Income before equity in earnings of
unconsolidated subsidiary............. 33.0 27.1 37.8 68.5 59.2
Equity in earnings of unconsolidated
subsidiary............................ 1.5 2.6 1.7 1.0 --
--------- --------- --------- -------- --------
Net income from continuing
operations.................. 34.5 29.7 39.5 69.5 59.2
Discontinued operations:
Income (loss) from discontinued
operations, net of tax............. 3.9 (1.1) 14.9 11.7 21.5
Gain on sale of discontinued
operations, net of tax............. -- 74.9 -- -- --
--------- --------- --------- -------- --------
Net income before
extraordinary item.......... 38.4 103.5 54.4 81.2 80.7
Extraordinary item, net of tax.......... -- -- -- -- (0.8)
--------- --------- --------- -------- --------
Net Income.................... $ 38.4 $ 103.5 $ 54.4 $ 81.2 $ 79.9
========= ========= ========= ======== ========
CONSOLIDATED BALANCE SHEET DATA:
Total invested assets................... $ 7,765.6 $ 7,909.4 $ 7,793.2 $3,284.6 $4,020.8
Total assets............................ 11,097.7 10,780.5 12,004.6 6,052.8 5,781.1
Total liabilities....................... 9,829.5 9,399.5 10,735.0 5,378.5 5,114.2
Minority interest....................... 309.1 364.3 460.5 -- --
Company-obligated mandatorily redeemable
preferred securities.................. 197.7 199.6 86.0 -- --
Total members' equity................... 761.4 817.1 723.1 674.3 666.9
</TABLE>
29
<PAGE> 36
- ---------------
(A) Consolidated Income Statement Data for 1997 includes the results for Delta
Life Corporation ("Delta"), subsequent to the acquisition date of October
23, 1997 and the results for AmVestors, subsequent to the acquisition date
of December 19, 1997, and Consolidated Balance Sheet Data includes year-end
data for Delta and AmVestors.
(B) The Closed Block was formed on June 30, 1996. Invested assets allocated to
the Closed Block are classified as Closed Block assets. Revenues and
expenses associated with the Closed Block are shown net as a single line
item. Accordingly, the individual income statement components for 1999,
1998 and 1997 are not fully comparable with those of 1996 and 1995 due to
the establishment of the Closed Block on June 30, 1996.
30
<PAGE> 37
AMHC AND AMERUS UNAUDITED PRO FORMA FINANCIAL DATA
The following tables show financial information after giving effect to the
restructuring and the combination with ILICO (which we refer to as "pro forma"
information). In the restructuring, AMHC will convert to stock form and will
distribute stock or other assets to its members. In addition, AmerUs will merge
into AMHC and AMHC will issue AMHC common stock to the current public
stockholders of AmerUs (the merger is shown in the tables that follow as
"Purchase of Minority Interest"). AmerUs is a consolidated subsidiary of AMHC
and as such, the historical data for AMHC includes the historical results of
AmerUs for the periods indicated. In the ILICO combination, AMHC will issue
shares of common stock, cash and policy credits as merger consideration. The
actual composition of cash, policy credits and common stock cannot be determined
at this time and is subject to regulatory approval. However, the value of the
consideration will be equal to 11.25 million shares. The amount of cash and
policy credits distributed will be determined by the average price of AMHC
shares for a specified period following the closing of the combination. In
addition, AMHC has purchased a minority interest in ILGOC for $100 million of
which $77.2 million was used by ILGOC to repurchase its former minority
interest. The financial information is provided for the year ended 1999. In
presenting the pro forma information for 1999, we assumed that the restructuring
and the combination had occurred as of January 1, 1999. The pro forma
information gives effect to the merger and the combination under the purchase
method of accounting in accordance with generally accepted accounting principles
(commonly referred to as "GAAP").
The restructuring is not dependent upon the combination with ILICO.
However, the ILICO combination is subject to the completion of the AMHC
restructuring, among other conditions. We expect that we will incur merger and
integration charges as a result of combining the companies. The pro forma
information, while helpful in illustrating the financial characteristics of the
combined company under one set of assumptions, does not reflect these expenses
and, accordingly, does not attempt to predict or suggest future results. It also
does not necessarily reflect what the historical results of the combined company
would have been had our companies been combined.
The information in the following tables is based on, and should be read
together with, the historical financial information set forth in this proxy
statement/prospectus and in AmerUs' prior SEC filings which we have incorporated
into this document by reference. See "Where You Can Find More Information" on
page 62.
31
<PAGE> 38
AMERICAN MUTUAL HOLDING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
RESTRUCTURING PURCHASE OF RESTRUCTURING
AND DISTRIBUTION MINORITY AND PURCHASE OF ILICO
HISTORICAL(A) TO MEMBERS(B) INTEREST(C) MINORITY INTEREST HISTORICAL
------------- ---------------- -------------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Securities available for sale at
fair value:
Fixed maturity securities......... $ 6,681.0 $ (71.8)(B) $ -- $ 6,609.2 $4,336.0
Equity securities................. 14.6 14.6 8.5
Short-term investments............ 0.2 0.2 --
Loans............................... 608.9 10.1(C) 619.0 378.0
Loans held for sale................. 12.9 12.9
Real estate......................... 45.7 45.7
Policy loans........................ 109.8 109.8 184.7
Other investments................... 292.5 292.5 12.2
--------- ------- ------- --------- --------
Total investments........... 7,765.6 (71.8) 10.1 7,703.9 4,919.4
--------- ------- ------- --------- --------
Cash and cash equivalents........... 293.0 (339.7)(B) 25.1 174.4
71.8(B)
Accrued investment income........... 92.2 92.2 65.4
Premiums, fees and other
receivables....................... 9.9 9.9 8.4
Reinsurance receivables............. 17.5 17.5 236.9
Deferred policy acquisition costs... 529.7 (223.4)(C) 306.3 328.7
Value of business acquired.......... 230.6 240.1(C) 470.7 10.3
Goodwill............................ 206.3 (37.5)(C) 168.8 12.9
Premiums and equipment, net......... 25.2 25.2 23.8
Other assets........................ 515.1 (15.0)(C) 500.1 2.5
Separate account assets............. -- 341.1
Closed block assets................. 1,412.6 16.2(C) 1,428.8
--------- ------- ------- --------- --------
Total Assets................ $11,097.7 $(339.7) $ (9.5) $10,748.5 $6,123.8
========= ======= ======= ========= ========
LIABILITIES
Policy reserves and policy owner
funds............................. $ 7,673.0 $ 7,673.0 $5,182.6
Other liabilities................... 204.1 204.1 205.6
Notes and contracts payable......... 196.3 196.3 25.0
Separate account liabilities........ -- 341.1
Closed block liabilities............ 1,756.1 1,756.1
--------- ------- ------- --------- --------
Total Liabilities........... 9,829.5 -- -- 9,829.5 5,754.3
--------- ------- ------- --------- --------
MINORITY INTEREST................... 309.1 -- (309.1)(C) -- 71.7
COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED CAPITAL
SECURITIES........................ 197.7 -- -- 197.7
STOCKHOLDERS EQUITY
Common stock,..................... -- 17.4(B) 12.7(C) 30.1
Additional paid-in-capital........ -- 483.9(B) 286.9(C) 770.8
Unearned compensation............. (0.2) (0.2)
Accumulated other comprehensive
income.......................... (78.6) (78.6) (10.2)
Unallocated ESOP shares........... (0.8) (0.8)
Retained Earnings................. -- --
Unassigned surplus................ 841.0 (841.0)(B) -- 308.0
--------- ------- ------- --------- --------
Total Stockholder's
Equity.................... 761.4 (339.7) 299.6 721.3 297.8
--------- ------- ------- --------- --------
Total Liabilities and
Equity.................... $11,097.7 $(339.7) $ (9.5) $10,748.5 $6,123.8
========= ======= ======= ========= ========
<CAPTION>
PRO FORMA FOR THE
RESTRUCTURING,
PURCHASE OF MINORITY
INTEREST AND
COMBINATION COMBINATION
WITH ILICO(D) WITH ILICO
------------- --------------------
<S> <C> <C>
ASSETS
Investments:
Securities available for sale at
fair value:
Fixed maturity securities......... $ (2.1)(D) $10,439.5
(503.6)(U)
Equity securities................. 23.1
Short-term investments............ 0.2
Loans............................... 4.9(D) 883.6
(118.3)(U)
Loans held for sale................. 12.9
Real estate......................... 45.7
Policy loans........................ (150.1)(U) 144.4
Other investments................... 304.7
------- ---------
Total investments........... (769.2) 11,854.1
------- ---------
Cash and cash equivalents........... (77.2)(E) 101.3
(14.0)(U)
(7.0)(J)
Accrued investment income........... 157.6
Premiums, fees and other
receivables....................... 18.3
Reinsurance receivables............. 1.6(D) 256.0
Deferred policy acquisition costs... (328.7)(F) 306.3
Value of business acquired.......... 297.3(G) 778.3
Goodwill............................ (12.9)(D)(H) 168.8
Premiums and equipment, net......... 11.5(D) 60.5
Other assets........................ 502.6
Separate account assets............. 341.1
Closed block assets................. 786.0(U) 2,214.8
------- ---------
Total Assets................ $(112.6) $16,759.7
======= =========
LIABILITIES
Policy reserves and policy owner
funds............................. $ 44.3(D) $11,968.6
(931.3)(U)
Other liabilities................... (11.2)(D)(I) 384.4
(14.1)(U)
Notes and contracts payable......... 0.9(D) 222.2
Separate account liabilities........ 341.1
Closed block liabilities............ 945.4(U) 2,701.5
------- ---------
Total Liabilities........... 34.0 15,617.8
------- ---------
MINORITY INTEREST................... (71.7)(D) --
COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED CAPITAL
SECURITIES........................ 197.7
STOCKHOLDERS EQUITY
Common stock,..................... 11.3(D) 41.4
Additional paid-in-capital........ 211.6(D) 982.4
Unearned compensation............. (0.2)
Accumulated other comprehensive
income.......................... 10.2(D) (78.6)
Unallocated ESOP shares........... (0.8)
Retained Earnings................. --
Unassigned surplus................ (308.0)(D) --
------- ---------
Total Stockholder's
Equity.................... (74.9) 944.2
------- ---------
Total Liabilities and
Equity.................... $(112.6) $16,759.7
======= =========
</TABLE>
(The Accompanying Notes are an integral part of this Unaudited Pro Forma
Consolidated Balance Sheet)
32
<PAGE> 39
AMERICAN MUTUAL HOLDING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
PURCHASE FOR THE
RESTRUCTURING OF RESTRUCTURING
AND DISTRIBUTION MINORITY AND PURCHASE OF ILICO
HISTORICAL(A) TO MEMBERS(B) INTEREST(C) MINORITY INTEREST HISTORICAL
------------- ---------------- ----------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Insurance premiums................ $ 89.5 $ $ $ 89.5 $165.2
Universal life and annuity product
charges......................... 74.7 74.7 64.5
Net investment income............. 557.5 (18.4)(K) (0.8)(O) 538.3 256.9
Realized gains on investments..... 2.5 2.5 4.8
Other income...................... 15.3 15.3
Contribution from Closed Block.... 25.2 25.2
------ ------ ----- ----------- ------
764.7 (18.4) (0.8) 745.5 491.4
------ ------ ----- ----------- ------
Operating Expenses
Policyowner benefits.............. 442.4 442.4 312.8
Underwriting, acquisition, and
insurance expenses.............. 127.2 (1.3)(L) 125.9 85.8
Amortization of deferred policy
acquisition costs & VOBA........ 67.8 6.8(M) 74.6 54.6
Dividends to policyowners......... 4.5 4.5 33.0
------ ------ ----- ----------- ------
641.9 -- 5.5 647.4 486.2
------ ------ ----- ----------- ------
Income from continuing
operations before income
taxes and minority
interest.................. 122.8 (18.4) (6.3) 98.1 5.2
Interest expense.................... 28.9 28.9 2.2
------ ------ ----- ----------- ------
Income before taxes and
minority interest......... 93.9 (18.4) (6.3) 69.2 3.0
Income tax (expense) benefit........ (32.8) 6.4(N) 2.6(N) (23.8) (1.6)
Minority interest................... (28.1) 28.1(C) -- (2.2)
------ ------ ----- ----------- ------
Income before equity in
earnings of unconsolidated
subsidiary................ 33.0 (12.0) 24.4 45.4 (0.8)
Equity in earnings of unconsolidated
subsidiary........................ 1.5 1.5 --
------ ------ ----- ----------- ------
Net income from continuing
operations................ $ 34.5 $(12.0) $24.4 $ 46.9 $ (0.8)
====== ====== ===== =========== ======
Income from continuing operations
per share(V):
Basic............................. $ 1.56
Diluted........................... 1.55
Share used in the calculation of
income from continuing operations
per share(V):
Basic............................. 30,229,682
Diluted........................... 30,306,649
<CAPTION>
PRO FORMA
FOR THE
RESTRUCTURING,
PURCHASE OF
MINORITY INTEREST
COMBINATION AND COMBINATION
WITH ILICO(D) WITH ILICO
------------- -----------------
<S> <C> <C>
Revenues
Insurance premiums................ $(117.4)(U) $ 137.3
Universal life and annuity product
charges......................... (2.1)(P) 137.1
Net investment income............. (9.7)(O) 738.4
(47.1)(U)
Realized gains on investments..... (0.3)(Q) 7.0
Other income...................... 15.3
Contribution from Closed Block.... 22.9(U) 48.1
------- -----------
(153.7) 1,083.2
------- -----------
Operating Expenses
Policyowner benefits.............. (14.2)(R) 628.8
(112.2)(U)
Underwriting, acquisition, and
insurance expenses.............. (0.6)(S) 209.0
(2.1)(U)
Amortization of deferred policy
acquisition costs & VOBA........ (5.2)(G) 124.0
Dividends to policyowners......... (27.3)(U) 10.2
------- -----------
(161.6) 972.0
------- -----------
Income from continuing
operations before income
taxes and minority
interest.................. 7.9 111.2
Interest expense.................... 31.1
------- -----------
Income before taxes and
minority interest......... 7.9 80.1
Income tax (expense) benefit........ (0.2)(T) (25.6)
Minority interest................... 2.2(D) --
------- -----------
Income before equity in
earnings of unconsolidated
subsidiary................ 9.9 54.5
Equity in earnings of unconsolidated
subsidiary........................ 1.5
------- -----------
Net income from continuing
operations................ $ 9.9 $ 56.0
======= ===========
Income from continuing operations
per share(V):
Basic............................. $ 1.36
Diluted........................... 1.35
Share used in the calculation of
income from continuing operations
per share(V):
Basic............................. 41,479,682
Diluted........................... 41,556,649
</TABLE>
(The Accompanying Notes are an integral part of this Unaudited Pro Forma
Consolidated Income Statement)
33
<PAGE> 40
AMERICAN MUTUAL HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(A) Relationship between AMHC and AmerUs:
AMHC owns 58% of AmerUs. The following reconciliation shows the
significance of AmerUs assets and net income to AMHC:
<TABLE>
<CAPTION>
HISTORICAL
-----------------
AS OF AND FOR THE
YEAR ENDED
DECEMBER 31, 1999
-----------------
(in millions)
<S> <C>
Asset Reconciliation:
AmerUs total assets....................................... $10,719.4
Cash at AMHC.............................................. 267.9
Other non-life insurance company assets at AMHC........... 131.1
Less intercompany eliminations............................ (20.7)
---------
AMHC total assets................................. $11,097.7
=========
Net Income Reconciliation:
AmerUs net income......................................... $ 66.6
Less minority interest.................................... (28.1)
Other non-life insurance company net (loss)............... (4.0)
---------
Income from continuing operations......................... 34.5
Net income of discontinued operations..................... 3.9
---------
AMHC net income................................... $ 38.4
=========
</TABLE>
(B) The unassigned surplus of AMHC will be distributed to the AMHC members
in the form of cash, policy credits and common stock as determined by an
actuarial calculation. Please refer to Appendix B for a complete discussion of
the allocation and distribution process included in the plan of conversion of
AMHC. Following is an estimate of the total distribution to members as of
December 31, 1999 (in millions):
<TABLE>
<S> <C>
Cash at AMHC................................................ $267.9
Cash representing the fair market value of net non-life
insurance company assets held by AMHC..................... 71.8
------
Total Cash Distribution........................... $339.7
Common stock of AMHC at historical book Value 17,390,165
shares allocated between common stock and paid in capital
as follows:
Common stock.............................................. 17.4
Additional paid in capital................................ 483.9
------
Total distribution................................ $841.0
======
</TABLE>
In order to distribute the $339.7 million of cash to the AMHC members,
approximately $71.8 million of fixed maturity securities will be sold and
converted to cash. No gain or loss on the sale of the fixed maturity securities
has been assumed in the pro forma. The non-life insurance company assets
represent value owned by the members which will be retained by AMHC after the
conversion. As a result, the members are entitled to receive consideration for
this value, which will be in the form of an additional cash distribution as
indicated in the pro forma information. The value of the non-life insurance
company assets was determined through a negotiation process between committees
of independent directors of AMHC and AmerUs and is not subject to change. The
actual cash distribution will vary from the pro
34
<PAGE> 41
AMERICAN MUTUAL HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
forma amounts due to operating results through the date of distribution and the
actual costs associated with the restructuring.
The historical components of AMHC's equity have been reclassified to
reflect the issuance of the 17,390,165 shares of common stock and the
reclassification of the remaining balance of unassigned surplus after the cash
distribution to additional paid in capital. Since the conversion is a change in
the form of ownership only, the accounting for the conversion of the membership
interests to common stock will be done on a historical cost basis.
(C) Giving effect to the acquisition of the minority interest of AmerUs
under purchase accounting, the total purchase cost of the minority interest of
AmerUs will be allocated to the assets and liabilities acquired based on 42.2
percent (the minority interest ownership percentage) of the relative fair values
as of the date of acquisition, with any excess of 42.2 percent of the fair value
of the net assets acquired over the purchase price recorded as a reduction of
non-current assets (goodwill). The minority interest ownership percentage was
determined by dividing the shares of AmerUs not owned by AMHC or held as
treasury shares by the issued and outstanding shares of AmerUs, net of treasury
shares. At December 31, 1999, there were 12,680,689 such shares held by the
public. The cost allocations, primarily related to value of business acquired,
deferred acquisition costs, mortgage loans, and goodwill, are based on studies
which are not yet completed. Accordingly, the final allocations may differ from
the amounts reflected here due to interest rate fluctuations, operating
experience, and results of operations through the date of closing. Although the
final allocations may differ, the pro forma financial statements reflect
management's best estimate based on currently available information. The
differences between the current and final allocations are not expected to be
material.
The market value of the common stock of AMHC is assumed to be equal to the
market value of the common stock of AmerUs as that value is more reliably
determinable than the value of AMHC and AmerUs stock is assumed to be exchanged
for AMHC stock on a one-for-one basis. The average closing price of the AmerUs
common stock used in the pro forma is $23.625 per share which represents the
average of the closing prices of the AmerUs common stock on the date of the
reorganization announcement, two days preceding, and two days succeeding the
announcement.
Purchase price of minority interest (in millions):
<TABLE>
<S> <C>
AMHC common stock exchanged for AmerUs common stock valued
as follows:
12,680,689 shares at an estimated fair market value or
$23.625 per share with a $1.00 par value per share
Common stock................................................ $ 12.7
Additional paid-in capital.................................. 286.9
------
Total value of common stock exchanged as purchase
price............................................ $299.6
======
</TABLE>
After the issuance of the shares in connection with the purchase of the
minority interest, there would be 30,070,854 shares of AMHC common stock
outstanding on a pro forma basis.
35
<PAGE> 42
AMERICAN MUTUAL HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The allocation of the purchase price of the minority interest is as follows
(in millions):
<TABLE>
<CAPTION>
MINORITY INTEREST
OWNERSHIP IN THE
TOTAL NET ASSETS
------- -----------------
<S> <C> <C>
Book value of AmerUs net assets at December 31, 1999........ $ 733.0 $ 309.1
Adjustments to reflect net assets at market value:
Mortgage loan appreciation................................ 23.9 10.1
Write-off of deferred acquisition costs on open block..... (529.7) (223.4)
Establishment of value of business acquired on open
block.................................................. 569.3 240.1
Write-off of deferred acquisition costs and establishment
of value of business acquired closed block............. 38.3 16.2
Write-off of existing goodwill............................ (206.3) (87.0)
Reduction of deferred tax charges......................... (35.6) (15.0)
Allocation of excess costs of acquiring the minority
interest over the fair value of identifiable assets
less liabilities....................................... 117.5 49.5
------- -------
Fair market value of AmerUs net assets at December
31, 1999........................................ $ 710.4 $ 299.6
======= =======
</TABLE>
(D) Giving effect to the combination with ILICO under purchase accounting,
the total purchase cost of ILICO will be allocated to the assets and liabilities
acquired based on the relative fair values as of the date of acquisition, with
any excess of the fair value of the assets acquired less the fair value of the
liabilities assumed over the purchase price recorded as a reduction of
non-current assets (value of business acquired). The cost allocations, primarily
related to value of business acquired, deferred acquisition costs, and mortgage
loans, are based on studies which are not yet completed. Accordingly, the final
allocations may differ from the amounts reflected here due to interest rate
fluctuations, operating experience, and results of operations through the date
of closing. Although the final allocations may differ, the pro forma financial
statements reflect management's best estimate based on currently available
information and the differences between the current and final allocations are
not expected to be material.
The market value of the common stock of AMHC is assumed to be equal to the
market value of the common stock of AmerUs as that value is reliably
determinable and AmerUs stock is assumed to be exchanged for AMHC stock on a
one-for-one basis. The average closing price of the AmerUs common stock used in
the pro forma is $19.8125 per share which represents the average of the closing
prices of the AmerUs common stock on the date of the combination announcement,
two days preceding, and two days succeeding the announcement.
The combination agreement calls for combination consideration equivalent to
11.25 million shares of AMHC common stock in the form of common stock, cash and
policy credits. It has been assumed that all of the combination consideration is
in the form of common stock for pro forma purposes.
The common stock will be distributed to the members of ILICO as determined
by an actuarial calculation.
36
<PAGE> 43
AMERICAN MUTUAL HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Combination consideration for ILICO (in millions):
<TABLE>
<S> <C>
Issuance of 11,250,000 shares of Class A common stock of
AMHC to members of ILICO at an estimated fair value of
$19.8125 per share with a $1.00 par value per share
Common stock................................................ $ 11.3
Additional paid-in capital.................................. 211.6
------
Total value of common stock exchanged............. $222.9
Cash paid to acquire minority interest...................... 77.2
Costs of the combination.................................... 7.0
Obligations accrued for early retirement, severance and
employment agreements..................................... 10.0
------
Total purchase price.............................. $317.1
======
</TABLE>
After issuance of the shares as combination consideration, AMHC would have
41,320,854 shares of common stock outstanding on a pro forma basis.
The allocation of the purchase price of ILICO is as follows (in millions):
<TABLE>
<S> <C>
Investments (including cash and short-term Investments)..... $ 5,096.6
Receivables and other assets................................ 350.1
Value of business acquired.................................. 307.6
Separate Account Assets..................................... 341.1
Policyowner reserves and funds.............................. (5,226.9)
Other liabilities........................................... (184.4)
Debt........................................................ (25.9)
Separate Account Liabilities................................ (341.1)
---------
$ 317.1
=========
</TABLE>
The historical components of ILICO's equity have been eliminated in
accordance with purchase accounting. In addition, common stock is adjusted to
reflect the shares issued in conjunction with the combination amounting to $11.3
million. Additional paid-in capital is also adjusted for the excess of the
combination consideration exchanged over the stated value of the AMHC common
stock amounting to $211.6 million.
(E) Represents the cash paid to acquire the minority interest.
(F) Represents the unamortized balance of deferred policy acquisition
costs.
37
<PAGE> 44
AMERICAN MUTUAL HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(G) Value of the insurance business acquired reflects the estimated fair
value of the business in force and represents the portion of the cost to acquire
the company that is allocated to the value of the right to receive future cash
flows from the life insurance and annuity contracts existing as of the assumed
date of the acquisition. Amortization is recognized in proportion to expected
future gross profits over periods between 20 and 30 years and is based on the
average interest crediting rates which range from 3.5% to 6.2% for 1999 and over
the next five years. The estimated amortization for the next five years is as
follows (in millions):
<TABLE>
<S> <C>
1999........................................................ $38.6
2000........................................................ $27.3
2001........................................................ $26.3
2002........................................................ $25.8
2003........................................................ $25.2
2004........................................................ $24.5
</TABLE>
The value of business acquired has been reduced by the amount the fair
value of the assets acquired less the liabilities assumed exceeded the purchase
cost of $52.4 million.
(H) Represents the unamortized balance of goodwill at the assumed date of
acquisition.
(I) Represents various liabilities assumed in connection with the
combination and the net impact on the deferred tax liability as a result of the
purchase accounting adjustments as follows (in millions):
<TABLE>
<S> <C>
Eliminate historical deferred income taxes.................. $(39.8)
Establish new purchase accounting deferred income taxes..... 18.6
Establish liability for employment and severance
agreements................................................ 10.0
------
$(11.2)
======
</TABLE>
(J) Represents the transaction costs, primarily investment banking and
legal fees paid in connection with the combination.
(K) Represents reductions in interest income resulting from cash
distribution to members calculated on the cash on hand distributed based upon a
rate of 5% per annum, and interest income on the proceeds from the fixed
maturity securities sold, based upon a rate of 7% per annum.
(L) Represents a reduction in amortization expense on goodwill consistent
with an original life of 30 years.
(M) Represents the difference between the amortization that historically
was recorded on the deferred acquisition cost asset and the pro forma
amortization on the value of business acquired assets established as part of the
minority interest purchase transaction.
(N) Represents the income tax effect on the net pro forma adjustments based
upon a 35% effective tax rate.
(O) Represents the change in net investment income resulting from change in
carrying value of the investment portfolio at the assumed date of acquisition.
(P) Represents the reduction of product charges due to the elimination of
unearned revenues at the assumed date of acquisition. The unearned revenues are
eliminated due to their inclusion in the determination of the value of the
business acquired.
(Q) Represents the elimination of the gain from the sale of stock of a
subsidiary.
38
<PAGE> 45
AMERICAN MUTUAL HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(R) Represents the reduction in policyowner benefits resulting from
decreased investment income as previously discussed and the increase in
policyowner reserves at the assumed date of acquisition due to market value
adjustments to the investment portfolio.
(S) Includes the effects of increased depreciation of $0.3 million on the
write-up of the home office premises calculated over 30 years on the
straight-line method and the decreased goodwill amortization of $0.9 million due
to the elimination of historical goodwill.
(T) Represents the income tax effects on the net pro forma adjustments
based upon a 35% effective tax rate and the elimination of the mutual company
differential earnings tax of $2.6 million.
(U) Reflects the formation of the closed block for ILICO and the
reclassification of the related assets and liabilities, and the reclassification
of the related components of the income statement to the contribution from
closed block.
Summarized financial information assuming the Closed Block was formed as of
January 1, 1999 for pro forma income statement purposes and as of December 31,
1999 for pro forma balance sheet purposes is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
ASSETS
Investments
Fixed Maturity Securities............................... $503.6
Mortgage Loans.......................................... 118.3
Policy Loans............................................ 150.1
------
772.0
Cash.................................................... 14.0
------
Total Assets.................................. $786.0
======
LIABILITIES
Policy Reserves and policyowner funds................... $931.3
Other liabilities....................................... 14.1
------
Total Liabilities............................. $945.4
======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Revenues
Insurance Premiums.................................... $117.4
Net Investment Income................................. 47.1
------
164.5
Expenses
Policyowner benefits.................................. $112.2
Underwriting, acquisition and insurance expenses...... 2.1
Dividends to policyowners............................. 27.3
------
Contribution from Closed Block before income taxes.... $ 22.9
======
</TABLE>
39
<PAGE> 46
AMERICAN MUTUAL HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(V) The basic earnings per share calculation reflects net income from
continuing operations divided by the weighted average number of shares
outstanding for the year ended December 31, 1999, assuming the shares of AMHC
were issued January 1, 1999 in a one-for-one exchange for AmerUs common stock in
connection with the restructuring and the 11,250,000 shares of ILICO combination
consideration were also issued on January 1, 1999. The diluted earnings per
share amount is calculated in the same manner with the weighted average number
of shares outstanding increased for the dilutive effect of options, warrants,
and stock appreciation rights.
40
<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION OF AMHC
The following is a discussion of AMHC's results of operations. As AMHC's
principal asset is AmerUs, this discussion principally relates to AmerUs. The
principal difference is that your stock is treated as a minority interest for
purposes of this discussion.
The following analysis of the consolidated results of operations and
financial condition of AMHC should be read in conjunction with the Selected
Consolidated Financial and Operating Data and Consolidated Financial Statements
and related notes which are attached to this proxy statement/ prospectus.
OVERVIEW
AMHC is a mutual insurance holding company whose principal asset is a 58%
interest in AmerUs. AmerUs owns three principal life insurance and annuity
companies and is primarily engaged through these subsidiaries in the business of
marketing, underwriting and distributing a broad range of individual life
insurance and annuity products to individuals and businesses in 49 states, the
District of Columbia and the U.S. Virgin Islands. AMHC also owns a finance
company and a real estate management company in which it conducts limited home
equity loan origination, sales, and servicing and limited real estate
management, development, syndication, and marketing. AMHC has two reportable
operating segments: Life Insurance and Annuities. The Life Insurance segment's
primary product offerings consist of whole life, universal life and term life
insurance policies. The primary product offerings of the Annuity segment are
fixed annuities.
AMHC sold certain lines of business and made the decision to exit certain
other businesses in 1998. These businesses are referred to as discontinued
operations and include the following activities: banking, residential real
estate brokerage, residential land development and mortgage banking.
In accordance with GAAP, universal life insurance premiums and annuity
deposits received are reflected as increases in liabilities for policyowner
account balances and not as revenues. Revenues reported for universal life and
annuity products consist of policy charges for the cost of insurance,
administration charges and surrender charges assessed against policyowner
account balances. Surrender benefits paid relating to universal life insurance
policies and annuity products are reflected as decreases in liabilities for
policyowner account balances and not as expenses. Amounts for interest credited
to universal life and annuity policyowner account balances and benefit claims in
excess of policyowner account balances are reported as expenses in the financial
statements. AMHC receives investment income earned from the funds deposited into
account balances by universal life and annuity policyowners, the majority of
which is passed through to such policyowners in the form of interest credited.
Premium revenues reported for traditional life insurance products are
recognized as revenues when due. Future policy benefits and policy acquisition
costs are recognized as expenses over the life of the policy by means of a
provision for future policy benefits and amortization of deferred policy
acquisition costs.
The costs related to acquiring new business, including certain costs of
issuing policies and certain other variable selling expenses (principally
commissions), defined as deferred policy acquisition costs, are capitalized and
amortized as an expense primarily in proportion to expected profits or margins
from such policies. This amortization is adjusted when current or estimated
future gross profits or margins on the underlying policies vary from previous
estimates. For example, the amortization of deferred policy acquisition costs is
accelerated when policy terminations are higher than originally estimated or
when investments supporting the policies are sold at a gain prior to their
anticipated maturity. Death and other policyowner benefits reflect exposure to
mortality risk and fluctuate from period to period based on the level of claims
incurred within insurance retention limits. The profitability of AMHC is
primarily affected by expense levels, interest spread results (i.e., the excess
of investment earnings over the interest credited to policyowners) and
fluctuations in mortality, persistency and other policyowner benefits. AMHC has
the
41
<PAGE> 48
ability to mitigate adverse experience through adjustments to credited interest
rates, policyowner dividends or cost of insurance charges.
ACQUISITIONS
AmerUs acquired all of the outstanding stock of Delta on October 23, 1997,
for approximately $165 million in cash. The transaction was accounted for as a
purchase and accordingly, AMHC's results of operations include Delta from the
date of purchase. AmerUs acquired all of the outstanding stock of AmVestors on
December 19, 1997, in a stock exchange valued at approximately $350 million.
This transaction was also accounted for as a purchase and AMHC's results of
operations include AmVestors from the date of purchase. (See Note 15 of the
Consolidated Financial Statements for the discussion of AMHC's acquisitions.)
DISCONTINUED OPERATIONS
During 1998, AMHC sold its residential real estate and bank operating
segments. The consolidated statements of operations have been reclassified to
present the results of operations and gain on sale of the discontinued
operations. See Note 17 of the Consolidated Financial Statements for additional
information.
THE CLOSED BLOCK
The Closed Block was established on June 30, 1996. Insurance policies which
had a dividend scale in effect as of June 30, 1996, were included in the Closed
Block. The Closed Block was designed to provide reasonable assurance to owners
of insurance policies included therein that, after the reorganization of AmerUs
Life, assets would be available to maintain the dividend scales and interest
credits in effect prior to the reorganization if the experience underlying such
scales and credits continues.
The contribution to the operating income of AMHC from the Closed Block is
reported as a single line item in the income statement. Accordingly, premiums,
product charges, investment income, realized gains (losses) on investments,
policyowner benefits and dividends attributable to the Closed Block, less
certain minor expenses including amortization of deferred policy acquisition
costs, are shown as a net number under the caption "Contribution from the Closed
Block". This results in material reductions in the respective line items in the
income statement while having no effect on net income. The expenses associated
with the administration of the policies included in the Closed Block and the
renewal commissions on these policies are not charged against the Contribution
from the Closed Block, but rather are grouped with underwriting, acquisition and
insurance expenses. Also, all assets allocated to the Closed Block are grouped
together and shown as a separate item titled "Closed Block Assets". Likewise,
all liabilities attributable to the Closed Block are combined and disclosed as
the "Closed Block Liabilities".
OPERATING SEGMENTS
AMHC has two reportable operating segments: Life Insurance and Annuities.
Products generally distinguish a segment. AMHC uses the same accounting policies
and procedures to measure operating segment income as it uses to measure its
consolidated income from operations with the exception of the elimination of
certain items which management believes are not necessarily indicative of
overall operating trends. For example, realized capital gains or losses on
investments, excluding gains or losses on convertible bonds which are considered
core earnings, are not included as part of operating segment income. Non-core
realized capital gains or losses on investments may be realized at the sole
discretion of management and are often realized in accordance with tax planning
strategies. Therefore, non-core realized capital gains or losses do not reflect
AMHC's ongoing earnings capacity. Revenues and benefits and expenses are
primarily attributed directly to each operating segment. Net investment income
and core realized gains (losses) on investments are allocated based on the
directly related asset portfolios. Other revenues and expenses which are deemed
not to be associated with any specific reportable segment are grouped together
in the All Other category. These items relate to holding company revenues and
expenses and the operations of the companies' finance and real estate management
subsidiaries. AMHC assesses the
42
<PAGE> 49
performance of its operating segments before interest expense, income taxes,
minority interest, and equity in earnings of its unconsolidated subsidiary.
Income from operations and operating segment information do not include
discontinued operations which are comprised of the former banking, residential
brokerage, residential land development and mortgage banking activities of AMHC.
RESULTS OF OPERATIONS
1999 COMPARED TO 1998 AND 1997
A summary of AMHC's revenue follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Insurance Premiums:
Life Insurance -- Traditional...................... $ 64,263 $ 51,261 $ 30,733
Annuities -- Immediate annuity and supplementary
contract premiums............................... 25,122 29,610 17,238
All other.......................................... 136 326 156
-------- -------- --------
Total insurance premiums................... 89,521 81,197 48,127
Product Charges:
Life Insurance -- Universal Life................... 46,841 46,224 45,637
Annuities.......................................... 27,835 26,757 1,669
-------- -------- --------
Total product charges...................... 74,676 72,981 47,306
Net Investment Income:
Life Insurance..................................... 93,350 70,952 73,407
Annuities.......................................... 442,851 432,299 147,924
All other.......................................... 21,307 1,917 5,579
-------- -------- --------
Total net investment income................ 557,508 505,168 226,910
Realized Gains (Losses) on Investments:
Life Insurance -- core............................. -- -- --
Annuities -- core.................................. 10,166 9,400 --
All other -- core.................................. 4,629 351 --
All other -- non-core.............................. (12,261) (8,623) 11,879
-------- -------- --------
Total realized gains (losses) on
investments.............................. 2,534 1,128 11,879
All other income..................................... 15,311 13,077 13,766
Contribution from the Closed Block................... 25,166 31,478 31,044
-------- -------- --------
Total revenues............................. $764,716 $705,029 $379,032
======== ======== ========
</TABLE>
Traditional life insurance premiums increased by $13.0 million to $64.3
million in 1999 compared to $51.3 million in 1998 and $30.7 million in 1997. The
increase in traditional life insurance premiums was primarily the result of the
growth of the business since the formation of the Closed Block in June, 1996 and
continued favorable persistency.
Immediate annuity and supplementary contract premiums were $25.1 million in
1999 compared to $29.6 million in 1998 and $17.2 million in 1997. The decrease
in premiums in 1999 was primarily due to decreased immediate annuity sales while
the increase in annuity and supplementary contract premiums in 1998 was
primarily due to the acquisition of Delta and AmVestors. Without these
acquisitions, immediate annuity and supplementary contract premiums increased by
$2.5 million in 1998 due to increased immediate annuity sales.
Universal life product charges increased by $0.6 million in 1999 to $46.8
million compared to $46.2 million in 1998 and $45.6 million in 1997. The
increase in product charges each year was primarily due to increased cost of
insurance charges as a result of the normal aging of the block of business,
partially offset by higher reinsurance costs.
43
<PAGE> 50
Annuity product charges increased by $1.0 million in 1999 to $27.8 million
compared to $26.8 million in 1998 and $1.7 million in 1997. Increased surrender
charges and expense loads on deferred annuities primarily contributed to the
increase in 1999 while the increase in 1998 was primarily due to the
acquisitions of Delta and AmVestors. Annuity product charges for 1998 and 1997
included $23.5 million and $0.7 million, respectively, from Delta and AmVestors.
Total net investment income was $557.5 million in 1999 compared to $505.2
million in 1998 and $226.9 in 1997. The increase in 1999 net investment income
was primarily attributable to higher average invested assets (excluding market
value adjustments) and a higher effective yield compared to 1998. Average
invested assets (excluding market value adjustments) increased approximately
$470.2 million in 1999 compared to 1998 primarily due to the Company's increased
investment funds from two structured asset-backed commercial paper vehicles. See
further discussion of these vehicles in the Liquidity and Capital Resources
section. In addition to these new investments, AMHC's average invested assets
increased approximately $150 million from the proceeds from the sale of AMHC's
residential real estate and banking operating segments in mid-1998. The increase
in 1998 net investment income was primarily due to the acquisitions of Delta and
AmVestors. Net investment income in 1998 and 1997 included $322.0 million and
$30.2 million, respectively, from Delta and AmVestors. The effective yield of
the entire portfolio in 1999 was 7.12% compared to 6.87% in 1998 and 7.47% in
1997. Yields in 1998 were impacted by a decline in value on hedge funds and
long-term private partnership investments resulting in lower net investment
income in both the life insurance and annuity segments in that year. The
effective yield of the annuity portion of the portfolio decreased 10 basis
points to 6.68% in 1999 compared to 6.78% in 1998 and 7.24% in 1997. The
decrease in the 1999 effective yield primarily resulted from lower reinvestment
rates throughout 1998 and the majority of 1999 compared to the portfolio rate at
the beginning of the prior year period.
Realized gains on investments were $2.5 million in 1999 compared to $1.1
million and $11.9 million in 1998 and 1997, respectively. The level of realized
gains and losses will fluctuate from period to period depending on the
prevailing interest rate and economic environment and the timing of the sale of
investments. All other core gains increased $4.2 million in 1999 compared to
1998 due to the operations of the finance company which began in August, 1998.
Such amount represents gains from the sale of loans originated by the finance
company.
Other income increased by $2.2 million to $15.3 million in 1999 compared to
$13.1 million in 1998 and $13.8 million in 1997. Other income primarily consists
of real estate operating income, property management fees, and structured
finance fees from affordable housing programs. In addition, AMHC began
operations of a finance company in August 1998 which contributed to the increase
in other income for that year.
44
<PAGE> 51
The Contribution from the Closed Block was $25.2 million in 1999 compared
to $31.5 million in 1998 and $31.0 million in 1997. The following table sets
forth the operating results of the Closed Block for the years ended December 31,
1999, 1998 and 1997.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Revenues:
Insurance premiums................................. $189,444 $198,178 $206,145
Universal life and annuity product charges......... 12,463 13,695 13,599
Net investment income.............................. 108,117 115,762 113,759
Realized gains (losses) on investments............. (380) 10,324 718
-------- -------- --------
Total revenues............................. 309,644 337,959 334,221
Benefits and expenses:
Policyowner benefits............................... 193,482 200,783 206,638
Underwriting, acquisition and insurance expenses... 4,408 5,042 5,477
Amortization of deferred policy acquisition
costs........................................... 20,337 26,286 31,471
Dividends to policyowners.......................... 66,251 74,370 59,591
-------- -------- --------
Total benefits and expenses................ 284,478 306,481 303,177
-------- -------- --------
Contribution from the Closed Block................... $ 25,166 $ 31,478 $ 31,044
======== ======== ========
</TABLE>
Closed Block insurance premiums decreased by $8.8 million in 1999 to $189.4
million compared to $198.2 million in 1998 and $206.1 million in 1997. The
decrease in insurance premiums each year is consistent with the reduction of the
Closed Block's life insurance in force that is expected to continue over the
life of the Block. Similarly, the 1999 decrease in product charges or universal
life policies included in the Closed Block is primarily the result of the
reduction of such business in force.
Net investment income for the Closed Block increased by $7.7 million in
1999 to $108.1 million compared to $115.8 million in 1998 and $113.8 million in
1997. The decrease in 1999 was primarily attributable to lower effective yields,
partially offset by higher average invested assets (excluding market value
adjustments) while the increase in 1998 was primarily attributable to the growth
in average invested assets (excluding market value adjustments) resulting from
the reinvestment of investment earnings.
Realized losses on investments of the Closed Block were $0.4 million in
1999 compared to realized gains of $10.3 million in 1998 and $0.7 million in
1997. The level of realized gains and losses will fluctuate from period to
period depending on the prevailing interest rate and economic environment and
the timing of the sale of investments.
Closed Block policyowner benefits decreased by $7.3 million in 1999 to
$193.5 million compared to $200.8 million in 1998 and $206.6 million in 1997.
The decrease in policyowner benefits each year is primarily due to lower death
benefits and to the reduction of life reserves which is consistent with the
reduction of the Closed Block's life insurance in force that is expected over
the life of the Block.
The amortization of deferred policy acquisition costs for the Closed Block
decreased by $6.0 million in 1999 to $20.3 million compared to $26.3 million in
1998 and $31.5 million in 1997. The decrease in the amortization of deferred
policy acquisition costs each year is consistent with the projected reduction in
the gross margins of the Closed Block as the life insurance in force declines.
Closed Block dividends to policyowners decreased by $8.1 million to $66.3
million in 1999 compared to $74.4 million in 1998 and $59.6 million in 1997. The
decrease in 1999 was primarily due to the decrease in deferred dividends
resulting from lower realized gains while the increase in 1998 primarily
resulted from increased deferred dividends associated with the higher realized
gains that year.
45
<PAGE> 52
A summary of AMHC's policyowner benefits follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Life Insurance:
Traditional:
Death benefits.................................. $ 9,398 $ 4,475 $ 1,401
Change in liability for future policy benefits
and other policy benefits..................... 41,306 31,773 19,968
-------- -------- --------
Total traditional.......................... 50,704 36,248 21,369
Universal:
Death benefits in excess of cash value.......... 21,978 17,928 20,254
Interest credited on policyowner account
balances...................................... 30,365 34,317 32,750
Other........................................... 1,107 2,949 3,453
-------- -------- --------
Total universal............................ 53,450 55,194 56,457
-------- -------- --------
Total life insurance benefits.............. 104,154 91,442 77,826
Annuities
Interest credited to deferred annuity account
balances........................................ 281,063 282,465 81,834
Other annuity benefits............................. 56,920 56,828 35,739
-------- -------- --------
Total annuity benefits..................... 337,983 339,293 117,573
All other benefits................................... 291 21 577
-------- -------- --------
Total policyowner benefits................. $442,428 $430,756 $195,976
======== ======== ========
</TABLE>
Total life insurance benefits increased by $12.8 million in 1999 to $104.2
million compared to $91.4 million in 1998 and $77.8 million in 1997. An increase
in life insurance benefits in life insurance benefits is expected as the
traditional block of business continues to grow and as the universal block of
business ages. However, in the last half of 1999 AMHC experienced higher that
expected death benefits. AMHC does not believe that this is an indication of a
change in long-term mortality trends but more of a fluctuation which is not
unusual from time to time. Partially offsetting the increases in death benefits
and higher policy reserves in 1999 was a reduction in interest credited.
Interest credited on universal policyowner account balances decreased $3.9
million in 1999 to $30.4 million compared to $34.3 million in 1998 primarily due
to a reduction in crediting rates. The weighted average interest crediting rate
on policyowner account balances for 1999 was 5.67% compared to 6.08% for 1998.
Interest credited on universal policyowner account balances in 1998 was $1.5
higher than 1997. The increase was primarily due to higher account values,
partially offset by lower interest crediting rates. The weighted average
interest crediting rate decreased 15 basis points to 6.08% for 1998 compared to
6.23% for 1997.
Annuity benefits were $338.0 million in 1999 compared to $339.3 million in
1998 and $117.6 million in 1997. The decrease in 1999 was primarily attributable
to a lower weighted average crediting rate on annuity balances in 1999 compared
to 1998, partially offset by higher average liabilities. The weighted average
crediting rate on deferred annuity account balances was decreased 24 basis
points to 4.95% for 1999 compared to 5.19% for 1998 and 5.25% for 1997.
Crediting rates were decreased in response to the decrease in effective yields
on the annuity investment portfolio resulting in GAAP spreads widening 14 basis
points in 1999 as compared to 1998. Other annuity benefits increased in 1999 as
compared to 1998. Other annuity benefits in 1999 included approximately $13.1
million of interest expense on two insurance contracts issued to two commercial
paper conduits during the year. See further discussion of these conduits in the
Liquidity and Capital Resources section. Partially offsetting this increased
expense was a decrease in immediate annuity reserves and benefit payments on
immediate annuities, which corresponds with the reduction in immediate annuity
sales. The increase in annuity benefits in 1998 was primarily due to the
acquisitions of Delta and AmVestors.
46
<PAGE> 53
A summary of AMHC's expenses follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
-------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Life Insurance
Underwriting, acquisition and other expenses........ $ 53,376 $ 43,376 $38,496
Amortization of deferred policy acquisition costs
and value of business acquired (VOBA), net of
non-core adjustment of $282, $1,038 and $892 for
the years ended December 31, 1999, 1998 and 1997,
respectively..................................... 17,268 21,360 16,423
-------- -------- -------
Total life insurance........................ 70,644 64,736 54,919
Annuities
Underwriting, acquisition and other expenses........ 30,900 35,592 7,365
Amortization of deferred policy acquisition costs
and value of business acquired (VOBA), net of
non-core adjustment of $1,852, ($1,237) and
($242) for the years ended December 31, 1999,
1998 and 1997, respectively...................... 48,378 39,053 6,703
-------- -------- -------
Total annuities............................. 79,278 74,645 14,068
Amortization of deferred policy acquisition costs due
to non-core realized gains or losses................ 2,134 (199) 650
All other expenses.................................... 35,830 25,949 21,556
Reorganization costs.................................. 7,062 -- --
-------- -------- -------
Total expenses.............................. $194,948 $165,131 $91,193
======== ======== =======
</TABLE>
Total life insurance expenses were $70.6 million in 1999 compared to $64.7
million in 1998 and $54.9 million in 1997. Underwriting, acquisition and
insurance expenses increased each year, primarily due to costs related to the
Year 2000 Compliance Project and costs associated with AMHC's enhancement of its
administration and distribution systems. Amortization of deferred policy
acquisition costs and value of business acquired (VOBA) decreased $4.1 million
in 1999 and increased $5.0 million in 1998. Deferred policy acquisition costs
are generally amortized in proportion to gross margins. In 1999, modifications
were made to the dividend scale of traditional products to coincide with the
decline in investment yields, resulting in increased estimated future gross
margins. These modifications primarily contributed to the decreased amortization
in 1999. Lower death benefits in 1998 on those policies for which deferred costs
are amortized contributed to higher gross margins in 1998, resulting in the
increased amortization that year.
Total annuity expenses increased by $4.7 million in 1999 to $79.3 million
compared to $74.6 million in 1998 and $14.1 million in 1997. Underwriting,
acquisition and insurance expenses decreased $4.7 million in 1999 primarily due
to cost savings realized from the consolidation of acquired subsidiary
operations. Amortization of deferred policy acquisition costs and VOBA increased
$9.3 million in 1999. Gross margins increased due to higher interest spreads and
the reduced expenses, resulting in the increased amortization. The increase in
annuity expenses in 1998 was primarily attributable to the acquisitions of Delta
and AmVestors.
All other expenses increased by $9.9 million in 1999 to $35.8 million
compared to $25.9 million in 1998 and $21.6 million in 1997. The increase in
1999 was partially due to the inclusion of twelve months of expenses from the
finance company in 1999 compared to five months of expenses in 1998 as the
finance company began operations in August of that year. In addition, expenses
in 1998 were reduced by certain one-time benefits and 1999 expenses included the
amortization of the debt issuance costs on the capital securities and senior
notes issued in mid-1998 and additional holding company expenses primarily
related to air transportation, conferences, incentive compensation and corporate
development programs. The
47
<PAGE> 54
increase in 1998 expenses was primarily due to the inclusion of five months of
expenses from the finance company in 1998 compared to no finance company
expenses in 1997.
The 1999 reorganization costs consist of legal, actuarial, and consulting
expenses associated with the proposed demutualization of AMHC. As these costs
are not of a continuing nature, they have been excluded from the Operating
Segment amounts.
A summary of AMHC's adjusted pre-tax income operating income by operating
segment follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Life Insurance:
Open Block:
Revenues..................................... $ 204,454 $ 168,437 $ 149,777
Benefits and Expenses........................ (174,798) (156,178) (132,745)
Dividends to policyowners.................... (4,526) (2,558) (1,587)
Closed Block Contribution....................... 25,166 31,478 31,044
--------- --------- ---------
Adjusted pre-tax operating income....... 50,296 41,179 46,489
Annuities:
Revenues........................................ 505,974 498,066 166,831
Benefits and expenses........................... (417,261) (413,938) (131,641)
--------- --------- ---------
Adjusted pre-tax operating income....... 88,713 84,128 35,190
All other adjusted pre-tax operating income
(loss).......................................... 5,262 (10,299) (2,632)
--------- --------- ---------
Total adjusted pre-tax operating
income................................ $ 144,271 $ 115,008 $ 79,047
========= ========= =========
</TABLE>
Adjusted pre-tax operating income from Life Insurance operations increased
by $9.1 million in 1999 to $50.3 million compared to $41.2 million in 1998 and
$46.5 million in 1997. The increase in 1999 compared to 1998 was primarily due
to increased investment income and decreased deferred policy acquisition costs
amortization which was partially offset by a decreased contribution from the
Closed Block and increased costs related to the Year 2000 Compliance Project and
enhancement of the Company's administration and distribution systems. The
decrease in 1998 was primarily due to lower net investment income and increased
costs related to the Year 2000 Compliance Project and costs associated with the
Company's development of alternative distribution systems.
Adjusted pre-tax operating income from Annuity operations increased by $4.6
million in 1999 to $88.7 million compared to $84.1 million in 1998 and $35.2
million in 1997. The increase in 1999 was primarily due to increased spreads
while the increase in 1998 was primarily due to the acquisitions of Delta and
AmVestors.
All other adjusted pre-tax operating income was $5.3 million in 1999
compared to a pre-tax loss of $10.3 million in 1998 and a pre-tax loss of $2.6
million in 1997. The increase in 1999 was primarily due to increased investment
income primarily on the proceeds AMHC received from the sale of its residential
real estate and bank operating segments in mid-1998. The increased loss in 1998
was primarily from the finance company operations which began in August of that
year.
Interest expense increased by $1.2 million in 1999 to $29.0 million
compared to $27.8 million in 1998 and $16.9 million in 1997. The increased
interest expense in 1999 was primarily due to higher interest rates on the
senior notes and adjusted conversion-rate equity security units outstanding
during 1999 as compared to the revolving credit agreement borrowings outstanding
during 1998. The increased interest expense in 1998 was primarily due to
increased debt levels from the 1997 fourth quarter acquisitions of Delta and
AmVestors.
Income tax expense increased by $8.0 million in 1999 to $32.8 million
compared to $24.8 million in 1998 and $19.4 million in 1997. The effective tax
rate in 1999 was 34.4% compared 30.4% in 1998 and
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<PAGE> 55
25.8% in 1997. The increase in the effective rate in 1999 was primarily due to a
$0.3 million decrease in tax credit generated by affordable housing and
historical rehabilitation investments and the capitalization of $7.1 million of
demutualization costs for income tax purposes. The increase in the effective tax
rate in 1998 was primarily due to a $2.4 million increase in goodwill
amortization and a $0.8 million decrease in tax credits generated by affordable
housing and historic rehabilitation investments. Tax credits generated from
these investments totaled $5.2 million in 1999 compared to $5.5 million in 1998
and $6.3 million in 1997.
The equity in earnings of unconsolidated subsidiary represents 34% of the
net income of AMAL Corporation, net of goodwill amortization. AMAL Corporation
is the joint venture partner through which the Company markets variable life and
variable annuity products and selected fixed annuity products.
Minority interest represents the minority stockholders' ownership
percentage share of net income of AMHC's subsidiary, AmerUs. The minority
stockholder ownership percentage was 42%, 43%, and 28% for the years ended
December 31, 1999, 1998, and 1997, respectively.
Net income from continuing operations increased $4.8 million in 1999 to
$34.5 million compared to $29.7 million in 1998. The increase in 1999 primarily
resulted from the increased pre-tax adjusted operating income from the Life and
Annuity operations combined with increased investment income from the proceeds
received on the sale of the residential real estate and bank operating segments
in mid-1998. This was partially offset by demutualization expenses and a higher
effective income tax rate. Net income from continuing operations decreased $9.8
million to $29.7 million in 1998 compared to $39.5 million in 1997. Increases in
pre-tax adjusted operating income from the Annuity operations were offset by
increased interest expense and a higher effective income tax rate. In addition,
the Company decreased its ownership of AmerUs by 15% in 1998.
Net income was $38.4 million in 1999 compared to $103.5 million in 1998 and
$54.4 million in 1997. AMHC sold the majority of its residential real estate
operating segment and its entire bank operating segment in 1998. AMHC recorded
an after tax gain of $74.9 million on the sales which resulted in the higher
1998 net income.
LIQUIDITY AND CAPITAL RESOURCES
AMHC
AMHC's cash flows from operations consist of dividends from subsidiaries,
if declared and paid, interest income on loans and advances to its subsidiaries
(including a surplus note issued to AmerUs by AmerUs Life), investment income on
assets held by AMHC and fees which AMHC charges its subsidiaries and certain
other of its affiliates for management services, offset by the expenses incurred
for debt service, salaries and other expenses.
AMHC intends to rely primarily on dividends and interest income from its
life insurance subsidiaries in order to make dividend payments to its
stockholders. The payment of dividends by its life insurance subsidiaries is
regulated under various state laws. Under Iowa law, AmerUs Life and Delta Life
and Annuity Company ("Delta Life") may pay dividends only from the earned
surplus arising from their respective businesses and must receive the prior
approval of the Iowa Insurance Commissioner to pay any dividend that would
exceed certain statutory limitations. The current statute limits any dividend,
together with dividends paid out within the preceding 12 months, to the greater
of (i) 10% of the respective company's policyowners' surplus as of the preceding
year end or (ii) the net gain from operations for the previous calendar year.
Iowa law gives the Iowa Insurance Commissioner broad discretion to disapprove
requests for dividends in excess of these limits. The payment of dividends by
AmVestors' subsidiaries, American Investors Life Insurance Company ("American")
and Financial Benefit Life Insurance Company ("FBL"), is regulated under Kansas
law, which has statutory limitations similar to those in place in Iowa. Based on
these limitations and 1998 results, AMHC's subsidiaries could have paid an
estimated $60.7 million in dividends in 1999 without obtaining regulatory
approval. Of this amount, AMHC's subsidiaries paid AmerUs $48 million in
dividends in 1999. Based on 1999 results, AMHC's
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<PAGE> 56
subsidiaries could pay an estimated $61.1 million in dividends in 2000 without
obtaining regulatory approval.
AMHC and its subsidiaries generated cash flows from operating activities of
$738.3 million, $407.5 million and $250.8 million for the years ended December
31, 1999, 1998 and 1997, respectively. Excess operating cash flows were
primarily used to increase AMHC's investment portfolio, fund policyowner account
withdrawals, and purchase of minority interest in AmerUs.
AMHC's subsidiary AmerUs has a $150 million revolving credit facility with
a syndicate of lenders (the "Bank Credit Facility"). As of December 31, 1999,
there was a $32 million outstanding loan balance under the facility. The Bank
Credit Facility provides for typical events of default and covenants with
respect to the conduct of the business of AmerUs and its subsidiaries and
requires the maintenance of various financial levels and ratios. Among other
covenants, AmerUs (a) cannot have a leverage ratio greater than 0.35:1.0 or an
interest coverage ratio less than 2.5:1.0, (b) is prohibited from paying cash
dividends on its common stock in excess of an amount equal to 3% of its
consolidated net worth as of the last day of the preceding fiscal year, and (c)
must cause certain of its subsidiaries, including AmerUs Life and Delta Life, to
maintain certain ratings from A.M. Best and certain levels of risk-based
capital.
During 1999, AmerUs Life entered into two $250 million separate account
funding agreements, of which one remained outstanding as of December 31, 1999.
Under this agreement, a five-year floating rate insurance contract is issued to
a commercial paper conduit. The funding agreement is secured by assets in AmerUs
Life's separate account and are further backed by the general account assets.
The separate account assets are legally segregated and are not subject to claims
that arise out of any other business of AmerUs Life. The separate account assets
and liabilities are included with general account assets in the financial
statements. The funding agreement may not be cancelled by the commercial paper
conduit unless there is a default under the agreement, but AmerUs Life may
terminate at any time.
Life Insurance Subsidiaries
The cash flows of AMHC's life insurance subsidiaries consist primarily of
premium income, deposits to policyowner account balances, income from
investments, sales, maturities and calls of investments and repayments of
investment principal. Cash outflows are primarily related to withdrawals of
policyowner account balances, investment purchases, payment of policy
acquisition costs, payment of policyowner benefits, payment of debt, income
taxes and current operating expenses. Life insurance companies generally produce
a positive cash flow from operations, as measured by the amount by which cash
flows are adequate to meet benefit obligations to policyowners and normal
operating expenses as they are incurred. The remaining cash flow is generally
used to increase the asset base to provide funds to meet the need for future
policy benefit payments and for writing new business.
Management anticipates that funds to meet its short-term and long-term
capital expenditures, cash dividends to stockholders and operating cash needs
will come from existing capital and internally generated funds. Management
believes that the current level of cash and available-for-sale and short-term
securities, combined with expected net cash inflows from operations, maturities
of fixed maturity investments, principal payments on mortgage-backed securities
and its insurance products, will be adequate to meet the anticipated short-term
cash obligations of AMHC's life insurance subsidiaries.
Matching the investment portfolio maturities to the cash flow demands of
the type of insurance being provided is an important consideration for each type
of life insurance product and annuity. AMHC continuously monitors benefits and
surrenders to provide projections of future cash requirements. As part of this
monitoring process, AMHC performs cash flow testing of its assets and
liabilities under various scenarios to evaluate the adequacy of reserves. In
developing its investment strategy, AMHC establishes a level of cash and
securities which, combined with expected net cash inflows from operations,
maturities of fixed maturity investments and principal payments on
mortgage-backed securities, are believed adequate to meet anticipated short-term
and long-term benefit and expense payment obligations. There can be no assurance
that future experience regarding benefits and surrenders will be similar to
historic experience
50
<PAGE> 57
since withdrawal and surrender levels are influenced by such factors as the
interest rate environment and the claims-paying and financial strength ratings
of AMHC's life insurance subsidiaries.
AMHC takes into account asset/liability management considerations in the
product development and design process. Contract terms for AMHC's
interest-sensitive products include surrender and withdrawal provisions which
mitigate the risk of losses due to early withdrawals. These provisions generally
do one or more of the following: limit the amount of penalty-free withdrawals,
limit the circumstances under which withdrawals are permitted, or assess a
surrender charge or market value adjustment relating to the underlying assets.
The following table summarizes liabilities for interest-sensitive life
products and annuities by their contractual withdrawal provisions at December
31, 1999 (including liabilities in both the Closed Block and the general
account):
<TABLE>
<CAPTION>
(Dollars in millions)
<S> <C>
Not subject to discretionary withdrawal..................... $ 366.5
Subject to discretionary withdrawal with adjustments
Specified surrender charges (A)........................... 4,378.4
Market value adjustments.................................. 1,474.3
--------
Subtotal.......................................... 5,852.7
Subject to discretionary withdrawal without adjustments..... 1,400.8
--------
Total............................................. $7,620.0
========
</TABLE>
- ---------------
(A) Includes $1,216.3 million of liabilities with a contractual surrender
charge of less than five percent of the account balance.
AmerUs Life and its joint venture partner are contingently liable in the
event the joint venture, Ameritas Variable Life Insurance Company ("AVLIC"), can
not meet its policyholder obligations. At December 31, 1999, AVLIC had statutory
assets of $2,559.1 million, liabilities of $2,517.5 million, and surplus of
$41.6 million.
Through its membership in the Federal Home Loan Bank ("FHLB") of Des
Moines, AmerUs Life is eligible to borrow on a line of credit available to
provide it additional liquidity. Interest is payable at a current rate at the
time of any advance. As of December 31, 1999, AmerUs Life had a $25.0 million
open secured line of credit against which there were no borrowings. In addition
to the line of credit, AmerUs Life has long-term advances from the FHLB
outstanding of $16.1 million at December 31, 1999.
AMHC's life insurance subsidiaries may also obtain liquidity through sales
of investments. AMHC's investment portfolio as of December 31, 1999 had a
carrying value of $9 billion, including Closed Block investments.
At December 31, 1999, the statutory surplus of AMHC's subsidiaries was
approximately $444.6 million. AMHC believes that this level of statutory capital
is more than adequate as each life insurance subsidiary's risk-based capital is
significantly in excess of required levels.
In the future, in addition to their cash flows from operations and
borrowing capacity, the life insurance subsidiaries would anticipate obtaining
their required capital from AMHC as AMHC will have access to the public debt and
equity markets.
EFFECTS OF INFLATION AND INTEREST RATE CHANGES
AMHC does not believe that inflation has had a material effect on its
consolidated results of operations.
Interest rate changes may have temporary effects on the sale and
profitability of the annuities and life insurance products offered by AMHC. For
example, if interest rates rise, competing investments (such as
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<PAGE> 58
annuities or life insurance products offered by AMHC's competitors, certificates
of deposit, mutual funds, and similar instruments) may become more attractive to
potential purchasers of AMHC's products until AMHC increases the interest rate
credited to owners of its annuities and life insurance products. In contrast, as
interest rates fall, AMHC attempts to adjust its credited rates to compensate
for the corresponding decline in reinvestment rates. AMHC monitors interest
rates and sells annuities and life insurance policies that permit flexibility to
make interest rate changes as part of its management of interest spreads.
However, the profitability of AMHC's products is based upon persistency,
mortality and expenses, as well as interest rate spreads.
AMHC manages its investment portfolio in part to reduce its exposure to
interest rate fluctuations. In general, the market value of its fixed maturity
portfolio increases or decreases in an inverse relationship with fluctuations in
interest rates, and net investment income increases or decreases in a direct
relationship with interest rate changes.
AMHC has developed an asset/liability management approach with separate
investment portfolios for major product lines such as traditional life,
universal life and annuities. Investment policies and strategies have been
established based on the specific characteristics of each product line. The
portfolio investment policies and strategies establish asset duration, quality
and other guidelines. AMHC utilizes analytical systems to establish an optimal
asset mix for each line of business. AMHC seeks to manage the asset/liability
mismatch and the associated interest rate risk through active management of the
investment portfolio. Financial, actuarial, investment, product development and
product marketing professionals work together throughout the product
development, introduction and management phases to jointly develop and implement
product features, initial and renewal crediting strategies, and investment
strategies based on extensive modeling of a variety of factors under a number of
interest rate scenarios.
In force reserves and the assets allocated to each segment are modeled on a
regular basis to analyze projected cash flows under a variety of economic
scenarios. The result of this modeling is used to modify asset allocation,
investment portfolio duration and convexity and renewal crediting strategies.
AMHC invests in CMOs as part of its basic portfolio strategy, but uses other
types of derivatives only as a hedge against the effects of interest rate
fluctuations or to synthetically alter the investment characteristics of
specific assets. For a further discussion and disclosure of the nature and
extent of AMHC's use of derivatives, see Note 14 to the Consolidated Financial
Statements.
FEDERAL INCOME TAX MATTERS
AMHC and its non-life subsidiaries file a consolidated federal income tax
return. The life insurance subsidiaries file separate federal income tax
returns. The separate return method is used to compute AMHC's provision for
federal income taxes. Deferred income tax assets and liabilities are determined
based on differences among the financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws.
EMERGING ACCOUNTING MATTERS
SFAS 133 and 137
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 defines derivative instruments
and provides comprehensive accounting and reporting standards for the
recognition and measurement of derivative and hedging activities (including
certain instruments embedded in other contracts). It requires derivatives to be
recorded in the consolidated balance sheet at fair value and establishes
criteria for hedges of changes in the fair value of assets, liabilities or firm
commitments, hedges or variable cash flows or forecasted transactions, and
hedges of foreign currency exposures of net investments in foreign operations.
Changes in the fair value of derivatives not meeting specific hedge accounting
criteria would be recognized in the consolidated statement of operations. In
June 1999, the FASB issued SFAS No. 137 "Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133". SFAS No. 137 delays the effective date of SFAS No. 133 for all fiscal
quarters until fiscal years beginning after June 15, 2000.
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<PAGE> 59
AMHC is evaluating SFAS No. 133 and has not determined its effect on the
consolidated financial statements.
SOP 97-3
On January 1, 1999, AMHC adopted the American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) 97-3, "Accounting by Insurance
and Other Enterprises for Insurance-Related Assessments". This statement
provides guidance on when an insurance or other enterprise should recognize a
liability for guaranty fund and other assessments and on how to measure such
liability. The adoption of SOP 97-3 had no material impact on the financial
position or results of operations as AMHC previously estimated assessment
liabilities when a determination of an insolvency had occurred.
SOP 98-1
On January 1, 1999, AMHC adopted the AICPA SOP 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use". This SOP
provides guidance for determining whether costs of software developed or
obtained for internal use should be capitalized or expensed as incurred. In the
past, AMHC has expensed such costs as they were incurred. The adoption of SOP
98-1 had no material impact on the financial position or results of operations
of AMHC.
Statutory Accounting Codification
The NAIC has codified statutory accounting practices, which are expected to
constitute the only source of prescribed statutory accounting practices and are
effective in 2001. Codification will change prescribed statutory accounting
practices and may result in changes to the accounting practices that insurance
enterprises use to prepare their statutory financial statements. The changes of
codification will not have a material impact on statutory surplus.
YEAR 2000 COMPLIANCE
In connection with the year 2000, an important business issue emerged
regarding how existing application software programs and operating systems could
accommodate the date value "2000". Many existing application software products
were designed to accommodate only a two-digit date position which represents the
year (e.g., the number "95" is stored on the system and represents the year
1995). As a result, the year 1999 (i.e., "99") is the maximum date value many
information technology systems will be able to process accurately.
AMHC formed a Year 2000 working group to address potential problems posed
by this development to assure that AMHC was prepared for the year 2000. AMHC's
overall Year 2000 compliance initiatives included the following components: (i)
assessment of all business critical systems (business critical systems include
computer and embedded systems); processes and external interfaces and
dependencies; (ii) remediation or upgrading of business critical systems; (iii)
testing of both modified and updated systems as well as integrated systems
testing; (iv) implementation of modified and updated systems; and (v)
contingency planning.
AMHC completed the Year 2000 modifications, conversions and testing and, to
date, has not experienced any significant operational difficulties in 2000.
Total costs associated with Year 2000 modifications and conversions are
approximately $8.5 million, with approximately $4.3 million incurred for the
year ended December 31, 1999. These costs were expensed as incurred.
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<PAGE> 60
BENEFICIAL OWNERSHIP OF AMERUS COMMON STOCK
PRINCIPAL HOLDERS
The following table sets forth the beneficial ownership as of March 31,
2000 of AmerUs' Class A and Class B common stock of each person known by AmerUs
to own beneficially more than 5% of each such class:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS CLASS OF STOCK BENEFICIALLY OWNED OF CLASS
- ---------------- -------------- ------------------ ----------------
<S> <C> <C> <C>
American Mutual Holding Company(1)........... Class A common 12,390,165 49%
699 Walnut Street, Suite 2000
Des Moines, Iowa 50309
American Mutual Holding Company(1)........... Class B common 5,000,000 100%
699 Walnut Street, Suite 2000
Des Moines, Iowa 50309
</TABLE>
- ---------------
(1) Owned beneficially and of record by AmerUs Group Co. and owned beneficially
by AMHC through its 100% ownership of AmerUs Group Co.
DIRECTORS AND OFFICERS
The following table sets forth the beneficial ownership of AmerUs' Class A
common stock as of March 31, 2000 of each of the directors, certain executive
officers and all directors and executive officers as a group. The percentage of
Class A common stock owned by all directors and executive officers as a group as
of March 31, 2000 was 3.98%. No shares of Class B common stock were owned by any
director or executive officer of AmerUs as of such date.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OWNERSHIP(1) OF CLASS(2)
- ---- ------------ -----------
<S> <C> <C>
John R. Albers (3)(12)...................................... 22,500 *
Roger K. Brooks (3)(4)(5)(6)(11)(14)........................ 296,958 1.18%
Malcolm Candlish (3)(12)(13)................................ 9,930 *
Maureen M. Culhane (12)(13)................................. 7,593 *
Thomas F. Gaffney (3)(9)(12)(13)............................ 22,134 *
Sam C. Kalainov (3)(4)(5)(7)(11)............................ 49,705 *
Ralph W. Laster, Jr (8)(12)................................. 9,404 *
John W. Norris, Jr (3)(12)(13).............................. 6,459 *
Jack C. Pester (3)(12)(13).................................. 6,361 *
John A. Wing (12)(13)....................................... 13,364 *
Michael G. Fraizer (3)(4)(5)(11)............................ 62,339 *
Thomas C. Godlasky (3)(4)(5)(10)(11)........................ 104,439 *
Mark V. Heitz (5)(11)....................................... 251,511 1.00%
Gary R. McPhail (4)(11)..................................... 88,224 *
Directors and executive officers as a group (16 persons).... 1,011,355 3.98%
</TABLE>
- ---------------
(1) Unless otherwise indicated, each person has sole voting and dispositive
power with respect to the shares shown. Some directors and executive
officers share the voting and dispositive power over their shares with
their spouses as community property, joint tenants or tenants in common.
(2) An (*) indicates that the individual's ownership interest of AmerUs' Class
A common stock is less than one percent.
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<PAGE> 61
(3) Messrs. Albers, Brooks, Candlish, Gaffney, Kalainov, Norris and Pester are
directors of AMHC, which owns 12,390,165 shares of Class A common stock and
5,000,000 shares of Class B common stock. In addition, Mr. Brooks is
Chairman, President and Chief Executive Officer of AMHC, Mr. Fraizer is
Senior Vice President, Chief Administration and Human Resources Officer of
AMHC, Mr. Godlasky is Executive Vice President and Chief Financial Officer
of AMHC. All of the foregoing persons have disclaimed beneficial ownership
of all shares of AmerUs's common stock which are beneficially owned by
AMHC.
(4) Includes shares of restricted stock which has vesting and transfer
restrictions for three (3) years from the date of grant. Mr. Brooks, 6,000;
Mr. Kalainov, 3,000; Mr. Godlasky, 2,000; Mr. McPhail, 2,000; Mr. Fraizer,
600; and all executive officers as a group, 14,600.
(5) Includes beneficial interest in shares of AmerUs' Class A common stock held
pursuant to the AmerUs Savings & Retirement Plan. The attributed shares
owned by AmerUs's Savings & Retirement Plan are voted by the trustees as
directed by their respective participants.
(6) Includes 6,000 shares owned by his spouse.
(7) Includes 36,800 shares owned by his spouse.
(8) Includes 7,156 shares owned by the Jerri S. Laster Trust, of which Mr.
Laster is a co-trustee.
(9) Includes 14,017 shares owned by his spouse through the Donna L. Gaffney
Trust.
(10) Includes 12,063 shares and 669 shares of Class A common stock owned by his
spouse and his daughter, respectively.
(11) Includes shares of Class A common stock that may be purchased upon the
exercise of employee stock options exercisable on March 31, 2000 or within
sixty (60) days thereafter: Mr. Heitz, 148,759; Mr. Brooks, 110,000; Mr.
McPhail, 46,667; Mr. Godlasky, 40,000; Mr. Fraizer, 15,000; and all
executive officers as a group, 387,093.
(12) Includes shares of Class A common stock that were granted pursuant to
AmerUs' Non-Employee Stock Option Plan and may be purchased upon the
exercise of stock options exercisable on March 31, 2000 or within sixty
(60) days thereafter: Mr. Albers, 2,500; Mr. Candlish, 2,500; Ms. Culhane,
2,500; Mr. Gaffney, 2,500; Mr. Norris, 2,500; Mr. Pester, 2,500; Mr. Wing,
2,500; and Mr. Laster, 834.
(13) Includes shares of Class A common stock that were acquired through the
Non-Employee Director Stock Plan which has vesting and transfer
restrictions for two (2) years after the date of purchase: Ms. Culhane,
4,593; Mr. Gaffney, 2,617; Mr. Norris, 2,480; Mr. Candlish, 2,430; Mr.
Pester, 2,325; and Mr. Wing, 864.
(14) Includes 336 shares of Class A common stock that were acquired pursuant to
AmerUs' Warrant Agreement and may be purchased upon the exercise of
warrants exercisable on March 31, 2000 or sixty (60) days thereafter.
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<PAGE> 62
DESCRIPTION OF CAPITAL STOCK
The following description does not purport to be complete and is qualified
in its entirety by reference to the proposed articles of incorporation of AMHC,
a copy of which is filed as Appendix C to this proxy statement/prospectus, and
the proposed by-laws, a copy of which is filed as an exhibit to this
registration statement of which this proxy statement/prospectus forms a part.
GENERAL
After the restructuring, AMHC will be authorized to issue 250,000,000
shares of capital stock, of which 20,000,000 shares will be preferred stock, no
par value, and 230,000,000 will be common stock, no par value. In addition,
3,150,000 shares of common stock will be reserved for issuance under options
granted or available for grant under the Stock Incentive Plan, the 2000 Stock
Incentive Plan and Director Plan, respectively. AMHC will also be authorized to
issue shares of preferred stock on such terms as determined by the AMHC board of
directors (the "Preferred Stock").
COMMON STOCK
Each share of common stock will entitle its holder to one vote per share on
all matters upon which stockholders are entitled to vote (including election of
directors, mergers, sales of assets other than in the regular course of
business, dissolution and amendments to the articles of incorporation). The
shares of common stock will be subject to the relative rights, preferences,
qualifications and limitations of any class or series of preferred stock. There
will be no provision in AMHC's articles of incorporation permitting cumulative
voting in the election of directors.
PREFERRED STOCK
The AMHC board will be authorized, subject to any limitations prescribed by
law, from time to time to issue up to an aggregate of 20,000,000 shares of
preferred stock in one or more series, each of such series to have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights, and such
qualifications, limitations or restrictions thereof, as shall be determined by
the AMHC board in a resolution or resolutions providing for the issue of such
preferred stock; provided, however, that no preferred stock may have more than
one vote per share. Thus, any series may, if so determined by the AMHC board,
have full or limited voting rights with the common stock, be convertible into
common stock or another security of AMHC, and have such other relative rights,
preferences and limitations as the AMHC board shall determine. As a result, any
class or series of preferred stock could have rights which would adversely
affect the rights of the holders of the common stock. The shares of any class or
series of preferred stock need not be identical. The issuance of a new series of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions or other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or discouraging a third
party from acquiring, a majority of the outstanding voting stock of AMHC.
CAPITAL SECURITIES SERIES A OF AMERUS CAPITAL I
The Capital Securities were issued through a wholly owned subsidiary trust
of AmerUs, AmerUs Capital I. The sole asset of the trust is the junior
subordinated debentures of AmerUs in the principal amount of $88.66 million
bearing interest at 8.85% and maturing February 1, 2027. AmerUs has fully and
unconditionally guaranteed the obligation of the trust under the Capital
Securities and is obligated to mandatorily redeem the securities on February 1,
2027. AmerUs may prepay the securities at anytime after February 1, 2007. These
obligations will be assumed by AMHC upon consummation of the merger.
ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS OF AMERUS CAPITAL II
The Adjustable Conversion-rate Equity Security Units were issued through a
wholly owned subsidiary trust of AmerUs, AmerUs Capital II. Each unit consists
of a forward common stock purchase contract for a share at a price of $31.5625
per share on July 27, 2001, and a quarterly income preferred security
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<PAGE> 63
bearing interest at 6.86% and due July 27, 2003. AmerUs is obligated to
mandatorily redeem the capital securities on July 27, 2003. At December 31,
1999, 4,080,500 units were outstanding. These obligations will be assumed by
AMHC upon consummation of the merger.
WARRANTS
As of December 31, 1999, AmerUs had outstanding warrants convertible into
473,596 shares of AmerUs Class A common stock at an exercise price of $24.42 per
share. The warrants expire on April 4, 2002. Following the restructuring, these
warrants will be convertible into a like amount of AMHC common stock. For
additional information concerning the warrants, see "Where You Can Find More
Information" on page 62.
INDEMNIFICATION AND LIMITATION OF LIABILITY
AMHC's articles of incorporation will provide that no director of AMHC will
be liable to AMHC or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except to the extent otherwise required by the
IBCA. This provision will not prevent stockholders from obtaining injunctive or
other equitable relief against directors nor will it shield directors from
liability under Federal or state securities laws. In addition, the articles of
incorporation will provide that AMHC will, to the maximum extent permitted by
law, indemnify any person who incurs any loss by reason of the fact that he or
she is or was or has agreed to be a director or officer of AMHC or while a
director or officer of AMHC is or was serving at the request of AMHC as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, subject to such person having met the
standards of conduct required for such indemnification under Iowa law.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS OF AMHC
The following discussion is a summary of certain provisions of the articles
of incorporation and bylaws of AMHC relating to stockholder voting rights,
advance notice requirements and other provisions which may be deemed to have an
"anti-takeover" effect. In addition to these provisions, the inability of the
holders of the common stock to elect a majority of the AMHC board at any one
annual meeting may also deter attempts to effect, or prevent the consummation
of, a change in control of AMHC. These and other provisions affect stockholder
rights and should be given careful attention.
ISSUANCE OF COMMON STOCK, PREFERRED STOCK AND OTHER RIGHTS
AMHC believes that its ability to issue, by action of a majority of the
AMHC board, and without stockholder consent, the authorized but unissued shares
of common stock, shares of preferred stock and other rights will provide AMHC
with the flexibility necessary to meet its future needs without experiencing the
time delay of having to seek stockholder approval. Unissued shares of common
stock and preferred stock will be issuable from time to time for any corporate
purpose, including, without limitation, stock splits, stock dividends, employee
benefit and compensation plans, acquisitions and public or private sales for
cash as a means of raising capital. It is possible that the AMHC board might use
its authority to issue common stock, preferred stock or other rights in a way
that could deter or impede the completion of a tender offer or other attempt to
gain control of AMHC of which the AMHC board does not approve. AMHC does not
have any plans or commitments to use its authority to effect any such issuance,
but reserves the right to take any action in the future which the AMHC board
deems to be in the best interests of the stockholders and AMHC under the
circumstances. It is not possible to state the actual effect of any issuance of
preferred stock upon the rights of holders of common stock because the AMHC
board has not determined any issuance price or prices, terms or rights relating
to preferred stock. However, such effects might include (i) restrictions on
common stock dividends if preferred stock dividends have not been paid; (ii)
dilution of the voting power and equity interest of existing holders of common
stock to the extent that any preferred stock series has voting rights or would
acquire voting rights upon the occurrence of certain events (such as the failure
to pay dividends for a specified period) or that any preferred stock
57
<PAGE> 64
series is convertible into common stock; and (iii) current holders of common
stock not being entitled to share in AMHC's assets upon liquidation, dissolution
or winding-up until satisfaction of any liquidation preferences granted to any
series of preferred stock.
BOARD OF DIRECTORS
The articles of incorporation will provide that the number of company
directors will be determined pursuant to the by-laws, but will not be less than
seven or more than 21 directors (subject to the rights of the holders of any
series of preferred stock). The by-laws will provide that the exact number of
directors will be determined from time to time by the affirmative vote of a
majority of the entire AMHC board. At any meeting of the AMHC board, a majority
of the entire AMHC board will constitute a quorum for the transaction of
business, and subject to certain exceptions, at any meeting at which a quorum is
present the affirmative vote of a majority of the directors present will
constitute the act of the AMHC board. The AMHC board will be divided into three
classes, designated Classes I, II and III, which will be as nearly equal in
number as possible. At each annual meeting of stockholders following such
initial classification and election, the respective successors of each class
shall be elected for three-year terms, and each director will hold office until
such annual meeting and until his or her successor is elected and qualified,
unless the director dies, resigns, is disqualified or is removed from office.
Thus, approximately two-thirds of the members of the board of directors at any
time will have had prior board experience. With such a staggered board of
directors, at least two annual meetings will normally be required to effect a
change in the composition of a majority of the board of directors. Under the
IBCA and AMHC's articles of incorporation, and subject to the rights of the
holders of any series of preferred stock, a majority of the board of directors
though less than a quorum, or the sole remaining director, may fill vacancies on
the board of directors or newly created directorships resulting from any
increase in the authorized number of directors. The by-laws will provide that
the holders of a majority of shares then entitled to vote if an election of
directors were held may remove any director or the entire board of directors,
with or without cause.
LIMITATIONS ON CALLING SPECIAL MEETINGS OF STOCKHOLDERS
Under Iowa law, special meetings of stockholders may be called by the board
of directors or by such other persons as may be authorized by the articles of
incorporation, the by-laws or Section 490.702(1)(b) of the IBCA. The notice for
a special meeting must set forth the purpose or purposes of the meeting and,
except as otherwise required by law or the articles of incorporation, no
business will be transacted at any special meeting of stockholders other than
the items of business stated in the notice.
ADVANCE NOTICE REQUIREMENTS
The by-laws will establish advance notice procedures with regard to (i) the
nomination, other than by or at the direction of the AMHC board, of candidates
for election to the AMHC board (the "Nomination Provision") and (ii) certain
business to be brought before an annual meeting of stockholders of AMHC (the
"Business Provision"). The Nomination Provision, by requiring advance notice of
nominations by stockholders, affords the AMHC board a meaningful opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the AMHC board, to inform stockholders about such
qualifications. The Business Provision, by requiring advance notice of business
proposed to be brought before an annual meeting, provides a more orderly
procedure for conducting annual meetings of stockholders and provides the AMHC
board with a meaningful opportunity prior to the meeting to inform stockholders,
to the extent deemed necessary or desirable by the AMHC board, of any business
proposed to be conducted at such meeting, together with any recommendation of
the AMHC board. The Business Provision will not affect the right of stockholders
to make stockholder proposals for inclusion in proxy statements for AMHC's
annual meetings of stockholders pursuant to the rules of the Commission. In
addition, neither the Nomination Provision nor the Business Provision will
prevent any stockholder or stockholders holding at least 10% of the shares
entitled to vote on a particular matter from requesting a special meeting with
respect to such matter as described above in "Limitations
58
<PAGE> 65
on Calling Special Meetings of Stockholders". Although these bylaw provisions do
not give the AMHC board any power to approve or disapprove of stockholder
nominations for the election of directors or of any other business desired by
stockholders to be conducted at an annual meeting, they may make it difficult
for a third party to conduct a solicitation of proxies to elect its own slate of
directors or otherwise attempt to obtain control of AMHC, even if such a
solicitation or attempt might be beneficial to AMHC and its stockholders.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
Except to the extent the articles of incorporation or by-laws otherwise
provide, the AMHC board may, upon the affirmative vote of a majority of the
entire board, amend or repeal any bylaw, provided that the stockholders may
specify particular provisions of the bylaw which may not be amended or repealed
by the AMHC board. The articles of incorporation may be amended with the
affirmative vote of the holders of a majority of the outstanding voting
securities of AMHC having the right to vote generally in the election of
directors. Under Iowa law, certain proposed amendments to the articles of
incorporation which adversely affect the rights of a particular class of stock
must be approved by a majority of such class.
STATE STATUTORY PROVISIONS
Any merger or acquisition of AMHC by another entity or the acquisition or
attempted acquisition of more than 10% of the stock of AMHC is subject to
regulatory approval by the Iowa and Kansas insurance commissioners. Section
490.1108 of the IBCA provides that in considering acquisition proposals,
directors may consider, in addition to the consideration of the effects of any
action on stockholders, the effects on AMHC's employees, suppliers, creditors,
customers and the communities in which it operates, as well as the long-term and
short-term interests of AMHC. Consideration of any or all community interest
factors is not a violation of the business judgment rule, even if the directors
reasonably determine that effects on a community or other factors outweigh the
financial or other benefits to AMHC or a stockholder or group of stockholders.
Section 490.624A of the IBCA also includes authorization of "poison pills" which
include, without limitation, terms and conditions of stock rights or options
issued by a corporation that preclude or limit the exercise, transfer or receipt
of stock rights by persons owning or offering to acquire a specified number or
percentage of a corporation's outstanding shares.
In addition, prior to and for a period of five years following the
effective date of the conversion, the Iowa insurance laws provide that a person,
other than the reorganized company, an employee benefit plan or employee benefit
trust sponsored by the reorganized company, or as otherwise specifically
provided for in the plan of conversion, shall not directly or indirectly acquire
or offer to acquire the beneficial ownership of more than five percent of any
class of voting security of the reorganized company, and a person, other than
the reorganized company or other than an employee benefit plan or employee
benefit trust sponsored by the reorganized company, who acquires five percent or
more of any class of voting security of the reorganized company prior to the
conversion or as specifically provided for in the plan of conversion, shall not
directly or indirectly acquire or offer to acquire the beneficial ownership of
additional voting securities of the reorganized company, unless the acquisition
is approved by the Iowa Insurance Commissioner as not being contrary to the
interests of the policyholders of the reorganized company or its life insurance
company subsidiary and by the board of directors of the reorganized company.
Section 490.1110 of the IBCA also imposes a 3 year moratorium on business
combinations with any person owning 10% or more of the outstanding voting stock
of the corporation and its affiliate unless (1) the transaction or acquisition
in which the stockholder became a 10% or more stockholder is approved in advance
by the board, (2) after becoming a 10% or more stockholder, the stockholder
owned at least eighty-five percent of the corporation's outstanding voting stock
not owned by directors and officers, and by employee stock plans that do not
allow individual employees to decide confidentially whether to tender their
shares, or, (3) at or after the time the stockholder became a 10% or more
stockholder, the business combination is approved by the board and authorized by
the holders of two-thirds of the outstanding voting stock not held by the 10% or
more stockholder.
59
<PAGE> 66
The foregoing provisions of state law could have the effect of delaying,
deferring or preventing a change in control of AMHC if the board of directors
determines that a change of control is not in the best interests of AMHC, its
stockholders and other constituencies. In addition, the regulatory restrictions
on the acquisition of securities of AMHC may also deter attempts to effect, or
prevent the consummation of, a change in control of AMHC.
CERTAIN DIFFERENCES IN THE RIGHTS OF AMHC STOCKHOLDERS
AND AMERUS STOCKHOLDERS
As Iowa corporations, both AmerUs and AMHC are governed by the Iowa
Business Corporation Act. As a result of the merger, holders of AmerUs common
stock, whose rights as stockholders are currently governed by the AmerUs
articles of incorporation and by-laws, will become holders of AMHC common stock,
whose rights as stockholders will be governed by the proposed AMHC articles of
incorporation and by-laws.
After the restructuring is completed, there will be no material differences
between the rights of current AmerUs stockholders and the rights of AMHC
stockholders, except for the differences set forth below.
The following table summarizes and compares the differences between the
principal rights of AMHC stockholders and the rights of AmerUs stockholders. It
is qualified in its entirety, however, by reference to the full texts of the
proposed AMHC articles of incorporation and by-laws and the AmerUs articles of
incorporation and by-laws. A copy of the proposed AMHC articles of incorporation
is filed as Appendix C to this proxy statement/prospectus, and a copy of the
proposed bylaws is filed as an exhibit to this registration statement of which
this proxy statement/prospectus forms a part. The AmerUs articles of
incorporation and by-laws are incorporated by reference in AmerUs' Annual Report
on Form 10-K for the year ended December 31, 1999.
<TABLE>
<CAPTION>
CHARACTERISTIC AMERUS NEW AMHC
- -------------- ------ --------
<S> <C> <C>
Authorized number of shares............... 230,000,000 shares of 230,000,000 shares of
common stock (180,000,000 common stock, 20,000,000
shares of Class A common shares of preferred stock.
stock and 50,000,000 Class
B common stock), 20,000,000
shares of preferred stock.
Classes of common......................... Two classes of common stock One class of common stock.
(Class A and Class B common The shares of common stock
stock) and special voting entitle the holder to the
rights for Class B common same rights and
stock. preferences, and subject
the holder to the same
qualifications, limitations
and restrictions as all
other stockholders of
common stock. The shares of
common stock are subject to
the relative rights,
preferences,
qualifications,
limitations, and
restrictions of any class
or series of preferred
stock now or hereafter
issued by AMHC.
</TABLE>
60
<PAGE> 67
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Information concerning transactions and relationship between AMHC, AmerUs
and their affiliates is contained in AmerUs' Annual Report on Form 10-K for the
year ended December 31, 1999 and is incorporated in this document by reference.
For more information on how to obtain this report, see "Where You Can Find More
Information" on page 62.
LEGAL MATTERS
The legality of the AMHC common stock offered hereby will be passed upon
for AMHC by Joseph K. Haggerty, Esq., Senior Vice President and General Counsel
of AMHC. Mr. Haggerty beneficially owns 20,644 shares of AmerUs common stock,
has current exercisable options to purchase 5,334 shares, has beneficial
ownership of 10,668 units of the adjustable conversion-rate equity security
units of AmerUs and is a policyholder of AMHC.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the board of directors
of AmerUs does not know of any matters that will be presented for consideration
at the special meeting other than as described in this proxy
statement/prospectus. However, the proposed proxy will be deemed to confer
authority to the individuals named as authorized therein to vote the shares
represented by such proxy as to any matters that fall within the purposes
outlined in the Notice of Special Meeting of Stockholders as determined by a
majority of AmerUs's board, including any adjournments or postponements.
Nonetheless, a proxy which is voted against the proposal to approve the merger
will not be voted in favor of any adjournment or postponement.
EXPERTS
The consolidated financial statements and financial statement schedules of
AMHC as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999, have been included herein in reliance
upon the reports of KPMG LLP, independent auditors, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements and financial statement schedules of
AmerUs, as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999, have been incorporated by reference
from the Form 10-K herein in reliance upon the reports of KPMG LLP, independent
auditors, which reports are also incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of ILICO at December 31, 1999 and
1998, and for each of the three years in the period ended December 31, 1999,
incorporated by reference from the February 22, 2000 Form 8-K/A herein have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon incorporated by reference herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
61
<PAGE> 68
WHERE YOU CAN FIND MORE INFORMATION
AMHC has filed with the SEC a registration statement under the Securities
Act that registers the distribution to AmerUs stockholders of the shares of AMHC
common stock to be issued in connection with the merger. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about AMHC and AMHC common stock. The rules and regulations
of the SEC allow us to omit certain information included in the registration
statement from this proxy statement/ prospectus.
In addition, AmerUs files reports, proxy statements and other information
with the SEC under the Exchange Act. You may read and obtain copies of this
information by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The SEC also maintains an Internet worldwide web site that contains
reports, proxy statements and other information about issuers, like AmerUs, who
file electronically with the SEC. The address of the site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
AmerUs at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The SEC allows AmerUs to "incorporate by reference" information into this
proxy statement/ prospectus. This means that the company can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered to be a part of
this proxy statement/prospectus, except for any information that is superseded
by information that is included directly in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below that AmerUs has previously filed with the SEC. They contain
important information about AmerUs and its financial condition.
<TABLE>
<CAPTION>
AMERUS SEC FILINGS PERIOD
- ------------------ ------
<S> <C>
Proxy Statement for 2000................. Dated March 31, 2000
Annual Report on Form 10-K............... Year Ended December 31, 1999
Current Reports on Form 8-K and 8-K/A.... Dated February 19 and December 23, 1999;
January 13, February 22, and March 6
and 24, 2000
</TABLE>
AmerUs incorporates by reference additional documents that it may file with
the SEC between the date of this proxy statement/prospectus and the date of the
special meeting. These documents include periodic reports, such as Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
AmerUs has supplied all information contained or incorporated by reference
in this proxy statement/ prospectus relating to AmerUs, as well as all pro forma
financial information, and AMHC has supplied all such information relating to
AMHC.
Documents incorporated by reference are available from AmerUs without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. You can obtain documents incorporated by reference in this
proxy statement/ prospectus by requesting them in writing or by telephone from
AmerUs at the following address:
James A. Smallenberger
Senior Vice President and Secretary
699 Walnut Street, Suite 2000,
Des Moines, Iowa 50309-3948
(515) 362-3600
In order to obtain timely delivery prior to the special meeting, members
must request the information no later than June 15, 2000.
62
<PAGE> 69
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AMERICAN MUTUAL HOLDING COMPANY
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998......................................... F-3
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997.......................... F-4
Consolidated Statements of Comprehensive Income for the
years ended December 31, 1999, 1998 and 1997.............. F-5
Consolidated Statements of Members' Equity for the years
ended December 31, 1999, 1998 and 1997.................... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... F-7
Notes to Consolidated Financial Statements.................. F-9
</TABLE>
Separate financial statements of subsidiaries not consolidated and 50% or less
owned persons accounted for by the equity method have been omitted because they
do not individually constitute a significant subsidiary.
F-1
<PAGE> 70
INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Mutual Holding Company:
We have audited the accompanying consolidated balance sheets of American
Mutual Holding Company and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of income, comprehensive income, members'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1999. 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 American
Mutual Holding Company and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Des Moines, Iowa
February 2, 2000, except as to note 19,
which is as of February 21, 2000
F-2
<PAGE> 71
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Investments:
Securities available for sale at fair value (notes 2 and
6):
Fixed maturity securities............................... $ 6,680,951 $ 6,746,544
Equity securities....................................... 14,585 33,060
Short-term investments.................................. 155 22,428
Loans (note 3)............................................ 608,917 637,732
Loans held for sale....................................... 12,882 83,329
Real estate............................................... 45,757 46,729
Policy loans.............................................. 109,864 110,786
Other investments......................................... 292,493 228,828
----------- -----------
Total investments................................... 7,765,604 7,909,436
Cash and cash equivalents................................... 293,026 140,639
Accrued investment income................................... 92,249 84,058
Premiums, fees and other receivables........................ 9,941 16,615
Reinsurance receivables..................................... 17,534 6,174
Deferred policy acquisition costs (note 4).................. 529,663 246,030
Value of business acquired (note 5)......................... 230,542 224,540
Investment in unconsolidated subsidiary..................... 30,683 29,602
Goodwill.................................................... 206,324 215,506
Property and equipment...................................... 25,212 26,059
Deferred income taxes (note 7).............................. 77,446 --
Other assets................................................ 386,504 395,039
Closed Block assets......................................... 1,412,622 1,453,305
Assets of discontinued operations (note 17)................. 20,357 33,476
----------- -----------
Total assets........................................ $11,097,707 $10,780,479
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Policy reserves and policyowner funds:
Future life and annuity policy benefits................... $ 7,390,991 $ 7,185,417
Policyowner funds......................................... 282,026 98,019
----------- -----------
7,673,017 7,283,436
Accrued expenses and other liabilities...................... 165,632 219,037
Dividends payable to policyowners........................... 2,248 2,104
Policy and contract claims.................................. 12,221 10,452
Income taxes payable........................................ 21,395 2,369
Deferred income taxes (note 7).............................. -- 7,504
Notes and contracts payable (note 6)........................ 196,263 168,188
Closed Block liabilities.................................... 1,756,064 1,703,195
Liabilities of discontinued operations (note 17)............ 2,725 3,242
----------- -----------
Total liabilities................................... 9,829,565 9,399,527
----------- -----------
Minority interest........................................... 309,101 364,262
Company-obligated mandatorily redeemable preferred capital
securities of subsidiary trusts holding solely junior
subordinated debentures of the Company (note 6)........... 197,691 199,629
Members' equity:
Accumulated other comprehensive income(loss).............. (78,628) 16,329
Unearned compensation..................................... (187) (137)
Unallocated ESOP shares (note 8).......................... (797) --
Unassigned surplus........................................ 840,962 800,869
----------- -----------
Total members' equity............................... 761,350 817,061
Commitments and contingencies (note 10).....................
----------- -----------
Total liabilities and members' equity............... $11,097,707 $10,780,479
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 72
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Insurance premiums........................................ $ 89,521 $ 81,197 $ 48,127
Universal life and annuity product charges................ 74,676 72,981 47,306
Net investment income (note 2)............................ 557,508 505,168 226,910
Realized gains on investments (note 2).................... 2,534 1,128 11,879
Other income.............................................. 15,311 13,077 13,766
Contribution from the Closed Block........................ 25,166 31,478 31,044
-------- -------- --------
764,716 705,029 379,032
-------- -------- --------
Benefits and expenses:
Policyowner benefits...................................... 442,428 430,756 195,976
Underwriting, acquisition, and other expenses............. 127,168 104,917 67,417
Amortization of deferred policy acquisition costs and
value of business acquired (notes 4 and 5)............. 67,780 60,214 23,776
Dividends to policyowners................................. 4,526 2,558 1,587
-------- -------- --------
641,902 598,445 288,756
-------- -------- --------
Income from continuing operations................. 122,814 106,584 90,276
Interest expense (note 6)................................... 28,952 27,787 16,934
-------- -------- --------
Income before tax expense, minority interest and
equity in earnings of unconsolidated
subsidiary...................................... 93,862 78,797 73,342
Income tax expense (note 7)................................. 32,788 24,792 19,362
Minority interest........................................... 28,107 26,919 16,169
-------- -------- --------
Income before equity in earnings of unconsolidated
subsidiary...................................... 32,967 27,086 37,811
Equity in earnings of unconsolidated subsidiary............. 1,558 2,654 1,700
-------- -------- --------
Net income from continuing operations............. 34,525 29,740 39,511
Discontinued operations (note 17):
Income (loss) from discontinued operations, net of tax of
$2,631 in 1999, $(1,988) in 1998 and $10,565 in 1997... 3,911 (1,124) 14,923
Gain on sale of discontinued operations, net of tax of
$22,969................................................ -- 74,883 --
-------- -------- --------
Net income........................................ $ 38,436 $103,499 $ 54,434
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 73
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Net income.................................................. $ 38,436 $103,499 $ 54,434
Other comprehensive income (loss), before tax
Unrealized holding gains (losses) arising during period... (254,937) (36,716) 51,717
Less: reclassification adjustment for gains (losses)
included in net income................................. (3,190) 6,477 18,531
Minimum pension liability adjustment...................... 1,478 (1,478) --
--------- -------- --------
Other comprehensive income (loss), before tax............. (250,269) (44,671) 33,186
Income tax (expense) benefit related to items of other
comprehensive income (note 7).......................... 87,594 15,635 (12,739)
--------- -------- --------
(162,675) (29,036) 20,447
Amounts attributable to:
Discontinued operations................................ -- 1,043 692
Minority interest...................................... 69,194 17,469 (27,851)
--------- -------- --------
Other comprehensive (loss), net of taxes.......... (93,481) (10,524) (6,712)
--------- -------- --------
Comprehensive income (loss)................................. $ (55,045) $ 92,975 $ 47,722
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 74
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER UNALLOCATED
COMPREHENSIVE UNEARNED ESOP UNASSIGNED
INCOME (LOSS) COMPENSATION SHARES SURPLUS TOTAL
------------- ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1996... $ 33,565 $ -- $ -- $640,718 $674,283
Net income........................ -- -- -- 54,434 54,434
Other comprehensive income, net of
taxes........................... (6,712) -- -- -- (6,712)
Gain on sale of subsidiary shares,
net of taxes.................... -- -- -- 1,055 1,055
-------- ----- ------- -------- --------
Balance as of December 31, 1997... $ 26,853 $ -- $ -- $696,207 $723,060
Net income........................ -- -- -- 103,499 103,499
Other comprehensive income, net of
taxes........................... (14,492) -- -- -- (14,492)
Stock issued under various
incentive plans, net of
forfeitures..................... -- (137) -- 371 234
Retirement of company-obligated
mandatorily redeemable preferred
capital securities.............. -- -- -- 1,668 1,668
Minority interest ownership
changes......................... 3,968 -- -- (876) 3,092
-------- ----- ------- -------- --------
Balance as of December 31, 1998... $ 16,329 $(137) $ -- $800,869 $817,061
Net income........................ -- -- -- 38,436 38,436
Other comprehensive income, net of
taxes........................... (95,147) -- -- -- (95,147)
Stock issued under various
incentive plans, net of
forfeitures..................... -- (48) -- 473 425
Adoption of leveraged ESOP........ -- -- (1,028) -- (1,028)
Allocation of shares in leveraged
ESOP............................ -- -- 231 74 305
Retirement of company-obligated
mandatorily redeemable preferred
capital securities.............. -- -- -- 205 205
Minority interest ownership
changes......................... 190 (2) -- 905 1,093
-------- ----- ------- -------- --------
Balance as of December 31, 1999... $(78,628) $(187) $ (797) $840,962 $761,350
======== ===== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 75
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 38,436 $ 103,499 $ 54,434
Less: (Income) loss from discontinued operations... (3,911) 1,124 (14,923)
------------ ----------- -----------
34,525 104,623 39,511
Adjustments to reconcile net income to net cash
provided by operating activities:
Policyowner assessments on universal life and
annuity products.............................. (54,944) (71,104) (43,441)
Interest credited to policyowner account
balances...................................... 311,428 316,782 114,584
Gain on sale of discontinued operations......... -- (97,805) --
Realized investment gains....................... (2,534) (1,128) (11,879)
Goodwill amortization........................... 7,403 7,531 602
VOBA amortization............................... 32,604 32,932 2,790
Minority interest............................... 28,107 26,919 16,169
Change in:
Accrued investment income..................... (8,263) 937 (53,773)
Reinsurance receivables....................... (11,361) 29 (4,874)
Loans held for sale........................... 70,447 (75,570) --
Deferred policy acquisition costs............. (118,078) (117,452) (30,366)
Liabilities for future policy benefits........ 329,948 104,303 (8,966)
Policy and contract claims and other
policyowner funds.......................... (291) 8,885 (2,727)
Income taxes:
Current.................................... 18,548 (10,160) (2,773)
Deferred................................... 14,405 (2,055) 1,054
Other, net...................................... 26,840 73,940 98,910
Change in Closed Block assets and liabilities,
net........................................... 59,548 105,911 135,970
------------ ----------- -----------
Net cash provided by operating
activities............................... $ 738,332 $ 407,518 $ 250,791
------------ ----------- -----------
Cash flows from investing activities:
Purchase of fixed maturities available-for-sale.... (11,253,044) (3,449,439) (1,472,652)
Maturities, calls and principal reductions of fixed
maturities available-for-sale................... 10,865,639 3,526,882 1,361,339
Purchase of equity securities...................... (214,060) (323,670) (55,277)
Proceeds from sale of equity securities............ 229,101 331,641 67,794
Proceeds from repayment and sale of loans and
leases.......................................... 208,232 144,307 180,892
Purchase of loans and leases....................... (176,997) (262,083) (116,564)
Purchase of real estate and other invested assets,
net............................................. (60,350) (40,708) (2,755)
Proceeds from sale of discontinued operations...... -- 119,724 --
Change in policy loans, net........................ 922 7,079 (9,625)
Other assets, net.................................. 3,011 48,606 18,555
Acquisitions, net of cash acquired................. -- -- (153,798)
Change in Closed Block investments, net............ (54,373) (93,364) (103,401)
Purchase of minority interest and note
receivable...................................... (8,181) (110,622) --
------------ ----------- -----------
Net cash (used in) investing activities.... $ (460,100) $ (101,647) $ (285,492)
------------ ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 76
AMERICAN MUTUAL HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from financing activities:
Deposits to policyowner account balances............. $ 1,023,252 $ 855,181 $ 122,531
Withdrawals from policyowner account balances........ (1,169,228) (1,087,856) (233,537)
Change in debt, net.................................. 28,075 (119,892) 23,859
Issuance of company-obligated mandatorily redeemable
capital securities................................ -- 144,963 86,000
Retirement of company-obligated mandatorily
redeemable capital securities..................... (1,523) (3,911) --
Adoption and allocation of shares in leveraged
ESOP.............................................. (1,250) -- --
Net proceeds from initial public stock offering...... -- -- 97,198
Dividends to stockholders of subsidiary.............. (5,171) (6,494) (1,934)
Other, net........................................... -- (5,936) (10,453)
----------- ----------- ----------
Net cash provided by (used in) financing
activities................................. (125,845) (223,945) 83,664
----------- ----------- ----------
Net increase in cash......................... 152,387 81,926 48,963
Cash and cash equivalents at beginning of year......... 140,639 58,713 9,750
----------- ----------- ----------
Cash and cash equivalents at end of year............... $ 293,026 $ 140,639 $ 58,713
=========== =========== ==========
Supplemental disclosure of cash activities:
Interest paid........................................ $ 32,832 $ 32,525 $ 13,134
=========== =========== ==========
Income taxes paid.................................... $ 6,143 $ 21,492 $ 44,437
=========== =========== ==========
Supplemental disclosure of noncash investing and
financing activities:
Sale of subsidiaries for notes and accounts
receivable........................................ $ -- $ 125,527 $ --
=========== =========== ==========
Details of acquisitions:
Fair value of assets acquired..................... $ -- $ -- $5,744,191
Liabilities assumed............................... -- -- 5,190,829
----------- ----------- ----------
Carrying value of acquisitions....................... -- -- 553,362
Common stock issued.................................. -- -- (343,894)
Warrants, options, and SAR's rolled over............. -- -- (23,184)
Payments on liabilities included above............... -- -- 25,800
----------- ----------- ----------
Cash paid.............................................. -- -- 212,084
Less cash acquired..................................... -- -- 58,286
----------- ----------- ----------
Net cash paid for acquisitions......................... $ -- $ -- $ 153,798
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 77
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF BUSINESS ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
American Mutual Holding Company (AMHC) is a holding company which owns all
of the outstanding stock of AmerUs Group Co. (AGC). AGC's principal asset is a
majority ownership percentage in AmerUs Life Holdings, Inc. (AmerUs) which is
primarily comprised of three life insurance companies operating throughout the
United States. In addition to AmerUs, AGC owns a finance company and a real
estate management company. AMHC is primarily engaged through its subsidiaries in
the business of marketing, underwriting, and distributing life insurance and
annuity products to individuals. Through its finance company and real estate
management company, AMHC conducts limited wholesale origination, sale, and
servicing of home equity loans and limited management, development, syndication,
and marketing services for commercial real estate and mortgage portfolios of its
subsidiaries.
Organization
AMHC was formed on August 1, 1996 through a plan of reorganization (the
Reorganization) of the former American Mutual Life Insurance Company (American
Mutual Life). Pursuant to this Reorganization which became effective on June 30,
1996, American Mutual Life was converted to a mutual insurance holding company
structure whereby AMHC, a mutual insurance holding company, was formed.
Additionally, American Mutual Life was converted to a stock life insurance
company and renamed AmerUs Life Insurance Company (AmerUs Life). All of the
initial shares of capital stock of AmerUs Life were issued to AMHC.
On August 1, 1996, AMHC contributed all of its shares of capital stock of
AmerUs Life to AGC. On the same date, AmerUs was formed and all of its shares of
capital stock were issued to AGC.
As a result of the Reorganization, AMHC indirectly owned, through AmerUs
Group, 14,500,000 shares of Class A common stock and 5,000,000 shares of Class B
common stock of AmerUs. The Class B common stock must be held, directly or
indirectly, by AMHC. The Class B common stock is generally convertible on a
share-for-share basis for Class A common stock. Each share of Class A and Class
B common stock entitles its holder to one vote per share; however, the voting
rights of the Class B shares are adjusted to ensure that votes of the Class B
shares together with the votes of Class A shares held by the Class B
stockholders will always have a majority of the votes. AMHC must directly or
indirectly control a majority of the voting shares of AmerUs. In addition, as
long as the members of AMHC own directly or indirectly more than 50 percent of
the voting power of the outstanding voting stock, AMHC is entitled to equity
purchase rights which provide for AmerUs to notify AMHC in writing of a proposed
sale of voting stock or any options, warrants, or rights to acquire voting
stock. AMHC has the right to purchase the same proportionate number of shares
being offered for sale as AMHC owns of the total shares at the time of the
registration.
Consolidation and Basis of Presentation
The consolidated financial statements include AMHC, AGC, and its principal
subsidiaries AmerUs, AmerUs Home Equity Inc. (Equity), and AmerUs Properties,
Inc. (Properties) (collectively, the Company). AmerUs is a majority-owned
subsidiary which prepares consolidated financial statements that include the
accounts and operations of AmerUs and its wholly owned subsidiaries, principally
AmerUs Life, AmVestors Financial Corporation (AmVestors), Delta Life Corporation
(Delta), and AmerUs Capital Management Group, Inc. (ACM). Equity and Properties
are wholly owned subsidiaries of AGC. All significant intercompany transactions
and balances have been eliminated in the consolidation.
The accompanying consolidated financial statements of the Company and its
subsidiaries have been prepared in conformity with generally accepted accounting
principles (GAAP), which, as to the insurance
F-9
<PAGE> 78
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
company subsidiaries, differ from statutory accounting practices prescribed or
permitted by regulatory authorities.
The preparation of consolidated financial statements in conformity 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 consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Certain balances for 1998 and 1997 have been reclassified to conform to the
1999 presentation.
Discontinued Operations
During 1998, AMHC disposed of its residential real estate and bank
operating segments. The consolidated statements of operations have been
reclassified to present the results of operations and gain on sale of the
discontinued operations. See note 17 for additional information.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company includes cash and amounts
due from other financial institutions and interest-bearing deposits in other
financial institutions purchased with original maturities of three months or
less in cash and cash equivalents. Amounts of interest-bearing deposits included
as cash equivalents at December 31, 1999 and 1998, were $313.9 million and
$157.0 million, respectively.
Closed Block
The Reorganization contained an arrangement, known as a closed block (the
Closed Block), to provide for dividends on policies that were generally in force
on June 30, 1996 and were within the classes of individual policies for which
AmerUs Life had a dividend scale in effect at the time of the Reorganization.
The primary products included in the Closed Block are whole life, certain
universal life policies and term life insurance policies. The Closed Block was
designed to give reasonable assurance to owners of affected policies that assets
will be available to support such policies, including maintaining dividend
scales in effect at the time of the Reorganization, if the experience underlying
such scales continues. The assets, including revenue therefrom, allocated to the
Closed Block will accrue solely to the benefit of the owners of policies
included in the Closed Block until the Closed Block is no longer in effect.
AmerUs Life will not be required to support the payment of dividends and
interest credits on the Closed Block policies from its general funds, although
it could choose to provide such support. AmerUs Life will continue to pay
guaranteed benefits under all policies, including policies included in the
Closed Block, in accordance with their terms. In the event that the Closed Block
assets were insufficient to meet the benefits of the Closed Block guaranteed
benefits, general assets would be utilized to meet the contractual benefits of
the Closed Block policyholders.
The estimated net cash flows assumed in determining the Closed Block
funding consist of premiums from policies included in the Closed Block,
investment income from Closed Block assets, proceeds from maturities and
dispositions of Closed Block assets, less benefits paid on Closed Block
policies, certain expenses funded in the Closed Block, and dividends on Closed
Block policies based on current payable dividend scales. To the extent that the
actual cash flows from the assets allocated to the Closed Block are, in the
aggregate, more favorable than assumed in establishing the Closed Block, total
dividends paid to the Closed Block policyholders in future years will be greater
than the total dividends that would have been paid to such policyholders if the
current payable dividend scales had been continued. Conversely, to the extent
that the actual cash flows from the assets allocated to the Closed Block are, in
the aggregate, less
F-10
<PAGE> 79
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
favorable than assumed in establishing the Closed Block, total dividends paid to
the Closed Block policyholders in future years will be less than the total
dividends that would have been paid to such policyholders if the current payable
dividend scales had been continued.
The financial information of the Closed Block, while prepared on a GAAP
basis, reflects its contractual provisions and not its actual results of
operations and financial position. Closed Block underwriting, acquisition and
insurance expenses include premium taxes and guarantee fund assessments. All
other underwriting, acquisition, and insurance expenses related to the Closed
Block operations are charged to operations outside the Closed Block;
accordingly, the contribution from the Closed Block does not represent the
actual profitability of the Closed Block operations. Operating costs and
expenses outside of the Closed Block are, therefore, disproportionate to the
business outside of the Closed Block. Unrealized gains and losses on investments
are included outside of the Closed Block as a component of other comprehensive
income and will be included in the Closed Block operations upon their
realization. Unrealized gains and losses are not included in the determination
of the policyholder obligation.
F-11
<PAGE> 80
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information of the Closed Block as of December 31,
1999, 1998, and 1997 and for the years ended December 31, 1999, 1998, and 1997,
is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ------------ ----------
<S> <C> <C> <C>
Assets:
Securities available for sale at fair value
Fixed maturity securities (amortized cost
1999 -- $1,133,717; 1998 -- $1,074,208;
1997 -- $1,004,976)...................... $1,087,672 $1,116,540 $1,053,066
Short-term investments..................... -- 8,875 660
Policy loans.................................. 188,035 181,866 168,368
Other investments............................. 602 3,027 591
Cash and cash equivalents..................... 5,910 4 21
Accrued investment income..................... 14,949 14,445 12,617
Premiums and fees receivable.................. 957 3,385 3,591
Deferred policy acquisition costs............. 97,141 117,479 143,765
Other assets.................................. 17,356 7,684 9,169
---------- ---------- ----------
Total Assets.......................... $1,412,622 $1,453,305 $1,391,848
========== ========== ==========
Liabilities:
Future life and annuity policy benefits....... $1,581,923 $1,517,162 $1,448,725
Policyowner funds............................. 8,905 6,350 6,786
Accrued expenses.............................. -- 3,887 5,980
Dividends payable to policyowners............. 152,984 149,487 135,985
Policy and contract claims.................... 4,670 8,395 5,966
Other liabilities............................. 7,582 17,914 19,990
---------- ---------- ----------
Total Liabilities..................... $1,756,064 $1,703,195 $1,623,432
========== ========== ==========
Revenues and expenses:
Insurance premiums............................ $ 189,444 $ 198,178 $ 206,145
Universal life and annuity product charges.... 12,463 13,695 13,599
Net investment income......................... 108,117 115,762 113,759
Realized gains (losses) on investments........ (380) 10,324 718
Policyowner benefits.......................... (193,482) (200,783) (206,638)
Underwriting, acquisition, and other
expenses................................... (4,408) (5,042) (5,477)
Amortization of deferred policy acquisition
costs...................................... (20,337) (26,286) (31,471)
Dividends to policyowners..................... (66,251) (74,370) (59,591)
---------- ---------- ----------
Contribution from the Closed Block
before income taxes................. $ 25,166 $ 31,478 $ 31,044
========== ========== ==========
</TABLE>
Investments
Investments in fixed maturity and equity securities that are to be held for
indefinite periods of time are reported as securities available-for-sale.
Securities available-for-sale are reported in the accompanying consolidated
financial statements at fair value. Any valuation changes resulting from changes
in the fair value of these securities are reflected as a component of members'
equity, except for certain policies of Delta Life and Annuity Company (Delta
Life) which have specific investments identified and for which valuation changes
and related unrealized gains or losses are included in future life and annuity
policy benefits. These unrealized gains or losses, excluding certain Delta Life
unrealized gains or losses described
F-12
<PAGE> 81
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
above, are reported net of taxes and adjustments to deferred policy acquisition
costs and value of business acquired.
Premiums and discounts on fixed maturity securities are amortized or
accreted over the life of the related security as an adjustment to yield using
the effective interest method. Realized gains and losses are included in
earnings and are determined using the specific identification method. The
carrying value of investments is reduced to its estimated realizable value if a
decline in fair value is considered other than temporary, with such reduction
charged to earnings.
Mortgage loans on real estate and other long-term investments are stated at
cost less amortized discounts and allowances for possible losses. Policy loans
are stated at their aggregate unpaid balances. Real estate acquired by
foreclosure is stated at the lower of cost or fair value less estimated cost to
sell.
Investments in loans and real estate are considered impaired when the
Company determines that collection of amounts due under the contractual terms is
doubtful or carrying values exceed the fair values of underlying collateral. The
Company adjusts such assets to their estimated net realizable value at the point
at which it determines an impairment is other than temporary. Interest income on
impaired mortgage loans is recognized when cash is received. In addition, the
Company has established a valuation allowance for loans, real estate, and other
invested assets. Valuation allowances for other than temporary impairments in
value are netted against the asset categories to which they apply, and additions
to valuation allowances are included in total investment results.
AmerUs Life has one $250 million separate account funding agreement. Under
this agreement, a five-year floating rate insurance contract was issued to a
commercial paper conduit. The funding agreement is secured by assets in the
Company's separate account and is further backed by the general account assets.
The separate account assets are legally segregated and are not subject to claims
that arise out of any other business of the Company. The separate account assets
and liabilities are included with general account assets in the financial
statements. The funding agreement may not be cancelled by the commercial paper
conduit unless there is a default under the agreement, but the Company may
terminate at any time.
Investments in partnerships and joint ventures in which the Company's
ownership percentage exceeds 3% are generally accounted for under the equity
method whereby the Company initially records the investment at cost.
Subsequently, the Company increases or decreases the carrying amount of the
investment for its share of income or loss, respectively, of the investee.
Investments in partnerships and joint ventures in which the Company's ownership
percentage is less than 3% are generally accounted for under the cost method
whereby dividends received by the investee are recognized as income. The Company
is primarily a limited partner in such investments. These investments are shown
as other investments and totalled approximately $104.8 million and $99.7 million
at December 31, 1999 and 1998, respectively.
Loans
Loans are stated at the principal amounts outstanding, net of unearned
income, deferred loan fees, discounts, and allowances for possible losses.
Unearned income, net deferred loan fees, and discounts on loans which are
probable of collection are amortized over the terms of the loans using a method
that approximates the interest method. A loan is considered impaired if it is
probable that contractual amounts due will not be collected. Impaired loans are
valued at the fair value of the underlying collateral. Accrued interest
receivable in arrears which management believes is doubtful of collection is
charged to income. Subsequent interest income is not recognized on such loans
until collected or until determined by management to be collectible.
F-13
<PAGE> 82
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Loans Held for Sale
Loans held for sale are carried at the lower of cost or market determined
on an aggregate basis. The cost of loans sold is determined on a specific
identification basis, and gains or losses on the sale of loans are recognized on
the settlement date. Net fees and costs associated with the origination and
acquisition of loans held for sale are included in the basis for determining
gain or loss.
Real Estate
Real estate is stated at cost less accumulated depreciation. Depreciation
is calculated over the estimated useful lives primarily using accelerated
depreciation methods.
Interest Rate Swaps, Caps, Swaptions, and Options
The Company uses interest rate swaps, caps, swaptions, and options as part
of its overall interest rate risk management strategy for certain life insurance
and annuity products. The book values of the underlying hedged investments or
anticipated investment transactions are amortized over the remaining lives of
the hedged investments as adjustments to investment income. Certain agreements
hedge assets which are carried at fair value; accordingly, such underlying
hedged investments are also carried at fair value. Any unamortized gains or
losses are recognized when the underlying investments are sold.
Interest rate swap contracts are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income as incurred.
Interest rate caps are used to limit the effects of changing interest rates
on yields of variable rate or short-term assets or liabilities. The initial cost
of any such agreement is amortized to investment income over the life of the
agreement. Periodic payments that are receivable as a result of the agreements
are accrued as an adjustment of investment income.
Swaption agreements are used in conjunction with interest rate caps to
protect against rising rates. Swaption agreements involve the right to enter
into a swap transaction at a pre-specified price. The initial cost of a swaption
agreement is amortized to investment income over the life of the agreement.
The Company has equity-indexed annuity products that guarantee the return
of principal to the customer and credits interest based on a percentage of the
gain in the S&P 500 Index(R). A portion of the premium from each customer is
invested in investment grade fixed income securities to cover the minimum
guaranteed value due the customer at the end of the term. A portion of the
premium is used to purchase S&P 500 call options to hedge the growth in interest
credited to the customer as a direct result of increases in the S&P 500
Index(R). The amounts to be paid or received pursuant to these agreements are
accrued and recognized in income over the life of the agreements. The initial
cost of an option agreement is amortized to income over the life of the
agreement.
Policy Acquisition Costs
Certain commissions, policy issue and underwriting costs, and other
variable costs incurred to acquire or renew traditional life insurance,
universal life insurance, and annuity products have been deferred. The
amortization method of deferred policy acquisition costs for traditional life
insurance products varies, dependent upon whether the contract is participating
or nonparticipating. Participating contracts are those which are expected to pay
dividends to policyowners in proportion to their relative contribution to the
Company's surplus. Deferred policy acquisition costs for participating
traditional life insurance are being amortized over the life of the policies
generally in proportion to the present value of estimated gross
F-14
<PAGE> 83
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
margins. Nonparticipating traditional life insurance deferred policy acquisition
costs are being amortized over the premium-paying period of the related policies
in proportion to the ratio of annual premium revenues to total anticipated
premium revenues using assumptions consistent with those used in computing
policy benefit reserves. For universal life insurance and annuity products,
deferred policy acquisition costs are being amortized generally in proportion to
the present value of estimated gross margins from surrender charges and
investment, mortality, and expense margins. The amortization for participating
traditional life, universal life, and annuity products is adjusted
retrospectively when current or estimated future gross profits or margins on the
underlying policies vary from previous estimates. Deferred policy acquisition
costs are adjusted for the impact on estimated gross profits of net unrealized
gains and losses on securities.
Value of Business Acquired
Value of Business Acquired (VOBA) from insurance companies acquired
represents the portion of the purchase price allocated to the right to receive
future cash flows from insurance contracts existing at the date of the
acquisition. This cost of policies purchased represents the actuarially
determined present value of the projected future cash flows from the acquired
policies.
The expected future cash flows used in determining such value are based on
actuarially determined projections of future premium receipts, mortality,
surrenders, operating expenses, changes in insurance liabilities, investment
yields on the assets retained to support the policy liabilities and other
factors. These projections take into account all factors known or expected at
the valuation date, based on the judgment of management. The actual experience
on purchased business may vary from projections due to differences in renewal
premium, investment spread, investment gains or losses, mortality and morbidity
costs and other factors.
The discount rate used to determine the value of policies purchased is the
rate of return required in order to invest in the business being acquired.
Factors in determining this rate include the cost of capital required to fund
the acquisition; the acquired company's compatibility with other Company
activities that may impact future cash flows; the complexity of the acquired
company; and recent discount rates used by others to determine valuations to
acquire similar blocks of business.
VOBA is amortized based on the incidence of the expected cash flows using
the interest rate credited to the underlying policies. If cash flows differ from
expectations, the amortization of the VOBA is adjusted. Each year, the
recoverability of the VOBA is evaluated and if the evaluation indicates that the
existing insurance liabilities, together with the present value of future net
cash flows from the blocks of business acquired, is insufficient to recover the
VOBA, the difference is charged to expense as an additional write-off of the
VOBA.
Goodwill
Goodwill represents the excess of the amount paid to acquire a company over
the fair value of its net assets. Goodwill is amortized on a straight-line basis
over a thirty year period. The value of goodwill is monitored based on the
estimates of future earnings. If it is determined that future earnings do not
support the recoverability of goodwill, its carrying value is reduced by a
corresponding charge to expense.
Recognition of Revenues
Premiums for traditional life insurance products (including those products
with fixed and guaranteed premiums and benefits and which consist principally of
whole life insurance policies and certain annuities with life contingencies) are
recognized as revenues when due. For limited payment life insurance policies,
premiums are recorded as income when due, with any excess profit deferred and
recognized over the expected lives of the contracts. Amounts received as
payments for universal life insurance policies and for
F-15
<PAGE> 84
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
annuity products (including deferred annuities and annuities without life
contingencies) are not recorded as premium revenue. Revenues for such contracts
consist of policy charges for the cost of insurance, policy administration
charges, and surrender charges assessed against policyowner account balances
during the period. All insurance-related revenue is reported net of reinsurance
ceded.
Gains resulting from the sale of real estate inventory are recognized when
the Company receives a sufficient downpayment and the buyer is required to
maintain a continuing investment in the property. When these conditions are not
satisfied, the gain on the sale of real estate is deferred and recognized over
the life of the related receivable. Revenues resulting from rental of property
are recorded as income on the accrual basis.
Future Policy Benefits
The liability for future policy benefits for traditional life insurance is
computed using the net level method, utilizing the guaranteed interest and
mortality rates used in calculating cash surrender values, as described in the
contracts. Reserve interest assumptions range from 2.00% to 7.50%. The
weighted-average assumed interest rate for all traditional life policy reserves
was 4.33% in 1999, 4.30% in 1998, and 4.27% in 1997. Policy benefit claims are
charged to expense in the period that the claims are incurred. All
insurance-related benefits, losses, and expenses are reported net of reinsurance
ceded.
Future policy benefit reserves for universal life insurance and annuity
products are computed under a retrospective deposit method and represent policy
account balances before applicable surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the period in
excess of related policy account balances. The weighted-average interest
crediting rate for universal products was 5.67% in 1999, 6.08% in 1998, and
6.23% in 1997. The range of interest crediting rates for annuity products
excluding bonus interest payouts, was 4.00% to 7.00% in 1999, 1998 and 1997.
Participating Policies
Participating policies entitle the policyowners to receive dividends based
on actual interest, mortality, morbidity, and expense experience for the related
policies. These dividends are distributed to the policyowners through an annual
dividend using current dividend scales, which are approved by the board of
directors. Nearly 100% of traditional life policies are currently paying
dividends, and traditional life policies represent 62% of the Company's
individual life policies in force (based on face amounts).
Servicing Rights
Servicing assets are determined based upon estimated future revenues from
contractually specified servicing fees and other ancillary revenues that are
expected to compensate the Company for performing the servicing. Such servicing
rights are recognized at the time of sale of loans to permanent investors. The
resulting servicing rights asset is amortized over the expected life of the
servicing revenues.
Capitalized servicing rights are periodically assessed for impairment,
which is recognized in the statement of operations during the period in which
impairment occurs by establishing a corresponding valuation allowance.
The fair value of mortgage servicing rights was estimated with a valuation
model using current prepayment speeds and a market discount rate. Based upon the
Company's estimate, the fair value of its mortgage servicing rights exceeded
book value by approximately $1.6 million and $1.9 million at December 31, 1999
and 1998, respectively.
F-16
<PAGE> 85
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are recorded at cost and are depreciated principally
under the straight-line method.
Stock-based Compensation
Statement of Financial Accounting Standards (SFAS) 123, "Accounting for
Stock-based Compensation," requires increased disclosure of compensation expense
arising from stock compensation plans. SFAS 123 encourages rather than requires
companies to adopt a new method of accounting for stock compensation awards
based on their estimated fair value at the date they are granted. Companies are
permitted to continue accounting under APB Opinion 25 which requires
compensation cost be recognized based on the difference, if any, between the
quoted market price of the stock on the date of grant and the amount an employee
must pay to acquire the stock. The Company has elected to continue to apply APB
Opinion 25 in its consolidated financial statements and has disclosed pro forma
net income.
Guaranty Fund Assessments
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyowners and claimants in the event of insolvency of
other life insurance companies. As of December 31, 1999, the Company has accrued
for the gross amount of guaranty fund assessments for known insolvencies net of
estimated recoveries of premium tax offsets.
Benefit Plan Costs
The Company recognizes pension costs for its defined benefit plans in
accordance with SFAS 87, "Employers' Accounting for Pensions." Pension costs are
funded according to regulations provided under the Internal Revenue Code.
Postretirement Benefits Other Than Pensions
Under SFAS 106, "Employers' Accounting for Postretirement Benefits," the
cost of postretirement benefits is recognized on an accrual basis as employees
perform services to earn the benefits.
Income Taxes
The Company and its non-life insurance subsidiaries file a consolidated
federal income tax return. The life insurance subsidiaries file separate federal
income tax returns. The separate return method is used to compute the Company's
provision for federal income taxes. Deferred income tax assets and liabilities
are determined based on differences among the financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and laws.
Emerging Accounting Matters
SFAS 133 and 137
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 defines derivative instruments and
provides comprehensive accounting and reporting standards for the recognition
and measurement of derivative and hedging activities (including certain
instruments embedded in other contracts). It requires derivatives to be recorded
in the consolidated balance sheet at fair value and establishes criteria for
hedges of changes in the fair value of assets, liabilities or firm commitments,
hedges of variable cash flows or forecasted transactions, and hedges of
F-17
<PAGE> 86
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
foreign currency exposures of net investments in foreign operations. Changes in
the fair value of derivatives not meeting specific hedge accounting criteria
would be recognized in the consolidated statement of operations. In June 1999,
the FASB issued SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133." SFAS
137 delays the effective date of SFAS 133 for all fiscal quarters until fiscal
years beginning after June 15, 2000. The Company is evaluating SFAS 133 and has
not determined its effect on the consolidated financial statements.
SOP 97-3
On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants (AICPA) Statement of Position (SOP) 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." This
statement provides guidance on when an insurance or other enterprise should
recognize a liability for guaranty fund and other assessments and on how to
measure such liability. The adoption of SOP 97-3 had no material impact on the
financial position or results of operations as the Company currently estimates
assessment liabilities when a determination of an insolvency has occurred.
SOP 98-1
On January 1, 1999, the Company adopted AICPA SOP 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." This SOP
provides guidance for determining whether costs of software developed or
obtained for internal use should be capitalized or expensed as incurred. In the
past, the Company has expensed such costs as they were incurred. The adoption of
SOP 98-1 had no material impact on the financial position or results of
operations of the Company.
Statutory Accounting Codification
The NAIC has codified statutory accounting practices, which are expected to
constitute the only source of prescribed statutory accounting practices and are
effective in 2001. Codification will change prescribed statutory accounting
practices and may result in changes to the accounting practices that insurance
enterprises use to prepare their statutory financial statements. The changes of
codification will not have a material impact on statutory surplus.
Business Risks
The Company operates in a business environment which is subject to various
risks and uncertainties. Such risks and uncertainties include interest rate
risk, legal and regulatory changes and default risk.
Interest rate risk is the potential for interest rates to change, which can
cause fluctuations in the value of investments. To the extent that fluctuations
in interest rates cause the duration of assets and liabilities to differ, the
Company may have to sell assets prior to their maturity and realize losses.
Interest rate exposure for the investment portfolio is managed through
asset/liability management techniques which attempt to match the duration of the
assets with the estimated duration of the liabilities. The Company also utilizes
derivative investment contracts to manage interest rate risk.
The potential also exists for changes in the legal or regulatory
environment in which the Company operates, which can create additional costs and
expenses not anticipated by the Company in pricing its products. In other words,
regulatory initiatives or new legal theories may create costs for the Company
beyond those recorded in the financial statements. The Company mitigates this
risk by operating in a geographically diverse area, which reduces its exposure
to any single jurisdiction, closely monitoring the
F-18
<PAGE> 87
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
regulatory environment to anticipate changes and by using underwriting practices
which identify and minimize the potential adverse impact of this risk.
Default risk is the risk that issuers of securities owned by the Company
may default or that other parties, including reinsurers, may not be able to pay
amounts due the Company. The Company attempts to minimize this risk by adhering
to a conservative investment strategy, holding a well diversified portfolio of
assets to minimize concentrations, maintaining sound reinsurance and credit and
collection policies and providing allowances or reserves for any amounts deemed
uncollectible.
(2) INVESTMENTS
The Company's investments classified as available-for-sale securities at
December 31, 1999 and 1998, are summarized as follows:
<TABLE>
<CAPTION>
1999
-----------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED COST GAINS LOSSES FAIR VALUE
-------------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities available-for-sale:
Corporate bonds............................. $3,904,184 $ 18,332 $212,372 $3,710,144
U. S. government bonds...................... 360,808 44 11,679 349,173
State and political subdivisions............ 47,208 -- 1,761 45,447
Foreign government bonds.................... 157,460 6,078 4,175 159,363
Asset-backed bonds.......................... 660,399 32 47,899 612,532
Mortgage-backed securities.................. 1,608,846 3,382 58,780 1,553,448
Redeemable preferred stock.................. 267,795 5,144 22,095 250,844
---------- -------- -------- ----------
$7,006,700 $ 33,012 $358,761 $6,680,951
========== ======== ======== ==========
Equity securities available-for-sale.......... $ 13,440 $ 1,735 $ 590 $ 14,585
========== ======== ======== ==========
Short-term investments Available-for-sale..... $ 155 $ -- $ -- $ 155
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED COST GAINS LOSSES FAIR VALUE
-------------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities available-for-sale:
Corporate bonds............................. $3,405,967 $121,783 $ 21,032 $3,506,718
U. S. government bonds...................... 73,661 2,639 12 76,288
State and political subdivisions............ 47,347 2,134 -- 49,481
Asset-backed bonds.......................... 130,557 6,455 8,218 128,794
Foreign government bonds.................... 726,991 5,382 17,258 715,115
Mortgage-backed securities.................. 2,141,129 29,595 1,719 2,169,005
Redeemable preferred stock.................. 105,843 2,613 7,313 101,143
---------- -------- -------- ----------
$6,631,495 $170,601 $ 55,552 $6,746,544
========== ======== ======== ==========
Equity securities available-for-sale.......... $ 48,321 $ 1,690 $ 16,951 $ 33,060
========== ======== ======== ==========
Short-term investments Available-for-sale..... $ 22,428 $ -- $ -- $ 22,428
========== ======== ======== ==========
</TABLE>
F-19
<PAGE> 88
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and estimated fair value of investments in fixed
maturity securities at December 31, 1999, are summarized by stated maturity as
follows:
<TABLE>
<CAPTION>
AMORTIZED COST FAIR VALUE
-------------- ----------
(in thousands)
<S> <C> <C>
Fixed maturities available-for-sale
Due in 2000.............................................. $ 96,137 $ 96,420
Due in 2001 -- 2005...................................... 1,904,087 1,849,422
Due after 2006-2010...................................... 1,961,843 1,833,885
Due after 2010........................................... 1,435,787 1,347,776
Mortgage-backed securities................................. 1,608,846 1,553,448
---------- ----------
$7,006,700 $6,680,951
========== ==========
</TABLE>
The foregoing data is based on the stated maturities of the securities.
Actual maturities will differ for some securities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
The ratings of the Company's fixed maturity securities at December 31, 1999
are summarized as follows (in thousands):
<TABLE>
<S> <C>
Treasuries and AAA...................................... $2,473,459
AA...................................................... 451,471
A....................................................... 1,633,532
BBB..................................................... 1,596,128
BB...................................................... 366,852
Less than BB............................................ 159,509
----------
$6,680,951
==========
</TABLE>
Ratings are those assigned primarily by Standard & Poor's when available,
with remaining ratings as assigned by Moody's and converted to a generally
comparable Standard & Poor's rating. Bonds not rated by either organization are
included based on the rating prescribed by the Securities Valuation Office of
the National Association of Insurance Commissioners (NAIC). NAIC Class 1 is
considered equivalent to an A or higher rating; Class 2, BBB; Class 3, BB; and
Classes 4-6, less than BB.
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Fixed maturity securities............................ $490,123 $456,174 $185,433
Equity securities.................................... 821 1,340 2,118
Loans................................................ 58,090 42,836 30,435
Real estate.......................................... 1,528 4,695 2,054
Policy loans......................................... 6,580 6,632 5,215
Other................................................ 8,791 2,874 11,447
-------- -------- --------
Gross investment income.............................. 565,933 514,551 236,702
Investment expenses.................................. 8,425 9,383 9,792
-------- -------- --------
Net investment income................................ $557,508 $505,168 $226,910
======== ======== ========
</TABLE>
F-20
<PAGE> 89
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investment expenses include depreciation on real estate of none, $0.9
million and $0.3 million in the years ended December 31, 1999, 1998, and 1997,
respectively.
Realized gains and losses on investments and provisions for loan losses are
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
-------- -------- -------
(in thousands)
<S> <C> <C> <C>
Securities available-for-sale
Fixed maturity securities
Gross realized gains............................. $ 57,194 $ 45,897 $15,862
Gross realized losses............................ (44,944) (32,003) (9,335)
Equity securities
Gross realized gains............................. 3,841 7,800 3,670
Gross realized losses............................ (19,296) (7,771) (57)
Other investments..................................... 1,342 (2,421) 6,307
Provision for loan losses............................. 4,397 (10,374) (4,568)
-------- -------- -------
$ 2,534 $ 1,128 $11,879
======== ======== =======
</TABLE>
The unrealized appreciation on securities available-for-sale is reported as
a separate component of members' equity, reduced by adjustments to deferred
acquisition costs, VOBA, and a provision for deferred income taxes.
A summary of the components of the net unrealized appreciation on invested
assets carried at fair value is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Unrealized appreciation:
Fixed maturity securities......................... $(283,908) $105,186 $117,797
Equity securities................................. 1,145 (15,261) 1,218
Other investments................................. (76) 674 304
Closed Block investments.......................... (46,045) 42,332 48,090
Deferred policy acquisition costs and VOBA.......... 119,961 (82,286) (83,426)
Deferred income taxes............................... 72,959 (22,464) (29,279)
Minority interest................................... 57,336 (11,852) (27,851)
--------- -------- --------
$ (78,628) $ 16,329 $ 26,853
========= ======== ========
</TABLE>
The approximate change in unrealized appreciation on fixed maturity
securities was a decrease of $389 million, a decrease of $13 million, and an
increase of $42 million for the years ended December 31, 1999, 1998, and 1997,
respectively; the corresponding amounts for equity securities were a $16 million
increase, a $16 million decrease, and a $3 million decrease, respectively.
At December 31, 1999 investments in fixed maturity securities with a
carrying amount of $26.3 million were on deposit with state insurance
departments to satisfy regulatory requirements.
No investment in any person or its affiliates exceeded 10% of members'
equity at December 31, 1999.
F-21
<PAGE> 90
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) LOANS
Loans consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Single-family real estate................................... $169,525 $187,080
Multi-family real estate.................................... 4,980 26,855
Commercial real estate...................................... 452,149 398,394
Real estate contracts....................................... -- 6,215
Commercial.................................................. 309 41,487
-------- --------
626,963 660,031
Allowance for credit losses................................. (18,046) (22,299)
-------- --------
Loans, net.................................................. $608,917 $637,732
======== ========
</TABLE>
The Company manages its credit risk associated with these loans by
diversifying its mortgage portfolio by property type and geographic location and
by seeking favorable loan to value ratios on secured properties. The states with
the highest concentration of mortgage loans were Florida, Texas, and Tennessee
with principal balances of $93.6 million, $84.5 million and $38.4 million,
respectively.
At December 31, 1999 and 1998, the Company's investment in loans included
$4.4 million and $15.4 million, respectively, in loans that were considered to
be impaired, for which the related allowance for credit losses was $1.9 million
and $4.0 million, respectively. The average recorded investment in impaired
loans during the years ended December 31, 1999 and 1998 was $11.1 million and
$18.9 million, respectively. For the years ended December 31, 1999 and 1998, the
Company recorded $2.1 million and $0.3 million, respectively, in interest income
on those impaired loans.
The amounts the Company will ultimately realize from these loans could
differ materially from their carrying values because of future developments
affecting the underlying collateral or the borrower's ability to repay the
loans. As of December 31, 1999, there were no material commitments to lend
additional funds to customers whose loans were classified as nonaccrual or
restructured.
No mortgage loan on any one individual property exceeded $13 million at
December 31, 1999.
Changes in the allowance for loan losses, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year............................ $22,299 $15,284 $11,622
Charge offs, net of recoveries.......................... 144 (2,259) (855)
Write down on loans sold/transferred to real estate..... -- (1,100) (51)
Provision for loan losses............................... (4,397) 10,374 4,568
------- ------- -------
Balance at end of year.................................. $18,046 $22,299 $15,284
======= ======= =======
</TABLE>
Write downs on loans sold or transferred to real estate fluctuate between
periods in relation to foreclosure activity and the related underlying
collateral values.
As of December 31, 1999 and 1998, the Company was servicing loans for
others totaling approximately $349.9 million and $399.9 million, respectively.
Servicing loans for others generally consists
F-22
<PAGE> 91
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of collecting loan payments, maintaining escrow accounts, disbursing payments to
investors, and foreclosure processing. Loan servicing income is recorded on the
accrual basis and includes servicing fees from investors. The Company carries
fidelity and mortgage interest insurance coverages sufficient to meet secondary
market requirements.
Changes in servicing rights were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1999 1998
------- ------
(in thousands)
<S> <C> <C>
Balance at beginning of period.............................. $ 1,511 $ --
Transfer from discontinued operations....................... -- 2,031
Amortization................................................ (1,026) (520)
------- ------
Balance prior to valuation allowance........................ 485 1,511
Less valuation allowance.................................... -- (103)
------- ------
Balance at end of year...................................... $ 485 $1,408
======= ======
</TABLE>
Servicing assets are reported on the balance sheet line item "Other
Assets." Approximately $2.0 million of servicing rights were transferred from
the bank operating segment to the finance company immediately prior to the sale
of the bank operating segment.
(4) DEFERRED POLICY ACQUISITION COSTS
A summary of the policy acquisition costs deferred and amortized are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year......................... $319,774 $202,322 $171,957
Policy acquisition costs deferred.................... 153,254 144,734 51,351
Policy acquisition costs amortized................... (35,176) (27,282) (20,986)
-------- -------- --------
437,852 319,774 202,322
Unrealized (gain) loss on available-for-sale
securities......................................... 91,811 (73,744) (83,426)
-------- -------- --------
Balance at end of year............................... $529,663 $246,030 $118,896
======== ======== ========
</TABLE>
The components of the deferred policy acquisition costs are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Universal life insurance............................. $123,425 $116,734 $117,673
Annuity products..................................... 207,396 127,116 39,783
Participating traditional life insurance............. 84,265 58,402 36,006
Nonparticipating traditional life insurance.......... 22,766 17,522 8,860
437,852 319,774 202,322
Unrealized (gain) loss on available-for-sale
securities......................................... 91,811 (73,744) (83,426)
-------- -------- --------
$529,663 $246,030 $118,896
======== ======== ========
</TABLE>
Commissions represent approximately 79 percent of deferred policy
acquisition costs.
F-23
<PAGE> 92
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) VALUE OF BUSINESS ACQUIRED
A summary of VOBA established and amortized is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of the year..................... $233,082 $266,014 $ --
Value of business acquired during the year........... 1,914 -- 268,804
Amortization of VOBA asset........................... (32,604) (32,932) (2,790)
-------- -------- --------
202,392 233,082 266,014
Unrealized (gain) loss on available for-sale
securities......................................... 28,150 (8,542) --
-------- -------- --------
Balance at end of year............................... $230,542 $224,540 $266,014
======== ======== ========
</TABLE>
Amortization is recognized in proportion to expected future gross profits
over a 20 year period and is based on the average interest crediting rates which
range from 4.05% to 7.61% for 1999 and over the next five years. Interest
accrued on the unamortized VOBA amounted to $13.0 million and $14.6 million in
1999 and 1998, respectively, which is netted with the VOBA amortization expense.
The estimated amortization for the next five years is as follows:
<TABLE>
<S> <C>
2000....................................................... $36,468
2001....................................................... 32,855
2002....................................................... 28,119
2003....................................................... 23,472
2004....................................................... 18,116
</TABLE>
(6) NOTES, CONTRACTS PAYABLE AND CAPITAL SECURITIES
Notes and contracts payable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
TERMS AND DESCRIPTION 1999 1998
--------------------- -------- --------
(in thousands)
<S> <C> <C>
Federal Home Loan Bank community investment long-term
advances with a weighted-average interest rate of 6.29%
and 6.34% at December 31, 1999 and 1998, respectively,
maturing at various dates through January 2014(A)......... $ 16,088 $ 16,051
Senior notes bearing interest at 6.95% due June 2005........ 125,000 125,000
Notes payable to banks and insurance companies; interest
rates ranging from 6.50% to 6.89% and 6.89% to 9.00% at
December 31, 1999 and 1998, respectively; principal and
interest due at various times through 2013; collateralized
by rental real estate with a depreciated cost of $24.3
million and $29.6 million, respectively................... 23,175 27,137
Revolving credit agreement(B)............................... 32,000 --
-------- --------
$196,263 $168,188
======== ========
</TABLE>
- ---------------
(A) AmerUs Life has multiple credit arrangements with the Federal Home Loan
Bank (FHLB). In addition to the long-term advances disclosed above, AmerUs
Life has a $25 million open secured line of credit and, periodically,
AmerUs Life borrows amounts under repurchase agreements, of which no amount
was outstanding under either type of facility at December 31, 1999. The
carrying
F-24
<PAGE> 93
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value of the securities pledged to the FHLB under all agreements was $17.7
million at December 31, 1999.
(B) AmerUs has a revolving credit agreement that provides for a maximum
borrowing of $150 million in 1999 with the balance maturing in October,
2002. The interest rate is variable, however, the Company may elect to fix
the rate for periods from 30 days to six months. The loan agreement
contains various financial and operating covenants which, among other
things, limit future indebtedness and restrict amount of future dividend
payments.
Capital securities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
AmerUs Capital I 8.85% Capital Securities Series A due
February 1, 2007(A)....................................... $ 68,900 $ 68,900
AmerUs Capital II 7.00% Adjustable Conversion-rate Equity
Security Units due July 27, 2003(B)....................... 128,791 130,729
-------- --------
$197,691 $199,629
======== ========
</TABLE>
- ---------------
(A) The Capital Securities were issued through a wholly owned subsidiary trust,
AmerUs Capital I. The sole asset of the trust is the junior subordinated
debentures of AmerUs in the principal amount of $88.66 million with
interest at 8.85% maturing February 1, 2027. AmerUs has fully and
unconditionally guaranteed the obligation of the trust under the Capital
Securities and is obligated to mandatorily redeem the securities on
February 1, 2027. AmerUs may prepay the securities at any time after
February 1, 2007.
(B) The Adjustable Conversion-rate Equity Security Units were issued through a
wholly owned subsidiary trust, AmerUs Capital II. Each unit consists of a
forward common stock purchase contract for a share at a price of $31.5625
per share on July 27, 2001, and a quarterly income preferred security
bearing interest at 6.86% and due July 27, 2003. AmerUs repurchased 451,000
units on December 31, 1998 at an average unit price of $22.89. On September
10, 1999, AmerUs repurchased 61,400 units at an average unit price of
$24.80. These transactions resulted in gains of $1.7 million and $0.2
million, net of minority interest, respectively, which have been reflected
as additions to paid-in capital as the gains are primarily attributable to
the change in value of the forward common stock purchase contract. AmerUs
is obligated to mandatorily redeem the capital securities on July 27, 2003.
At December 31, 1999, 4,080,500 units were outstanding.
Aggregate maturities of notes, contracts payable, and capital securities
for the next five years and thereafter are as follows (in thousands):
<TABLE>
<S> <C>
2000...................................................... $ 3,217
2001...................................................... 3,247
2002...................................................... 35,280
2003...................................................... 132,105
2004...................................................... 3,351
Thereafter................................................ 216,754
--------
$393,954
========
</TABLE>
F-25
<PAGE> 94
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest expense on the debt and capital securities totaled $29.0 million,
$27.8 million, and $16.9 million in the years ended December 31, 1999, 1998, and
1997, respectively.
(7) INCOME TAXES
Comprehensive income tax expense is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
-------- -------- -------
(in thousands)
<S> <C> <C> <C>
Income tax expense (benefit)
Continued operations................................ $ 32,788 $ 24,792 $19,362
Discontinued operations............................. 2,631 20,981 10,565
Other comprehensive income.......................... (87,594) (15,635) 12,739
-------- -------- -------
$(52,175) $ 30,138 $42,666
======== ======== =======
</TABLE>
The effective income tax rate on pre-tax income varies from the prevailing
corporate federal income tax rate and is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Corporate federal income tax rate........................... 35.00% 35.00% 35.00%
Acquisitions costs and reorganization expenses.............. 2.59 -- --
Net benefit of tax credits.................................. (6.38) (7.18) (9.51)
Goodwill amortization....................................... 2.72 3.27 0.09
Other items, net............................................ 0.43 (0.65) 0.22
----- ----- -----
34.36% 30.44% 25.80%
===== ===== =====
</TABLE>
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Current................................................. $18,383 $26,847 $18,308
Deferred................................................ 14,405 (2,055) 1,054
------- ------- -------
Total income tax expense...................... $32,788 $24,792 $19,362
======= ======= =======
</TABLE>
F-26
<PAGE> 95
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of net deferred income tax assets (liabilities)
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
Deferred income tax assets:
Policy reserves and policyholder funds.................... $ 292,533 $ 248,011
Policy acquisition costs capitalized for tax.............. 49,188 14,920
Deferred policy acquisition costs related to unrealized
appreciation........................................... -- 23,953
Net unrealized depreciation on available-for-sale
securities........................................... 114,945 --
Deferred compensation..................................... 9,955 16,508
Credit carryover.......................................... 14,412 --
Other invested assets..................................... 1,897 --
Other..................................................... 22,031 34,561
--------- ---------
Total gross deferred income tax asset............. 504,961 337,953
--------- ---------
Deferred income tax liabilities:
Deferred policy acquisition costs......................... (182,489) (123,205)
Net unrealized appreciation on available-for-sale
securities............................................. -- (71,854)
Deferred policy acquisition costs related to net
unrealized depreciation................................ (41,986) --
Reinsurance receivable.................................... (113,521) (50,743)
Value of business acquired................................ (70,837) (81,579)
Other..................................................... (18,682) (18,076)
--------- ---------
Total gross deferred tax liability................ (427,515) (345,457)
--------- ---------
Net deferred income tax asset (liability)................. $ 77,446 $ (7,504)
========= =========
</TABLE>
The Company is required to establish a "valuation allowance" for any
portion of the deferred tax asset that management believes will not be realized.
In the opinion of management, it is more likely than not that it will realize
the benefit of the deferred tax assets, and, therefore, no such valuation
allowance has been established.
Federal income tax returns for the Company for years through 1992 are
closed to further assessment of taxes. The Internal Revenue Service is examining
federal income tax returns of the Company for 1993 through 1996. Management
believes adequate provisions have been made for any additional taxes which may
become due with respect to open years.
(8) EMPLOYEE BENEFIT PLANS
Defined Benefit Plans
The Company had a defined benefit pension plan which covered substantially
all of the Company's employees. The plans provided for benefits based upon years
of service and the employee's compensation. The Company froze the defined
benefit pension plan effective December 31, 1995. Effective January 1,
F-27
<PAGE> 96
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996, the defined benefit pension plan was replaced by a defined contribution
savings and retirement plan which also replaced the Company's defined
contribution pension plans.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 42,202 $ 40,865
Interest cost............................................. 2,690 2,916
Amendments................................................ 1,141 799
Actuarial (gain) loss..................................... (3,987) 627
Settlements............................................... 632 --
Actual benefits paid...................................... (10,640) (3,005)
-------- --------
Benefit obligation at end of year......................... $ 32,038 $ 42,202
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year............ $ 43,591 $ 43,392
Actual return on plan assets.............................. (2,399) 3,250
Company contribution...................................... 5,898 348
Benefits paid and transfers............................... (10,640) (3,399)
-------- --------
Fair value of plan assets at end of year.................. $ 36,450 $ 43,591
======== ========
Reconciliation of funded status:
Accumulated benefit obligation............................ $(32,038) $(42,202)
Projected benefit obligation.............................. (32,038) (42,202)
Market value of plan assets............................... 36,450 43,591
-------- --------
Funded status............................................. 4,412 1,389
Unrecognized transition obligation........................ (16) (55)
Unrecognized prior service cost........................... 421 248
Unrecognized net loss..................................... 1,122 812
-------- --------
Prepaid benefit cost...................................... $ 5,939 $ 2,394
======== ========
Amounts recognized in the consolidated balance sheet consist
of:
Liabilities:
Accrued pension........................................ $ (3,374) $ (7,158)
Additional minimum liability........................... -- (1,898)
-------- --------
Total accrued pension liability................... $ (3,374) $ (9,056)
======== ========
Assets:
Prepaid pension costs.................................. $ 9,313 $ 9,312
Intangible asset....................................... -- 420
-------- --------
Total assets...................................... $ 9,313 $ 9,732
======== ========
</TABLE>
F-28
<PAGE> 97
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1999 1998
------ ------
(in thousands)
<S> <C> <C>
Other comprehensive income
Accumulated other comprehensive income.................... $ -- $1,718
Prepaid pension cost...................................... 5,939 2,394
Weighted-average assumptions as of end of year
Discounted rate........................................... 8.00% 6.75%
Expected return on plan assets............................ 8.00% 8.00%
Rate of compensation increase............................. NA NA
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost........................................... $ -- $ -- $ 784
Interest cost.......................................... 2,690 2,916 3,457
Expected return on plan assets......................... (3,368) (3,463) (4,006)
Amortization of transition obligation.................. (5) (6) (61)
Amortization of prior service cost..................... (32) 769 (30)
Recognized actuarial loss.............................. 27 40 22
------- ------- -------
Net periodic benefit cost.............................. (688) 256 166
Settlement cost........................................ 2,408 -- 141
------- ------- -------
Total expense.......................................... $ 1,720 $ 256 $ 307
======= ======= =======
</TABLE>
Defined Contribution Pension Plans
The Company has a defined contribution savings and retirement plan. Company
contributions are non-discretionary and consist of a matching contribution of an
amount equal to 125 percent of employee contributions, up to 4 percent of annual
employee compensation, and an annual contribution of an amount equal to 4
percent of annual employee compensation. Beginning in 1999, the Company uses a
combination of cash and AmerUs common stock for the annual contribution. The
shares for this purpose are provided by AmerUs' leveraged Employee Stock
Ownership Plan. Compensation expense for the employer match and annual
contribution amounted to $4.4 million, $3.3 million and $3.9 million in 1999,
1998 and 1997, respectively including $0.5 million of ESOP compensation expense
in 1999.
Leveraged Employee Stock Ownership Plan
In connection with the acquisition of AmVestors, AmerUs has a leveraged
Employee Stock Ownership Plan (ESOP) which was sponsored by AmVestors for all
AmVestors full-time employees with one year of service. The ESOP acquired
AmVestors stock, which was subsequently exchanged for AmerUs' stock, through the
proceeds of a note payable to American Investors Life Insurance Company, a
subsidiary of AmVestors. The note bears interest at 7.0% and is payable in
annual installments through December 30, 2002. The note had an unpaid principal
balance of $1.4 million and $1.8 million at December 31, 1999 and 1998,
respectively.
The Company makes annual contributions to the ESOP equal to the ESOP's debt
service less dividends received by the ESOP. All dividends received by the ESOP
are used to pay debt service. The ESOP shares initially were pledged as
collateral for its debt. As the debt is repaid, shares are released
F-29
<PAGE> 98
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
from collateral and allocated to active employees of the Company based on the
proportion of debt service paid in the year. Beginning in 1999, the released
shares are used to fund a portion of the Company's annual defined contribution
savings and retirement plan contribution.
AmerUs accounts for its ESOP in accordance with SOP 93-6. Accordingly, as
shares are released from collateral, compensation expense, or a reduction in the
annual defined contribution savings and retirement plan liability, is reported
equal to the current market price of the shares. ESOP compensation expense was
$0.5 million, $0.4 million and $0.3 million for the years ended December 31,
1999, 1998 and 1997, respectively.
The ESOP shares were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Allocated shares..................................... 169,439 148,336 152,149
Unallocated shares................................... 79,307 102,362 123,909
-------- -------- --------
Total ESOP shares.......................... 248,746 250,698 276,058
======== ======== ========
Fair market value of unallocated shares (in
thousands)......................................... $ 1,824 $ 2,250 $ 4,570
======== ======== ========
</TABLE>
Nonqualified Pension Plan
The Company has a nonqualified pension plan covering substantially all of
AmerUs Life's career and general agents. Accumulated benefits of the plan are
unfunded and have been included in other liabilities at December 31, 1999 and
1998 amounting to $21.2 million, and $16.9 million, respectively. Total
nonqualified pension expense amounted to $0.9 million, $0.5 million and $0.7
million in 1999, 1998 and 1997, respectively.
F-30
<PAGE> 99
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postretirement Plans
The Company has postretirement benefit plans which provide eligible
participants and dependents with certain medical, dental and life insurance
benefits.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------- -------
(in thousands)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 7,585 $ 8,918
Service cost.............................................. 166 268
Interest cost............................................. 481 536
Plan participants' contributions.......................... 58 52
Actuarial (gain).......................................... (964) (519)
Settlements............................................... -- (904)
Actual benefits paid...................................... (651) (766)
------- -------
Benefit obligation at end of year......................... $ 6,675 $ 7,585
======= =======
Change in plan assets:
Fair value of plan assets at beginning of year............ $ -- $ --
Company contribution...................................... 593 714
Plan participant contribution............................. 58 52
Benefits paid............................................. (651) (766)
------- -------
Fair value of plan assets at end of year.................. $ -- $ --
======= =======
Reconciliation of funded status:
Accumulated postretirement benefit obligation............. $(6,675) $(7,585)
Market value of plan assets............................... -- --
------- -------
Funded status............................................. (6,675) (7,585)
Unrecognized prior service cost........................... 740 823
Unrecognized net (gain)................................... (2,723) (1,470)
------- -------
Accrued benefit cost...................................... $(8,658) $(8,232)
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1999 1998
---- ----
<S> <C> <C>
Weighted-average assumptions as of end of year:
Discount rate............................................. 8.00% 6.75%
Initial weighted health care cost trend rate.............. 7.20% 7.50%
Ultimate health care cost trend rate...................... 5.00% 5.00%
</TABLE>
F-31
<PAGE> 100
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998 1997
---- ----- ----
(in thousands)
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost.............................................. $166 $ 268 $363
Interest cost............................................. 481 536 592
Amortization of prior service cost........................ 83 83 83
Recognized actuarial loss................................. (68) (62) (59)
---- ----- ----
Net periodic benefit cost................................. 662 825 979
Settlement (gain)......................................... -- (904) --
---- ----- ----
Total (income) expense.................................... $662 $ (79) $979
==== ===== ====
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in the
assumed health care cost trend rates would have the following effects in 1999:
<TABLE>
<CAPTION>
1% POINT 1% POINT
INCREASE DECREASE
-------- --------
(in thousands)
<S> <C> <C>
Effect on total of service and interest cost components..... $ 4.3 $ (6.3)
Effect on postretirement benefit obligation................. $46.4 $(48.6)
</TABLE>
(9) REINSURANCE
At December 31, 1999, the Company's maximum retention limit for acceptance
of risk on life insurance was $1 million. The Company has indemnity reinsurance
agreements with various companies whereby life insurance in excess of its
retention limits are reinsured. Insurance in force ceded to nonaffiliated
companies under risk sharing arrangements at December 31, 1999, 1998, and 1997,
totaled approximately $5,616 million, $3,779 million, and $4,102 million,
respectively.
In January, 2000, the Company's maximum retention limit was reduced to $0.1
million for the majority of policies issued since July 1, 1996 and for the
majority of new business going forward.
Net premiums and amounts earned were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
-------- ------- -------
(in thousands)
<S> <C> <C> <C>
Direct premiums and amounts assessed against
policyholders........................................ $101,622 $89,848 $56,307
Reinsurance assumed.................................... 1,750 1,036 1,375
Reinsurance ceded...................................... (13,851) (9,687) (9,555)
-------- ------- -------
Net premiums and amounts earned........................ $ 89,521 $81,197 $48,127
======== ======= =======
</TABLE>
At December 31, 1999 and 1998, the Company reinsured 25% and 39%,
respectively, of its equity index annuity reserves amounting to $108.6 million
and $92.6 million, respectively, with an unaffiliated reinsurer. As of the same
dates, the Company also reinsured approximately 1% in each year of its deferred
annuity reserves amounting to $44.2 million and $59.3 million, respectively,
with an unaffiliated reinsurer.
In the third quarter of 1999, the Company entered into a reinsurance
agreement for the assumption of a block of equity-index annuities of its joint
venture partner, AVLIC. The Company received assets of
F-32
<PAGE> 101
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $57 million and assumed liabilities of approximately $59 million.
A value of business acquired asset of approximately $2 million was recorded in
connection with this transaction.
The Company is contingently liable for the portion of the policies
reinsured under each of its existing reinsurance agreements in the event the
reinsurance companies are unable to pay their portion of any reinsured claim.
Management believes that any liability from this contingency is unlikely.
However, to limit the possibility of such losses, the Company evaluates the
financial condition of its reinsurers and monitors concentration of credit risk.
(10) COMMITMENTS AND CONTINGENCIES
AMHC has provided a $0.5 million guarantee to an Iowa non-profit
corporation under normal commercial terms as of December 31, 1999.
AmerUs has entered into agreements with various partnerships in which a
subsidiary of AMHC has an interest. Pursuant to these agreements AmerUs is
obligated to make future capital contributions to the partnerships of up to
$58.3 million at December 31, 1999.
The Company has agreed to loan up to $6.9 million to newly formed
partnerships.
The Company is party to financial instruments in the normal course of
business to meet the financing needs of its customers having risk exposure not
reflected in the balance sheet. These financial instruments include commitments
to extend credit, guarantees, and standby letters of credit. Commitments to
extend credit are agreements to lend to customers. Commitments generally have
fixed expiration dates and may require payment of a fee. Since many commitments
expire without being drawn upon, the total amount of commitments does not
necessarily represent future cash requirements. The Company has also guaranteed
two loans for a fee. At December 31, 1999, outstanding commitments to extend
credit totaled approximately $25.7 million and loan guarantees totaled
approximately $6.6 million.
AmerUs has an agreement with Bank One, N.A. whereby AmerUs guarantees the
payment of loans made to certain of AmerUs' managers and executives for the
purpose of purchasing AmerUs Common Stock and ACES pursuant to the Stock
Purchase Program. The liability of AmerUs in respect of the principal amount of
loans is limited to $25 million. AmerUs has also guaranteed interest and all
other fees and obligations owing on the loans. Each participant in the program
has agreed to repay AmerUs for any amounts paid by AmerUs under the guarantee in
accordance with a reimbursement agreement entered into between the participants
and AmerUs.
AmerUs Life and its joint venture partner are contingently liable in the
event the joint venture, Ameritas Variable Life Insurance Company (AVLIC),
cannot meet its policyholder obligations. At December 31, 1999, AVLIC had
statutory assets of $2,559.1 million, liabilities of $2,517.5 million, and a
surplus of $41.6 million.
In the ordinary course of business, the Company and its subsidiaries are
also engaged in certain other litigation, none of which management believes is
material to the Company's results of operations.
(11) MEMBERS' EQUITY
Life Insurance Regulation
Generally, the members' equity of the AmerUs' insurance subsidiaries
available for distribution to AmerUs is limited to the amounts that the
insurance subsidiaries' net assets, as determined in accordance with statutory
accounting practices, exceeds minimum statutory and risk based capital
requirements; however, payments of such amounts as dividends may be subject to
approval by regulatory authorities. In
F-33
<PAGE> 102
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000, the Company's insurance subsidiaries can distribute approximately $61.1
million in the form of dividends to AmerUs without prior approval of such
regulatory authorities.
(12) STOCK BASED COMPENSATION
Stock Option Plans
AmerUs has two stock incentive plans authorizing the issuance of incentive
and non-qualified stock options to employees, officers, and non-employee
directors of the Company. AmerUs has reserved 1,400,000 shares and 150,000
shares of Class A Common Stock for issuance under these plans.
In conjunction with the acquisition of AmVestors, AmerUs has two additional
plans in which no additional shares may be granted. They are a non-qualified
stock plan and an incentive stock option plan.
The Company also has a non-employee stock option plan authorizing the
issuance of stock options or SARs to insurance agents and other non-employees of
the Company. The Company has reserved 100,000 shares of Class A Common stock for
issuance under this plan. The terms and conditions under this plan are the same
as under the employee stock incentive plans.
The option price per share under all plans may not be less than the fair
value of AmerUs' common stock on the date of grant and the term of the option
may not be longer than ten years. Generally, all options have a three year
vesting schedule with one-third of the options granted vesting at the end of
each of the three years.
A summary of AmerUs' stock option plan follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
year......................... 1,327,473 $25.02 1,485,709 $23.57 -- $ --
Granted at market price........ 275,750 21.61 163,550 31.19 684,000 28.09
Conversion of AmVestors stock
options...................... -- -- -- -- 801,709 19.72
Exercised...................... (10,442) 19.15 (268,786) 20.51 -- --
Forfeited...................... (83,017) 28.04 (53,000) 28.19 -- --
--------- ------ --------- ------ --------- ------
Outstanding, end of year....... 1,509,764 $24.27 1,327,473 $25.02 1,485,709 $23.57
========= ====== ========= ====== ========= ======
Exercisable, end of year....... 940,543 $23.62 700,381 $22.03 801,709 $19.72
========= ====== ========= ====== ========= ======
</TABLE>
F-34
<PAGE> 103
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
under AmerUs' option plans as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- -----------------------------------------------------------------------------------------------
REMAINING WEIGHTED AVERAGE WEIGHTED
OPTIONS CONTRACTUAL LIFE AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING IN YEARS EXERCISE PRICE
- ------------------------ ----------- ---------------- --------------
<S> <C> <C> <C>
$10.88-14.50.................................. 13,448 4.9 $13.01
14.51-18.12.................................. 105,225 4.3 15.17
18.13-21.75.................................. 417,954 7.2 19.66
21.76-23.37.................................. 243,604 5.1 23.35
23.38-29.00.................................. 590,333 7.5 27.88
29.01-32.62.................................. 99,200 8.5 31.19
32.63-36.25.................................. 40,000 8.0 35.63
--------- --- ------
1,509,764 6.9 $24.27
========= === ======
</TABLE>
The following table summarizes information about stock options exercisable
under AmerUs' option plans as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------------------
WEIGHTED
OPTIONS AVERAGE
RANGE OF EXERCISE PRICES EXERCISABLE EXERCISE PRICE
- ------------------------ ----------- --------------
<S> <C> <C>
$10.88-14.50................................................ 13,448 $13.01
14.51-18.12................................................ 105,225 15.17
18.13-21.75................................................ 240,541 19.12
21.76-23.37................................................ 133,082 23.24
23.38-29.00................................................ 394,833 27.88
29.01-32.62................................................ 33,409 31.19
32.63-36.25................................................ 20,005 35.42
------- ------
940,543 $23.62
======= ======
</TABLE>
The estimated weighted fair value of options granted in 1999, 1998, and
1997 was $9.63, $13.03, and $11.68 per share, respectively. AmerUs applies APB
Opinion 25 and related Interpretations in accounting for its stock option plans.
Accordingly, no compensation expense has been recognized for its option plans.
Had compensation expense for the AmerUs option plans been determined based on
the fair value at the grant dates for awards under those plans consistent with
the method prescribed by SFAS 123, the Company's net earnings for the years
ended December 31, 1999, 1998, and 1997 would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------- -------- -------
(in thousands)
<S> <C> <C> <C>
Net earnings:
As reported.......................................... $38,436 $103,499 $54,434
Pro forma............................................ 37,164 102,486 53,929
</TABLE>
F-35
<PAGE> 104
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of options granted was estimated on the date of grant using
the Black-Scholes pricing model with an expected life equal to the contractual
expiration and the following weighted average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Expected volatility....................................... 37.00% 25.00% 25.00%
Risk free interest rate................................... 5.39 5.69 6.29
Dividend yield............................................ 1.86 1.26 1.43
</TABLE>
Restricted Stock
AmerUs has awarded common stock to eligible employees and non-employee
directors under the two stock incentive plans. The plans have restriction
periods of two to three years tied to employment and/or service. A portion of
the awards were recorded at the market value on the date of the grant as
unearned compensation since common shares were legally issued on that date. The
initial values of these grants are amortized over the restriction periods, net
of forfeitures. The remaining awards, for which common shares will not be issued
until the end of the restriction period, are being accrued net of forfeitures
over the required service period at the market value on the date of issuance.
Restricted stock and compensation expense information is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998 1997
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year......... 17,899 $31.07 -- $ -- -- $ --
Granted at market price................ 18,946 23.01 19,949 31.17 -- --
Exercised.............................. -- -- -- -- -- --
Forfeited.............................. (600) 31.56 (2,050) 31.56 -- --
------ ------ ------ ------ -- ----
Outstanding, end of year............... 36,245 $26.85 17,899 $31.07 -- $ --
====== ====== ====== ====== == ====
Compensation expense (in thousands).... $ 335 $ 264 $ --
====== ====== ====
</TABLE>
Stock Appreciation Rights
As part of the stock incentive plans and the non-employee stock option
plan, the Board of Directors is authorized to grant stock appreciation rights
(SARs) to employees and officers in tandem with stock options. A SAR can be
exercised only to the extent the option with respect to which it is granted is
not
F-36
<PAGE> 105
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exercised, and is subject to the same terms and conditions as the option to
which it relates. Issuance of SARs is made at the sole discretion of the Board
of Directors. AmerUs' SARs are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998 1997
----------------- ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Rights outstanding, beginning
of year..................... -- $ -- 81,024 $21.94 -- $ --
Granted at market price....... 13,500 23.31 -- -- -- --
Conversion of AmVestors
rights...................... -- -- -- -- 81,024 21.94
Exercise of rights............ -- -- (81,024) 21.94 -- $ --
------ ------ ------- ------ ------ ------
Rights outstanding, end of
year........................ 13,500 $23.31 -- $ -- 81,024 21.94
====== ====== ======= ====== ====== ======
Compensation expense (in
thousands).................. $ -- $ -- $ --
====== ====== ======
</TABLE>
Stock Warrants
In conjunction with the acquisition of AmVestors, Life has outstanding
warrants to purchase shares of AmerUs' Class A Common stock. AmerUs' stock
warrant activity is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Warrants outstanding, beginning of year.............. 473,596 477,770 --
Acquisition of AmVestors warrants.................... -- -- 477,770
Exercise of warrants................................. -- (4,174) --
-------- -------- --------
Warrants outstanding, end of year.................... 473,596 473,596 477,770
======== ======== ========
Compensation expense (in thousands).................. $ -- $ -- $ --
======== ======== ========
</TABLE>
The remaining warrants are exercisable at $24.42 per share and expire on
April 2, 2002.
(13) STATUTORY ACCOUNTING PRACTICES
The Company's insurance subsidiaries' statutory net income was $49.4
million, $61.0 million and $59.0 million in the years ended December 31, 1999,
1998 and 1997, respectively. The Company's insurance subsidiaries' statutory
surplus and capital was $444.6 million, $472.1 million and $577.3 million at
December 31, 1999, 1998 and 1997, respectively. The minimum capital and surplus
requirements in the states of Iowa and Kansas are $5.0 million and $1.2 million,
respectively.
The Company's insurance subsidiaries are domiciled in Iowa and Kansas and
prepare their statutory-basis financial statements in accordance with accounting
practices prescribed or permitted by those respective state insurance
departments. Prescribed statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the NAIC. Permitted statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state and may change
in the future. The NAIC has codified statutory accounting practices which are
expected to constitute the only source of prescribed statutory accounting
practices and are effective in 2001. Codification will change prescribed
statutory accounting practices and may result in changes to the accounting
practices that
F-37
<PAGE> 106
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
insurance enterprises use to prepare their statutory financial statements. The
Company is currently evaluating the impact of codification on its statutory
financial statements, however, the changes will not have a material impact on
statutory surplus.
The respective insurance departments impose minimum risk-based capital
(RBC) requirements on insurance enterprises that were developed by the NAIC. The
formulas for determining the amount of RBC specify various weighting factors
that are applied to financial balances or various levels of activity based on
the perceived degree of risk. Regulatory compliance is determined by a ratio
(the Ratio) of the enterprise's regulatory total adjusted capital, as defined by
the NAIC, to its authorized control level, RBC, as defined by the NAIC.
Enterprises below specific trigger points or ratios are classified within
certain levels, each of which requires specified corrective action. The life
insurance subsidiaries exceed the authorized control level RBC requirements in
each of the years since the inception of the RBC requirement in 1993.
(14) FINANCIAL INSTRUMENTS
The Company utilizes a variety of off balance sheet financial instruments
as part of its efforts to hedge and manage fluctuations in the market value of
its portfolio of securities available-for-sale, attributable to changes in
general interest rate levels, and to manage duration mismatch of assets and
liabilities. Those instruments include interest rate exchange agreements (swaps,
caps, and swaptions) and equity-indexed agreements (options) and involve
elements of credit and market risks in excess of the amounts recognized in the
accompanying financial statements at a given point in time. The contract or
notional amounts of those instruments reflect the extent of involvement in the
various types of financial instruments.
The Company's exposure to credit risk is the risk of loss from a
counterparty failing to perform according to the terms of the contract. That
exposure includes settlement risk (i.e., the risk that the counterparty defaults
after the Company has delivered funds or securities under terms of the
contract), which would result in an accounting loss, and replacement cost risk
(i.e., the cost to replace the contract at current market rates should the
counterparty default prior to settlement date). To limit exposure associated
with counterparty nonperformance on interest rate exchange agreements, the
Company enters into transactions with only highly rated counterparties.
The credit risk on all financial instruments, whether on or off the balance
sheet, is controlled through an ongoing credit review, approval, and monitoring
process. The Company determines, on an individual counterparty basis, the need
for collateral or other security to support financial instruments with credit
risk and establishes individual and aggregate counterparty exposure limits.
The Company's outstanding derivative positions shown in notional or
contract amounts, along with their carrying values and estimated fair values,
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
NOTIONAL CARRYING FAIR
AMOUNT VALUE VALUE
-------- -------------- --------
(in thousands)
<S> <C> <C> <C>
Interest rate caps................................. $ -- $ -- $ --
Interest rate swaps................................ 385,000 -- 3,336
Options............................................ 255,914 91,888 121,701
Futures............................................ -- -- --
-------- ------- --------
$640,914 $91,888 $125,037
======== ======= ========
</TABLE>
F-38
<PAGE> 107
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------
NOTIONAL FAIR
AMOUNT CARRYING VALUE VALUE
---------- -------------- -------
(in thousands)
<S> <C> <C> <C>
Interest rate caps................................ $1,050,000 $ 1,749 $ 457
Interest rate swaps............................... 200,000 -- (1,879)
Options........................................... 86,035 49,167 70,862
Futures........................................... -- -- (298)
---------- ------- -------
$1,336,035 $50,916 $69,142
========== ======= =======
</TABLE>
Interest Rate Exchange Agreements
The Company enters into interest rate exchange agreements to reduce and
manage interest rate risk associated with individual assets and liabilities and
its overall aggregate portfolio. Interest rate swap agreements, which expire in
2002, 2003 and 2004, generally involve the exchange of interest payments. The
interest rate cap agreements involve the payment of a maximum fixed interest
rate when an indexed rate exceeds that fixed rate. Swaption agreements involve
the right to enter into a swap transaction at a pre-specified price. These
agreements are used in conjunction with interest rate caps to protect against
rising rates. The amounts to be received or paid pursuant to those agreements
are accrued and recognized in the accompanying consolidated statements of income
through an adjustment to investment income over the life of the agreements. The
net effect on income from amortization and interest paid or received was a
decrease of $1.5 million, $0.8 million, and $0.5 million for the years ended
December 31, 1999, 1998, and 1997, respectively. Gains or losses realized on
closed or terminated agreements accounted for as hedges are deferred and
amortized to investment income on a constant yield basis over the shorter of the
life of the agreements or the expected remaining life of the underlying assets
or liabilities.
Equity-Indexed Agreements
The Company enters into financial agreements to manage the equity risk in
its equity-indexed annuities. Call options, which expire beginning in 2000
through 2009, are linked to the index in which the equity-indexed annuity
crediting rates are based. This allows the Company to participate in index
increases if the market advances as a hedge against the higher credited rates.
The amounts to be received or paid pursuant to these agreements are accrued and
recognized as an adjustment to income over the life of the agreements.
The following table shows unrealized gains and losses on derivative
positions:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------------------
TOTAL NET
NOTIONAL UNREALIZED UNREALIZED UNREALIZED
VALUE GAINS (LOSSES) GAINS (LOSSES)
-------- ---------- ---------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Interest rate caps....................... $ -- $ -- $ -- $ --
Interest rate swaps...................... 385,000 3,336 -- 3,336
Options.................................. 255,914 29,813 -- 29,813
Futures.................................. -- -- -- --
-------- ------- ------- -------
$640,914 $33,149 $ -- $33,149
======== ======= ======= =======
</TABLE>
F-39
<PAGE> 108
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------
TOTAL NET
NOTIONAL UNREALIZED UNREALIZED UNREALIZED
VALUE GAINS (LOSSES) GAINS (LOSSES)
---------- ---------- ---------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Interest rate caps..................... $1,050,000 $ -- $(1,292) $(1,292)
Interest rate swaps.................... 200,000 -- (1,879) (1,879)
Options................................ 86,035 21,695 -- 21,695
Futures................................ -- -- (298) (298)
---------- ------- ------- -------
$1,336,035 $21,695 $(3,469) $18,226
========== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE BY YEAR FOR DERIVATIVE PRODUCTS
-----------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
------- ------ ------- -------- -------- ------- ------- ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pay fixed swaps:
Notional amount..... $ -- $ -- $50,000 $150,000 $185,000 $ -- $ -- $ -- $ -- $ --
Weighted average:
Receive rate(A)..... 6.313% 6.313% 6.313% 6.339% 6.490% -- -- -- -- --
Pay rate(B)......... 6.258% 6.258% 6.258% 6.281% 6.407% -- -- -- -- --
Options:
Notional amount..... $79,524 $ -- $ -- $ 44,194 $ 53,205 $52,156 $12,200 $4,700 $3,830 $6,105
</TABLE>
- ---------------
(A) The actual variable rates in the agreements are based on a constant
maturity treasury (CMT) plus a spread and one-month LIBOR, and the table
assumes that such rates will remain constant at December 31, 1999, levels.
To the extent that actual rates change, the variable interest rate
information will change accordingly.
(B) The actual variable rates in the agreements are based on three-month LIBOR,
and the table assumes that such rates will remain constant at December 31,
1999, levels. To the extent that actual rates change, the variable interest
rate information will change accordingly.
(15) ACQUISITIONS
On October 23, 1997, AmerUs acquired all of the outstanding capital stock
of Delta in exchange for cash of approximately $165 million. The acquisition was
accounted for using the purchase method of accounting with goodwill of $69.4
million established which is being amortized on a straight-line basis over
thirty years. The operations of Delta for the period from October 23, 1997
through December 31, 1997 have been included in the 1997 consolidated statement
of operations of the Company.
On December 19, 1997, AmerUs acquired AmVestors in a stock exchange valued
at approximately $350 million. The acquisition was accounted for using the
purchase method of accounting with goodwill of $152.9 million established which
is being amortized on a straight-line basis over thirty years. The operations of
AmVestors for the period of December 19, 1997 through December 31, 1997 have
been included in the 1997 consolidated statement of operations of the Company.
F-40
<PAGE> 109
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth certain pro forma operating data of the
Company for the year ended December 31, 1997. This pro forma data assumes the
acquisitions of Delta and AmVestors occurred on January 1, 1997.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------
(in thousands)
<S> <C>
Pro forma operating data:
Total revenue............................................. $728,600
Net income................................................ $ 71,400
</TABLE>
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosures About Fair Values of Financial Instruments,"
requires disclosures of fair value information about financial instruments,
whether recognized or not recognized in a company's balance sheet, for which it
is practicable to estimate that value. In cases where quoted market prices are
not available, fair values are based on estimates using discounted cash flow or
other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rates and estimates of the amount and
timing of future cash flows. SFAS 107 excludes certain insurance liabilities and
other nonfinancial instruments from its disclosure requirements. The fair value
amounts presented herein do not include an amount for the value associated with
customer or agent relationships, the expected interest margin (interest earnings
over interest credited) to be earned in the future on investment-type products,
or other intangible items. Accordingly, the aggregate fair value amounts
presented herein do not necessarily represent the underlying value of the
Company; likewise, care should be exercised in deriving conclusions about the
Company's business or financial condition based on the fair value information
presented herein.
The Company closely monitors the level of its insurance liabilities, the
level of interest rates credited to its interest sensitive products and the
assumed interest margin provided for within the pricing structure of its other
products. Those amounts are taken into consideration in the Company's overall
management of interest rate risk that attempts to minimize exposure to changing
interest rates through the matching of investment maturities with amounts
expected to be due under insurance contracts. As such, the Company believes that
it has reduced the volatility inherent in its fair value adjusted stockholder's
equity, although such volatility will not be reduced completely. The Company has
used discount rates in the determination of fair values for its liabilities that
are consistent with market yields for related assets. The use of the asset
market yield is consistent with management's opinion that the risks inherent in
the Company's asset and liability portfolios are similar and the fact that fair
values for both assets and liabilities generally will react in much the same
manner during periods of interest rate changes. However, that assumption might
not result in fair values that are consistent with values obtained through an
actuarial appraisal of the Company's business or values that might arise in a
negotiated transaction.
The following presentation reflects fair values for those instruments
specifically covered by SFAS 107, along with fair value amounts for those
traditional insurance liabilities for which disclosure is permitted but not
required; the fair values for all other assets and liabilities have been
reported at their carrying amounts.
Valuation Methods and Assumptions
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
- Short-term investments and other investments: the carrying amounts for
these instruments approximate their fair values.
F-41
<PAGE> 110
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- Fixed maturities and equity securities: fair values for bonds are based
on quoted market prices or dealer quotes. If a quoted market price is not
available, fair value is estimated using values obtained from independent
pricing services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the investments.
The fair values for preferred and common stocks are based on quoted
market prices.
- Loans: for all performing fixed interest rate loans, the estimated net
cash flows to maturity were discounted to derive an estimated market
value. The discount rate used was based on the individual loan's
remaining weighted average life and a basis point spread based on the
market conditions for the type of loan and credit quality. These spreads
were over the December 31, 1998, United States Treasury yield curve.
Performing variable rate commercial loans and residential loans were
valued at the current outstanding balance. Loans which have been
restructured, in foreclosure, significantly delinquent, or are to
affiliates were valued primarily at the lower of the estimated net cash
flows to maturity discounted at a market rate of interest or the current
outstanding principal balance.
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, such as commercial, real estate,
and installment. The fair value of loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount rates
that reflect the credit and interest rate risk inherent in the loan. The
estimate of maturity is based on the historical experience with repayments for
each loan classification, modified, as required, by an estimate of the effect of
current economic and lending conditions. The effect of nonperforming loans is
considered in assessing the credit risk inherent in the fair value estimate.
- Loans held for sale: the fair value of loans held for sale is estimated
based on the fair value of recent and pending sales of loans with similar
characteristics.
- Hedging instruments: fair values for derivative securities are based on
pricing models or formulas using current assumptions and are classified
as other assets or other liabilities.
- Policy reserves: fair values of the Company's liabilities under contracts
not involving significant mortality or morbidity risks (annuities
primarily) are stated at the cost the Company would incur to extinguish
the liability; i.e., the cash surrender value.
- Notes payable, contracts payable, and capital securities: fair values for
notes payable and contracts payable and capital securities are estimated
using discounted cash flow analysis based on the Company's current
incremental borrowing rate for similar types of borrowing arrangements.
The carrying amounts of other financial assets, dividends payable to
policyowners and policy reserves, including significant mortality or morbidity
risks, approximate their fair values.
F-42
<PAGE> 111
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair values of the Company's significant financial
instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1999 1998
----------------------- -----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Securities available-for-sale:
Fixed maturity.................. $6,680,951 $6,680,951 $6,746,544 $6,746,544
Equity securities............... 14,585 14,585 33,060 33,060
Short-term investments.......... 155 155 22,428 22,428
Loans.............................. 608,917 632,833 637,732 688,135
Other investments, excluding
options......................... 200,605 200,605 179,661 179,661
Loans held for sale................ 12,882 13,315 83,329 83,605
Interest rate swaps:
Net receivable position......... -- 3,336 -- --
Net payable position............ -- -- -- (1,879)
Interest rate caps................. -- -- 1,749 457
Options............................ 91,888 121,701 49,167 70,862
Futures............................ -- -- -- (298)
Financial liabilities:
Policy reserves for annuities...... $6,264,417 $6,140,936 $6,203,214 $5,977,945
Debt and capital securities........ 393,954 393,954 367,817 367,817
</TABLE>
(17) DISCONTINUED OPERATIONS
In the first quarter of 1998, the Company began implementation of a plan
for the disposition of its residential real estate operating segment. This
operating segment consisted of four subsidiaries: AmerUs Mortgage, Inc. (AMI),
AmerUs Home Services (AHS), Sunset Homes, and AmerUs Land Development (ALD),
formerly known as Iowa Realty Development Company. In April 1998, the Company
ceased loan origination activity of AMI. In October 1998, the Company sold the
mortgage servicing rights of AMI and recorded an after tax gain of $1.7 million.
The Company plans to complete the sale of the remaining assets of AMI and has
recorded an estimated loss of $0.3 million on these assets. In May 1998, the
Company sold AHS and recorded an after tax gain of $19.1 million. The Company
plans to complete the liquidation of the Sunset Homes real estate inventory. No
loss is expected on the sale of this inventory. The Company plans to complete
the liquidation of the ALD real estate inventory and no loss is expected on the
sale of this inventory.
In July 1998, the Company completed the sale of its Bank operating segment
subsidiary, AmerUs Bank. The Company recorded an after tax gain of $54.1 million
on the sale.
The results of operations for the above subsidiaries have been classified
as discontinued operations and prior periods have been restated. Gains on sale
of discontinued operations, operating income and loss from
F-43
<PAGE> 112
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
discontinued operations, and the remaining assets and liabilities of the
discontinued segments are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------- -------
(in thousands)
<S> <C> <C> <C>
Gain on sale of AMI mortgage servicing rights, net of income
taxes of $1,052........................................... $ -- $ 1,720 $ --
Gain on sale of AHS, net of income taxes of $16,680......... -- 19,087 --
Gain on sale of AmerUs Bank, net of income taxes of
$5,142.................................................... -- 54,076 --
------ ------- -------
-- 74,883 --
------ ------- -------
Operating income (loss) from real estate operations, net of
income taxes of $2,631, $(1,277), and $2,144,
respectively.............................................. 3,911 (752) 1,377
Operating income (loss) from bank operations, net of income
taxes of none, $(711), and $8,421, respectively........... -- (372) 13,546
------ ------- -------
3,911 (1,124) 14,923
------ ------- -------
Income from discontinued operations.................... $3,911 $73,759 $14,923
====== ======= =======
</TABLE>
(18) REORGANIZATION
On December 20, 1999 the Company and AmerUs announced that their respective
boards of directors had approved plans for the demutualization of the Company
and the merger of AmerUs into the Company following the demutualization. Upon
completion of the demutualization, the Company would be a public company and
will change its name to AmerUs Group Co. (AmerUs Group). Members of the Company
will receive approximately 17 million shares of AmerUs Group and cash or policy
credits in excess of $300 million as a result of the demutualization.
Shareholders of AmerUs will receive shares in AmerUs Group in a one-for-one
exchange.
Approval for the demutualization and merger is needed from the members of
the Company; the Iowa Commissioner of Insurance and shareholders of AmerUs. The
Company expects to ask for approval of these transactions during the second
quarter of 2000.
(19) SUBSEQUENT EVENTS
On February 18, 2000, the Company, AmerUs, and ILICO Insurance Co. (ILICo)
entered into a definitive agreement for a combination of the companies. Under
these terms, the Company will proceed with its previously announced
demutualization. ILICo will demutualize separately and ILICo's members will
receive cash, policy credits and stock equivalents to the value of 11.25 million
shares of stock of AmerUs Group. Upon demutualization, ILICo will become a
subsidiary of AmerUs Group and will continue operations as a stock life
insurance company.
As part of the transaction, the Company made an initial investment of $100
million in a downstream holding company of ILICo on February 18, 2000.
ILICo is a 95-year-old mutual life insurance and annuity company based in
Indianapolis, Indiana. ILICo and its subsidiaries are licensed to do business in
all 50 states and the District of Columbia. At December 31, 1999, ILICo had
total assets of $6.1 billion and insurance in force of $30.3 billion.
The contemplated transactions are subject to normal closing conditions,
including appropriate policyholder/member, shareholder and regulatory approvals.
The Company expects the demutualization of ILICo and combination with AmerUs
Group to take place in the fourth quarter of 2000.
F-44
<PAGE> 113
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 1, 2000, the Company acquired an independent marketing
organization for approximately $18.1 million. Additional consideration may be
paid contingent on the earnings of the acquired company over the next five
years. The assets of the acquired company were approximately $1.6 million as of
December 31, 1999 and the revenues were approximately $10.0 million for the year
then ended.
(20) OPERATING SEGMENTS
The Company has two operating segments: Life Insurance and Annuities.
Products generally distinguish a segment. A brief description of each segment
follows:
Life Insurance
Open Block: The primary product offerings consist of whole life, universal
life and term life insurance policies. These products are marketed on a national
basis primarily through a Preferred Producer agency system and a Personal
Producing General Agent ("PPGA") distribution system.
Closed Block: The Closed Block was established for insurance policies which
had a dividend scale in effect as of June 30, 1996. The Closed Block was
designed to provide reasonable assurance to owners of insurance policies
included therein that, after the Reorganization of AmerUs Life, assets would be
available to maintain the dividend scales and interest credits in effect prior
to the Reorganization if the experience underlying such scales and credits
continues, The primary products included in the Closed Block are whole life,
certain universal life policies and term life insurance policies.
Annuities
The Annuity segment markets fixed annuities on a national basis primarily
through independent brokers and marketing companies. The Annuity segment also
includes one insurance contract issued to a commercial paper conduit.
The Company uses the same accounting policies and procedures to measure
operating segment income and assets as it uses to measure its consolidated
income from operations and assets with the exception of the elimination of
certain items which management believes are not necessarily indicative of
overall operating trends. For example, net realized capital gains or losses on
investments, excluding gains or losses on convertible debt which are considered
core earnings, are not included as part of operating segment income. These items
are shown between adjusted pre-tax operating income and income from continuing
operations on the following operating segment income tables. Operating segment
income is generally income before non-core realized gains and losses, interest
expense, income taxes, equity in earnings of the Company's unconsolidated
subsidiary, AMAL, and minority interest. Premiums, product charges, policyowner
benefits, insurance expenses, amortization of deferred policy acquisition costs
and VOBA and dividends to policyowners are attributed directly to each operating
segment. Net investment income and core realized gains and losses on investments
are allocated based on directly-related assets required for transacting the
business of that segment. Other revenues and benefits and expenses which are
deemed not to be associated with any specific reportable segment are grouped
together in the All Other category. These items primarily consist of former
product lines such as group and health, and holding company revenues and
expenses. The contribution to the operating income of the life insurance segment
from the Closed Block is reported as a single line item.
Assets are segmented based on policy liabilities directly attributable to
each segment, All assets allocated to the Closed Block are grouped together and
shown as a separate item entitled "Closed Block Assets."
Discontinued operations as described in note 17 are not included in segment
reporting.
F-45
<PAGE> 114
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There are no significant intersegment transactions.
Operating segment income and assets are as follows:
OPERATING SEGMENT INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
LIFE TOTAL
INSURANCE ANNUITIES ALL OTHER CONSOLIDATED
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Revenues:
Insurance premiums............................... $ 64,263 $25,122 $ 136 $ 89,521
Universal life and annuity product charges....... 46,841 27,835 -- 74,676
Net investment income............................ 93,350 442,851 21,307 557,508
Realized gains on investments.................... -- 10,166 4,629 14,795
Other income..................................... -- -- 15,311 15,311
Contribution from the Closed Block............... 25,166 -- -- 25,166
-------- ------- ------- --------
229,620 505,974 41,383 776,977
Benefits and expenses:
Policyowner benefits............................. 104,154 337,983 291 442,428
Underwriting, acquisition, and other expenses.... 53,376 30,900 35,830 120,106
Amortization of deferred policy acquisition costs
and value of business acquired, net of
non-core adjustment of $2,134................. 17,268 48,378 -- 65,646
Dividends to policyowners........................ 4,526 -- -- 4,526
-------- ------- ------- --------
179,324 417,261 36,121 632,706
-------- ------- ------- --------
Adjusted pre-tax operating income.................. $ 50,296 $88,713 $ 5,262 144,271
======== ======= =======
Non-core realized gains (losses) on
investments................................... (12,261)
Amortization of deferred policy acquisition costs
due to non-core realized gains or losses...... (2,134)
Reorganization costs............................. (7,062)
--------
Income from continuing operations.................. 122,814
Interest (expense)................................. (28,952)
Income tax (expense)............................... (32,788)
Equity in earnings of unconsolidated subsidiary.... 1,558
Minority interest.................................. (28,107)
Income from discontinued operations................ 3,911
--------
Net income....................................... $ 38,436
========
</TABLE>
F-46
<PAGE> 115
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING SEGMENT INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
LIFE TOTAL
INSURANCE ANNUITIES ALL OTHER CONSOLIDATED
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Revenues:
Insurance premiums............................. $ 51,261 $ 29,610 $ 326 $ 81,197
Universal life and annuity product charges..... 46,224 26,757 -- 72,981
Net investment income.......................... 70,952 432,299 1,917 505,168
Realized gains on investments.................. -- 9,400 351 9,751
Other income................................... -- -- 13,077 13,077
Contribution from the Closed Block............. 31,478 -- -- 31,478
-------- -------- -------- --------
199,915 498,066 15,671 713,652
Benefits and expenses:
Policyowner benefits........................... 91,442 339,293 21 430,756
Underwriting, acquisition, and other
expenses.................................... 43,376 35,592 25,949 104,917
Amortization of deferred policy acquisition
costs and value of business acquired, net of
non-core adjustment of ($199)............... 21,360 39,053 -- 60,413
Dividends to policyowners...................... 2,558 -- -- 2,558
-------- -------- -------- --------
158,736 413,938 25,970 598,644
-------- -------- -------- --------
Adjusted pre-tax operating income................ $ 41,179 $ 84,128 $(10,299) 115,008
======== ======== ========
Non-core realized gains (losses) on
investments................................. (8,623)
Amortization of deferred policy acquisition
costs due to non-core realized gains or
losses...................................... 199
--------
Income from continuing operations................ 106,584
Interest (expense)............................... (27,787)
Income tax (expense)............................. (24,792)
Equity in earnings of unconsolidated
subsidiary..................................... 2,654
Minority interest................................ (26,919)
Income from discontinued operations.............. 73,759
--------
Net income..................................... $103,499
========
</TABLE>
F-47
<PAGE> 116
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING SEGMENT INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
LIFE INSURANCE ANNUITIES ALL OTHER CONSOLIDATED
-------------- --------- --------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Revenues:
Insurance premiums............................ $ 30,733 $ 17,238 $ 156 $ 48,127
Universal life and annuity product charges.... 45,637 1,669 -- 47,306
Net investment income......................... 73,407 147,924 5,579 226,910
Realized gains on investments................. -- -- -- --
Other income.................................. -- -- 13,766 13,766
Contribution from the Closed Block............ 31,044 -- -- 31,044
-------- -------- ------- --------
180,821 166,831 19,501 367,153
Benefits and expenses:
Policyowner benefits.......................... 77,826 117,573 577 195,976
Underwriting, acquisition, and other
expenses................................... 38,496 7,365 21,556 67,417
Amortization of deferred policy acquisition
costs and value of business acquired, net
of non-core adjustment of $650............. 16,423 6,703 -- 23,126
Dividends to policyowners..................... 1,587 -- -- 1,587
-------- -------- ------- --------
134,332 131,641 22,133 288,106
-------- -------- ------- --------
Adjusted pre-tax operating income............... $ 46,489 $ 35,190 $(2,632) 79,047
======== ======== =======
Non-core realized gains (losses) on
investments................................... 11,879
Amortization of deferred policy acquisition
costs due to non-core realized gains or
losses........................................ (650)
--------
Income from continuing operations............... 90,276
Interest (expense).............................. (16,934)
Income tax (expense)............................ (19,362)
Equity in earnings of unconsolidated
subsidiary.................................... 1,700
Minority interest............................... (16,169)
Income from discontinued operations............. 14,923
--------
Net income.................................... $ 54,434
========
</TABLE>
F-48
<PAGE> 117
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING SEGMENT ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
LIFE INSURANCE ANNUITIES ALL OTHER CONSOLIDATED
-------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Investments................................. $1,258,204 $6,396,039 $111,361 $ 7,765,604
Deferred policy acquisition costs and
VOBA...................................... 290,952 469,253 -- 760,205
Other assets................................ 197,669 622,750 338,857 1,159,276
Closed Block assets......................... 1,412,622 -- -- 1,412,622
---------- ---------- -------- -----------
Total assets................................ $3,159,447 $7,488,042 $450,218 $11,097,707
========== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
TOTAL
LIFE INSURANCE ANNUITIES ALL OTHER CONSOLIDATED
-------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Investments................................. $1,163,503 $6,510,465 $235,468 $ 7,909,436
Deferred policy acquisition costs and
VOBA...................................... 140,379 330,191 -- 470,570
Other assets................................ 93,807 680,228 173,133 947,168
Closed Block assets......................... 1,453,305 -- -- 1,453,305
---------- ---------- -------- -----------
Total assets................................ $2,850,994 $7,520,884 $408,601 $10,780,479
========== ========== ======== ===========
</TABLE>
F-49
<PAGE> 118
AMERICAN MUTUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(21) QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
1999 QUARTERLY DATA
Total revenues (excluding realized gains)...... $184,951 $186,920 $192,709 $197,602
Realized gains (losses)........................ $ 3,329 $ 4,671 $ 1,921 $ (7,387)
Total benefits and expenses.................... $154,334 $152,830 $162,250 $172,488
Net income..................................... $ 12,047 $ 13,899 $ 8,575 $ 3,915
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
1998 QUARTERLY DATA
Total revenues (excluding realized gains)...... $174,309 $174,389 $170,553 $184,650
Realized gains (losses)........................ $ 6,489 $ 3,958 $ (6,358) $ (2,961)
Total benefits and expenses.................... $147,877 $150,556 $148,775 $151,237
Net income..................................... $ 9,500 $ 28,385 $ 57,446 $ 8,168
</TABLE>
F-50
<PAGE> 119
APPENDIX A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made as of this
17th day of December, 1999, by and between American Mutual Holding Company, an
Iowa mutual insurance holding company (to be converted to a stock company
pursuant to Chapters 521A and 508B of the Code of Iowa and renamed "AmerUs Group
Co.") ("AMHC"), and AmerUs Life Holdings, Inc., an Iowa corporation ("AMH").
RECITALS
WHEREAS, the Board of Directors of AMHC deems it advisable and in the best
interest of AMHC and its members that AMHC convert into a stock company and
merge with AMH with AMHC as the surviving corporation;
WHEREAS, the Board of Directors of AMH deems it advisable and in the best
interest of AMH and its stockholders that AMH merge with and into AMHC;
WHEREAS, the Board of Directors of AMHC has approved and will recommend to
its members the Plan of Conversion dated as of December 17th, 1999 (the "Plan"),
whereby AMHC shall convert to a stock company, change its name to "AmerUs Group
Co." and merge with AMH, and the Board of Directors of AMH has approved and will
recommend to its stockholders the merger of AMH with and into AMHC, both subject
to the terms set forth herein (the "Merger"); and
WHEREAS, for U.S. federal income tax purposes, it is intended that this
Agreement be a "plan of reorganization" within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree
as follows:
ARTICLE I
MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth herein, and in accordance with Section 521A.14(5) and Chapter 508B of the
Code of Iowa and the Iowa Business Corporation Act (the "IBCA"), AMH shall be
merged with and into AMHC at the Effective Time (as defined below). Following
the Merger, the separate corporate existence of AMH shall cease and AMHC shall
continue under the name "AmerUs Group Co." as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all rights and
obligations of each of AMHC and AMH in accordance with Section 521A.14(5) and
Chapter 508B of the Code of Iowa and the IBCA.
SECTION 1.2 Effective Time of Merger. The Merger shall become effective
(the "Effective Time") at the date and time set forth in properly executed
articles of merger (the "Articles of Merger") which shall be duly filed by AMHC
and AMH with the Secretary of State of the State of Iowa after all the
conditions set forth in Article VI have been satisfied or waived.
ARTICLE II
SURVIVING CORPORATION
SECTION 2.1 Articles of Incorporation. The form of Amended and Restated
Articles of Incorporation attached as Exhibit B to the Plan shall be the
articles of incorporation of the Surviving Corporation, until thereafter changed
or amended as provided therein or by applicable law.
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<PAGE> 120
SECTION 2.2 By-Laws. The form of Amended and Restated By-laws attached as
Exhibit C to the Plan shall be the By-laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
SECTION 2.3 Directors and Officers. The directors and officers of the
Surviving Corporation shall consist of the directors and officers of AMHC and
AMH in office immediately prior to the Effective Time, until the earlier of
their resignation or removal or until their respective successors are duly
elected or appointed and qualified, as the case may be.
ARTICLE III
CONVERSION OF SHARES; EFFECT OF MERGER
SECTION 3.1 Conversion; Exchange Ratio. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of capital stock
of AMH or AMHC:
(a) Each share of (i) Class A Common Stock, no par value, of AMH (the
"Class A Shares"), and (ii) Class B Common Stock, no par value, of AMH (the
"Class B Shares," and together with the Class A Shares, the "AMH Shares"),
issued and outstanding immediately prior to the Effective Time (other than
shares to be cancelled in accordance with Section 3.1(b)) shall (subject to
Section 3.1(d)) be converted into the right to receive one validly issued,
fully paid and non-assessable share of Common Stock, no par value, of the
Surviving Corporation ("AMHC Shares") (the "Exchange Ratio"). Certificates
for AMHC Shares will be delivered only in the manner provided by Section
3.3.
(b) Each AMH Share held in treasury by AMH and each AMH Share held by
AMHC or any direct or indirect subsidiary of AMHC or AMH immediately prior
to the Effective Time shall be cancelled and retired, and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Each share of Common Stock, no par value, of AMHC issued and
outstanding or issuable pursuant to the Plan immediately prior to the
Effective Time shall, by virtue of the Merger, remain outstanding or
issuable as one fully paid and non-assessable share of Common Stock, no par
value, of the Surviving Corporation.
(d) Notwithstanding anything in this Agreement to the contrary, AMH
Shares held by a person (a "Dissenting Stockholder") who complies with all
the provisions of Iowa law concerning the right of holders of AMH Shares to
dissent from the Merger and require appraisal of their AMH Shares
("Dissenting Shares") shall not be converted as described in Section 3.1(a)
but shall become the right only to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the laws of
the State of Iowa. If, after the Effective Time, such Dissenting
Stockholder withdraws his demand for appraisal or fails to perfect or
otherwise loses his right of appraisal, in any case pursuant to the IBCA,
his AMH Shares shall be deemed converted as of the Effective Time into the
right to receive AMHC Shares as provided in Section 3.1(a).
SECTION 3.2 Exchange of Shares. At the Effective Time, the stock transfer
books of AMH shall be closed as to the holders of capital stock of AMH
immediately prior to the Effective Time and no transfer of capital stock of AMH
by any such holder shall thereafter be made or recognized. If, after the
Effective Time, certificates which represented AMH Shares immediately prior to
the Effective Time are properly presented in accordance with Section 3.3 hereof
to the exchange agent, ChaseMellon Shareholder Services, L.L.C. (hereinafter
referred to as the "Exchange Agent"), such certificates shall be cancelled and
exchanged for certificates representing the number of AMHC Shares into which the
AMH Shares represented thereby were converted in the Merger.
SECTION 3.3 Exchange Procedure. (a) At or prior to the Effective Time,
AMHC shall deposit, or shall cause to be deposited, with the Exchange Agent, for
the benefit of the holders of certificates formerly
A-2
<PAGE> 121
representing AMH Shares ("Old Certificates"), for exchange in accordance with
this Article III, certificates representing the AMHC Shares ("New Certificates")
to be issued pursuant to this Article III in exchange for outstanding AMH
Shares.
(b) As promptly as practicable after the Effective Time, AMHC shall send or
cause to be sent to each holder of record of AMH Shares immediately prior to the
Effective Time whose shares were converted into the right to receive AMHC Shares
pursuant to Section 3.1 transmittal materials for use in exchanging such
stockholder's Old Certificates for the consideration set forth in this Article
III. AMHC shall cause the New Certificates into which such stockholder's AMH
Shares are converted at the Effective Time to be delivered to such stockholder
upon delivery to and receipt by the Exchange Agent of Old Certificates
representing all such stockholder's AMH Shares (or indemnity reasonably
satisfactory to AMHC and the Exchange Agent, if any of such certificates are
lost, stolen or destroyed). No interest will be paid on any merger
consideration.
(c) Until surrendered for exchange in accordance with the provisions of
this Section 3.3, each certificate theretofore representing AMH Shares (other
than shares to be cancelled pursuant to Section 3.1(b) hereof and Dissenting
Shares) shall from and after the Effective Time represent for all purposes only
the right to receive AMHC Shares as set forth in this Agreement. No dividends or
other distributions with respect to AMHC Shares with a record date occurring
after the Effective Time shall be paid to the holder of any unsurrendered Old
Certificate representing AMH Shares converted in the Merger into the right to
receive such AMHC Shares until the holder thereof receives New Certificates in
exchange therefor in accordance with the procedures set forth in this Section
3.3. After so receiving New Certificates, the record holder thereof also shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to AMHC
Shares such holder had the right to receive upon surrender of the Old
Certificates.
SECTION 3.4 Transfer Taxes. If any certificate for any AMHC Shares is to
be issued in a name other than the name of the registered owner of the AMH
Shares surrendered, it shall be a condition of such exchange that (i) the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes; or (ii) establish to the satisfaction of the Exchange Agent that all
applicable taxes have been paid or that no taxes are due.
SECTION 3.5 Closing. The closing of the transaction contemplated by this
Agreement (the "Closing") shall take place on such date and time and at such
place after satisfaction or waiver of the conditions set forth in Article VI
upon which AMH and AMHC mutually agree and which, to the extent required by law,
are approved by the Iowa Commissioner of Insurance (the "Iowa Commissioner").
SECTION 3.6 No Further Ownership Rights in AMH Stock; No Liability. The
consideration provided pursuant to this Article III to persons identified on the
books and records of AMH as the owners of AMH Shares shall be deemed to have
been paid in full satisfaction of all rights pertaining to the AMH Shares
theretofore existing, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the AMH Shares which
were outstanding immediately prior to the Effective Time. None of AMH, AMHC, the
Surviving Corporation or the Exchange Agent shall be liable to any person in
respect of any property delivered in good faith to a public official pursuant to
any abandoned property, escheat or other similar law.
SECTION 3.7 AMH Common Stock Rights. Each stock option, restricted stock
award, stock warrant, stock appreciation right and similar common stock
equivalents, instruments or units (each, a "Common Stock Right") outstanding at
the Effective Time which may be exercised for issuance of, converted into or
relating to the AMH Shares (or, in the case of stock appreciation rights, which
are based upon the value of AMH Shares) (each, a "Continuing Common Stock
Right") shall be assumed by AMHC and converted into a stock option, restricted
stock award, a stock warrant or similar common stock equivalent, instrument or
unit, respectively, to purchase, convert into or relate to AMHC Shares (or, in
the case of stock appreciation rights, become based upon the value of AMHC
Shares) wherein (i) the right to purchase or convert into AMH Shares pursuant to
the Continuing Common Stock Right shall be converted into the right to purchase
or convert into that same number of AMHC Shares, (ii) the exercise
A-3
<PAGE> 122
or conversion price per share of the AMHC Shares shall be the previous exercise
or conversion price per AMH Share, and (iii) in all other material respects the
Continuing Common Stock Right shall be subject to the same terms and conditions
as governed the Common Stock Right on which it was based, including the length
of time within which the Continuing Common Stock Right may be exercised or
converted (which shall not be extended except that the holder of a Continuing
Common Stock Right who continues in the service of AMHC or a subsidiary of AMHC
shall not be deemed to have terminated service for purposes of determining the
Continuing Common Stock Right exercise or conversion period) and for all
Continuing Common Stock Rights, such adjustments shall be and are intended to be
effected in a manner which is consistent with Section 424(a) of the Code. At the
Effective Time, AMHC shall assume and adopt the AmerUs Life Holdings, Inc.
Non-Employee Director Stock Plan, the AmerUs Life Holdings, Inc. 1999
Non-Employee Stock Option Plan, the AmerUs Life Holdings, Inc. Stock Incentive
Plan and the AmerUs Group Co. MIP Deferral Plan, as each such plan is maintained
and administered by AMH at the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of AMH. AMH represents and
warrants to AMHC as follows:
(a) Organization and Authority. AMH and each of its subsidiaries is a
corporation duly organized, validly existing, and in good standing under
the laws of its jurisdiction of organization, and has full corporate power
and authority to conduct its business and own its property as now conducted
and owned, in each case, except to the extent that the lack of such
organization, existence, good standing, power or authority does not have,
nor could reasonably be expected to have, a Material Adverse Effect (as
defined in Section 8.5) on AMH. Each of AMH and its subsidiaries is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction in which the nature of its business or the ownership or
leasing of its property makes such qualification or licensing necessary
other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not result in a Material
Adverse Effect with respect to AMH. AMH has the requisite corporate power
and authority to enter into this Agreement and, subject to approval of this
Agreement by the requisite vote of holders of each of the Class A Shares
and Class B Shares, voting as separate classes, and receipt of necessary
regulatory approvals, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action of AMH, except for the required approval of
the stockholders of AMH of this Agreement. This Agreement has been duly and
validly executed and delivered by AMH and, assuming the due and valid
authorization, execution and delivery of this Agreement by AMHC,
constitutes a legal, valid and binding obligation of AMH, enforceable
against it in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of
equity.
(b) Capitalization of AMH; Ownership of Subsidiary Stock. The
authorized capital stock of AMH consists of 180,000,000 Class A Shares,
50,000,000 Class B Shares and 20,000,000 shares of preferred stock, no par
value ("AMH Preferred Stock"). At the close of business on November 1,
1999, an aggregate of 30,070,854 Class A Shares and Class B Shares and no
shares of AMH Preferred Stock were issued and outstanding, with 25,070,854
Class A Shares and 5,000,000 Class B Shares issued and outstanding,
respectively, which comprise all the issued and outstanding shares of
capital stock of AMH. All such issued and outstanding shares of capital
stock of AMH have been duly authorized, validly issued and are fully paid
and non-assessable. AMH owns all the outstanding shares of capital stock of
each of AmerUs Life Insurance Company, Delta Life Corporation, AmVestors
Financial Corporation and American Capital Management Group, Inc.
A-4
<PAGE> 123
(c) No Violation of Existing Agreements. Except as set forth on
Schedule 4.1(c), the execution and delivery of this Agreement, together
with all documents and instruments contemplated herein, the consummation of
the transactions contemplated hereby and thereby, and the compliance with
the terms, conditions and provisions hereof by AMH do not (i) contravene
any provisions of AMH's articles of incorporation or by-laws; (ii) conflict
with or result in a breach of or constitute a material default (or an event
that might, with the passage of time or the giving of notice or both,
constitute a material default) or give rise to any right to terminate,
cancel or accelerate or to any loss of material benefit under any of the
terms, conditions, or provisions of any material lease, indenture,
mortgage, loan, or credit agreement or any other agreement or instrument to
which AMH is a party or by which it or its assets may be bound or affected;
(iii) violate or constitute a breach of any decision, judgment or order of
any court or arbitration board or of any governmental department,
commission, board, agency or instrumentality, domestic or foreign, by which
AMH is bound or to which it is subject; or (iv) violate any applicable law,
rule, or regulation to which AMH or any of its property is bound, in each
case of clauses (i)-(iv) which has or could reasonably be expected to have
a Material Adverse Effect (as defined in Section 8.5) on AMH.
(d) No Consents or Approvals of Governmental Authorities. Except for
any required regulatory approvals, including, without limitation, approval
by the Iowa Commissioner, the Commissioner of Insurance of the State of
Kansas (the "Kansas Commissioner") and any required securities or broker-
dealer approvals and acceptance of the Articles of Merger pursuant to the
IBCA, no consent or approval of, or filing and expiration of a waiting
period or a period for disapproval by, any governmental authority is
required for AMH to consummate the transactions contemplated by this
Agreement, except for any such approval which the failure to obtain would
have, or could reasonably be expected to have, a Material Adverse Effect
(as defined in Section 8.5) on AMH.
(e) Title to Assets. Each of AMH and its subsidiaries has good and
merchantable title to all material properties and assets which are
reflected and identified as owned by such entities in the financial
statements of AMH set forth in its Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission (the "SEC") for the fiscal quarter
ended September 30, 1999 (the "AMH Quarterly Financial Statements"), other
than property disposed of in the ordinary course of business subsequent to
the date of such financial statements, free and clear of any material
mortgage, lien, pledge, charge, claim or encumbrance, or material right,
title and interest in others, except (a) as reflected or specified in AMH's
audited financial statements set forth in its Annual Report on Form 10-K
filed with the SEC for its fiscal year ended December 31, 1998, including
the notes thereto and the unaudited quarterly financial statements of AMH
filed on Form 10-Q with the SEC for each of the first three quarters of
1999, including the notes thereto (collectively, the "AMH Financial
Statements"), (b) the lien of taxes not yet due or payable or being
contested in good faith by appropriate proceedings and (c) such
imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the use of the properties subject
thereto or affected thereby or could otherwise be reasonably expected to
result in a Material Adverse Effect (as defined in Section 8.5) on AMH.
(f) Taxes. Each of AMH and its subsidiaries has filed or caused to be
filed in a timely manner (within any applicable extension periods) all
material tax returns required to be filed by the Code or by applicable
state or foreign tax laws; all taxes shown to be due on such tax returns
have been or will be timely paid in full and no material tax liens have
been filed, in each case, except for filings or payments the absence of
which, or liens the existence of which, would not have nor could reasonably
be expected to result in a Material Adverse Effect (as defined in Section
8.5) on AMH. The Federal consolidated income tax returns in which AMH
and/or any of its subsidiaries joined have been examined by the Internal
Revenue Service for taxable years through the year ended December 31, 1992
and all material deficiencies resulting from such examinations have been
paid; taxable years through the year ended December 31, 1996, are currently
before the IRS Office of Appeals or under examination.
A-5
<PAGE> 124
(g) Undisclosed Liabilities. Except as disclosed in the Schedules to
this Agreement, the AMH Financial Statements, or as incurred in the
ordinary course of business since the date of the AMH Financial Statements,
neither AMH nor any of its subsidiaries has to AMH's knowledge any
liabilities (absolute, accrued, contingent, unknown or otherwise) of a
nature which, if known, would be required to be disclosed on a balance
sheet or in the related notes to the consolidated financial statements
prepared in accordance with generally accepted accounting principles
("GAAP") and which would have, or could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect (as defined in
Section 8.5) on AMH.
(h) Absence of Material Events. Since September 30, 1999, there has
not been: (a) any change in the business, assets or prospects of AMH or its
subsidiaries which has had or could reasonably be expected to result in a
Material Adverse Effect (as defined in Section 8.5) to AMH, nor, to the
knowledge of AMH, are any such changes threatened, anticipated or
contemplated, or (b) any actual or, to the knowledge of AMH, threatened,
anticipated or contemplated, damage, destruction, loss, conversion,
termination, cancellation, default or taking by eminent domain or other
action by governmental authority which has had or could reasonably be
expected to have a Material Adverse Effect on AMH.
(i) Financial Statements. The AMH Financial Statements fairly present
in all material respects the consolidated financial position of AMH and its
subsidiaries as at the respective dates thereof and the consolidated
results of AMH operations and cash flows for the respective periods
indicated, in each case in accordance with GAAP consistently applied,
except as may be indicated in the notes thereto, or, in the case of
unaudited interim financial statements, as may be permitted by GAAP, except
for normal and recurring year-end adjustments and the absence of certain
notes.
(j) Litigation. Except as set forth in Schedule 4.1(j), there is no
action, suit, investigation or proceeding pending against AMH or its
subsidiaries, or, to AMH's knowledge, threatened against or affecting AMH
or its subsidiaries, before any court or arbitrator or any governmental
body, agency or official relating to the transactions contemplated hereby
or which, if determined or resolved adversely to AMH, could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect (as defined in Section 8.5) on AMH.
(k) Employee Benefit Plans. Each employee benefit plan of AMH or its
subsidiaries (and each related trust, insurance contract or fund) to the
knowledge of AMH is being maintained and administered in compliance with
its terms and to the knowledge of AMH, AMH has complied in form and in
operation in all respects with the applicable requirements of all laws,
regulations and rulings, including but not limited to ERISA and the Code,
and all amounts due thereunder have been paid, except, in each case to the
extent that any such non-compliance would not, nor could reasonably be
expected to result in a Material Adverse Effect (as defined in Section 8.5)
on AMH.
(l) Compliance With Laws. To the knowledge of AMH, neither AMH nor any
of its subsidiaries is in conflict with, or in default or violation of any
law, rule, regulation, order, judgment or decree applicable to AMH or any
of its subsidiaries or by which AMH or any of its subsidiaries or any of
their respective properties is bound or affected, in each case except for
such matters which do not have, nor could reasonably be expected to have, a
Material Adverse Effect (as defined in Section 8.5) on AMH. To the
knowledge of AMH, (i) no investigation or review by any governmental entity
is pending or threatened against AMH or any of its subsidiaries, nor has
any governmental entity indicated an intention to conduct the same and (ii)
there is no material judgment, injunction, order or decree binding upon AMH
or any of its subsidiaries, in each case except for such matters which do
not have, nor could reasonably be expected to have, a Material Adverse
Effect (as defined in Section 8.5) on AMH.
(m) Environmental Matters. Except as set forth in Schedule 4.1(m), to
the knowledge of AMH, each of AMH and its subsidiaries is in material
compliance with all applicable federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface
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strata), including, without limitation, laws, standards and regulations
relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, wastes, toxic substances hazardous
substances, or conditions, petroleum and petroleum products ("Materials of
Environmental Concern"), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which compliance includes, but is not limited to,
the possession by AMH or its subsidiaries of all permits and other
governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof, except in each case
any such non-compliance which does not have, nor could reasonably be
expected to have, a Material Adverse Effect (as defined in Section 8.5) on
AMH.
SECTION 4.2 Representations and Warranties of AMHC. AMHC represents and
warrants to AMH as follows:
(a) Organization and Authority. AMHC is a mutual insurance holding
company duly organized, validly existing, and in good standing under the
laws of the State of Iowa, and has full corporate power and authority to
conduct its business and own its property as now conducted and owned,
except to the extent that the lack of such organization, existence, good
standing, power or authority does not have, nor could reasonably be
expected to have, a Material Adverse Effect on AMHC. Each of AMHC and its
subsidiaries is duly qualified or licensed and in good standing as a
foreign corporation in each jurisdiction in which the nature of its
business or the ownership or leasing of its property makes such
qualification or licensing necessary other than in such jurisdictions where
the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect (as defined in Section
8.5) on AMHC. AMHC has the requisite corporate power and authority to enter
into this Agreement and, subject to approval of this Agreement by the
requisite vote of its members, and receipt of necessary regulatory
approvals, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action of AMHC, except for the required approval of
the members of AMHC of this Agreement. This Agreement has been duly and
validly executed and delivered by AMHC and, assuming the due and valid
authorization, execution and delivery of this Agreement by AMH, constitutes
a legal, valid and binding obligation of AMHC, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity.
(b) Capitalization of AMHC. As of the date of this Agreement, AMHC has
no capital stock authorized, issued or outstanding. The authorized capital
stock of AMHC after conversion to a stock company shall consist of
230,000,000 shares of Common Stock, no par value, and 20,000,000 shares of
preferred stock, no par value. The AMHC Shares, when issued in accordance
with this Agreement, shall be duly authorized, validly issued and fully
paid and non-assessable.
(c) No Violation of Existing Agreements. Except as set forth on
Schedule 4.2(c), the execution and delivery of this Agreement, together
with all documents and instruments contemplated herein, the consummation of
the transactions contemplated hereby and thereby, and the compliance with
the terms, conditions and provisions hereof by AMHC do not (i) contravene
any provisions of AMHC's articles of incorporation or by-laws; (ii)
conflict with or result in a breach of or constitute a material default (or
an event that might, with the passage of time or the giving of notice or
both, constitute a material default) or give rise to any right to
terminate, cancel or accelerate or to any loss of material benefit under
any of the terms, conditions, or provisions of any material lease,
indenture, mortgage, loan, or credit agreement or any other agreement or
instrument to which AMHC is a party or by which it or its assets may be
bound or affected; (iii) violate or constitute a breach of any decision,
judgment or order of any court or arbitration board or of any governmental
department, commission, board, agency or instrumentality, domestic or
foreign, by which AMHC is bound or to which it is subject; or (iv) violate
any applicable law, rule, or regulation to which AMHC or any of its
property
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is bound, in each case of clauses (i)-(iv) which has or could reasonably be
expected to have a Material Adverse Effect (as defined in Section 8.5) on
AMHC.
(d) No Consents or Approvals of Governmental Authorities. Except as
stated in the Plan, and except for any required approval by regulatory
authorities, including, without limitation, securities or broker-dealer
approvals, no consent or approval of, or filing and expiration of a waiting
period or a period for disapproval by, any governmental authority is
required for AMHC to consummate the transactions contemplated by this
Agreement, except for filing and acceptance of the Articles of Merger
pursuant to the IBCA, which the failure to obtain would have, or could
reasonably be expected to have, a Material Adverse Effect (as defined in
Section 8.5) on AMHC.
(e) Title to Assets. Each of AMHC and its subsidiaries has good and
merchantable title to all material properties and assets reflected and
identified as owned by such entities in its financial statements dated as
of September 30, 1999 (the "Quarterly AMHC Financial Statements"), other
than property disposed of in the ordinary course of business subsequent to
the date of such financial statements, free and clear of any material
mortgage, lien, pledge, charge, claim or encumbrance, or material right,
title and interest in others, except (a) as reflected in AMHC's audited
financial statements for its fiscal year ended December 31, 1998, including
the notes thereto and the unaudited quarterly financial statements of AMHC
for each of the first three quarters of 1999 (collectively, the "AMHC
Financial Statements"), (b) the lien of taxes not yet due or payable or
being contested in good faith by appropriate proceedings and (c) such
imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the use of the properties subject
thereto or affected thereby or could otherwise be reasonably expected to
result in a Material Adverse Effect (as defined in Section 8.5) on AMHC.
(f) Taxes. Each of AMHC and its subsidiaries has filed or caused to be
filed in a timely manner (within any applicable extension periods) all
material tax returns required to be filed by the Code or by applicable
state or foreign tax laws; all taxes shown to be due on such tax returns
have been or will be timely paid in full and no material tax liens have
been filed in each case, except for filings or payments the absence of
which, or liens the existence of which, would have or could be reasonably
expected to have a Material Adverse Effect (as defined in Section 8.5) on
AMHC. The Federal consolidated income tax returns in which AMHC and/or any
of its subsidiaries joined have been examined by the Internal Revenue
Service for all taxable years through the year ended December 31, 1992 and
all material deficiencies resulting from such examinations have been paid;
taxable years through the year ended December 31, 1996, are currently
before the IRS Office of Appeals or under examination.
(g) Undisclosed Liabilities. Except as disclosed in the Schedules to
this Agreement, the AMHC Financial Statements or as incurred in the
ordinary course of business since the date of the AMHC Financial
Statements, neither AMHC nor any of its subsidiaries has to AMHC's
knowledge any liabilities (absolute, accrued, contingent, unknown or
otherwise) of a nature which, if known, would be required to be disclosed
on a balance sheet or in the related notes to the consolidated financial
statements prepared in accordance with GAAP and which have, or could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect (as defined in Section 8.5) on AMHC.
(h) Absence of Material Events. Since December 31, 1998, there has not
been: (a) any change in the business, assets or prospects of AMHC and its
subsidiaries which has had or could be reasonably expected to result in
Material Adverse Effect (as defined in Section 8.5) to AMHC, nor, to the
knowledge of AMHC, are any such changes threatened, anticipated or
contemplated or (b) any actual or, to the knowledge of AMHC, threatened,
anticipated or contemplated, damage, destruction, loss, conversion,
termination, cancellation, default or taking by eminent domain or other
action by governmental authority which has had or could be reasonably
expected to have a Material Adverse Effect on AMHC.
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(i) Financial Statements. The AMHC Financial Statements fairly present
in all material respects the consolidated financial position of AMHC and
its subsidiaries as at the respective dates thereof and the consolidated
results of AMHC operations and cash flows for the respective periods
indicated, in each case in accordance with GAAP consistently applied,
except as may be indicated in the notes thereto, or, in the case of
unaudited interim financial statements, as may be permitted by GAAP, except
for normal and recurring year-end adjustments and the absence of notes.
(j) Litigation. Except as set forth in Schedule 4.2(j), there is no
action, suit, investigation or proceeding pending against AMHC or its
subsidiaries, or, to AMHC's knowledge, threatened against or affecting
AMHC, before any court or arbitrator or any governmental body, agency or
official relating to the transactions contemplated hereby or which, if
determined or resolved adversely to AMHC, may have, individually or in the
aggregate, a Material Adverse Effect on AMHC (as defined in Section 8.5).
(k) Employee Benefit Plans. Each employee benefit plan of AMHC and its
subsidiaries (and each related trust, insurance contract or fund) to the
knowledge of AMHC is being maintained and administered in compliance with
its terms and to the knowledge of AMHC, AMHC has complied in form and in
operation in all respects with the applicable requirements of all laws,
regulations and rulings, including but not limited to ERISA and the Code,
and all amounts due thereunder have been paid, except, in each case to the
extent that any such non-compliance would not, nor could reasonably be
expected to result in a Material Adverse Effect on AMHC (as defined in
Section 8.5).
(l) Compliance With Laws. To the knowledge of AMHC, neither AMHC nor
any of its subsidiaries is in conflict with, or in default or violation of
any law, rule, regulation, order, judgment or decree applicable to AMHC or
any of its subsidiaries or by which AMHC or any of its subsidiaries or any
of their respective properties is bound or affected, in each case except
for such matters which do not have, nor could reasonably be expected to
have, a Material Adverse Effect (as defined in Section 8.5) on AMHC. To the
knowledge of AMHC, (i) no investigation or review by any governmental
entity is pending or threatened against AMHC or any of its subsidiaries,
nor has any governmental entity indicated an intention to conduct the same
and (ii) there is no material judgment, injunction, order or decree binding
upon AMHC or any of its subsidiaries, in each case except for such matters
which do not have, nor could reasonably be expected to have, a Material
Adverse Effect (as defined in Section 8.5) on AMHC.
(m) Environmental Matters. Except as set forth in Schedule 4.2(m), to
the knowledge of AMHC, each of AMHC and its subsidiaries is in material
compliance with all Environmental Laws, which compliance includes, but is
not limited to, the possession by AMHC or its subsidiaries of all permits
and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof,
except in each case any such non-compliance which does not have, nor could
reasonably be expected to have, a Material Adverse Effect on AMHC (as
defined in Section 8.5).
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business Prior to Closing. During the term of this
Agreement each of AMHC and AMH shall, and shall cause each of their respective
subsidiaries to, operate its business only in the ordinary course and shall use
all reasonable efforts to preserve intact its ongoing business, except (i) the
sale of property identified on Schedule 5.1 at the price and upon the terms set
forth on Schedule 5.1, (ii) as otherwise mutually agreed or, (iii) in the case
of AMHC and its subsidiaries, except for sales of assets with prior approval of
the board of directors of each of AMHC and AMH.
SECTION 5.2 Best Efforts. Each of AMHC and AMH agrees to use its
reasonable best efforts to take or cause to be taken and to do or cause to be
done all such actions and things as shall be reasonably
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necessary or advisable, or as shall be reasonably requested by the other party,
in order to consummate and make effective the Merger and the transactions
contemplated hereby.
SECTION 5.3 Securities Filings. Each of AMHC and AMH shall cooperate and
promptly prepare and file with the SEC and any applicable state agency, all
filings required under federal or state securities laws, and shall obtain all
"Blue Sky" permits or securities approvals required to carry out the Merger and
the transactions contemplated by this Agreement.
SECTION 5.4 Members' and Stockholders' Approval. The Board of Directors of
AMHC shall recommend approval and adoption of the Plan, this Agreement and the
Merger by its members, and the Board of Directors of AMH shall recommend
approval and adoption of this Agreement and the Merger by its stockholders, and
each of AMHC and AMH shall use its reasonable best efforts to obtain the
approval and adoption of this Agreement and the Merger from its members and
stockholders, respectively, and otherwise comply with all legal requirements
applicable to the respective approvals required.
SECTION 5.5 Indemnification. From and after the Effective Time, AMHC will
cause the Surviving Corporation to fulfill and honor in all respects the
indemnification obligations of AMH and AMHC pursuant to their respective
Articles of Incorporation, Bylaws and any indemnification agreements between AMH
and its directors and officers and AMHC and its directors and officers existing
prior to the date hereof. Until the sixth anniversary of the Effective Time,
AMHC shall cause the Surviving Corporation to maintain director's and officer's
liability insurance with respect to claims against the directors and officers of
AMHC and AMH arising from facts or events which occurred before the Effective
Time, which insurance shall contain at least the same coverage and amounts as
that coverage currently provided by AMHC or AMH, respectively, with respect to
its directors and officers.
SECTION 5.6 Notification of Certain Matters. Each of AMHC and AMH will
give prompt notice to the other of the occurrence, or failure to occur, of any
event, which occurrence or failure to occur would be reasonably likely to cause
(a) any representation or warranty contained in this Agreement and made by it to
be untrue or inaccurate in any material respect at any time from the date of
this Agreement to the Effective Time such that the conditions set forth in
Section 6.2(a) or 6.3(a), as the case may be, would not be satisfied as a result
thereof, or (b) any material failure of AMHC or AMH, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement. Notwithstanding the above, delivery of
any notice pursuant to this section will not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 5.7 Notices of Demand for Appraisal. AMH shall give AMHC (i)
prompt notice of any written demands for appraisal or any withdrawals of such
demands, and any other instruments served pursuant to IBCA and received by AMH
which relate to any such demand for appraisal and (ii) the opportunity to
participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for appraisal under IBCA. AMH shall not,
except with the prior written consent of AMHC or as may be required by
applicable law, voluntarily make any payment with respect to any demands for
appraisal of AMH Shares or offer to settle or settle any such demands.
SECTION 5.8 Dividends. AMHC shall not permit its non-insurance
subsidiaries to declare, set aside or pay any dividends on, or make any other
distributions in respect of the capital stock of such subsidiaries, including,
without limitation, any repurchase of capital stock.
SECTION 5.9 Modification of Plan. AMHC shall not modify or amend the Plan,
whether pursuant to Section 7.3 or 7.4 thereof or otherwise, in any manner that
adversely affects AMH or the stockholders of AMH (other than AMHC) in a material
manner.
SECTION 5.10 Listing Application. AMHC shall promptly prepare and file
with the New York Stock Exchange or NASDAQ National Market listing applications
covering the AMHC Shares issuable in the Merger or upon exercise or conversion
of the Continuing Common Stock Rights and shall use its reasonable best efforts
to obtain, prior to the Effective Time, approval for listing of such Common
Stock, subject only to official notice of issuance.
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SECTION 5.11 Actions Relating to Continuing Common Stock Rights. AMHC
shall take all actions reasonably necessary to assume the Continuing Common
Stock Rights, employee benefit plans of AMH, execute supplemental indentures
where necessary and otherwise assume the obligations of AMH in accordance with
this Agreement and the IBCA.
SECTION 5.12 Schedules. From time to time prior to the Effective Time, the
parties to this Agreement shall promptly supplement and amend the Schedules to
this Agreement with respect to any matter, condition or occurrence hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in the Schedules at such time.
Unless waived by the other party hereto, which waiver shall not be unreasonably
withheld, no supplement or amendment shall be deemed to cure any breach of any
representation or warranty made in this Agreement or have any effect for the
purpose of determining satisfaction of the conditions set forth in Section
6.2(a) or Section 6.3(a).
ARTICLE VI
CONDITIONS TO CONSUMMATION OF MERGER
SECTION 6.1 Conditions to Obligations of Each Party. The respective
obligation of each of AMHC and AMH to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) AMHC Approvals. The Plan, this Agreement and transactions
contemplated hereby shall have been approved and adopted by the requisite
vote of the members of AMHC in accordance with and to the extent required
by the Plan, Articles of Incorporation of AMHC or applicable laws;
(b) AMH Approvals. This Agreement and transactions contemplated hereby
shall have been approved and adopted by the requisite vote of each class of
the stockholders of AMH in accordance with and to the extent required by
the Articles of Incorporation of AMH or applicable laws;
(c) No Injunctions. No preliminary or permanent injunction or other
order of any federal or state court in the United States which prohibits
the consummation of the Merger shall have been issued and remain in effect;
(d) Securities Filings. All required securities filings shall have
become effective and shall be effective at the Effective Time, and no stop
order suspending effectiveness of such filings shall have been issued, and
no action, suit, proceeding or investigation by the SEC or any state
securities commission to suspend the effectiveness thereof shall have been
initiated and be continuing, or, to the knowledge of AMHC or AMH,
threatened, and all necessary approvals under state securities laws
relating to the issuance or trading of AMHC Shares to be issued in
connection with the Merger shall have been received;
(e) Regulatory Approvals. Approval of any necessary regulatory bodies
shall have been obtained and be in effect, except for approvals which the
failure to obtain would not, individually or in the aggregate, in the
judgment of AMHC and AMH, be reasonably expected to result in a Material
Adverse Effect (as defined in Section 8.5) on AMHC, AMH or the Surviving
Corporation;
(f) Listing. The AMHC Shares issuable in the Merger and in connection
with the exercise of Continuing Common Stock Rights shall have been
approved for listing on the New York Stock Exchange, or, if mutually
agreed, on another exchange or quoted in the automated quotation system of
a registered securities association, subject only to official notice of
issuance;
(g) Litigation. No order, judgment or decree shall be outstanding
against a party hereto or a third party that would have the effect of
imposing materially adverse conditions deemed to be unreasonable by AMHC or
AMH to, or preventing completion of, the Merger and no suit, action or
other proceeding shall be pending before any court or governmental entity
in which it is sought to restrain or prohibit the Merger or obtain other
substantial monetary or other relief against one or
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more parties hereto in connection with this Agreement or the Plan and which
AMHC or AMH determines in good faith, based upon the advice of their
respective counsel, makes it inadvisable to proceed with the Merger because
any such suit, action or proceeding has a significant potential to be
resolved in a way so as to deprive the party electing not to proceed of any
of the material benefits to it of the Merger;
(h) Non-Governmental Consents. All consents or approvals of all
persons, other than the Iowa Commissioner, Kansas Commissioner, required
securities or broker-dealer approvals, or other regulatory bodies, and
supplements to any outstanding indentures entered into by AMHC or AMH,
required for or in connection with the execution, delivery and performance
of this Agreement and the consummation of the Merger shall have been
obtained and be in full force and effect, unless the failure to obtain any
such consent or approval is not in the judgment of AMHC and AMH reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
(as defined in Section 8.5) on AMHC, AMH or the Surviving Corporation;
(i) Effectiveness of Plan. All conditions precedent to the
effectiveness of the Plan (including, without limitation, receipt of the
opinion of Caplin & Drysdale, Chartered, special tax counsel referenced in
the Plan), except for effectiveness of the Merger, shall have been
satisfied or waived, subject to the extent required by law to the approval
of the Iowa Commissioner;
(j) Tax Opinions. Each of AMHC and AMH shall have received a copy
addressed to it of the opinion of Caplin & Drysdale, Chartered, referenced
in the Plan. In addition, each of AMHC and AMH shall have received an
opinion of counsel or accountant or other confirmation reasonably
satisfactory to AMHC and AMH, to the effect that the transactions
contemplated by this Agreement do not result in the imposition of an
entity-level state tax; and
(k) Insurance. AMHC shall have purchased (i) single premium
environmental liability insurance with a ten year term in an amount of $50
million per event and in the aggregate and with a retention of $500,000 per
event including, without limitation, coverage for items set forth in
Schedule 4.2(m), and (ii) representation and warranty insurance in an
amount and upon such terms upon which AMHC and AMH mutually agree.
SECTION 6.2 Additional Conditions to Obligations of AMHC. The obligation
of AMHC to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Effective time of each of the following conditions, any of
which may be waived, in writing, exclusively by AMHC, in its sole discretion.
(a) Representations and Warranties. The representations and warranties
of AMH contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement. In addition, the
representations and warranties of AMH contained in this Agreement shall be
true and correct in all material respects on and as of the Effective Time
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Effective Time, except in such cases
where the failure to be so true and correct would not have a Material
Adverse Effect (as defined in Section 8.5) on AMH.
(b) Agreements and Covenants. AMH shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the
Effective Time.
(c) Material Adverse Effect. No Material Adverse Effect (as defined in
Section 8.5) with respect to AMH shall have occurred since the date of this
Agreement.
SECTION 6.3 Additional Conditions to the Obligations of AMH. The
obligations of AMH to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of
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each of the following conditions, any of which may be waived, in writing,
exclusively by AMH, in its sole discretion.
(a) Representations and Warranties. The representations and warranties
of AMHC contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement. In addition, the
representations and warranties of AMHC contained in this Agreement shall be
true and correct in all material respects on and as of the Effective Time
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Effective Time, except in such cases
where the failure to be so true and correct would not have a Material
Adverse Effect (as defined in Section 8.5) on AMHC.
(b) Agreements and Covenants. AMHC shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the
Effective Time.
(c) Material Adverse Effect. No Material Adverse Effect (as defined in
Section 8.5) with respect to AMHC shall have occurred since the date of
this Agreement.
(d) Corporate Opinion. AMH shall have received an opinion dated as of
the date of Closing of Belin Lamson McCormick Zumbach Flynn, A Professional
Corporation, corporate counsel to AMHC, in form and substance reasonably
satisfactory to it, to the effect that the AMHC Shares issuable pursuant to
the Merger are duly authorized, validly issued, fully paid and
non-assessable and with respect to such other matters as AMH may reasonably
request.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of AMH and members of AMHC:
(a) by mutual written consent duly authorized by the Board of
Directors of each of AMH and AMHC;
(b) by AMHC if the approval of the stockholders of AMH contemplated by
this Agreement shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders;
(c) by AMH if the approval of the members of AMHC contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of members;
(d) by AMHC, upon a breach of any representation, warranty, covenant
or agreement on the part of AMH set forth in this Agreement, or if any
representation or warranty of AMH shall have become untrue, in either case
such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in AMH's representations and warranties or breach by AMH is
curable by AMH through the exercise of its commercially reasonable efforts,
then AMHC may not terminate this Agreement under this Section 7.1(d)
provided AMH continues to exercise such commercially reasonable efforts to
cure such breach; or
(e) by AMH, upon a breach of any representation, warranty, covenant or
agreement on the part of AMHC set forth in this Agreement, or if any
representation or warranty of AMHC shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in AMHC's representations and warranties or breach by AMHC is
curable by AMHC through the exercise of its commercially
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reasonable efforts, then AMH may not terminate this Agreement under this
Section 7.1(e) provided AMHC continues to exercise such commercially
reasonable efforts to cure such breach.
SECTION 7.2 Effect of Termination; Exclusive Remedy. If this Agreement is
validly terminated pursuant to Section 7.1 hereof, this Agreement shall
forthwith become null and void, and there will be no liability on the part of
AMHC, AMH or any of their respective affiliates, officers, directors, employees,
agents, consultants or other representatives with respect to this Agreement or
the matters contemplated hereby. Termination shall be the sole and exclusive
remedy available to a party hereunder, and to the full extent permitted by law,
each party hereby waives all rights to remedies other than termination of this
Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties hereto
at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of AMH and members of AMHC and,
to the extent required by law, subject to the approval of the Iowa Commissioner;
provided, however, that after any such approval, there shall not be made without
approval of the applicable stockholders and members any amendment that by law or
governing document is required to be submitted to the stockholders or members of
any of the parties hereto for approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
SECTION 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, or (b) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS; POST-CLOSING COVENANTS
SECTION 8.1 Entire Agreement; No Assignment. This Agreement (including any
Exhibits and Schedules, and other documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all other prior agreements
and understandings, both written and oral among the parties or any of them, with
respect to the merger of AMH with and into AMHC; (b) is not intended to confer
upon any other person any rights or remedies hereunder, except that the current
and former directors and officers of AMH are intended by the parties to this
Agreement to be third party beneficiaries of Section 5.5 of this Agreement; and
(c) shall not be assigned by operation of law or otherwise.
SECTION 8.2 Representations, Warranties and Covenants. (a) The
representations and warranties of AMHC and AMH contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
(b) Notwithstanding any other provision of this Agreement, any
representation, warranty or covenant made by AMHC with respect to its
subsidiaries shall not for purposes of this Agreement include AMH and/or its
subsidiaries.
SECTION 8.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Iowa without giving effect
to the provisions thereof relating to conflicts of law.
SECTION 8.4 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider that any further assignments or
assurances in law or any other acts are necessary or desirable to (i) vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of AMH acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger, or (ii) otherwise carry out the purposes of
this Agreement, AMH and its proper officers and directors shall be deemed hereby
to have
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granted to the Surviving Corporation an irrevocable power of attorney coupled
with an interest to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of the Surviving Corporation are fully
authorized in the name of AMH or otherwise to take any and all such action.
SECTION 8.5 Definition of Material Adverse Effect; Person; Knowledge. For
the purposes of this Agreement, the term "Material Adverse Effect," with respect
to any Person, shall mean any change, event or effect that is material and
adverse to the business, assets, financial condition, results of operations or
prospects of such Person and its subsidiaries taken as a whole (except for those
changes, events and effects that are directly caused by (i) conditions affecting
the United States economy as a whole; or (ii) conditions affecting either the
insurance or annuity industry, in either such case as a whole, which conditions
(in the case of clause (i) or (ii)) do not affect such Person and its
subsidiaries taken as a whole in a disproportionate manner; or (iii) any adverse
effect on a Person and its subsidiaries taken as a whole, or the operations of
such Person and its subsidiaries taken as a whole, where such effect is
primarily attributable to the transactions contemplated by this Agreement or the
pendency or announcement of the Merger). For purposes of this Agreement,
"Person" shall mean any corporation, partnership or other business entity.
References herein to the "knowledge of," "best knowledge of," "know" and
variations thereof of a Person, mean the actual knowledge of the Chairman of the
Board, Chief Executive Officer, Senior Vice President, Chief Financial Officer
and Treasurer, Senior Vice President and Secretary or Senior Vice President and
General Counsel of such Person. References to "subsidiaries" herein shall not
include AMH when the "Person" is AMHC.
SECTION 8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of AMH and AMHC has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
AMERICAN MUTUAL HOLDING COMPANY
By: /s/ ROGER K. BROOKS
----------------------------------
Name:
Title:
AMERUS LIFE HOLDINGS, INC.
By: /s/ MICHAEL G. FRAIZER
----------------------------------
Name:
Title:
A-15
<PAGE> 134
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 ("Amendment") is made as of this 18th day of February,
2000, to the Agreement and Plan of Merger dated December 17, 1999, by and
between American Mutual Holding Company, an Iowa mutual insurance holding
company ("AMHC"), and AmerUs Life Holdings, Inc., an Iowa corporation ("AMH")
(the "Merger Agreement").
RECITALS
WHEREAS, the respective Boards of Directors of AMHC and AMH have approved
and will recommend to its members and stockholders, respectively, the approval
of the Merger Agreement and this Amendment whereby AMH shall merge with and into
AMHC, subject to the terms set forth therein and herein (the "Merger");
WHEREAS, subsequent to the date of the Merger Agreement, AMHC and AMH
entered into a Combination and Investment Agreement (the "Combination
Agreement"), by and among AMHC, AMH, Indianapolis Life Insurance Company, an
Indiana mutual insurance company ("Indianapolis Life") and The Indianapolis Life
Group of Companies, Inc., an Indiana corporation ("ILGC"), pursuant to which
among other things, AMHC, AMH, Indianapolis Life and ILGC will enter into a
strategic combination pursuant to a series of transactions in which AMHC and AMH
will first complete the Restructuring (as defined in the Plan) and Indianapolis
Life will thereafter complete a plan of conversion under applicable provisions
of the insurance law of the State of Indiana (the "Indianapolis Life
Demutualization") with Indianapolis Life remaining an Indiana domiciled life
insurance company while becoming an indirect wholly-owned stock subsidiary of
AMHC upon completion of the Indianapolis Life Demutualization;
WHEREAS, the Combination Agreement requires that AMHC and/or AMH invest
$100 million in ILGC ("ILGC Investment") in return for 105.96 shares of
non-voting common stock of ILGC which represents 45% of the equity in ILGC (the
non-voting common stock will be exchangeable for ILGC voting stock upon receipt
of regulatory approval for such exchange); and
WHEREAS, the Board of Directors of AMH adopted on February 11, 2000, the
AmerUs Life Holdings, Inc. 2000 Stock Option Plan (the "AMH 2000 Stock Option
Plan"); and
WHEREAS, the parties desire to amend the Merger Agreement to provide for
treatment of the ILGC Investment, AMH 2000 Stock Option Plan and other matters.
NOW, THEREFORE, the parties agree as follows:
1. The last sentence of Section 3.7 is amended by striking such
sentence in its entirety and substituting in lieu thereof the following
sentence:
"At the Effective Time, AMHC shall assume and adopt the AmerUs Life
Holdings, Inc. Non-Employee Director Stock Plan, the AmerUs Life
Holdings, Inc. 1999 Non-Employee Stock Option Plan, the AmerUs Life
Holdings, Inc. Stock Incentive Plan, the AmerUs Group Co. MIP Deferral
Plan and the AmerUs Life Holdings, Inc. 2000 Stock Option Plan, as each
such plan is maintained and administered by AMH at the Effective Time."
2. The following is added as Section 6.2(d) to the Agreement:
"(d) Purchase Agreement. AMH shall have performed or complied in
all respects with the terms of the Purchase Agreement, dated February
18, 2000, between AMH and AMHC."
3. The following is added as Section 8.7 to the Agreement:
SECTION 8.7 Monetization of Non-Insurance Subsidiaries and ILGC
Common Stock. Each of AMHC and AMH agrees that upon consummation of the
transactions contemplated hereby, the Surviving Corporation shall be
obligated to make appropriate credit to Net Cash Proceeds with respect
to the Non-Insurance Subsidiaries and ILGC Common Stock and to make
distributions to those persons who are Eligible Members of AMHC, in each
such case to the
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extent required by and in accordance with the Plan. "Net Cash Proceeds,"
"Non-Insurance Subsidiaries," "ILGC Common Stock," and "Eligible
Members" shall all have the meanings given such terms in the Plan.
4. Except as set forth herein, the Agreement remains in full force and
effect and unmodified.
5. Capitalized terms used but not defined herein shall have the
meanings given such terms in the Merger Agreement.
IN WITNESS WHEREOF, each of AMH and AMHC has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
AMERICAN MUTUAL HOLDING COMPANY
By: /s/ ROGER K. BROOKS
------------------------------------
Name:
Title:
AMERUS LIFE HOLDINGS, INC.
By: /s/ MICHAEL G. FRAIZER
------------------------------------
Name:
Title:
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<PAGE> 136
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 2 dated as of April 3, 2000, is made to the Agreement
and Plan of Merger dated December 17, 1999, as amended on February 18, 2000,
between American Mutual Holding Company ("AMHC") and AmerUs Life Holdings, Inc.
("AMH").
WHEREAS, the respective Boards of Directors of AMHC and AMH have approved
and will recommend to its members and stockholders, respectively, the approval
of the Merger Agreement and this Amendment whereby AMH shall merge with and into
AMHC, subject to the terms set forth therein and herein (the "Merger");
WHEREAS, subsequent to the date of the Merger Agreement, AMHC and AMH
entered into a Combination and Investment Agreement (the "Combination
Agreement"), by and among AMHC, AMH, Indianapolis Life Insurance Company, an
Indiana mutual insurance company ("Indianapolis Life") and The Indianapolis Life
Group of Companies, Inc., an Indiana corporation ("ILGC");
WHEREAS, pursuant to the Combination Agreement, AMHC invested $100 million
in ILGC in return for 105.96 shares of non-voting common stock of ILGC ("ILGC
Stock");
WHEREAS, AMHC and AMH entered into a Purchase Agreement to permit AMHC to
sell and require AMH to purchase the ILGC Stock;
WHEREAS, AMH fulfilled its obligation under the Purchase Agreement and
purchased the ILGC stock for the Purchase Price (as defined in the Purchase
Agreement) (the "Stock Purchase");
WHEREAS, the Purchase Agreement is no longer a component of the Plan, the
Merger Agreement and related transactions following the Stock Purchase; and
WHEREAS, the parties desire to amend the Merger Agreement to reflect the
Stock Purchase.
NOW, THEREFORE, the parties agree as follows:
1. Section 6.2(d) of the Agreement shall be deleted in its entirety.
2. Section 8.7 of the Agreement shall be deleted in its entirety.
3. Except as set forth herein, the Agreement remains in full force and
effect and unmodified.
4. Capitalized terms used but not defined herein shall have the
meanings given such terms in the Merger Agreement.
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IN WITNESS WHEREOF, each of AMH and AMHC has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
AMERICAN MUTUAL HOLDING COMPANY
By: /s/ ROGER K. BROOKS
----------------------------------
Name:
Title:
AMERUS LIFE HOLDINGS, INC.
By: /s/ MICHAEL G. FRAIZER
----------------------------------
Name:
Title:
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<PAGE> 138
APPENDIX B
PLAN OF CONVERSION
OF
AMERICAN MUTUAL HOLDING COMPANY
UNDER SECTION 521A.14(5)(b) AND
CHAPTER 508B OF THE CODE OF IOWA (1999)
DATED AS OF DECEMBER 17, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I: DEFINITIONS...................................... B-3
ARTICLE II: APPROVAL BY THE COMMISSIONER.................... B-6
2.1 Application.......................................... B-6
2.2 Commissioner's Public Hearing; Commissioner's
Order................................................ B-6
2.3 Notice of Public Hearing............................. B-7
ARTICLE III: APPROVAL BY MEMBERS............................ B-7
3.1 Member Vote.......................................... B-7
3.2 Notice Of Members' Meeting........................... B-7
ARTICLE IV: THE RESTRUCTURING............................... B-7
4.1 Effect of Restructuring on the Company............... B-7
4.2 Effectiveness of Plan................................ B-8
4.3 Plan Implementation.................................. B-10
ARTICLE V: POLICIES......................................... B-10
5.1 Policies............................................. B-10
5.2 Determination of Ownership........................... B-10
5.3 In Force............................................. B-11
5.4 Certain Group Policies and Contracts................. B-12
ARTICLE VI: ALLOCATION OF MEMBER CONSIDERATION.............. B-12
6.1 Allocation of Allocable Shares....................... B-12
6.2 Allocation of Aggregate Variable Component........... B-13
6.3 Payment of Consideration............................. B-13
6.4 Commission-Free Program.............................. B-15
6.5 ERISA Plans.......................................... B-15
ARTICLE VII: ADDITIONAL PROVISIONS.......................... B-16
7.1 Notices.............................................. B-16
7.2 Directors............................................ B-16
7.3 Corrections.......................................... B-16
7.4 Amendment or Withdrawal of the Plan.................. B-16
7.5 Costs and Expenses................................... B-16
7.6 Governing Law........................................ B-16
</TABLE>
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PLAN OF CONVERSION
OF
AMERICAN MUTUAL HOLDING COMPANY
This Plan of Conversion (the "Plan"), which has been adopted by the Board
of Directors (the "Board") of American Mutual Holding Company, a mutual
insurance holding company organized under the laws of the State of Iowa (the
"Company"), at a meeting duly called and held on December 17, 1999 (the
"Adoption Date"), provides for the conversion of the Company from a mutual
insurance holding company into a stock holding company in accordance with the
requirements of Section 521A.14(5)(b) and Chapter 508B. of the Code of Iowa
(1999) (the "Conversion") and the merger of Amerus Life Holdings, Inc. ("AMH")
with and into the Company, with the Company the survivor in such merger (the
"Merger"). The Conversion and the Merger are hereinafter collectively referred
to as the "Restructuring". AMH is a publicly traded stock company organized
under the laws of the State of Iowa, which is controlled by the Company through
its indirect ownership of approximately 58% of AMH'S common stock (comprised of
49% of AMH'S Class A Common Stock and 100% of its Class B Common Stock).
The principal purpose of the Restructuring is to enhance the Company's
financial flexibility. The Restructuring will also provide Eligible Members with
an opportunity to receive shares of Company Common Stock, cash or Policy Credits
in exchange for their otherwise illiquid Membership Interests, which will
thereupon be extinguished. Thus, Eligible Members will realize economic value
from their Membership Interests that is not currently available to them so long
as the Company remains a mutual company.
THE RESTRUCTURING WILL NOT, IN ANY WAY, CHANGE PREMIUMS OR REDUCE POLICY
BENEFITS, VALUES, GUARANTEES OR OTHER POLICY OBLIGATIONS OF AMERUS LIFE
INSURANCE COMPANY ("AMERUS LIFE") TO ITS POLICYOWNERS (AMERUS LIFE IS A DIRECT,
WHOLLY-OWNED SUBSIDIARY OF AMH). ALSO, POLICY DIVIDENDS WILL CONTINUE TO BE PAID
AS DECLARED (ALTHOUGH, AS ALWAYS, DIVIDENDS MAY VARY FROM YEAR TO YEAR).
The Board of Directors believes that the Restructuring will provide the
Company with greater financial flexibility to support future growth and
financial strength and, through the existence and management of the Closed Block
which was formed as part of the AmerUs Reorganization, ensures that the
interests of the Mutual Owners collectively are properly protected. The Board,
therefore, has unanimously determined that the Plan is fair and equitable to
Members as owners of the Company and is also fair and equitable to the Members
in their capacity as policyowners of AmerUs Life.
The Plan provides that Owners of one or more Policies that are in force on
the Adoption Date will be Voting Members. Only Voting Members will be entitled
to vote on the Plan. The Plan further provides that Owners of one or more
Eligible Policies on the Adoption Date will be Eligible Members. Only Eligible
Members will be entitled under Iowa law to receive consideration under the Plan.
ARTICLE I:
DEFINITIONS
As used in the Plan, the following terms have the following meanings:
"Actuarial Contribution" means, with respect to a particular Policy, the
contribution that such Policy has made to AmerUs Life's statutory surplus and
asset valuation reserve, plus the contribution that such Policy is expected to
make in the future, as calculated according to the principles, assumptions and
methodologies set forth in this Plan and the Actuarial Contribution Memorandum.
"Actuarial Contribution Date" means December 31, 1998.
"Actuarial Contribution Memorandum" has the meaning specified in Section
6.1(b).
"Adoption Date" has the meaning specified in the first paragraph hereof.
"AGC" has the meaning specified in Section 4.1.
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"Agreement and Plan of Merger" means the Agreement and Plan of Merger
between the Company and AMH, as it may be amended from time to time.
"Aggregate Fixed Component" has the meaning specified in Section 6.1(b).
"Aggregate Variable Component" has the meaning specified in Section 6.1(b).
"Allocable Shares" means the number of shares of the Company Common Stock
that will be allocated to Eligible Members. The number of Allocable Shares will
consist of the following: (i) 17,390,165 shares of Company Common Stock plus
(ii) the number of shares of Company Common Stock determined by dividing the Net
Cash Proceeds by the Stock Price.
"Amended and Restated Articles of Incorporation" has the meaning specified
in Section 4.1.
"American Mutual Life" means American Mutual Life Insurance Company, a
mutual life insurance company, the surviving company of the merger in 1994
between Central Life Assurance Company and American Mutual Life Insurance
Company.
"AmerUs Life" has the meaning specified in the third paragraph hereof.
"AmerUs Reorganization" means the reorganization of American Mutual Life
completed on June 30, 1996, whereby pursuant to Iowa law the Company was formed
as a mutual insurance holding company and American Mutual Life was converted
into a stock life insurance company and its name was changed to AmerUs Life
Insurance Company.
"AMH Special Committee" means a committee composed of independent directors
who serve on the board of directors of AMH and not on the board of directors of
the Company.
"AMH Stock" means the Class A Common Stock and the Class B Common Stock of
AMH.
"Application" has the meaning specified in Section 2.1.
"Articles of Merger" means the Articles of Merger to be filed with the Iowa
Secretary of State as specified in Section 4.2(b).
"Board" has the meaning specified in the first paragraph hereof.
"Certificate" as used in relation to group life or accident and health
insurance or group annuities means a certificate evidencing coverage under a
master policy or contract issued to the owner of such coverage.
"Chapter 508B." means Chapter 508B. of the Iowa Code.
"Closed Block" means the accounting mechanism and procedure set up by
AmerUs Life as part of the AmerUs Reorganization to provide reasonable assurance
to policyowners whose policies are included therein that, after the AmerUs
Reorganization, assets would be available to maintain the dividend scales and
interest credits in effect prior to the AmerUs Reorganization if the experience
underlying such scales and credits continued.
"Closing Price" means on any date of determination the closing sales price
(or, if no closing price is reported, the last reported sale price) of Company
Common Stock on a national securities exchange or on NASDAQ.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commissioner" means the Insurance Commissioner of the State of Iowa.
"Company" has the meaning specified in the first paragraph hereof.
"Company Common Stock" means the common stock, no par value, of the Company
which will be authorized and issued in connection with the Restructuring.
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"Company Special Committee" means a committee composed of independent
directors who serve on the board of directors of the Company and not on the
board of directors of AMH.
"Eligible Member" means a Person who is (or, collectively, the Persons who
are) on the Adoption Date the Owner of one or more Eligible Policies.
"Eligible Policy" means a Policy that has been In Force for at least one
year prior to the Adoption Date and which remains In Force on the Plan Effective
Date.
"Equity Share" has the meaning specified in Section 6.2.
"ERISA" has the meaning specified in Section 6.5.
"In Force" has the meaning specified in Section 5.3(a).
"Iowa Code" means the Code of Iowa (1999), as amended.
"IRA" means an individual retirement annuity within the meaning of Section
408 of the Code.
"Member" means a Person who is (or, collectively, the Persons who are) on a
specified date, the Owner of one or more Policies which is (are) then In Force.
"Members' Equity" means the value of all the assets of the Company net of
its liabilities and other obligations.
"Members' Meeting" has the meaning specified in Section 3.1(a).
"Membership Interests" means all of the rights or interests of Members of
the Company arising under the articles of incorporation or bylaws of the Company
or otherwise by law, including but not limited to, any right to vote and any
rights which may exist with regard to Members' Equity in the event the Company
is liquidated. All Membership Interests will be terminated on the Plan Effective
Date.
"Merger" has the meaning specified in Section 4.1.
"Mutual Owners" means Owners whose Policies are included in the Closed
Block.
"NASDAQ" has the meaning specified in Section 4.2(e).
"Net Cash Proceeds" has the meaning specified in Sections 4.2(d) and
4.2(a)(iii), taken together.
"Non-Insurance Subsidiaries" means all the directly and indirectly owned
subsidiaries of the Company except AMH and its directly and indirectly owned
subsidiaries.
"Owner" means, with respect to any Policy, the Person or Persons specified
or determined pursuant to Section 5.2 or Section 5.4.
"Participating Policy" means a Policy under which there is eligibility to
participate in the divisible surplus of AmerUs Life.
"Person" means an individual, corporation, limited liability company, joint
venture, partnership, association, trust, trustee, unincorporated entity,
organization or government or any department or agency thereof. A Person who is
the Owner of Policies in more than one legal capacity (e.g. a trustee under
separate trusts) shall be deemed to be a separate Person in each such capacity.
"Plan" means this Plan of Conversion (including all Exhibits and Schedules
hereto), as it may be corrected or amended from time to time in accordance with
Section 7.3 or 7.4.
"Plan Effective Date" has the meaning specified in Section 4.2(b).
"Policy" has the meaning specified in Section 5.1(a).
"Policy Credit" means an increase in accumulation account value (to which
no surrender or similar charge will be applied) or an increase in a dividend
accumulation on a Policy.
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"Policy Date" means, with respect to any Policy, the date specified in such
Policy as the date such Policy commences.
"Public Hearing" has the meaning specified in Section 2.2.
"Restructuring" has the meaning specified in the first paragraph hereof.
"Secretary of State" means the Secretary of State of the State of Iowa.
"Section 508B.(2)" means Section 508B.(2) of the Iowa Code, which provides
that in "lieu of selecting a plan provided for in this Chapter, a mutual company
may convert to a stock company pursuant to a plan approved by the Commissioner."
"Section 521A.14(5)(b)" means Section 521A.14(5)(b) of the Iowa Code.
"Securities Act" means the Securities Act of 1933, as amended.
"Statement Date" means December 31, 1998.
"States" means the States of the United States, District of Columbia, the
Commonwealth of Puerto Rico and Territories of the United States within the
meaning of Section 2(6) of the Securities Act and APO/FPO (military) addresses.
"Stock Price" means the greater of the Closing Price per share of Company
Common Stock on the Plan Effective Date, or the average of the Closing Price per
share of Company Common Stock for each of the first ten Trading Days commencing
with the Plan Effective Date.
"Trading Day" means a day on which the Company Common Stock (a) is not
suspended from trading on any national or regional securities exchange or NASDAQ
and (b) has traded at least once on the national or regional securities exchange
or NASDAQ that is the primary market for the trading of Company Common Stock.
"Variable Component Policy" means an Eligible Policy that is a
Participating Policy.
"Voting Member" means a Member on the Adoption Date.
ARTICLE II
APPROVAL BY THE COMMISSIONER
2.1 Application. The Company shall file with the Commissioner an
application (the "Application") to reorganize pursuant to Section 508B.(2) as a
stock holding company owned by its shareholders in a transaction whereby the
Eligible Members will exchange their Membership Interests in the Company for the
consideration received as a result of the Plan and immediately thereafter the
Company (in its stock form) shall merge with AMH from which the Company will be
the surviving entity. The Application shall include the following:
(a) the Plan of Conversion;
(b) the form of Agreement and Plan of Merger;
(c) the form of notice of the Public Hearing;
(d) the form of notice of the Members' Meeting;
(e) the form of ballot to be solicited from Voting Members;
(f) the information required by Section 508B.6 of the Iowa Code; and
(g) any other information or documentation required by the
Commissioner.
2.2 Commissioner's Public Hearing; Commissioner's Order. The Plan of
Conversion is subject to the approval of the Commissioner. The Commissioner will
hold a hearing on the fairness and equity of the terms of the Plan and on
whether the Company will have the amount of capital and surplus necessary for
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its future solvency (the "Public Hearing"). The Company, its Members and other
interested persons, shall have the right to appear at the hearing.
2.3 Notice of Public Hearing. (a) Written notice by the Company of such
Public Hearing, in a form satisfactory to the Commissioner, shall be mailed by
first class or delivered by the Company at the Company's expense at least 30
days prior to the Public Hearing to each Voting Member, and other interested
persons as determined by the Commissioner. Such notice of Public Hearing shall
be accompanied or preceded by information relevant to the Public Hearing,
including the time, date, place and purpose of the Public Hearing.
(b) The Company shall give notice of such Public Hearing by publication
once in each of the Des Moines Register and USA Today (National Edition) and by
posting on the Company's website. Such newspaper publications and Company
website postings shall not be less than 30 days before the Public Hearing, and
shall be in a form satisfactory to the Commissioner.
ARTICLE III
APPROVAL BY MEMBERS
3.1 Member Vote. (a) The Company shall hold a special meeting of Members
(the "Members' Meeting"). At the Members' Meeting, the Voting Members shall be
entitled to vote on the proposal to approve the Plan and the Merger in person or
by ballot. Voting Members may designate another person to act as proxy to vote
their ballot.
(b) The Plan and the Merger are subject to the approval of not less than
two-thirds of the votes of the Voting Members voting thereon in person or by
ballot at the Members' Meeting.
(c) Each Voting Member shall be entitled to one vote pursuant to the
Articles of Incorporation of the Company, regardless of the number of Policies
or amount of insurance and benefits held by such Voting Member. Two or more
persons who qualify as Voting Members under a single Policy shall be deemed one
Voting Member for purposes of voting and collectively shall be entitled to one
vote.
3.2 Notice of Members' Meeting. (a) The Company shall mail by first class
mail notice of the Members' Meeting to all Voting Members. The notice shall set
forth the reasons for the ballot vote and the time and place of the Members'
Meeting, and shall enclose one ballot for each Voting Member. Such notice and
ballot shall be mailed to the address of each Voting Member as it appears on the
records of the Company at least 20 days prior to the Members' Meeting. The
notice shall be in a form satisfactory to the Commissioner.
(b) Such notice of the Members' Meeting shall be accompanied by the ballot
and information relevant to the Members' Meeting, including a copy or summary of
the Plan and other explanatory information. Such notice period for the Members
Meeting may run concurrently with the notice period for the Public Hearing
provided in Section 2.3.
(c) The Company shall give notice of such Members' Meeting by publication
once in each of the Des Moines Register and USA Today (National Edition) and by
posting on the Company's website. Such newspaper publications and Company
website postings shall not be less than 20 days before the Members' Meeting, and
shall be in a form satisfactory to the Commissioner.
ARTICLE IV
THE RESTRUCTURING
4.1 Effect of Restructuring on the Company. Upon the Plan Effective Date,
the Company shall be converted from a mutual insurance holding company to a
stock company in accordance with Section 521A.14(5)(b) and Chapter 508B. and AMH
will be merged with and into the Company in accordance with the Agreement and
Plan of Merger (the "Merger"), the form of which is attached hereto
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as Exhibit A. Additionally, in connection with the Restructuring, the Company
will liquidate AmerUs Group Co. ("AGC"), a wholly-owned subsidiary of the
Company which is currently the intermediate holding company of AMH, into the
Company. Upon the Plan Effective Date, the amended and restated articles of
incorporation and bylaws of the Company shall be substantially in the form set
forth in Exhibits B and C, respectively. AmerUs Life shall become a direct
wholly-owned subsidiary of the Company as a result of the transactions
contemplated by the Plan upon the Plan Effective Date.
4.2 Effectiveness of Plan. (a) The following conditions must be met before
the Plan becomes effective:
(i) the Company shall have received the approvals contemplated by
Articles II and III;
(ii) the Company shall have received, on or prior to the Plan
Effective Date, the opinions of special tax counsel to the Company,
addressed to the Board and in form and substance satisfactory to the Board,
substantially to the effect that:
(1) the liquidation of AGC into the Company will be tax free to AGC
and the Company;
(2) the reorganization of the Company pursuant to the Plan and the
extinguishment of the Members' Membership Interests will not result in
the recognition of any gain or loss for federal income tax purposes by
the Company;
(3) the merger of AMH with and into the Company will be tax free to
both AMH and the Company and the shareholders of AMH will recognize no
gain or loss from the receipt of Company Common Stock in exchange for
AMH Stock;
(4) Policies issued by AmerUs Life prior to the Plan Effective Date
will not be deemed newly issued, issued in exchange for existing
Policies or newly purchased for any material federal income tax purposes
as a result of the consummation of the Plan;
(5) with respect to any Policy described in Section 6.3(a)(i), (ii)
or (iii), the crediting of consideration in the form of Policy Credits
to such Policy will not:
(A) be treated as a distribution that would affect the treatment
of the Policy under Section 402, 403(b), or 408 of the Code;
(B) be treated as a distribution or contribution with respect to
the Policy that would result in a penalty tax under Section 72(e),
72(t), 4973, or 4979 of the Code;
(C) result in current taxable income to the member owning the
Policy;
(D) be treated for purposes of Section 72 of the Code as part of
the investment in the Policy, but will be treated for purposes of
Sections 403 and 408 of the Code as investment earnings attributable
to the year in which the policy credits are issued; and
(E) be subject to withholding pursuant to Section 3405 of the
Code.
(6) Eligible Members receiving solely Company Common Stock pursuant
to Section 6.3 will not recognize gain or loss for federal income tax
purposes as a result of the consummation of the Plan; and
(7) the summary of the principal federal income tax consequences to
Eligible Members resulting from their receipt of consideration pursuant
to Section 6.3, set forth in the information provided to Eligible
Members pursuant to Section 3.2, to the extent that it describes matters
of law or legal conclusions, is, subject to the limitations and
assumptions set forth therein, an accurate summary of the material
federal income tax consequences to Eligible Members of the consummation
of the Plan under the federal income tax law and remains accurate as of
the Plan Effective Date, except for any changes in law, regulations or
official interpretations occurring after the date thereof and before the
Plan Effective Date, the effect of which the Board, in its
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discretion, has determined (taking into account any remedial action the
Board may authorize or direct) to be not materially adverse to the
interests of the Eligible Members; and
(iii) simultaneously with the effectiveness of the Plan, the Merger
shall occur and the Company shall have credited to Net Cash Proceeds an
amount of cash equal to the fair value (taking into account liabilities) of
the Company's ownership interest in the Non-Insurance Subsidiaries as
determined jointly by the boards of directors of the Company and AMH as of
the Adoption Date. The Company Special Committee and the AMH Special
Committee, who have received advice from independent financial and legal
advisors, have each made recommendations to the board of directors of their
respective companies with respect to the fair value of the Non-Insurance
Subsidiaries and other matters. The Company Special Committee and the AMH
Special Committee have agreed that fair value of the Non-Insurance
Subsidiaries is $92.6 million. The amount of compensation for serving on
the Company Special Committee or the AMH Special Committee will be
determined by the boards of directors of each company.
(b) The effective date of the Plan (the "Plan Effective Date") shall be the
date and time set forth in the properly executed Articles of Merger duly filed
with the Secretary of State as the effective date and time of the Merger, which
shall be a date occurring after approval of the Plan by the Commissioner and the
Voting Members, provided that in no event shall the Plan Effective Date be more
than 12 months after the date on which the Commissioner approved or
conditionally approved the Plan, unless such period is extended by the
Commissioner.
(c) Upon the Plan becoming effective:
(i) the Company shall become a stock holding company by operation of
Section 521A.(14)(5)(b) and Chapter 508B. and the corporate existence of
the Company before, on or after the Plan Effective Date shall continue
without interruption, and all of its rights, privileges, powers, permits
and licenses and all of its duties, liabilities and obligations shall be,
remain and continue unaffected;
(ii) all Membership Interests shall be extinguished;
(iii) Eligible Members shall be entitled to receive in exchange for
their Membership Interests shares of Company Common Stock, cash or Policy
Credits in accordance with Section 6.3;
(iv) the amended and restated articles of incorporation referred to in
Section 4.1 shall be effective and the Company's name shall be changed to
AmerUs Group Co.; and
(v) the Merger shall be effective.
(d) After the Plan Effective Date, the Company shall issue shares of
Company Common Stock to Eligible Members entitled to receive Company Common
Stock in accordance with Section 6.3(c) and the Company shall distribute the Net
Cash Proceeds (as defined below) in the form of cash or Policy Credits to the
Eligible Members entitled to receive cash or Policy Credits in accordance with
Section 6.3(b). The "Net Cash Proceeds" means the cash balances of the Company
immediately prior to the Plan Effective Date (including the amount of cash to be
credited pursuant to Section 4.2(a)(iii)) after deducting expenses relating to
the Plan, and all other expenses of the Company accrued as of the Plan Effective
Date and liabilities, provided, however, that Net Cash Proceeds shall not
include any capital raised by the Company on or prior to the Plan Effective Date
pursuant to Section 4.2(f) of the Plan.
(e) The Company shall arrange for the listing or quotation of Company
Common Stock on a national securities exchange [or on the National Association
of Securities Dealers Automated Quotations National Market System (the
"NASDAQ")] and shall use its best efforts to keep Company Common Stock listed or
quoted on a national securities exchange or on NASDAQ for so long as the Company
is a publicly-traded company. It is expected that the Company's Common Stock
will be listed on the New York Stock Exchange under the trading symbol, "AMH".
Such listing or quotation and such efforts by the Company to keep such listing
or quotation shall be in satisfaction of any duty the Company may have to
encourage
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and assist in the establishment of a public market for shares of Company Common
Stock. Except as provided in Section 6.4, the Company shall have no obligation
to provide a procedure for the sale of shares of Company Common Stock.
(f) On or prior to the Plan Effective Date, the Company may raise capital
through (1) a private placement or public offering of debt, preferred stock, or
a combination thereof, or (2) bank borrowings or such other means as the Board
may determine. The capital to be raised shall be in such amounts as the Board
shall determine.
4.3 Plan Implementation. On the Plan Effective Date, the actions necessary
to complete the Restructuring will occur in the following order: (i) AGC will be
liquidated into the Company; (ii) the Company will convert from a mutual
insurance holding company to a stock holding company pursuant to Section
521A.14(5)(b) and Chapter 508B.; (iii) the Amended and Restated Articles of
Incorporation will be filed with the Secretary of State; and (iv) the Articles
of Merger will be filed with the Iowa Secretary of State.
ARTICLE V
POLICIES
5.1 Policies. (a) (i) Each individual and group life insurance policy
(including, without limitation, a pure endowment contract), annuity contract or
accident and health insurance policy that has been issued by AmerUs Life,
including each supplemental contract, and (ii) each other interest referred to
in Section 5.4, is deemed to be a Policy for purposes of the Plan.
(b) The following policies and contracts shall not be deemed to be Policies
for purposes of the Plan:
(i) any certificate issued to an insured pursuant to a group life or
health insurance policy, except as set forth in Section 5.4(a); and
(ii) any certificates issued pursuant to a group annuity contract
except as set forth in Section 5.4(a); and
(iii) any reinsurance assumed on an indemnity basis (but certificates
of assumption constitute Policies if the issuing company was a mutual life
insurance company and they otherwise fall within the definition of
Policies).
5.2 Determination of Ownership. Unless otherwise stated herein, the Owner
of any Policy as of any date specified in the Plan shall be determined by the
Company on the basis of AmerUs Life's records as of such date in accordance with
the following provisions:
(a) The Owner of a Policy that is an individual insurance policy or annuity
contract (including each Certificate deemed to be a Policy pursuant to Section
5.4(a)) shall be the Person specified in such Policy as the owner or contract
holder unless no owner or contract holder is so specified, in which case (i) the
Owner of a Policy that is an individual policy of life insurance or of accident
and health insurance shall be deemed to be the Person insured, if such Policy
was issued upon the application of such Person, or the Person who effectuated
such Policy, if such Policy was issued on the application of a Person other than
the Person insured, and (ii) the Owner of a Policy that is an annuity or pure
endowment contract shall be deemed to be the Person to whom such Policy is
payable by its terms.
(b) Except as specified in Section 5.4, the Owner of a Policy that is a
group insurance policy or group annuity contract shall be the Person or Persons
specified in the policy or contract as the holder thereof, unless no holder is
so specified, in which case the Owner shall be the Person or Persons to whom or
in whose names the policy or contract shall have been issued, as shown on AmerUs
Life's records.
(c) Notwithstanding Sections 5.2(a) and (b), if on or prior to the
specified date in the Plan, a Policy has been assigned to another Person by an
assignment of ownership thereof absolute on its face and filed with AmerUs Life,
in accordance with the provisions of such Policy and AmerUs Life's rules with
respect
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to the absolute assignment of such Policy in effect at the time of such
assignment, then the Owner of such Policy shall be deemed to be the assignee of
such Policy as shown on the records of AmerUs Life for the purposes of the Plan.
Unless an assignment satisfies the requirements specified for such an assignment
in this Section 5.2(c), the determination of the Owner of a Policy shall be made
without giving effect to such assignment.
(d) Notwithstanding Sections 5.2(a), (b) and (c), with respect to a Policy
that funds an employee benefit plan and that has been assigned by an assignment
that is absolute on its face, subsequent to one year prior to the Adoption Date
and before the Plan Effective Date as provided above, to a trust for such plan
that is qualified under Section 401(a), 403(a) or 501(c)(9) of the Code, such
trust shall be deemed to have been the Owner on the Adoption Date and as of the
Plan Effective Date for purposes of Sections 6.1(b) and 6.2 and the definition
of Eligible Member set forth in Article I hereof.
(e) In no event may there be more than one Owner of a Policy, although more
than one Person may constitute a single Owner. If a Person owns a Policy with
one or more other Persons, they will constitute a single Owner with respect to
the Policy.
(f) Except as otherwise set forth in this Article V, the identity of the
Owner of a Policy shall be determined by the Company without giving effect to
any interest of any other Person in such Policy.
(g) In any situation not expressly covered by the foregoing provisions of
this Section 5.2, the Owner of a Policy, as reflected on the records of AmerUs
Life and determined in good faith by, the Company, shall be presumed to be the
Owner of such Policy for purposes of this Section 5.2, and, except for
administrative errors, the Company shall not be required to examine or consider
any other facts or circumstances.
(h) The Owner of a supplementary contract or other settlement option issued
in settlement of the proceeds under any of AmerUs Life's insurance policies or
annuity contracts shall be the Person entitled to payments at such date under
such contract or option.
(i) The mailing address of an Owner as of any date for purposes of the Plan
shall be the Owner's last known address as shown on the records of AmerUs Life
as of such date.
(j) Any dispute as to the identity of the Owner of a Policy or the right to
vote or receive consideration shall be determined in accordance with the
foregoing or such other procedures as may be acceptable to the Commissioner.
5.3 In Force.
(a) Except as otherwise provided in Section 5.4, a Policy shall be deemed
to be in force ("In Force") as of any date if, as shown on AmerUs Life's records
on such date, the Policy Date of such Policy occurs on or prior to such date,
and as of such date the required premium has been received by AmerUs Life and
such Policy, as shown on AmerUs Life's records on such date, has not matured by
death or otherwise or been surrendered or otherwise terminated; provided that
(i) a Policy that is a life insurance policy shall be deemed to be In Force
after lapse for nonpayment of premiums during any applicable grace period as
administered by AmerUs Life and for so long as it continues as reduced paid-up
insurance or as extended term insurance on the records of AmerUs Life, (ii)
except as otherwise provided in Section 5.3(c), a Policy that is a supplementary
contract or other settlement option issued in settlement of proceeds under any
of AmerUs Life's insurance policies or annuity contracts shall be deemed to be
In Force in accordance with its Policy Date as shown on AmerUs Life's records on
any determination date, without regard to any prior period during which a
predecessor Policy was In Force, (iii) a Policy that has been reinstated after
the Adoption Date shall not be deemed to be In Force for purposes of the Plan,
(iv) a group Policy shall not be deemed to be In Force on any date if on that
date the Policy has terminated and the Company's only obligations with respect
to such Policy are either to Certificate holders on disability waiver or on
disability under such Policy, are for unpaid claims incurred under such Policy
prior to termination or are to pay or to continue paying fixed retirement
annuity amounts to individuals previously covered under the terminated Policy,
and (v) an individual Policy shall not be deemed to be In
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Force on any date if on that date the Policy has terminated and AmerUs Life's
only obligations with respect to such Policy are to the policyholder of such
Policy on disability under such Policy or are for unpaid claims incurred under
such Policy prior to its termination.
(b) Notwithstanding the fact that a new Policy has been issued as a result
of the exercise of a right under a predecessor Policy, such new Policy shall be
deemed to be In Force in accordance with its Policy Date, without regard to the
Policy Date of the predecessor Policy.
(c) A Policy shall not be deemed to be In Force until it is issued,
notwithstanding that temporary insurance upon application for such Policy may
have been In Force prior to the Policy Date of such Policies.
(d) A Policy shall not be deemed to have matured by death as of any date
unless notice of such death has been received by AmerUs Life on or prior to such
date, as shown on AmerUs Life's records. The date of the surrender or lapse of a
Policy shall be as shown on AmerUs Life's records.
(e) In the case of any reinstated policy deemed pursuant to this Plan of
Conversion to be a Variable Component Policy, the determination of such Policy's
Actuarial Contribution pursuant to Article VI shall be made based on the Policy
Date of such Policy and without regard to any lapse or reinstatement.
(f) Any dispute as to whether a Policy is In Force shall be determined by
the Company in good faith.
5.4 Certain Group Policies and Contracts. (a) Each Certificate issued
under any of AmerUs Life's group annuity contracts as part of a custodial 403(b)
or IRA arrangement or as part of a non-ERISA 403(b) arrangement shall be deemed
to be a Policy, the Owner of which shall be determined in accordance with
Section 5.2. Such Certificate shall be deemed to be In Force as of any date if,
as shown on AmerUs Life's records on such date, such Certificate's Policy Date
occurs on or prior to such date and such Certificate has not terminated on or
before such date. The custodian or employer-sponsor holding such group annuity
contracts shall not be a Voting Member or an Eligible Member or an Owner.
(b) Subject to Section 5.3(a), each Person who signs a participation or
subscription agreement to participate in any trust established by AmerUs Life
for the purpose of securing group life, accident and health or annuity coverage
shall be deemed to be an Owner of a Policy that shall be deemed to be In Force
as of any date, if such Person's participation or subscription agreement is in
effect as of such date as shown on AmerUs Life's records. Neither the trustee of
any such trust established by the Company nor any insured shall be an Eligible
Member or an Owner.
ARTICLE VI
ALLOCATION OF MEMBER CONSIDERATION
6.1 Allocation of Allocable Shares. (a) The consideration to be given to
Eligible Members in exchange for their Membership Interests shall be shares of
Company Common Stock, cash or Policy Credits as provided in this Article VI
equal in value to the value of the Members' Equity as determined by reference to
17,390,165 shares of Company Common Stock to be distributed plus Net Cash
Proceeds. Solely for purposes of calculating the amount of such consideration,
each Eligible Member will be allocated (but not necessarily issued) shares of
Company Common Stock in accordance with this Article VI. In no event, will the
number of shares of Company Common Stock issued to Eligible Members as provided
in Section 6.3(c) exceed 17,390,165 shares.
(b) Each Eligible Member shall be allocated out of the Allocable Shares a
number of shares of Company Common Stock equal to the sum of:
(1) a fixed component of consideration equal to 20 shares of Company
Common Stock for such Eligible Member; and
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(2) if applicable, a variable component of consideration equal to the
portion, if any, of the Aggregate Variable Component allocated with respect
to each Variable Component Policy of which such Eligible Member is the
Owner.
The Allocable Shares shall be allocated first to provide for the number of
shares required for the aggregate fixed component of consideration allocable in
respect of all Eligible Members (the "Aggregate Fixed Component"), and the
remainder of the Allocable Shares shall constitute the aggregate variable
component of consideration (the "Aggregate Variable Component"). The Aggregate
Variable Component shall be allocated in respect of the Variable Component
Policies in accordance with the principles set forth in Section 6.2 and the
calculation of actuarial contribution described in the Actuarial Contribution
Memorandum (the "Actuarial Contribution Memorandum") attached as Exhibit D.
6.2 Allocation of Aggregate Variable Component. The Aggregate Variable
Component shall be allocated to Eligible Members with respect to Variable
Component Policies as follows:
(i) Such allocation shall be made by multiplying an Equity Share
(defined below) for each Variable Component Policy by the number of shares
of Company Common Stock constituting the Aggregate Variable Component and,
for each Variable Component Policy, rounding such result to the nearest
integral number of shares (with one-half being rounded upward). Because of
such rounding, the aggregate of Eligible Members' Variable Components will
not necessarily be equal to the Aggregate Variable Component. In the event
the aggregate of Eligible Members' Variable Component is greater than the
Aggregate Variable Component, the Company will reduce the aggregate of
Eligible Members' Variable Component by rounding down to the nearest
integral number of shares, starting with one-half shares, until the
aggregate of Eligible Members' Variable Component is not greater than the
Aggregate Variable Component.
(ii) The Equity Share for each Variable Component Policy shall be
equal to the ratio of the Actuarial Contribution for such Variable
Component Policy to the sum of all Actuarial Contributions of all Variable
Component Policies.
(iii) The Company shall make reasonable determinations of the dollar
amount of the Actuarial Contribution, which shall be zero or a positive
number, for each Variable Component Policy, according to the principles and
methodologies set forth in detail in the Actuarial Contribution Memorandum.
(iv) Each such Actuarial Contribution shall be determined on the basis
of AmerUs Life's records as of the Actuarial Contribution Date.
6.3 Payment of Consideration. (a) The Company shall pay or credit cash or
Policy Credits (in an amount determined pursuant to Section 6.3(b)) to each
Eligible Member based on the number of shares of Company Common Stock allocated
to such Eligible Member, or the Company shall issue a number of shares of
Company Common Stock equal to the number of shares allocated to such Eligible
Member, as provided in this Article VI as follows:
(i) Policy Credits to the extent shares of Company Common Stock are
allocable with respect to a Policy that is an individual retirement annuity
contract within the meaning of Section 408(b) of the Code or a tax
sheltered annuity contract within the meaning of Section 403(b) of the
Code;
(ii) Policy Credits to the extent shares of Company Common Stock are
allocable with respect to a Policy that is an individual annuity contract
that has been issued pursuant to a plan qualified under Section 401(a) of
the Code directly to the plan participant;
(iii) Policy Credits to the extent that shares of Company Common Stock
are allocable with respect to a Policy that is an individual life insurance
policy that has been issued pursuant to a plan qualified under Section
401(a) of the Code directly to the plan participant;
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(iv) cash to the extent that shares of Company Common Stock are
allocable to an Eligible Member whose address for mailing purposes as shown
on the records of the Company is an address at which mail is undeliverable,
unless the Policy is one of the types described in clauses (i) through
(iii) of this Section 6.3(a);
(v) cash to the extent that shares of Company Common Stock are
allocable with respect to a Policy and such Policy is known to the Company
to be subject to a creditor lien (other than a policy loan made by AmerUs
Life) or bankruptcy proceeding, unless the Policy is one of the types
described in clauses (i) through (iii) of this Section 6.3(a);
(vi) cash to the extent that shares of Company Common Stock are
allocable to an Eligible Member whose address for mailing purposes as shown
on the records of the Company is located outside the States of the United
States of America, unless the Policy is one of the types described in
clauses (i) through (iii) of this Section 6.3(a);
(vii) except as otherwise provided in clauses (i) through (vi) of this
Section 6.3(a), the Company Common Stock if such Eligible Member has
affirmatively elected, on a form provided to such Eligible Member that has
been properly completed and received by the Company on or prior to the date
of the Special Meeting referred to in Section 3.1, a preference to receive
Common Stock; and
(viii) except as provided in clauses (i) through (vii) of this Section
6.3(a), and subject to Section 6.3(d), cash.
In the event that an Eligible Member who is the Owner of more than one Eligible
Policy is entitled to receive consideration under this Article VI both in the
form of Policy Credits and in the form of cash or shares of Company Common
Stock, cash or shares of Company Common Stock with respect to the fixed
component of consideration payable to such Eligible Member shall be payable only
with respect to those Eligible Policies for which only cash or shares of Company
Common Stock are paid. In the event that an Eligible Member who is the Owner of
more than one Eligible Policy is entitled to receive consideration under this
Article VI only in the form of Policy Credits, the fixed component of
consideration payable to such Eligible Member shall be payable with respect to
the Eligible Policy with the earliest Policy Date.
(b) If consideration is to be paid or credited to an Eligible Member in
cash or Policy Credits, as the case may be, pursuant to the Plan, the amount of
such consideration shall be equal to the number of shares of Company Common
Stock allocable to such Eligible Member as provided in this Article VI
multiplied by the Stock Price. The Company shall use reasonable efforts to make
payment of such consideration as soon as reasonably practicable after the Plan
Effective Date net of any applicable withholding tax, or the crediting of a
Policy Credit, as the case may be.
(c) As soon as reasonably practicable after the Plan Effective Date, the
Company shall (i) issue to each Eligible Member, in book-entry form as
uncertificated shares, the shares of Company Common Stock allocated to such
Eligible Member for which such Eligible Member will not receive consideration
from the Company in the form of cash or Policy Credits, and (ii) mail to each
such Eligible Member an appropriate notice that a designated number of shares of
Company Common Stock have been registered in the name of such Eligible Member.
Upon request of the registered holder of such shares issued in book-entry form
as uncertificated shares, the Company shall promptly mail a stock certificate
representing such shares to the registered holder.
(d) Subject to the provisions of the following sentence, the total amount
of funds available to be distributed in cash or credited as Policy Credits to
Eligible Members described in clauses (i) through (vi) and clause (viii) of
Section 6.3(a) shall be equal to the amount of Net Cash Proceeds available to
the Company pursuant to Section 4.2(d). If the amount available to be paid by
the Company to such Eligible Members as determined under the preceding sentence
is inadequate, after the payment and crediting of cash and Policy Credits
pursuant to clauses (i) through (vi) of Section 6.3(a), to pay cash to all the
Eligible Members referenced in Section 6.3(a)(viii), the amount available shall
be distributed by the
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Company to such Eligible Members in accordance with the number of shares of
Company Common Stock allocated, beginning with the Eligible Members allocated no
more than the number of shares of Company Common Stock constituting the fixed
component of consideration and continuing to the highest level of share
allocation possible at which cash preferences can be satisfied using such amount
of available funds. In the event that the amount of available funds is not
sufficient to meet cash preferences with respect to Eligible Members entitled to
the same number of shares of Company Common Stock, such available funds shall be
paid to such Eligible Members pro rata, provided, however, that amounts shall be
paid only to the extent representing whole shares of Company Common Stock. Such
Eligible Members shall receive the remainder of the consideration to be paid in
Company Common Stock. In the event that Eligible Members elect to receive shares
of Company Common Stock in an amount that results in the Net Cash Proceeds not
being fully utilized and the number of shares of Company Common Stock to be
issued to Members in connection with the Restructuring being in excess of
17,390,165 shares, then the number of shares of Company Common Stock to be
issued to Members in connection with the Restructuring will be reduced to
17,390,165 shares in a fair and equitable manner and the amount of the remaining
Net Cash Proceeds will be distributed by the Company in a fair and equitable
manner to Eligible Members electing to receive Company Common Stock necessary to
reduce Net Cash Proceeds to zero.
(e) In the event that more than one Person constitutes a single Owner of a
Policy, consideration allocated pursuant to this Article VI may be distributed
jointly to such Persons.
6.4 Commission-Free Program. The Company may establish a commission-free
program which shall begin at such time after the 180th day following the Plan
Effective Date and before the 12-month anniversary of the Effective Date, and
shall continue for 3 months or for such longer period of time, as the Board of
Directors of the Company may determine to be appropriate and in the best
interest of the Company and its shareholders. Pursuant to such program, each
Eligible Member who receives under the Plan a number of shares of Company Common
Stock that is less than or equal to a number specified by the Board of Directors
of the Company (which number shall not be more than 99) shall be entitled to
sell at prevailing market prices all, but not less than all, the shares of
Company Common Stock received hereunder by such Eligible Member, without paying
brokerage commissions, mailing charges, registration fees, or other
administrative or similar expenses. Record holders of a number of shares of
Company Common Stock that is less than or equal to a number specified by the
Board of Directors of the Company (which number shall not be more than 99) shall
be entitled to purchase at prevailing market prices additional shares to
round-up their holdings to 100 shares, without paying brokerage commissions,
mailing charges, registration fees or other administrative or similar expenses.
The Company shall establish administrative procedures for the delivery of
requests to sell or purchase shares of Company Common Stock and for the sale or
purchase of such shares of Company Common Stock through such program. The
Company may, in its discretion, institute one or more commission-free programs
in the future, but is not required to do so.
6.5 ERISA Plans. The Company will apply to the Department of Labor for an
exemption from Section 406 of the Employee Retirement Income Security Act of
1974 ("ERISA") and Section 4975 of the Code with respect to the receipt of
consideration pursuant to the Plan by employee benefit plans subject to the
provisions of such sections. Notwithstanding any other provision of the Plan, if
such exemption is not granted prior to the Plan Effective Date, the Company may
delay payment of such consideration to such Eligible Members who are subject to
such provisions and may place such consideration in an interest bearing escrow
or similar arrangement subject to terms and conditions approved by the
Commissioner. Any such escrow or arrangement shall provide for payment to
Eligible Members of such consideration plus interest earned thereon not later
than the third anniversary of the Plan Effective Date and all costs and expenses
of such escrow or arrangements shall be borne by the Company.
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ARTICLE VII
ADDITIONAL PROVISIONS
7.1 Notices. If the Company complies substantially and in good faith with
the requirements and the terms of the Plan with respect to the giving of any
required notice to members, its failure in any case to give such notice to any
person or persons entitled thereto shall not impair the validity of the actions
and proceedings taken under Section 521A.14(5)(b) and Chapter 508B. and the Plan
or entitle such person to any injunctive or other equitable relief with respect
thereto.
7.2 Directors. The Company shall take action in accordance with Iowa law
to cause the number of directors comprising the Company's board of directors on
the Plan Effective Date to be eleven (11) persons. In accordance with Section 2
of Article VII of the Amended and Restated Articles of Incorporation attached
hereto as Exhibit B, the Board will be divided into three classes as follows:
Class I -- Wesley H. Boldt, Roger K. Brooks and F. A. Wittern, Jr.; Class
II -- John R. Albers, Dr. Joseph A. Borgen, Thomas F. Gaffney and Jack C.
Pester; and Class III -- Malcolm Candlish, John W. Norris, Ralph W. Laster, Jr.
and John A. Wing.
7.3 Corrections. The Company may, until the Plan Effective Date, by an
instrument executed by its Chairman, Chief Executive Officer, Vice Chairman,
President or any Executive Vice President, attested by its Secretary or
Assistant Secretary under the Company's corporate seal and submitted to the
Commissioner, make such modifications as are appropriate to correct errors,
clarify existing items or make additions to correct manifest omissions in the
Plan (including the Exhibits and Schedules). The Company may in the same manner
also make such modifications as may be required by the Commissioner after the
Public Hearing as a condition of approval of the Plan.
7.4 Amendment or Withdrawal of the Plan. The Plan may be amended by the
Board at any time prior to filing the Application. Thereafter, at any time prior
to the Plan Effective Date, the Board may withdraw or, with the Commissioner's
approval, amend the Plan.
7.5 Costs and Expenses. All reasonable costs and expenses of the
Commissioner related to the review of the Plan, including those costs
attributable to the use of experts, shall be paid by the Company.
7.6 Governing Law. The terms of the Plan shall be governed by and
construed in accordance with the laws of the State of Iowa.
IN WITNESS WHEREOF, American Mutual Holding Company, by authority of its
Board of Directors, has caused the Plan of Conversion to be duly executed as of
the date first above written.
AMERICAN MUTUAL HOLDING
COMPANY
By: /s/ ROGER K. BROOKS
----------------------------------
Roger K. Brooks
Chairman, President and Chief
Executive Officer
ATTEST:
/s/ JAMES A. SMALLENBERGER
- ------------------------------------
James A. Smallenberger
Senior Vice President and Secretary
B-16
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AMENDMENT NO. 1
TO
PLAN OF CONVERSION
OF
AMERICAN MUTUAL HOLDING COMPANY
THIS AMENDMENT NO. 1 dated February 18, 2000, is made to the Plan of
Conversion of American Mutual Holding Company (the "Company") dated December 17,
1999.
WHEREAS, the Company's Board of Directors has previously adopted a Plan of
Conversion which provides for the conversion of the Company from a mutual
insurance holding company into a stock holding company in accordance with the
requirements of Section 521A.14(5)(b) and Chapter 508B. of the Code of Iowa
(1999) (the "Conversion") and the merger of AmerUs Life Holdings, Inc. ("AMH")
with and into the Company, with the Company the survivor in such merger (the
"Merger") (the Conversion and the Merger are hereinafter collectively referred
to as the "Restructuring");
WHEREAS, subsequent to the date of the Plan of Conversion, the Company and
AMH entered into a Combination and Investment Agreement (the "Combination
Agreement"), by and among the Company, AMH, Indianapolis Life Insurance Company,
an Indiana mutual insurance company ("Indianapolis Life"), and The Indianapolis
Life Group of Companies, Inc., an Indiana corporation ("ILGC"), pursuant to
which among other things, the Company, AMH, Indianapolis Life and ILGC will
enter into a strategic combination pursuant to a series of transactions in which
the Company and AMH will first complete the Restructuring and Indianapolis Life
will thereafter complete a plan of conversion under applicable provisions of the
insurance law of the State of Indiana (the "Indianapolis Life Demutualization")
with Indianapolis Life remaining an Indiana domiciled life insurance company
while becoming an indirect wholly-owned stock subsidiary of the Company upon
completion of the Indianapolis Life Demutualization;
WHEREAS, the Combination Agreement requires that AMHC and/or AMH invest
$100 million in ILGC ("ILGC Investment") in return for 105.96 shares of
non-voting common stock of ILGC which represents 45% of the equity in ILGC (the
non-voting common stock will be exchangeable for ILGC voting stock upon receipt
of regulatory approval for such exchange) (the 45% equity interest of AMHC
and/or AMH in ILGC regardless of whether represented by non-voting or voting
common stock of ILGC is hereinafter referred to as the "ILGC Common Stock");
WHEREAS, at the request of AMH, AMHC will initially invest the $100 million
for the ILGC Common Stock;
WHEREAS, AMHC and AMH have entered into or will enter into a Purchase
Agreement to permit AMHC to sell and require AMH to purchase the ILGC Common
Stock upon the occurrence of certain events set forth in the Purchase Agreement;
WHEREAS, the Board desires to amend the Plan of Conversion to reflect the
Indianapolis Life Demutualization and the ILGC Investment.
NOW THEREFORE, in consideration of the above premises, the Plan of
Conversion shall be amended and supplemented as follows:
1. Article I Definitions shall be amended to add the following items
having the following meanings:
a. "Combination Agreement" shall mean the agreement by and among
the Company, AMH, Indianapolis Life and ILGC pursuant to which among
other things, the Company, AMH, Indianapolis Life and ILGC will enter
into a strategic combination pursuant to a series of transactions in
which the Company and AMH will first complete the Restructuring and
Indianapolis Life will thereafter complete the Indianapolis Life
Demutualization.
b. "ILGC" shall mean The Indianapolis Life Group of Companies, an
Indiana corporation, which is a 61.3% owned subsidiary of Indianapolis
Life.
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<PAGE> 155
c. "ILGC Common Stock" shall mean the 105.96 shares of non-voting
common stock of ILGC (exchangeable for ILGC voting stock upon receipt of
regulatory approval for such exchange), representing a 45% equity
interest in ILGC, which will be purchased by the Company.
d. "ILGC Common Stock Consideration" shall mean (i) zero if the
Purchase Price (as defined in the Purchase Agreement) has been paid in
full to the Company in accordance with the terms of the Purchase
Agreement or, (ii) if the Purchase Price has not been paid in full, an
amount equal to (a) what the Purchase Price would have been had the
purchase rights of the Company been exercised on the Plan Effective Date
less (b) any payments which have been made by AMH in partial
satisfaction of its obligations under the Purchase Agreement.
e. "Indianapolis Life" shall mean Indianapolis Life Insurance
Company, an Indiana mutual insurance company.
f. "Indianapolis Life Demutualization" shall mean the completion of
a plan of conversion by Indianapolis Life under applicable provisions of
the insurance law of the State of Indiana with Indianapolis Life
converting from a mutual life insurance company to a stock life
insurance company and remaining an Indiana domiciled life insurance
company while becoming an indirect wholly-owned subsidiary of the
Company.
g. "Purchase Agreement" shall mean an agreement between the Company
and AMH whereby the Company is permitted to sell and AMH is required to
purchase the ILGC Common Stock upon the occurrence of certain events
specified therein.
2. Section 4.2(a)(iii) shall be amended in its entirety to read as
follows:
(iii) simultaneously with the effectiveness of the Plan, the Merger
shall occur and the Company shall have credited to Net Cash Proceeds an
amount of cash equal to (i) the ILGC Common Stock Consideration plus,
(ii) the fair value (taking into account liabilities) of the Company's
ownership interest in the Non-Insurance Subsidiaries as determined
jointly by the boards of directors of the Company and AMH as of the
Adoption Date. The Company Special Committee and the AMH Special
Committee, who have received advice from independent financial and legal
advisors, have each made recommendations to the board of directors of
their respective companies with respect to the fair value of the
Non-Insurance Subsidiaries and other matters. The Company Special
Committee and the AMH Special Committee have agreed that fair value of
the Non-Insurance Subsidiaries is $92.6 million. The amount of
compensation for serving on the Company Special Committee or the AMH
Special Committee will be determined by the boards of directors of each
company.
3. Section 4.2(d) shall be amended in its entirety to read as follows:
(d) After the Plan Effective Date, the Company shall issue shares
of Company Common Stock to Eligible Members entitled to receive Company
Common Stock in accordance with Section 6.3(c) and the Company shall
distribute the Net Cash Proceeds (as defined below) in the form of cash
or Policy Credits to the Eligible Members entitled to receive cash or
Policy Credits in accordance with Section 6.3(b). The "Net Cash
Proceeds" means the cash balances of the Company immediately prior to
the Plan Effective Date (including the amount of cash to be credited
pursuant to Section 4.2(a)(iii)) after deducting expenses relating to
the Plan, and all other expenses of the Company accrued as of the Plan
Effective Date and liabilities, provided, however, that Net Cash
Proceeds shall not include any capital raised by the Company on or prior
to the Plan Effective Date pursuant to Section 4.2(f) of the Plan. In no
event shall the amount of cash and Policy Credits distributed to the
Eligible Members under the Plan be less than the Net Cash Proceeds.
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<PAGE> 156
4. Section 6.1 shall be amended in its entirety to read as follows:
6.6 Allocation of Allocable Shares. (a) The consideration to be
given to Eligible Members in exchange for their Membership Interests
shall be shares of Company Common Stock, cash or Policy Credits as
provided in this Article VI equal in value to the value of the Members'
Equity as determined by reference to 17,390,165 shares of Company Common
Stock to be distributed plus Net Cash Proceeds. Solely for purposes of
calculating the amount of such consideration, each Eligible Member will
be allocated (but not necessarily issued) shares of Company Common Stock
in accordance with this Article VI. In no event, will the number of
shares of Company Common Stock issued to Eligible Members as provided in
Section 6.3(c) exceed 17,390,165 shares or will Eligible Members be
given consideration other than Company Common Stock, cash or Policy
Credits.
5. The form of Amendment No. 1 to The Agreement and Plan of Merger
dated as of December 17, 1999, shall be added as Exhibit E to the Plan.
6. All other terms and conditions of the Plan of Conversion shall
remain unchanged and in full force and effect as originally written.
7. All capitalized terms used but not defined herein shall have the
meanings given to such terms in the Plan.
IN WITNESS WHEREOF, American Mutual Holding Company, by authority of its
Board of Directors, has caused this Amendment No. 1 to the Plan of Conversion to
be duly executed on this 18th day of February, 2000.
AMERICAN MUTUAL HOLDING COMPANY
By: /s/ ROGER K. BROOKS
----------------------------------
Roger K. Brooks
Chairman, President and Chief
Executive Officer
ATTEST:
/s/ JAMES A. SMALLENBERGER
- ------------------------------------
James A. Smallenberger
Senior Vice President and Secretary
B-19
<PAGE> 157
AMENDMENT NO. 2
TO
PLAN OF CONVERSION
OF
AMERICAN MUTUAL HOLDING COMPANY
THIS AMENDMENT NO. 2 dated as of April 3, 2000, is made to the Plan of
Conversion of American Mutual Holding Company (the "Company") dated December 17,
1999, as amended on February 18, 2000.
WHEREAS, the Company's Board of Directors has previously adopted a Plan of
Conversion which provides for the conversion of the Company from a mutual
insurance holding company into a stock holding company in accordance with the
requirements of Section 521A.14(5)(b) and Chapter 508B. of the Code of Iowa
(1999) (the "Conversion") and the merger of AmerUs Life Holdings, Inc. ("AMH")
with and into the Company, with the Company the survivor in such merger (the
"Merger");
WHEREAS, subsequent to the date of the Plan of Conversion, the Company and
AMH entered into a Combination and Investment Agreement (the "Combination
Agreement"), by and among the Company, AMH, Indianapolis Life Insurance Company,
an Indiana mutual insurance company ("Indianapolis Life"), and The Indianapolis
Life Group of Companies, Inc., an Indiana corporation ("ILGC");
WHEREAS, pursuant to the Combination Agreement, the Company invested $100
million in ILGC in return for 105.96 shares of non-voting common stock of ILGC
("ILGC Stock");
WHEREAS, the Company and AMH entered into a Purchase Agreement to permit
the Company to sell and require AMH to purchase the ILGC Stock;
WHEREAS, AMH fulfilled its obligation under the Purchase Agreement and
purchased the ILGC Stock for the Purchase Price (as defined in the Purchase
Agreement) (the "Stock Purchase");
WHEREAS, the Purchase Agreement is no longer a component of the Plan, the
Merger Agreement and related transactions following the Stock Purchase;
WHEREAS, the Board desires to amend the Plan of Conversion to reflect the
Stock Purchase.
NOW THEREFORE, in consideration of the above premises, the Plan of
Conversion shall be amended and supplemented as follows:
1. Article I Definitions shall be amended to delete in their entirety
the definitions of "Combination Agreement", "ILGC", "ILGC Common Stock",
"ILGC Common Stock Consideration", "Indianapolis Life", "Indianapolis Life
Demutualization" and "Purchase Agreement".
2. Section 4.2(a)(iii) shall be amended in its entirety to read as
follows:
(iii) simultaneously with the effectiveness of the Plan, the Merger
shall occur and the Company shall have credited to Net Cash Proceeds an
amount of cash equal to the fair value (taking into account liabilities)
of the Company's ownership interest in the Non-Insurance Subsidiaries as
determined jointly by the boards of directors of the Company and AMH as
of the Adoption Date. The Company Special Committee and the AMH Special
Committee, who have received advice from independent financial and legal
advisors, have each made recommendations to the board of directors of
their respective companies with respect to the fair value of the Non-
Insurance Subsidiaries and other matters. The Company Special Committee
and the AMH Special Committee have agreed that fair value of the
Non-Insurance Subsidiaries is $92.6 million. The amount of compensation
for serving on the Company Special Committee or the AMH Special
Committee will be determined by the boards of directors of each company.
3. All other terms and conditions of the Plan of Conversion shall
remain unchanged and in full force and effect as originally written.
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<PAGE> 158
4. All capitalized terms used but not defined herein shall have the
meanings given to such terms in the Plan as amended.
IN WITNESS WHEREOF, American Mutual Holding Company, by authority of its
Board of Directors, has caused this Amendment No. 2 to the Plan of Conversion to
be duly executed on this 3rd day of April, 2000.
AMERICAN MUTUAL HOLDING COMPANY
By: /s/ ROGER K. BROOKS
----------------------------------
Roger K. Brooks
Chairman, President and Chief
Executive Officer
ATTEST:
/s/ JAMES A. SMALLENBERGER
- ------------------------------------
James A. Smallenberger
Senior Vice President and Secretary
B-21
<PAGE> 159
APPENDIX C
FORM OF AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN MUTUAL HOLDING COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
The corporation hereinafter named ("Corporation") does hereby adopt the
following Amended and Restated Articles of Incorporation:
1. The name of the Corporation is American Mutual Holding Company.
These amended and restated articles of incorporation change the name of the
Corporation to "AmerUs Group Co." and effect other corporate changes.
2. The Articles of Incorporation of the Corporation are amended and
restated so as henceforth to read in their entirety as follows:
ARTICLE I
NAME
The name of the corporation is AmerUs Group Co. (the "Corporation") by
which name it shall continue to do business and shall have and retain all of its
property, rights and privileges.
ARTICLE II
PLACE OF BUSINESS; REGISTERED OFFICE AND AGENT
The location of the principal executive office of the Corporation is 699
Walnut Street, Des Moines, Iowa 50309. The registered office of the Corporation
shall be at the same address and the name of its initial registered agent under
these Amended and Restated Articles of Incorporation at that office is James A.
Smallenberger.
ARTICLE III
PERPETUAL EXISTENCE
The Corporation shall have perpetual existence.
ARTICLE IV
PURPOSES
The purpose for which the Corporation is organized is the transaction of
any and all lawful business for which corporations may be organized under the
Iowa Business Corporation Act.
ARTICLE V
EXEMPTION OF PRIVATE PROPERTY
The private property of the shareholders, directors, officers, agents and
managers of the Corporation shall in no case be liable for corporate debts, but
shall be exempt therefrom.
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<PAGE> 160
ARTICLE VI
CAPITALIZATION
SECTION 1.
The aggregate number of shares of all classes of capital stock which the
Corporation shall have authority to issue is two hundred and fifty million
(250,000,000) shares, of which twenty million (20,000,000) shares shall be
preferred stock, no par value, issuable in one or more series and two hundred
thirty million (230,000,000) shares shall be common stock, no par value.
SECTION 2.
The shares of common stock of the Corporation shall, in all respects,
entitle the holder to the same rights and preferences, and subject the holder to
the same qualifications, limitations and restrictions as all other holders of
common stock. The shares of common stock of the Corporation are and shall be
subject to the relative rights, preferences, qualifications, limitations, and
restrictions of any class or series of preferred stock now or hereafter issued
by the Corporation.
SECTION 3.
The Board of Directors of the Corporation is hereby expressly authorized,
at any time and from time to time, to divide the shares of preferred stock into
one or more series, to issue from time to time in whole or in part the shares of
preferred stock or the shares of any series thereof, and in the resolution or
resolutions providing for the issue of shares of preferred stock or of a
particular series to fix and determine the voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof that may be desired, to the fullest extent now or hereafter
permitted by Section 490.602 of the Iowa Business Corporation Act, as amended
from time to time; provided, however, in no event shall preferred stock have
more than one vote for each share of preferred stock.
SECTION 4.
No shareholder of the Corporation shall be entitled to exercise any right
of cumulative voting.
ARTICLE VII
MANAGEMENT
SECTION 1.
The business and affairs of the Corporation shall be under the direction of
the Board of Directors. The authorized number of directors shall in no case be
fewer than seven (7) or more than twenty-one (21). The exact number of directors
within such range shall be fixed from time to time by the Board of Directors
pursuant to a resolution adopted by the affirmative vote of a majority of the
entire Board of Directors then in office.
SECTION 2.
The directors of the Corporation, other than those who may be elected by
the holders of any class or series of preferred stock, shall be divided into
three classes, as nearly equal in number as reasonably possible, determined by
terms expiring in successive years: Class I, Class II and Class III. The
directors in Class I shall be Wesley H. Boldt, West Des Moines, Iowa; Roger K.
Brooks, Des Moines, Iowa; and F.A. Wittern, Jr., West Des Moines, Iowa; and each
such person shall serve a term expiring at the first annual shareholders'
meeting following the effective date hereof; the directors in Class II shall be
John R. Albers, Dallas, Texas; Dr. Joseph A. Borgen, St. Charles, Iowa; Thomas
F. Gaffney, Tierra Verde, Florida; and Jack C. Pester, Houston, Texas; and each
such person shall serve a term expiring at the second annual
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<PAGE> 161
shareholders' meeting following the effective date hereof; and the directors in
Class III shall be Malcolm Candlish, Osprey, Florida; John W. Norris, Jr.,
Richardson, Texas; Ralph W. Laster, Jr., Topeka, Kansas; and John A. Wing,
Evanston, Illinois; and each such person shall serve a term expiring at the
third annual shareholders' meeting following the effective date hereof. After
the initial term of the directors of a class of directors under these Amended
and Restated Articles of Incorporation, each director of such class as may be
elected shall be elected for a term expiring on the third annual shareholders'
meeting following the annual meeting at which such director is elected. No
decrease in the number of directors shall shorten the term of any incumbent
director. Each director shall serve until a successor is duly elected and
qualified, and shall be eligible for re-election.
SECTION 3.
The Board of Directors shall have the power without the assent or vote of
the shareholders of the Corporation to adopt such Bylaws and rules and
regulations for the transaction of business of the Corporation not inconsistent
with these Amended and Restated Articles of Incorporation or the laws of the
State of Iowa, and to amend, alter or repeal such Bylaws, rules or regulations.
Advance notice of nominations for the election of directors and of business to
be brought by shareholders before any meeting of shareholders of the Corporation
shall be given in the manner and to the extent provided in the Bylaws of the
Corporation. The Board of Directors may fix reasonable compensation of the
directors for their services.
SECTION 4.
A majority of the directors then in office, in their sole discretion, and
whether or not consisting of less than a quorum, may elect a replacement
director to serve during the unexpired term of any director previously elected
whose office is vacant as a result of death, resignation, retirement,
disqualification, removal or otherwise, and may elect directors to fill any
newly created directorships. Except as otherwise expressly provided by law and
subject to the terms of any preferred stock, the shareholders may not elect a
replacement director to fill any vacancy on the Board of Directors caused by
death, resignation, retirement, disqualification, removal or otherwise, and may
not elect directors to fill any newly created directorships. At any election of
directors by the Board of Directors to fill any vacancy caused by an increase in
the number of directors, the terms of the office for which candidates are
nominated and elected shall be divided as set forth in Section 2 of this Article
VII. A director may be removed with or without cause by the shareholders.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify a director, officer or employee of the
Corporation, whether serving before or after its conversion from a mutual
insurance holding company to a stock company, and each director, officer or
employee of the Corporation who is serving or who has served, whether before or
after its conversion from a mutual insurance holding company to a stock company,
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise or employee
benefit plan to the fullest extent possible, as provided in Sections 850 through
858 of the Iowa Business Corporation Act, and the Corporation's Bylaws, subject
to such limitations as may be established by the Board of Directors. Any repeal
or modification of this Article VIII or of Sections 850 through 858 of the Iowa
Business Corporation Act, shall not adversely affect any right of
indemnification of a director, officer or employee of the Corporation existing
at any time prior to such repeal or modification.
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<PAGE> 162
ARTICLE IX
DIRECTORS NOT PERSONALLY LIABLE
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for a breach of the director's duty
of loyalty to the Corporation or its shareholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) for a transaction from which the director derives an improper
personal benefit, or (iv) under section 490.833 of the Iowa Business Corporation
Act. If the Iowa Business Corporation Act is hereafter amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be eliminated or limited to the extent
of such amendment, automatically and without any further action, to the maximum
extent permitted by law. Any repeal or modification of this Article by the
shareholders of the Corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability or any other right or
protection of a director of the Corporation with respect to any state of facts
existing at or prior to the time of such repeal or modification.
ARTICLE X
ADOPTION OF IOWA BUSINESS CORPORATION ACT
The Corporation voluntary elects to adopt the provisions of the Iowa
Business Corporation Act pursuant to Section 490.1701, of the Iowa Business
Corporation Act.
ARTICLE XI
CORPORATE SEAL
The Corporation shall have no corporate seal.
1. The date of adoption of the Amended and Restated Articles of
Incorporation by the Board of Directors of the Corporation was .
2. The duly adopted Amended and Restated Articles of Incorporation
supersedes the original articles of incorporation and all amendments therein.
3. The Amended and Restated Articles of Incorporation amend the original
articles of incorporation. The designation, number of members of the Corporation
qualified to vote, number of votes entitled to be cast by each voting group
entitled to vote separately on the Amended and Restated Articles of
Incorporation, and the number of votes of each voting group indisputably
represented at the meeting is as follows:
<TABLE>
<S> <C> <C> <C>
DESIGNATION OF NUMBER OF VOTES ENTITLED VOTES
GROUP MEMBERS TO BE CAST ON REPRESENTED AT
ENTITLED TO RESTATED MEETING
VOTE ARTICLES
</TABLE>
MEMBERS QUALIFIED TO VOTE
4a. The total number of votes cast for and against the Amended and Restated
Articles of Incorporation by each voting group entitled to vote separately on
the Amended and Restated Articles of Incorporation is as follows:
<TABLE>
<S> <C> <C>
VOTING GROUP VOTES FOR VOTES AGAINST
</TABLE>
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<PAGE> 163
MEMBERS QUALIFIED TO VOTE
The number of votes cast for the Amended and Restated Articles of
Incorporation by each voting group was sufficient for approval by that voting
group.
5. The effective time and date of these Amended and Restated Articles of
Incorporation shall be on filing with the Iowa Secretary of State.
IN WITNESS WHEREOF, American Mutual Holding Company has caused this Amended
and Restated Articles of Incorporation to be signed by Roger K. Brooks, its
Chairman, President and Chief Executive Officer, this day of ,
2000.
AMERICAN MUTUAL HOLDING COMPANY
By:
------------------------------------
Roger K. Brooks, Chairman,
President
and Chief Executive Officer
ATTEST:
- ------------------------------------------------------
James A. Smallenberger, Secretary
STATE OF IOWA
SS
COUNTY OF POLK
On this day of , 2000, before me, the undersigned, a
Notary Public in and for said State, personally appeared Roger K. Brooks, being
by me duly sworn, did say that he is the Chairman, President and Chief Executive
Officer of American Mutual Holding Company, executing the within and foregoing
instrument; that said instrument was signed on behalf of said Corporation by
authority of its Board of Directors; and the said Chairman, President and Chief
Executive Officer, as such officer, acknowledged the execution of said
instrument to be the voluntary act and deed of said Corporation, by it and by
him voluntarily executed.
------------------------------------
Notary Public in and for said State
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<PAGE> 164
CERTIFICATE OF APPROVAL
ATTORNEY GENERAL
Pursuant to the provisions of the Iowa Code, the undersigned approves the
Amended and Restated Articles of Incorporation of American Mutual Holding
Company, and finds them in conformance with the laws of the United States and
with the laws and Constitution of the State of Iowa.
THOMAS J. MILLER
Attorney General of Iowa
By:
----------------------------------
Scott M. Galenbeck
Assistant Attorney General
Date:
CERTIFICATE OF APPROVAL
COMMISSIONER OF INSURANCE
Pursuant to the provisions of the Iowa Code, the undersigned approves the
Amended and Restated Articles of Incorporation of American Mutual Holding
Company.
THERESE M. VAUGHAN
Commissioner of Insurance
By:
----------------------------------
Robert L. Howe
Deputy Commissioner and Chief
Examiner
Date:
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<PAGE> 165
APPENDIX D
As of April 3, 2000
Board of Directors
AmerUs Life Holdings, Inc.
699 Walnut Street, Suite 2000
Des Moines, Iowa 50309
Dear Sirs and Madame:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of AmerUs Life Holdings, Inc. ("ALH" or the "Company"),
other than American Mutual Holding Company ("AMHC"), of the consideration to be
received by such stockholders pursuant to the terms of the Agreement and Plan of
Merger, dated as of December 17, 1999 as amended by Amendment No. 1 thereto,
dated as of February 18, 2000 and by Amendment No. 2 thereto, dated as of April
3, 2000 (as so amended, the "Agreement"), by and between AMHC and the Company
pursuant to which ALH shall be merged (the "Merger") with and into AMHC.
Pursuant to the terms of the Plan of Conversion, dated as of December 17, 1999
as amended by Amendment No. 1 thereto, dated as of February 18, 2000 and by
Amendment No. 2 thereto, dated as of April 3, 2000 (as so amended the "Plan"),
which has been adopted by the Board of Directors of AMHC, prior to the Merger
AMHC shall be converted from a mutual insurance holding company to a stock
holding company (together with the Merger, the "Demutualization"). We have not
been requested to address, and this opinion does not address, the fairness from
a financial point of view of all or any portion of the Demutualization to AMHC
or the Eligible Members (as defined in the Plan) of AMHC.
Pursuant to the Agreement, each share of Class A common stock, no par value
per share, of the Company, other than shares owned by AMHC ("ALH Common Stock"),
shall be converted into the right to receive one share (the "Exchange Ratio") of
common stock, no par value per share, of AMHC ("AMHC Common Stock"). In
connection with the Demutualization, the Eligible Members of AMHC shall receive
in exchange for their membership interests in AMHC aggregate consideration
consisting of (i) a number of shares of AMHC Common Stock equal to the number of
shares of common stock of ALH (of any class) owned by AMHC immediately prior to
effectiveness of the Plan, and (ii) an amount of cash and Policy Credits (as
defined in the Plan) equal to the sum of (x) the cash balances of AMHC
immediately prior to effectiveness of the Plan after deducting expenses relating
to the Plan and all other expenses and liabilities of AMHC accrued as of such
time, and (y) the fair value (taking into account liabilities), as of December
17, 1999 and as determined jointly by the special committees of ALH and AMHC and
as approved by the boards of directors of ALH and AMHC, of AMHC's ownership
interest in its subsidiaries other than ALH, including ALH's direct and indirect
subsidiaries, and its other net assets (the "Non-Insurance Assets"). We
understand that the amount of cash and Policy Credits to be paid by AMHC in
respect of the Non-Insurance Assets will in no event exceed $92.6 million.
In arriving at our opinion, we have reviewed the Agreement and the Plan. We
also have reviewed financial and other information that was publicly available
or furnished to us by the Company and AMHC including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the management of AMHC were independent third
party appraisals of certain real estate and other assets held in subsidiaries of
AMHC. In addition, we have compared certain financial and securities data of the
Company and AMHC with various other companies whose securities are traded in
public markets, reviewed the historical stock prices and trading volumes of ALH
Common Stock and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion. We were
not requested to, nor did we, solicit the interest of any other party in
acquiring the Company.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and AMHC or their
respective representatives, or that was otherwise reviewed by us. With respect
to the appraisals supplied to us, we have relied on representations that they
have been reasonably
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prepared on a basis which reflects the fair market value of the assets subject
to such appraisals. We have not assumed any responsibility for making an
independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter, and with respect to the Non-Insurance Assets, as of
December 17, 1999. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which AMHC Common Stock will actually trade at any time. Our opinion
does not address the relative merits of the Merger or the Plan and any other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Accordingly,
our opinion does not constitute a recommendation to any stockholder as to how
such stockholder should vote on the proposed Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In 1997, DLJ acted as co-manager in
the initial public offering of ALH and advised ALH in its acquisition of
AmVestors Financial Corp. and received usual and customary compensation for its
services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio, together with the payment by AMHC to the
Eligible Members of AMHC of an amount of cash and Policy Credits in respect of
the Non-Insurance Assets based on the fair value of the Non-Insurance Assets as
of December 17, 1999, as contemplated by the Plan, are as a whole fair from a
financial point of view to holders of ALH Common Stock, other than AMHC.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ JOHN A. SIPP
----------------------------------
John A. Sipp
Managing Director
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APPENDIX E
SECTIONS 490.1320 ET SEQ. OF IOWA BUSINESS CORPORATION ACT
490.1320 NOTICE OF DISSENTERS' RIGHTS. -- 1. If proposed corporate action
creating dissenters' rights under section 490.1302 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this part and be accompanied
by a copy of this part.
2. If corporate action creating dissenters' rights under section 490.1302
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 490.1322.
490.1321 NOTICE OF INTENT TO DEMAND PAYMENT. -- 1. If proposed corporate
action creating dissenters' rights under section 490.1302 is submitted to a vote
at a shareholders' meeting, a stockholder who wishes to assert dissenters'
rights must do all of the following:
a. Deliver to the corporation before the vote is taken written notice
of the stockholder's intent to demand payment for the stockholder's shares
if the proposed action is effectuated.
b. Not vote the dissenting stockholder's shares in favor of the
proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1, is
not entitled to payment for the stockholder's shares under this part.
490.1322 DISSENTERS' NOTICE. -- 1. If proposed corporate action creating
dissenters' rights under section 490.1302 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of section 490.1321.
2. The dissenters' notice must be sent no later than ten days after the
proposed corporate action is authorized at a shareholders' meeting, or if the
corporate action is taken without a vote of the shareholders, no later than ten
days after the corporate action is taken, and must do all the following:
a. State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited.
b. Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
c. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date.
d. Set a date by which the corporation must receive the payment
demand, which date shall not be fewer than sixty days after the date the
dissenters' notice is delivered.
e. Be accompanied by a copy of this division.
490.1323 DUTY TO DEMAND PAYMENT. -- 1. A stockholder sent a dissenter's
notice described in section 490.1322 must demand payment, certify whether the
stockholder acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to section 490.1322,
subsection 2, paragraph "c", and deposit the stockholder's certificates in
accordance with the terms of the notice.
2. The stockholder who demands payment and deposits the stockholder's
shares under subsection 1 retains all other rights of the stockholder until
these rights are canceled or modified by the taking of the proposed corporate
action.
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3. A stockholder who does not demand payment or deposit the stockholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the stockholder's shares under this
division.
490.1324 SHARE RESTRICTIONS. -- 1. The corporation may restrict the
transfer of uncertified shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under section 490.1326.
2. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a stockholder until these
rights are canceled or modified by the taking of the proposed corporate action.
490.1325 PAYMENT. -- 1. Except as provided in section 490.1327, at the
time the proposed corporate action is taken, or upon receipt of a payment
demand, whichever occurs later, the corporation shall pay each dissenter who
complied with section 490.1323 the amount the corporate estimates to be the fair
value of the dissenter's shares, plus accrued interest.
2. The payment must be accompanied by all of the following:
a. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any.
b. A statement of the corporation's estimate of the fair value of the
shares.
c. An explanation of how the interest was calculated.
d. A statement of the dissenter's right to demand payment under
section 490.1328.
e. A copy of this division.
490.1326 FAILURE TO TAKE ACTION. -- 1. If the corporation does not take
the proposed action within one hundred eighty days after the date set for
demanding payment and depositing share certificates, the corporation shall
return the deposited certificates and release the transfer restrictions imposed
on uncertificated shares.
2. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 490.1322 as if the corporate action was taken
without a vote of the shareholders and repeat the payment demand procedure.
490.1327 AFTER-ACQUIRED SHARES. -- 1. A corporation may elect to withhold
payment required by section 490.1325 from dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
2. To the extent the corporation elects to withhold payment under
subsection 1, after taking the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of the dissenter's
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under section
490.1328.
490.1328 PROCEDURE IF STOCKHOLDER DISSATISFIED WITH PAYMENT OR
OFFER -- 1. A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under
section 490.1325, or reject the corporation's offer under section 490.1327
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and demand payment of the fair value of the dissenter's shares and interest due,
if any of the following apply:
a. The dissenter believes that the amount paid under section 490.1325
or offered under section 490.1327 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated.
b. The corporation fails to make payment under section 490.1325 within
sixty days after the date set for demanding payment.
c. The corporation having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
2. A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection 1 within thirty days after the corporation made or
offered payment for the dissenter's shares.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 851 of the Iowa Business Corporation Act ("IBCA") provides that a
corporation has the power to indemnify its directors and officers against
liabilities and expenses incurred by reason of such person serving in the
capacity of director or officer, if such person has acted in good faith and in a
manner reasonably believed by the individual to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe the individual's conduct was unlawful. The
foregoing indemnity provisions notwithstanding, in the case of actions brought
by or in the right of the corporation, no indemnification shall be made to such
director or officer with respect to any matter as to which such individual has
been adjudged to be liable to the corporation unless, and only to the extent
that, a court determines that indemnification is proper under the circumstances.
AMHC's Articles of Incorporation provide that AMHC shall indemnify its
directors to the fullest extent possible under the IBCA. AMHC's Bylaws extend
the same indemnity to its officers. The Articles of Incorporation provide that
no director shall be liable to AMHC or its stockholders for monetary damages for
breach of the individual's fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to AMHC or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for any transaction
in which the director derived an improper personal benefit; or (iv) under the
IBCA provisions relating to improper distributions.
AMHC maintains a directors' and officers' liability insurance policy to
insure against losses arising from claims made against its directors and
officers, subject to the limitations and conditions as set forth in the
policies. In addition, AMHC has entered into indemnification agreements with its
directors and certain of its executive officers providing for the
indemnification of such persons as permitted by AMHC's Articles of Incorporation
and Iowa law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed herewith or incorporated by reference as
part of this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger as amended (included as
Appendix A to the Proxy Statement/Prospectus and
incorporated by reference herein).
2.2 -- Plan of Conversion of AMHC as amended (included as
Appendix B to the Proxy Statement/Prospectus and
incorporated by reference herein).
3.1* -- Articles of Incorporation of AMHC.
3.2* -- Bylaws of AMHC.
4.1 -- Form of Stock Certificate for shares of Class A common
stock of AmerUs (incorporated by reference to Exhibit 4.1
to AmerUs' Registration Statement on Form S-1 (No.
333-12239)).
4.2 -- 1999 Non-Employee Stock Ownership Plan, filed as Exhibit
4.2 to AmerUs' Registration Statement on Form S-3,
Registration Number 333-72643, dated February 19, 1999,
is hereby incorporated by reference.
4.3 -- All instruments defining the rights of holders of
long-term debt of AmerUs and its subsidiaries (not filed
pursuant to (4)(iii) of Item 601(b) of Regulation S-K; to
be furnished upon request of the Commission).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
5.1* -- Opinion of Joseph K. Haggerty, Esq., Senior Vice
President and General Counsel, regarding the legality of
the securities being issued hereunder.
8.1* -- Tax Opinion of Caplin & Drysdale.
10.1 -- Amended and Restated Intercompany Agreement dated as of
December 1, 1996, among American Mutual Holding Company,
AmerUs Group Co. and the Company. Filed as Exhibit 10.81
to the Registrant's registration statement on Form S-1,
Registration Number 333-12239, is hereby incorporated by
reference.
10.2 -- Joint Venture Agreement, dated as of June 30, 1996,
between American Mutual Insurance Company and Ameritas
Life Insurance Corp., filed as Exhibit 10.2 on Form 10-K,
dated March 25, 1998, is hereby incorporated by
reference.
10.3 -- Management and Administration Service Agreement, dated as
of April 1, 1996, among American Mutual Life Insurance
Company, Ameritas Variable Life Insurance Company and
Ameritas Life Insurance Corp., filed as Exhibit 10.3 to
the registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by
reference.
10.4 -- AmerUs Life Holdings, Inc. Executive Stock Purchase Plan,
dated November 13, 1998, filed as Exhibit 4.11 to the
registration statement of the Registrant on Form S-8,
Registration Number 333-72237, is hereby incorporated by
reference.
10.5 -- All AmerUs Supplemental Executive Retirement Plan,
effective January 1, 1996, filed as Exhibit 10.6 to the
registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by
reference.
10.6 -- Management Incentive Plan, filed as Exhibit 10.9 to the
registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by
reference.
10.7 -- AmerUs Life Insurance Company Performance Share Plan,
filed as Exhibit 10.10 to the registration statement of
the Registrant on Form S-1, Registration Number
333-12239, is hereby incorporated by reference.
10.8 -- AmerUs Life Stock Incentive Plan, filed as Exhibit 10.11
to the registration statement of the Registrant on Form
S-1, Registration Number 333-12239, is hereby
incorporated by reference.
10.9 -- AmerUs Life Non-Employee Director Stock Plan, filed as
Exhibit 10.13 to the registration statement of the
Registrant on Form S-1, Registration Number 333-12239, is
hereby incorporated by reference.
10.10 -- Form of Indemnification Agreement executed with directors
and certain officers, filed as Exhibit 10.33 to the
registration statement of the Registrant on Form S-1,
Registration Number 333-12239, is hereby incorporated by
reference.
10.11 -- Tax Allocation Agreement dated as of November 4, 1996,
filed as Exhibit 10.68 to the registration statement of
the Registrant on Form S-1, Registration Number
333-12239, is hereby incorporated by reference.
10.12 -- Agreement and Plan of Merger, dated as of August 13, 1997
and as amended as of September 5, 1997, among the
Registrant, a wholly owned subsidiary of the Registrant
and Delta Life Corporation, filed as Exhibit 2.2 to the
Registrant's report on Form 8-K on October 8, 1997, is
hereby incorporated by reference.
10.13 -- Credit Agreement, dated as of October 23, 1997, among the
Registrant, Various Lender Institutions, the Co-Arrangers
and The Chase Manhattan Bank, as Administrative Agent,
filed as Exhibit 10.84 to the registration statement of
the Registrant on Form S-4, Registration Number
333-40065, is incorporated by reference.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.14 -- Coinsurance Agreement, effective February 1, 1996,
between Delta Life and Annuity Company and London Life
Reinsurance Company, filed as Exhibit 10.85 to the
registration statement of the Registrant on Form S-4,
Registration Number 333-40065, is incorporated by
reference.
10.15 -- AmVestors Financial Corporation 1996 Incentive Stock
Option Plan, filed as Exhibit (4)(a) to Registration
Statement of AmVestors Financial Corporation on Form S-8,
Registration Number 333-14571 dated October 21, 1996, is
hereby incorporated by reference.
10.16 -- 1989 Non-Qualified Stock Option Plan adopted March 17,
1989, filed as Exhibit (10)(q) to Form 10-K of AmVestors
Financial Corporation, dated April 12, 1989, is hereby
incorporated by reference.
10.17 -- Lease -- Business Property, dated December 1, 1996,
between AmerUs Properties, Inc. and AmerUs Life Insurance
Company, property 611 Fifth Avenue, Des Moines, Iowa,
filed as Exhibit 10.58 on Form 10-K, dated March 25,
1998, is hereby incorporated by reference.
10.18 -- First Amendment dated February 1, 1998 to Lease Agreement
dated December 1, 1996 between AmerUs Properties, Inc.
and AmerUs Life Insurance Company, property 611 Fifth
Avenue, Des Moines, Iowa, filed as Exhibit 10.59 on Form
10-K, dated March 25, 1998, is hereby incorporated by
reference.
10.19 -- Lease -- Business Property, dated December 1, 1999
between AmerUs Properties, Inc. and AmerUs Life Insurance
Company, property 611 Fifth Avenue, Des Moines, Iowa,
filed as Exhibit 10.19 on Form 10-K, dated March 8, 2000,
is hereby incorporated by reference.
10.20 -- Lease -- Assignment & Assumption Agreement -- Business
Property, dated December 15, 1999, between AmerUs
Properties, Inc. and 611 Fifth Avenue, L.L.C., property
611 Fifth Avenue, Des Moines, Iowa, filed as Exhibit
10.20 on Form 10-K, dated March 8, 2000, is hereby
incorporated by reference.
10.21 -- Lease -- Business Property, dated December 1, 1996,
between AmerUs Properties, Inc. and AmerUs Life Insurance
Company, 1213 Cherry Street, Des Moines, Iowa, filed as
Exhibit 10.60 on Form 10-K, dated March 25, 1998, is
hereby incorporated by reference.
10.22 -- Lease -- Business Property, dated December 1, 1996,
between AmerUs Properties, Inc. and the Registrant,
property 418 Sixth Avenue Moines, Iowa, filed as Exhibit
10.61 on Form 10-K, dated March 25, 1998, is hereby
incorporated by reference.
10.23 -- Revised and Restated Lease -- Business Property, dated
May 28, 1998, between AmerUs Properties, Inc. and the
Registrant property, 699 Walnut Street, Suite 2000, Des
Moines, Iowa, filed as Exhibit 10.26 on Form 10-K, dated
March 30, 1999, is hereby incorporated by reference.
10.24 -- Addendum, dated May 28, 1998 to lease dated May 28, 1998
between AmerUs Properties and the Registrant, filed as
Exhibit 10.27 on Form 10-K, dated March 30, 1999, is
hereby incorporated by reference.
10.25 -- Addendum II, dated July 21, 1998, to lease dated May 28,
1998 between AmerUs Properties and the Registrant, filed
as Exhibit 10.28 on Form 10-K, dated March 30, 1999, is
hereby incorporated by reference.
10.26 -- Servicing Agreement, dated March 5, 1997, between AmerUs
Life Insurance Company and AmerUs Properties, Inc., filed
as Exhibit 10.64 on Form 10-K, dated March 25, 1998, is
hereby incorporated by reference.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.27 -- Consent dated as of May 20, 1998 to the Credit Agreement
dated as of October 23, 1997 among the Registrant,
Various Lender Institutions, the Co-Arrangers and The
Chase Manhattan Bank, as Administrative Agent, filed as
Exhibit 10.72 on Form 10-Q, dated November 12, 1998, is
hereby incorporated by reference.
10.28 -- First Amendment dated as of May 30, 1997 to the Credit
Agreement dated as of October 23, 1997 among the
Registrant, Various Lender Institutions, the Co-
Arrangers and The Chase Manhattan Bank, as Administrative
Agent, filed as Exhibit 10.73 on Form 10-Q, dated
November 12, 1998, is hereby incorporated by reference.
10.29 -- Second Amendment dated as of June 22, 1998 to the Credit
Agreement dated as of October 23, 1997 among the
Registrant, Various Lender Institutions, the Co-
Arrangers and The Chase Manhattan Bank, as Administrative
Agent, filed as Exhibit 10.74 on Form 10-Q, dated
November 12, 1998, is hereby incorporated by reference.
10.30 -- Second Consent and Amendment dated as of October 2, 1998
to the Credit Agreement dated as of October 23, 1997
among the Registrant, Various Lender Institutions, the
Co-Arrangers and The Chase Manhattan Bank, as
Administrative Agent, filed as Exhibit 10.75 on Form
10-Q, dated November 12, 1998, is hereby incorporated by
reference.
10.31 -- MIP Deferral Plan dated as of September 1, 1998, filed as
Exhibit 10.76 on Form 10-Q, dated November 12, 1998, is
hereby incorporated by reference.
10.32 -- Open Line of Credit Application and Terms Agreement,
dated March 5, 1999, between Federal Home Loan Bank of
Des Moines and AmerUs Life Insurance Company, filed as
Exhibit 10.34 on Form 10-Q dated May 14, 1999, is hereby
incorporated by reference.
10.33 -- Origination Agreement, dated August 1, 1998, between
AmerUs Home Equity, Inc. and AmerUs Life Insurance
Company, filed as Exhibit 10.36 on Form 10-K, dated March
30, 1999, is hereby incorporated by reference.
10.34 -- Third Waiver to Credit Agreement dated as of November 16,
1998 to the Credit Agreement dated as of October 23, 1997
among the Registrant, Various Lender Institutions, the
Co-Arrangers and The Chase Manhattan Bank, as
Administrative Agent, filed as Exhibit 10.37 on Form
10-K, dated March 30, 1999, is hereby incorporated by
reference.
10.35 -- Fourth Consent and Amendment, dated as of December 4,
1998 to the Credit Agreement dated as of October 23, 1997
among the Registrant, Various Lender Institutions, the
Co-Arrangers and The Chase Manhattan Bank, as
Administrative Agent, filed as Exhibit 10.38 on Form
10-K, dated March 30, 1999, is hereby incorporated by
reference.
10.36 -- Administrative Services Agreement, dated as of August 1,
1998, among American Mutual Holding Company, Registrant,
AmerUs Group, AmerUs Home Equity, Inc., AmerUs Mortgage,
Inc., AmerUs Properties, Inc., American Capital
Management Group, Inc., AmerUs Life Insurance Company,
AmVestors Financial Corporation, American Investors Life
Insurance Company, Inc., and Delta Life and Annuity
Company, filed as Exhibit 10.39 on Form 10-K, dated March
30, 1999, is hereby incorporated by reference.
10.37 -- Facility and Guaranty Agreement, dated February 12, 1999,
among The First National Bank of Chicago and the
Registrant, filed as Exhibit 10.39 on Form 10-Q dated May
14, 1999, is hereby incorporated by reference.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.38 -- Form of Reimbursement Agreement, dated February 15, 1999,
among the Registrant and Roger K. Brooks, Victor N.
Daley, Michael G. Fraizer, Thomas C. Godlasky, Marcia S.
Hanson, Mark V. Heitz and Gary R. McPhail, filed as
Exhibit 10.40 on Form 10-Q dated May 14, 1999, is hereby
incorporated by reference.
10.39 -- Amendment No. 1 to Facility Agreement, dated March 23,
1999, among The First National Bank of Chicago and the
Registrant, filed as Exhibit 10.41 on Form 10-Q dated May
14, 1999, is hereby incorporated by reference.
10.40 -- 1999 Non-Employee Stock Option Plan, dated April 19,
1999, filed on Form S-3, Registration Number 333-72643,
is hereby incorporated by reference.
10.41 -- Fifth Waiver and Amendment to Credit Agreement dated as
of October 1, 1998 to the Credit Agreement dated as of
October 23, 1997 among the Registrant, Various Lender
Institutions, the Co-Arrangers and The Chase Manhattan
Bank, as Administrative Agent, filed as Exhibit 10.43 on
Form 10-Q, dated June 30, 1999, is hereby incorporated by
reference.
10.42 -- Sixth Amendment to Credit Agreement dated as of May 18,
1999 to the Credit Agreement dated as of October 23, 1997
among the Registrant, Various Lender Institutions, the
Co-Arrangers and The Chase Manhattan Bank, as
Administrative Agent, filed as Exhibit 10.44 on Form
10-Q, dated June 30, 1999, is hereby incorporated by
reference.
10.43 -- Administrative Services Agreement, dated as of January 1,
2000, among American Mutual Holding Company, the
Registrant, AmerUs Group Co., AmerUs Home Equity, Inc.,
AmerUs Mortgage, Inc., AmerUs Properties, Inc., American
Capital Management Group, Inc., AmerUs Life Insurance
company, AmVestors Financial Corporation, and Delta Life
and Annuity Company, filed as Exhibit 10.43 on Form 10-K,
dated March 8, 2000, is hereby incorporated by reference.
10.44 -- Amendment No. 2 to Facility Agreement, dated January 25,
2000, among The First National Bank of Chicago and the
Registrant, filed as Exhibit 10.44 on Form 10-K, dated
March 8, 2000, is hereby incorporated by reference.
10.45 -- Irrevocable Standby Letter of Credit Application and
Terms Agreement, dated February 1, 2000, between Federal
Home Loan Bank of Des Moines and AmerUs Life Insurance
Company, filed as Exhibit 10.45 on Form 10-K, dated March
8, 2000,is hereby incorporated by reference.
10.47 -- Investment Advisory Agreements, dated as of February 18,
2000, by and between Indianapolis Life Insurance Company,
Bankers Life Insurance Company of New York, IL Annuity
and Insurance Company, Western Security Life Insurance
Company and AmerUs Capital Management Group, Inc. filed
as Exhibits 10.1, 10.3, 10.4, and 10.2, respectively, to
the Registrant's report on Form 8-K on March 6, 2000, are
hereby incorporated by reference
23.1* -- Consent of Counsel (contained on Exhibit 5.1).
23.2* -- Consent of KPMG LLP.
23.3* -- Consent of KPMG LLP to AMHC.
23.4* -- Consent of Donaldson, Lufkin & Jenrette.
23.5* -- Consent of Caplin & Drysdale.
23.6* -- Consent of Ernst & Young LLP.
24.1* -- Power of Attorney (contained on the signature page).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
99.1 -- Form of Amended and Restated Articles of Incorporation of
AMHC (included as Appendix C to the Proxy
Statement/Prospectus and incorporated by reference
herein).
99.2* -- Form of Amended and Restated By-Laws of AMHC.
99.3* -- Form of Proxy.
99.4 -- Employment Agreement, dated as of September 19, 1997,
among Mark V. Heitz, AmVestors Financial Corporation,
American Investors Life Insurance Company, Inc.,
AmVestors Investment Group, Inc. and American Investors
Sales Group, Inc., filed as Exhibit 99.3 to the
registration statement of the Registrant on Form S-4,
Registration Number 333-40065, is incorporated by
reference.
99.5 -- Agreement of Sale, dated as of October 22, 1997, by and
between R. Rex Lee and AmerUs Group, Co., filed as
Exhibit 99.4 to the registration statement of the
Registrant on Form S-4, Registration Number 333-40065, is
incorporated by reference.
99.6 -- Retirement Agreement, dated June 27, 1997, by and between
Victor N. Daley and Registrant filed as Exhibit 99.5 on
Form 10-K, dated March 30, 1999, is hereby incorporated
by reference.
99.7 -- First Amendment to Employment Agreement, dated as of
April 15, 1999, to the Employment Agreement dated as of
September 19, 1997, among Mark V. Heitz, AmVestors
Financial Corporation, American Investors Life Insurance
Company, Inc., AmVestors Investment Group, Inc., American
Investors Sales Group, Inc., and the Registrant, filed as
Exhibit 99.4 on Form 10-Q, dated June 30, 1999, is hereby
incorporated by reference.
99.8 -- Supplemental Benefit Agreement, dated as of April 15,
1999, among Roger K. Brooks and the Registrant, filed as
Exhibit 99.5 on Form 10-Q, dated June 30, 1999, is hereby
incorporated by reference.
99.9 -- Form of Supplemental Benefit Agreement, dated as of April
15, 1999, among the Registrant and Victor N. Daley,
Michael G. Fraizer, Thomas C. Godlasky and Gary R.
McPhail, filed as Exhibit 99.6 on Form 10-Q, dated June
30, 1999, is hereby incorporated by reference.
99.10 -- Amended and Restated Employment Agreement, dated as of
April 15, 1999, among Marcia S. Hanson and the
Registrant, filed as Exhibit 99.7 on Form 10-Q, dated
June 30, 1999, is hereby incorporated by reference.
</TABLE>
- ---------------
* filed herewith
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b)
II-6
<PAGE> 176
if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding; or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) Insofar as indemnification for liabilities arising 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference in the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act, American Mutual Holding
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Des Moines, State
of Iowa, on May 12, 2000.
By: American Mutual Holding Company
/s/ ROGER K. BROOKS
------------------------------------
Roger K. Brooks
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of AMHC, hereby severally and
individually constitute and appoint Michael G. Fraizer and James A.
Smallenberger, and each of them, the true and lawful attorneys and agents of
each of us to execute in the name, place and stead of each of us (individually
and in any capacity stated below) any and all amendments to this Form S-4 and
all instruments necessary or advisable in connection therewith and to file the
same with the Securities and Exchange Commission, each of said attorneys and
agents to have the power to act with or without the others and to have full
power and authority to do and perform in the name and on behalf of each of the
undersigned every act whatsoever necessary or advisable to be done on the
premises as fully and to all intents and purposes of any of the undersigned
might or could do in person, and we hereby ratify and confirm our signatures as
they may be signed by or said attorneys and agents or each of them to any and
all such amendments and instruments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROGER K. BROOKS Director May 12, 2000
- ----------------------------------------------------- Chairman of the Board, President
Roger K. Brooks and Chief Executive Officer
(Principal Executive Officer of
AMHC)
/s/ MICHAEL G. FRAIZER Executive Vice President and Chief May 12, 2000
- ----------------------------------------------------- Financial Officer (Principal
Michael G. Fraizer Financial Officer of AMHC)
/s/ BRENDA J. CUSHING Vice President and Controller May 12, 2000
- ----------------------------------------------------- (Principal Accounting Officer of
Brenda J. Cushing AMHC)
/s/ JOHN R. ALBERS Director May 12, 2000
- -----------------------------------------------------
John R. Albers
</TABLE>
II-8
<PAGE> 178
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WESLEY H. BOLDT Director May 12, 2000
- -----------------------------------------------------
Wesley H. Boldt
/s/ JOSEPH A. BORGEN Director May 12, 2000
- -----------------------------------------------------
Joseph A. Borgen
/s/ MALCOLM CANDLISH Director May 12, 2000
- -----------------------------------------------------
Malcolm Candlish
/s/ THOMAS F. GAFFNEY Director May 12, 2000
- -----------------------------------------------------
Thomas F. Gaffney
/s/ SAM C. KALAINOV Director May 12, 2000
- -----------------------------------------------------
Sam C. Kalainov
Director May 12, 2000
- -----------------------------------------------------
John W. Norris, Jr.
/s/ JACK C. PESTER Director May 12, 2000
- -----------------------------------------------------
Jack C. Pester
/s/ F.A. WITTERN, JR. Director May 12, 2000
- -----------------------------------------------------
F.A. Wittern, Jr.
</TABLE>
II-9
<PAGE> 179
AMERICAN MUTUAL HOLDING COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE PAGE
-------- ----
<S> <C> <C>
Independent Auditors' Report on Schedules............................. S-2
Summary of Investments -- Other than Investments in Related
I Parties................................................... S-3
II Condensed Financial Information of Registrant............... S-4 through S-8
III Supplementary Insurance Information......................... S-9
IV Reinsurance................................................. S-10
V Valuation and Qualifying Accounts........................... S-11
</TABLE>
All other schedules are omitted for the reason that they are not required,
amounts are not sufficient to require submission of the schedule, or that the
equivalent information has been included in the consolidated financial
statements, and notes thereto.
S-1
<PAGE> 180
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
The Board of Directors
American Mutual Holding Company
Under date of February 2, 2000, except as to Note 4 which is as of February
21, 2000 we reported on the consolidated balance sheets of American Mutual
Holding Company and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, comprehensive income, members'
equity, and cash flows for the years in the three-year period ended December 31,
1999 which are in the prospectus. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedules as listed in the accompanying
index. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Des Moines, Iowa
February 2, 2000, except as to Note 4
Which is as of February 21, 2000
S-2
<PAGE> 181
AMERICAN MUTUAL HOLDING COMPANY
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
<TABLE>
<CAPTION>
AMOUNT AT
WHICH SHOWN IN
TYPE OF INVESTMENT AMORTIZED COST MARKET VALUE THE BALANCE SHEET
------------------ -------------- -------------- -----------------
(in thousands)
<S> <C> <C> <C>
December 31, 1999
Fixed Maturities:
Bonds
United States Government and government Agencies
and authorities............................... $1,682,889 $1,626,760 $1,626,760
States, municipalities and political
subdivisions.................................. 47,208 45,447 45,447
Foreign governments.............................. 157,460 159,363 159,363
Public utilities................................. 541,682 511,630 511,630
Convertibles and bonds with warrants attached.... 89,276 89,828 89,828
All other corporate bonds........................ 4,220,390 3,997,079 3,997,079
Redeemable preferred stock....................... 267,795 250,844 250,844
---------- ---------- ----------
Total fixed maturities................... $7,006,700 $6,680,951 $6,680,951
Equity Securities:
Common Stocks
Banks, trust and insurance companies.......... $ 12,188 13,523 13,523
Industrial, miscellaneous and all other....... 1,252 1,062 1,062
---------- ---------- ----------
Total equity securities.................. $ 13,440 $ 14,585 $ 14,585
Loans.............................................. 608,917 608,917
Loans held for sale................................ 12,882 12,882
Real estate........................................ 45,757 45,757
Policy loans....................................... 109,864 109,864
Other long-term investment......................... 292,319 292,493 292,493
Short-term investments............................. 155 155
---------- ----------
Total investments.................................. $8,090,034 $7,765,604
========== ==========
</TABLE>
S-3
<PAGE> 182
AMERICAN MUTUAL HOLDING COMPANY
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(PARENT COMPANY)
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
ASSETS
Investments:
Securities available-for-sale at fair value:.............. $ 17,296 $ 18,156
Equity securities...................................... -- 875
Loans..................................................... 309 40,430
Other investments......................................... 15,708 12,345
Investments in subsidiaries, at equity...................... 782,586 939,611
Cash and cash equivalents................................... 267,913 77,232
Accrued investment income................................... 630 1,661
Deferred income taxes....................................... 1,044 1,049
Other assets................................................ 3,730 102,564
---------- ----------
Total assets...................................... $1,089,216 $1,193,923
========== ==========
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accrued expenses and other liabilities.................... $ 13,000 $ 10,928
Income taxes payable...................................... 5,765 1,672
---------- ----------
Total liabilities................................. 18,765 12,600
---------- ----------
Minority interest........................................... 309,101 364,262
---------- ----------
Members' equity:
Accumulated other comprehensive income (loss)............. (78,628) 16,329
Unearned compensation..................................... (187) (137)
Unallocated ESOP shares................................... (797) --
Unassigned surplus........................................ 840,962 800,869
---------- ----------
Total members' equity............................. 761,350 817,061
---------- ----------
Total liabilities and members' equity............. $1,089,216 $1,193,923
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
S-4
<PAGE> 183
AMERICAN MUTUAL HOLDING COMPANY
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF INCOME
(PARENT COMPANY)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- -------
(in thousands)
<S> <C> <C> <C>
Revenues:
Equity in undistributed earnings of subsidiaries.......... $65,461 $ 59,734 $59,729
Net investment income..................................... 17,147 8,005 2,766
Realized losses........................................... (1,000) -- --
Other income.............................................. 16 107 51
------- -------- -------
81,624 67,846 62,546
Expenses:
Operating expenses........................................ 15,555 11,716 8,394
Interest expense.......................................... 38 505 595
------- -------- -------
15,593 12,221 8,989
------- -------- -------
Income from continuing operations before income tax expense
and minority interest..................................... 66,031 55,625 53,557
Income tax expense (benefit)................................ 2,908 (1,034) (2,123)
Minority interest........................................... 28,107 26,919 16,169
------- -------- -------
Net income from continuing operations....................... 35,016 29,740 39,511
Discontinued operations:
Income (loss) from discontinued operations................ 3,420 (1,124) 14,923
Gain on sale of discontinued operations................... -- 74,883 --
------- -------- -------
3,420 73,759 14,923
------- -------- -------
Net income.................................................. $38,436 $103,499 $54,434
======= ======== =======
</TABLE>
See accompanying notes to condensed financial statements.
S-5
<PAGE> 184
AMERICAN MUTUAL HOLDING COMPANY
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(PARENT COMPANY)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 38,436 $103,499 $ 54,434
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed earnings.......................... (69,195) (58,610) (74,652)
Dividends from subsidiaries............................... 43,798 17,876 30,097
Minority interest......................................... 28,107 26,919 16,169
Gain on sale of subsidiaries.............................. -- (97,805) --
Realized investment losses................................ 1,000 -- --
Change in:
Income taxes.............................................. 7,616 6,222 2,909
Other, net................................................ 104,274 22,176 376
-------- -------- --------
Net cash provided by operating activities......... 154,036 20,277 29,333
-------- -------- --------
Cash flows from investing activities:
Purchase of investments................................... (125) (29,629) (500)
Capital contribution to subsidiaries...................... -- (14,184) (22,058)
Proceeds from sale of subsidiaries........................ -- 119,724 --
Purchase of note receivable............................... -- (9,150) --
Proceeds from repayment and sale of loans and leases...... 40,121 -- --
Other assets, net......................................... (3,351) -- --
-------- -------- --------
Net cash provided by (used in) investing
activities...................................... 36,645 66,761 (22,558)
-------- -------- --------
Cash flows from financing activities:
Change in debt, net....................................... -- (9,861) (52,509)
Net proceeds from initial public stock offering........... -- -- 42,171
-------- -------- --------
Net cash used in financing activities..................... -- (9,861) (10,338)
-------- -------- --------
Net increase (decrease) in cash........................... 190,681 77,177 (3,563)
Cash at beginning of period................................. 77,232 55 3,618
-------- -------- --------
Cash at end of period....................................... $267,913 $ 77,232 $ 55
======== ======== ========
</TABLE>
See notes to accompanying condensed financial statements
S-6
<PAGE> 185
AMERICAN MUTUAL HOLDING COMPANY
(PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
American Mutual Holding Company ("AMHC") is a holding company which owns
all of the outstanding stock of AmerUs Group Co. ("AGC"). AGC's principal asset
is a majority ownership percentage in AmerUs Life Holdings, Inc. ("AmerUs")
which is primarily comprised of three life insurance companies operating
throughout the United States. In addition to AmerUs, AGC owns a finance company
and a real estate management company. AMHC's investment in its subsidiaries is
stated at cost plus equity in undistributed earnings of the subsidiaries. The
Company's share of net income of its unconsolidated subsidiaries is included in
income using the equity method. These financial statements should be read in
conjunction with AMHC's consolidated financial statements.
(2) DISCONTINUED OPERATIONS
In the first quarter of 1998, the Company began implementation of a plan
for the disposition of its residential real estate operating segment. This
operating segment consisted of four subsidiaries: AmerUs Mortgage, Inc. (AMI),
AmerUs Home Services (AHS), Sunset Homes, and AmerUs Land Development (ALD),
formerly known as Iowa Realty Development Company. In April 1998, the Company
ceased loan origination activity of AMI. In October 1998, the Company sold the
mortgage servicing rights of AMI and recorded an after tax gain of $1.7 million.
The Company plans to complete the sale of the remaining assets of AMI and has
recorded an estimated loss of $0.3 million on these assets. In May 1998, the
Company sold AHS and recorded an after tax gain of $19.1 million. The Company
plans to complete the liquidation of the Sunset Homes real estate inventory. No
loss is expected on the sale of this inventory. The Company plans to complete
the liquidation of the ALD real estate inventory and no loss is expected on the
sale of this inventory.
In July 1998, the Company completed the sale of its Bank operating segment
subsidiary, AmerUs Bank. The Company recorded an after tax gain of $54.1 million
on the sale.
The results of operations for the above subsidiaries have been classified
as discontinued operations and prior periods have been restated. Gains on sale
of discontinued operations, operating income and loss from discontinued
operations, and the remaining assets and liabilities of the discontinued
segments are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------- -------
(in thousands)
<S> <C> <C> <C>
Gains on sale of AMI mortgage servicing rights, net of
income tax of $1,052...................................... $ -- $ 1,720 $ --
Gain on sale of AHS, net of income taxes of $16,680......... -- 19,087 --
Gain on sale of AmerUs Bank, net of income taxes of
$5,142.................................................... -- 54,076 --
------ ------- -------
-- 74,883 --
------ ------- -------
Operating income (loss) from real estate operations, net of
income taxes of 2,631, $(1,277), and $2,144
respectively.............................................. 3,911 (752) 1,377
Operating income (loss) from bank operations, net of income
taxes on none, $(711), and $8,421, respectively........... -- (372) 13,546
------ ------- -------
3,911 (1,124) 14,923
------ ------- -------
Income from discontinued operations......................... $3,911 $73,759 $14,923
====== ======= =======
</TABLE>
S-7
<PAGE> 186
AMERICAN MUTUAL HOLDING COMPANY
(PARENT COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) REORGANIZATION
On December 20, 1999, the Company and AmerUs announced that their
respective boards of directors had approved plans for the demutualization of the
Company and the merger of AmerUs into the Company following the demutualization.
Upon completion of the demutualization, the Company would be a public company
and will change its name to AmerUs Group Co. (AmerUs Group). Members of the
Company will receive approximately 17 million shares of AmerUs Group and cash or
policy credits in excess of $300 million as a result of the demutualization.
Shareholders of AmerUs will receive shares in AmerUs Group in a one-for-one
exchange.
Approval for the demutualization and merger is needed from the members of
the Company, the Iowa Commissioner of Insurance and shareholders of AmerUs. The
Company expects to ask for approval of these transactions during the second
quarter of 2000.
(4) SUBSEQUENT EVENTS
On February 18, 2000, the Company, AmerUs, and ILICO Insurance Co. (ILICo)
entered into a definitive agreement for a combination of the companies. Under
these terms, the Company will proceed with its previously announced
demutualization. ILICo will demutualize separately and ILICo's members will
receive cash, policy credits and stock equivalents to the value of 11.25 million
shares of stock of AmerUs Group. Upon demutualization, ILICo will become a
subsidiary of AmerUs Group and will continue operations as a stock life
insurance company.
As part of the transaction, the Company made an initial investment of $100
million in a downstream holding company of ILICo on February 18, 2000.
ILICo is a 95-year-old mutual life insurance and annuity company based in
Indianapolis, Indiana. ILICo and its subsidiaries are licensed to do business in
all 50 states and the District of Columbia. At December 31, 1999, ILICo had
total assets of $6.1 billion and insurance in force of $30.3 billion.
The contemplated transactions are subject to normal closing conditions,
including appropriate policyholder/member, shareholder and regulatory approvals.
The Company expects the demutualization of ILICo and combination with AmerUs
Group to take place in the fourth quarter of 2000.
On February 1, 2000, the Company acquired an independent marketing
organization for approximately $18.1 million. Additional consideration may be
paid contingent on the earnings of the acquired company over the next five
years. The assets of the acquired company were approximately $1.6 million as of
December 31, 1999 and the revenues were approximately $10.0 million for the year
then ended.
S-8
<PAGE> 187
AMERICAN MUTUAL HOLDING COMPANY
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
DEFERRED BENEFITS,
POLICY FUTURE POLICY OTHER POLICY CLAIMS,
ACQUISITION BENEFITS, LOSSES, CLAIMS & NET LOSSES &
COSTS & CLAIMS & LOSS UNEARNED BENEFITS PREMIUM INVESTMENT SETTLEMENT
SEGMENT VOBA EXPENSES(1) PREMIUMS PAYABLE(2) REVENUE INCOME EXPENSES
------- ----------- ----------------- -------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life Insurance(3)
12/31/99............. $388,093 $2,596,073 $-- $16,891 $253,707 $201,467 $368,413
12/31/98............. $257,858 $2,638,249 $-- $18,525 $249,439 $186,714 $369,153
12/31/97............. $242,582 $2,524,216 $-- $ 8,461 $236,878 $187,166 $345,642
Annuities
12/31/99............. $469,253 $6,823,004 $-- $ -- $ 25,122 $442,851 $337,983
12/31/98............. $330,191 $6,302,489 $-- $ -- $ 29,610 $432,299 $339,293
12/31/97............. $286,093 $6,215,935 $-- $ -- $ 17,238 $147,924 $117,573
Other
12/31/99............. $ -- $ -- $-- $ -- $ 136 $ 21,307 $ 291
12/31/98............. $ -- $ 17,801 $-- $ 322 $ 326 $ 1,917 $ 21
12/31/97............. $ -- $ 17,005 $-- $ 2,053 $ 156 $ 5,579 $ 577
Totals(3)
12/31/99............. $857,346 $9,419,077 $-- $16,891 $278,695 $665,625 $706,687
12/31/98............. $588,049 $8,958,539 $-- $18,847 $279,375 $620,930 $708,467
12/31/97............. $528,675 $8,757,156 $-- $10,514 $254,272 $340,669 $463,792
<CAPTION>
AMORTIZATION
OF DEFERRED
POLICY OTHER
ACQUISITION OPERATING PREMIUM
SEGMENT COSTS & VOBA EXPENSES WRITTEN
------- ------------ --------- -------
<S> <C> <C> <C>
Life Insurance(3)
12/31/99............. $37,887 $ 57,784 n/a
12/31/98............. $48,684 $ 48,418 n/a
12/31/97............. $48,786 $ 43,973 n/a
Annuities
12/31/99............. $50,230 $ 30,900 n/a
12/31/98............. $37,816 $ 35,592 n/a
12/31/97............. $ 6,461 $ 7,365 n/a
Other
12/31/99............. $ -- $ 42,892 n/a
12/31/98............. $ -- $ 25,949 n/a
12/31/97............. $ -- $ 21,556 n/a
Totals(3)
12/31/99............. $88,117 $131,576 n/a
12/31/98............. $86,500 $109,959 n/a
12/31/97............. $55,247 $ 72,894 n/a
</TABLE>
- ---------------
(1) Includes policy reserves, policyholder funds, and dividends payable
(2) Policy and contract claims
(3) Includes Closed Block amounts
S-9
<PAGE> 188
AMERICAN MUTUAL HOLDING COMPANY
SCHEDULE IV
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
ASSUMED PERCENTAGE OF
CEDED TO OTHER FROM OTHER AMOUNT ASSUMED
GROSS AMOUNT COMPANIES COMPANIES NET AMOUNT TO NET
------------ -------------- ---------- ----------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Life insurance in force..... $33,046,944 $5,616,065 $655,021 $28,085,900 2.33%
=========== ========== ======== =========== ====
Premiums Life insurance
premiums and charges...... $ 74,878 $ 12,365 $ 1,750 $ 64,263 2.72%
Accident and health
insurance.............. 25,122 -- -- 25,122 --%
Other..................... 1,622 1,486 -- 136 --%
----------- ---------- -------- ----------- ----
Total premiums.............. $ 101,622 $ 13,851 $ 1,750 $ 89,521 1.95%
=========== ========== ======== =========== ====
YEAR ENDED DECEMBER 31, 1998
Life insurance in force..... $31,092,285 $3,778,838 $626,086 $27,939,533 2.24%
=========== ========== ======== =========== ====
Premiums
Life insurance premiums
and charges............ $ 58,536 $ 8,311 $ 1,036 $ 51,261 2.02%
Accident and health
insurance.............. 29,610 -- -- 29,610 --%
Other..................... 1,702 1,376 -- 326 --%
----------- ---------- -------- ----------- ----
Total premiums.............. $ 89,848 $ 9,687 $ 1,036 $ 81,197 1.28%
=========== ========== ======== =========== ====
YEAR ENDED DECEMBER 31, 1997
Life insurance in force..... $30,312,097 $4,102,216 $500,613 $26,710,494 1.87%
=========== ========== ======== =========== ====
Premiums
Life insurance premiums
and charges............ $ 37,581 $ 8,223 $ 1,375 $ 30,733 4.47%
Accident and health
insurance.............. 17,238 -- -- 17,238 --%
Other..................... 1,488 1,332 -- 156 --%
----------- ---------- -------- ----------- ----
Total premiums.............. $ 56,307 $ 9,555 $ 1,375 $ 48,127 2.86%
=========== ========== ======== =========== ====
</TABLE>
S-10
<PAGE> 189
AMERICAN MUTUAL HOLDING COMPANY
SCHEDULE V
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO PROVISIONS ON
MORTGAGE LOANS BEGINNING CHARGED TO COSTS MORTGAGES MORTGAGES SOLD BALANCE AT
OF PERIOD OF PERIOD AND EXPENSES ACQUIRED OR TRANSFERRED END OF PERIOD
- -------------- ---------- ---------------- ---------- ------------------ --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1999 $22,299 $ 144 $(4,397) $ -- $18,046
1998 $15,284 $(2,259) $10,374 $(1,100) $22,299
1997 $11,622 $ (855) $ 4,568 $ (51) $15,284
</TABLE>
S-11
<PAGE> 190
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1* -- Articles of Incorporation of AMHC.
3.2* -- Bylaws of AMHC.
5.1* -- Opinion of Joseph K. Haggerty, Esq., Senior Vice
President and General Counsel, regarding the legality of
the securities being issued hereunder.
8.1* -- Tax Opinion of Caplin & Drysdale.
23.1* -- Consent of Counsel (contained in Exhibit 5.1)
23.2* -- Consent of KPMG LLP.
23.3* -- Consent of KPMG LLP to AMHC.
23.4* -- Consent of Donaldson, Lufkin & Jenrette.
23.5* -- Consent of Caplin & Drysdale.
23.6* -- Consent of Ernst & Young LLP.
24.1* -- Power of Attorney (contained on the signature page).
99.2* -- Form of Amended and Restated By-Laws of AMHC.
99.3* -- Form of Proxy.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
AMERICAN MUTUAL HOLDING COMPANY
AMERICAN MUTUAL LIFE INSURANCE COMPANY ("American Mutual"), Des Moines,
Iowa, an Iowa mutual life insurance company organized under Chapters 491 and
508, 1995 Code of Iowa, acting as incorporator, does hereby form a mutual
corporation (the "Corporation") under the provisions of Chapter 491, 1995 Code
of Iowa, and does hereby adopt the following Articles of Incorporation.
ARTICLE I: ORGANIZATION
Section 1.1. The Corporation is a mutual insurance holding company
resulting from the reorganization of American Mutual pursuant to Section
521A.14, 1995 Iowa Code Supplement ("Section 521A.14"). The corporation shall
not have common stock. Pursuant to the reorganization, American Mutual has
concurrently herewith restated its Articles of Incorporation as a stock life
insurance company and has changed its name to AmerUs Life Insurance Company
("Stock Life Company").
ARTICLE II: NAME AND PLACE OF BUSINESS
Section 2.1. The name of the Corporation shall be AMERICAN MUTUAL
HOLDING COMPANY.
Section 2.2. The principal place of business of the Corporation shall
be in the Des Moines metropolitan area, Polk County, Iowa.
ARTICLE III: PURPOSES AND POWERS
Section 3.1. The Corporation has the purpose of engaging in any lawful
business.
Section 3.2. The Corporation has the same power as an individual to do
all things necessary or convenient to carry out its business and affairs,
including without limitation power to do all the following:
a. Sue and be sued, complain, and defend in its corporate name;
b. Have a corporate seal, which may be altered at will, and use it, or
a facsimile of it, by impressing or affixing it or in any other manner
reproducing it;
c. Make and amend bylaws, not inconsistent with its articles of
incorporation or with the laws of this state, for managing the business and
regulating the affairs of the Corporation;
d. Purchase, receive, lease, or otherwise acquire, and own, hold,
improve, use and otherwise deal with, real or personal property, or any legal or
equitable interest in property, wherever located;
e. Except as provided by statute or rules applicable to the
Corporation, sell, convey, mortgage, pledge, lease, exchange, and otherwise
dispose of all or any part of its property;
f. Except as provided by statute or rules applicable to the
Corporation, purchase, receive, subscribe for, or otherwise acquire, own, hold,
vote, use, sell, mortgage, lend, pledge, or otherwise dispose of, and deal in
and with shares or other interests in, or obligations of, any other entity;
<PAGE> 2
g. Except as provided by statute or rules applicable to the
Corporation, make contracts and guarantees, incur liabilities, borrow money,
issue its notes, bonds, and other obligations and secure any of its obligations
by mortgage or pledge of any of its property, franchises, or income;
h. Lend money, invest and reinvest its funds, and receive and hold real
and personal property as security for repayment;
i. Be a promoter, partner, member, associate, or manager of any
partnership, joint venture, trust, or other entity;
j. Conduct its business, locate offices, and exercise the powers
granted by this chapter within or without this state;
k. Elect directors and appoint officers, employees, and agents of the
Corporation, define their duties and fix their compensation;
l. Pay pensions and establish pension plans, pension trusts, profit
sharing plans, share bonus plans, and benefit or incentives plans for any or all
of its current or former directors, officers, employees, and agents;
m. Make donations for the public welfare or for charitable, scientific,
or educational purposes;
n. Transact any lawful business that will aid governmental policy;
o. Make payments or donations, or do any other act, not inconsistent
with law, that furthers the business and affairs of the corporation;
and all other powers of a business corporation as if this Corporation was
incorporated pursuant to the Iowa Business Corporation Act, Chapter 490, Code of
Iowa (1995), and all acts amendatory thereof or additional thereto.
ARTICLE IV: COMMENCEMENT
Section 4.1. The time of commencement of the existence of the
Corporation is 11:59 p.m., June 30, 1996.
ARTICLE V: DURATION
Section 5.1. The Corporation shall have perpetual existence unless
sooner dissolved as provided by law.
ARTICLE VI: MEMBERS
Section 6.1. Each person who, and each corporation, firm or association
which, is the owner of a policy or contract of life or health insurance or
annuity issued or assumed by American Mutual which is in force at the time of
commencement of the existence of the Corporation shall be a member of the
Corporation so long as the policy or contract of insurance or annuity remains in
force.
Section 6.2. Each person who, and each corporation, firm or corporation
which, is the owner of a policy or contract of insurance issued or assumed by an
insurance company which reorganizes from a domestic mutual insurance company
pursuant to subsection 2 of Section 521A.14, by merging its policyholders'
membership interests into the Corporation and continuing its corporate existence
as a stock
2
<PAGE> 3
insurance company subsidiary of the Corporation (hereinafter called "Additional
Insurance Company Subsidiary") which is in force on the effective date of such
reorganization shall be a member of the Corporation so long as the policy or
contract of insurance or annuity remains in force.
Section 6.3. Except as provided in Section 6.1 or 6.2, each person who,
and each corporation, firm or association which, is the owner of a policy or
contract of life or health insurance or annuity issued by Stock Life Company or
an Additional Insurance Company Subsidiary in force on or after two years from
the date of commencement of the existence of the Corporation (other than a
policy or contract of reinsurance and other than a policy or contract of life or
health insurance or annuity which by resolution duly adopted by the Board of
Directors and approved by the Commissioner of Insurance of the State of Iowa
does not carry a membership interest) shall be a member of the Corporation,
unless otherwise provided by the Bylaws of the Corporation, for so long as such
policy or contract or annuity remains in force.
Section 6.4. A member's membership interest in the Corporation shall
automatically follow and shall not be severable from the policy or contract of
insurance or annuity by virtue of which the member's membership in the
Corporation is derived. Upon lapse or termination of the policy or contract of
insurance or annuity by virtue of which the member's membership in the
Corporation is derived, the member's membership in the Corporation shall
automatically terminate and cease and the member shall not be entitled to
receive any distribution or compensation from the Corporation for the member's
membership in the Corporation. A members' membership interest shall not
constitute a security or an investment contract.
Section 6.5. A member's membership in the Corporation, or any rights
appertaining thereto or derived therefrom, shall not be conveyable,
transferable, assignable, salable, (including judicial sale), devisable,
inheritable, or be alienable in any manner whatsoever, including transfer by
operation of law, except as the ownership of the policy or contract of insurance
or annuity by virtue of which the member's membership in the Corporation is
derived is conveyed, transferred, assigned, sold, devised, or distributed under
the statutes of intestate succession.
Section 6.6. A member's membership in the Corporation, or any rights
appertaining thereto or derived therefrom, shall not separate from the policy or
contract of life or health insurance or annuity by virtue of which the member's
membership in the corporation is derived, be subject to attachment, execution or
levy, or be subject to a lien, mortgage, security interest or in any manner be
used as collateral or otherwise be hypothecated.
Section 6.7. The rights of a member as a member of the Corporation
shall be limited to the right to vote as provided by these Articles of
Incorporation and the Bylaws of the Corporation at an annual or special meeting
of the Corporation and on any proposition submitted to a vote and as provided by
law. The voting rights of the members shall be equal, subject to the provisions
of Section 10.2. A member shall have only one vote regardless of the number of
policies or contracts of insurance or annuities owned by that member. Rights of
members, other than the right to vote, shall be ratable as provided by law, the
Bylaws or as determined by the Board of Directors.
ARTICLE VII: LIMITATIONS
Section 7.1. Pursuant to the reorganization of American Mutual, the
Corporation will receive all of the initial shares of the capital stock of Stock
Life Company. Pursuant to the reorganization of a domestic mutual insurance
company which results in its becoming an Additional Insurance Company
Subsidiary, the Corporation will receive all of the initial shares of the
capital stock of any Additional Insurance Company Subsidiary. The Corporation
shall at all times retain direct or indirect ownership and control of a majority
of the voting shares of capital stock of Stock Life Company and of any
Additional
3
<PAGE> 4
Insurance Company Subsidiary. The Corporation shall not convey, transfer,
assign, pledge, subject to a security interest or lien, encumber, or otherwise
hypothecate or alienate voting shares of the capital stock of Stock Life Company
or of any Additional Insurance Company Subsidiary such that the Corporation
retains less than direct or indirect ownership and control of a majority of the
voting shares of the capital stock of Stock Life Company or of any Additional
Insurance Company Subsidiary. As used in this section "majority of the voting
shares" means shares which carry the right to cast a majority of the votes
entitled to be cast by all of the outstanding shares of the capital stock of
Stock Life Company and of any Additional Insurance Company Subsidiary for the
election of directors and on all other matters submitted to a vote of the
shareholders.
Section 7.2. The Corporation shall not pay dividends or make other
distributions or payments of income or profits, except as provided in Section
7.3 or as otherwise directed or approved by the Commissioner of Insurance of the
State of Iowa. No member shall have the right to receive in any manner, nor have
the right to the benefit of, such dividend, distribution or payment until the
Board of Directors declares such dividend, distribution or payment and the terms
and conditions of any such dividend, distribution or payment are approved by the
Commissioner of Insurance of the State of Iowa. The Board of Directors may, in
its sole discretion, from time to time waive the receipt by the Corporation of
any or all dividends, distributions or payments or any part thereof, from Stock
Life Company and any Additional Insurance Company Subsidiary upon the condition
that the amount of any dividends, distributions or payments waived be applied by
the Stock Life Company and any Additional Insurance Company Subsidiary
respectively for the sole benefit of those policyowners who are members.
Section 7.3. In the event of the voluntary dissolution or liquidation
of the Corporation, any surplus of the Corporation remaining after payment of
all liabilities of the Corporation shall be distributed to the members at the
time of such dissolution or liquidation as determined by the Board of Directors
and approved by the Commissioner of Insurance of the State of Iowa.
ARTICLE VIII: EXEMPTION FROM CORPORATE DEBTS
Section 8.1. The private property of the members, officers and
directors of the Corporation shall in no case be liable for corporate debts but
shall be exempt therefrom.
Section 8.2. Members shall not be personally liable for the acts,
debts, or liabilities of the Corporation.
Section 8.3. Members shall not be subject to assessments.
ARTICLE IX: BOARD OF DIRECTORS AND OFFICERS
Section 9.1. The corporate powers of the Corporation shall be exercised
by the Board of Directors, and by such officers and agents as the Board may
authorize, elect or appoint. The Board of Directors shall consist of not less
than seven (7) nor more than twenty-one (21) directors. The directors shall be
divided into five classes as nearly equal numerically as possible, determined by
terms expiring in successive years. Each director shall serve a term of
approximately five years, except where it is necessary to fix a shorter term in
order to preserve the classification. The term of office of each director shall
begin at the annual meeting at which such director is elected or at the time
elected by the Board of Directors. No decrease in the number of directors shall
shorten the term of any incumbent director. Each director shall serve until a
successor is elected and shall be eligible for re-election. At any meeting of
the Board of Directors of the Corporation any vacancy or vacancies on the Board
of Directors may be filled by the Board of Directors until the next annual
meeting of the Corporation, provided, however, that any vacancy occurring by
reason of death, resignation, retirement or removal may be filled for the
unexpired term to which such vacancy relates.
4
<PAGE> 5
Section 9.2. The initial Board of Directors shall consist of eleven
(11) members. The initial Board of Directors shall be:
<TABLE>
<CAPTION>
Name Address Term Ending
---- ------- -----------
<S> <C> <C>
Jack C. Pester 11 Auburn Place 1997
West University Place
Houston, TX 77005
John A. Wing 1233 Crain 1997
Evanston, IL 60202
Roger K. Brooks 300 Walnut Street 1998
Des Moines, IA 50309
Malcolm Candlish 465 Walls Way 1998
Osprey, FL 34229
John R. Albers 3825 Gillon Avenue 1999
Dallas, TX 75205
Dr. Joseph A. Borgen RR 1 Box 119 1999
St. Charles, IA 50240
Thomas F. Gaffney 2091 Oceanview Drive North 2000
Tierra Verde, FL 33715
Sam C. Kalainov 681 50th Street 2000
Des Moines, IA 50312
John W. Norris, Jr. 2100 Lake Park Blvd. 2000
Richardson, TX 75080
Wesley H. Boldt 2300 Thornton 2001
Des Moines, IA 50321
D T Doan 670 58th Place 2001
West Des Moines, IA 50266
</TABLE>
who shall serve a term expiring at the annual meeting of the Corporation in the
year set forth following their respective names and addresses above and until
their successors are elected and qualified.
Section 9.3. The number of directors may be increased or decreased from
time to time by the Board of Directors within the limits fixed by these Articles
of Incorporation; provided, however, that such number may not be increased by
more than three in any one year and any increase shall require the approval of
at least two-thirds of the entire Board of Directors.
Section 9.4. The Board of Directors solely shall have the power to: (i)
adopt Bylaws of this Corporation and rules and regulations for the transaction
of the business of the Corporation not inconsistent with these Articles of
Incorporation or the laws of the State of Iowa; and (ii) to amend or repeal such
Bylaws, rules and regulations. The Bylaws shall provide for the officers of the
Corporation
5
<PAGE> 6
and for their election or appointment. The Bylaws shall provide procedures for
the nomination and election of directors. The Board of Directors may fix
reasonable compensation of the directors for their service.
Section 9.5. The Board of Directors shall have the power, without a
vote of the members of the Corporation, to approve, authorize and accomplish the
merger of a domestic mutual insurance company's policyholders' membership
interests into the Corporation pursuant to the reorganization of the domestic
mutual insurance company in accordance with the provisions of subsection 2 of
Section 521A.14, by which the domestic mutual insurance company will continue
its corporate existence as a stock company, all of the initial shares of the
capital stock of which shall be issued to the Corporation.
Section 9.6. The Board of Directors shall have the power, without a
vote of the members of the corporation, to approve, authorize and accomplish the
merger of a mutual insurance holding company which has resulted from the
reorganization of a domestic mutual insurance company pursuant to Section
521A.14, and which has surplus equal to not more than twenty-five percent (25%)
of the surplus of the combined companies, provided the Corporation is the
surviving corporation.
Section 9.7. By a two-third's vote of the entire Board, the Board of
Directors may remove any director from office, and the Board shall have the
power to fill such vacancy as hereinbefore provided. A director shall not
otherwise be removed from office. The Board of Directors by a majority vote may
remove any officer from office and shall have the power to fill any vacancy
occurring for any reason among the officers of the corporation.
Section 9.8. The Corporation shall not loan money to a director or
officer of the Corporation.
Section 9.9. A director, in determining what is in the best interests
of the Corporation when considering an offer or proposal of acquisition, merger
or consolidation of the Corporation or a similar proposal, may consider any or
all of the following community interest factors, in addition to consideration of
the effects of any action on members: (i) the effects of action on the
Corporation's employees, suppliers, creditors and customers; (ii) the effects of
the action on the communities in which the Corporation operates; (iii) the
long-term as well as short-term interests of the Corporation and its members,
including the possibility that these interests may be best served by the
continued independence of the Corporation.
If on the basis of the community interest factors described above, the
Board of Directors determines that a proposal or offer to acquire or merge the
Corporation is not in the best interests of the Corporation, it may reject the
proposal or offer. If the Board of Directors determines to reject any such
proposal or offer, the Board of Directors has no obligation to facilitate, to
remove any barriers to, or to refrain from impeding, the proposal or offer.
Consideration of any or all of the community interest factors is not a violation
of the business judgment rule or of any duty of the director to the members, or
a group of members, even if the director reasonably determines that a community
interest factor or factors outweigh the financial or other benefits to the
Corporation or a member or group of members.
Section 9.10. A director of the Corporation shall not be personally
liable to the Corporation or its members for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for a breach of the
director's duty of loyalty to the Corporation or its members, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, or (iii) for a transaction from which the director derives
an improper personal benefit. If Chapter 491, Code of Iowa (1995), is amended to
authorize corporate action further eliminating or limiting personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the full extent permitted by Chapter 491, Code of Iowa
(1995), as so amended. Any repeal or modification of the
6
<PAGE> 7
provisions of this Section 9.10 shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE X: ANNUAL MEETINGS AND SPECIAL MEETINGS OF MEMBERS
Section 10.1. The annual meeting of the members of the Corporation
shall be held at the principal office of the corporation in the City of Des
Moines, Iowa, at ten o'clock a.m. on the first Tuesday in May of each year for
the election of a director or directors and the transaction of any other
business properly coming before the annual meeting.
Section 10.2. At any annual or special meeting of the members of the
Corporation, each member who was a member on the last day of the month next
preceding a date ninety (90) days preceding such meeting ("Qualified Voter"),
shall have one vote upon any proposition coming before such meeting, which vote
may only be cast in person or by a ballot mailed by the Qualified Voter to the
Corporation in accordance with such regulations as may be provided by the
Bylaws. Votes may not be cast by proxy. A Qualified Voter shall not agree to
cast the Qualified Voter's vote for or against any proposition in exchange for a
valuable consideration. Any vote so cast shall be void. Except as provided in
Section 10.5, any proposition submitted to the vote of the Qualified Voters
shall be carried or lost in accordance with the majority of the votes cast in
person or by ballot for or against.
Section 10.3. Special meetings of the members of the Corporation may be
called at any time by a majority of the Board of Directors. Notice of a special
meeting, stating the time and place of holding the meeting and the purpose
thereof, shall be given by mailing notice of the special meeting addressed to
the Qualified Voter at the Qualified Voter's post office address as the same
appears on the records of the Corporation. Special meetings shall be held on the
date and at the place stated in the notice, which shall be not less than twenty
(20) nor more than sixty (60) days after such notice is mailed.
Section 10.4. A quorum at any annual or special meeting of the members
of the Corporation shall consist of at least twenty-five (25) Qualified Voters.
Section 10.5. In addition to any vote, concurrence, consent or approval
by the members required by the laws of the State of Iowa or any other provision
of these Articles of Incorporation or otherwise, in the event the following
propositions, proposals or actions have not been approved by a resolution duly
adopted by the Board of Directors, the affirmative vote, concurrence, consent or
approval of at least seventy-five percent (75%) of the Qualified Voters shall be
required to authorize, adopt or approve: (i) the sale, lease or exchange of all
or a substantial part of the assets of the Corporation; (ii) the distribution of
all or any part of the surplus of the Corporation; (iii) the dissolution or
liquidation of the Corporation; (iv) the acquisition, merger, consolidation of
the Corporation, or a similar proposal; (v) demutualization of the Corporation
or other conversion of the Corporation into a stock company; or (vi) amending
the Articles of Incorporation of the Corporation. The Board of Directors may, in
its sole discretion, determine whether or not or when a proposition as set forth
in paragraphs (i) through (vi) of this Section 10.5 which has not been approved
by a resolution duly adopted by the Board of Directors, irrespective of how or
by whom the proposition was initiated, will be submitted to the Qualified
Voters.
ARTICLE XI: INDEMNIFICATION
Section 11.1. The Corporation shall have the power to indemnify as
provided in Section 491.16, Code of Iowa (1995), as it may be amended from time
to time. Any repeal or modification of this Section 11.1 or of Section 491.16,
Code of Iowa (1995), shall not adversely affect any right of indemnification of
a director, officer, employee or agent of the Corporation existing at any time
prior to such repeal or modification.
7
<PAGE> 8
ARTICLE XII: CHANGE OF ARTICLES
Section 12.1. These Articles of Incorporation may be changed or amended
at any annual meeting of the members of the Corporation or at any special
meeting called for that purpose, provided the change or amendment is proposed,
filed and notice is given as hereinafter provided. No change or amendment other
than such as may be proposed by the Board of Directors shall be voted upon at
any meeting unless the proposed change or amendment is requested in writing by
at least five percent (5%) of the Qualified Voters of the Corporation. A written
copy of such change or amendment, whether proposed by the Board of Directors or
by the Qualified Voters, must be filed with the Secretary of the Corporation at
least ninety (90) days prior to the meeting at which it is proposed. The said
change or amendment shall be acted upon and a copy thereof mailed, not less than
twenty (20) nor more than sixty (60) days prior to the said annual or special
meeting, to each Qualified Voter of the Corporation at his post office address
as the same appears on the records of the Corporation.
Section 12.2. When changes or amendments to the Articles of
Incorporation are proposed other than by the Board of Directors, such requests
or proposals shall include the signature, address and policy or contract number
of the Qualified Voters signing the same.
Dated this 13th day of June, 1996.
[SEAL]
AMERICAN MUTUAL LIFE INSURANCE COMPANY
By /s/ SAM C. KALAINOV
---------------------------------------
Attest: Sam C. Kalainov, Chairman
/s/ JAMES A. SMALLENBERGER By /s/ ROGER K. BROOKS
- --------------------------------- ----------------------------------------
James A. Smallenberger, Secretary Roger K. Brooks, Chief Executive Officer
STATE OF IOWA )
) SS
COUNTY OF POLK )
On this 13th day of June, 1996, before me, the undersigned, a Notary
Public in and for said State, personally appeared Sam C. Kalainov and Roger K.
Brooks, being by me duly sworn, did say that they are the Chairman and Chief
Executive Officer, respectively, of American Mutual Life Insurance Company,
executing the within and foregoing instrument; that the seal affixed thereto is
the seal of said corporation; that said instrument was signed (and sealed) on
behalf of said corporation by authority of its Board of Directors; and the said
Chairman and Chief Executive Officer, as such officers, acknowledged the
execution of said instrument to be the voluntary act and deed of said
corporation, by it and by them voluntarily executed.
/s/ JULIE LYNN KETTERER
------------------------------------------
Notary Public in and for said State
8
<PAGE> 9
CERTIFICATE OF APPROVAL
The foregoing Articles of Incorporation of American Mutual Holding
Company, having been submitted to us for examination and we, in our respective
capacities as Commissioner of Insurance and as Attorney General of the State of
Iowa having examined them and having found them to be in accordance with the
provisions of Chapter 491, Code of Iowa (1995) and Section 521A.14, 1995 Iowa
Code Supplement, do hereby approve them this 19th day of June, 1996.
/s/ ROBERT L. HOWE
------------------------------------
Deputy Commissioner of Insurance and
Chief Examiner State of Iowa
/s/ SCOTT M. GALENBECK
------------------------------------
Assistant Attorney General
State of Iowa
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AMERICAN MUTUAL HOLDING COMPANY
ARTICLE I
MEETINGS OF THE MEMBERS
Section 1.1 Meetings of the members of American Mutual Holding Company
(the "Corporation") shall be held in accordance with the provisions of the
Corporation's Articles of Incorporation (the "Articles of Incorporation").
Section 1.2 A member who is a qualified voter as defined in the
Articles of Incorporation ("Qualified Voter") who desires to cast his, her or
its vote by ballot without attending the meeting may do so by requesting a
ballot from the principal office of the Corporation at least five (5) days prior
to such meeting. Unless so requested it shall not be necessary for the
Corporation, its officers or Directors, to furnish a ballot to any Qualified
Voter except those present in person at such meeting. Provided, however, that
whenever the number of candidates nominated for election for the office of
Director is greater than the number to be elected, or whenever a proposed
amendment to the Articles of Incorporation is to be voted upon at such meeting,
or whenever the Board of Directors in its sole discretion may deem it advisable,
a ballot shall be furnished to each Qualified Voter without a prior request.
Section 1.3 Ballots shall contain the names of the candidates for
Director or Directors and the terms for which such Director or Directors are to
be elected, and any proposed amendment to the Articles of Incorporation or other
proposition to be voted upon at such meeting, as the case may be. In addition to
the ballot there may be submitted to the Qualified Voters such information about
the candidates and their qualifications, or the merits of the proposed amendment
or proposition as the Board of Directors may deem proper. When a ballot is
submitted to all Qualified Voters it shall be mailed, not more than sixty (60)
nor less than twenty (20) days prior to the date of such meeting, to each such
voter at his, her or its post office address as the same appears on the records
of the Corporation. No vote by proxy shall be counted.
Section 1.4 Ballots shall contain directions that the Qualified Voter
may vote for a candidate by placing a cross in the square opposite the Qualified
Voter's name, or that the Qualified Voter may vote for or against an amendment
to the Articles of Incorporation or for or against any other proposition by a
cross in the square provided for that purpose and shall contain the date of the
meeting at which it is to be voted. Such ballot shall be signed by the Qualified
Voter and shall include the address and the number of such policy or contract by
virtue of which such Qualified Voter's membership in the Corporation is derived
and shall be mailed to the Home Office of the Corporation and shall not be
counted unless it reaches the Home Office no later than the day prior to the
annual or special meeting at which it is to be voted.
Section 1.5 At a meeting at which members of the Board of Directors are
to be elected, if the ballot contains the name of a candidate who dies or
withdraws before the election and is included in a class for which the number of
candidates nominated for election is greater than the number to be elected, then
there shall be no election in such class. A new election shall be held for the
unexpired term of such vacancy or vacancies at the next following annual
meeting.
Section 1.6 The Qualified Voters in attendance at an annual or special
meeting shall select not less than three tellers from among the Qualified Voters
in attendance at the meeting, none of whom shall be a candidate for the office
of Director if Directors shall be voted on at such meeting, who shall canvass
the vote and report in
<PAGE> 2
writing to the Board of Directors the results of the vote. Alternatively, the
Board of Directors may appoint an independent auditor as teller.
Section 1.7 The person or persons receiving the highest number of votes
cast by Qualified Voters either in person or by ballot shall be elected Director
or Directors. Any proposed amendment to the Articles of Incorporation or any
other matter submitted to the Qualified Voters shall be carried or lost in
accordance with the majority votes in person or by ballot for or against it
unless otherwise provided in the Articles of Incorporation. Such ballots shall
be preserved by the Secretary at least until after the first subsequent annual
meeting and shall be available for inspection at the request of any Qualified
Voter.
ARTICLE II
NOMINATION OF CANDIDATES FOR DIRECTOR
Section 2.1 Nomination of candidates for Director to succeed those
whose terms are expiring shall be made each year by the Board of Directors and
may be made by the Qualified Voters in accordance with Section 2.2 of these
Bylaws.
Section 2.2 To be nominated by the Qualified Voters a person must have
been designated as a nominee by Qualified Voters residing in at least seven (7)
states of the United States of America and numbering in each such state not less
than one tenth of one per cent (1/10 of 1%) of the Qualified Voters of the
entire Corporation on the last day of the month preceding a date ninety (90)
days preceding such annual meeting. For the purpose of this Section, the
District of Columbia shall be deemed to be a state of the United States of
America. A Qualified Voter shall designate the Qualified Voter's proposed
nominee by a certificate of designation of proposed nominee ("Certificate of
Designation") which shall set forth the name and address of the proposed
nominee, the name, address and the number of the policy or contract by virtue of
which the Qualified Voter's membership interest in the Corporation is derived. A
Certificate of Designation shall be signed and sworn to or affirmed by the
Qualified Voter before a person authorized to administer oaths in the
jurisdiction where the Qualified Voter signs the certificate of designation and
the Qualified Voter's signature must be verified by such person. A Qualified
Voter shall not designate more than one proposed nominee in any one year. Any
Certificate of Designation of any Qualified Voter who or which purports to
designate more than one proposed nominee in any one year shall be void.
Section 2.3 Statements of nominations made by the Board of Directors
shall be signed by the Chief Executive Officer or such other officer or Director
of the Corporation as may be authorized so to do by the Board of Directors.
Section 2.4 A statement of nominations made by the Board of Directors
and Certificates of Designation of nominees by the Qualified Voters shall be
filed with the Secretary of the Corporation not more than one hundred twenty
(120) nor less than ninety (90) days before the date of the annual meeting of
the Corporation, provided, however, that the Board of Directors at any time
after filing its statement of nominations with the Secretary of the Corporation
may substitute another candidate for any candidate whom it has nominated by
filing a statement or statements of such substitution or substitutions with the
Secretary of the Corporation. Each nominee shall be assigned to a class which
has terms expiring. If the Qualified Voters designating a nominee fail to assign
the nominee to any class or are not in agreement as to the class to which a
designated nominee should be assigned the Board of Directors shall make such
assignment. Each nominee shall be required to notify the Secretary in writing of
his or her availability as a candidate for election to the Board of Directors so
that such notification shall be received by the Secretary not less than
seventy-five (75) days before the annual meeting, provided, however, that a
nominee or nominees who have been substituted by the Board of Directors shall
notify the Secretary in writing of his availability as a candidate for election
to the Board of Directors within five (5) days after the filing with the
Secretary of the Corporation of the statement of substitution of such nominee.
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Section 2.5 Directors who are not officers of the Corporation shall
retire from the Board of Directors at the annual meeting next following the date
they attain age 70 or retire from active employment notwithstanding any election
for a longer term. A Director other than the Chief Executive Officer who is also
an officer of the Corporation shall retire from the Board upon retirement from
the Corporation as an employee or upon any other termination of office for any
reason. A Director who is also the Chief Executive Officer shall not retire from
the Board upon his or her retirement as an employee, but shall remain a member
of the Board after such retirement for a period not to exceed two (2) years
after the date of the annual meeting following the date of his or her
retirement. However, upon termination of his employment for any reason other
than retirement, the Chief Executive Officer shall immediately retire from the
Board.
ARTICLE III
THE BOARD OF DIRECTORS
Section 3.1 Annual meetings of the Board of Directors shall be held as
soon as practicable after each annual meeting of the members of this
Corporation, and other meetings of the Board of Directors shall be held on the
call of the Chief Executive Officer or by a majority of the Board of Directors
upon two (2) days written notice at the times and places designated in the call,
unless the Board of Directors shall by resolution fix the time and place of said
meetings. Any director may waive any call or notice required to be given either
before or after the time stated therein.
Section 3.2 At all meetings of the Board of Directors, regular or
special, a majority of its membership shall constitute a quorum for the
transaction of business, but at any such meeting less than a quorum may adjourn
from time to time to a subsequent date at which date the meeting may be held
without notice provided a quorum is present at such deferred meeting. At all
meetings of the Board of Directors, regular or special, a quorum being present,
the act of the majority of the directors present at the meeting shall be the act
of the Board of Directors unless a greater number is required by law, the
Articles of Incorporation or these Bylaws. At each annual meeting the Board
shall elect a Secretary of the Board who shall keep a record of the proceedings
of the Board of Directors.
Section 3.3 The Board of Directors shall have authority to fix the
compensation, including fees and reimbursement of reasonable expenses, of
directors for services to the Corporation in any capacity, provided no such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 3.4 Any action required or permitted to be taken at a meeting
of the Board of Directors or any committee of the Board of Directors may be
taken without a meeting if all members of the Board of Directors or committee of
the Board of Directors, as the case may be, consent thereto in writing setting
forth the action so taken, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee of the Board of
Directors.
Section 3.5 Every director, and every member of any committee of the
Board of Directors shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the Corporation
by any of the Corporation's officers or employees, or committees of the Board of
Directors, or by any other person as to matters the director or member
reasonably believes are within each other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation, including, but not limited to, such records, information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
surplus and/or net profits of the Corporation.
Section 3.6 No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in
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which one or more of its directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because any one or more of such officer's or
director's votes are counted for such purpose, if: (a) the material facts as to
such director's or officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (b) the material facts as to such director's or officer's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Qualified Voters entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by a vote of the Qualified
Voters; or (c) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the Qualified Voters. All Directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
COMMITTEES
Section 4.1 An Executive Committee composed of not less than four (4)
nor more than six (6) Directors and the Chief Executive Officer is hereby
created. The other members of the Executive Committee shall be appointed by the
Board of Directors and shall serve during the pleasure of the Board. A majority
of the members of the Executive Committee shall constitute a quorum and any
matters voted on by the persons who make up such quorum shall be carried or lost
in accordance with the majority of votes cast for or against such matter. The
Executive Committee shall have and may exercise the powers of the Board in the
management of the business and affairs of the Corporation except when the Board
of Directors is in session and except the power to make, alter or repeal Bylaws
and the power to fill vacancies in, or make nominations for the Board.
Section 4.2 The Board of Directors shall have the power to appoint such
other committees as it may see fit. The Board of Directors or Executive
Committee shall have the power to delegate to any committee so appointed such of
their respective powers as the Board of Directors or the Executive Committee
select to delegate.
ARTICLE V
ELECTION OF CEO AND OTHER OFFICERS BY THE
BOARD OF DIRECTORS
Section 5.1 At any of its meetings the Board of Directors may elect a
Chief Executive Officer and such officers of the Corporation as the Board may
deem necessary, each of whom shall serve until removed by the Board of
Directors. The Chief Executive Officer may appoint other officers, each of whom
shall serve until removed by the Chief Executive Officer.
ARTICLE VI
RESPONSIBILITIES OF THE CHIEF EXECUTIVE OFFICER
Section 6.1 The Chief Executive Officer shall supervise the carrying
out of the policies adopted or approved by the Board and the Executive
Committee, shall exercise a general supervision and superintendent over all the
business affairs of the Corporation and shall possess such other powers and
perform such other duties as may be incident to the office of Chief Executive
Officer. The Chief Executive Officer shall preside at all
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meetings of the Board of Directors from which the Chairman of the Board of
Directors is absent. The Chief Executive Officer shall preside at all meetings
of the Corporation.
ARTICLE VII
RESPONSIBILITIES OF THE CHAIRMAN OF THE BOARD
Section 7.1 The Chairman of the Board of Directors shall preside at
meetings of the Board of Directors at which he or she is present. The Chairman
of the Board shall have such powers and perform such duties as may be assigned
to him or her by these Bylaws or by or pursuant to authorization of the Board.
ARTICLE VIII
DUTIES OF OFFICERS, OTHER THAN THE CEO AND
CHAIRMAN OF THE BOARD
Section 8.1 All officers other than the Chief Executive Officer shall
also have and perform such duties as may be assigned to them by the Board of
Directors or the Chief Executive Officer.
ARTICLE IX
CONTRACTS AND STOCK IN OTHER CORPORATIONS
Section 9.1 The Board of Directors may authorize any officer or
officers, agent or agents of the Corporation, in addition to the officers who
may otherwise be authorized, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation. Such authority
may be general or confined to specific instances.
Section 9.2 In the absence of a resolution of the Board of Directors to
the contrary, the Chief Executive Officer, the President and any Vice President
acting within the scope of his or her authority are authorized and empowered on
behalf of the Corporation to attend and vote, or to grant discretionary proxies
to be used, at any meeting of shareholders of any corporation in which this
Corporation holds or owns shares of stock, and in that connection, on behalf of
this Corporation, to execute a waiver of notice of any such meeting or a written
consent to action without a meeting. The Board of Directors shall have authority
to designate any officer or person as a proxy or attorney-in-fact to vote shares
of stock in any other corporation in which this Corporation may own or hold
shares of stock.
ARTICLE X
FUNDS OF THE CORPORATION
Section 10.1 All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks or
other depositories as shall from time to time be selected by resolution of the
Board of Directors.
Section 10.2 All checks, drafts or orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the Corporation
shall be signed by such officer or officers, agent or agents of the Corporation
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
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ARTICLE XI
AMENDING, ALTERING OR REPEALING THE BYLAWS
Section 11.1 These Bylaws may be amended, altered or repealed by the
Board of Directors at any regular or special meeting of the Board of Directors,
provided written notice expressing in substance the proposed changes shall have
been given to each Director at least two (2) days prior to the date of such
regular or special meeting.
ARTICLE XII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 12.1 The Corporation shall indemnify and advance expenses to
any person who was or is a party to or is threatened to be made a party to any
threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (including a grand jury
proceeding) and whether formal or informal, by reason of the fact that such
person (a) is or was a director or officer of the Corporation, or (b) while a
director or officer of the Corporation, is or was serving at the request of the
Corporation as a director, officer, employee, agent, partner or trustee (or in a
similar capacity) of another corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan, to the maximum extent it is
empowered to indemnify and advance expenses to a director by sections 490.850
through 490.858, 1995 Code of Iowa, as they now exist or may hereafter be
amended or changed (but, in the case of any such amendment or change, only to
the extent that such amendment or change empowers the Corporation to provide
broader indemnification than said law empowered the Corporation to provide prior
to such amendment or change), against reasonable expenses (including attorneys'
fees), judgments, fines, penalties, including an excise tax assessed with
respect to an employee benefit plan, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such claim, action, suit
or proceeding or any appeal thereof; provided, however, that except as provided
in Section 12.2 of these bylaws with respect to proceedings seeking to enforce
rights of indemnification, entitlement to such indemnification shall be
conditional upon the Corporation being afforded the opportunity to participate
directly on behalf of such person in such claim, action, suit or proceeding or
any settlement discussions relating thereto, and with respect to any settlement
or other nonadjudicated disposition of any threatened or pending claim, action,
suit or proceeding, entitlement to indemnification shall be further conditional
upon the prior approval by the Corporation of the proposed settlement or
nonadjudicated disposition. Such approval shall be made (a) by the Board of
Directors by majority vote of a quorum consisting of directors not at the time
parties to the claim, action, suit or proceeding, or (b) by special legal
counsel selected by the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the claim, action, suit, or
proceeding, or, if the requisite quorum of the full board cannot be obtained
therefor, by a majority vote of the full board, in which selection of counsel
directors who are parties may participate. Approval or disapproval by the
Corporation of any proposed settlement or other nonadjudicated disposition shall
not subject the Corporation to any liability to or require indemnification or
reimbursement of any party whom the Corporation would not otherwise have been
required to indemnify or reimburse. The right to indemnification conferred in
this Article XII shall include the right to payment or reimbursement by the
Corporation of reasonable expenses incurred in connection with any such claim,
action, suit or proceeding in advance of its final disposition; provided,
however, that the payment or reimbursement of such expenses in advance of the
final disposition of such claim, action, suit or proceeding shall be made only
upon (a) delivery to the Corporation of a written undertaking, by or on behalf
of the person claiming indemnification under this Article XII to repay all
amounts so advanced if it shall ultimately be determined that such person is not
entitled to be indemnified under this Article XII or otherwise, or (b) delivery
to the Corporation of a written affirmation of such person's good faith belief
that such person has met the applicable standard of conduct necessary to require
indemnification by the Corporation pursuant to this Article XII or otherwise, or
(c) a determination that the facts then known to those making the determination
would not preclude indemnification under this Article XII.
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Section 12.2 Any indemnification or advancement of expenses required
under this Article XII shall be made promptly upon, and in any event within
thirty (30) days after, the written request of the person entitled thereto. If
the Corporation denies a written request for indemnity or advancement of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within thirty (30) days of the date such request is received by the
Corporation, the person seeking indemnification or advancement of expenses as
granted by this Article XII may at any time within the applicable statute of
limitations bring suit against the Corporation in any court of competent
jurisdiction to establish such person's right to indemnity or advancement of
expenses. Such person's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification in any such action
or proceeding shall also be indemnified by the Corporation. It shall be a
defense to any action brought against the Corporation to compel indemnification
(other than an action brought to enforce a claim for the advancement of expenses
pursuant to this Article XII where the written affirmation of good faith or the
undertaking to repay as required above has been received by the Corporation)
that the claimant has not met the standard of conduct set forth in section
490.851, 1995 Code of Iowa, but the burden of proving such defense shall be on
the Corporation. Neither (a) the failure of the Corporation (including its Board
of Directors, special legal counsel or the shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in section 490.851, 1995 Code of Iowa,
nor (b) the fact that there has been an actual determination by the Corporation
(including its Board of Directors, special legal counsel or the shareholders)
that the claimant has not met such applicable standard of conduct, shall create
a presumption that the claimant has not met the applicable standard of conduct.
In the event that the applicable standard of conduct has been met as to some
claims, actions, suits or proceedings, but not as to others, a person who has a
right of indemnification pursuant to this Article XII shall be indemnified
against all expenses (including attorney fees) actually and reasonably incurred
by such person in connection with the claim, action, suit or proceeding as to
which the applicable standard has been met. Nothing contained in this section
shall limit the obligation, duty or ability of the Corporation to indemnify such
person as provided elsewhere in this Article XII.
Section 12.3 The provisions of this Article XII shall be deemed a
contract between the Corporation and each director and officer who serves in
such capacity at any time while this Article XII and the relevant provisions of
the Iowa Business Corporation Act are in effect, and any repeal or modification
of any such law or of this Article XII shall not adversely affect any rights or
obligations then existing with respect to any state of facts then or theretofore
existing or any claim, action, suit or proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
Section 12.4 The Corporation shall indemnify and advance expenses to
any person who was or is a witness in or is threatened to be made a witness in
any threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (including a grand jury
proceeding) and whether formal or informal, by reason of the fact that such
person (a) is or was a director or officer of the Corporation, or (b) while a
director or officer of the Corporation, is or was serving at the request of the
Corporation as a director, officer, employee, agent, partner or trustee (or in a
similar capacity) of another corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan, to the same extent that such person
would be entitled to indemnification and advancement of expenses under this
Article XII if such person were, or were threatened to be made, a party to such
claim, action, suit or proceeding, against reasonable expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with such claim, action, suit or proceeding or any appeal thereof.
Section 12.5 Except as limited by section 490.851, 1995 Code of Iowa,
the indemnification and advancement of expenses provided by or granted pursuant
to this Article XII shall not be deemed exclusive of any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise; provided, however, that in no event shall any such provision or
agreement provide indemnification to a person who was or is a director or
officer of the Corporation (a) for a breach of a director's or officer's duty of
loyalty to the Corporation or its shareholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or knowing
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violation of the law, (c) for a transaction from which the person seeking
indemnification derived an improper personal benefit or (d) for liability under
section 490.833, 1995 Code of Iowa.
Section 12.6 This Article XII shall be applicable to all claims,
actions, suits or proceedings commenced after the effective date hereof, whether
arising from acts or omissions occurring before or after the effective date
hereof. Each person who is now serving or who shall hereafter serve as a
director or officer of the Corporation shall be deemed to be doing so in
reliance upon the rights of indemnification provided for in this Article XII,
and such rights of indemnification shall continue as to a person who has ceased
to be a director or officer, and shall inure to the benefit of the heirs,
executors, administrators and legal or personal representatives of such a
person. If this Article XII or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer of the Corporation to the
maximum extent permitted by any applicable portion of this Article that shall
not have been invalidated.
Section 12.7 Notwithstanding anything in this Article XII to the
contrary, except with respect to proceedings initiated to enforce rights of
indemnification to which such person is entitled under this Article XII or
otherwise, the Corporation shall indemnify any such person in connection with a
claim, action, suit or proceeding (or part thereof) initiated by such person
only if the initiation of such claim, action, suit or proceeding (or part
thereof) was authorized by the Board of Directors.
Section 12.8 The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan against any liability asserted against such person and
incurred by such person in such capacity, or arising out of such person's status
as such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Article XII, section
490.850 through 490.458, 1995 Code of Iowa, or otherwise. The Corporation may
create a trust fund, grant a security interest and/or use other means
(including, without limitation, letters of credit, surety bonds and/or similar
arrangements), as well as enter into contracts providing for indemnification to
the maximum extent permitted by law and including as part thereof any or all of
the foregoing, to ensure the payment of such sums as may become necessary to
effect full indemnification. The Corporation's obligation to make
indemnification and pay expenses pursuant to this Article XII shall be in excess
of any insurance purchased and maintained by the Corporation and such insurance
shall be primary. To the extent that indemnity or expenses of a person entitled
to indemnification and payment of expenses pursuant to this Article XII are paid
on behalf of or to such person by such insurance such payments shall be deemed
to be in satisfaction of the Corporation's obligation to such person to make
indemnification and pay expenses pursuant to this Article XII.
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EXHIBIT 5.1
May 11, 2000
American Mutual Holding Company,
699 Walnut Street
Des Moines, Iowa 50309
Re: American Mutual Holding Company:
Shares of Common Stock
Ladies and Gentleman:
Roger K. Brooks I am Senior Vice President and General Counsel of
American Mutual Holding Company, a mutual insurance holding company organized
under the laws of Iowa (the "Company"), and in my capacity as such have
represented the Company in connection with the registration under the Securities
Act of 1933, as amended, of (i) 14,700,000 shares of common stock, no par value
(the "Merger Common Stock"), that are to be issued in connection with the
Agreement and Plan of Merger, dated as of February 18, 2000 between the Company
and AmerUs Life Holdings, Inc. (as amended, the "Merger Agreement").
In rendering the opinions expressed below, I have examined originals,
or copies certified to my satisfaction, of such corporate records of the Company
and its subsidiaries, agreements and other instruments, certificates of public
officials, certificates of officers of the Company and its subsidiaries or
representatives thereof, and other documents, and such questions of law, as I
have considered necessary or appropriate as a basis for the opinions hereinafter
expressed.
Based on the foregoing, having regard to legal considerations I deem
relevant, and subject to the assumptions, exceptions and qualifications set
forth herein, I am of the opinion that, assuming that the shareholders of AmerUs
Life Holdings, Inc. approve the Merger Agreement as is contemplated in the
Registration Statement, the shares of Merger Common Stock being issued by the
Company will have been duly authorized and, when issued in accordance with the
Merger Agreement, will be legally issued, fully paid and non-assessable.
I am admitted to the Bar of the State of Iowa, and I express no opinion
as to the law of any jurisdiction other than the laws of the State of Iowa and
the Federal laws of the United States of America. My opinions are rendered only
with respect to the laws, and the rules, regulations and orders thereunder,
which are in effect on the date hereof.
<PAGE> 2
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 of the Company relating to the Common Stock.
In giving such consent, I do not thereby admit that I am in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ JOSEPH K. HAGGERTY
Joseph K. Haggerty
<PAGE> 1
EXHIBIT 8.1
December 15, 1999
Board of Directors
American Mutual Holding Company
699 Walnut Street
Des Moines, Iowa 50309
Board of Directors
AmerUs Life Holdings, Inc
699 Walnut Street
Des Moines, Iowa 50309
Re: Federal Income Tax Consequences of
Proposed Demutualization and Merger
Dear Sirs:
You have requested our opinion regarding the federal income tax
consequences of a proposed demutualization (the "Demutualization") of American
Mutual Holding Company ("AMHC"), a proposed liquidation (the "Liquidation") of
AmerUs Group Co. ("Group") prior to the Demutualization, and a proposed merger
(the "Merger") of AmerUs Life Holdings, Inc. ("ALH") into AMHC following the
Demutualization.
The opinions expressed herein are subject to our understanding of the
relevant facts as summarized below.
FACTS
A. Parties to the Transactions
AMHC is a mutual insurance holding company organized under Iowa law. As
a mutual insurance holding company, AMHC does not have capital stock, instead it
has members who are certain of the policyholders of AmerUs Life Insurance
Company ("AmerUs Life"), a wholly owned subsidiary of ALH. The sole asset of
AMHC is 100% of the outstanding stock of Group. AMHC is the common parent of an
affiliated group of corporations that file consolidated returns for Federal
income tax purposes. The principal businesses of the AMHC consolidated group are
conducted through three wholly owned subsidiaries of Group - AmerUs Properties,
Inc. ("Properties"), AmerUs Home Equity, Inc. ("Home Equity"), and AmerUs Land
Development, Inc. ("Land") - and their respective wholly owned subsidiaries. The
AMHC group also has various inactive subsidiaries that have discontinued
business operations. Each member of the AMHC consolidated group uses the
calendar year for its taxable year and follows the accrual method of accounting
for Federal income tax purposes.
Group is a wholly owned subsidiary of AMHC incorporated under Iowa law.
Group's assets consist primarily of 100% of the stock of Properties, Home Equity
and Land, as well as 58% of the stock of ALH. Properties is actively involved in
the business of managing and developing commercial real estate and mortgage
portfolios of AMHC and its subsidiaries. Home Equity is actively involved in the
wholesale origination, sale, and servicing of home equity mortgage loans. Land
owns a substantial inventory of raw land suitable for development that it
acquired from AmerUs Home Services ("Home
<PAGE> 2
Services"), a former subsidiary of Group, and that it intends to liquidate in an
orderly fashion. The stock of Properties and Home Equity represent approximately
5% and 1%, respectively, of the total value of Group's assets. The stock of Land
represents approximately 2% of the value of Group's assets. The stock of ALH
represents approximately 51% of the value of Group's assets. The remaining 41%
of AMHC's assets consists of cash and investment securities.
ALH is incorporated under Iowa law and is a publicly traded insurance
holding company. ALH owns 100% of the stock of AmerUs Life, as well as 100% of
the stock of Delta Life Corporation ("Delta") and 100% of the stock of AmVestors
Financial Corporation ("AmVestors"). ALH's wholly owned subsidiaries have
additional direct and indirect subsidiaries of their own, each of which is
wholly owned by members of the ALH group. ALH and those of its subsidiaries that
are not life insurance companies file a consolidated return. In addition, AmerUs
Life and its wholly owned life insurance subsidiary American Vanguard Life
Insurance Company file their own life-life consolidated return under section
1504(c)(1).(1) The direct and indirect subsidiaries of ALH (other than those
that are inactive or that serve only as holding companies) are all involved in
the life insurance business or other related financial services. The common
stock of ALH is traded on the New York Stock Exchange. Approximately 42% of the
outstanding common stock of ALH is held by public investors. The other 58% is
held by Group. Each member of the ALH consolidated group uses the calendar year
for its taxable year and follows the accrual method of accounting for Federal
income tax purposes.
B. Reorganization of AmerUs Life and Related Transactions
Prior to June 30, 1996, AmerUs Life was organized as a mutual life
insurance company under Chapter 491 of the Iowa Business Corporation Act.(2)
AmerUs Life was reorganized as a stock life insurance company under Chapter 490
of the Iowa Business Corporation Act on June 30, 1996, pursuant to a plan of
reorganization authorized under section 521A.14 of the Iowa Code. The plan of
reorganization was approved by the Iowa Commissioner of Insurance and by a vote
of the policyholders of AmerUs Life.
AMHC was organized as a mutual insurance holding company under section
521A.14 of the Iowa Code incident to the reorganization of AmerUs Life. As
required under section 521A.14 and as provided in the plan of reorganization,
AmerUs Life's policyholders became members of AMHC and ceased to have any
membership interest in AmerUs Life itself on the effective date of the
reorganization. All equity ownership interests in AmerUs Life became represented
by its capital stock, 100 percent of which was initially issued to AMHC. On
August 1, 1996, AMHC transferred the stock of AmerUs Life to Group, and Group
thereafter transferred that stock to ALH. ALH was formed to serve as the direct
holding company of AmerUs Life (and such other life insurance companies as the
group might acquire) and as the issuer of the stock and other securities to be
offered to public investors.
Pursuant to section 521A.14 of the Iowa Code and the articles of
incorporation of ALH, AMHC is required to hold stock which directly or
indirectly represents more than 50 percent of the voting power of the stock of
AmerUs Life or of any intermediate holding company that owns all of the voting
stock of AmerUs Life (i.e., ALH in this case). This requirement has been
satisfied by the creation of Class A and
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(1) All statutory references are to the Internal Revenue Code of 1986, as
amended. All references to "Reg". are to the Treasury Regulations on Income Tax
(1986 Code).
(2) AmerUs Life was originally organized in 1896 as a mutual insurance company
under the name Central Life Assurance Society of the United States. The company
was converted to a stock company in 1902 and back to a mutual company in 1919.
The company's name was changed to American Mutual Life Insurance Company when a
previously unrelated company of that name was merged into the company at the end
of 1994. The company's name was changed to AmerUs Life Insurance Company on June
30, 1996.
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Class B shares of ALH common stock. The Class A and Class B shares have
identical dividend and liquidation rights, and each share is ordinarily entitled
to one vote. However, the voting rights of the Class B shares are subject to an
adjustment mechanism which assures that the Class A and Class B shares held by
Group will retain more than 50 percent of the combined voting power of all ALH
stock. Apart from this majority voting interest, the articles of incorporation
of ALH currently provide that at least 25 percent of its common stock will be
directly or indirectly owned by AMHC.
The principal purpose of the reorganization was to create a corporate
structure that would provide access to the capital markets through one or more
public offerings of stock and thereby fund growth and expansion of the life
insurance business, including through acquisitions of other life insurance
companies. Accordingly, it was intended that a public offering of stock would be
made as soon as practicable after the reorganization.
A registration statement for a public offering of the common stock of
ALH was filed with the SEC on September 18, 1996, and became effective on
December 12, 1996. To facilitate market acceptance of the public offering,
AmerUs Life distributed the stock of its primary non-life subsidiaries
(Properties, Home Services, and AmerUs Bank) to Group and Group contributed the
stock of AmerUs Life to ALH. On September 12, 1997, the parties received rulings
from the IRS on the qualification of these transactions, and related transfers,
as tax-free transactions under sections 355, 368(a)(1)(D), 351 and related
sections. See PLR 97500050. On February 3, 1997, the sale of approximately 28
percent of the common stock of ALH, which had been offered pursuant to a public
offering and a subscription rights offering to policyholders, was closed for
total consideration of approximately $106 million. As a result of the public
offering both ALH and AmerUs Life ceased to be members of the affiliated group
of which AMHC was the common parent, and both companies had new taxable years
commencing on February 4, 1997.
Consistent with the growth objectives of the reorganization and public
offering, ALH acquired Delta on October 24, 1997, and it acquired AmVestors on
December 19, 1997. The Delta acquisition was effected through a reverse
triangular cash merger, and the AmVestors acquisition was effected through a
reverse triangular merger in which ALH stock was issued to the former AmVestors
shareholders. As a result of the ALH stock issued in the AmVestors merger and
subsequent repurchases of ALH stock in the open market, Group now owns
approximately 58 percent of the outstanding stock of ALH, and the public
shareholders own approximately 42 percent.
C. Rights of AMHC's Members
Prior to the reorganization, the policyholders of AmerUs Life were also
members of the company. This meant that policyholders had the right to vote, on
a one-policyholder-one-vote basis, for AmerUs Life's directors and on certain
corporate transactions and the right to participate in any distribution of
surplus upon a liquidation of the company.
As a result of the reorganization, AmerUs Life's policyholders
exchanged their membership interests in AmerUs Life for corresponding membership
interests in AMHC. For the two-year period ending on June 30, 1998, only those
persons who were AmerUs Life policyholders on June 30, 1996, became members of
AMHC. As of June 30, 1998, all other AmerUs Life policyholders also became AMHC
members.
A policyholder's membership interest in AMHC consists of the rights to
vote and to participate in the distribution of AMHC's surplus in the event of
AMHC's voluntary dissolution or liquidation or to receive consideration in the
event of AMHC's demutualization. The voting rights of members are equal, with
each member having only one vote regardless of the number of policies owned by
that member. The members have the right to vote for the election of AMHC's
Directors and on any proposition that the
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Directors put to a vote of members or which is required to be put to a vote of
members under Iowa law. An individual ceases to be a member of AMHC when he or
she ceases to be a policyholder of AmerUs Life. Consistent with section 521A.14
of the Iowa Code, AMHC's articles of incorporation provide the members of AMHC
with the sole right to receive dividends, liquidating distributions, or any
proceeds from the demutualization of AMHC, but those rights are in all cases
subject to the prior approval the Commissioner of Insurance of the State of
Iowa.
Under Iowa law, AMHC is treated as a mutual entity and may be
demutualized under section 512A.14(5)(b) and Chapter 508B of the Iowa Code, the
same statutory provisions that govern the demutualization of mutual life
insurance companies. In the event of such demutualization, (including by means
of a statutory merger into a pre-existing stock company), AMHC's members would
be entitled to receive consideration in the form of stock, subscription rights
to stock, cash, or such other consideration permitted under section 508B.3 and
approved by the Commissioner of Insurance. A demutualization would not affect
the contractual rights of AmerUs Life's policyholders under their insurance
contracts.
D. Proposed Transactions
The proposed transactions will take place as follows: (i) Group will
liquidate into AMHC, (ii) AMHC will convert to a stock corporation under Iowa
law (the "Conversion") by amending its articles of incorporation to provide for
the issuance of capital stock, and (iii) ALH will then merge into AMHC by means
of a statutory merger under Iowa law.
In the conversion transaction, the members of AMHC will receive, in the
aggregate, voting common stock that will ultimately represent approximately 58%
of AMHC and approximately $300 million of cash or policy credits funded by AMHC
(as more fully described below). The value of consideration to be received by
each member will reflect valuations based upon the member's voting rights and
actuarial computations of the member's contribution to the surplus of AmerUs
Life. This allocation of value will be subject to the approval of the Iowa
Commissioner of Insurance.
In the case of membership interests associated with tax sheltered
annuities, individual retirement annuities, and other policies issued directly
to pension plan participants (collectively "Qualified Contracts") the underlying
policy will be credited with an additional amount of earnings, and no stock or
cash will be distributed to the member/policyholder. It is expected that cash or
property will be transferred from AMHC to the issuer of the qualified contracts
(i.e., AmerUs Life) to fund these additional amounts.
In the merger, the public shareholders of ALH will receive voting
common stock of AMHC representing approximately 42% of the corporation. The
voting common stock will be the only class of AMHC stock outstanding after the
transaction.
The purpose of the proposed transactions is to eliminate the mutual
holding company structure, which no longer accords with AMHC and ALH's strategic
business plan as a non-diversified stock company engaged in the life insurance
business. The new structure is intended to support the future growth and
financial strength of the combined entity in the life insurance industry and
increase the liquidity of public markets in the stock of the public holding
company.
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REPRESENTATIONS
In connection with the proposed transactions, the following
representations have been made to us by the parties:
A. Liquidation of Group Into AMHC
1. Group has outstanding 10,000 shares of voting common stock all of
which is owned by AMHC. No other shares of Group stock are outstanding.
2. AMHC acquired all of the shares of Group in exchange for a
contribution of all of the shares of AmerUs Life received by AMHC pursuant to
the demutualization of AmerUs Life.
3. The basis of the Group stock in the hands of AMHC was determined by
reference to AMHC's basis in the shares of AmerUs Life received by AMHC pursuant
to the demutualization of AmerUs Life. That basis was, in turn, determined by
reference to the basis that AmerUs Life had in its assets (net of AmerUs Life's
liabilities) on the date of its demutualization.
4. AMHC has no plan or intent to dispose of any Group stock prior to
the liquidation. Group has no plan or intent to issue any additional shares of
stock prior to the liquidation.
5. AMHC, on the date of adoption of the plan of liquidation, and at all
times until the final liquidating distribution is completed, will be the owner
of at least 80 percent of the single outstanding class of Group stock.
6. No shares of Group stock will have been redeemed during the 3 years
preceding the adoption of the plan of liquidation.
7. Prior to the transaction, the Board of Directors of Group will
approve a plan of liquidation of Group contingent upon the receipt of the
approval of the Iowa Commissioner of Insurance for the demutualization of AMHC
and the merger of ALH into AMHC.
8. All distributions from Group to AMHC pursuant to the plan of
complete liquidation will be made within a single taxable year of Group.
9. As soon as the first liquidating distribution has been made, Group
will cease to be a going concern and its activities will be limited to winding
up its affairs, paying its debts, and distributing its remaining assets to its
shareholders.
10. All the stock in Group will be redeemed and cancelled and Group
will be dissolved.
11. Group will retain no assets following the final liquidating
distribution.
12. On May 27, 1998, Group transferred all of the stock of Home
Services to MidAmerican Realty Services Company ("MidAmerican") in exchange for
cash and property with an aggregate value of approximately $84 million. To the
best of Management's knowledge, neither Group, AMHC, nor any of the members of
AMHC, own stock of MidAmerican and MidAmerican does not have a membership
interest in AMHC.
13. On July 31, 1998, Group transferred all of the stock of AmerUs Bank
to Commercial Federal Corporation ("Commercial") in exchange for cash and
property with an aggregate value of approximately $93.2 million; in addition,
approximately $85.0 of assets that Commercial did not want to
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<PAGE> 6
acquire (primarily a loan portfolio) were distributed by AmerUs Bank to Group
immediately prior to the transaction. To the best of Management's knowledge,
neither Group, AMHC, nor any of the members of AMHC own stock of Commercial and
Commercial does not have a membership interest in AMHC.
14. Other than exchanging the stock of AmerUs Life for stock of Group,
AMHC has not disposed of any assets other than in the ordinary course of
business during the 3-year period ending on the date of the adoption of the plan
of liquidation.
15. The liquidation of Group will not be preceded or followed by the
reincorporation in, or transfer or sale to, a recipient corporation of any of
the businesses or assets of Group.
16. Prior to adoption of the plan of liquidation, no assets of Group
will have been distributed in kind, transferred or sold to AMHC, except for (i)
transactions occurring in the normal course of business, and (ii) transactions
occurring more than 3 years prior to adoption of the plan of liquidation.
17. Group will report all earned income represented by assets that will
be distributed to its shareholders such as receivables being reported on a cash
basis, unfinished construction contracts, commissions due, etc.
18. The fair market value of the assets of Group will exceed its
liabilities both at the date of the adoption of the plan of complete liquidation
and immediately prior to the time the first liquidating distribution is made.
19. There is no intercorporate debt existing between AMHC and Group and
none has been cancelled, forgiven, or discounted, except for transactions
occurring more than 3 years prior to the date of adoption of the plan of
liquidation.
20. AMHC is not an organization that is exempt from Federal income tax
under section 501 or any other provision of the Code.
B. Recapitalization of AMHC
1. AMHC currently has outstanding no capital stock. All of the
ownership of AMHC is represented by membership interests owned by certain of the
policyholders of AmerUs Life.
2. There is no person that owns membership interests representing 5
percent or more of the voting rights in AMHC, nor will any person receive 5
percent or more in aggregate value of the cash, stock and policy credits to be
issued in the recapitalization.
3. Following the recapitalization and the merger, AMHC will continue to
be a holding company, and will own all of the stock of the subsidiaries formerly
owned by it and by ALH.
4. AMHC and its members will each pay their own expenses, if any,
incurred in connection with the recapitalization.
C. Merger of ALH Into AMHC
1. The terms of the Merger were negotiated through arm's length
bargaining between ALH and AMHC and, accordingly, the fair market value of the
shares of AMHC stock and other consideration received by each ALH shareholder
will be approximately equal to the fair market value of the shares of ALH stock
surrendered in the Merger exchange.
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2. AMHC has no plan or intention to reacquire any of its stock issued
in the Merger.
3. AMHC has no plan or intention to sell or otherwise dispose of any of
the assets of ALH or its subsidiaries acquired in the Merger, except for
dispositions made in the ordinary course of business.
4. The liabilities of ALH assumed by AMHC and the liabilities to which
the transferred assets of ALH are subject were incurred by ALH in the ordinary
course of its business.
5. Following the Merger, AMHC will continue the historic business of
ALH or use a significant portion of ALH's historic business assets in a
business.
6. AMHC, ALH, and the shareholders of ALH will pay their respective
expenses, if any, incurred in connection with the Merger.
7. There is no intercorporate indebtedness existing between ALH and
AMHC that was issued, acquired, or will be settled at a discount.
8. Neither party to the Merger is an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.
9. ALH is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Code.
10. Both the fair market value and the adjusted bases of the assets of
ALH transferred to AMHC will each equal or exceed the sum of the liabilities
assumed by AMHC plus the amount of liabilities, if any, to which the transferred
assets are subject.
11. The payment of cash in lieu of fractional shares of AMHC stock is
solely for the purpose of avoiding the expense and inconvenience to AMHC of
issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the Merger to
the ALH shareholders instead of issuing fractional shares of AMHC stock will not
exceed one percent of the total consideration that will be issued in the Merger
to the ALH shareholders in exchange for their shares of ALH stock. The
fractional share interest of each ALH shareholder will be aggregated, and no ALH
shareholder will receive cash in an amount equal to or greater than the value of
one full share of AMHC.
12. None of the compensation received by any shareholder-employee of
ALH will be separate consideration for, or allocable to, any of the shares of
ALH stock owned by that person prior to the Merger; none of the shares of AMHC
stock received by any shareholder-employee will be separate consideration for,
or allocable to, any employment agreement; and the compensation paid to any
shareholder-employee of ALH will be for services actually rendered and will be
commensurate with the amounts paid to third parties bargaining at arm's-length
for similar services.
DISCUSSION
A. Liquidation of Group Into AMHC
Under section 332, no gain or loss is recognized by a distributee
corporation on the receipt of property from a liquidating corporation in which
the distributee owns 80 percent or more of the stock. Under section 337, the
liquidating corporation recognizes neither gain nor loss on the transaction, as
well.
The distribution by Group of all its properties to AMHC, pursuant to a
plan of liquidation, will satisfy the requirements of section 332 and,
therefore, will be tax free to both corporations. As a result of
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the transaction, AMHC's basis in its Group stock will be eliminated, and AMHC
will succeed to Group's basis in the transferred properties. Section 334(b).
B. Conversion of AMHC Into a Stock Company
In the Conversion, AMHC will be converted from a mutual holding company
to a stock company under Iowa law, and the ownership interests in AMHC will be
converted from membership interests to common stock interests. It is clear that
an exchange of stock interests for new stock interests in the same corporation
will qualify as a recapitalization within the meaning of section 368(a)(1)(E).
See, e.g., Rev. Rul. 84-114, 1984-2 C.B. 90 (exchange of old common stock for
new preferred stock). Such a transaction is merely a "reshuffling of [the]
capital structure within the framework of an existing corporation". Helvering v.
Southwest Consolidated Corp., 315 U.S. 194, 202 (1942).(3)
The Conversion will involve a similar change in the capital structure
of a single corporation. Further, the Internal Revenue Service (the "Service")
has issued a series of private letter rulings(4) that have treated
demutualizations of mutual insurance companies as recapitalizations under
section 368(a)(1)(E) of the Code.(5) See Priv. Rul. 9540004 (April 18, 1995);
Priv. Rul. 9512021 (Dec. 29, 1994); Priv. Rul. 9235009 (April 16, 1992); Priv.
Rul. 9022038 (March 5, 1990); Priv. Rul. 8711121 (Dec. 16, 1986).
To qualify as a recapitalization under section 368(a)(1)(E), the
Conversion must also satisfy the business purpose requirement. See Reg. Section
1.368-1(b). The Conversion is one step in an overall transaction designed to
eliminate the mutual holding company structure, which no longer accords with
AMHC and ALH's strategic business plan as a non-diversified stock company
engaged in the life insurance business. The new structure is intended to support
the future growth and financial strength of the combined entity in the life
insurance industry. Accordingly, the business purpose requirement for
recapitalization treatment will be satisfied.
Because the Conversion of AMHC will constitute a recapitalization
within the meaning of section 368(a)(1)(E), those members receiving stock for
their AMHC membership interests will not recognize gain or loss on the exchange.
Section 354(a)(1). The members will obtain a tax basis in their stock equal to
their basis in the membership interests transferred to ALH in exchange
therefore. Section 358(a)(1). AMHC will not recognize gain or loss on the
issuance of its stock. Section 1032.
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(3) Because a recapitalization is a single-entity transaction not involving a
transfer of corporate assets, the "continuity of business enterprise"
requirement of Reg.Section 1.368-1(d)(2) is not applicable. See Rev. Rul. 82-34,
1982-1 C.B. 59. In addition the "continuity of proprietary interest" requirement
applicable to other types of reorganizations will not apply to the Conversion.
See Rev. Rul. 77-479, 1977-2 C.B. 119; Rev. Rul. 77-415, 1977-2 C.B. 311; Tech.
Adv. Memo. 8815003 (Dec. 11, 1987). Even if applicable, however, this
requirement would be satisfied because the members of AMHC would be treated as
the owners of the company for purposes of the continuity of proprietary interest
test. See Rev. Rul. 74-277, 1974-1 C.B. 88; Rev. Rul. 71-233, 1971-1 C.B. 113.
(4) Although private rulings are only binding authority with respect to the
parties involved in the rulings, they are indicative of the administrative
practice of the Service and are cited for that reason.
(5) It is also possible that the Conversion could qualify as an "F"
reorganization pursuant to section 368(a)(1)(F) of the Code. That section refers
to transactions that constitute a "mere change in identity, form, or place of
organization of one corporation". See Rev. Rul. 80-105, 1980-1 C.B. 78
(conversion of mutual savings and loan association into a stock corporation was
a valid "F" reorganization). This characterization would result in the same
tax-free treatment for the parties discussed in section B of this opinion.
However, the trend in recent rulings is to treat demutualizations as "E"
reorganizations.
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C. Merger of ALH Into AMHC
Section 368(a)(1)(A) accords "reorganization" treatment to a
transaction in which one corporation merges into another under a state merger
statute. To qualify as a reorganization a Merger must also satisfy several
non-statutory requirements, developed by the courts and now contained in the
Treasury Regulations. The first of these is the business purpose requirement.
See Reg. Section 1.368-1(b). As stated above, the Conversion is one step in an
overall transaction designed to eliminate the mutual holding company structure,
which no longer accords with AMHC and ALH's strategic business plan as a
non-diversified stock company engaged in the life insurance business. The new
structure is intended to support the future growth and financial strength of the
combined entity in the life insurance industry. Accordingly, the business
purpose requirement for reorganization treatment will be satisfied.
"Continuity of interest" is the second non-statutory requirement. See
Reg. Section 1.368-1(e) and -1T(e). Continuity of interest requires that
proprietary interests in the target corporation (ALH) representing a substantial
part of the value of all outstanding proprietary interests in that corporation
prior to the merger be exchanged for proprietary interests in the acquiring
corporation (AMHC) or be exchanged by the acquiring corporation for a direct
interest in the target corporation enterprise. For advance ruling purposes, the
Service defines "substantial" as at least 50 percent. Rev. Proc. 77-37, 1977-2
C.B. 568. Here the continuity of interest requirement will be satisfied because
100% of the ALH stock will be exchanged for new AMHC stock or, in the case of
the stock held by AMHC, for a direct interest in ALH's assets.
"Continuity of business enterprise" ("COBE") is the third non-statutory
requirement. See Reg. Section 1.368-1(d). COBE requires that the acquiring
corporation either continue the target corporation's historic business or use a
significant portion of the target corporation's historic business assets in a
business. We understand that there is no intention to dispose of or contract
ALH's historic insurance business after the transaction. Thus, the COBE
requirement will be satisfied.
D. Receipt by AMHC Members of Cash from AMHC for AMHC Equity Interests
The receipt by AMHC members of cash from AMHC in redemption of
membership interests will be treated as a payment to each member in exchange for
his membership interests, and any gain will be taxed at capital gains rates to
the extent that the membership interest was a capital asset in the member's
hands (which will generally be the case). Sections 302(b)(1), (b)(2) and (b)(3)
and 356(a); McDonald v. Commissioner, 52 T.C. 82 (1969).
E. Receipt by ALH Shareholders of AMHC Stock for ALH Stock
Because the merger of ALH into AMHC will constitute a reorganization
within the meaning of section 368(a)(1)(A), the receipt of AMHC stock in
exchange for ALH stock will not result in the recognition of gain or loss on the
exchange. Section 354(a)(1). The ALH shareholders will obtain a tax basis in
their AMHC stock equal to their basis in the ALH stock surrendered in the
transaction. Section 358(a)(1). AMHC will not recognize gain or loss on the
issuance of its stock. Section 1032.
F. Treatment of Policy Credits
The Qualified Contracts are subject to certain limitations on
contributions and distributions. Adverse tax consequences to the policyholders
could result if the crediting of additional amounts to these policies were to
result in a deemed distribution to the policyholders or a deemed contribution by
the policyholders.
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As a result of the transaction, policyholders will exchange their
rights as members of AMHC for additional policy credits on the underlying
insurance contracts with AmerUs Life.(6) The membership interests held in AMHC
arise solely as a result of having purchased those insurance contracts from
AmerUs Life. The continued ownership of a membership interest in AMHC is
entirely dependent upon a continuation of the insurance contract in force with
AmerUs Life. At the time that an annuity or insurance contract is purchased from
a mutual insurer no consideration is required to be allocated to the membership
interest. Rev. Rul. 71-233, 1971-1 C.B. 113 (policyholder has no basis in
membership interest). When policyholder dividends are credited to an annuity
contract, it is not treated as a distribution to the policyholder or a
contribution by the policyholder. See sections 72(e)(4)(b) and 408(b)(2)(c).
These results indicate that a membership interest associated with an annuity
contract generally is not treated for tax purposes as an asset separate from the
contract, but rather is viewed as a component of the contract. Cf. Reg. Section
1.72-2(a)(3)(i) (a "program of interrelated contributions and benefits" should
be treated as a single contract for purposes of section 72).
The same result should obtain with respect to insurance contracts that
provide life insurance protection incidental to an annuity contract or qualified
plan. See Reg. Sections 1.72-2(a)(3)(ii), 1.401(a)-1(a)(3), 1.403(b)-1(c)(3).
Thus, the issuance of policy credits with respect to the Qualified Contracts in
exchange for AMHC membership rights is a mere change in the form of a component
of the Qualified Contracts. The Conversion increases the accumulation value of
the Qualified Contracts and thus should be treated in the same manner as any
other return of or return on investment within the Qualified Contract and should
not be regarded as having been received or contributed by the policyholder. See,
e.g., PLR 9745013, PLR 9540004, PLR 9230033. In particular, the Conversion will
not cause any value to leave tax-deferred solution. See Rev. Rul. 90-24, 1990-1
C.B. 27 (no distribution on exchange of one qualified annuity for another); PLR
9339024. Accordingly, the transaction should not result in a distribution that
is subject to withholding or taxable to the employee or beneficiary under the
contract, the qualification of the policies under section 403(b) or 408(b) will
not be adversely affected, and the Conversion will not result in the imposition
of a penalty for premature distributions or excess contributions.
Further support for the foregoing conclusion can be found in Rev. Proc.
99-44, 1999-48 I.R.B. 598, which provides that an annuity contract will not be
disqualified under section 403(a), section 403(b) or section 408 due to a
policyholder's ability to direct investment of contract premiums if the same
rights could have been made available to the contract holder through a custodial
account or trust arrangement satisfying the requirements of section 403(b)(7)(A)
or section 408(a). By analogizing a qualified annuity to a custodial account or
trust arrangement, the revenue procedure seems to imply that the core
requirements of qualification under section 403(a), section 403(b) or section
408 are the limitations on contributions by and distributions to the contract
holder. If a Qualified Contract and the associated membership interest had been
held by a custodial account or trust arrangement, there would be no doubt that
the conversion of the membership interest into additional policy credits on the
contract would not have constituted a contribution by or distribution to the
beneficiary of the account or trust. Thus, extending the apparent rationale of
the revenue procedure to this case indicates that issuing policy credits with
respect to Qualified Contracts should have no adverse effect.
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(6) The issuance of policy credits to the holders of Qualified Contracts will
increase the surrender value of such contracts and the appropriate statutory
reserves for such contracts, which should result in a corresponding increase to
AmerUs Life's life insurance reserves under section 807(d). As a result AmerUs
Life's deductions under section 807(b) for the year will increase, or its gross
income under section 807(a) for the year will decrease, by the amount of the
increased reserves.
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OPINIONS
On the basis of the foregoing and subject to the conditions,
qualifications and limitations set forth herein, we are of the opinion that:
1. No gain or loss will be recognized by AMHC or Group on the
Liquidation of Group into AMHC, pursuant to sections 332 and 337(a).
2. The basis of Group's assets in the hands of AMHC following the
Liquidation will, in each case, be the same as the basis of those assets in the
hands of Group immediately prior to the Liquidation. Section 334(b)(1).
3. The holding period of the assets of Group in the hands of AMHC will,
in each instance, include the period for which such assets were held by Group.
Section 1223(2).
4. As provided by section 381(a) and section 1.381(a)-1 of the
regulations, AMHC will succeed to and take into account as of the date of the
proposed transfer, as defined in section 1.381(b)-1(b) of the regulations, the
items of Group described in section 381(c). Any deficit in earnings and profits
may be used only to offset earnings and profits accumulated after that date.
5. The Conversion of AMHC into a stock company and the distribution by
it of stock and cash in exchange for outstanding membership interests will
qualify as a reorganization under section 368(a)(1)(E). No gain or loss will be
recognized by AMHC on the Conversion and related distributions. Sections 1032,
6. No gain or loss will be recognized by the AMHC members who receive
AMHC stock in the Conversion in exchange for their membership interests. Section
354(a)(1).
7. The AMHC members who receive AMHC stock for their membership
interests will obtain a tax basis in the stock equal to their basis in the
membership interests transferred to ALH in exchange therefore. Section
358(a)(1).
8. The receipt by AMHC members of cash from AMHC in redemption of their
membership interests will be treated as a payment to each member in exchange for
his membership interest, and any gain will be taxed at capital gains rates to
the extent that the membership interest was a capital asset in the member's
hands. Sections 302(b) and 356(a).
9. The issuance of policy credits to AMHC members owning Qualified
Contracts -
a. Will not be treated as a distribution that would affect the
treatment of the Qualified Contracts under section 402, 403(b), or 408;
b. Will not be treated as a distribution or contribution with
respect to the Qualified Contract that would result in a penalty tax under
section 72(e), 72(t), 4973, or 4979;
c. Will not result in current taxable income to the members
owning the Qualified Contracts;
d. Will not be treated for purposes of section 72 as part of
the investment in the Qualified Contracts, but will be treated for purposes of
sections 403 and 408 as investment earnings attributable to the year in which
the policy credits are issued; and
11
<PAGE> 12
e. Will not be subject to withholding pursuant to section
3405.
10. Policies issued by AmerUs Life prior to the effective date of the
Conversion will not be deemed newly issued, issued in exchange for existing
policies or newly purchased, for any material federal income tax purposes as a
result of the Conversion.
11. The Merger of ALH into AMHC will qualify as a reorganization under
section 368(a)(1)(A). ALH and AMHC will each be "a party to a reorganization"
within the meaning of section 368(b).
12. No gain or loss will be recognized by ALH upon the transfer of its
assets to AMHC in exchange for AMHC Common Stock, the assumption of the
liabilities of ALH, and the receipt of cash by ALH stockholders for fractional
shares. Sections 361 and 357(a).
13. No gain or loss will be recognized by AMHC upon its receipt of the
assets of ALH in exchange for AMHC Common Stock. Section 1032(a).
14. The basis of ALH's assets in the hands of AMHC will, in each case,
be the same as the basis of those assets in the hands of ALH immediately prior
to the exchange. Section 362(b).
15. The holding period of the assets of ALH in the hands of AMHC will,
in each instance, include the period for which such assets were held by ALH.
Section 1223(2).
16. No gain or loss will be recognized by ALH shareholders upon their
receipt of AMHC stock in exchange for their ALH stock, except as noted in
Paragraph (18) below. Section 354(a)(1).
17. The basis of the AMHC stock received by the ALH shareholders will
be the same as the basis of the ALH stock surrendered in exchange therefor.
Section 358(a)(1).
18. The holding period of the AMHC stock received by each ALH
shareholder will include the period during which the ALH shares surrendered
therefor were held, provided that the ALH shares were held as a capital asset in
the hands of such ALH shareholder on the date of the exchange. Section 1223(1).
19. The payment of cash to ALH shareholders in lieu of fractional share
interests of AMHC shares will be treated as if the fractional shares were
actually distributed as part of the exchange and were subsequently redeemed by
AMHC. These cash payments will be treated as having been received as
distributions in full payment in exchange for the stock redeemed as provided in
section 302(a). Rev. Rul. 66-365, 1966-2 C.B. 116.
20. As provided by section 381(a) and section 1.381(a)-1 of the
regulations, AMHC will succeed to and take into account as of the date of the
proposed transfer, as defined in section 1.381(b)-1(b) of the regulations, the
items of ALH described in section 381(c), subject to the conditions and
limitations of sections 381, 382, 383, and 384 and the regulations thereunder.
Any deficit in earnings and profits may be used only to offset earnings and
profits accumulated after that date.
This opinion is based upon existing law, regulations, administrative
rulings and judicial opinions. No assurance can be given that changes in law or
regulation or forthcoming opinions or decisions will not modify the conclusions
expressed in this opinion letter. Further, no assurance can be given that the
Internal Revenue Service will not apply stricter standards than set forth in its
advance ruling guidelines or that it will not challenge the conclusions stated
in this opinion letter.
12
<PAGE> 13
No opinion is expressed with respect to state, local, foreign or other
tax laws. This opinion does not take into account the special circumstances of
certain holders of ALH Common Stock, for example, foreign persons, tax-exempt
organizations, insurance companies, financial institutions, dealers in stocks
and securities, and persons who do not hold their ALH Common Stock as a capital
asset, which might affect the results described above.
Very truly yours,
/s/ Caplin & Drysdale, Chartered
Caplin & Drysdale, Chartered
13
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
AmerUs Life Holdings, Inc.
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Registration Statement.
/s/ KPMG LLP
Des Moines, Iowa
May 11, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
American Mutual Holding Company
We consent to the use of our reports included herein and to the references to
our firm under the headings "Experts" and "Selected Consolidated Financial Data
of AMHC" in the Registration Statement.
/s/ KPMG LLP
Des Moines, Iowa
May 11, 2000
<PAGE> 1
EXHIBIT 23.4
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter, dated April 3,
2000, to the Board of Directors of AmerUs Life Holdings, Inc. (the "Company") as
Appendix D to the Proxy Statement/Prospectus relating to the merger and the
conversion and (ii) all references to DLJ in the sections captioned "Summary -
Fairness Opinion" and "The Restructuring - Fairness Opinion" of the Proxy
Statement/Prospectus which forms a part of this Registration Statement on Form
S-4. In giving such consent, we do not admit that we come within the category of
persons whose consent is required under, and we do not admit that we are
"experts" for purposes of, the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ JOHN A. SIPP
-----------------------------------
John A. Sipp
Managing Director
New York, New York
May 10, 2000
<PAGE> 1
EXHIBIT 23.5
[CAPLIN & DRYSDALE, CHARTERED LETTERHEAD]
May 11, 2000
Board of Directors
American Mutual Holding Company
699 Walnut Street
Des Moines, Iowa 50309
Board of Directors
AmerUs Life Holdings, Inc.
699 Walnut Street
Des Moines, Iowa 50309
Re: Federal Income Tax Consequences of
Proposed Demutualization and Merger
Dear Sirs:
We have acted as special tax counsel to American Mutual Holding Company
("AMHC") and AmerUs Life Holdings, Inc. ("ALH") in connection with the proposal
to convert AMHC into a stock company and merge ALH into AMHC, as described in
the Registration Statement on Form S-4 (the "Registration Statement") filed by
AMHC.
We hereby consent to the use of our name and the filing of our opinion
as an exhibit to the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Sincerely,
/s/ CAPLIN & DRYSDALE, CHARTERED
---------------------------------------
Caplin & Drysdale, Chartered
<PAGE> 1
EXHIBIT 23.6
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of American Mutual
Holding Company for the registration of shares of its common stock and to the
incorporation by reference therein of our report dated February 25, 2000, with
respect to the consolidated financial statements of Indianapolis Life Insurance
Company included in Form 8-K/A dated March 24, 2000 for AmerUs Life Holdings,
Inc., filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Indianapolis Indiana
May 10, 2000
<PAGE> 1
EXHIBIT 99.2
FORM OF AMENDED AND RESTATED
BY-LAWS
OF
AMERUS GROUP CO.
ARTICLE I
PRINCIPAL OFFICE
Section 1.1. The location of the principal office of AmerUs Group Co. (the
"Corporation") in the State of Iowa will be identified in the Corporation's
annual report filed with the Iowa Secretary of State. The Corporation may have
such other offices either within or without the State of Iowa as the business of
the Corporation may from time to time require.
ARTICLE II
REGISTERED OFFICE AND AGENT
Section 2.1. The initial registered agent and office of the Corporation are set
forth in the Amended and Restated Articles of Incorporation. The registered
agent or registered office, or both, may be changed by resolution of the Board
of Directors.
ARTICLE III
MEETINGS OF SHAREHOLDERS
SECTION 3.1. ANNUAL MEETING.
The annual meeting of the shareholders for the election of directors and for the
transaction of such other business as may properly come before the meeting,
shall be held on such date and at such time as may be fixed from time to time by
the Board of Directors or if no date and time are so fixed, at 2:00 p.m. on the
second Thursday in May of each year at such place as the Board of Directors
shall each year fix. The date of the annual meeting of shareholders shall in all
events be within the earlier of the first six (6) months after the end of the
Corporation's fiscal year or fifteen (15) months after the shareholders' last
annual meeting.
SECTION 3.2. SPECIAL MEETINGS.
Special meetings of the shareholders, for any purpose or purposes, unless
otherwise prescribed by law (which for purposes of these bylaws shall mean as
required from time to time by the Iowa Business Corporation Act (the "IBCA") or
the Amended and Restated Articles of Incorporation of the Corporation), may be
called by the Chairman of the Board or the Board of Directors, and
<PAGE> 2
shall be called by the Board of Directors upon the written demand, signed, dated
and delivered to the Secretary, of the holders of at least ten percent (10%) of
all the votes entitled to be cast on any issue proposed to be considered at the
meeting. Such written demand shall state the purpose or purposes for which such
meeting is to be called. The time, date and place of any special meeting shall
be determined by the Board of Directors.
SECTION 3.3. NOTICES AND REPORTS TO SHAREHOLDERS.
(a) Notice of the place, date and time of all meetings of shareholders and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be communicated not fewer than ten (10) days nor
more than sixty (60) days before the date of the meeting to each
shareholder entitled to vote at such meeting. The Board of Directors may
establish a record date for the determination of shareholders entitled to
notice, as provided in Section 3.5 of these bylaws. Notice of adjourned
meetings need only be given if required by law or Section 3.7 of these
bylaws.
(b) In the event (i) of the issuance, or the authorization for issuance of
shares for promissory notes or promises to render services in the future,
or (ii) of any indemnification of or advancement of expenses to a director
required by law to be reported to shareholders, the Corporation shall
report the same to the shareholders with or before the notice of the next
shareholders' meeting, including, in the case of issuance of shares, the
number of shares and the consideration received.
(c) In the event corporate action is taken without a meeting in accordance
with the IBCA by less than unanimous written consent, prompt notice of the
taking of such corporate action shall be given to those shareholders who
have not consented in writing.
(d) If notice of proposed corporate action is required by law to be given
to shareholders not entitled to vote and the action is to be taken by
consent of the voting shareholders, the Corporation shall give all
shareholders written notice of the proposed action at least ten (10) days
before the action is taken. The notice must contain or be accompanied by
the same material that would have been required to be sent to shareholders
not entitled to vote in a notice of meeting at which the proposed action
would have been submitted to the shareholders for action.
SECTION 3.4. WAIVER OF NOTICE.
(a) Any shareholder may waive any notice required by law or these bylaws if
in writing and signed by any shareholder entitled to such notice, whether
before or after the date and time stated in such notice. Such a waiver
shall be equivalent to notice to such shareholder in due time as required
by law or these bylaws. Any such waiver shall be delivered to the
Corporation for inclusion in the minutes or filing with the corporate
records.
(b) A shareholder's attendance at a meeting, in person or by proxy, waives
(i) objection to lack of notice or defective notice of such meeting, unless
the shareholder at the beginning of the meeting or promptly upon the
shareholder's arrival objects to holding the meeting or
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transacting business at the meeting, and (ii) objection to consideration of
a particular matter at the meeting that is not within the purpose or
purposes described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
SECTION 3.5. RECORD DATE.
The Board of Directors may fix, in advance, a date as the record date for any
determination of shareholders for any purpose, such date in every case to be not
more than seventy (70) days prior to the date on which the particular action or
meeting requiring such determination of shareholders is to be taken or held. If
no record date is so fixed for the determination of shareholders, the close of
business on the day before the date on which the first notice of a shareholders'
meeting is communicated to shareholders or the date on which the Board of
Directors authorizes a share dividend or a distribution (other than one
involving a repurchase or reacquisition of shares), as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the adjourned meeting is scheduled to be reconvened on a date
which is more than 120 days after the date fixed for the original meeting or
unless the Board of Directors selects a new record date or unless a new record
date is required by law.
SECTION 3.6. SHAREHOLDERS' LIST.
After fixing a record date for a meeting, the Corporation shall prepare an
alphabetical list of the names of all shareholders who are entitled to notice of
a shareholders' meeting. The list must be arranged by voting group and within
each voting group by class or series of shares, and show the address of and
number of shares held by each shareholder. The shareholders' list must be
available for inspection by any shareholder beginning two (2) business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, at the Corporation's principal office or at a
place identified in the meeting notice in the city where the meeting will be
held. A shareholder, or a shareholder's agent or attorney, is entitled on
written demand to inspect and, subject to the requirements of law, to copy the
list, during regular business hours and at such person's expense, during the
period it is available for inspection. The Corporation shall make the
shareholders' list available at the meeting, and any shareholder, or a
shareholder's agent or attorney, is entitled to inspect the list at any time
during the meeting or any adjournment.
SECTION 3.7. QUORUM.
(a) At any meeting of the shareholders, one third of the votes entitled to
be cast on the matter by a voting group constitutes a quorum of that voting
group for action on that matter, unless the representation of a different
number is required by law or the Articles of Incorporation, and in that
case, the representation of the number so required shall constitute a
quorum. If a quorum shall fail to attend any meeting, the chairperson of
the meeting or a majority of the votes present may adjourn the meeting to
another place, date or time.
(b) When a meeting is adjourned to another place, date or time, notice need
not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at
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which the adjournment is taken; provided, however, that if the date of any
adjourned meeting is more than one hundred twenty (120) days after the date
for which the meeting was originally noticed, or if a new record date is
fixed for the adjourned meeting, notice of the place, date and time of the
adjourned meeting shall be given in conformity with these bylaws. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
(c) Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment thereof unless a new record date is or must be set for that
adjourned meeting.
SECTION 3.8. ORGANIZATION.
(a) The Chairman of the Board, or in the absence of the Chairman, such
person as the Board of Directors may have designated, or, in the absence of
such a person, such person as shall be designated by the holders of a
majority of the votes present at the meeting, shall call meetings of the
shareholders to order and shall act as presiding officer of such meetings.
(b) The Secretary of the Corporation shall act as secretary at all meetings
of the shareholders, but in the absence of the Secretary at any meeting of
the shareholders, the presiding officer may appoint any person to act as
secretary of the meeting.
SECTION 3.9. VOTING OF SHARES.
(a) Every shareholder entitled to vote may vote in person or by proxy.
Unless otherwise provided by law, directors shall be elected by a majority
of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. Shareholders do not have the right to
cumulate their votes for the election of directors.
(b) The shareholders having the right to vote shares at any meeting shall
be only those of record on the stock books of the Corporation, on the
record date fixed by law or pursuant to the provisions of Section 3.5 of
these bylaws.
(c) Absent special circumstances approved by the Board of Directors, the
shares of the Corporation held, directly or indirectly, by another
corporation, are not entitled to vote if a majority of the shares entitled
to vote for the election of directors of such other corporation is held by
the Corporation. The foregoing does not limit the power of the Corporation
to vote any shares held by the Corporation in a fiduciary capacity.
(d) Voting by shareholders on any question or in any election may be viva
voce unless the chairperson of the meeting shall order or any shareholder
shall demand that voting be by ballot. On a vote by ballot, each ballot
shall be signed by the shareholder voting, or in the shareholder's name by
proxy, if there be such proxy, and shall state the number of shares voted
by such shareholder.
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(e) If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast opposing the action,
unless a greater number is required by law.
SECTION 3.10. VOTING BY PROXY OR REPRESENTATIVE.
(a) At all meetings of the shareholders, a shareholder entitled to vote may
vote in person or by proxy appointed in writing, which appointment shall be
effective when received by the secretary of the meeting or other officer,
agent or inspector authorized to tabulate votes. An appointment of a proxy
is valid for eleven (11) months from the date of its execution, unless a
longer period is expressly provided in the appointment form.
(b) Shares held by an administrator, executor, guardian, conservator,
receiver, trustee, pledgee, or another corporation may be voted as provided
by law.
SECTION 3.11. INSPECTORS.
The Board of Directors in advance of any meeting of shareholders may (but shall
not be obligated to) appoint inspectors to act at such meeting or any
adjournment thereof. If inspectors are not so appointed, the officer or person
acting as presiding officer of any such meeting may, and on the request of any
shareholder or the shareholder's proxy, shall make such appointment. In case any
person appointed as inspector shall fail to appear or act, the vacancy may be
filled by appointment made by the Board of Directors in advance of the meeting,
or at the meeting by the officer or person acting as presiding officer. The
inspectors shall register proxies, determine the number of shares outstanding,
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the authenticity, validity and effect of proxies, receive votes,
ballots, assents or consents, hear and determine all challenges and questions in
any way arising in connection with the vote, count and tabulate all votes,
assents and consents, determine and announce the result, and do such acts as may
appear proper to conduct the election or vote with fairness to all shareholders.
The maximum number of such inspectors appointed shall be three (3), and no
inspector whether appointed by the Board of Directors or by the officer or
person acting as presiding officer need be a shareholder.
SECTION 3.12. NEW BUSINESS AND NOMINATION.
(a) At any annual meeting of the shareholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any shareholder of the
Corporation who is entitled to vote with respect thereto and who complies
with the notice procedures set forth in this Section 3.12(a). For business
to be properly brought before an annual meeting by a shareholder, the
shareholder must have given a timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered or mailed to and received at the principal executive offices of
the Corporation not less than (i) for the first such annual meeting after
the effective date of these bylaws, before the close of business on the
tenth day following the date on which notice of such meeting is first given
to stockholders and (ii) thereafter, not less than thirty (30) days prior
to the date of the annual meeting; provided, however, that in the event
that less
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<PAGE> 6
than forty (40) days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be
timely must be received not later than the close of business on the 10th
day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A shareholder's
notice to the Secretary shall set forth as to each matter such shareholder
proposed to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and
address, as they appear on the Corporation's books, of the shareholder
proposing such business, (iii) the class and number of the Corporation's
capital stock that are beneficially owned by such shareholder and (iv) any
material interest of such shareholder in such business. Notwithstanding
anything in these bylaws to the contrary, no business shall be brought
before or conducted at an annual meeting except in accordance with the
provisions of this Section 3.12(a). The officer of the Corporation or other
person presiding over the annual meeting shall, if the facts so warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section
3.12(a) and, if he should so determine, he shall so declare to the meeting
and any such business so determined to be not properly brought before the
meeting shall not be transacted. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports
of officers, directors, and committees, but, in connection with such
reports, no new business shall be acted upon at such annual meeting unless
stated and filed as herein provided.
(b) At any special meeting of the shareholders, only such business shall be
conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors, unless such special meeting of the
shareholders was called in accordance with Section 3.2 of these By-laws
pursuant to the written demand of at least ten percent (10%) of all the
votes entitled to be cast on any issue proposed to be considered at such
meeting, in which case only such business as is stated in the applicable
written demand may be brought before the special meeting of the
shareholders.
(c) Only persons who are nominated in accordance with the procedures set
forth in these bylaws shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders at which directors are
to be elected only (i) by or at the direction of the Board of Directors or
(ii) by any shareholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice
procedures set forth in this Section 3.12(c). Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
by timely notice in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice shall be delivered or mailed to and received
at the principal executive offices of the Corporation not less than (i) for
the first such annual meeting after the effective date of these bylaws,
before the close of business on the tenth day following the date on which
notice of such meeting is first given to stockholders and (ii) thereafter,
not less than 30 days prior to the date of the meeting; provided, however,
that in the event that less than 40 days' notice or prior disclosure of the
date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date
of the meeting was mailed or such
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public disclosure was made. Such shareholder's notice shall set forth (i)
as to each person whom such shareholder proposes to nominate for election
or re-election as a director, all information relating to such person that
is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation
14(a) under the Securities Exchange Act of 1934, as amended (including such
person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (ii) as to the shareholder
giving the notice (x) the name and address, as they appear on the
Corporation's books, of such shareholder and (y) the class and number of
shares of the Corporation's capital stock that are beneficially owned by
such shareholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director shall
furnish to the Secretary of the Corporation that information required to be
set forth in a shareholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the provisions of this
Section 3.12(c). The officer of the Corporation or other person presiding
at the meeting shall, if the facts so warrant, determine that a nomination
was not made in accordance with such provisions and, if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
SECTION 3.13. CONDUCT OF BUSINESS.
The presiding officer of any meeting of shareholders shall determine the order
of business and procedure at the meeting, including such regulation of the
manner of voting and the conduct of business as seem to him or her to be in
order.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.1. QUALIFICATIONS AND GENERAL POWERS.
No director is required to be an officer or employee or a shareholder of the
Corporation or a resident of the State of Iowa. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. The
Board of Directors may authorize any officer or officers, agent or agents, to
enter into any contract or to execute and deliver any instrument in the name and
on behalf of the Corporation, and such authority may be general or confined to
specific instances.
SECTION 4.2. NUMBER OF DIRECTORS: TENURE.
The number of directors of the Corporation shall be not less than seven (7) nor
more than twenty-one (21), the exact number within such range to be determined
from time to time by resolution of the Board of Directors adopted by the
affirmative vote of a majority of the entire Board of Directors then in office.
The Board of Directors shall not be authorized to change the range or to change
to a fixed number of directors without the approval of the shareholders. At each
annual election commencing at the first annual meeting next following the end of
calendar year 1999, the
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successors to the class of directors whose term expires at that time shall be
elected by the shareholders to hold office for a term of three years to succeed
those directors whose term expires and until his or her successor shall have
been elected and qualified, or until his or her death, resignation or removal.
SECTION 4.3. QUORUM AND MANNER OF ACTING.
A quorum of the Board of Directors consists of a majority of the number of
directors prescribed in accordance with Section 4.2. If at any meeting of the
board there be less than a quorum present, a majority of the directors present
may adjourn the meeting from time to time until a quorum shall be present.
Notice of any adjourned meeting need not be given. At all meetings of directors,
a quorum being present, the act of the majority of the directors present at the
meeting shall be the act of the Board of Directors.
SECTION 4.4. RESIGNATION.
Any director of the Corporation may resign at any time by delivering written
notice to the Chairman of the Board, the Board of Directors, or the Corporation.
A resignation is effective when the notice is delivered unless the notice
specifies a later effective date.
SECTION 4.5. REMOVAL.
A director shall be subject to removal, with or without cause, at a meeting of
the shareholders called for that purpose in the manner prescribed by law and
these By-laws.
SECTION 4.6. VACANCIES.
Any vacancy occurring in the Board of Directors through death, resignation,
removal or any other cause, including an increase in the number of directors,
may be filled by the Board of Directors. If the directors remaining in office
constitute fewer than a quorum of the board, they may fill the vacancy by the
affirmative vote of a majority of the remaining directors.
SECTION 4.7. COMPENSATION OF DIRECTORS.
The directors shall be entitled to be reimbursed for any expenses paid by them
on account of attendance at any regular or special meeting of the Board of
Directors and the board may fix the compensation of directors from time to time
by resolution of the board.
SECTION 4.8. PLACE OF MEETINGS, ETC.
The Board of Directors may hold its meetings at such place or places within or
without the State of Iowa. The Board of Directors may meet in person or via any
means of communication, including, but not limited to telephone conference call,
by which all directors participating may simultaneously hear each other during
the meeting. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
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SECTION 4.9. ANNUAL MEETING.
Immediately after the final adjournment of each annual meeting of the
shareholders for the election of directors, or at such other time or place as
the Board of Directors shall designate, the Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business. Notice of such meeting shall be given as set forth in Sections
4.10 and 4.11. Such meeting may be held at any other time or place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors or in a consent and waiver of notice thereof signed by all
the directors, at which meeting the same matters shall be acted upon as is above
provided.
SECTION 4.10. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place and at
such times as the Board of Directors shall by resolution fix and determine from
time to time. Notice of each such meeting shall be communicated to each director
at least five (5) days before the date on which the meeting is to be held.
SECTION 4.11. SPECIAL MEETINGS: NOTICE.
(a) Special meetings of the Board of Directors shall be held whenever
called by direction of the Chairman of the Board or one-fourth (1/4) of the
directors at the time being in office.
(b) Notice of each such meeting shall be communicated to each director at
least two (2) days before the date on which the meeting is to be held. Each
notice shall state the date, time and place of the meeting. Unless
otherwise stated in the notice thereof, any and all business may be
transacted at a special meeting. At any meeting at which every director
shall be present, even without any notice, any business may be transacted.
SECTION 4.12. WAIVER OF NOTICE.
A director may waive any notice required by law or these bylaws if in writing
and signed by a director entitled to such notice, whether before or after the
date and time stated in such notice. Such a waiver shall be equivalent to notice
in due time as required by these bylaws. Attendance of a director at or
participation in a meeting shall constitute a waiver of notice of such meeting,
unless the director at the beginning of the meeting or promptly upon arrival
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
SECTION 4.13. DIRECTOR'S ASSENT PRESUMED.
A director who is present at a meeting of the Board of Directors at which action
on any corporate matter is taken shall be presumed to have assented to the
action taken unless the director objects at the beginning of the meeting, or
promptly upon the director's arrival to holding it or transacting business at
the meeting, or the director's dissent or abstention shall be entered in the
minutes of the meeting or unless the director shall file a written dissent or
abstention to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such
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dissent or abstention by registered or certified mail to the Secretary
immediately after the adjournment of the meeting. Such right to dissent or
abstain shall not apply to a director who voted in favor of such action.
SECTION 4.14. ORDER OF BUSINESS.
(a) At meetings of the Board of Directors, business shall be transacted in
such order as, from time to time, the Chairman of the Board or the Board of
Directors may determine.
(b) At all meetings of the board, the Chairman of the Board or, in his or
her absence, the person designated by the vote of a majority of the
directors present shall preside.
SECTION 4.15. ACTION WITHOUT MEETING.
Any action required or permitted by law to be taken at any meeting of the Board
of Directors may be taken without a meeting if the action is taken by all the
directors and if one or more consents in writing describing the action so taken
shall be signed by each director then in office and included in the minutes or
filed with the corporate records reflecting the action taken. Action taken under
this section is effective when the last director signs the consent, unless the
consent specifies a different effective date.
SECTION 4.16. DIVIDENDS.
The Board of Directors may authorize and the Corporation may make distributions
to its shareholders in cash or property, but no distribution may be made if,
after giving it effect, either of the following would result:
(a) The Corporation would not be able to pay its debts as they become due
in the usual course of business; or
(b) The Corporation's total assets would be less than the sum of its total
liabilities plus, unless the Articles of Incorporation permit otherwise,
the amount that would be needed, if the Corporation were to be dissolved at
the time of this distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
The Board of Directors may base a determination that a distribution is not
prohibited either on financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances or on a fair
valuation or other method that is reasonable in the circumstances.
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ARTICLE V
THE EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 5.1.
The Board of Directors shall appoint an Executive Committee of not less than
three (3) nor more than five (5) directors. The members of the Executive
Committee shall serve at the will of the Board of Directors. The Executive
Committee shall have and may exercise all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation
except when the Board of Directors is in session, subject to the limitations set
forth in Section 5.3 of these bylaws. The Executive Committee shall fix its own
rules governing the conduct of its activities.
SECTION 5.2. OTHER COMMITTEES.
The Board of Directors, by resolution adopted by the affirmative vote of a
majority of the number of directors then in office, may establish one or more
other committees of the Board of Directors, each committee to consist of two (2)
or more directors appointed by the Board of Directors. Any such committee shall
serve at the will of the Board of Directors. Each such committee shall have the
powers and duties delegated to it by the Board of Directors. The Board of
Directors may elect one or more of its members as alternate members of any such
committee who may take the place of any absent member or members at any meeting
of such committee, upon request of the Chief Executive Officer or the
chairperson of such committee. Each such committee shall fix its own rules
governing the conduct of its activities as the Board of Directors may request.
SECTION 5.3. LIMITATIONS.
A committee of the board shall not: (a) authorize distributions by the
Corporation; (b) approve or propose to shareholders of the Corporation action
that the law requires be approved by shareholders; (c) fill vacancies on the
Board of Directors of the Corporation or on any of its committees; (d) amend the
Articles of Incorporation of the Corporation; (e) adopt, amend or repeal bylaws
of the Corporation; (f) approve a plan of merger not requiring shareholder
approval; (g) authorize or approve reacquisition of shares by the Corporation,
except according to a formula or method prescribed by the Board of Directors; or
(h) authorize or approve the issuance or sale or contract for sale of shares, or
determine the designation and relative rights, preferences and limitations of a
class or series of shares, except that the Board of Directors may authorize a
committee or a senior executive officer of the Corporation to do so within
limits specifically prescribed by the Board of Directors.
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ARTICLE VI
OFFICERS
SECTION 6.1. OFFICERS.
The officers of the Corporation shall be a Chairman of the Board, a Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary, a
Treasurer and such other officers as may from time to time be appointed by the
Board of Directors. One person may hold the offices and perform the duties of
any two or more of said offices. In its discretion, the Board of Directors may
delegate the powers or duties of any officer to any other officer or agents,
notwithstanding any provision of these bylaws, and the Board of Directors may
leave unfilled for any such period as it may fix, any office except those of
Chairman of the Board, Chief Executive Officer, President, Treasurer and
Secretary. The officers of the Corporation shall be appointed annually by the
Board of Directors at the annual meeting thereof and shall perform such duties
as from time to time may be assigned to them by the Chief Executive Officer, the
President, or by the Board of Directors. Each such officer shall hold office
until the next succeeding annual meeting of the Board of Directors and until his
or her successor shall have been duly chosen and shall qualify or until his or
her death or until he or she shall resign or shall have been removed.
SECTION 6.2. RESIGNATION AND REMOVAL.
An officer may resign at any time by delivering notice to the Secretary. A
resignation is effective when the notice is delivered unless the notice
specifies a later effective date. Any officer may be removed by the Board of
Directors at any time with or without cause, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
SECTION 6.3. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall, when present, preside at all meetings of the
shareholders. The Chairman of the Board shall, when present, preside at all
meetings of the Board of Directors. In general he or she shall perform all
duties incident to the office of Chairman of the Board and such other duties as
may be prescribed by the Board of Directors from time to time.
SECTION 6.4. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER.
Subject to the control of the Board of Directors, the Chief Executive Officer
shall have general charge of and direct the operations of the Corporation and
shall be the Chief Executive Officer of the Corporation. The Chief Executive
Officer shall keep the Board of Directors fully informed and shall freely
consult with them concerning the business of the Corporation in his or her
charge. The Chief Executive Officer shall have authority to sign, execute and
acknowledge all contracts, checks, deeds, mortgages, bonds, leases or other
obligations on behalf of the Corporation as the Chief Executive Officer may deem
necessary or proper to be executed in the course of the Corporation's regular
business as authorized by the Board of Directors. The Chief Executive Officer
may sign, together with the Secretary or Assistant Secretary, certificates for
shares of stock of the Corporation. The Chief Executive Officer may sign in the
name of the Corporation reports and all other documents or instruments which are
necessary or proper to be executed in
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the course of the Corporation's business. He or she shall perform all duties
incident to the office of Chief Executive Officer as herein defined, and all
such other duties as from time to time may be assigned by the Board of
Directors.
SECTION 6.5. POWERS AND DUTIES OF THE PRESIDENT.
In the absence of the Chief Executive Officer or in the event of his or her
death, inability or refusal to act, the President shall perform the duties of
the Chief Executive Officer and when so acting shall have the powers of and be
subject to all the restrictions upon the Chief Executive Officer. The President
may sign with the Secretary or Assistant Secretary all certificates for the
shares of stock of the Corporation. The President shall perform all duties
incident to the office of President, as herein defined, and all such other
duties as from time to time may be assigned by the Chief Executive Officer or by
the Board of Directors.
SECTION 6.6. POWERS AND DUTIES OF THE VICE PRESIDENT(S).
In the absence of the President or in the event of the death, inability or
refusal to act of the President, the Vice President (or in the event there is
more than one Vice President, the Vice President selected by the Board of
Directors) shall perform on an interim basis the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the Secretary
or Assistant Secretary, certificates for shares of stock of the Corporation; and
shall perform such other duties and have such authority as from time to time may
be assigned to such Vice President by the Chief Executive Officer, the President
or by the Board of Directors.
SECTION 6.7. POWERS AND DUTIES OF THE SECRETARY.
The Secretary shall (a) keep minutes of all meetings of the shareholders and of
the Board of Directors; (b) authenticate records of the Corporation and attend
to giving and serving all notices of the Corporation as provided by these bylaws
or as required by law; (c) be custodian of the corporate seal, if any, the stock
certificate books and such other books, records and papers as the Board of
Directors may direct; (d) keep a stock record showing the names of all persons
who are shareholders of the Corporation, their post office addresses as
furnished by each such shareholder, and the number of shares of each class of
stock held by them respectively, and timely prepare the list referred to in
Section 3.6; (e) sign with the Chief Executive Officer, the President or a Vice
President certificates for shares of stock of the Corporation, the issuance of
which shall have been duly authorized; and (f) in general, perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to the Secretary by the Chief Executive Officer or the Board of
Directors.
SECTION 6.8. POWERS AND DUTIES OF THE TREASURER.
The Treasurer shall (a) have custody of and be responsible for all moneys and
securities of the Corporation, shall keep full and accurate records and accounts
in books belonging to the Corporation, showing the transactions of the
Corporation, its accounts, liabilities and financial condition and shall see
that all expenditures are duly authorized and are evidenced by proper
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receipts and vouchers; (b) deposit in the name of the Corporation in such
depository or depositories as are approved by the Board of Directors, all moneys
that may come into the Treasurer's hands for the Corporation's account; (c)
prepare annual financial statements that include a balance sheet as of the end
of the fiscal year and an income statement for that year; and (d) in general,
perform such duties as may from time to time be assigned to the Treasurer by the
Chief Executive Officer or by the Board of Directors.
SECTION 6.9. ASSISTANTS.
There shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors may from time to time authorize and appoint. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary, or the Treasurer,
respectively, or by the Chief Executive Officer or the Board of Directors. The
Board of Directors shall have the power to appoint any person to act as
assistant to any other officer, or to perform the duties of any officer,
whenever for any reason it is impracticable for such officer to act personally,
and such assistant or acting officer so appointed shall have the power to
perform all the duties of the office to which he or she is so appointed to be
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors.
ARTICLE VII
SHARES, THEIR ISSUANCE AND TRANSFER
SECTION 7.1. CONSIDERATION FOR SHARES.
The Board of Directors may authorize shares to be issued for consideration
consisting of any tangible or intangible property or benefit to the Corporation,
including cash, promissory notes, services performed, contracts for services to
be performed, other securities of the Corporation or securities of any other
corporation. Before the Corporation issues shares, the Board of Directors must
determine that the consideration received or to be received for shares to be
issued is adequate.
SECTION 7.2. CERTIFICATES FOR SHARES; UNCERTIFICATED SHARES.
(a) Except as set forth in (b) below, every shareholder of the Corporation
shall be entitled to a certificate or certificates, to be in such form as
the Board of Directors shall prescribe, certifying the number and class of
shares of the Corporation owned by such shareholder.
(b) The Board of Directors may authorize the issue of some or all the shares of
any or all the classes or series of shares of the Corporation, without
certificates. The authorization does not affect shares already represented
by certificates until they are surrendered to the Corporation. Within a
reasonable time after the issue or transfer of shares without certificates,
the Corporation shall send the shareholder a written statement of the
information required on certificates by Section 490.625, subsections 2 and
3, and, if applicable, Section 490.627, in each case of the IBCA, as such
sections may be amended from time-to-time.
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SECTION 7.3. EXECUTION OF CERTIFICATES.
The certificates for shares of stock shall be numbered in the order in which
they shall be issued and shall be signed by the Chief Executive Officer,
President or a Vice President and the Secretary or an Assistant Secretary of the
Corporation. The signatures of the Chief Executive Officer, President or Vice
President and the Secretary or Assistant Secretary or other persons signing for
the Corporation upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. In case any officer or
other authorized person who has signed or whose facsimile signature has been
placed upon such certificate for the Corporation shall have ceased to be such
officer or employee or agent before such certificate is issued, it may be issued
by the Corporation with the same effect as if he or she were such officer or
employee or agent at the date of its issue.
SECTION 7.4. SHARE RECORD.
A record shall be kept by the Secretary, or by any other officer, employee or
agent designated by the Board of Directors, of the names and addresses of all
shareholders and the number and class of shares held by each represented by such
certificates and the respective dates thereof and in case of cancellation, the
respective dates of cancellation.
SECTION 7.5. CANCELLATION.
Every certificate surrendered to the Corporation for exchange or transfer shall
be canceled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided in Section 7.8 of these bylaws.
SECTION 7.6. TRANSFERS OF STOCK.
Transfers of shares of the capital stock of the Corporation shall be made only
on the books of the Corporation by the record holder thereof, or by his or her
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the Corporation, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes
thereon or evidence deemed acceptable by the Secretary of the Corporation with
respect to uncertificated shares. The person in whose name shares of stock stand
on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation; provided, however, that whenever any
transfer of shares shall be made for collateral security, and not absolutely,
such fact, if known to the Secretary of the Corporation, shall be so expressed
in the entry of transfer.
SECTION 7.7. REGULATIONS.
The Board of Directors may make such other rules and regulations as it may deem
expedient, not inconsistent with law, concerning the issue, transfer and
registration of certificates for shares of the stock of the Corporation.
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SECTION 7.8. LOST, DESTROYED, OR MUTILATED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
SECTION 8.2. FISCAL YEAR.
The fiscal year of the Corporation shall be from the first day of January
through the last day of December.
SECTION 8.3. BOOKS AND RECORDS.
The books and records of the Corporation shall be kept (except that the
shareholder list must also be kept at the places described in Section 3.6 of
these bylaws) at the principal office of the Corporation.
SECTION 8.4. VOTING OF STOCKS OWNED BY THE CORPORATION.
In the absence of a resolution of the Board of Directors to the contrary, the
Chief Executive Officer, the President and any Vice President acting within the
scope of his or her authority as provided in Section 6.6 of these bylaws, are
authorized and empowered on behalf of the Corporation to attend and vote, or to
grant discretionary proxies to be used, at any meeting of shareholders of any
corporation in which this Corporation holds or owns shares of stock, and in that
connection, on behalf of this Corporation, to execute a waiver of notice of any
such meeting or a written consent to action without a meeting. The Board of
Directors shall have authority to designate any officer or person as a proxy or
attorney-in fact to vote shares of stock in any other corporation in which this
Corporation may own or hold shares of stock.
SECTION 8.5. SHAREHOLDERS' RIGHT TO INFORMATION.
(a) A shareholder of the Corporation is entitled to inspect and copy,
during regular business hours at the Corporation's principal office, any of
the following records of the Corporation, if the shareholder gives the
Corporation written notice of the shareholder's demand at least five (5)
business days before the date on which the shareholder wishes to inspect a
copy of any of the following: (i) Articles or Restated Articles of
Incorporation and all amendments currently
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in effect, (ii) bylaws or restated bylaws and all amendments currently in
effect; (iii) resolutions adopted by the Board of Directors creating one or
more classes or series of shares and fixing their relative rights,
preferences and limitations, if shares issued pursuant to those resolutions
are outstanding; (iv) minutes of all shareholders' meetings and records of
all action taken by shareholders without a meeting, for the past three (3)
years; (v) all written communications to shareholders generally within the
past three (3) years, including the financial statements furnished for the
past three (3) years; (vi) a list of the names and business addresses of
the Corporation's current directors and officers; and (vii) the
Corporation's most recent annual report delivered to the Iowa Secretary of
State.
(b) If a shareholder makes a demand in good faith and for a proper purpose,
the shareholder describes with reasonable particularity the shareholder's
purpose and the records the shareholder desires to inspect, and the record
requested is directly connected with the shareholder's stated purpose, then
the shareholder shall be entitled to inspect and copy, during regular
business hours at a reasonable location specified by the Corporation, any
of the following records of the Corporation, provided the shareholder gives
the Corporation written notice of the shareholder's demand at least five
(5) business days before the date on which the shareholder wishes to
inspect and copy any of the following: (i) excerpts from minutes of any
meeting of the Board of Directors, records of any actions of a committee of
the Board of Directors while acting in place of the Board of Directors on
behalf of the Corporation, minutes of any meeting of the shareholders, and
records of action taken by the shareholders or the Board of Directors
without a meeting to the extent not subject to inspection under Section
8.5(a) of these bylaws; (ii) accounting records of the Corporation; and
(iii) the record of shareholders of the Corporation.
(c) The Corporation may impose a reasonable charge, covering the costs of
labor and material, for copies of any documents provided to the
shareholder. The charge shall not exceed the estimated cost of production
or reproduction of the records.
(d) Upon written request from a shareholder, the Corporation, at its
expense, shall furnish to that shareholder the annual financial statements
of the Corporation, including a balance sheet and income statement and, if
the annual financial statements are reported upon by a public accountant,
that report must accompany them.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 9.1. INDEMNITY.
The Corporation shall indemnify and advance expenses to any person who was or is
a party to or is threatened to be made a party to any threatened, pending or
completed claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (including a grand jury proceeding) and whether
formal or informal, by reason of the fact that such person (a) is or was a
director or officer of the Corporation, or any of the subsidiaries of the
Corporation, whether before or after the conversion of the Corporation from a
mutual insurance holding company to a
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stock company, or (b) while a director or officer of the Corporation, or any of
the subsidiaries of the Corporation, whether before or after the conversion of
the Corporation from a mutual insurance holding company, is or was serving at
the request of the Corporation as a director, officer, employee, agent, partner
or trustee (or in a similar capacity) of another corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan, to the maximum
extent it is empowered to indemnify and advance expenses to a director by Part E
of Division VIII of the IBCA as the same exists or may hereafter be amended or
changed (but, in the case of any such amendment or change, only to the extent
that such amendment or change empowers the Corporation to provide broader
indemnification than said law empowered the Corporation to provide prior to such
amendment or change), against reasonable expenses (including attorneys' fees),
judgments, fines, penalties, including an excise tax assessed with respect to an
employee benefit plan, and amounts paid in settlement actually and reasonably
incurred by such person in connection with such claim, action, suit or
proceeding or any appeal thereof; provided, however, that except as provided in
Section 9.2 of these bylaws with respect to proceedings seeking to enforce
rights of indemnification, entitlement to such indemnification shall be
conditional upon the Corporation being afforded the opportunity to participate
directly on behalf of such person in such claim, action, suit or proceeding or
any settlement discussions relating thereto, and with respect to any settlement
or other nonadjudicated disposition of any threatened or pending claim, action,
suit or proceeding, entitlement to indemnification shall be further conditional
upon the prior approval by the Corporation of the proposed settlement or
nonadjudicated disposition. Such approval shall be made (a) by the Board of
Directors by majority vote of a quorum consisting of directors not at the time
parties to the claim, action, suit or proceeding, or (b) by special legal
counsel selected by the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the claim, action, suit, or
proceeding, or, if the requisite quorum of the full board cannot be obtained
therefor, by a majority vote of the full board, in which selection of counsel
directors who are parties may participate. Approval or disapproval by the
Corporation of any proposed settlement or other nonadjudicated disposition shall
not subject the Corporation to any liability to or require indemnification or
reimbursement of any party whom the Corporation would not otherwise have been
required to indemnify or reimburse. The right to indemnification conferred in
this Article IX shall include the right to payment or reimbursement by the
Corporation of reasonable expenses incurred in connection with any such claim,
action, suit or proceeding in advance of its final disposition; provided,
however, that the payment or reimbursement of such expenses in advance of the
final disposition of such claim, action, suit or proceeding shall be made only
upon (a) delivery to the Corporation of a written undertaking, by or on behalf
of the person claiming indemnification under this Article IX to repay all
amounts so advanced if it shall ultimately be determined that such person is not
entitled to be indemnified under this Article IX or otherwise, or (b) delivery
to the Corporation of a written affirmation of such person's good faith belief
that such person has met the applicable standard of conduct necessary to require
indemnification by the Corporation pursuant to this Article IX or otherwise, or
(c) a determination that the facts then known to those making the determination
would not preclude indemnification under this Article IX.
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SECTION 9.2. PAYMENT.
Any indemnification or advancement of expenses required under this Article IX
shall be made promptly upon, and in any event within thirty (30) days after, the
written request of the person entitled thereto. If the Corporation denies a
written request for indemnity or advancement of expenses, in whole or in part,
or if payment in full pursuant to such request is not made within thirty (30)
days of the date such request is received by the Corporation, the person seeking
indemnification or advancement of expenses as granted by this Article IX may at
any time within the applicable statute of limitations bring suit against the
Corporation in any court of competent jurisdiction to establish such person's
right to indemnity or advancement of expenses. Such person's costs and expenses
incurred in connection with successfully establishing his or her right to
indemnification in any such action or proceeding shall also be indemnified by
the Corporation. It shall be a defense to any action brought against the
Corporation to compel indemnification (other than an action brought to enforce a
claim for the advancement of expenses pursuant to this Article IX where the
written affirmation of good faith or the undertaking to repay as required above
has been received by the Corporation) that the claimant has not met the standard
of conduct set forth in Section 490.851 of the IBCA, but the burden of proving
such defense shall be on the Corporation. Neither (a) the failure of the
Corporation (including its Board of Directors, special legal counsel or the
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 490.851 of the IBCA, nor (b) the fact that there has been an actual
determination by the Corporation (including its Board of Directors, special
legal counsel or the shareholders) that the claimant has not met such applicable
standard of conduct, shall create a presumption that the claimant has not met
the applicable standard of conduct. In the event that the applicable standard of
conduct has been met as to some claims, actions, suits or proceedings, but not
as to others, a person who has a right of indemnification pursuant to this
Article IX shall be indemnified against all expenses (including attorney fees)
actually and reasonably incurred by such person in connection with the claim,
action, suit or proceeding as to which the applicable standard has been met.
Nothing contained in this section shall limit the obligation, duty or ability of
the Corporation to indemnify such person as provided elsewhere in this Article
IX.
SECTION 9.3. CONTRACT.
The provisions of this Article IX shall be deemed a contract between the
Corporation and each director and officer who serves in such capacity at any
time while this Article IX and the relevant provisions of the IBCA are in
effect, and any repeal or modification of any such law or of this Article IX
shall not adversely affect any rights or obligations then existing with respect
to any state of facts then or theretofore existing or any claim, action, suit or
proceeding theretofore or thereafter brought or threatened based in whole or in
part upon any such state of facts.
SECTION 9.4. WITNESSES.
The Corporation shall indemnify and advance expenses to any person who was or is
a witness in or is threatened to be made a witness in any threatened, pending or
completed claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (including a grand jury
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proceeding) and whether formal or informal, by reason of the fact that such
person (a) is or was a director or officer of the Corporation, or any of the
subsidiaries of the Corporation, whether before or after the conversion from a
mutual insurance holding company, or (b) while a director or officer of the
Corporation, or any of the subsidiaries of the Corporation, whether before or
after the conversion from a mutual insurance holding company, is or was serving
at the request of the Corporation as a director, officer, employee, agent,
partner or trustee (or in a similar capacity) of another corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan,
to the same extent that such person would be entitled to indemnification and
advancement of expenses under this Article IX if such person were, or were
threatened to be made, a party to such claim, action, suit or proceeding,
against reasonable expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with such claim, action, suit or
proceeding or any appeal thereof.
SECTION 9.5. NONEXCLUSIVE.
Except as limited by Section 490.851 of the IBCA, the indemnification and
advancement of expenses provided by or granted pursuant to this Article IX shall
not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors, law or otherwise;
provided, however, that in no event shall any such provision or agreement
provide indemnification to a person who was or is a director or officer of the
Corporation (a) for a breach of a director's or officer's duty of loyalty to the
Corporation or its shareholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of the law, (c) for a
transaction from which the person seeking indemnification derived an improper
personal benefit or (d) for liability under Section 490.833 of the IBCA.
SECTION 9.6. APPLICABILITY.
This Article IX shall be applicable to all claims, actions, suits or proceedings
commenced after the effective date hereof, whether arising from acts or
omissions occurring before or after the effective date hereof. Each person who
is now serving or who shall hereafter serve as a director or officer of the
Corporation or any of its subsidiaries shall be deemed to be doing so in
reliance upon the rights of indemnification provided for in this Article IX, and
such rights of indemnification shall continue as to a person who has ceased to
be a director or officer, and shall inure to the benefit of the heirs,
executors, administrators and legal or personal representatives of such a
person. If this Article IX or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, and any of its subsidiaries then
the Corporation shall nevertheless indemnify each director and officer of the
Corporation to the maximum extent permitted by any applicable portion of this
Article IX that shall not have been invalidated.
SECTION 9.7. INITIATION OF CLAIMS.
Notwithstanding anything in this Article IX to the contrary, except with respect
to proceedings initiated to enforce rights of indemnification to which such
person is entitled under this Article IX or otherwise, the Corporation shall
indemnify any such person in connection with a claim, action,
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<PAGE> 21
suit or proceeding (or part thereof) initiated by such person only if the
initiation of such claim, action, suit or proceeding (or part thereof) was
authorized by the Board of Directors.
SECTION 9.8. INSURANCE.
The Corporation may purchase and maintain insurance, at its expense, to protect
itself and any person who is or was a director, officer, employee or agent of
the Corporation, or any of its subsidiaries, whether before or after the
conversion of the Corporation from a mutual insurance holding company, or is or
was serving at the request of the Corporation or any of its subsidiaries,
whether before or after the conversion from a mutual insurance holding company,
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against such person and incurred by
such person in such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Article IX, the IBCA or
otherwise. The Corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit, surety
bonds and/or similar arrangements), as well as enter into contracts providing
for indemnification to the maximum extent permitted by law and including as part
thereof any or all of the foregoing, to ensure the payment of such sums as may
become necessary to effect full indemnification. The Corporation's obligation to
make indemnification and pay expenses pursuant to this Article IX shall be in
excess of any insurance purchased and maintained by the Corporation and such
insurance shall be primary. To the extent that indemnity or expenses of a person
entitled to indemnification and payment of expenses pursuant to this Article IX
are paid on behalf of or to such person by such insurance such payments shall be
deemed to be in satisfaction of the Corporation's obligation to such person to
make indemnification and pay expenses pursuant to this Article IX.
ARTICLE X
EMERGENCY BYLAWS
SECTION 10.1. NATIONAL EMERGENCY.
In the event of a national emergency because of some catastrophic event which
makes it impossible to conduct the business of the Corporation in accordance
with the Articles of Incorporation or these bylaws, the provisions of this
Article X (hereinafter referred to as the Emergency Bylaws) shall become
operative.
SECTION 10.2. EMERGENCY EXECUTIVE COMMITTEE.
(a) Upon the Emergency Bylaws becoming operative a meeting of the Executive
Committee may be called by any director or officer of the Corporation.
Three (3) members of the Executive Committee shall constitute a quorum for
the transaction of business at all such meetings of the Executive
Committee.
(b) To the extent required to constitute a quorum at any such meeting of
the Executive Committee, first the available directors who are not members
of the Executive Committee in
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<PAGE> 22
order of seniority as directors and then the available officers of the
Corporation in order of seniority determined pursuant to Article VI of
these bylaws shall be deemed members of the Executive Committee for such
meeting. The Board of Directors may, before these Emergency Bylaws become
operative, prepare a list of other officers of the Corporation or other
persons who shall be deemed members of the Executive Committee at any
meeting of the Executive Committee pursuant to these Emergency Bylaws in
the event that there are no directors or officers determined pursuant to
Article VI of these bylaws capable of serving as members of the Executive
Committee. The list shall specify the order of priority in which such
persons shall serve.
(c) Any vacancy on the Executive Committee pursuant to these Emergency
Bylaws may be filled at any meeting of the Executive Committee by a
majority of the members, though less than a quorum, or by the sole
remaining member. Such members shall serve until the annual meeting of the
Board of Directors following the end of the national emergency or until the
successors are appointed and qualified.
SECTION 10.3. ALTERNATIVE PLACES OF BUSINESS.
The Board of Directors, before these Emergency Bylaws become operative, may,
effective when these Emergency Bylaws are operative, designate several alternate
places of business.
SECTION 10.4. DURATION.
To the extent not inconsistent with this Section, the bylaws of the Corporation
shall remain in effect during the national emergency and upon termination of the
national emergency these Emergency Bylaws shall cease to be operative.
ARTICLE XI
AMENDMENTS
SECTION 11.1. AMENDMENTS TO BYLAWS.
These bylaws may be amended or repealed by the Board of Directors or by the
shareholders; provided, however, that the shareholders may from time to time
specify particular provisions of the bylaws which shall not be amended or
repealed by the Board of Directors.
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<PAGE> 1
EXHIBIT 99.3
PROXY SOLICITED BY AMERUS
- --------------------------------------------------------------------------------
PROXY
The undersigned, a holder of record of shares of common stock, no par
value ("AmerUs common stock"), of AmerUs Life Holdings, Inc., an Iowa
corporation ("AmerUs"), hereby appoints Roger K. Brooks, Michael G. Fraizer and
James A. Smallenberger and each of them, with full power of substitution, to
attend the special meeting of AmerUs stockholders at 2:00 p.m., Central Time, on
Thursday, June 22, 2000, at the AmerUs Conference Center, Hub Tower, 3rd Floor,
699 Walnut Street, Des Moines, Iowa (and any adjournments, postponements,
continuations or reschedulings thereof), and to vote as specified in this proxy
all the shares of AmerUs common stock which the undersigned would otherwise be
entitled to vote if personally present. The undersigned hereby revokes any
previous proxies with respect to the matters covered in this proxy.
If returned cards are signed but not marked, the undersigned will be
deemed to have voted for the proposal and in the sole discretion of the proxies
as to any other matter. The AmerUs board unanimously recommends a vote "FOR" the
proposal set forth below:
1. Approval of the Agreement and Plan of Merger, dated as of December
17, 1999, as amended on February 18 and April 3, 2000, between AmerUs Life
Holdings, Inc. ("AmerUs") and American Mutual Holding Company ("AMHC"), pursuant
to which AmerUs will merge with and into AMHC with AMHC the survivor in such
merger.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the proxies are authorized to vote upon any other
business as may properly come before the meeting or any adjournments,
postponements, continuations or reschedulings thereof.
- --------------------------------------------------------------------------------
Please sign your name exactly as it appears hereon. When shares of
AmerUs common stock are held of record by joint tenants, only one need sign.
When signing as an attorney-in-fact, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or authorized officer. If a partnership, please sign
in partnership name by authorized person.
Dated:
Signature
--------------------------------
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