<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIES EVENT REPORTED) NOVEMBER 10, 1998
SUNAMERICA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MARYLAND 1-4618 86-0176061
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
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
<PAGE> 2
Item 5. Other Events
------------
The Registrant has released earnings information for fiscal
year ended September 30, 1998.
See the attached press release dated November 10, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
---------------------------------------------------------
(c) Exhibits
Exhibit (99) Press release dated November 10, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and 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: November 10, 1998 By: /s/ Susan L. Harris
-------------------
Susan L. Harris
Senior Vice President
and Secretary
<PAGE> 1
EXHIBIT 99
[SUNAMERICA LETTERHEAD]
Karel Carnohan
Vice President, Investor Relations
(310) 772-6535
Brent Zimmerman
Director, Investor Relations
(310) 772-6534
FOR IMMEDIATE RELEASE
SUNAMERICA'S FISCAL 1998
OPERATING EARNINGS UP 29% AT $2.47 PER SHARE;
Total Sales Increase 60%
LOS ANGELES - November 10, 1998 -- SunAmerica Inc. (NYSE:SAI) today reported
operating earnings for its fiscal year ended September 30, 1998 of $543.4
million or $2.47 per share, exceeding the analyst consensus estimate as
published by FirstCall. This was a 29% increase on a per-share basis from $398.0
million or $1.91 per share in fiscal 1997. All earnings per share amounts were
calculated on a diluted basis. Operating earnings, which exclude net realized
investment gains or losses, are a commonly used earnings measure in the
insurance industry and the measure most analysts use in their published earnings
estimates. Net income for the year totaled $516.3 million or $2.34 per share, up
29% on a per-share basis compared with $379.1 million or $1.81 per share in
fiscal 1997. The company's return on average equity remained strong at 19.9% for
the year versus 21.2% in fiscal 1997.
For the fourth quarter of fiscal 1998, the company reported operating earnings
of $148.3 million or $0.68 per share, a 28% increase on a per-share basis from
the $116.4 million or $0.53 per share in last year's fourth quarter and higher
than the First Call consensus estimate. Net income for the fourth quarter was
$113.9 million or $0.52 per share compared with $117.5 million or $0.54 per
share in the 1997 fourth quarter. Reflecting its conservative balance sheet
philosophy, the company recorded net realized losses of $52.9 million in the
fourth quarter of 1998, posting increased impairment reserves for various bonds
and other assets.
<PAGE> 2
"1998 was yet another year of outstanding achievements and record growth," said
Eli Broad, chairman and chief executive officer. "Sales reached record levels,
asset growth was strong, and we continued to capitalize on attractive
consolidation opportunities within the industry."
SunAmerica's total sales rose to a record $8.5 billion in fiscal 1998, up 60%
over the prior year. Total annuity sales for fiscal 1998 reached a record $3.7
billion, up 32% over last year, with variable annuity product sales rising 40%
to $3.5 billion. Fixed annuity product sales were $208 million in 1998 versus
$324 million in the prior year, reflecting a general decrease in demand for
long-term fixed-rate products.
For the fourth quarter of fiscal 1998, total sales were a record $2.3
billion, up 58% over last year. Total annuity sales reached $1 billion for the
second consecutive quarter, rising 32% over 1997 fourth-quarter annuity sales of
$763 million. Demand for SunAmerica's variable annuity products remained strong
in the fourth quarter of fiscal 1998, as sales rose 48% to $973 million, as
compared to $656 million in the 1997 fourth quarter. Fixed annuity product sales
were $36 million in the 1998 fourth quarter, versus $107 million in last year's
comparable quarter. The fixed component of variable annuity product sales was
$491 million in the fourth quarter of 1998, versus $234 million in last year's
fourth quarter, indicating continued strong demand for dollar- cost-averaging
features designed to mitigate the impact of investing in a volatile equity
market. Highlighting the flexibility of the variable annuity and the advantages
of dollar-cost-averaging, investors moved a net $395 million from the fixed
accounts of SunAmerica's variable annuity products into variable accounts during
the current quarter.
SunAmerica's flagship variable annuity, Polaris/Polaris II, was the nation's
number-one selling individual, multi-manager variable annuity in the first nine
months of calendar 1998. According to preliminary numbers from the Variable
Annuity Research and Data Service (VARDS), Polaris ranked 5th among all U.S.
variable annuities, pushing SunAmerica's nine-month variable annuity sales
growth to 47%, versus industry growth of about 18%. The company increased the
attractiveness of Polaris II during the year with several enhancements,
including a "Dogs" of Wall Street fund option, a six-month dollar-cost-averaging
account and a choice of death benefits.
<PAGE> 3
"Long-term, as the demographics of the aging baby boomer generation fuel demand,
sales of variable annuities should continue to increase," said Jana Waring
Greer, president, SunAmerica Retirement Markets. "However, in recent weeks,
sales of variable annuities have slowed as investors paused to reevaluate their
investment decisions in light of volatile markets. At SunAmerica, we continue to
believe that fluctuating market conditions increase the value of financial
planning services and make the flexibility and security of variable annuities
even more attractive. Our strong presence in financial planning distribution
channels and the strong performance of Polaris gives us an advantage in these
markets."
The company's mutual fund sales continued to benefit from strong demand for the
Style Select Series, as well as its recently introduced "Dogs" of Wall Street
and "Focus" funds. Fund sales rose 60% in the 1998 fourth quarter to $252
million, as compared to $158 million in last year's quarter. For the full year,
mutual fund sales increased 88% to $854 million, up from $455 million in fiscal
1997. Assets under management at the end of fiscal 1998 were $3.0 billion, up
16% from a year ago. In an ongoing effort to provide cutting-edge products, the
company was recently the first to offer the security of a minimum guaranteed
return of principal plus interest to the beneficiaries of the investor who buys
a SunAmerica mutual fund.
Sales of the company's institutional products, guaranteed investment contracts
(GICs), nearly doubled in the 1998 fourth quarter to more than $1 billion, up
96% from $525 million in the prior-year quarter. For the full year, GIC sales
rose 93% to $4 billion, and GIC reserves at the end of the fiscal year totaled
$8.4 billion, up 51% from a year earlier. This growth reflects the company's
ongoing efforts to expand its international GIC sales and increased marketing of
its "AAA"-rated products. The international GIC sales, which are
non-surrenderable contracts, have lengthened the overall maturity and duration
of the company's GIC business.
Part of the company's growth strategy is to increase its share of existing
retirement savings assets by acquiring select businesses. The company will soon
add another $5 billion of annuity and life insurance reserves with the
acquisition of MBL Life, expected to be completed by the end of the calendar
year. During this same period, it continued to expand its distribution network
by acquiring four new broker-dealers with more than 3,500 representatives. Now
with a total of 9,600 representatives, the SunAmerica Financial Network
represents the fifth-largest retail securities sales force in the nation. To
support future sales growth, the company has also strengthened its wholesaling
and marketing organizations and fortified its commitment to increase awareness
of the SunAmerica brand by reinvigorating its highly successful national
advertising campaign.
<PAGE> 4
"Our solid sales growth this quarter is evidence that the demand for
top-performing retirement savings and investment products has remained strong,"
Broad said. "SunAmerica is well-positioned in the U.S. retirement savings
market, with a powerful distribution network and an increasingly recognized
brand name - crucial elements in a highly competitive marketplace. We also
recognize the significant opportunities that exist in international retirement
savings markets, and we are very excited at the prospect of expanding our
franchise around the globe as part of American International Group."
SunAmerica's fee income rose to $125.5 million in the current quarter, up 36%
over the 1997 fourth quarter, primarily reflecting the company's strength in the
variable annuity market and the growth of the SunAmerica Financial Network.
Average variable annuity reserves in the quarter were up 32% over last year's
comparable quarter, helping to boost variable annuity fees by 35% to $56.4
million in the current quarter. Net retained commissions increased 71% to $31.4
million in the 1998 fourth quarter, versus the comparable 1997 quarter, and
asset management fees rose 15% to $7.8 million.
The company's net investment income rose 13% to $224.1 million in the fourth
quarter of 1998 from $197.9 million in the 1997 fourth quarter, reflecting an
increase in average invested assets due to strong sales and a growing capital
base. Average invested assets totaled $26.2 billion in the 1998 fourth quarter,
up 7% over the $24.4 billion reported for the same period last year. The
company's spread between the yield on its average invested assets and the rate
paid on its average interest-bearing liabilities (the "spread difference") was
2.97% in 1998's fourth quarter, up slightly from the 2.94% reported in both the
prior-year fourth quarter and the 1998 third quarter. For the full year, net
investment income rose 24% and the spread difference was 2.93%, as compared to
2.95% in fiscal 1997. The yield on partnership investments in fiscal 1998
remained strong at 23.4%, up slightly from 21.0% in the prior year. This
portfolio includes more than 650 investments with an average size of about $2.5
million, including investments in affordable housing, real estate and a varied
group of privately managed partnerships. Credit quality remained excellent with
non-performing assets at 0.2% of total invested assets at fiscal year end, which
is well below industry averages.
<PAGE> 5
SunAmerica Inc. is a diversified financial services company specializing in
retirement savings and investment products and services. The company earns fees
or spread income on approximately $110 billion of assets, including $26.1
billion of investments and $11.4 billion of variable annuity assets on its
balance sheet at September 30, 1998; $3 billion managed in mutual funds and
private accounts; $13 billion under custody in retirement trust accounts; and an
estimated $56 billion of nonproprietary and advisory assets in the SunAmerica
Financial Network.
To obtain investor materials, including the company's annual and quarterly
shareholder reports, please call SunAmerica's investor relations department at
(310) 772-6235, or send e-mail requests to [email protected]. To learn
more about the SunAmerica companies, please visit our Web site at
www.sunamerica.com.
SunAmerica's variable annuities and mutual funds are offered by prospectus only.
The prospectus includes detailed information, including charges and fees.
Investors should read the prospectus carefully before investing.
(Tables attached)
<PAGE> 6
SUNAMERICA INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands - unaudited)
<TABLE>
<CAPTION>
September 30, September 30
1998 1997
------------- ------------
<S> <C> <C>
Assets
Cash and short-term investments $ 1,796,132 $ 993,349
Bonds, notes and redeemable
preferred stocks available
for sale, at fair value 18,800,847 18,523,655
Mortgage loans 3,412,449 3,139,309
Commons stocks, at fair value 82,808 96,541
Equity-method partnerships 779,098 561,336
Cost-method partnerships 865,953 725,457
Other invested assets 328,120 368,531
------------ ------------
Total investments 26,065,407 24,408,178
Variable annuity assets held in
separate accounts 11,405,434 9,514,675
Deferred acquisition costs 996,503 1,118,582
Other assets 733,063 595,451
------------ ------------
TOTAL ASSETS $ 39,200,407 $ 35,636,886
============ ============
Liabilities and shareholders'
equity
Liabilities:
Reserves for fixed
annuity contracts $ 12,970,549 $ 14,445,126
Reserves for guaranteed
investment contracts 8,380,844 5,553,292
Variable annuity liabilities
related to separate accounts 11,405,434 9,514,675
Long-term notes and debentures 1,216,483 1,136,072
Trust deposits 439,918 427,433
Payable to brokers for
purchases of securities 91,463 266,477
Other payables and accrued
liabilities and deferred
income taxes 1,208,649 1,214,705
------------ ------------
Total liabilities 35,713,340 32,557,780
------------ ------------
Preferred securities
of subsidiary grantor trusts 495,000 495,000
------------ ------------
Shareholders' equity:
Preferred Stock 248,000 248,000
Nontransferable Class B Stock 16,273 16,273
Common Stock 179,526 179,076
Additional paid-in capital 755,776 750,401
Retained earnings 1,596,220 1,180,446
Net unrealized gains on debt
and equity securities
available for sale 196,272 209,910
------------ ------------
Total shareholders' equity 2,992,067 2,584,106
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 39,200,407 $ 35,636,886
============ ============
</TABLE>
<PAGE> 7
SUNAMERICA INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarters ended September 30, Years ended September 30,
----------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Investment income $ 567,604 $ 525,318 $ 2,160,463 $1,795,826
--------- ---------- ----------- ----------
Interest expense on:
Fixed annuity contracts (172,633) (192,450) (721,490) (644,426)
Guaranteed investment
contracts (125,604) (87,185) (426,496) (314,144)
Trust deposits (2,475) (2,333) (9,400) (9,726)
Senior indebtedness (32,480) (35,110) (120,253) (106,279)
--------- ----------- ----------- ----------
Total interest expense (333,192) (317,078) (1,277,639) (1,074,575)
Dividends paid on preferred
securities of grantor trusts (10,294) (10,296) (41,178) (41,874)
--------- ----------- ----------- ----------
NET INVESTMENT INCOME 224,118 197,944 841,646 679,377
--------- ----------- ----------- ----------
NET REALIZED INVESTMENT
GAINS (LOSSES) (52,945) 1,679 (41,721) (29,203)
--------- ----------- ----------- ----------
Fee income:
Variable annuity fees 56,440 41,920 204,474 141,204
Net retained commissions 31,432 18,365 114,461 64,911
Surrender charges 13,210 10,696 54,361 35,241
Asset management fees 7,839 6,839 29,592 25,764
Loan servicing fees 5,868 6,202 23,398 24,264
Trust Fees 4,338 4,612 18,080 17,912
Other Fees 6,341 3,696 14,461 8,407
--------- ---------- ----------- ----------
TOTAL FEE INCOME 125,468 92,330 458,827 317,703
--------- ---------- ----------- ----------
GENERAL AND ADMINISTRATIVE
EXPENSES (74,294) (74,030) (310,273) (265,738)
--------- ---------- ----------- ----------
AMORTIZATION OF DEFERRED
ACQUISITION COSTS (66,685) (52,596) (241,167) (165,089)
--------- ---------- ----------- ----------
PRETAX INCOME 155,662 165,327 707,312 537,050
Income tax expense (41,800) (47,800) (191,000) (158,000)
--------- ---------- ----------- ----------
NET INCOME $ 113,862 $ 117,527 $ 516,312 $ 379,050
========= ========== ===========
EARNINGS PER SHARE:
Basic $ 0.57 $ 0.60 $ 2.61 $ 2.01
========= ========== =========== ==========
Diluted $ 0.52 $ 0.54 $ 2.34 $ 1.81
========= ========== =========== ==========
</TABLE>
<PAGE> 8
SUNAMERICA INC.
KEY OPERATING STATISTICS
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarters ended September 30, Years ended September 30,
----------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Operating earnings(1) $ 148,276 $ 116,436 $ 543,431 $ 398,032
============ ============ ============ ==========
Operating earnings per share:
Basic $ 0.75 $ 0.60 $ 2.75 $ 2.12
============ ============ ============ ==========
Diluted $ 0.68 $ 0.53 $ 2.47 $ 1.91
============ ============ ============ ==========
Average shares outstanding
Basic $ 193,499 $ 189,356 $ 193,023 $ 179,381
============ ============ ============ ==========
Diluted $ 218,261 $ 217,967 $ 220,404 $ 205,726
============ ============ ============ ==========
At September 30, At September 30,
1998 1997
------------ ----------
Aggregate common shares outstanding $ 195,798 $ 195,348(2)
============ ==========
Book value per-share $ 14.45 $ 12.40
============ ==========
Pro forma book value per share(2) $ 16.02 $ 13.40
============ ==========
Book Value per share excluding net
unrealized gains/losses or debt and
equity securities available for sale $ 13.50 $ 11.39
============ ==========
Pro forma book value per share excluding
net unrealized gains/ losses on debt
and equity securities available for sale(2) $ 15.10 $ 12.47
============ ==========
</TABLE>
(1) After-tax earnings before net realized investment gains and losses.
(2) On a pro forma basis, assuming that the Premium Equity Redemption
Cumulative Security Units were converted to Common Stock.
NOTES TO EDITORS:
ANALYST ESTIMATES ARE BASED ON OPERATING EARNINGS PER DILUTED SHARE,
WHICH WERE $0.68 IN THE FOURTH QUARTER OF FISCAL 1998, UP 28% FROM
$0.53 IN THE 1997 FOURTH QUARTER; AND $2.47 FOR FISCAL 1998, UP 29%
FROM $1.91 IN FISCAL 1997.
