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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
October 10, 1994
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Date of Report (Date of earliest event reported)
Southwestern Life Corporation
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(Exact name of Registrant as specified in its charter)
Delaware 1-7697 43-6069928
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(State or other jurisdiction (Commission (IRS employer
of incorporation file no.) identification no.)
500 North Akard Street, Dallas, Texas 75201
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(Address of principal executive offices, including zip code)
(214) 954-7111
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
The Registrant determined that realized losses in the amount of $46.4
million in the value of certain of its investments in collateralized mortgage
obligations were appropriate as of the quarter ended March 31, 1994. The Company
has amended its financial statements for the quarters ended March 31, 1994 and
June 30, 1994 to reflect these losses, and has filed amendments on October 12,
1994 on Form 10-Q/A to its Quarterly Reports on Form 10-Q for each such quarter,
which amendments on Form 10-Q/A and the financial statements (including the
Notes thereto) and exhibits included therein are incorporated herein by
reference.
On October 10, 1994, Robert L. Beisenherz resigned from his position as
President, Chief Executive Officer and Chairman of the Board of the Registrant
and from all positions he held with the Registrant's subsidiaries. On such date,
the Registrant's Board of Directors elected James R. Kerber as the Registrant's
President and Chief Executive Officer and as a member of the Registrant's Board
of Directors.
A copy of the press release announcing the March 31, 1994 losses and the
change of the Registrant's management is attached as Exhibit 1 of this Current
Report on Form 8-K and are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS.
(a) None
(b) None
(c) Exhibits.
Exhibit No. Description
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1 Press Release of Registrant dated October 12, 1994
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Southwestern Life Corporation
By: /s/John T. Hull
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John T. Hull
Executive Vice President,
Treasurer and Chief
Financial Officer
Date: October 12, 1994
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INDEX TO EXHIBITS
Sequential
Exhibit No. Document Description Page No.
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1 Press Release of Southwestern Life 5
Corporation dated October 12, 1994
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EXHIBIT 1
DATE: OCTOBER 12, 1994
FOR FURTHER INFORMATION CONTACT:
MICHAEL E. CONLEY (214) 954-7414
FOR IMMEDIATE RELEASE
SOUTHWESTERN LIFE CORPORATION ANNOUNCES MANAGEMENT CHANGE;
RESTATES 1994 FIRST QUARTER AND SIX MONTH FINANCIAL RESULTS.
DALLAS--OCT. 12, 1994--Southwestern Life Corporation (ASE: SLC), a Dallas-
based insurance holding company, today announced that Robert L. Beisenherz has
resigned as chairman, president and chief executive officer of the Company. The
Company's Board of Directors also announced that it was evaluating potential
acquisitions and strategic alliances designed to increase insurance premium
income and reduce operational expenses, and had elected James R. Kerber to the
Board and as president and chief executive officer of the Company.
Mr. Kerber, 62, has 35 years management experience in the life insurance
industry. For the past five years he has served as senior executive vice
president-operations of Life Partners Group, Inc. in Denver, Colo.
The Company also today announced it has restated its financial results for
the first quarter ended Mar. 31, 1994 and six months ended June 30, 1994 to
account for realized losses in certain of its collateralized mortgage
obligation (CMO) investments previously accounted for as unrealized losses
through a charge to stockholders' equity. The restatements resulted from a
reevaluation of the particular CMO investments by the Company and, at the
Company's request, its independent auditors. As a result of
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such reevaluation, management determined that the unrealized losses represented
"other than temporary" declines in the fair values of such investments and that
a realization of the losses through a charge to earnings was appropriate.
Under current statutory accounting standards, the write-downs have no
effect upon the Company's operating cash flows or upon the statutory financial
results of its insurance subsidiaries.
The Company reported a restated net loss, after preferred dividend
requirements, of $43.7 million, or 91 cents per common share, in the first
quarter of 1994, reflecting pre-tax losses totaling $46.4 million in its
investment in CMOs evidenced by its interests in a trust sponsored by an
unaffiliated third party, the Fund America Investors Corporation II ("Fund
America"), and its rights to residual interests held by a special-purpose trust,
the Secured Investors Structured Trust ("SIST"), which had been sponsored by the
Company. The Company had previously reported a net loss, after preferred
dividend requirements, of $8.5 million, or 18 cents per common share, in the
first quarter of 1994.
For the six months ended June 30, 1994, the Company reported a restated net
loss, after preferred dividend requirements, of $42.5 million, or 89 cents per
common share. The Company had previously reported a net loss, after preferred
dividend requirements of $7.3 million, or 15 cents per common share, for the
first half of 1994.
The Company had not previously tax-effected any of its unrealized
investment losses at Mar. 31, 1994 or June 30, 1994. In
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conjunction with its reevaluation of the CMOs, a determination was made that a
substantial portion of the write-downs could be tax-effected. As a consequence
of the tax-effecting of the write-downs, common equity was revised upwards to
$125.4 million, or $2.65 per share, as of June 30, 1994. Common equity had been
previously reported to be $114.2 million, or $2.42 per share, at June 30, 1994.
The carrying value of the two investments at June 30, 1994 was $31.2
million, although the undiscounted future cash flows exceeded $300 million at
the same date. The securities underlying the Fund America investment are the
principal components ($102 million) of bonds ("RFCO Strips") issued by the
Resolution Funding Corporation, whose sole purpose is to provide financing for
the federal government's Resolution Trust Corporation. The RFCO Strips are due
in full in a single payment in 2030. According to the Offering Circular for the
RFCO Strips, the principal amount of the RFCO Strips will be fully repaid from
the proceeds of non-interest bearing obligations of the United States issued by
the Secretary of the Treasury and deposited in a separate account at the Federal
Reserve Bank of New York.
The securities underlying the SIST residual are the principal components
($14.5 million) of RFCO Strips due in full in 2021.
The Company said that amended Form 10-Qs for the periods ended Mar. 31,
1994 and June 30, 1994, would be promptly filed with the Securities and Exchange
Commission.
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A preliminary review of the Fund America investment and SIST residual as
of Sept. 30, 1994 under applicable GAAP standards and interpretations indicates
that no further realized losses as of that date will be required.
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SOUTHWESTERN LIFE CORPORATION
CONSOLIDATED BALANCE SHEETS
As of June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
As Originally
ASSETS Reported As Amended
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(In Thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Available for sale at fair value $1,607,230 $1,607,230
Held to maturity at amortized cost 15,305 15,305
Equity securities, at fair value 18,144 18,144
Mortgage loans on real estate, at amortized cost 124,084 124,084
Real estate, at lower of cost or fair value 64,781 64,781
Policy loans 175,713 175,713
Collateral loans 76,432 76,432
Investments in limited partnerships 44,430 44,430
Cash and short-term investments 272,029 272,029
Other invested assets 21,004 21,004
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Total investments 2,419,152 2,419,152
Due from reinsurers 253,152 253,152
Notes and accounts receivable and uncollected premiums 15,528 15,528
Accrued investment income 29,587 29,587
Deferred policy acquisition costs 208,420 208,420
Present value of future profits of acquired business 81,564 81,564
Deferred income tax asset 55,274 54,265
Excess cost of investments in subsidiaries over net
assets acquired, net of accumulated amortization 302,833 302,833
Other assets 43,390 43,390
Assets held in separate accounts 5,016 5,016
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$3,413,916 $3,412,907
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LIABILITIES AND STOCKHOLDERS' EQUITY
Insurance liabilities:
Future policy benefits and other policy liabilities $ 916,901 $ 916,901
Universal life and investment contract liabilities 1,667,107 1,667,107
Notes payable:
Due within one year 8,235 8,235
Due after one year 379,343 379,343
Federal income taxes currently payable 21,366 9,101
Other liabilities 101,789 101,789
Liabilities related to separate accounts 5,016 5,016
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3,099,757 3,087,492
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Stockholders' equity:
Preferred stock 199,997 199,997
Common stock 71,721 71,721
Common stock, Class B
Additional paid-in capital 155,564 155,564
Net unrealized investment gains (losses) (120,349) (73,901)
Retained earnings 64,569 29,377
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371,502 382,758
Notes receivable collateralized by common stock (1,762) (1,762)
Treasury stock, at cost (55,581) (55,581)
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314,159 325,415
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$3,413,916 $3,412,907
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</TABLE>
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SOUTHWESTERN LIFE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, 1994 June 30, 1994
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As Originally As Originally
Reported As Amended Reported As Amended
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<S> <C> <C> <C> <C>
Income:
Premium income and other
considerations $ 116,574 $ 116,574 $ 229,705 $ 229,705
Net investment income 30,007 30,007 82,004 82,004
Realized investment gains (losses) 674 (45,774) 1,347 (45,101)
Equity in earnings of equity
investees and limited partnerships 412 412 843 843
Other income 2,499 2,499 11,325 11,325
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150,166 103,718 325,224 278,776
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Benefits, expenses and costs:
Policyholder benefits 90,685 90,685 190,269 190,269
Amortization of deferred policy
acquisition costs and present
value of future profits 12,293 12,293 25,395 25,395
Other operating expenses 37,480 37,480 72,349 72,349
Amortization of excess cost 2,398 2,398 4,796 4,796
Interest expense 12,445 12,445 25,109 25,109
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155,301 155,301 317,918 317,918
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Operating earnings (loss) before
income taxes (5,135) (51,583) 7,306 (34,142)
Income tax expense (credit) (958) (12,214) 6,745 (4,511)
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Net earnings (loss) (4,177) (39,369) 561 (34,631)
Less dividends on preferred stock (4,325) (4,325) (7,825) (7,825)
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Net earnings (loss) applicable to
common stock $ (8,502) $ (43,694) $ (7,264) $ (42,456)
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Weighted average shares outstanding 47,878,690 47,878,690 47,853,939 47,853,939
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Earnings (loss) per common share $(.18) $(.91) $(.15) $(.89)
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</TABLE>
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