<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1998 Commission File Number 1-7255
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-1219710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1776 American Heritage Life Drive, Jacksonville, Florida 32224
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 992-1776
Former name, former address and former fiscal year, if changed since last report
N/A
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Number of registrant's shares of common stock outstanding at
October 31, 1998
27,867,165
<PAGE> 2
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
(Amounts in thousands, except share and per share amounts)
ASSETS
Investments:
Debt securities, available-for-sale, at fair value (cost of $936,240 in
1998 and $889,811 in 1997) $ 988,219 923,287
Equity securities, available-for-sale, at fair value (cost of $28,036
in 1998 and $20,329 in 1997) 38,361 36,817
Mortgage loans on real estate 87,346 70,697
Investment real estate, at cost 519 482
Policy loans 422,149 407,482
Short-term investments 16,505 32,635
----------- ---------
Total investments 1,553,099 1,471,400
----------- ---------
Cash 21,753 23,261
Agents' balances and prepaid commissions 33,277 35,268
Premiums receivable 49,085 43,196
Accrued investment income 38,082 30,519
Deferred acquisition costs and cost of business acquired 234,116 223,651
Property and equipment, at cost, less accumulated depreciation 34,767 31,898
Reinsurance receivables 12,322 11,004
Other assets 48,519 45,062
----------- ---------
Total assets $ 2,025,020 1,915,259
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities:
Future policy benefits $ 308,218 289,765
Policyholders' account balances 1,074,623 1,013,602
Unearned premiums 45,550 52,666
Policy and contract claims 62,084 58,484
----------- ---------
Total policy liabilities 1,490,475 1,414,517
Notes payable to banks 55,447 39,192
Deferred income taxes 53,146 46,820
Other liabilities 45,925 59,007
----------- ---------
Total liabilities 1,644,993 1,559,536
----------- ---------
AHLIC-obligated mandatorily redeemable preferred securities of
subsidiaries holding solely subordinated debentures of AHLIC 103,500 103,500
----------- ---------
Stockholders' equity:
Common stock of $1 par value. Authorized 75,000,000
shares in 1998 and 35,000,000 shares in 1997; issued
28,139,880 in 1998 and 14,020,861 in 1997 28,140 14,021
Additional paid-in capital 42,174 42,528
Retained earnings 188,156 183,852
Yield enhancement, contract and issuance costs of
mandatorily redeemable preferred securities (9,561) (9,561)
Net unrealized investment gains 31,667 25,612
----------- ---------
280,576 256,452
Less cost of 272,715 in 1998 and 142,589
in 1997 common shares in treasury 4,049 4,229
----------- ---------
Total stockholders' equity 276,527 252,223
----------- ---------
Total liabilities and shareholders' equity $ 2,025,020 1,915,259
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
--------------------------- --------------------------
<S> <C> <C> <C> <C>
(Amounts in thousands, except share and per share amounts)
Income:
Insurance revenues $ 231,620 206,945 81,731 75,120
Net investment income 82,326 77,990 27,972 26,778
Other income 1,743 443 549 443
Realized investment gains, net 345 310 164 146
----------- ---------- ---------- ----------
Total income 316,034 285,688 110,416 102,487
----------- ---------- ---------- ----------
Benefits, claims and expenses:
Benefits and claims 143,836 131,746 51,534 48,890
Underwriting, acquisition and insurance expenses:
Taxes, commissions and general expenses 92,639 90,088 31,306 31,181
Amortization of deferred acquisition costs and
cost of business acquired 29,357 22,763 10,435 8,310
Other operating expenses 9,622 6,380 3,317 2,602
----------- ---------- ---------- ----------
Total benefits, claims and expenses 275,454 250,977 96,592 90,983
----------- ---------- ---------- ----------
Earnings before income taxes 40,580 34,711 13,824 11,504
Income taxes 13,458 11,482 4,537 3,820
----------- ---------- ---------- ----------
Net earnings $ 27,122 23,229 9,287 7,684
=========== ========== ========== ==========
Net earnings per share of common stock - basic .98 .84 .34 .28
=========== ========== ========== ==========
- diluted .95 .83 .32 .27
=========== ========== ========== ==========
Dividends declared per share $ .315 .295 .105 .100
=========== ========== ========== ==========
Average number of shares outstanding - basic 27,559,354 27,579,106 27,582,091 27,664,249
=========== ========== ========== ==========
- diluted 28,440,024 27,858,374 28,615,378 27,801,723
=========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
(Amounts in thousands, except share and per share amounts)
Common stock:
Balance at beginning of period $ 14,021 3,967
Par value of shares issued pursuant to stock split 14,056 --
Other shares issued, net 63 54
--------- --------
Balance at end of period 28,140 14,021
--------- --------
Additional paid-in capital:
Balance at beginning of period 42,528 42,644
Excess over par value on shares issued 628 542
Addition (deduction) related to exercise of stock options (982) (658)
--------- --------
Balance at end of period 42,174 42,528
--------- --------
Retained earnings:
Balance at beginning of period 183,852 163,460
Add net earnings 27,122 23,229
--------- --------
210,974 186,689
Par value of shares issued pursuant to stock split (14,056) --
Cash-in-lieu of fractional shares related to stock split (2) --
Deduct cash dividends declared on common stock - $.315
per share in 1998 and $.295 per share in 1997 (8,760) (8,156)
--------- --------
Balance at end of period 188,156 178,533
--------- --------
Yield enhancement, contract and issuance costs of
mandatorily redeemable preferred securities at
beginning of period (9,561) --
Change during the period -- (9,552)
--------- --------
Balance at end of period (9,561) (9,552)
--------- --------
Accumulated other comprehensive income:
Net unrealized investment gains (losses):
Balance at beginning of period 25,613 12,158
Change during the period 6,054 10,374
--------- --------
Balance at end of period 31,667 22,532
--------- --------
Treasury stock:
Balance at beginning of period 4,229 3,287
Add treasury shares purchased (3,207 shares in 1998
and 19,406 shares in 1997) 54 504
Less treasury shares surrendered (15,668 shares in 1998
and 104,352 shares in 1997) (234) (2,285)
--------- --------
Balance at end of period 4,049 1,506
--------- --------
Total stockholders' equity $ 276,527 246,556
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOW
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
(Amounts in thousands)
Operating activities:
Net earnings $ 27,122 23,229
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Change in agents' balances and prepaid commissions 2,045 807
Change in premiums receivable (5,889) (8,012)
Change in accrued investment income (7,086) (7,563)
Change in reinsurance receivables (1,264) 3,272
Amortization of deferred acquisition costs and
cost of business acquired 29,357 22,763
Acquisition costs deferred (39,031) (31,295)
Change in future policy benefits 16,262 10,802
Change in policyholders' account balances 31,311 59,209
Change in unearned premiums (7,116) 824
Change in policy and contract claims 2,551 1,556
Change in income taxes 2,735 2,575
Provision for depreciation and amortization 2,499 1,654
Change in unearned investment income (240) 277
Other, net (6,302) (1,552)
--------- --------
Net cash provided by operating activities 46,954 78,546
--------- --------
Investing activities:
Sales of debt securities 11,156 35,543
Maturities of debt securities 88,741 47,266
Sales (purchases) of short-term investments, net 16,707 (5,094)
Sales of equity securities 4,935 2,390
Maturities of mortgage loans on real estate 2,639 2,948
Policy loans paid 26,596 24,025
Acquisitions, net of cash acquired 1,389 (50,876)
Purchases of debt securities (127,556) (99,305)
Purchases of equity securities (6,393) (342)
Origination of mortgage loans on real estate (19,274) (14,711)
Policy loans made (40,187) (49,212)
Purchases and additions of property and equipment
and investment real estate (4,584) (3,628)
Other, net (10,146) 2,171
--------- ---------
Net cash used by investing activities (55,977) (108,825)
--------- ---------
Financing activities:
Change in notes payable to banks, net 16,255 (60,839)
Proceeds from securities offering, net 0 98,939
Dividends to stockholders (8,761) (8,157)
Other, net 21 1,866
--------- --------
Net cash provided by financing activities 7,515 31,809
--------- --------
Increase (decrease) in cash (1,508) 1,530
Cash, beginning of period 23,261 21,672
--------- --------
Cash, end of period $ 21,753 23,202
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
(1) In the opinion of management, the accompanying consolidated financial
statements, which are unaudited, include all adjustments necessary to
present fairly the consolidated results of operations and financial
position of the Company for the periods indicated. However, certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted. It is suggested that these consolidated financial statements
be read in conjunction with the consolidated financial statements,
schedules and notes thereto included in the Company's Form 10-K for the
year ended December 31, 1997.
(2) The financial statements of the Company's life insurance operations,
primarily the operations of American Heritage Life Insurance Company (AHL)
and Columbia Universal Life Insurance Company (CUL), have been included in
the consolidated financial statements on the basis of generally accepted
accounting principles.
(3) On June 30, 1998, the Company closed on the acquisition of Keystone State
Life Insurance Company (Keystone) of Philadelphia, Pennsylvania. Keystone
primarily markets individual life products. The acquisition was included
in the balance sheet at September 30, 1998, and included in earnings for
the third quarter of 1998.
(4) Earnings per share of common stock were based on the weighted average
number of shares outstanding during each period, excluding treasury
shares.
(5) Current accrued income taxes were included in other liabilities in the
amount of $526,000 at September 30, 1998 and $683,000 at December 31,
1997, in the accompanying consolidated balance sheets.
(6) The Company's insurance subsidiaries, like other insurance companies, are
currently defendants in lawsuits that involve claims for punitive,
exemplary or other extracontractual damages, which are for amounts
substantially in excess of the actual damages sought. Management considers
such litigation regrettably to be of the type to which insurance companies
are usually and customarily subjected to in the ordinary course of
business and to date the settlements of such claims of this nature have
not been material to the financial position of the Company. In the opinion
of management, based on the currently ascertained facts of the pending
litigation, which the Company intends to vigorously defend, the ultimate
resolution of such litigation should not be material to the financial
position of the Company.
5
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PERIODS ENDED SEPTEMBER 30, 1998 COMPARED TO
PERIODS ENDED SEPTEMBER 30, 1997
RESULTS OF OPERATIONS
American Heritage Life Investment Corporation (AHLIC) and subsidiaries (the
"Company") are engaged primarily in the life insurance business. The Company's
consolidated earnings are primarily attributable to its principal insurance
subsidiaries, American Heritage Life Insurance Company (AHL) and Columbia
Universal Life Insurance Company (CUL). Significant changes in the components of
the consolidated results of operations for the comparative periods are presented
below.
On June 30, 1998, the Company closed on the acquisition of Keystone State Life
Insurance Company (Keystone). The acquisition was reflected in the Company's
financial statements at September 30, 1998.
Pursuant to generally accepted accounting principles (GAAP), insurance revenues
for reporting purposes include only the mortality, expense, and surrender
charges for interest-sensitive products. Insurance revenues do not include group
and credit premium equivalents and cash deposits from interest-sensitive
products. Insurance revenues for the nine months ended September 30, 1998 were
$231.6 million, an increase of 11.9% from the $206.9 million for the same period
in 1997. For the three months ended September 30, 1998, insurance revenues were
$81.7 million versus $75.1 million for the same period in 1997, an increase of
8.8%. These increases were due primarily to an increase in interest-sensitive
policy charges, cancer and accident and health insurance revenues, partially
offset by a decrease in credit insurance revenues.
As a result of more of: (1) the ordinary life business being interest-sensitive;
(2) the group business being on a self-funded or split-funded basis; and (3) the
credit business being written on a reinsurance/administrative services only
basis, in which only the fees charged are included in insurance revenues for
GAAP purposes, it is important to evaluate insurance revenues including premium
equivalents. Including premium equivalents of $250.7 million and $274.2 million
for the nine months ended September 30, 1998 and 1997, respectively, insurance
revenues, including premium equivalents, were $482.3 million and $481.2 million,
up .2% in 1998. For the three months ended September 30, 1998 and 1997,
insurance revenues, including premium equivalents of $91.4 million and $89.9
million, respectively, were $173.1 million and $165.0 million, respectively, up
4.9% in 1998. Ordinary insurance revenues including premium equivalents were up
due in part to an increase in accident and health and cancer revenues. Universal
life revenues were also up with assumed revenues and premium equivalents of $8.4
million with no comparable amounts in 1997. The increase was partially offset by
a decrease in group and credit insurance revenues and premium equivalents which
were down due primarily to a decrease in administrative services only business
and credit reinsurance.
For the nine months ended September 30, 1998, net investment income was $82.3
million, an increase of 5.6% over the $78.0 million reported for the same period
in 1997. Net investment income for the three months ended September 30, 1998 was
$28.0 million compared to $26.8 million for the three months ended September 30,
1997, or an increase of 4.5%. These increases in net investment income for the
nine months and three months ended September 30, 1998 compared to the same
periods in 1997 were due primarily to an increase in invested assets. These
increases were partially offset by a decrease in Management Security Plan (MSP)
policy loan interest due to a decrease in the average rate charged (7.49% in
1998 versus 7.93% in 1997) on decreased policy loan balances (see page 8 for
discussion regarding MSP loans.)
6
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PERIODS ENDED SEPTEMBER 30, 1998 COMPARED TO
PERIODS ENDED SEPTEMBER 30, 1997
RESULTS OF OPERATIONS (CONTINUED)
The effective yield on invested assets for the nine months ended September 30,
1998 was 7.26% compared to 7.56% for the same period in 1997. Excluding MSP
policy loans, the effective yield was 7.25% for the nine months ended September
30, 1998 and 7.42% for the same period in 1997.
Other income was $1.7 million for the nine months ended September 30, 1998, up
over the $.4 million for the same period in 1997. For the three months ended
September 30, 1998, other income was $.5 million compared to $.4 million for the
same period in 1997, or an increase of 23.9%. The increase for the nine month
period is due to revenues from ERJ Insurance Group acquired effective July 31,
1997.
Benefits and claims were $143.8 million for the nine months ended September 30,
1998, up 9.2% from the $131.7 million for the same period in 1997. For the three
months ended September 30, 1998, benefits and claims totaled $51.5 million
compared to $48.9 million for the same period in 1997, or an increase of 5.4%.
The increases for the nine months and three months ended September 30, 1998
versus 1997 were due primarily to increased ordinary benefits, including
additional benefits from an assumed block of universal life business with no
comparable amounts for 1997 and individual accident and health claims.
Taxes, commissions, and general expenses aggregated $92.6 million for the first
nine months of 1998 versus $90.1 million for the first nine months of 1997, or
an increase of 2.8%. For the three months ended September 30, 1998 and 1997,
taxes, commissions and general expenses were $31.3 million and $31.2 million,
respectively, or an increase of .4%. The increases for the nine months and three
months were influenced by recent acquisitions and additional expenses associated
with new production and technology.
Pursuant to GAAP, the initial costs directly associated with selling,
underwriting, and processing traditional ordinary insurance products are
deferred and amortized over the premium-paying period of the related policies.
For interest-sensitive products, these costs are amortized over the lives of the
policies in relation to the present value of estimated gross profits from
surrender charges and investment, mortality, and expense margins. These costs
increase as the amount of sales and insurance in force increase. The charge to
earnings for acquisition costs of ordinary insurance is comprised of: (1) the
amortization of costs for policies which remain in force; (2) the write-off of
unamortized costs related to policies which are terminated; and (3) the
amortization of the cost of business acquired. For the nine months ended
September 30, 1998, the amortization of deferred acquisition costs was $29.4
million compared to $22.8 million for the comparable period in 1997, or an
increase of 29.0%. For the three months ended September 30, 1998, the
amortization of deferred acquisition costs was $10.4 million compared to $8.3
million for the comparable period in 1997, or an increase of 25.6%. These
increases in amortization expense were primarily due to increased amortization
from the growth of business in force and the cost of business acquired.
For the nine months ended September 30, 1998, other operating expenses were $9.6
million compared to $6.4 million for the same period in 1997, an increase of
50.8%. For the three months ended September 30, 1998, other operating expenses
were $3.3 million compared to $2.6 million for the same period in 1997, or an
increase of 27.5%. These increases were due primarily to an increase in interest
expense as a result of an increase in the amount of average outstanding bank
debt and the interest on the mandatorily redeemable preferred securities issued
at the end of the second quarter of 1997. These expenses are also up due to the
expenses of ERJ Insurance Group, an insurance agency acquired July 31, 1997.
7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PERIODS ENDED SEPTEMBER 30, 1998 COMPARED TO
PERIODS ENDED SEPTEMBER 30, 1997
RESULTS OF OPERATIONS (CONTINUED)
Income taxes increased 17.2% for the nine months ended September 30, 1998 from
the same period in 1997, primarily as a result of an increase in net earnings.
For the nine months ended September 30, 1998 and 1997, the effective tax rate
was 33.2% and 33.1%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company is engaged primarily in the life insurance business. The principal
subsidiaries, AHL and CUL, generate major sources of cash flow from premiums
collected for traditional insurance products, deposits, and policy charges for
interest-sensitive products and investment income attributable to the life
insurance operations and associated investment portfolio. This results in a
significant portion of the Company's assets being liquid. Such assets are made
up of cash, short-term investments, and readily marketable securities.
As an insurer, the Company is required to maintain substantial liabilities for
future policy benefits and policyholders' account balances. Since premiums and
deposits received in anticipation of such benefits are investable funds, it is
expected that the Company will continue to increase its investment portfolio
using cash flow from operations.
The decrease in net cash provided by operating activities for the nine months
ended September 30, 1998, compared to the same period in 1997, was due primarily
to a decrease in policyholder account balances as a result of certain surrenders
in 1998.
The decrease in net cash used by investing activities for the nine months ended
September 30, 1998 versus the same period in 1997 was due primarily to the
acquisition of CUL and Concord General in 1997.
The decrease in net cash provided by financing activities for the nine months
ended September 30, 1998, compared to the same period in 1997, was due primarily
to proceeds from the offering of mandatorily redeemable preferred securities,
which was partially offset with the payoff of debt in 1997.
The Company's policy loans are a higher percentage of invested and total assets
than industry norm as a result of a significant block of Management Security
Plan (MSP) business. The MSP product is an interest-sensitive, deferred
compensation/executive benefit-type product with the policy loan feature being
an integral part of the product. A market rate of interest is charged on the
policy loans, and a predetermined built-in spread is achieved between the
interest rate charged on the policy loans and the interest rate credited on the
loaned funds. Accordingly, all MSP policy loans are completely collateralized by
the underlying policyholders' account balances. Policy loans are typically
funded out of cash provided by operating activities and do not represent a
significant restriction on the Company's liquidity.
At September 30, 1998, the fair value of the Company's debt and equity security
portfolio aggregated $1,026.6 million compared with an amortized cost of $964.3
million, or an unrealized gain of $62.3 million. At December 31, 1997, the fair
value of the portfolio aggregated $960.1 million compared with an amortized cost
of $910.1 million, or an unrealized gain of $50.0 million. This change in the
unrealized gain was primarily due to changes in market conditions.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PERIODS ENDED SEPTEMBER 30, 1998 COMPARED TO
PERIODS ENDED SEPTEMBER 30, 1997
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company's amortized cost of high-yield bonds (rated below BBB by Standard &
Poor's Corporation and excluding non-rated and private placements) at September
30, 1998 aggregated $35.9 million with a market value of $36.2 million. At
market value, these investments represented 1.8% of total assets, or 2.3% of
total invested assets. Such holdings were not material to invested assets nor is
it expected that any subsequent gains or losses on these securities would be
material to the operations of the Company.
AHLIC is a holding company, and its liquidity is largely dependent on the
ability of its subsidiaries, primarily AHL, to pay dividends and on external
financings. As a result, AHLIC borrows on an interim basis through lines of
credit with its major banks to cover any short-term cash requirements which may
occur. The increase in bank debt at September 30, 1998, compared to the amount
at December 31, 1997, reflected additional borrowings to fund shareholder
dividends and interest expense. At September 30, 1998, the debt to total capital
(excluding unrealized investment gains) ratio was 13.7%.
YEAR 2000
The Company has completed an assessment and has in place a Year 2000 compliance
plan which includes updates and revisions to existing software, and the
installation of replacement software. The Company's Year 2000 plan is intended
to ensure that there are no date-related failures associated with computer
hardware, computer software, business equipment, control systems or its
relationships with business partners. The Company has in place a corporate
project team and is using both internal and external resources for testing and
acceptance of software and hardware. The Company has been aggressively
addressing Year 2000 compliance since 1996 and is on schedule to have the
conversion completed according to plan. Our current estimate continues to be
that substantial compliance will occur in late 1998 and early 1999 - well in
advance of the end of the century.
Based on current information, costs of addressing potential problems are not
expected to have a material adverse impact on the Company's financial position,
results of operations or cash flows in future periods. However, if the Company,
its customers or vendors are unable to resolve such processing issues in a
timely manner, it could result in some financial and operational risk. If the
Company fails to complete those portions of its Year 2000 compliance plan, not
already substantially done, its ability to electronically adjudicate claims
would be negatively impacted. However, the Company has in place manual claims
adjudication systems that would be utilized in such an unlikely event. Although
manual systems would be more labor intensive and less efficient, the incremental
cost incurred would not be material. Accordingly, the Company is devoting the
necessary resources to resolve all significant Year 2000 issues in a timely
manner.
The cost of achieving Year 2000 compliance is estimated to be $2.5 million over
the cost of normal software upgrades and replacements, and will be incurred
through calendar year 1999.
The foregoing discussion contains forward-looking statements together with
related data and projections about the Company's projected financial results and
its future plans and strategies. However, actual results and needs of the
Company may vary materially from forward-looking statements and projections made
from time to time by the Company on the basis of management's then current
expectations. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Forward-Looking Information" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
9
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company's insurance subsidiaries, like other insurance
companies, are currently defendants in lawsuits that involve claims
for punitive, exemplary, or other extracontractual damages, which
are for amounts substantially in excess of the actual damages
sought. Management considers such litigation, regrettably, to be of
the type to which insurance companies are usually and customarily
subjected to in the ordinary course of business and, to date, the
settlement of such claims of this nature have not been material to
the financial position of the Company. In the opinion of management,
based on the currently ascertained facts of the pending litigation
which the Company intends to vigorously defend, the ultimate
resolution of such litigation should not be material to the
financial position of the Company.
Item 5 Other Information
For information concerning how a shareholder may properly bring
business before a meeting of shareholders of the Company and
nominate persons for election as directors to the Company's Board,
reference is made to Item 5. (Other Information) of the Company's
quarterly report on Form 10-Q for the quarterly period ended June
30, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule (for SEC purposes only)
(b) A Form 8K was filed August 11, 1998 including the following
items:
Item 5. Other Events
- By-Laws of American Heritage Life Investment
Corporation, as amended and restated, dated July 30,
1998.
Item 7. Financial Statements and Exhibit
- By-Laws of American Heritage Life Investment
Corporation, as amended and restated, dated July 30,
1998.
10
<PAGE> 12
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(REGISTRANT)
Date November 12, 1998 /s/ Elizabeth A. Mahin
----------------- ----------------------------------------------------
Elizabeth A. Mahin
Senior Vice President and Chief Accounting Officer
(Authorized Officer)
Date November 12, 1998 /s/ John K. Anderson, Jr.
----------------- ----------------------------------------------------
John K. Anderson, Jr.
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN HERITAGE LIFE INVESTMENT CORPORATION FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 988,219
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 38,361
<MORTGAGE> 87,346
<REAL-ESTATE> 519
<TOTAL-INVEST> 1,553,099
<CASH> 21,753
<RECOVER-REINSURE> 12,322
<DEFERRED-ACQUISITION> 234,116
<TOTAL-ASSETS> 2,025,020
<POLICY-LOSSES> 308,218
<UNEARNED-PREMIUMS> 45,550
<POLICY-OTHER> 62,084
<POLICY-HOLDER-FUNDS> 1,074,623
<NOTES-PAYABLE> 55,447
103,500
0
<COMMON> 28,140
<OTHER-SE> 206,213
<TOTAL-LIABILITY-AND-EQUITY> 2,025,020
231,620
<INVESTMENT-INCOME> 82,326
<INVESTMENT-GAINS> 345
<OTHER-INCOME> 1,743
<BENEFITS> 143,836
<UNDERWRITING-AMORTIZATION> 29,357
<UNDERWRITING-OTHER> 92,639
<INCOME-PRETAX> 40,580
<INCOME-TAX> 13,458
<INCOME-CONTINUING> 27,122
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,122
<EPS-PRIMARY> .98
<EPS-DILUTED> .95
<RESERVE-OPEN> 58,484
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
