SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) December 31, 1998
ANCHOR NATIONAL LIFE INSURANCE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ARIZONA 33-47472 86-0198983
(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
<PAGE>
Item 2. Acquisition or Disposition of Assets
----------------------------------------
On July 15, 1998, SunAmerica Inc., Anchor National Life Insurance Company,
and First SunAmerica Life Insurance Company entered into a definitive agreement
to acquire the individual life and individual and group annuity businesses of
MBL Life Assurance Corporation (The "MBL Business") for a cash purchase price of
$128,420,000. As part of this transaction, the Company acquired assets having
an aggregate fair value of $5,718,227,000, composed primarily of investments
totaling $5,663,318,000. Approximately $5,801,879,000 in reserves were assumed
under a reinsurance contract, and included $2,317,365,000 of reserves for
universal life policies, $3,413,827,000 of fixed annuity reserves and
$70,687,000 of guaranteed investment contract reserves. The purchase price was
agreed to by the parties on an arms-length basis and the entire transaction was
approved by the New Jersey Superior Court, which has jurisdiction over the plan
of rehabilitation under which MBL Life Assurance Corporation is operating. The
acquisition was completed through Anchor National Life Insurance Company on
December 31, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
(a) Financial statements of businesses acquired.
Historical financial statements prepared pursuant to Rule 3-05 of
Regulation S-X concerning the MBL Business have not been filed herewith. Under
a 100% coinsurance transaction, the coinsurer agrees to indemnify the issuing
insurer for all of its obligations under the relevant annuity contracts.
However, the issuing insurer remains the only party obligated to the insured
party. In consideration for its indemnification, the coinsurer receives assets,
usually composed of cash and/or marketable securities, in an amount equal to the
annuity liabilities, computed on a statutory basis, less a negotiated fee. Such
assets are not specifically associated with the annuity liabilities on a
historical basis. The coinsurance of the MBL Business (The "MBL Transaction")
reflects the assumption of certain annuity liabilities as to which the parties
to the transaction matched assets at a particular point in time. Separate
historical financial statements do not exist for these assets and liabilities.
Further, it is not possible to make meaningful historical financial statements
concerning this portion of the transaction because the various assets acquired
may not be properly associated with the various liabilities assumed at any
historical point in time. Accordingly, historical financial statements prepared
pursuant to Rule 3-05 of Regulation S-X concerning this transaction have not
been filed. However, an audited Statement of Assets Acquired and Liabilities
Assumed in this transaction, as of December 31, 1998, the effective date of the
transaction, is included herewith as Exhibit 99-1. Such audited financial
statement includes related notes and a report of independent accountants.
(b) Pro Forma Financial Information
As more fully described under Item 2 of the Current Report on Form 8-K/A,
on December 31, 1998, the Registrant acquired certain assets and assumed certain
liabilities of MBL Life Assurance Corporation ("MBL Life") in a 100%
coinsurance
2
<PAGE>
(b) Pro Forma Financial Information (Continued)
transaction. A pro forma condensed balanced sheet is not filed herewith because
the entire transaction is fully reflected in the Registrant's December 31, 1998
consolidated balance sheet, which was filed on February 16, 1998 as part of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31,
1998.
The pro forma condensed income statement set forth in Exhibit 99-2 herein
reflects the effects of the MBL Transaction as if it had been consummated on
October 1, 1997, the beginning of the Registrant's most recent fiscal year end.
The pro forma condensed income statement set forth in Exhibit 99-3 herein
reflects the effects of the MBL Transaction as if it had been consummated on
October 1, 1998, the beginning of the Registrant's most recent fiscal interim
period.
(c) Exhibits
Exhibit No. Description of Exhibit
- ------------ ------------------------
99-1 Statement of Assets Acquired and Liabilities Assumed in the MBL
Transaction.
99-2 Pro Forma Condensed Income Statement for the year ended September 30,
1998.
99-3 Pro Forma Condensed Income Statement for the three months ended
December 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
SUNAMERICA INC.
Date: March 12, 1999 By: /S/ Scott L. Robinson
------------------------
Scott L. Robinson
Senior Vice President and Controller
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 99-1
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
IN THE MBL TRANSACTION
DECEMBER 31, 1998
<S> <C>
ASSETS ACQUIRED
Cash $ 6,173,000
Investments 5,663,318,000
Accrued investment income 45,521,000
Deferred acquisition cost 113,039,000
Other assets 3,215,000
--------------
Total assets acquired $5,831,266,000
==============
LIABILITIES ASSUMED
Accumulated value of fixed annuity contracts $3,413,827,000
Accumulated value of universal life contracts 2,317,365,000
Reserves for guaranteed investment contracts 70,687,000
Other liabilities 29,387,000
--------------
Total liabilities assumed $5,831,266,000
==============
See accompanying notes
</TABLE>
4
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
IN THE MBL TRANSACTION
1. Description of the Transaction
---------------------------------
On December 31, 1998, Anchor National Life Insurance Company (The "Company"),
completed the acquisition of a block of annuity contracts and universal life
contracts from MBL Life Assurance Corporation ("MBL Life") for a total cash
consideration of $128,420,000.
As part of this transaction, the Company acquired assets having an
aggregate fair value of $5,718,227,000, composed primarily of investments
totaling $5,663,318,000. Liabilities assumed included $3,413,827,000 of fixed
annuity contracts, $2,317,365,000 of universal life contracts and $70,687,000 of
guaranteed investment contracts from MBL Life. The transfer of assets necessary
to support these liabilities was effected pursuant to a 100% coinsurance
agreement entered into by MBL Life and the Company. Under a 100% coinsurance
agreement, the coinsurer agrees to indemnify the issuing issurer for all of its
obligations under the relevant annuity contracts. However, the issuing insurer
remains the only party obligated to the insured party. In consideration for its
indemnification, the coinsurer receives assets, usually composed of cash and/or
marketable securities, in an amount equal to the liabilities assumed, computed
on a statutory basis, less a negotiated fee.
The acquisition has been accounted for by using the purchase method of
accounting, and, accordingly, all assets and liabilities presented in the
accompanying Statement of Assets Acquired and Liabilities Assumed in the MBL
Transaction (the "Statement") have been stated at their estimated fair values to
present the balance sheet impact of assuming the fixed annuity and universal
life insurance liabilities of MBL Life as of December 31, 1998.
2. Investments
-----------
Investments acquired, at December 31, 1998, are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average
Yield to
Fair Value Maturity
------------- --------
<S> <C> <C>
Bonds, notes and redeemable
preferred stocks $ 2,276,895,000 5.80%
Short-term investments 3,077,037,000 5.50
Policy loans 309,386,000 8.00
------------------- -----
Total $ 5,663,318,000 5.76%
=================== =====
</TABLE>
All of the portfolio of bonds, notes and redeemable preferred stocks acquired
have been designated by the Company as available to be sold in response to
changes in market interest rates, changes in prepayment risk, the Company's need
for liquidity and other similar factors. A summary of the fair value of
bonds, notes and redeemable preferred
5
<PAGE>
2. Investments (Continued)
-----------
<TABLE>
<CAPTION>
stocks acquired, at December 31, 1998, by major category follows:
<S> <C>
Securities of public utilities $ 176,456,000
Corporate bonds and notes 1,583,637,000
Other debt 516,802,000
--------------
Total $2,276,895,000
==============
</TABLE>
<TABLE>
<CAPTION>
A summary of the fair value of bonds, notes and redeemable preferred stocks
acquired, at December 31, 1998, by contractual maturity follows:
<S> <C>
Due in one year or less $ 850,566,000
Due after one year through five years 1,208,364,000
Due after five years through ten years 51,149,000
Due after ten years 166,816,000
--------------
Total $2,276,895,000
==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks acquired
will differ from those shown above due to prepayments and redemptions.
At December 31, 1998, no single investment acquired exceeded 10% of the
Company's consolidated shareholder's equity.
At December 31, 1998, bonds having a fair value of $5,798,000 were not
rated investment grade by nationally recognized credit rating authorities. Such
bonds were less than 1% of the bonds acquired.
At December 31, 1998, there were no investments in default as to the
payment of principal or interest.
3. Deferred Acquisition Cost
---------------------------
An amount equal to the sum of the allocated purchase price and the fair value of
the related net liabilities assumed in the coinsurance transaction has been
recorded as Deferred Acquisition Cost in the accompanying Statement. Such
amount, totaling $113,039,000 at December 31, 1998, will be amortized, with
interest, in relation to the incidence of estimated gross profits to be realized
over the estimated lives of the annuity contracts assumed. Estimated gross
profits are composed of net interest income, net realized investment gains and
losses, surrender charges and direct administrative expenses.
The deferred acquisition cost attributable to the coinsurance
6
<PAGE>
3. Deferred Acquisition Cost (Continued)
---------------------------
transaction is substantially less than a computation of the present value
of estimated future gross profits discounted at the applicable current average
credit rate.
4. Fixed Annuity Contracts
-------------------------
The fair value of fixed annuity contracts assumed was $3,413,827,000, The
crediting rate for these annuities is 5.10%.
The fair values of fixed annuity contracts assumed are summarized by applicable
surrender charge as follows:
<TABLE>
<CAPTION>
Reserves
---------------
Surrenderable:
<S> <C>
With a surrender charge of 5.4% $ 2,989,911,000
With a minimal surrender charge 54,815,000
Not surrenderable 369,101,000
---------------
Total $ 3,413,827,000
===============
</TABLE>
5. Universal Life Contracts
--------------------------
The total fair value of universal life contracts assumed was $2,317,365,000.
The crediting rates per policy under the rehabilitation agreement approved by
the New Jersey Superior Court were determined by the amount of premium paid by
each policyholder. The average crediting rate on the universal life policies
assumed is 5.20%.
<TABLE>
<CAPTION>
The fair value and face amount of universal life contracts assumed by
applicable surrender charge is as follows:
Surrender Charge Reserves Face Amount
----------------- ----------- --------------
<S> <C> <C>
0% $ 485,000 $ 13,133,000
5.40 2,089,080,000 9,587,821,000
7.10 76,957,000 439,035,000
28.00 15,923,000 42,766,000
35.00 244,000 627,000
No surrender value 134,676,000 21,773,000
--------------- --------------
2,317,365,000 $10,105,155,000
=============== ===============
</TABLE>
7
<PAGE>
6. Guaranteed Investment Contracts
---------------------------------
The fair value of guaranteed investment contract ("GIC") reserves assumed
was $70,687,000. Of these GIC contract reserves, $24,011,000 related to
structured payment contracts that were reaffirmed as part of the MBL Life
rehabilitation and had an average interest crediting rate of 16.11%. The fair
value summarized by maturity is as follows:
<TABLE>
<CAPTION>
Maturity Reserves
-------- ---------
<S> <C>
2001 $15,534,000
2007 813,000
2011 7,664,000
-----------
24,011,000
===========
</TABLE>
The remaining $46,676,000 of the GIC reserves were pension GIC contracts
that were restructured in the rehabilitation and had an average crediting rate
of 5.10% and no specified maturity date.
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
Anchor National Life Insurance Company
In our opinion, the accompanying statement of assets acquired and liabilities
assumed in the MBL Life Assurance Corporation transaction presents fairly, in
all material respects, the assets acquired and liabilities assumed by Anchor
National Life Insurance Company, in the coinsurance transaction at December 31,
1998 in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Company's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether this financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
March 11, 1999
9
<PAGE>
<TABLE>
<CAPTION>
Exhibit 99-2
PRO FORMA CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
Pro Forma Adjustments
-----------------------------
Anchor National Estimated Pro Forma
as Reported Full-Year Results
for the Results of for the
Year ended Coinsurance Other Year Ended
9/30/98 Transaction Adjustments 9/30/98
----------------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
Investment income $ 221,966 $ 326,047 (1) $ (7,063) (4) $ 540,950
Interest expense (135,094) (298,213) (2) --- (433,307)
----------------------- -------------- ------------- ------------
Net investment income 86,872 27,834 (7,063) 107,643
Net realized investment gains 19,482 --- --- 19,482
Fee income 290,362 --- --- 290,362
General and administrative
expenses (96,102) --- --- (96,102)
Amortization of deferred
acquisition costs (72,713) (5,900) (3) --- (78,613)
Other income (expense), net (18,209) --- --- (18,209)
----------------------- -------------- ------------- ------------
Pretax income 209,692 21,934 (7,063) 224,563
Income tax benefit (expense) (71,051) (7,677) (5) 2,472 (5) (76,256)
----------------------- -------------- ------------- ------------
Net income $ 138,641 $ 14,257 $ (4,591) $ 148,307
======================= ============== ============= ============
</TABLE>
See accompanying explanatory notes
10
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
PRO FORMA CONDENSED INCOME STATEMENT
EXPLANATORY NOTES
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(1) To record investment income on assets received (before deduction of the
allocated purchase price) in the coinsurance transaction at 5.76%, the weighted
average yield to maturity on the assets on the date of acquisition.
(2) To record interest expense on the assumed annuity and universal life
contracts at 5.14%, the weighted average rate credited to contract holders on
the date of assumption.
(3) To record amortization of the deferred acquisition cost arising from
this transaction based upon the investment income and interest expense recorded
above, as described in Notes (1) and (2), and the Registrant's estimate of
related future gross profits.
(4) To reflect lost interest income on the $128,420,000 purchase price at
the Registrant's average short-term portfolio yield of 5.50%.
(5) To record the income tax effect on the pro forma adjustments at the
statutory rate of 35%.
11
<PAGE>
<TABLE>
<CAPTION>
Exhibit 99-3
PRO FORMA CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS)
Pro Forma Adjustments
-----------------------------
Anchor National Pro Forma
as Reported Estimated Results
for the Three-Month for the
Three Months Results of Three Months
Ended Coinsurance Other Ended
12/31/98 Transaction Adjustments 12/31/98
----------------------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
Investment income $ 54,278 $ 81,512 (1) $ (1,766) (4) $ 134,024
Interest expense (27,313) (74,553) (2) --- (101,866)
----------------------- ------------- -------------- ----------
Net investment income 26,965 6,959 (1,766) 32,158
Net realized investment gains 271 --- --- 271
Fee income 83,330 --- --- 83,330
General and administrative
expenses (22,375) --- --- (22,375)
Amortization of deferred
acquisition costs (27,070) (1,475) (3) --- (28,545)
Other income (expense), net (6,624) --- --- (6,624)
----------------------- ------------- -------------- ----------
Pretax income 54,497 5,484 (1,766) 58,215
Income tax benefit (expense) (20,106) (1,919) (5) 618 (5) (21,407)
----------------------- ------------- -------------- ----------
Net income $ 34,391 $ 3,565 $ (1,148) $ 36,808
======================= ============= ============== ==========
</TABLE>
See accompanying explanatory notes
12
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
PRO FORMA CONDENSED INCOME STATEMENT
EXPLANATORY NOTES
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
(1) To record investment income on assets received (before deduction of the
allocated purchase price) in the coinsurance transaction at 5.76%, the weighted
average yield to maturity on the assets on the date of acquisition.
(2) To record interest expense on the assumed annuity and universal life
contracts at 5.14%, the weighted average rate credited to contract holders on
the date of assumption.
(3) To record amortization of the deferred acquisition cost arising from
this transaction based upon the investment income and interest expense recorded
above, as described in Notes (1) and (2), and the Registrant's estimate to
related future gross profits.
(4) To reflect lost interest income on the $128,420,000 purchase price at
the Registrant's average short-term portfolio yield of 5.50%.
(5) To record the income tax effect of the pro forma adjustments at the
statutory rate of 35%.
13
