SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) FEBRUARY 29, 1996,
PREVIOUSLY REPORTED AS NOVEMBER 10, 1995
AS FILED ON MARCH 15, 1996
SUNAMERICA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MARYLAND 1-4618 86-0176061
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1 SUNAMERICA CENTER
LOS ANGELES, CALIFORNIA 90067-6022
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including
area code (310) 772-6000
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Current
Report on Form 8-K, dated and filed March 15, 1996, as set forth
in the pages attached hereto:
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits is amended in its entirety.<PAGE>
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(a) The financial statements of Ford Life Insurance Company
("Ford Life") are included herein as Exhibits 99.1 and 99.2
and include the following:
Audited Financial Statements (Exhibit 99.1)
Report of Independent Accountants
Statement of Income and of Earnings Retained for Use in the
Business for the Years Ended December 31, 1995, 1994 and
1993
Balance Sheet at December 31, 1995 and 1994
Statement of Stockholder's Equity for the Years Ended
December 31, 1995, 1994 and 1993
Statement of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993
Notes to Financial Statements
Unaudited Interim Financial Statements (Exhibit 99.2)
Report of Independent Accountants
Condensed Statement of Income for the Three Months Ended
December 31, 1995 and 1994
Condensed Balance Sheet at December 31, 1995 and 1994
Condensed Statement of Cash Flows for the Three Months
Ended December 31, 1995 and 1994
Footnotes to Condensed Financial Statements
(b) Unaudited Pro Forma Financial Information
The unaudited pro forma condensed balance sheet set forth
herein as Exhibit 99.5 gives effect to the acquisition of
Ford Life as if it had occurred on December 31, 1995, the
date of SunAmerica Inc.'s ("SunAmerica") most recently filed
balance sheet.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(Continued)
-----------
The unaudited pro forma condensed income statement set forth
herein as Exhibit 99.6 gives effect to the acquisition as if
it had been consummated on October 1, 1995, the beginning of
SunAmerica's most recently reported fiscal quarter.
The unaudited pro forma condensed consolidated balance sheet
and the unaudited pro forma condensed consolidated income
statement as of and for the year ended September 30, 1995,
the date of SunAmerica's most recently completed fiscal year
end, have been previously filed as part of a Current Report
on Form 8-K, dated and filed as of December 12, 1995 and
amended on December 14, 1995 and May 7, 1996.
Pro forma adjustments are based upon available information
and certain assumptions that management of SunAmerica
believes are reasonable in the circumstances. The unaudited
pro forma consolidated financial information should be read
in conjunction with the audited consolidated financial
statements and related notes contained in SunAmerica's 1995
Annual Report on Form 10-K, the unaudited consolidated
financial statements and related notes contained in
SunAmerica's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995, and the audited financial statements
and related notes and the unaudited interim financial
statements and related notes pertaining to Ford Life
contained elsewhere in this Current Report on Form 8-K.
The acquisition is accounted for as a purchase in accordance
with generally accepted accounting principles. Under
purchase accounting, the total purchase price is allocated
to the acquired assets and liabilities based on their fair
values. Allocation of the purchase price is subject to
valuations and other studies that are not complete.
Accordingly, the final allocation may be different from the
amounts reflected herein. However, management of SunAmerica
does not believe such differences will be material.
(c) Exhibits
10.1 Stock Purchase Agreement between The American Road
Insurance Company and SunAmerica Inc., dated as of
November 10, 1995, is incorporated herein by
reference to Exhibit 10.1 to the Company's Form 8-K,
filed on December 12, 1995 and amended on December
14, 1995 and May 7, 1996.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(Continued)
-----------
27.1 Financial Data Schedule for Ford Life Insurance
Company (Year Ended December 31, 1995)
27.2 Financial Data Schedule for Ford Life Insurance
Company (Three Months Ended December 31, 1995)
99.1 Audited Financial Statements and Report of Independent
Accountants as of and for the Three Years Ended
December 31, 1995, 1994 and 1993 for Ford Life
Insurance Company
99.2 Unaudited Interim Financial Statements and Report of
Independent Accountants as of and for the Three Months
Ended December 31, 1995 and 1994 for Ford Life
Insurance Company
99.3 Pro Forma Unaudited Condensed Balance Sheet at
September 30, 1995, giving effect to the acquisition
of Ford Life Insurance Company, is incorporated here-
in by reference to Exhibit 99.3 to the Company's Form
8-K, filed on December 12, 1995 and amended on
December 14, 1995 and May 7, 1996
99.4 Pro Forma Unaudited Condensed Income Statement for the
year ended September 30, 1995, giving effect to the
acquisition of Ford Life Insurance Company, is
incorporated herein by reference to Exhibit 99.4 to
the Company's Form 8-K, filed on December 12, 1995 and
amended on December 14, 1995 and May 7, 1996
99.5 Pro Forma Unaudited Condensed Balance Sheet at
December 31, 1995, giving effect to the acquisition of
Ford Life Insurance Company
99.6 Pro Forma Unaudited Condensed Income Statement for the
Three Months Ended December 31, 1995, giving effect to
the acquisition of Ford Life Insurance Company
<PAGE>
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.
SUNAMERICA INC.
Date: May 7, 1996 By: /s/ SCOTT L. ROBINSON
-----------------------------
Scott L. Robinson
Senior Vice President
and Controller
<PAGE>
<PAGE>
LIST OF EXHIBITS FILED
----------------------
Exhibit
Number
- --------
27.1 Financial Data Schedule for Ford Life Insurance Company (Year Ended
December 31, 1995)
27.2 Financial Data Schedule for Ford Life Insurance Company (Three
Months Ended December 31, 1995)
99.1 Audited Financial Statements and Report of Independent Accountants
as of and for the Three Years Ended December 31, 1995, 1994 and
1993 for Ford Life Insurance Company
99.2 Unaudited Interim Financial Statements and Report of Independent
Accountants as of and for the Three Months Ended December 31, 1995
and 1994 for Ford Life Insurance Company
99.5 Pro Forma Unaudited Condensed Balance Sheet at December 31, 1995,
giving effect to the acquisition of Ford Life Insurance Company
99.6 Pro Forma Unaudited Condensed Income Statement for the Three Months
Ended December 31, 1995, giving effect to the acquisition of Ford
Life Insurance Company
<PAGE>
FORD LIFE INSURANCE COMPANY
1995 AUDIT OF FINANCIAL STATEMENTS
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Ford Life Insurance Company:
We have audited the balance sheet of Ford Life Insurance Company at December
31, 1995 and 1994, and the related statements of income and of earnings
retained for use in the business, stockholder's equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Ford Life Insurance Company at
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, Ford Life changed its
method of accounting for investments as of January 1, 1994.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Detroit, Michigan
January 26, 1996
1
<PAGE>
FORD LIFE INSURANCE COMPANY
STATEMENT OF INCOME AND OF EARNINGS RETAINED FOR USE IN THE BUSINESS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenue
Premiums earned $ 38,295 $ 40,526 $ 43,974
Investment and other income 213,727 152,526 152,897
-------- -------- --------
Total revenue 252,022 193,052 196,871
-------- -------- --------
Expenses
Losses incurred 18,087 20,585 25,588
Amortization of deferred acquisition costs 32,845 16,649 50,799
Interest credited on annuities 175,061 115,037 69,982
Interest on short-term borrowings 1,480 4,928 -
Operating expenses 24,101 15,605 16,340
-------- -------- --------
Total expenses 251,574 172,804 162,709
-------- -------- --------
Income before income taxes 448 20,248 34,162
Provision for income taxes 2,050 6,526 13,024
-------- -------- --------
Net income (loss) (1,602) 13,722 21,138
Earnings retained for use in the business
Beginning of year 199,363 185,641 164,503
-------- -------- --------
End of year $197,761 $199,363 $185,641
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
<PAGE>
FORD LIFE INSURANCE COMPANY
BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 171,537 $ 212,195
Investment securities
Available for sale at market 2,976,557 2,376,237
Held to maturity, at amortized cost 2,095 2,102
Investment income due and accrued 46,875 42,834
Reinsurance receivables
Affiliated companies 36,322 38,140
Other 4,372 5,933
Accounts receivable
Affiliated companies 2,841 4,306
Other 722 927
Agents' balances receivable 6,564 7,548
Prepaid reinsurance premiums 92,971 101,042
Deferred income taxes 14,146 68,723
Deferred acquisition costs
Annuity contracts 79,118 172,137
Insurance policies 27,442 29,627
Other 1,719 1,884
----------- -----------
Total assets $ 3,463,281 $ 3,063,635
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Unearned premiums $ 151,310 $ 163,181
Annuity contracts 3,006,003 2,726,576
Unpaid losses 45,111 50,170
Federal taxes payable 9,491 -
Accounts payable
Affiliated companies 5,620 5,595
Other 11,637 4,471
Deferred income and other liabilities 1,460 2,047
----------- -----------
Total liabilities 3,230,632 2,952,040
----------- -----------
STOCKHOLDER'S EQUITY
Capital stock, par value $12.50 a share, 200,000
shares authorized, issued and outstanding 2,500 2,500
Paid-in surplus (contributions by stockholder) 21,859 21,859
Unrealized (loss) gain on investments, net of taxes
of $6,589 in 1995 and $(59,068) in 1994 12,318 (109,587)
Foreign currency translation adjustments (1,789) (2,540)
Earnings retained for use in the business 197,761 199,363
----------- -----------
Total stockholder's equity 232,649 111,595
----------- -----------
Total liabilities and stockholder's equity $ 3,463,281 $ 3,063,635
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
FORD LIFE INSURANCE COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
for the years ended December 31, 1995, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
FOREIGN EARNINGS
UNREALIZED CURRENCY RETAINED FOR TOTAL
CAPITAL PAID-IN GAINS/(LOSSES) TRANSLATION USE IN THE STOCKHOLDER'S
STOCK SURPLUS ON INVESTMENTS ADJUSTMENTS BUSINESS EQUITY
------- -------- -------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993 $ 2,500 $ 10,500 $ 18 $ (595) $ 164,503 $ 176,926
Contribution by stockholder 1,359 1,359
Change in unrealized gains, net of tax 43 43
Change in foreign currency
translation (744) (744)
Net income 21,138 21,138
------- -------- -------- -------- --------- ---------
Balances, December 31, 1993 2,500 11,859 61 (1,339) 185,641 198,722
Contribution by stockholder 10,000 10,000
Change in accounting principle,
adoption of SFAS 115, net of tax 25,200 25,200
Change in foreign currency
translation (1,201) (1,201)
Change in unrealized gains (losses),
net of tax (134,848) (134,848)
Net income 13,722 13,722
------- -------- -------- -------- --------- ---------
Balances, December 31, 1994 2,500 21,859 (109,587) (2,540) 199,363 111,595
Change in unrealized gains (losses),
net of tax 121,905 121,905
Change in foreign currency
translation 751 751
Net income (loss) (1,602) (1,602)
------- -------- -------- -------- --------- ---------
Balances, December 31, 1995 $ 2,500 $ 21,859 $ 12,318 $ (1,789) $ 197,761 $ 232,649
======= ======== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
FORD LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (1,602) $ 13,722 $ 21,138
Adjustments to reconcile net income to
net cash used in operating activities:
Interest credited to annuity contracts 176,089 125,296 77,794
Deferred income taxes (10,798) 4,947 (12,611)
Amortization of discounts on investments (79) (15) (357)
Losses (gains) on sale of investments 10,106 23,184 (44,627)
Changes in
Unearned premiums (11,871) (3,061) (15,813)
Unpaid losses (5,059) (4,315) 4,718
Deferred acquisition costs (7,400) (74,895) (19,813)
Reinsurance receivables, affiliate 1,818 865 (6,534)
Reinsurance receivables, other 1,561 712 306
Prepaid reinsurance premiums 8,071 1,167 6,467
Other assets (1,222) (18,881) (3,938)
Other liabilities 16,097 (30,146) 16,938
----------- ----------- -----------
Net cash provided by operating activities 175,711 38,580 23,668
----------- ----------- -----------
Cash flows from investing activities
Acquisition of investments:
Held-to-maturity - (681) *
Available for sale (2,306,563) (3,231,656) *
----------- ----------- -----------
Total acquisitions of investments (2,306,563) (3,232,337) (3,803,818)
Proceeds from investment sales and maturities:
Sales of available for sale 1,986,332 2,285,526 *
Maturities of available for sale 527 411 *
----------- ----------- -----------
Total proceeds from investment sales and maturities 1,986,859 2,285,937 3,124,884
----------- ----------- -----------
Net cash used in investing activities (319,704) (946,400) (678,934)
----------- ----------- -----------
Cash flows provided by financing activities
Receipts from annuity contracts 267,214 1,105,706 789,863
Payment of annuity benefits (163,879) (102,472) (46,719)
Contribution by stockholder - 10,000 -
----------- ----------- -----------
Net cash provided by financing activities 103,335 1,013,234 743,144
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (40,658) 105,414 87,878
Cash and cash equivalents, beginning of year 212,195 106,781 18,903
----------- ----------- -----------
Cash and cash equivalents, end of year $ 171,537 $ 212,195 $ 106,781
=========== =========== ===========
Supplementary cash flow information
Income taxes paid (refunded) $ 3,317 $ (4,098) $ 32,246
Interest paid 1,840 4,928 -
</TABLE>
*Securities were not separately identified as held-to-maturity or available for
sale in prior years.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
FORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES:
a. BUSINESS: Ford Life Insurance Company ("Ford Life") offers
single premium and flexible premium deferred annuity contracts
(generally without life contingencies) through financial institutions,
general agents and brokers. Ford Life also issues credit life and
credit disability insurance covering purchasers of vehicles financed
by Ford Motor Credit Company ("Ford Credit") and other financial
institutions.
b. AFFILIATES: Ford Life is a wholly owned subsidiary of The
American Road Insurance Company ("TARIC"), which is a wholly owned
indirect subsidiary of Ford Motor Company ("Ford").
c. CASH EQUIVALENTS: Ford Life considers all highly liquid
investments purchased with an original maturity of three months or
less to be cash equivalents.
d. INVESTMENTS: Ford Life adopted Statement of Financial Accounting
Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities," as of January 1, 1994. Under SFAS
115, the Company's investments in equity and debt securities were
divided into two portfolios, available-for-sale and held-to-maturity,
based upon the Company's ability and intent to hold the securities to
maturity. Available-for-sale securities are recorded at fair value
with unrealized gains and losses, net of applicable income taxes,
excluded from income and reported in a separate component of
stockholder's equity. Held-to-maturity securities are recorded at
amortized cost.
For the year ended December 31, 1993, marketable equity securities were
recorded at market value, with unrealized gains and losses, net of
applicable taxes, recorded directly in stockholder's equity.
Realized gains and losses on the sale of investments are included in
investment and other income. The cost of investments sold generally is
determined on a specific security basis for debt securities.
6
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ACCOUNTING POLICIES, CONTINUED:
e. DEFERRED ACQUISITION COSTS: Costs incurred in the acquisition of
annuity contracts, consisting primarily of commissions, are deferred
and amortized over the life of the related contracts using the
interest method. Anticipated returns from the investment of annuity
contract receipts, including any unrealized gains or losses on
available for sale securities, are considered in determining the
amortization of such costs.
Costs of acquiring new credit life and disability business are
deferred and amortized over the terms of the related policies on the
same bases on which premiums are earned.
Deferred acquisition costs for both annuity and credit life and
disability business are reviewed to determine that the unamortized
portion of such costs does not exceed recoverable amounts after
considering anticipated investment income.
f. PREMIUMS: The liability for unearned premiums represents the
amount of premiums applicable to the unexpired terms of the credit
life and disability policies in force. Premiums are earned over the
policy periods based on amounts at risk, primarily using the
sum-of-the-digits method.
g. ANNUITIES: The liability for annuity contracts reflects deposits
received and interest credited, less related withdrawals including
surrender charges. At December 31, 1995 and 1994, the weighted
average interest rate on annuity contracts outstanding was 5.9 and 6.3
percent, respectively. The interest rates offered are guaranteed for
periods of either one or five years. Interest credited to annuity
account balances is recognized as expense; surrender charges are
recognized as a reduction of interest credited to annuitants.
h. UNPAID LOSSES: The liability for unpaid losses includes
provisions for reported insurance losses and an estimate of unreported
losses based on past experience.
i. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of the
Canadian branch are translated at current exchange rates, and the
effects of these translation adjustments are accumulated in a separate
component of stockholder's equity. The change in this account results
from translation adjustments accumulated during the year.
7
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ACCOUNTING POLICIES, CONTINUED:
j. DERIVATIVE FINANCIAL INSTRUMENTS: Ford Life has entered into
agreements to manage exposure to fluctuations in interest rates
related to annuity contracts. Interest rate exposure exists because
the interest rate payable on annuity contracts is reset annually
whereas interest rates on related investments are generally fixed.
Ford Life has interest rate swap agreements with Ford Credit.
The differential paid or received on interest rate swap agreements is
recognized on the accrual basis as an adjustment to interest credited
to annuities. For 1995, a differential of $6.9 million was paid and
for 1994, a differential of $766 thousand was received related to
interest rate swap agreements.
Ford Life also had an option from a third party to enter into an
interest rate swap agreement ("swaption"). The purchase price was
capitalized and amortized to interest credited to annuities over the
life of the swaption, which expired during 1995.
All derivative instruments are classified as "held for purposes
other than trading"; company policy specifically prohibits the use of
derivatives for speculative purposes.
k. ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS: The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
l. FINANCIAL STATEMENT RECLASSIFICATIONS: Certain amounts in prior
year financial statements have been reclassified to conform with the
1995 presentation.
8
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. INVESTMENT AND OTHER INCOME:
Investment and other income is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Interest on debt securities and cash equivalents $ 222,758 $ 172,228 $ 103,515
Dividends on marketable equity securities 5 149 154
Net (loss) gains on sales of investments (10,106) (23,184) 44,624
---------- --------- ---------
Total investment income 212,657 149,193 148,293
Less investment expense 2,535 1,731 1,359
---------- --------- ---------
Net investment income 210,122 147,462 146,934
Other income, primarily ceding fees 3,605 5,064 5,963
---------- --------- ---------
Investment and other income $ 213,727 $ 152,526 $ 152,897
========== ========= =========
</TABLE>
9
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. INVESTMENT SECURITIES:
At December 31, 1995 and 1994, the amortized cost and estimated market
values of investment securities were as follows:
<TABLE>
<CAPTION>
1995
------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
ISSUER COST GAINS LOSSES VALUE
------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Held to maturity:
U. S. government and agencies $ 2,095 $ 173 $ - $ 2,268
----------- ---------- ---------- -----------
Available for sale:
U. S. government and agencies 151,966 3,042 - 155,008
Municipal securities 26,000 1,174 - 27,174
Foreign governments 28,278 534 (13) 28,799
Corporate securities 1,863,549 73,764 (3,658) 1,933,655
Mortgage-backed securities 815,852 18,500 (2,431) 831,921
----------- ---------- ----------- -----------
Total available for sale 2,885,645 97,014 (6,102) 2,976,557
----------- ---------- ----------- -----------
Total investments in securities $ 2,887,740 $ 97,187 $ (6,102) $ 2,978,825
=========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
ISSUER COST GAINS LOSSES VALUE
------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Held to maturity:
U. S. government and agencies $ 2,102 $ 9 $ (55) $ 2,056
----------- --------- ----------- ----------
Available for sale:
U. S. government and agencies 78,369 15 (4,928) 73,456
Municipal securities 42,580 - (3,696) 38,884
Foreign governments 93,151 80 (9,534) 83,697
Corporate securities 1,642,860 383 (127,107) 1,516,136
Mortgage-backed securities 717,568 255 (54,656) 663,167
Equity securities 938 - (41) 897
----------- ----- ---------- -----------
Total available for sale 2,575,466 733 (199,962) 2,376,237
----------- ----- ---------- -----------
Total investments in securities $ 2,577,568 $ 742 $ (200,017) $ 2,378,293
=========== ===== ========== ===========
</TABLE>
Proceeds from sales of investments in available for sale securities
during 1995 and 1994, and securities held for investment in 1993 were $1,986.3
million, $2,285.5 million and $3,124.3 million, respectively. Gross gains of
$15.3, $9.2 and $51.7 million and gross losses of $25.4, $32.4 and $7.1 were
realized on those sales in 1995, 1994 and 1993, respectively.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. INVESTMENT SECURITIES, CONTINUED:
The amortized cost and estimated market value of investments in debt
securities at December 31, 1995, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
HELD TO MATURITY AVAILABLE FOR SALE
--------------------- -----------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
---------- --------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Due in one year or less - - $ 19,677 $ 20,025
Due after one year through five years $ 1,613 $ 1,684 1,162,790 1,209,700
Due after five years through ten years 186 209 496,753 521,108
Due after ten years 296 375 390,573 393,803
Mortgage-backed securities - - 815,852 831,921
------- ------- ---------- ----------
$ 2,095 $ 2,268 $2,885,645 $2,976,557
======= ======= ========== ==========
</TABLE>
4. SHORT-TERM BORROWINGS:
During 1995 and 1994, as part of its investment strategy, Ford Life entered
into repurchase agreements and dollar roll transactions to increase its
return on investments and improve liquidity. These transactions are
accounted for as collateralized borrowings. The maximum amount of
outstanding agreements at any month-end during 1995 and 1994 was $66.5 and
$95.9 million, respectively, and the average amount of outstanding
agreements was $35.8 and $56.6 million during 1995 and 1994, respectively.
There were no outstanding agreements as of December 31, 1995 or 1994.
11
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. DEFERRED ACQUISITION COSTS:
Following is an analysis of changes in deferred acquisition costs:
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- --------
(in thousands)
<S> <C> <C> <C>
Balance, beginning of year $ 201,764 $ 96,269 $ 75,825
Additions
Commissions paid 32,638 82,051 62,235
Premium taxes (32) 977 1,029
Interest bonus 7,639 8,516 7,979
--------- --------- --------
Net additions 40,245 91,544 71,243
Adjustment related to unrealized
(gains) losses on investments (102,604) 30,600 -
Amortization of acquisition costs (32,845) (16,649) (50,799)
--------- --------- --------
Balance, end of year $ 106,560 $ 201,764 $ 96,269
========= ========= ========
</TABLE>
6. REINSURANCE:
Ford Life cedes most of its credit disability insurance business, as
written, to American Road for a ceding fee. In addition, Ford Life cedes
and assumes credit life and credit disability insurance business to and
from other affiliates. Reinsurance ceding fees received and ceding
commissions paid are deferred and earned or amortized over the terms of the
related policies on the same bases on which the related premiums are
earned. Amounts deductible from losses incurred in connection with
insurance ceded to affiliated and unaffiliated companies were (in
millions): 1995 - $31.0 and $3.9; 1994 - $33.0 and $7.5; 1993 - $43.8
and $10.9. Amounts added to losses incurred relating to reinsurance
assumed from certain of its affiliates were (in millions): 1995 - $1.2;
1994 - $2.6; 1993 - $4.8.
12
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. REINSURANCE, CONTINUED:
The effect of reinsurance on premiums written and earned is as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
--------------- --------------- ---------------
WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Direct $ 86.6 $ 96.9 $100.7 $102.5 $ 99.2 $109.6
Assumed from American Road and affiliates 2.2 3.9 4.4 6.1 4.3 9.3
Ceded to
American Road and affiliates (43.4) (49.3) (49.5) (49.9) (48.5) (52.7)
Nonaffiliates (11.1) (13.2) (17.4) (18.2) (20.0) (22.2)
------ ------ ------ ------ ------ ------
Net premiums $ 34.3 $ 38.3 $ 38.2 $ 40.5 $ 35.0 $ 44.0
====== ====== ====== ====== ====== ======
</TABLE>
In 1993, Ford Life assumed all insurance in force and other outstanding
liabilities from Vista Life Insurance Company of Texas, an affiliate. Ford
Life received assets of $8.1 million, an amount equal to the liabilities
assumed, in consideration for this assumption. Ford Life also guaranteed
all of the outstanding liabilities of Vista Life Insurance Company of Texas
as of April 1, 1993. Concurrent with this reinsurance transaction, Ford
Life received a $1.4 million capital contribution from American Road.
Reinsurance contracts do not relieve Ford Life from its obligations to
policyholders. Failure of reinsurers to honor their obligations could
result in losses to Ford Life. Therefore, Ford Life evaluates the
financial condition of its reinsurers and monitors concentrations of credit
risk arising from similar geographic regions, activities or economic
characteristics of the reinsurers to minimize its exposure to significant
losses from reinsurance insolvencies. Ford Life holds collateral that
relates to balances recorded as reinsurance receivables and prepaid
reinsurance premiums, for nonaffiliates, in the form of trust balances,
custodial balances and letters of credit approximating $11.7 million at
December 31, 1995.
13
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. UNPAID LOSSES:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1 $ 50,170 $ 54,485 $ 48,636
Less reinsurance receivables 44,073 45,650 39,422
-------- -------- --------
6,097 8,835 9,214
-------- -------- --------
Incurred related to:
Current year 19,542 22,812 27,245
Prior years (1,455) (2,227) (1,657)
-------- -------- --------
Total incurred 18,087 20,585 25,588
-------- -------- --------
Paid related to:
Current year 15,160 17,447 19,619
Prior years 4,607 5,876 6,348
-------- -------- --------
Total paid 19,767 23,323 25,967
-------- -------- --------
Net balance at December 31 4,417 6,097 8,835
Plus reinsurance receivables 40,694 44,073 45,650
-------- -------- --------
Balance at December 31 $ 45,111 $ 50,170 $ 54,485
======== ======== ========
</TABLE>
The liability for unpaid claims and claim adjustment expenses is
calculated using factors, such as average claim amount, morbidity tables and
IBNR factors, which are applied to statistical amounts of premium in force,
policies in force and open claim counts. As a result of decreases in new
business production over the last several years, the in-force premium and
policy counts, as well as paid losses, have been on the decline.
14
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. INCOME TAXES:
Ford Life joins with American Road and Ford Holdings in filing consolidated
United States income tax returns. Pursuant to an agreement with Ford
Holdings, income tax liabilities or credits are allocated to Ford Life in
accordance with Ford Life's contribution to Ford Holdings' consolidated tax
position.
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ------- --------
(in thousands)
<S> <C> <C> <C>
Currently (refundable) payable
Federal $ 12,058 $ 757 $ 24,901
Foreign 110 618 664
State 680 204 70
-------- ------- --------
Total currently (refundable) payable 12,848 1,579 25,635
Deferred, primarily federal (10,798) 4,947 (12,611)
-------- ------- --------
Provision for income taxes $ 2,050 $ 6,526 $ 13,024
======== ======= ========
</TABLE>
Deferred income taxes, on a SFAS No. 109 basis, reflect the estimated
future tax effect of temporary differences between the amount of assets and
liabilities for financial reporting purposes and such amounts as measured by
tax laws and regulations. The components of deferred income tax assets and
liabilities as of December 31 were are as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- ----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
---------- ----------- --------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Unrealized gain/loss on securities - $ 6,589 $ 59,068 -
Unearned premium reserves $ 8,705 - 10,654 -
Deferred acquisition costs - 49,959 - $ 47,228
Annuity reserve 64,186 - 47,220 -
All other 844 3,041 711 1,702
-------- -------- --------- --------
Total deferred taxes $ 73,735 $ 59,589 $ 117,653 $ 48,930
======== ======== ========= ========
</TABLE>
The effective tax rate was 458 percent in 1995, 32 percent in 1994 and
38 percent in 1993. Differences between the effective tax rates and the U. S.
statutory tax rate principally were the result of investment income not subject
to tax or subject to tax at reduced rates, the impact of foreign and state
income taxes and the revision of estimated income tax expense for prior years.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. FINANCIAL INSTRUMENTS:
The estimated fair value of financial instruments held by Ford Life at
December 31, and the valuation techniques used to estimate the fair value
are described below. In accordance with SFAS No. 107, insurance contracts
have been excluded from this analysis.
<TABLE>
<CAPTION>
1995 1994
--------------------- --------------------
ESTIMATED ESTIMATED
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
---------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 171,537 $ 171,537 $ 212,195 $ 212,195
Investment securities 2,978,652 2,978,825 2,378,339 2,378,293
Accrued interest and dividends 46,875 46,875 42,834 42,834
LIABILITIES
Accounts payable 26,748 26,748 10,066 10,066
DERIVATIVE INSTRUMENTS
Interest rate instruments
Swap contracts 55 (40,386) 83 3,527
Swaption - - 1,844 1,844
</TABLE>
a. CASH AND CASH EQUIVALENTS: The book value approximates fair value
because of the short maturity of these instruments.
b. INVESTMENT SECURITIES: The fair value of substantially all
securities was estimated based on quoted market prices for those
securities. For securities for which there were no quoted
market prices, the estimate of fair value was based on similar
types of securities that are traded in the market.
c. ACCRUED INTEREST AND DIVIDENDS: The book value approximates fair
value because accrued amounts are expected to be received within
one year.
16
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. FINANCIAL INSTRUMENTS, CONTINUED:
d. ACCOUNTS PAYABLE: The book value approximates fair value because
amounts are expected to be paid within one year.
e. DERIVATIVE INSTRUMENTS: The estimated fair value of interest
rate swap and swaption contracts are based on fees currently charged
to enter into similar agreements, taking into account the remaining
terms of the agreements and counterparties' credit standing.
Information with respect to Ford Life's interest rate swap and
swaption contracts is summarized as follows:
<TABLE>
<CAPTION>
NOTIONAL OR
CONTRACT
AMOUNT
-----------
1995 1994 COUNTERPARTY
----- ------ ------------
(in millions)
<S> <C> <C> <C>
Interest rate swaps
Matures 1997, receive fixed-pay floating $ 5 - Ford Credit
Matures 1998, receive fixed-pay floating 10 - Ford Credit
Matures 1998, receive fixed-pay floating 20 - Ford Credit
Matures 1999, receive fixed-pay floating 10 $ 10 Ford Credit
Matures 1999, receive floating-pay fixed 500 500 Ford Credit
Matures 1999, receive fixed-pay floating 20 - Ford Credit
Matures 2000, receive fixed-pay floating 10 10 Ford Credit
Matures 2002, receive fixed-pay floating 10 10 Ford Credit
Swaption, exercisable 1995, matured 1995, receive
floating-pay fixed - 1,870 Third party
</TABLE>
10. TRANSACTIONS WITH AFFILIATED COMPANIES:
Ford and certain subsidiaries provide Ford Life with technical and
administrative advice and services for which Ford Life paid the following
(in thousands): 1995 - $8,129; 1994 - $5,857; 1993 - $5,960.
17
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. TRANSACTIONS WITH AFFILIATED COMPANIES, CONTINUED:
All of the liabilities of Ford Life are guaranteed by TARIC, its parent.
All related credit risk is guaranteed by Ford Credit.
See other Notes for additional information regarding transactions with
affiliated companies.
11. DIVIDEND RESTRICTION:
Payment of dividends by Ford Life to a company within its holding company
system is regulated by the State of Michigan. Under Michigan regulation
all dividends must be reported to the Michigan Insurance Commissioner prior
to payment.
12. LITIGATION AND CLAIMS:
Various legal actions, governmental proceedings and other claims are
pending or may be instituted or asserted in the future against Ford Life.
Some of these matters involve or may involve class actions, compensatory,
punitive, or antitrust or other treble damage claims in very large amounts,
or other requested relief.
Litigation is subject to many uncertainties, the outcome of individual
litigated matters is not predictable with assurance, and it is reasonable
possible that some of the foregoing matters could be decided unfavorable to
Ford Life. Although the amount of liability at December 31, 1995 with
respect to actions, governmental proceedings and claims cannot be
ascertained, Ford Life believes that any resulting liability should not
materially affect the financial statements of Ford Life at December 31,
1995.
13. STATUTORY NET INCOME AND STOCKHOLDER'S EQUITY:
Generally accepted accounting principles differ in certain respects from
statutory accounting practices prescribed or permitted by insurance
regulatory authorities. Statutory net income (loss) was (in thousands):
1995 - $14,444; 1994 - ($17,145); 1993 - $11,887. Statutory
stockholder's equity was (in thousands) $113,443 and $96,256 at December
31, 1995 and 1994, respectively.
Ford Life, domiciled in Michigan, prepares its statutory financial
statements in accordance with accounting practices prescribed or permitted
by the Michigan Insurance Bureau. Prescribed statutory accounting
practices include a variety of publications of the National Association of
Insurance Commissioners ("NAIC"), as well as state laws, regulations and
general administrative rules.
18
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
14. SUBSEQUENT EVENT:
On February 29, 1996, TARIC sold all of the outstanding stock of the
Company to SunAmerica Inc. ("Sun") for cash of $172.5 million. Prior to
February 29, 1996, all of the Company's credit life and disability business
was ceded to affiliates. The following table provides information about
the credit life and disability business at December 31, 1995 that was ceded
to affiliates.
<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(in thousands)
<S> <C>
Cash and investments $ 26,069
Deferred acquisition costs 27,442
Other assets 145,080
Unearned premiums, net of reinsurance 151,310
Loss reserves, net of reinsurance 45,111
Other liabilities 16,306
Total revenues 45,239
Total expenses 48,229
</TABLE>
19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Ford Life Insurance Company:
We have reviewed the condensed statements of income and cash flows for the
three-month periods ended December 31, 1995 and 1994. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet at December 31, 1995 and 1994 and the related
statements of income and of earnings retained for use in the business and cash
flows for the years then ended (not presented herein); and in our reports dated
January 26, 1996 and January 27, 1995, we expressed unqualified opinions on
those financial statements. In our opinion, the information set forth in the
accompanying condensed balance sheet at December 31, 1995 and 1994 is fairly
stated in all material respects in relation to the financial statements from
which it has been derived.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 21, 1996
<PAGE>
<PAGE>
FORD LIFE INSURANCE COMPANY
CONDENSED STATEMENT OF INCOME
for the periods ended December 31, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDED ENDED
DEC 31, DEC 31,
1995 1994
------ -------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Premiums earned $ 9,214 $ 10,122
Interest income 57,102 51,795
Net loss on sales of investments (380) (14,568)
Other income - 6
------- -------
Total revenues 65,936 47,355
------- -------
Expenses
Losses incurred 4,440 4,441
Amortization of deferred
acquisition costs 5,522 362
Interest credited on annuities 44,733 34,862
Other expenses 7,644 5,825
------- -------
Total expenses 62,339 45,490
------- -------
Income before income taxes 3,597 1,865
Provision (benefit) for
income taxes 1,393 (228)
------- -------
Net income $ 2,204 $ 2,093
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
FORD LIFE INSURANCE COMPANY
CONDENSED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
DEC 31, DEC 31,
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 171,537 $ 212,195
Investment securities
Available for sale, at market 2,976,557 2,376,237
Held to maturity, at amortized cost 2,095 2,102
Investment income due and accrued 46,875 42,834
Reinsurance balances and other assets 145,511 159,780
Deferred income taxes 14,146 68,723
Deferred acquisition costs 106,560 201,764
---------- ----------
Total assets $3,463,281 $3,063,635
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Unearned premiums $ 151,310 $ 163,181
Annuity contracts 3,006,003 2,726,576
Unpaid losses 45,111 50,170
Accounts payable and other liabilities 28,208 12,113
---------- ----------
Total liabilities 3,230,632 2,952,040
---------- ----------
Stockholder's equity
Capital stock, par value $12.50 a share,
200,000 shares authorized, issued and
outstanding 2,500 2,500
Paid-in surplus (contribution by
stockholder) 21,859 21,859
Unrealized gain (loss) on investments,
net of taxes 12,318 (109,587)
Foreign currency translation adjustments (1,789) (2,540)
Earnings retained for use in the business 197,761 199,363
---------- ----------
Total stockholder's equity 232,649 111,595
---------- ----------
Total liabilities and stockholder's
equity $3,463,281 $3,063,635
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
FORD LIFE INSURANCE COMPANY
CONDENSED STATEMENT OF CASH FLOWS
for the periods ended December 31, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDED DEC ENDED DEC
31, 1995 31, 1994
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Cash flows from operating activities
before loss on sale of investments
in securities $ 30,056 $(13,173)
Loss on sale of investments in securities 380 14,568
-------- --------
Net cash provided by operating
activities 30,436 1,395
-------- --------
Cash flows from investing activities
Acquisition of investments, available
for sale (64,572) (825,390)
Proceeds from investments sales and
maturities, available for sale 129,945 625,040
-------- --------
Net cash provided by (used in)
investing activities 65,373 (200,350)
-------- --------
Cash flows from financing activities
Receipts from annuity contracts 11,902 280,902
Payment of annuity benefits (48,251) (33,978)
Capital contribution - 10,000
-------- --------
Net cash (used in) provided by
financing activities (36,349) 256,924
-------- --------
Net increase in cash and cash equivalents 59,460 57,969
Cash and cash equivalents, September 30 112,077 154,226
-------- --------
Cash and cash equivalents, December 31 $171,537 $212,195
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
FORD LIFE INSURANCE COMPANY
FOOTNOTES TO CONDENSED FINANCIAL STATEMENTS
1. Ford Life Insurance Company ("FLIC") is a wholly owned subsidiary of The
American Road Insurance Company ("TARIC"). TARIC was a wholly owned
indirect subsidiary of Ford Motor Company.
2. The financial data presented herein are unaudited, but in the opinion of
management reflect all adjustments necessary for fair presentation of
such information.
3. The condensed balance sheet at December 31, 1995 and 1994 was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
4. On February 29, 1996, TARIC sold FLIC to SunAmerica Inc. ("Sun") for cash
of $172.5 million. Prior to closing, all of FLIC's lines of business,
except for annuities, were ceded (reinsured) with other subsidiaries of
TARIC. As of December 31, 1995, FLIC's balance sheet and income statement
reflect the following assets, liabilities, equity, revenues and expenses
related to credit life and disability business which were ceded subsequent
to year end:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(000s omitted)
<S> <C>
Total assets $ 198,591
Total liabilities 212,727
Total revenues for
the three months
ended December 31,
1995 10,012
Total expenses for
the three months
ended December 31,
1995 11,282
</TABLE>
<TABLE>
SUNAMERICA INC.
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS - UNAUDITED)
<CAPTION>
Historical financial
information as reported Pro forma adjustments
-------------------------- -----------------------------
Elimination of Purchase
SunAmerica Ford Life Ford Life's credit accounting Pro forma
At 12/31/95 At 12/31/95 life business adjustments combined
---------- ---------- ------------- ----------- ----------
<C>
<S>
Assets
Investments $11,587,108 $ 3,150,189 $ (26,069) $ (172,500) (1) $14,538,728
Variable annuity assets 5,454,132 - - - 5,454,132
Deferred acquisition costs 532,941 106,560 (27,442) 9,104 (2) 621,163
Other assets 270,172 192,386 (145,080) - 317,478
----------- ----------- ------------- ---------- -----------
Total assets $17,844,353 $ 3,449,135 $ (198,591) $ (163,396) $20,931,501
=========== =========== ============= ========== ===========
Liabilities and shareholders' equity
Reserves for fixed annuity
contracts $ 5,486,957 $ 3,006,003 $ - $ 69,000 (3) $ 8,561,960
Reserves for guaranteed
investment contracts 3,683,168 - - - 3,683,168
Trust deposits 427,788 - - - 427,788
Unearned premiums - 151,310 (151,310) - -
Other liabilities 281,652 73,319 (59,743) 72,457 (4) 367,685
Variable annuity liabilities 5,454,132 - - - 5,454,132
Long-term notes and debentures 539,835 - - - 539,835
Deferred income taxes 167,188 (14,146) (1,674) (58,068) (5) 93,300
Preferred securities of
grantor trusts 237,631 - - - 237,631
Shareholders' equity 1,566,002 232,649 14,136 (246,785) (6) 1,566,002
------------ ------------ -------------- ---------- -----------
Total liabilities and
shareholders' equity $ 17,844,353 $ 3,449,135 $ (198,591) $ (163,396) $20,931,501
============ ============ ============== ========== ===========
Footnotes to the Pro Forma Condensed Balance Sheet appear on the following page.
<PAGE>
SUNAMERICA INC.
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS - UNAUDITED)
(CONTINUED)
Note (1) - To record the contractual purchase price.
Note (2) - To adjust deferred acquisition costs to $88,222 of excess purchase price, computed as follows:
Ford Life's equity at December 31, 1995, after cession of credit life business $ 246,785
Write off Ford Life's deferred acquisition costs, net of related deferred taxes (51,427)
Eliminate deferred tax liability, related to book/tax difference on investments,
due to election to use Section 338(h)(10) of the Internal Revenue Code 31,680
Adjust reserves for fixed annuity contracts to estimated market value, net of tax (44,850)
Record acquisition taxes and other costs, net of tax (67,032)
Record deferred taxes on excess purchase price (30,878)
-------------
Purchase accounting adjusted equity 84,278
Purchase price 172,500
-------------
Excess purchase price $ 88,222
=============
Note (3) To adjust reserves for fixed annuity contracts to estimated market value.
Note (4) - To record $56,957 of Federal taxes payable resulting from the election to use Section 338(h)(10)
of the Internal Revenue Code and $15,500 of other acquisition costs.
Note (5) - To adjust net deferred tax asset, at 35%, as follows:
Tax effect of adjustment made to deferred acquisition costs $ (3,187)
Elimination of tax effect of book/tax difference on investments 31,680
Tax effect of market value adjustment of reserves for fixed annuity contracts 24,150
Tax effect of liability for acquisition and conversion costs 5,425
-------------
Adjustment to net deferred tax asset $ 58,068
=============
Note (6) - To eliminate Ford Life's adjusted equity, after cession of credit life business.
</TABLE>
<TABLE>
SUNAMERICA INC.
PRO FORMA CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS - UNAUDITED)
<CAPTION>
Historical financial
information as reported Pro forma adjustments
-------------------------------- ----------------------------------
SunAmerica Ford Life Elimination of
three months three months Ford Life's credit Other Pro Forma
ended 12/31/95 ended 12/31/95 life business adjustments combined
-------------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income $ 253,990 $ 57,102 $ (1,212) $ (2,700) (1) $ 307,180
Interest expense (151,864) (44,733) - - (196,597)
-------------- ------------- -------------- ----------- -----------
Net investment income 102,126 12,369 (1,212) (2,700) 110,583
Net realized investment gains
(losses) 1,404 (380) 837 - 1,861
Fee income 49,549 - - - 49,549
Premiums earned - 9,214 (9,214) - -
Losses incurred - (4,440) 4,440 - -
General and administrative
expenses (44,098) (7,644) 3,066 - (48,676)
Amortization of deferred
acquisition costs (19,002) (5,522) 3,425 1,597 (2) (19,502)
Other income, net 2,607 - (422) - 2,185
------------- ------------- --------------- ----------- -----------
Pretax income 92,586 3,597 920 (1,103) 96,000
Income tax (expense) benefit (27,800) (1,393) 350 393 (3) (28,450)
------------- ------------- --------------- ----------- -----------
Net income $ 64,786 $ 2,204 $ 1,270 $ (710) $ 67,550
============= ============= =============== =========== ===========
Net income per share $ 0.94 $ 0.98
============= ===========
Operating net income
per share (4) $ 0.93 $ 0.97
============= ===========
Footnotes to the Pro Forma Condensed Income Statement appear on the following page.
<PAGE>
SUNAMERICA INC.
PRO FORMA CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PERCENTAGES)
(CONTINUED)
Note (1) - To reflect lost interest income on the $172,500 purchase price at SunAmerica's average short-term
portfolio yield of 6-1/4%.
Note (2) - To eliminate Ford Life's recorded amortization and to reflect pro forma amortization of $500
based on the deferred acquisition cost arising from this transaction, Ford Life's realized gross
profits for the three months ended December 31, 1995 after elimination of the credit life business,
and SunAmerica's projection of estimated future gross profits for Ford Life.
Note (3) - Related tax effects which approximate the statutory rate of 35%.
Note (4) - Operating net income per share excludes after-tax net realized investment gains and losses, and represents
a common performance measure used by financial analysts.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 2,976,557
<DEBT-CARRYING-VALUE> 2,095
<DEBT-MARKET-VALUE> 2,268
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,978,652
<CASH> 171,537
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 106,560
<TOTAL-ASSETS> 3,463,281
<POLICY-LOSSES> 3,051,114
<UNEARNED-PREMIUMS> 151,310
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500
<OTHER-SE> 230,149
<TOTAL-LIABILITY-AND-EQUITY> 3,463,281
38,295
<INVESTMENT-INCOME> 210,122
<INVESTMENT-GAINS> (10,106)
<OTHER-INCOME> 3,605
<BENEFITS> 193,148
<UNDERWRITING-AMORTIZATION> 32,845
<UNDERWRITING-OTHER> 24,101
<INCOME-PRETAX> 448
<INCOME-TAX> 2,050
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,602)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 50,170
<PROVISION-CURRENT> 19,542
<PROVISION-PRIOR> (1,455)
<PAYMENTS-CURRENT> 15,160
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