SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ----------------
Commission File No. 33-5014
---------
FIRST SUNAMERICA LIFE INSURANCE COMPANY
---------------------------------------
(Exact name of registrant as specified in its charter)
Incorporated in New York 06-0992729
------------------------ -----------
(IRS Employer
Identification No.)
733 Third Avenue, 4th Floor, New York, New York 10017
Registrant's telephone number, including area code: (800) 272-3007
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS Yes X No
---- ----
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANTS COMMON STOCK ON MAY 14,
1996 WAS AS FOLLOWS:
Common Stock (par value $10,000.00 per share) 300 shares
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
INDEX
Page
Number(s)
Part I - Financial Information
Balance Sheet as of
March 31, 1996 and September 30, 1995 3 - 4
Income Statement for the
three months and six months ended
March 31, 1996 and 1995 5
Statement of Cash Flows for the
six months ended March 31, 1996 and 1995 6 - 7
Notes to Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 19
Part II - Other Information 20
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEET
(Unaudited)
March 31, September 30,
1996 1995
-------------- --------------
ASSETS
Investments:
Cash and short-term investments $ 2,108,000 $ 6,382,000
Bonds and notes:
Available for sale, at fair value
(amortized cost: March 1996,
$131,038,000; September 1995,
$109,217,000) 130,033,000 107,771,000
Held for investment, at amortized cost
(fair value: September 1995,
$2,289,000) --- 2,297,000
Mortgage loans 4,717,000 4,733,000
Common stocks, at fair value (cost:
March 1996, $0; September 1995,
$112,000) 45,000 35,000
-------------- --------------
Total investments 136,903,000 121,218,000
Variable annuity assets 45,114,000 32,760,000
Receivable from brokers for sales of
securities --- 815,000
Accrued investment income 1,188,000 928,000
Deferred acquisition costs 8,796,000 6,491,000
Income taxes currently receivable 205,000 ---
Other assets 896,000 945,000
-------------- --------------
TOTAL ASSETS $ 193,102,000 $ 163,157,000
============== ==============
3
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEET (Continued)
(Unaudited)
March 31, September 30,
1996 1995
-------------- --------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts $ 123,586,000 $ 106,332,000
Income taxes currently payable --- 23,000
Other liabilities 1,539,000 1,980,000
-------------- --------------
Total reserves, payables
and accrued liabilities 125,125,000 108,335,000
-------------- --------------
Variable annuity liabilities 45,114,000 32,760,000
-------------- --------------
Deferred income taxes 654,000 244,000
-------------- --------------
Shareholder's equity:
Common Stock 3,000,000 3,000,000
Additional paid-in capital 14,428,000 14,428,000
Retained earnings 5,341,000 5,250,000
Net unrealized losses on debt and
equity securities available for sale (560,000) (860,000)
-------------- --------------
Total shareholder's equity 22,209,000 21,818,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 193,102,000 $ 163,157,000
============== ==============
See notes to financial statements.
4
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (Continued)
<TABLE>
INCOME STATEMENT
FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<CAPTION>
Three Months Six Months
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment income $ 2,362,000 $ 1,774,000 $ 4,700,000 $ 3,355,000
----------- ----------- ----------- -----------
Interest expense on:
Fixed annuity contracts (1,706,000) (1,031,000) (3,361,000) (1,965,000)
Senior indebtedness (4,000) --- (4,000) ---
----------- ----------- ----------- -----------
Total interest expense (1,710,000) (1,031,000) (3,365,000) (1,965,000)
----------- ----------- ----------- -----------
NET INVESTMENT INCOME 652,000 743,000 1,335,000 1,390,000
----------- ----------- ----------- -----------
NET REALIZED INVESTMENT GAINS
(LOSSES) 103,000 (22,000) (528,000) (274,000)
----------- ----------- ----------- -----------
VARIABLE ANNUITY FEE INCOME 145,000 93,000 271,000 189,000
----------- ----------- ----------- -----------
Other income and expenses:
Surrender charges 46,000 61,000 76,000 106,000
General and administrative
expenses (335,000) (287,000) (722,000) (545,000)
Amortization of deferred
acquisition costs (126,000) (75,000) (252,000) (150,000)
Other, net --- (4,000) (40,000) (9,000)
----------- ----------- ----------- -----------
TOTAL OTHER INCOME AND EXPENSES (415,000) (305,000) (938,000) (598,000)
----------- ----------- ----------- -----------
PRETAX INCOME 485,000 509,000 140,000 707,000
Income tax expense (177,000) (166,000) (49,000) (224,000)
----------- ----------- ----------- -----------
NET INCOME $ 308,000 $ 343,000 $ 91,000 $ 483,000
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (Continued)
STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended March 31,
-------------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 91,000 $ 483,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Interest credited to fixed annuity
contracts 3,361,000 1,965,000
Net realized investment losses 528,000 274,000
Accretion of net premiums (discounts)
on investments 144,000 (146,000)
Amortization of goodwill 29,000 29,000
Provision for deferred income taxes 248,000 440,000
Change in:
Deferred acquisition costs (2,405,000) (1,386,000)
Income taxes receivable/payable (228,000) (378,000)
Other liabilities 107,000 125,000
Other, net (235,000) (51,000)
------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 1,640,000 1,355,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of bonds and notes available
for sale (63,896,000) (28,550,000)
Sales of bonds and notes available for
sale 39,400,000 5,764,000
Redemptions and maturities of:
Bonds and notes available for sale 5,224,000 3,807,000
Bonds and notes held for investment --- 1,012,000
Mortgage loans 18,000 17,000
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (19,254,000) (17,950,000)
------------ ------------
6
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (Continued)
STATEMENT OF CASH FLOWS (Continued)
(Unaudited)
Six Months Ended March 31,
-------------------------------
1996 1995
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on fixed annuity
contracts $ 20,494,000 $ 29,863,000
Net exchanges to (from) the fixed accounts
of variable annuity contracts (1,231,000) 333,000
Withdrawal payments on fixed annuity
contracts (3,908,000) (10,102,000)
Claims and annuity payments on fixed
annuity contracts (1,467,000) (1,435,000)
Net receipts from (repayments of) other
short-term financings (548,000) 3,115,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,340,000 21,774,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS (4,274,000) 5,179,000
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 6,382,000 14,785,000
------------ ------------
CASH AND SHORT-TERM INVESTMENTS AT
END OF PERIOD $ 2,108,000 $ 19,964,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid on indebtedness $ 4,000 $ ---
============ ============
Income taxes paid $ 30,000 $ 1,110,000
============ ============
See notes to financial statements.
7
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (continued)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
First SunAmerica Life Insurance Company (the "Company") is an indirect wholly
owned subsidiary of SunAmerica Inc. (the "Parent"). In the opinion of the
Company, the accompanying unaudited financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the Company's financial position as of March 31, 1996 and September 30,
1995, and the results of its operations for the three months and six months
ended March 31, 1996 and 1995 and its cash flows for the six months ended March
31, 1996 and 1995. The results of operations for the three months and six
months ended March 31, 1996 are not necessarily indicative of the results to
be expected for the full year. The accompanying unaudited financial statements
should be read in conjunction with the audited financial statements for the
fiscal year ended September 30, 1995, contained in the Company's Annual Report
on Form 10-K.
2. Reclassification of Securities Held for Investment
--------------------------------------------------
On December 1, 1995, the Company reassessed the appropriateness of classifying
a portion of its portfolio of bonds and notes as held for investment (the "Held
for Investment Portfolio"). This reassessment was made pursuant to the
provisions of "Special Report: A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities," issued by
the Financial Accounting Standards Board in November 1995. As a result of its
reassessment, the Company reclassified all of its Held for Investment Portfolio
as available for sale. At December 1, 1995, the amortized cost of the Held for
Investment Portfolio aggregated $2,296,000 and its fair value was $2,353,000.
Upon reclassification, the resulting net unrealized gain of $57,000 was
credited to Net Unrealized Gains (Losses) on Debt and Equity Securities
Available for Sale in the shareholder's equity section of the balance sheet.
8
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of financial condition
and results of operations of First SunAmerica Life Insurance Company (the
"Company") for the three months and six months ended March 31, 1996 and 1995.
RESULTS OF OPERATIONS
NET INCOME totaled $0.3 million in both the second quarter of 1996 and the
second quarter of 1995. For the six months, net income amounted to $0.1
million in 1996, compared with $0.5 million in 1995.
PRETAX INCOME totaled $0.5 million in the second quarters of both 1996 and
1995. For the six months, pretax income totaled $0.1 million in 1996, compared
with $0.7 million in 1995. The $0.6 million decrease in the six months of 1996
primarily resulted from increases in net realized investment losses, general
and administrative expenses and amortization of deferred acquisition costs.
NET INVESTMENT INCOME, which is the spread between the income earned on
invested assets and the interest paid on fixed annuities and other interest-
bearing liabilities, totaled $0.7 million in the second quarters of both 1996
and 1995. These amounts represent net investment spreads of 2.00% on average
invested assets (computed on a daily basis) of $130.2 million in the second
quarter of 1996 and 3.24% on average invested assets of $91.8 million in the
second quarter of 1995. For the six months, net investment income declined to
$1.3 million in 1996 from $1.4 million in 1995, and represented net investment
spreads of 2.10% and 3.13%, respectively, on average invested assets of $127.4
million and $88.7 million, respectively.
Net investment spreads also include the effect of income earned on the excess
of average invested assets over average interest-bearing liabilities. This
excess amounted to $14.4 million in the second quarter of 1996, $18.5 million
in the second quarter of 1995, $15.0 million in the six months of 1996 and
$18.3 million in the six months of 1995. The difference between the Company's
yield on average invested assets and the rate paid on average interest-bearing
liabilities was 1.36% in the second quarter of 1996, 2.11% in the second
quarter of 1995, 1.40% in the six months of 1996 and 1.98% in the six months
of 1995.
Investment income totaled $2.4 million in the second quarter of 1996,
compared with $1.8 million in the second quarter of 1995. For the six months,
investment income totaled $4.7 million in 1996, compared with $3.4 million in
1995. Investment income increased in 1996 as a result of higher levels of
average invested assets, offset slightly by a decline in portfolio yields. The
yield on average invested assets declined to 7.26% in the second quarter of
1996, from 7.73% in the second quarter of 1995. For the six months, the yield
on average invested assets decreased to 7.38% in 1996 from 7.56% in 1995. The
higher yields in the 1995 periods reflected the effects of both higher short-
term interest rates and extension fee income earned on certain bonds in the
second quarter of 1995. Over the last ten fiscal quarters, the Company's
quarterly investment yields on average invested assets have ranged from 6.28%
9
<PAGE>
to 7.81%; however, there can be no assurance that the Company will achieve
similar yields in future periods.
Total interest expense aggregated $1.7 million the second quarter of 1996 and
$1.0 million in the second quarter of 1995. For the six months, interest
expense aggregated $3.4 million in 1996, compared with $2.0 million in 1995.
The average rate paid on fixed annuity contracts was 5.91% in the second
quarter of 1996, compared with 5.62% in the second quarter of 1995. For the
six months, the average rate paid on fixed annuities increased to 5.98% in 1996
from 5.58% in 1995. Fixed annuity contracts averaged $115.6 million during the
second quarter of 1996, compared with $73.3 million during the second quarter
of 1995. For the six months, average fixed annuity contracts increased to
$112.3 million in 1996, compared with $70.4 million in 1995. The increases in
the average rates paid on fixed annuities during 1996 primarily resulted from
generally higher prevailing interest rates compared to the rates one year
earlier as crediting rates on fixed annuity contracts have reset over the past
year.
The growth in average invested assets since 1995 reflects sales of the
Company's fixed-rate products (including the fixed accounts of variable annuity
products). Since March 31, 1995, fixed annuity premiums have aggregated $42.3
million. Such premiums totaled $15.2 million in the second quarter of 1996,
down from the $24.1 million in the second quarter of 1995 and $20.5 million in
the six months of 1996, down from the $29.9 million in the six months of 1995.
These premiums include premiums for the fixed accounts of variable annuities
totaling $14.8 million, $0.4 million, $16.5 million and $0.4 million,
respectively. The increase in premiums for the fixed accounts of variable
annuities in 1996 resulted primarily from increased sales of the Company's
Polaris product.
NET REALIZED INVESTMENT GAINS totaled $103,000 in the second quarter of 1996,
compared with net realized investment losses of $22,000 in the second quarter
of 1995. These amounts represent 0.32% and 0.10%, respectively, of average
invested assets. For the six months, net realized investment losses totaled
$0.5 million in 1996, compared with $0.3 million in 1995 and represent 0.83%
and 0.62%, respectively, of average invested assets. Net realized investment
losses for the six months of 1996 include $0.4 million of net losses realized
on $39.0 million of sales of bonds. These bond sales include $35.8 million of
sales of mortgage backed securities ("MBSs") and $3.2 million of sales of high
yield investments that were made primarily to maximize total return. Net
losses for the six months of 1995 are also related to sales of bonds and MBSs
that were made primarily to maximize total return.
VARIABLE ANNUITY FEES are based on the market value of assets supporting
variable annuity contracts in separate accounts. Such fees increased to
$145,000 in the second quarter of 1996 from $93,000 in the second quarter of
1995. For the six months, variable annuity fees increased to $0.3 million in
1996 from $0.2 million in 1995. These increases reflect growth in average
variable annuity assets, principally due to the receipt of variable annuity
premiums and increased market values, partially offset by surrenders. Variable
annuity assets averaged $39.6 million during the second quarter of 1996 and
$26.0 million during the second quarter of 1995. For the six months, variable
annuity assets averaged $36.8 million in 1996 compared with $26.0 million in
1995. Variable annuity premiums, which exclude premiums allocated to the fixed
accounts of variable annuity products, have aggregated $15.2 million since
March 31, 1995. Variable annuity premiums totaled $7.8 million in the second
10
<PAGE>
quarter of 1996 up significantly from $0.2 million in the second quarter of
1995. For the six months, variable annuity premiums totaled $10.1 million in
1996, compared with $0.8 million in 1995. These increases in premiums were
primarily due to the introduction of two new variable annuity products during
March and December of 1995. The Company has encountered increased competition
in the variable annuity marketplace during recent years and anticipates that
the market will remain highly competitive for the foreseeable future.
SURRENDER CHARGES on fixed and variable annuities totaled $46,000 in the
second quarter of 1996 and $61,000 in the second quarter of 1995. For the six
months, surrender charges totaled $76,000 in 1996 and $106,000 in 1995.
Surrender charges generally are assessed on annuity withdrawals at declining
rates during the first five to seven years of the contract. Withdrawal
payments, which include surrenders and lump-sum annuity benefits, totaled $2.9
million in the second quarter of 1996 and $5.9 million in the second quarter
of 1995. Annualized, these payments represent 7.98% and 25.92%, respectively,
of average fixed and variable annuity reserves. For the six months, withdrawal
payments totaled $5.2 million in 1996 and $11.2 million in 1995, and
annualized, represent 7.40% and 25.28%, respectively, of average fixed and
variable annuity reserves. Withdrawals include variable annuity payments from
the separate accounts totaling $0.4 million in the second quarter of 1996, $0.6
million in the second quarter of 1995, $1.3 million in the six months of 1996
and $1.1 million in the six months of 1995. The decrease in fixed annuity
surrenders to $2.5 million in the second quarter of 1996 from $5.3 million in
the second quarter of 1995 and $3.9 million in the six months of 1996 from
$10.1 million in the six months of 1995, results primarily from unusually high
surrenders in 1995, principally due to policies coming off surrender charge
restrictions. Management anticipates that withdrawal rates will for the
foreseeable future stabilize at moderately higher levels than the current
quarter and the Company's investment portfolio has been structured to provide
sufficient liquidity for anticipated withdrawals.
GENERAL AND ADMINISTRATIVE EXPENSES totaled $0.3 million in the second
quarters of both 1996 and 1995 and $0.7 million in the six months of 1996
compared with $0.5 million in the six months of 1995. General and
administrative expenses remain closely controlled through a company-wide cost
containment program and represent approximately 1% of average total assets.
AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $126,000 in the second
quarter of 1996, $75,000 in the second quarter of 1995, $252,000 in the six
months of 1996 and $150,000 in the six months of 1995. These increases were
primarily due to additional fixed and variable annuity sales and the subsequent
amortization of related deferred commissions and other acquisition costs.
INCOME TAX EXPENSE totaled $177,000 in the second quarter of 1996 and
$166,000 in the second quarter of 1995, representing effective tax rates of 36%
and 33%, respectively. For the six months, income tax expense totaled $49,000
in 1996 and $224,000 in 1995, representing effective tax rates of 35% and 32%,
respectively. The lower tax rates in 1995 reflect prior period state income
tax benefits.
11
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
SHAREHOLDER'S EQUITY decreased by $0.4 million to $22.2 million at March 31,
1996 from $22.6 million at December 31, 1995, primarily as a result of a $0.7
million increase in net unrealized losses on debt and equity securities
available for sale from a gain of $0.1 million at December 31, 1995 to a loss
of $0.6 million at March 31, 1996. This decrease was partially offset by the
recording of $0.3 million of net income in the second quarter of 1996.
TOTAL ASSETS increased by $21.6 million to $193.1 million at March 31, 1996
from $171.5 million at December 31, 1995, principally due to a $10.3 million
increase in invested assets, $9.5 million increase in the separate accounts for
variable annuities, and a $1.8 million increase in deferred acquisition costs.
INVESTED ASSETS at March 31, 1996 totaled $136.9 million, compared with
$126.6 million at December 31, 1995. This $10.3 million increase primarily
resulted from a $13.0 million increase in reserves for fixed annuity contracts,
partially offset by a $1.0 million decrease in amounts payable from brokers for
purchases of securities and an increase in the net unrealized losses on debt
and equity securities available for sale.
The Company manages all of its invested assets internally. The Company's
general investment philosophy is to hold fixed maturity assets for long-term
investment. Thus, it does not have a trading portfolio. Effective December
1, 1995, pursuant to guidelines issued by the Financial Accounting Standards
Board, the Company determined that all of its portfolio of bonds and notes (the
"Bond Portfolio") is 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. Accordingly, the Company no longer classifies a
portion of its Bond Portfolio as held for investment.
THE BOND PORTFOLIO had an aggregate amortized cost that exceeded its fair
value by $1.0 million at March 31, 1996. At December 31, 1995, the fair value
of the Bond Portfolio was $1.0 million above its amortized cost. The net
unrealized losses on the Bond Portfolio since December 31, 1995 principally
reflect the higher relative prevailing interest rates at March 31, 1996 and
their corresponding effect on the fair value of the Bond Portfolio.
The entire Bond Portfolio at March 31, 1996 was rated by Standard and Poor's
Corporation ("S&P"), Moody's Investors Service ("Moody's"), Duffs & Phelps
Credit Rating Co. ("D&P"), Fitch Investor Service, Inc. ("Fitch") or under
comparable statutory rating guidelines established by the National Association
of Insurance Commissioners ("NAIC") and implemented by either the NAIC or the
Company. At March 31, 1996, approximately $121.9 million (at amortized cost)
was rated investment grade by one or more of these agencies or under the NAIC
guidelines, including $88.2 million of U.S. government/agency securities and
MBSs.
At March 31, 1996, the Bond Portfolio included $9.1 million (fair value,
$9.0 million) of bonds not rated investment grade by S&P, Moody's, D&P, Fitch
or the NAIC. Based on their March 31, 1996 amortized cost, these non-
investment-grade bonds accounted for 4.71% of the Company's total assets and
6.64% of invested assets.
12
<PAGE>
Non-investment-grade securities generally provide higher yields and involve
greater risks than investment-grade securities because their issuers typically
are more highly leveraged and more vulnerable to adverse economic conditions
than investment-grade issuers. In addition, the trading market for these
securities is usually more limited than for investment-grade securities. The
Company intends that its holdings of such securities not exceed current levels,
but its policies may change from time to time, including in connection with any
possible acquisition. The Company had no material concentrations of non-
investment-grade securities at March 31, 1996.
13
<PAGE>
<TABLE>
The following table summarizes the Company's rated bonds by rating classification as of March 31, 1996 (dollars in
thousands):
<CAPTION>
Issues not rated by S&P/Moody's/
Issues Rated by S&P/Moody's/D&P/Fitch D&P/Fitch, By NAIC Category Total
- ---------------------------------------------- ----------------------------------- ----------------------------------
S&P/(Moody's)/ Estimated NAIC Estimated Percent of Estimated
[D&P]/{Fitch} Amortized fair category Amortized fair Amortized invested fair
category(1) cost value (2) cost value cost assets(3) value
- --------------- ---------- ---------- -------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA to A-
(Aaa to A3)
[AAA to A-]
{AAA to A-} $ 75,929 $ 75,387 1 $ 26,463 $ 26,440 $ 102,392 74.27% $ 101,827
BBB+ to BBB-
(Baa1 to Baa3)
[BBB+ to BBB-]
{BBB+ to BBB-} 14,228 13,982 2 5,270 5,245 19,498 14.14 19,227
BB+ to BB-
(Ba1 to Ba3)
[BB+ to BB-]
{BB+ to BB-} -- -- 3 -- -- -- -- --
B+ to B- (B1 to B3)
[B+ to B-]
{B+ to B-} 6,328 6,453 4 2,076 2,106 8,404 6.10 8,559
CCC+ to C
(Caa to C)
[CCC]
{CCC+ to C-} 745 420 5 -- -- 745 0.54 420
C1 to D
[DD]
{D} -- -- 6 -- -- -- -- --
---------- ---------- ---------- ---------- ----------- -----------
TOTAL RATED ISSUES $ 97,230 $ 96,242 $ 33,809 $ 33,791 $ 131,039 $ 130,033
========== ========== ========== ========== =========== ===========
Footnotes appear on the following page.
14
<PAGE>
Footnotes to the table of rated bonds by rating classification
---------------------------------------------------------------
(1) S&P rates debt securities in rating categories ranging from AAA (the highest) to D (in payment default). A plus (+)
or minus (-) indicates the debt's relative standing within the rating category. A security rated BBB- or higher is
considered investment grade. Moody's rates debt securities in rating categories ranging from Aaa (the highest) to
C (extremely poor prospects of ever attaining any real investment standing). The number 1, 2 or 3 (with 1 the highest
and 3 the lowest) indicates the debt's relative standing within the rating category. A security rated Baa3 or higher
is considered investment grade. D&P rates debt securities in rating categories ranging from AAA (the highest) to DD
(in payment default). A plus (+) or minus (-) indicates the debt's relative standing within the rating category.
A security rated BBB- or higher is considered investment grade. Fitch rates debt securities in rating categories
ranging from AAA (the highest) to D (in payment default). A plus (+) or a minus (-) indicates the debt's relative
standing within the rating category. A security rated BBB- or higher is considered investment grade. Issues are
categorized based on the highest of the S&P, Moody's, D&P and Fitch ratings if rated by multiple agencies.
(2) Bonds and short-term promissory instruments are divided into six quality categories for NAIC rating purposes, ranging
from 1 (highest) to 5 (lowest) for nondefaulted bonds plus one category, 6, for bonds in or near default. These six
categories correspond with the S&P/Moody's/D&P/Fitch rating groups listed above, with categories 1 and 2 considered
investment grade. A substantial portion of the assets in the NAIC categories were rated by the Company based on its
implementation of NAIC rating guidelines.
(3) At amortized cost.
</TABLE>
15
<PAGE>
MORTGAGE LOANS aggregated $4.7 million at March 31, 1996 and consisted
of 2 first mortgage loans collateralized by properties located in California.
Both of these loans were multifamily residential loans to the same borrower.
At the time of their purchase by the Company, these mortgage loans had loan-to-
value ratios of 75% or less. At March 31, 1996, neither loan was delinquent.
No mortgage loans were foreclosed upon during the six months of 1996.
ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks
of interest rate fluctuations and disintermediation. The Company believes that
its fixed-rate liabilities should be backed by a portfolio principally composed
of fixed maturities that generate predictable rates of return. The Company
does not have a specific target rate of return. Instead, its rates of return
vary over time depending on the current interest rate environment, the slope
of the yield curve, the spread at which fixed maturities are priced over the
yield curve and general competitive conditions within the industry. Its
portfolio strategy is designed to achieve adequate risk-adjusted returns
consistent with its investment objectives of effective asset-liability
matching, liquidity and safety.
The Company designs its fixed-rate products and conducts its investment
operations in order to closely match the duration of the assets in its
investment portfolio to its annuity obligations. The Company seeks to achieve
a predictable spread between what it earns on its assets and what it pays on
its liabilities by investing principally in fixed maturities. The Company's
fixed-rate products incorporate surrender charges or other limitations on when
contracts can be surrendered for cash to encourage persistency. Approximately
94% of the Company's fixed annuity reserves had surrender penalties or other
restrictions at March 31, 1996.
As part of its asset-liability matching discipline, the Company conducts
detailed computer simulations that model its fixed-maturity assets and
liabilities under commonly used stress-test interest rate scenarios. Based on
the results of these computer simulations, the investment portfolio has been
constructed with a view to maintaining a desired investment spread between the
yield on portfolio assets and the rate paid on its reserves under a variety of
possible future interest rate scenarios. At March 31, 1996 the weighted
average life of the Company's investments was approximately four years and the
duration was approximately two. Weighted average life is the average time to
receipt of all principal, incorporating the effects of scheduled amortization
and expected prepayments, weighted by book value. Duration is a common option-
adjusted measure for the price sensitivity of a portfolio to changes in
interest rates. It is the calculation of the relative percentage change in
market value resulting from small shifts in interest rates, and recognizes the
changes in portfolio cashflows resulting from embedded options such as
prepayments and bond calls.
The Company also seeks to provide liquidity by using reverse repurchase
agreements ("Reverse Repos"), and by investing in MBSs. It also seeks to
enhance its spread income by using Reverse Repos. Reverse Repos involve a sale
of securities and an agreement to repurchase the same securities at a later
16
<PAGE>
date at an agreed upon price and are generally over-collateralized. MBSs are
generally investment-grade securities collateralized by large pools of mortgage
loans. MBSs generally pay principal and interest monthly. The amount of
principal and interest payments may fluctuate as a result of prepayments of the
underlying mortgage loans.
There are risks associated with some of the techniques the Company uses
to provide liquidity, enhance its spread income and match its assets and
liabilities. The primary risk associated with Reverse Repos is counterparty
risk. The Company believes, however, that the counterparties to its Reverse
Repos are financially responsible and that the counterparty risk associated
with those transactions is minimal. The primary risk associated with MBSs is
that a changing interest rate environment might cause prepayment of the
underlying obligations at speeds slower or faster than anticipated at the time
of their purchase.
INVESTED ASSETS EVALUATION routinely includes a review by the Company of
its portfolio of debt securities. Management identifies monthly those
investments that require additional monitoring and carefully reviews the
carrying value of such investments at least quarterly to determine whether
specific investments should be placed on a nonaccrual basis and to determine
declines in value that may be other than temporary. In making these reviews
for bonds, management principally considers the adequacy of collateral (if
any), compliance with contractual covenants, the borrower's recent financial
performance, news reports and other externally generated information concerning
the creditor's affairs. In the case of publicly traded bonds, management also
considers market value quotations, if available. For mortgage loans,
management generally considers information concerning the mortgaged property
and, among other things, factors impacting the current and expected payment
status of the loan and, if available, the current fair value of the underlying
collateral.
The carrying values of bonds that are determined to have declines in
value that are other than temporary are reduced to net realizable value and no
further accruals of interest are made. The valuation allowances on mortgage
loans are based on losses expected by management to be realized on transfers
of mortgage loans to real estate, on the disposition and settlement of mortgage
loans and on mortgage loans that management believes may not be collectible in
full. Accrual of interest is suspended when principal and interest payments
on mortgage loans are past due more than 90 days. During the six months ended
March 31, 1996 and 1995, no impairment writedowns were recorded.
DEFAULTED INVESTMENTS, comprising all investments (at amortized cost)
that are in default as to the payment of principal or interest, totaled $0.7
million (fair value, $0.4 million) of bonds and notes at March 31, 1996. At
March 31, 1996, defaulted investments constituted 0.5% of total invested assets
at amortized cost. At December 31, 1995, defaulted investments totaled $0.7
million, which constituted 0.6% of total invested assets at amortized cost.
SOURCES OF LIQUIDITY are readily available to the Company in the form of
existing cash and short-term investments, Reverse Repo capacity on invested
assets and, if required, proceeds from invested asset sales. At March 31,
17
<PAGE>
1996, approximately $77.2 million of the Company's Bond Portfolio had an
aggregate unrealized gain of $1.0 million, while approximately $52.8 million
of the Bond Portfolio had an aggregate unrealized loss of $2.0 million. In
addition, the Company's investment portfolio also currently provides
approximately $1.6 million of monthly cash flow from scheduled principal and
interest payments.
Management is aware that prevailing market interest rates may shift
significantly and has strategies in place to manage either an increase or
decrease in prevailing rates. In a rising interest rate environment, the
Company's average cost of funds would increase over time as it prices its new
and renewing annuities to maintain a generally competitive market rate.
Management would seek to place new funds in investments that were matched in
duration to, and higher yielding than, the liabilities assumed. The Company
believes that liquidity to fund withdrawals would be available through incoming
cash flow, the sale of short-term or floating-rate instruments or Reverse Repos
on the Company's substantial MBS segment of the Bond Portfolio, thereby
avoiding the sale of fixed-rate assets in an unfavorable bond market.
In a declining rate environment, the Company's cost of funds would
decrease over time, reflecting lower interest crediting rates on its fixed
annuities. Should increased liquidity be required for withdrawals, the Company
believes that a significant portion of its investments could be sold without
adverse consequences in light of the general strengthening that would be
expected in the bond market.
REGULATION
The Company is subject to regulation and supervision by the State of New
York and the Insurance Commission of the State of New York. Insurance laws
establish supervisory agencies with broad administrative and supervisory powers
related to granting and revoking licenses to transact business, regulating
marketing and other trade practices, operating guaranty associations, licensing
agents, approving policy forms, regulating certain premium rates, regulating
insurance holding company systems, establishing reserve requirements,
prescribing the form and content of required financial statements and reports,
performing financial and other examinations, determining the reasonableness and
adequacy of statutory capital and surplus, regulating the type and amount of
investments permitted, limiting the amount of dividends that can be paid and
the size of transactions that can be consummated without first obtaining
regulatory approval and other related matters.
During the last decade, the insurance regulatory framework has been placed
under increased scrutiny by various states, the federal government and the
NAIC. Various states have considered or enacted legislation that changes, and
in many cases increases, the states' authority to regulate insurance companies.
Legislation has been introduced from time to time in Congress that could result
in the federal government assuming some role in the regulation of insurance
companies. In recent years, the NAIC has approved and recommended to the
states for adoption and implementation several regulatory initiatives designed
to reduce the risk of insurance company insolvencies. These initiatives
include new investment reserve requirements, risk-based capital standards and
restrictions on an insurance company's ability to pay dividends to its
18
<PAGE>
stockholders. The NAIC is also currently developing model laws to govern
insurance company investments. Current proposals are still being debated and
the Company is monitoring developments in this area and the effects any changes
would have on the Company.
19
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submissions of Matters to a Vote of Security Holders
----------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
EXHIBITS
Exhibit
No. Description
- ------- -----------
3(a) Certificate of Amendment of Charter dated January 1, 1996
3(b) Bylaws, as Amended January 1, 1996
27 Financial Data Schedule
No Current Report on Form 8-K was filed during the three months ended March 31,
1996.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST SUNAMERICA NATIONAL LIFE INSURANCE COMPANY
Date: May 14, 1996 By:/s/ SCOTT L. ROBINSON
- ----------------------- ------------------------
Scott L. Robinson
Senior Vice President, Treasurer and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ SCOTT L. ROBINSON Senior Vice President, May 14, 1996
- ------------------------ Treasurer and Director ------------
Scott L. Robinson (Principal Financial
Officer)
/s/ N. SCOTT GILLIS Senior Vice President and May 14, 1996
- ------------------------ Controller (Principal ------------
N. Scott Gillis Accounting Officer)
21
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
LIST OF EXHIBITS FILED
Exhibit
No. Description
- ------- -----------
3(a) Certificate of Amendment of Charter dated January 1, 1996
3(b) Bylaws, as Amended January 1, 1996
27 Financial Data Schedule
BY-LAWS
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
(formerly The Capitol Life Insurance Company of New York)
As Amended January 1, 1996
______
ARTICLE I
STOCKHOLDERS' MEETING
SECTION 1. Annual Meeting. The annual meeting of the
stockholders for the election of the directors and for the transaction of
such other business as may come before such meeting shall be held on the
fourth Tuesday in June of each year.
SECTION 2. Special Meetings. Special meetings of the
stockholders may be called by the Secretary upon written request of the
Chairman of the Board, the President, or of three directors. At a special
meeting, no business will be transacted and no corporate action shall be
taken other than that stated in the notice of the meeting except with the
unanimous consent, either in person or by proxy, of all the stockholders
entitled to vote with respect to such business.
SECTION 3. Place of Meetings. All meetings of the
stockholders shall be held at the office of the Company in New York City, or
at such other place or places within or without the State of New York as
shall from time to time be designated by the board of directors.
SECTION 4. Notice of Meetings. Notice of all meetings,
annual or special, shall be given by mailing to each stockholder entitled to
vote thereat, at least ten days and not more than 50 days before such
meeting, a written or printed notice of the time, place and purpose or
purposes thereof. Any notice of meeting which has as one of its purposes the
election of directors shall be filed in the office of the Superintendent of
Insurance of the State of New York at least 10 days prior to the date of any
such meeting.
SECTION 5. Quorum. The holders of a majority of the
outstanding stock entitled to vote at any meeting represented in person or by
proxy, shall constitute a quorum for all purposes. In the absence of a
quorum, the stockholders entitled to vote thereat, represented in person or
by proxy, may adjourn the meeting to a day certain.
SECTION 6. Voting. At all meetings of stockholders each share of
stock held by a stockholder entitled to vote on any matter, represented in
person or by proxy, shall be entitled to one vote, provided, however, that no
stockholder shall vote his stock within one year after the date of
acquisition thereof or until 10 days after written notice of acquisition
thereof has been filed with the Superintendent of Insurance of the State of
New York, whichever shall first occur. Proxies shall be in writing and shall
be signed by the stockholder. Two inspectors of election shall be appointed
by the Chairman at any stockholders' meeting at which inspectors are
required.
SECTION 7. Written Consent. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting by the
written consent thereto of the stockholders, setting forth such action and
signed by the holders of all the outstanding shares entitled to vote thereon.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number, Authority and Qualifications. The
business and property of the Company shall be conducted and managed by a
board of directors consisting of not less than thirteen nor more than
nineteen directors. The number of directors shall be determined by vote of
the stockholders at the annual meeting and until the first such meeting, the
number of directors shall be fourteen. The number of directors determined by
the stockholders at any annual meeting may be increased or decreased, within
the limits prescribed in this section, by vote of the stockholders or the
whole board of directors.
At all times a majority of the directors shall be citizens and
residents of the United States, not less than one-third of the directors
shall be persons who are not officers of employees of the Company or of any
entity controlling, controlled by, or under common control with the Company
and who are not beneficial owners of a controlling interest in the voting
stock of the Company or any such entity ("Non-Affiliates"), and not fewer
than three directors shall be residents of the State of New York. Directors
shall be at least eighteen years of age but need not be stockholders.
SECTION 2. Election and Removal. The board of directors shall
be elected at the annual meeting of stockholders to serve until the next
annual meeting and until their successors shall be elected and qualify. Any
or all of the directors may be removed, with or without cause, by vote of the
stockholders.
SECTION 3. Vacancies. Whenever any vacancy shall occur in the
office of a director, such vacancy may be filled for the unexpired term by
vote of the stockholders or by majority vote of the remaining directors.
Where the number of directors is increased, additional directors may be
elected by the stockholders or by the board of directors. No director
elected pursuant to this section shall take office or exercise the duties
thereof until 10 days after written notice of his election shall have been
filed in the office of the Superintendent of Insurance of the State of New
York.
SECTION 4. Regular Meetings. Regular meetings of the board
of directors shall be held immediately following the annual meeting of the
stockholders and at such intervals and on such dates as the board may
designate.
SECTION 5. Special Meetings. Special meetings of the board
of directors may be called by order of the Chairman of the Board, the
President or upon the written request of any two members of the board.
SECTION 6. Place of Meeting. Meetings of the board of
directors shall be held at the office of the Company in New York City or at
such other place within or without the State of New York as may be designated
in the notice thereof.
SECTION 7. Notice of Meetings. Notice of all regular or
special meetings, other than the regular meeting held immediately following
the annual meeting of stockholders, shall be given by mailing to each
director at least three days before such meeting, a written or printed notice
of the time and place thereof. Such notice may also be given by telegram or
personal delivery at least one day before such meeting.
SECTION 8. Business Transacted at Meetings. No business and
no corporate action shall be considered at any special meeting of the board
of directors (other than that stated in any notice of such meeting) except by
the unanimous vote of all the directors present at such meeting.
SECTION 9. Quorum. A quorum shall consist of not less than a
majority of the directors then in office, provided, that a quorum must
include at least one Non-Affiliate.
SECTION 10. Action by the Board. Subject to the provisions of
Article X, Sections 4 and 5 hereof, any reference to corporate action to be
taken by the board of directors shall mean such action at a meeting of the
board. The vote of a majority of the directors present at the time of the
vote, if a quorum is present at such time, shall be the act of the board.
SECTION 11. Compensation. The compensation of directors shall be
regulated and determined by the stockholders. Nothing herein contained shall
be construed to preclude any director from serving the Company in any other
capacity, provided that no director who is also an officer of the Company
shall receive any fee for serving as a director of the Company.
<PAGE>
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1. Membership. The board of directors by a majority
vote of the whole board may elect from its own number an Executive Committee,
to serve at the pleasure of the board, consisting of at least five members,
one-third of which are Non-Affiliates. The Executive Committee shall elect
from among its members a Chairman and a Secretary.
SECTION 2. Powers of the Executive Committee. The Executive
Committee during the intervals between meetings of the board of directors
shall have and may exercise, except as otherwise provided by statute, all the
powers of the board with respect to the conduct and management of the
business and property of the Company and shall have power to authorize the
seal of the Company to be affixed to all papers which may require it.
SECTION 3. Meetings. Meetings of the Executive Committee may
be called by order of the Chairman of the Committee or of any two members of
the Committee. The Committee shall prepare regular minutes of the
transactions at its meetings and shall cause them to be recorded in books
kept for that purpose. All actions of the Committee shall be reported to the
board of directors at its next meeting succeeding the date of such action.
SECTION 4. Place of Meetings. Meetings of the Executive
Committee shall be held at the office of the Company in New York City or at
such other place, within or without the State of New York, as may be
designated in the notice thereof.
SECTION 5. Notice of Meetings. Notice of all meetings shall
be given by mailing to each member at least three days before such meeting,
a written or printed notice of the time and place thereof. Such notice may
also be given by telegram or personal delivery at least one day before such
meeting.
SECTION 6. Quorum. A quorum shall consist of a majority of
the total number of members of the Committee then in office and shall include
at least one member who is a Non-Affiliate .
ARTICLE IV
FINANCE COMMITTEE
SECTION 1. Membership. The board of directors by a majority
vote of the whole board may elect from its own number a Finance Committee to
serve at the pleasure of the board, consisting of at least five members,
one-third of which are Non-Affilliates the number to be determined by the
board of directors. The Finance Committee shall elect from among its
members a Chairman and a Secretary.
SECTION 2. Powers of the Finance Committee. The Finance
Committee shall possess and may exercise all the powers of the board of
directors with respect to the investments of the funds of the Company.
SECTION 3. Meetings. Meetings of the Finance Committee may be
called by order of the Chairman of the Committee or by any two members of the
Committee. The Committee shall prepare regular minutes of the transactions
at its meetings and shall cause them to be recorded in books kept for that
purpose. All actions of the Committee shall be reported to the board of
directors at its next meeting succeeding the date of such action.
SECTION 4. Place of Meeting. Meetings of the Finance
Committee shall be held at the office of the Company in New York City or at
such other place within or without the State of New York as may be designated
in the notice thereof.
SECTION 5. Notice of Meetings. Notice of all meetings shall
be given by mailing to each member at least three days before such meeting,
a written or printed notice of the time and place thereof. Such notice may
also be given by telegram or personal delivery at least one day before such
meeting.
<PAGE>
SECTION 6. Quorum. A quorum shall consist of a majority of
the total number of members of the Committee then in office and shall
include at least one member who is a Non-Affiliate.
ARTICLE V
AUDIT COMMITTEE
SECTION 1. Membership. The board of directors by a majority
vote of the whole board shall elect from its own number an Audit Committee to
serve at the pleasure of the board, consisting of at least five members, all
of which are Non-Affiliates. The Audit Committee shall elect from among its
members a Chairman and a Secretary.
Section 2. Powers of the Audit Committee. The Audit Committee
shall possess and have responsibility for recommending the selection of
independent certified public accountants, reviewing the Company's, financial
condition, the scope and results of the independent audit and any internal
audit, nominating candidates for director for election by shareholders or
policyholders, and evaluating the performance of officers deemed by the Audit
committee to be principal officers of the Company and recommending to the
whole board the selection and compensation of such principal officers.
Section 3. Meetings. Meetings of the Audit Committee may be
called by order of the Chairman of the Committee or by any two members of the
Committee . The Committee shall prepare regular minutes of the transactions
at its meetings and shall cause them to be recorded in books kept for that
purpose. All actions of the Committee shall be reported to the board of
directors at its next meeting succeeding the date of such action.
Section 4. Place of Meeting. Meetings of the Audit Committee
shall be held at the office of this Corporation in New York City or at such
other place within or without the State of New York as may be designated in
the notice thereof.
Section 5. Notice Of Meeting. Notice of all meetings shall be
given by mailing to each member at least three days before such meeting, a
written or printed notice of the time and place thereof. Such notice may
also be given by telegram or personal delivery at least one day before such
meeting.
Section 6. Quorum. A quorum shall consist of a majority of the
total number of members of the Committee then in office.
ARTICLE VI
OFFICERS
SECTION 1. Duties in General. All officers of the Company, in
addition to the duties prescribed by the by-laws, shall perform such duties
in the conduct and management of the business and property of the Company as
may be determined by the board of directors. In the case of more than one
person holding an office of the same title, any of them may perform the
duties of the office except insofar as the board of directors, the Chairman
of the Board, or the President may otherwise direct.
SECTION 2. Number of Designation. The officers of the Company
shall be a Chairman of the Board, a President, one or more Vice Presidents,
a Secretary, a Treasurer, one or more Assistant Secretaries, one or more
Assistant Treasurer, and one or more Assistant Vice Presidents, and such
other officers as the board of directors may from time to time deem
advisable.
SECTION 3. Election and Term of Office. All officers shall be
elected annually by the board of directors at the meeting of the board held
immediately following the annual meeting of stockholders and shall hold
office at the pleasure of the board until their successors shall have been
duly elected and qualify. The board of directors shall also have the power
at any time and from time to time to elect or appoint or delegate its power
to appoint, any additional officers not then elected, and any such officer so
elected or appointed shall serve at the pleasure of the board until the next
annual meeting of stockholders and until their respective successors shall be
elected, appointed or qualified. A vacancy in any office resulting from
death, resignation, removal, disqualification or from any other cause, shall
be filled for the balance of the unexpired term by the board of directors at
a meeting called for that purpose, or at any regular meeting, or, if such
office had been filled prior to such vacancy by appointment other than by the
board, by the committee or person making such appointment.
<PAGE>
SECTION 4. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the board of directors and
he shall perform such other duties as from time to time may be assigned to
him by the board of directors.
SECTION 5. President. The President, in the absence of the
Chairman of the Board, shall preside at all meetings of the stockholders and
of the board of directors. He shall be the chief executive officer and
chief operating officer of the Company in charge of the day-to-day operations
of the Company.
SECTION 6. Vice Presidents. The Vice Presidents shall have
such powers and perform such duties as may be assigned to them from time to
time by the board of directors, the Chairman of the Board or the President.
The board of directors, the Chairman of the Board or the President may from
time to time determine the order of priority as between two or more Vice
Presidents.
SECTION 7. Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders, of the board of directors, of the Executive
Committee and of the Finance Committee; shall issue notices of meetings;
shall have custody of the Company's seal and corporate books and records;
shall have charge of the issuance, transfer and cancellation of stock
certificates; shall have authority to attest and affix the corporate seal to
any instruments executed on behalf of the Company; and shall perform such
other duties as are incident to his office and as are required by the board
of directors, the Chairman of the Board or the President.
SECTION 8. Treasurer. The Treasurer shall perform the duties
incident to his office and such other duties as are required of him by the
board of directors, the Chairman of the Board or the President.
SECTION 9. Other Officers. Other officers who may from time to time
be elected by the board of directors shall have such powers and perform such
duties as may be assigned to them by the board of directors, the Chairman of
the Board or the President.
SECTION 10. Compensation. The compensation of the officers shall
be fixed by the board of directors.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Certificates. Every stockholder shall be entitled to a
certificate signed by the Chairman of the Board, the President or the Vice
President and by the Secretary or Assistant Secretary or the Treasurer or
Assistant Treasurer and under the seal of the Company, certifying the number
of shares and class of stock to which he is entitled. When any such
certificate is signed by a transfer agent or by a transfer clerk and by a
registrar, the signature of the Company's officers and the Company's seal
upon the certificate may be facsimiles, engraved or printed.
SECTION 2. Transfer. Transfers of stock may be made on the books
of the Company only by the holder thereof in person or by his attorney duly
authorized thereto in writing and upon surrender and cancellation of the
certificate therefor duly endorsed or accompanied by a duly executed stock
power.
SECTION 3. Lost or Destroyed Certificates. The board of directors
may order a new certificate to be issued in place of a certificate lost or
destroyed upon proof of such loss or destruction and upon tender to the
Company by the stockholder of a bond in such amount and in such form and with
or without surety as may be ordered, indemnifying the Company against any
liability, claim, loss, cost or damage by reason of such loss or destruction
and the issuance of a new certificate.
<PAGE>
ARTICLE VIII
DIVIDENDS
Dividends may be declared from the legally available surplus of the
Company at such times and in such amounts as the board of directors may
determine.
ARTICLE IX
CORPORATE FUNDS AND SECURITIES
SECTION 1. Deposits of Funds. Bills, notes, checks,
negotiable instruments or any other evidence of indebtedness payable to and
received by the Company may be endorsed for deposit to the credit of the
Company by such officers or agents of the Company as the board of directors
or Executive Committee may determine and, when authorized by the board of
directors or Executive Committee may be endorsed for deposit to the credit of
agents of the Company in such manner as the board of directors or Executive
Committee may direct.
SECTION 2. Withdrawals of Funds. All disbursements of the
funds of the Company shall be made by check, draft or other order signed by
such officers or agents of the Company as the board of directors or the
Executive Committee may from time to time authorize to sign the same.
SECTION 3. Sale and Transfer of Securities. All sales and
transfers of securities shall be made by any member of the Executive
Committee or Finance Committee or by any officer of the Company under
authority granted by a resolution of the board of directors, the Executive
Committee or the Finance Committee.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1. Voting Stock of Other Corporations. The Chairman
of the Board, the President, any Vice President or any other officer
designated by the board of directors of the Company may execute in the name
of the Company and affix the corporate seal to any proxy or power of attorney
authorizing the proxy or proxies or attorney or attorneys named therein to
vote the stock of any corporation held by this Company on any matter on which
such stock may be voted. If any stock owned by this Company is held in any
name other than the name of this Company, instructions as to the manner in
which such stock is to be voted on behalf of this Company may be given to the
holder of record by the Chairman of the Board, the President, any Vice
President, or any other officer designated by the board of directors.
SECTION 2. Notices. Any notice under these by-laws may be
given by mail by depositing the same in a post office or postal letter box or
postal mail chute in a sealed post-paid wrapper addressed to the person
entitled thereto at his address as the same appears upon the books or
records of the Company or at such other address as may be designated by such
person in a written instrument filed with the Secretary of the Company prior
to the sending of such notice, except that notices which may be given by
telegram or personal delivery may be telegraphed or delivered, as the case
may be, to such person at such address; and such notice shall be deemed to be
given at the time such notice is mailed, telegraphed, or delivered
personally.
SECTION 3. Waiver of Notice. Any stockholder, director or
member of the Executive Committee of the board of directors may at any time
waive any notice required to be given in writing or by telegram either
before, at or after the meeting to which it relates. Presence at a meeting
shall also constitute a waiver of such notice thereof unless the person
entitled to such notice objects to the failure to give such notice.
SECTION 4. Action Without a Meeting. Unless otherwise
restricted by the Charter or these Bylaws, any action required or permitted
to be taken at any meeting of the board of directors or any committee
thereof, may be taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of the proceedings of the board or
committee.
<PAGE>
SECTION 5. Participation in Meeting by Telephone. Any one or
more members of the board of directors or any committee thereof may
participate in a meeting of the board or of such committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at such
meeting.
ARTICLE XI
AMENDMENTS
The Bylaws may be amended in whole or in part by the vote of a
majority of all of the stockholders or the vote of all the members of the
board of directors.
The undersigned certifies that the foregoing is a true and complete
copy of the Bylaws of First SunAmerica Life Insurance Company with all
amendments to the date of this certificate.
Dated: January 1, 1996
/s/ LORIN M. FIFE
----------------------------------------
Lorin M. Fife
Assistant Secretary
First SunAmerica Life Insurance Company
January 8, 1996
<PAGE>
FIRST SUNAMERICA LIFE INSURANCE COMPANY
10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not Applicable.
Item 2. Changes in Securities
----------------------
Not Applicable.
Item 3. Defaults Upon Senior Securities
--------------------------------
Not Applicable.
Item 4. Submissions of Matters to a Vote of Security Holders
-----------------------------------------------------
Not Applicable.
Item 5. Other Information
-----------------
Not Appplicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
No exhibits are filed with this report and no Current Report on Form 8-K
was filed during the three months ended December 3,1 1995.
EXHIBITS
Exhibit No.
- -----------
3(i) Certificate of Amendment of Charter dated January 1, 1996
(ii) Bylaws, as Amended January 1, 1996
March 12, 1996
Ms. Virginia Puzon
Corporate Paralegal
SunAmerica Inc.
P.O. Box 54197
Los Angeles, CA 90054-0197
RE: First SunAmerica Life Insurance Company
Charter Amendment and Amended By-Laws
Dear Ms. Puzon:
The Certificate of Amendment of Charter of First SunAmerica Life
Insurance Company specifying the date of the annual meeting of shareholders
has been approved and placed on file with this Department as of February 27,
1996.
Enclosed is a certified copy of the Certificate of Amendment of
Charter of First SunAmerica Life Insurance Company to be filed in the office
of the New York County Clerk. Proof of the filing must be returned to this
office.
The certified copy of the Amended By-Laws of the First SunAmerica
Life Insurance Company specifying the date of the annual meeting of
shareholders has also been approved and placed on file with this Department
as of February 27, 1996.
We acknowledge receipt of a check in the amount of $10.00 in payment
of the charter filing fee.
Very truly yours,
/s/ NANCY E. SCHOEP
Nancy E. Schoep
Senior Attorney
Office of General Counsel
Albany Office
NES:td
<PAGE>
SHORT CERTIFICATE
STATE OF NEW YORK
INSURANCE DEPARTMENT
EDWARD J. MUHL
SUPERINTENDENT OF INSURANCE
It is hereby certified that the annexed copy of the Certificate of Amendment
of Charter of FIRST SUNAMERICA LIFE INSURANCE COMPANY, of New York, New York,
approved under Section 1206 of the Insurance Law,
has been compared with the original on file in this Department and that it is
a correct transcript therefrom and of the whole of said original.
SEAL In Witness Whereof, I have hereunto set
my hand and affixed the official seal of
this Department at the City of Albany, this
27th day of February 1996.
/s/ FRANK M. D'AMICO
Special Deputy Superintendent
<PAGE>
CERTIFICATE OF AMENDMENT OF CHARTER
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
UNDER SECTION 1206 OF THE INSURANCE LAW
FIRST: The name of the corporation is FIRST SUNAMERICA LIFE INSURANCE
COMPANY (the "Corporation"). The Corporation was formerly known as The
Capitol Life Insurance Company of New York.
SECOND:The Charter of the Corporation was filed with the office of the
Superintendent of Insurance of the State of New York on December 5, 1978.
THIRD: The amendment to the Charter affected by this Certificate is to amend
the first sentence of Section 6 to bring the provision relating to annual
meeting of shareholders into line with the current Bylaw of the Corporation.
FOURTH:In order to effect such amendment, the first sentence of Section 6
of the Charter of the Corporation is amended to read as follows:
Section 6. The annual meeting of the stockholders of
the corporation shall be held on the fourth Tuesday of June of
each year for the purpose of electing directors and for the
transaction of such other business as may properly be brought
before the meeting.
FIFTH: The foregoing amendment of the Charter of the Corporation was
authorized by resolution of the Board of Directors of the Corporation,
followed by the written consent of the holder of all of the outstanding
shares of the Corporation entitled to vote on said amendment.
IN WITNESS WHEREOF, we have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and
correct.
Dated: January 1, 1996
FIRST SUNAMERICA LIFE INSURANCE COMPANY
/s/ ELI BROAD
By:------------------------------------
Eli Broad
President
/s/ SUSAN L. HARRIS
By:------------------------------------
Susan L. Harris
Secretary
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT OF FIRST SUNAMERICA LIFE
INSURANCE COMPANY'S FORM 10-Q FOR THE SIX MONTHS ENDED MARCH 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 130,033,000
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 45,000
<MORTGAGE> 4,717,000
<REAL-ESTATE> 0
<TOTAL-INVEST> 136,903,000
<CASH> 2,108,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 8,796,000
<TOTAL-ASSETS> 193,102,000
<POLICY-LOSSES> 123,586,000
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 3,000,000
0
0
<OTHER-SE> 19,209,000
<TOTAL-LIABILITY-AND-EQUITY> 193,102,000
0
<INVESTMENT-INCOME> 4,696,000
<INVESTMENT-GAINS> (528,000)
<OTHER-INCOME> 271,000
<BENEFITS> 3,361,000
<UNDERWRITING-AMORTIZATION> 252,000
<UNDERWRITING-OTHER> (36,000)
<INCOME-PRETAX> 140,000
<INCOME-TAX> 49,000
<INCOME-CONTINUING> 91,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 91,000
<EPS-PRIMARY> 0
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