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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission file number 1-2964
TRANSAMERICA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0932740
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 983-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock--$1 Par Value New York Stock Exchange
Pacific Stock Exchange
Preference Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Depositary shares representing an New York Stock Exchange
interest in Preferred Stock - Series D
9-1/8% Cumulative Monthly Income New York Stock Exchange
Preferred Securities, Series A*
*Issued by Transamerica Delaware, LP, and
guaranteed by Transamerica Corporation
Securities registered pursuant to section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
Aggregate market value of Common Stock, $1 par value, held by nonaffil-
iates of the registrant as of the close of business at February 28, 1995:
$3,777,377,854.
Number of shares of Common Stock, $1 par value, outstanding as of the
close of business on February 28, 1995: 69,180,828.
Documents incorporated by reference:
Portions of the Transamerica Corporation 1994 Annual Report to
Shareholders are incorporated by reference into Parts I and II. With the
exception of those portions which are incorporated by reference, the Trans-
america Corporation 1994 Annual Report is not deemed filed as part of this
Report.
Portions of the Proxy Statement of Transamerica Corporation dated
March 17, 1995 are incorporated by reference into Part III. (A definitive
proxy statement has been filed with the Commission since the close of the
fiscal year.)
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TABLE OF CONTENTS
Page
____
Part I:
Item 1. Business ................................................. 3
Item 2. Properties ............................................... 21
Item 3. Legal Proceedings ........................................ 22
Item 4. Submission of Matters to a Vote of Securities Holders .... 22
Item 4A. Executive Officers of the Registrant ..................... 22
Part II:
Item 5. Market for Registrant's Common Equity and Related Stock-
holder Matters ........................................... 22
Item 6. Selected Financial Data .................................. 22
Item 7. Management's Discussion and Analysis of Financial Condi-
tion and Results of Operations ........................... 23
Item 8. Financial Statements and Supplementary Data .............. 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................... 23
Part III:
Item 10. Directors and Executive Officers of the Registrant ....... 23
Item 11. Executive Compensation ................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management ............................................... 26
Item 13. Certain Relationships and Related Transactions ........... 26
Part IV:
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ................................................. 26
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PART I
ITEM I. BUSINESS
Transamerica Corporation is a financial services organization which
engages through its subsidiaries in consumer lending, commercial lending,
leasing, life insurance, real estate services and asset management.
Transamerica was incorporated in Delaware in 1928.
On March 15, 1994, Transamerica acquired substantially all the operating
assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based
transportation equipment rental company, including certain dry cargo
containers, tank containers, tank chassis, operating leases and other assets
(collectively the "Container Operations") for $1,061,441,000 in cash.
Transamerica assumed certain specified liabilities of the Container Operations
including trade accounts payable. Transamerica did not assume any borrowings,
tax liabilities or contingent liabilities of Tiphook. The initial financing
of the acquisition was provided through short-term bank loans which have been
repaid and refinanced with long-term debt.
On April 13, 1994, Transamerica sold its remaining 21% ownership interest
in Sedgwick Group plc. Proceeds from the sale were $326,395,000, resulted in
no gain or loss and were used by Transamerica to purchase 4,500,000 shares of
its common stock and reduce debt.
On December 21, 1994, Transamerica sold its mutual fund subsidiary,
Transamerica Fund Management Company, for gross proceeds of $100,000,000. The
transaction resulted in an after tax gain of $4,857,000.
In 1993 Transamerica sold its former property and casualty insurance
subsidiary, Transamerica Insurance Group, through an initial public offering
in April 1993 and a secondary offering in December 1993. Proceeds from the
sales of stock, after underwriting discounts and issuance costs, totaled
$1,031,788,000. The proceeds were used to reduce indebtedness, including
$409,296,000 incurred to fund cash transactions with the property and casualty
insurance operation in connection with the initial public offering, and to
commence a common stock purchase program.
On July 17, 1990, Transamerica Corporation acquired FIFSI, Inc. (dba NOVA
Financial Services), a consumer lending subsidiary of First Interstate
Bancorp, for $117,455,000 in cash and the assumption of $445,400,000 of
liabilities. The transaction was accounted for as a purchase and the
operations of NOVA Financial Services have been included in the consolidated
statement of income from the date of acquisition.
Information concerning Transamerica's investment portfolio is
incorporated herein by reference to "Investment Portfolio" on pages 60 and 61
and "Note E. Financial Instruments" on pages 70 through 75 of the Transamerica
Corporation 1994 Annual Report.
BUSINESS SEGMENT INFORMATION
"Note G. Business Segment Information" on page 77 of the Transamerica
Corporation 1994 Annual Report is incorporated herein by reference.
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The business activities of Transamerica's principal subsidiaries are
more fully described below.
FINANCE
The Corporation's finance services are provided by Transamerica Finance
Group, Inc. ("Transamerica Finance Group"), which conducts the consumer
lending, commercial lending and leasing operations.
During 1990 Transamerica Finance Group entered into a five-year
arrangement in which it securitized a $375,000,000 participation interest in a
pool of its insurance premium finance receivables. The company also
securitized $430,000,000 of residential real estate secured consumer finance
receivables in 1990, none of which were outstanding at December 31, 1994.
These securitizations, which have been accounted for as sales, allowed
Transamerica Finance Group to improve its capital management and liquidity.
At December 31, 1994, $375,000,000 of securitized insurance premium finance
receivables remained outstanding. The consumer and commercial lending
operations continued to service these portfolios and remained partially at
risk through limited recourse provisions as long as such receivables remained
outstanding. The term "owned and serviced" is used herein to describe
Transamerica Finance Group's receivables portfolio and the securitized
receivables.
Consumer Lending
Transamerica Finance Group's consumer lending services are provided by
Transamerica Financial Services, based in Los Angeles, California, which has
568 branch lending offices. Branch offices are located in the United States
(549 in 41 states), Canada (13) and the United Kingdom (6). The consumer
lending operation makes both real estate secured and unsecured loans to
individuals. Customers typically borrow to consolidate debt, finance home
remodeling, pay for their children's college educations, make major purchases,
take vacations, and for other personal uses.
The consumer lending operation offers three principal loan products:
fixed rate real estate secured loans, revolving real estate secured lines of
credit and personal loans. The company's primary business is making fixed
rate home equity loans that generally range up to $200,000. Of the company's
net finance receivables outstanding at December 31, 1994, 81% are secured by
residential properties. Of the company's net finance receivables secured by
residential properties, 64% are secured by first mortgages. Company policy
generally limits the amount of cash advanced on any one loan, plus any
existing mortgage, to between 70% and 80% (depending on location) of the
appraised value of the mortgaged property, as determined by qualified
independent appraisers at the time of loan origination. Since 1991, the
consumer lending operation has continued to broaden its receivable portfolio
by expanding its revolving real estate secured lines of credit, its unsecured
personal loan business and its purchase from dealers of retail finance
contracts covering principally appliances, furniture and services.
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The following table sets forth certain statistical information relating
to the consumer lending operation's finance receivables for the years
indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
______________________________________________________________
1994 1993 1992 1991 1990
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Volume of finance receivables
acquired:
Instalment loans:
Secured by residential
real estate(1) .............. $1,708,806 $1,039,394 $1,120,549 $1,308,941 $1,800,204
Other(2) ...................... 623,619 524,241 436,521 310,607 276,240
__________ __________ __________ __________ __________
2,332,425 1,563,635 1,557,070 1,619,548 2,076,444
Other finance receivables(3) .... 72,708 29,181 4,843 5,310 5,773
__________ __________ __________ __________ __________
Total ....................... $2,405,133 $1,592,816 $1,561,913 $1,624,858 $2,082,217
========== ========== ========== ========== ==========
Finance receivables outstanding
at end of year:
Instalment loans:
Secured by residential
real estate(1) .............. $3,522,966 $3,295,346 $3,353,918 $3,357,842 $3,053,210
Other(2) ...................... 758,798 595,284 482,819 334,304 291,248
__________ __________ __________ __________ __________
4,281,764 3,890,630 3,836,737 3,692,146 3,344,458
Other finance receivables(3) .... 58,197 22,276 6,355 7,503 9,193
__________ __________ __________ __________ __________
4,339,961 3,912,906 3,843,092 3,699,649 3,353,651
Less unearned finance charges
and insurance premiums ........ 197,975 185,150 181,554 170,135 156,798
__________ __________ __________ __________ __________
Net finance receivables - owned . 4,141,986 3,727,756 3,661,538 3,529,514 3,196,853
Net finance receivables securi-
tized, sold and serviced(4) ... 59,437 125,832 233,474 394,597
__________ __________ __________ __________ __________
Net finance receivables owned
and serviced .................. $4,141,986 $3,787,193 $3,787,370 $3,762,988 $3,591,450
========== ========== ========== ========== ==========
Allowance for losses at end of
year(5) ......................... $ 117,218 $ 107,175 $ 107,183 $ 107,235 $ 102,349
Ratio to outstandings less
unearned finance charges and
insurance premiums:
Owned ........................... 2.83% 2.83% 2.83% 2.85% 2.85%
Owned and serviced .............. 2.83% 2.83% 2.83% 2.85% 2.85%
Provision for credit losses
charged to income ............... $ 82,230 $ 63,946 $ 48,897 $ 42,214 $ 35,617
Credit losses (net of recoveries):
Real estate secured instalment
loans(6) ...................... $ 46,910 $ 45,229 $ 29,250 $ 24,217 $ 20,143
Non-real estate secured
receivables(7) ................ 28,350 19,201 16,424 9,670 5,642
Ratio to average net finance
receivables outstanding(8):
Owned ........................... 1.93% 1.68% 1.21% 0.98% 0.79%
Owned and serviced .............. 1.93% 1.69% 1.21% 0.92% 0.79%
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<FN>
_______
(1) The 1994 increase was mainly due to favorable results from new real
estate loan products and an improving real estate market other than in
California. The 1994 volume also included $117,000,000 of purchased
receivables. The 1993 and 1992 decreases were mainly due to sluggishness in
the domestic economy and a weak real estate market, particularly in
California. Volume includes $491,236,000 in 1990 related to the purchase of
NOVA Financial Services on July 17, 1990 (real estate - $458,650,000, other -
$32,586,000).
(2) The increases since 1990 reflect general expansion in consumer
lending's program of non-real estate secured loans.
(3) The increases in 1994 and 1993 resulted from expansion in the
retail finance contract business, which consists of purchasing retail finance
contracts from dealers principally on appliances, furniture and services. The
1994 volume included $7,855,000 of purchased contracts.
(4) In December 1990, $430,000,000 of real estate secured receivables
were securitized and accounted for as a sale. These receivables were
completely run off in 1994.
(5) The 1993, 1992, 1991 and 1990 amounts included an allowance for
losses of $1,680,000, $3,561,000, $6,654,000 and $11,239,000 on the
securitized, sold and serviced portfolio. These amounts are reported in other
liabilities in the consolidated balance sheet. The decreases were due to
credit losses sustained and the runoff, completed in 1994, of the securitized
receivables.
(6) The increases since 1990 resulted mainly from the continued weak
California real estate market. With the adoption in the fourth quarter of
1992 of a required new accounting rule, losses on the disposal of repossessed
assets, which amounted to $7,314,000 in 1994, $5,952,000 in 1993 and
$3,021,000 in 1992 were classified as operating expenses rather than as
credit losses. Data for periods prior to the fourth quarter of 1992 have not
been reclassified.
(7) The increases since 1990 were caused by growth in the related
receivables outstanding and, through 1993, by sluggishness in the domestic
economy.
(8) The changes in ratios were due to corresponding fluctuations in
credit losses (see notes 6 and 7 above).
</TABLE>
_____________________
Delinquent Receivables. The following table shows the ratio of consumer
finance receivables which are contractually past due 60 days or more to
finance receivables outstanding for each category and in total for the years
indicated:
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As of December 31,
_____________________________________
1994 1993 1992 1991 1990
Instalment loans:
Secured by residential real
estate ..................... 1.78% 1.87% 1.85% 1.73% 1.48%
Other(1) ..................... 3.35 2.71 2.00 2.19 2.09
_____ _____ _____ _____ _____
Total instalment loans ....... 2.06 2.00 1.87 1.77 1.53
Other finance receivables ...... 3.65 3.96 0.09 0.14
_____ _____ _____ _____ _____
Total - owned ................ 2.08 2.01 1.87 1.77 1.53
Securitized, sold and serviced . 2.47 2.15 1.95 1.17
_____ _____ _____ _____ _____
Total owned and serviced(2) .. 2.08% 2.02% 1.87% 1.78% 1.49%
===== ===== ===== ===== =====
_______
(1) The increase in 1994 reflects the changing mix of products in the
portfolio and the introduction of new products with higher delinquency
experience.
(2) The increases through 1993 were principally due to the sluggishness
in the domestic economy and, in particular, the weakening in the California
real estate market.
________________
Accounts in Foreclosure and Repossessed Assets. Generally, by the time
an account secured by residential real estate becomes past due 90 days,
foreclosure proceedings have begun, at which time the account is moved from
finance receivables to other assets and is written down to the estimated
realizable value of the collateral if less than the account balance. After
foreclosure, repossessed assets are carried at the lower of cost or fair
value less estimated selling costs. Accounts in foreclosure and repossessed
assets held for sale totaled $226,119,000 at December 31, 1994 compared to
$214,665,000 at December 31, 1993. The increase primarily reflects higher
inventory in California due to California's continuing weak real estate market
and resultant longer disposal times. Since future improvement may be impacted
by factors such as economic conditions and the state of the real estate
market, the extent and timing of any change in the trend of foreclosures and
repossessed assets remains uncertain.
Commercial Lending
Transamerica Finance Group's commercial lending services are provided by
three core business units: inventory finance, business credit and insurance
premium finance. The commercial lending business operates from its base in
Chicago, Illinois, as well as from 42 branch lending offices. Branch offices
are located in the United States (19), Puerto Rico (13), Canada (5) and Europe
(5). The lending activities of these core businesses are discussed below.
Inventory finance (also known as wholesale financing or floor plan
financing) consists principally of financing dealers' purchases from
distributors or manufacturers of goods for inventory. The products financed
primarily include boats and other recreational equipment, television and
stereo equipment, major appliances such as refrigerators, washers, dryers and
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air conditioners, and manufactured housing. Loan terms typically provide for
repayment within 30 days following sale of the inventory by the borrower.
After initial review of a borrower's credit worthiness, the ongoing management
of credit risk in this area may include various monitoring techniques, such
as periodic physical inventory checks and review of the borrower's sales, as
well as maintenance of repurchase agreements with manufacturers which provides
a degree of security in the event of slow moving or obsolete inventory.
Business credit consists of secured loans, primarily revolving, to
manufacturers, distributors and selected service businesses, including
financial service companies. The loans are collateralized and consist of
credit lines typically from $5 million to $25 million with terms ranging from
three to five years. Actual borrowings are limited to specified percentages
of the borrower's inventory, receivables and other eligible collateral which
are regularly monitored to ascertain that receivables outstanding are within
approved limits and that the borrower is otherwise in compliance with the
terms of the arrangement. The loans to financial service companies are
secured by their respective finance receivable portfolios. The commercial
lending operation manages its credit risk in this area by monitoring the
quality of the borrower's loan portfolio and compliance with financial
covenants.
Insurance premium finance involves the financing of insurance premiums
for businesses, generally at fixed rates for terms of less than one year. The
receivables are secured by the commercial lending operation's right to cause
the policies to be canceled and receive the unearned premiums. Credit risk is
managed by requiring down payments from borrowers to mitigate the effects of
possible delays in receiving unearned premiums in the event of policy
cancellation and by monitoring the concentrations of potential return premiums
among the insurance carriers and their financial condition.
The relatively short-term nature of the company's financings enables the
commercial lending operation to adjust its finance charges in response to
competitive factors and changes in its costs. The interest rates at which the
commercial lending operation borrows funds generally move more quickly than
the rates at which it lends to customers. As a result, in rising interest
rate environments, margins are normally compressed until changes in the prime
lending rates are effected. Conversely, in declining interest rate
environments, margins are generally enhanced. The commercial lending
operation did not experience margin compression in the rising interest rate
environment of 1994 primarily due to the rapid pace at which changes in its
lending rates responded to other rate changes during the year.
In 1994, the commercial lending operation sold its U.S. and Canadian
repossessed rent-to-own stores with a net carrying value of $17,666,000 and
in 1990, sold its automobile fleet leasing operation which included
$45,478,000 in finance receivables. Also in 1990, $375,000,000 of insurance
premium finance receivables were securitized and accounted for as a sale.
In 1992, the commercial lending operation purchased for cash a business
credit portfolio consisting of twelve manufacturer/distributor accounts with a
net outstanding balance of $134,000,000. In 1991, an inventory finance
portfolio, which comprised lending arrangements with over 700 manufactured
housing and recreational product dealers with a net balance outstanding of
$290,604,000, was purchased for cash. These transactions were funded with
short-term debt.
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The following table sets forth certain statistical information relating
to the commercial lending operation's finance receivables for the years
indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
__________________________________________________________________
1994 1993 1992 1991 1990
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Volume of finance receivables
acquired:
Inventory finance(1) ............ $ 7,347,448 $ 6,773,720 $ 6,225,899 $5,570,486 $ 6,029,587
Business credit(2) .............. 6,602,199 3,696,180 2,023,010 2,000,434 2,407,304
Insurance premium finance(3) .... 1,813,157 1,967,242 1,732,615 1,761,820 1,452,742
___________ ___________ ___________ __________ ___________
Core businesses ............... 15,762,804 12,437,142 9,981,524 9,332,740 9,889,633
Other(4) ........................ 74,860 170,705 427,909 84,139 194,338
___________ ___________ ___________ __________ ___________
Total ......................... $15,837,664 $12,607,847 $10,409,433 $9,416,879 $10,083,971
=========== =========== =========== ========== ===========
Finance receivables outstanding
at end of year:
Inventory finance(5) ............ $ 2,078,519 $ 1,959,757 $ 1,873,895 $1,928,670 $ 1,872,191
Business credit(6)(7) ........... 654,966 553,859 575,984 288,776 968,216
Insurance premium finance(8) .... 277,358 354,322 284,738 323,958 218,622
___________ ___________ ___________ __________ ___________
Core businesses ............... 3,010,843 2,867,938 2,734,617 2,541,404 3,059,029
Other(9) ........................ 75,262 127,687 208,866 481,272 403,647
___________ ___________ ___________ __________ ___________
3,086,105 2,995,625 2,943,483 3,022,676 3,462,676
Less unearned finance charges ... 50,264 55,644 68,401 82,219 100,419
___________ ___________ ___________ __________ ___________
Net finance receivables - owned . 3,035,841 2,939,981 2,875,082 2,940,457 3,362,257
Net finance receivables securi-
tized, sold and serviced(10) .. 374,461 374,512 374,478 374,169 373,973
___________ ___________ ___________ __________ ___________
Net finance receivables owned
and serviced .................. $ 3,410,302 $ 3,314,493 $ 3,249,560 $3,314,626 $ 3,736,230
=========== =========== =========== ========== ===========
Allowance for losses at end of
year(11)(12)(13)............... $ 90,669 $ 80,668 $ 91,263 $ 172,718 $ 102,748
Ratio to outstandings less
unearned finance charges:(13)
Owned ........................... 2.96% 2.71% 3.14% 5.84% 3.03%
Owned and serviced .............. 2.66% 2.43% 2.81% 5.21% 2.75%
Provision for credit losses
charged to income(12) ........... $ 18,320 $ 33,098 $ 41,816 $ 248,472 $ 133,364
Credit losses (net of
recoveries)(14) ................. $ 8,805 $ 43,515 $ 121,137 $ 176,138 $ 100,638
Ratio to average net finance
receivables outstanding:(15)
Owned ........................... 0.29% 1.49% 4.18% 5.82% 2.68%
Owned and serviced .............. 0.26% 1.32% 3.71% 5.18% 2.57%
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<FN>
_______
(1) The increases in 1994 and 1993 reflect the overall improvement in
the economy and increased sales and marketing programs. Volume in 1991
includes $290,604,000 related to the purchase of lending arrangements with
manufactured housing and recreational products dealers.
(2) The increases in 1994 and 1993 primarily reflect a shift in focus
from purchasing participations from other financial institutions to
originating and selling participations in loans. As a result, volume and
collections have increased. The 1992 amount includes $134,000,000 related to
the purchase of a manufacturer/distributor business credit portfolio.
(3) The decrease in 1994 primarily reflects increased market competition
and the weak property and casualty insurance market. The increase in 1993
reflects the overall improvement in the economy and increased sales and
marketing programs.
(4) The 1994 and 1993 decreases were due to reduced receivable levels in
the liquidating portfolios. The 1992 increase mainly reflects additional
borrowings by customers in certain asset based lending lines, which were
reclassified to the "other" category in 1991 (see note 6), prior to
implementation or completion of work-out or liquidation arrangements. The
decline in 1991 was due to the sale of the automobile fleet leasing operation
in 1990.
(5) The 1994 increase was due to increased volume in both consumer
electronics and appliances, and home and recreational products. The 1993
increase was due to the increased volume, primarily in home and recreational
products. The 1992 decrease was mainly due to faster paying customers
resulting from implementation of stronger portfolio management procedures and
efforts by certain borrowers to decrease the time that they hold inventory by
using "just in time" delivery arrangements.
(6) In 1991, the company decided to exit the rent-to-own finance
business and reduce lending to certain asset based lending lines (formerly
included in business credit) resulting in the reclassification at December 31,
1991 of net rent-to-own finance receivables totaling $221,247,000 to assets
held for sale, which are included in other assets in the consolidated balance
sheet, and the transfer of other receivables totaling $206,931,000 from
business credit to the "other" category set forth under finance receivables
outstanding. Prior year data have not been restated.
(7) The 1994 increase resulted from a higher level of new business
during the year. The 1992 increase includes the purchase of a $134,000,000
manufacturer/distributor business credit portfolio. The 1991 decrease was due
principally to the reduction in rent-to-own finance receivables resulting from
the de-emphasis during the year, repossession of rent-to-own stores, and the
eventual decision to exit the business and to reduce lending to certain asset
based lending lines (see note 6 regarding reclassification of receivables
outstanding at December 31, 1991).
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(8) The 1994 decrease was due to reduced volume particularly late in the
year. The 1993 increase was due to the increased volume. The 1992 decrease
was due to a change in funding arrangements with one major customer.
(9) The decreases since 1991 primarily reflect the liquidation of
receivables from businesses being exited, including write offs in 1994, 1993
and 1992 of $367,000, $18,403,000 and $87,406,000. The 1991 increase was due
to the reclassification of receivables to be liquidated resulting from the
company's decision to reduce lending to certain asset based lending lines (see
notes 6 and 7).
(10) In 1990, $375,000,000 of insurance premium finance receivables were
securitized and accounted for as a sale. The amounts of securitized
receivables outstanding at year end are shown in the table under the caption
"Net finance receivables securitized, sold and serviced."
(11) Includes $938,000 of allowance for losses on the securitized, sold
and serviced portfolio at each year end which is reported in other liabilities
in the consolidated balance sheet.
(12) The 1991 provision and allowance for losses at December 31, 1991
included $62,816,000 recorded as part of the special charge recognized as a
result of the company's decision to reduce lending to certain asset based
lending lines and to liquidate receivables remaining from previously sold
businesses (see notes 6 and 7). The increased provision in 1991, excluding
the special charge, was in response to increased credit losses and higher than
normal delinquencies and nonearning receivables associated with the weak U.S.
and Canadian economies.
(13) The 1994 increase in the allowance for losses was primarily
attributable to receivables growth in the core businesses. The 1993 and 1992
reductions in the allowance for losses as a percentage of receivables
outstanding were attributable primarily to the write off of delinquent and
nonearning receivables in 1993 and 1992, and to lower levels of delinquent and
nonearning accounts in the remaining portfolio at December 31, 1993 and 1992.
In 1991, the percentages were increased principally due to the decision to
reduce lending to certain asset based lending lines and to liquidate
receivables remaining from previously sold businesses (see note 12).
(14) In 1994, 1993 and 1992, charges to the allowance for losses on
finance receivables due to credit losses sustained decreased $34,710,000
(80%), $77,622,000 (64%) and $55,001,000 (31%). These decreases were caused
mainly by decreases in delinquent and nonearning receivables resulting from
improved economic conditions and stronger portfolio management procedures
implemented in 1992 and the reclassification of certain receivables to assets
held for sale in 1991. In 1991, credit losses increased $75,500,000 (75%)
principally as a result of the depressed appliance and furniture rental and
Canadian computer markets associated with the general downturn in the U.S.
and Canadian economies.
(15) The changes in ratios were due to corresponding fluctuations in
credit losses (see note 14).
</TABLE>
_____________________
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Delinquent Receivables. Effective in 1993, the policy used for
determining delinquent receivables was revised to provide greater consistency
among the commercial lending operation's receivable portfolios. It is
management's view that the new methodology provides a better and more
meaningful assessment of the condition of the portfolios. Delinquent
receivables are now defined as the instalment balance for inventory finance
and business credit receivables and the receivable balance for all other
receivables over 60 days past due. Previously, delinquent receivables were
generally defined as financed inventory sold but unpaid 30 days or more, the
portion of business credit loans in excess of the approved lending limit and
all other receivable balances contractually past due 60 days or more.
The following table shows the ratio of delinquent commercial finance
receivables to finance receivables outstanding for each category and in total
as of the end of each of the years indicated. Delinquency ratios for 1992 and
prior years have not been restated for the change in policy outlined above.
As of December 31,
______________________________________
1994 1993 1992 1991 1990
Inventory finance(1) ........... 0.11% 0.13% 0.82% 1.31% 3.42%
Business credit(1)(2) .......... - - 0.21 0.88 10.34
Insurance premium finance ...... 0.51 0.54 0.57 1.03 2.02
______ ______ ______ ______ ______
Core businesses .............. 0.12 0.15 0.66 1.22 5.51
Other(3) ....................... 20.63 19.14 22.42 25.84 12.79
______ ______ ______ ______ ______
Total - owned ............... 0.62% 0.96% 2.21% 5.14% 6.36%
====== ====== ====== ====== ======
Total owned and serviced ..... 0.55% 0.86% 1.96% 4.57% 5.76%
====== ====== ====== ====== ======
_______
(1) The decreases in 1992 and 1991 reflect write offs of delinquent
accounts (and accounting reclassifications - see note 2), implementation of
stronger portfolio management procedures and general improvement in the
economy.
(2) The decline in 1991 was due principally to rent-to-own finance
receivables being reclassified to assets held for sale, and certain finance
receivables being reclassified to the "other" category. These
reclassifications resulted from the company's decision to exit the rent-to-own
finance business and reduce its lending to certain asset based lending lines.
Delinquency data exclude rent-to-own finance receivables which have been
reclassified to assets held for sale. The 1990 data have not been restated.
(3) Represents finance receivables retained from businesses sold or
exited which are being liquidated and receivables reclassified in 1991 due to
the company's decision to reduce lending to certain asset based lending lines
(see note 2).
_____________________
<PAGE>
Page 13
Nonearning Receivables. Effective in 1993, the policy used for
determining nonearning receivables was revised to provide greater consistency
among the commercial lending operation's receivable portfolios. It is
management's view that the new methodology provides a better and more
meaningful assessment of the condition of the portfolios. Nonearning
receivables are now defined as balances from borrowers that are over 90 days
delinquent or at such earlier time as full collectibility becomes doubtful.
Previously, nonearning receivables were defined as balances from borrowers in
bankruptcy or litigation and other accounts for which full collectibility was
doubtful. Accrual of finance charges is suspended on nonearning receivables
until such time as past due amounts are collected. Nonearning receivables
were $23,276,000 (0.75% of receivables outstanding) and $33,617,000 (1.12% of
receivables outstanding) at December 31, 1994 and 1993. Those amounts exclude
nonearning rent-to-own finance receivables which have been reclassified to
assets held for sale.
Assets Held for Sale. Assets held for sale at December 31, 1994 totaled
$10,908,000, net of a $65,086,000 valuation allowance, and consisted of rent-
to-own finance receivables of $72,381,000 and repossessed assets of
$3,613,000. In 1994, the commercial lending operation sold its U.S. and
Canadian repossessed rent-to-own stores. Assets held for sale at December 31,
1993 totaled $90,114,000, net of a $156,985,000 valuation allowance, and
comprised rent-to-own finance receivables of $120,469,000, repossessed rent-
to-own stores of $107,227,000 and other repossessed assets of $19,403,000. At
December 31, 1994, $24,495,000 of the rent-to-own finance receivables were
classified as both delinquent and nonearning compared to $27,489,000 at
December 31, 1993.
Leasing
Transamerica Leasing Inc. leases, services and manages containers,
chassis and trailers around the world. The leasing operation is based in
Purchase, New York and maintains 564 offices, depots and other facilities in
50 countries. The company specializes in intermodal transportation equipment,
which allows goods to travel by road, rail or ship. The company's customers
include railroads, steamship lines and motor carriers.
On March 15, 1994, the leasing operation purchased substantially all of
the assets of the container rental businesses of Tiphook plc for
$1,061,441,000. The acquired fleet of standard containers and tank containers
totaled 363,000 units.
In November 1992, the leasing operation sold its domestic over-the-road
trailer business. Proceeds from the sale, which resulted in no gain or loss,
totaled $191,000,000 and were used to reduce debt.
At December 31, 1994, the leasing operation's fleet consisted of standard
containers, refrigerated containers, domestic containers, tank containers and
chassis totaling 685,400 units which are owned or managed, and leased from 526
depots worldwide; 39,300 rail trailers leased to all major United States
railroads and to roll on/roll off steamship operators, shippers, shippers'
agents and regional truckers; and 5,700 over-the-road trailers in Europe.
<PAGE>
Page 14
At December 31, 1994 and 1993, 33% and 49% of the standard container,
refrigerated container, domestic container, tank container and chassis fleet
were on term lease or service contract minimum lease for periods of one to ten
years. Also, at December 31, 1994 and 1993, 33% and 34% of the rail trailer
fleet were on term lease or service contract minimum lease for periods of one
to five years.
The following table sets forth the leasing operation's fleet size, in
units, for the years indicated:
As of December 31,
___________________________________________
1994 1993 1992 1991 1990
Containers and chassis(1) 685,400 316,000 280,000 255,100 244,400
Rail trailers ............ 39,300 36,500 34,400 36,800 40,500
European trailers ........ 5,700 3,800 2,900 1,700 800
_______
(1) The 1994 increase was largely due to the acquisition of
substantially all of the operating assets of the container operations of
Tiphook plc and the acquisition of new standard and refrigerated containers.
___________________
The following table sets forth the leasing operation's fleet utilization
for the years indicated:
Years Ended December 31,
____________________________
1994 1993 1992 1991 1990
Containers and chassis(1) ..... 81% 83% 85% 89% 90%
Rail trailers(2) .............. 92% 91% 84% 75% 79%
European trailers(3) .......... 96% 89% 84% 83% 81%
_______
(1) The 1994 and 1993 declines were due to slow economic growth in key
European economies and Japan and, in 1994, the impact of the Tiphook fleet
acquisition. The 1992 decline was due to a higher than expected industry-wide
supply of equipment. The 1991 reduction resulted from a small decline in the
rate of growth of world trade and a less favorable geographic balance of
business.
(2) The 1994, 1993 and 1992 increases were primarily due to higher
domestic economic activity and because many shippers continued to move from
trucks to rail transport for long-haul shipments and, in 1993 and 1992, due to
a smaller industry fleet. The 1991 decline was due to reduced domestic
economic activity.
(3) The 1994 and 1993 increases were due to a greater number of units on
long term lease and improvement in the economy of the United Kingdom.
_____________________
<PAGE>
Page 15
LIFE INSURANCE
Transamerica's life insurance business is conducted by Transamerica
Occidental Life Insurance Company, Transamerica Life Insurance and Annuity
Company, First Transamerica Life Insurance Company, Transamerica Life
Insurance Company of Canada and Transamerica Assurance Company (hereinafter
collectively referred to as "Transamerica Life Companies"). The Transamerica
Life Companies are primarily engaged in the business of underwriting,
distribution and reinsurance of investment based and traditional life
insurance products in all states of the United States, the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, Canada, Taiwan and Hong Kong.
<PAGE>
Page 16
The following table sets forth certain statistical information relating
to the Transamerica Life Companies' operations.
<TABLE>
<CAPTION>
Years Ended December 31,
____________________________________________________________________
1994 1993 1992 1991 1990
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Insurance in force at
end of period:(1)(2)
Whole life and endowment .... $153,162,434 $150,151,065 $139,475,971 $126,118,638 $122,179,305
Individual term life ........ 187,841,222 172,441,372 160,517,919 156,996,821 145,177,179
Group life(3) ............... 9,630,184 7,838,176 6,252,910 4,656,433 3,062,966
Credit life(4) .............. 132,619 200,787 521,645 1,080,571 2,237,421
____________ ____________ ____________ ____________ ____________
Total ..................... $350,766,459 $330,631,400 $306,768,445 $288,852,463 $272,656,871
============ ============ ============ ============ ============
New insurance written:(2)
Whole life and endowment(5) . $ 23,056,708 $ 29,303,712 $ 28,265,139 $ 25,182,326 $ 25,679,301
Individual term life(6) ..... 37,823,218 46,724,456 41,235,278 36,385,130 39,867,771
Group life(3) ............... 2,369,123 2,057,706 2,002,644 1,273,166 2,518,760
Credit life(4) .............. 449 1,462 5,276 83,394
____________ ____________ ____________ ____________ ____________
Total ..................... $ 63,249,049 $ 78,086,323 $ 71,504,523 $ 62,845,898 $ 68,149,226
============ ============ ============ ============ ============
Premium income:(7)
Individual life and annui-
ties(8) ................... $ 599,948 $ 543,580 $ 490,357 $ 481,606 $ 524,630
Group life and annuities(9) . 137,913 95,004 104,087 165,318 120,722
Credit life(4) .............. (3,201)
Accident and health (individ-
ual, group and credit)(10) 280,587 227,640 219,285 62,977 48,259
____________ ____________ ____________ ____________ ____________
Total ..................... $ 1,018,448 $ 866,224 $ 813,729 $ 709,901 $ 690,410
============ ============ ============ ============ ============
Average individual life policy
in force at end of year
(actual dollar amounts) ..... $ 149,064 $ 144,050 $ 138,015 $ 129,141 $ 121,600
Average individual life policy
issued during year (actual
dollar amounts)(11) ......... $ 243,634 $ 247,944 $ 245,394 $ 217,637 $ 204,463
Number of individual life
policies in force at end of
year ........................ 1,221,765 1,200,076 1,171,616 1,141,154 1,147,077
Ratio of underwriting expenses
to premiums and other consid-
erations(12) ................ 8.7% 8.9% 9.2% 9.3% 9.1%
Lapse ratio--adjusted for de-
creases and expiries of
term insurance and rein-
surance assumed:(13)
Transamerica Life Companies . 8.0% 8.9% 9.2% 11.0% 11.9%
All U.S. stock life insur-
ance companies(14) ........ (15) 9.8% 9.9% 10.4% 11.0%
<PAGE>
Page 17
<FN>
_______
(1) The annual change in insurance in force results from additions for
new insurance written less reductions from terminations. Approximately 70% to
80% of terminations in all years were voluntary (from lapse or surrender) with
the remaining amount caused by deaths and other decreases by contract.
(2) Reinsurance assumed has been included, except for intercompany
amounts. Reinsurance ceded has not been deducted.
(3) The increases through 1994 were due to sales of insurance through
salary deduction plans offered by employers.
(4) The company discontinued this line of business in 1988 causing the
large decreases in insurance in force and new insurance written since that
time. In 1990, the company transferred the remaining operations of the credit
insurance line to a trust administered by an independent third party.
Insurance in force represents business which is only cancelable at the
policyholder's request. New insurance written in 1990, 1991, 1992 and 1993
represents added business on existing policies.
(5) The 1994 decrease was due to reduced sales of Trendsetter policies.
The 1993 and 1992 increases were attributable to increased marketing efforts.
In the first quarter of 1991, the company sold its United Kingdom subsidiary
which is the primary reason for the 1991 decrease.
(6) The 1994 and 1991 decreases were due primarily to a reduced level
of reinsurance assumed. The 1993 and 1992 increases were due primarily to an
increased level of promotion efforts via direct marketing.
(7) Premiums on reinsurance assumed have been included; cancellations
and return premiums and premiums on reinsurance ceded have been deducted.
Considerations for supplementary contracts and deposit administration funds
received have not been included.
(8) The 1994, 1993 and 1992 increases were due primarily to increased
sales of individual annuity policies. In the first quarter of 1991, the
company sold its United Kingdom subsidiary which is the primary reason for
the 1991 decrease.
(9) The changes were due primarily to changing levels of sales of group
annuity policies, principally single premium pension contracts.
(10) The 1994, 1993 and 1992 increases were primarily due to an increased
level of reinsurance assumed.
(11) The 1994 decrease was primarily due to lower face amounts of
universal life products. The 1993, 1992 and 1991 increases were primarily due
to higher face amounts of universal life products.
(12) The ratio is the percentage of salaries and other operating expenses
to premiums and other considerations.
(13) The lapse ratio is calculated in accordance with the A.M. Best
Company, Inc. formula. It is the ratio of amounts of ordinary life insurance
terminated during the year to ordinary life insurance in force at the
beginning of the year plus new business issued during the prior year.
<PAGE>
Page 18
(14) Industry median, as provided by A.M. Best Company, Inc.
(15) Information not yet available for 1994.
</TABLE>
_____________________
Transamerica Life Companies' individual life insurance business is
generated through a system of 597 field sales offices primarily in the United
States and Canada, 47 of which are branch offices operated by employees and
the remainder of which are independent offices operated by independent general
agents. These offices house a sales force consisting of 70 employees of the
Transamerica Life Companies and approximately 2,000 independent agents
operating under contract on an exclusive or near exclusive basis, which
together generated approximately 36% of new premiums written in 1994. The
remaining 64% of the Transamerica Life Companies' individual life insurance
business was generated by more than 19,700 producing independent insurance
brokers operating under nonexclusive contracts.
In addition to its sales force, the Transamerica Life Companies have
approximately 2,400 home office employees in Los Angeles, California, Kansas
City, Missouri and Charlotte, North Carolina who service outstanding policies
and new business submitted by agency offices, and more than 350 field sales
office employees serving its sales force.
Of life insurance in force at December 31, 1994, 21.4% was on residents
of California, followed by Texas (6.0%), Illinois (5.3%), Florida (3.8%), New
York (3.7%) and Pennsylvania (3.3%). No other state accounted for more than
3% of life insurance in force. Canada accounted for 13.7% and all other
foreign operations accounted for 0.9% of life insurance in force.
Reinsurance. Portions of the Transamerica Life Companies' life insurance
risks are reinsured with other companies. The maximum amount of individual
insurance retained on any one life is $2,000,000 at ages 16 to 65 inclusive.
This maximum is reduced for health impairments, for other ages and for certain
other special classes of risks. The Transamerica Life Companies also reinsure
a minor part of their liability under accident and health policies.
For many years the Transamerica Life Companies have solicited life
reinsurance from other companies. As of December 31, 1994, the company was
accepting business from 519 companies under automatic reinsurance agreements
and from many other companies on a case by case basis.
Reserves. In accordance with the life insurance laws and regulations
under which they operate, the Transamerica Life Companies are required to
carry on their books as liabilities actuarial reserves to meet the obligations
on their various life insurance policies. Such life insurance reserves are
calculated pursuant to mortality and annuity tables in general use in the
United States and Canada and are the computed amounts which, with additions
from premiums to be received, and with interest on such reserves compounded
annually at certain assumed rates, will be sufficient to meet the Transamerica
Life Companies' policy obligations at their maturities if deaths occur in
accordance with mortality tables employed.
<PAGE>
Page 19
Investments. The Transamerica Life Companies' investments at
December 31, 1994 totaled $22,329,072,000 which was invested as follows: 94.1%
in fixed maturities; 2.2% in mortgage loans and real estate; 1.8% in policy
loans; 0.8% in common stocks; 0.7% in short-term investments; 0.2% in
nonredeemable preferred stocks; 0.2% in other long-term investments; and less
than 0.1% in redeemable preferred stocks. Fixed maturities are invested as
follows: 51.2% in industrial and other non-government bonds; 28.9% in United
States government bonds; 17.9% in public utility bonds; 1.0% in foreign
government bonds; and 1.0% in municipal bonds.
The following table sets forth pretax mean investment yields, including
interest earned and dividends received, before (gross) and after (net)
deducting investment expenses for the Transamerica Life Companies' various
investments. The yields are computed based on the mean of beginning and end
of year assets, producing results which vary somewhat from the daily average
yield.
<TABLE>
<CAPTION>
Years Ended December 31,
____________________________________
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Fixed maturities, at amortized cost--gross(1) 8.26% 9.16% 9.43% 9.91% 10.17%
Equity securities, at market value--gross(2) 2.87 2.96 1.95 3.89 2.72
Mortgages--gross ............................ 10.70 10.53 9.50 9.86 9.96
Total invested assets:
Gross ..................................... 8.08 8.81 9.03 9.38 9.71
Net ....................................... 7.90% 8.67% 8.87% 9.27% 9.53%
<FN>
_______
(1) The decreases reflect the lower yields on new investments.
(2) The decrease in the 1992 yield resulted from an increase in the
market value of the portfolio. The increase in 1991 was due to a shift in mix
to preferred stocks, which have higher returns.
</TABLE>
_____________________
REAL ESTATE SERVICES AND ASSET MANAGEMENT
Real estate services comprise real estate tax, realty and other services.
Transamerica Real Estate Tax Service, a division of Transamerica
Corporation, prepares tax payments and reports and conducts tax searches with
respect to real property taxes and assessments, issues flood hazard
determinations in all 50 states, and provides real property information
services in several states. It also provides customers with information
through an on-line computer system. As of December 31, 1994, tax reports were
generated for more than 3,000 institutional mortgage servicers and their
borrowers. The company operates from 35 offices throughout the United States.
<PAGE>
Page 20
The following table sets forth the number of tax service contracts under
management at the end of the years indicated and new tax service contracts
written during those years:
1994 1993 1992 1991 1990
(Amounts in thousands)
Tax service contracts
under management ....... 16,694 15,496 14,751 13,712 12,835
New tax service contracts 4,581 5,103 3,870 2,668 2,544
Transamerica Realty Services, Inc. owns and manages real estate in
various communities. Transamerica Realty Services, Inc. also provides real
estate services to other subsidiaries of the Corporation, including asset and
property management of real estate held for investment principally by the
Corporation's life insurance subsidiaries.
Transamerica Asset Management, in 1994, operated through its two
subsidiaries, Criterion Investment Management Company and Transamerica Fund
Management Company. Transamerica Fund Management Company was sold on
December 21, 1994, for gross proceeds of $100,000,000 which resulted in an
after tax gain of $4,857,000. Criterion Investment Management Company is an
investment advisor to public and private retirement funds. Assets under the
management of Criterion Investment Management Company were $9,972,000,000,
$10,588,000,000 and $9,990,000,000 at December 31, 1994, 1993 and 1992. On
March 17, 1995, Transamerica announced it had entered into an agreement to
sell the assets of Criterion Investment Management Company. The sale is
expected to result in a small gain.
REGULATION
Finance Activities
Transamerica Finance Group's consumer lending and commercial lending
operations are subject to various state and federal laws. Depending upon the
type of lending, these laws may require licensing and certain disclosures and
may limit the amounts, terms and interest rates that may be offered.
Insurance Activities
The Corporation's life insurance business, in common with those of other
companies in this industry, are subject to regulation and supervision in the
states, territories and countries in which they operate. Although the extent
of such regulation varies, in general state laws establish supervisory
agencies with broad powers relating to licensing of insurance companies and
their agents to transact business therein, supervising premium rates and forms
of policies used, and regulating the form and content of required financial
statements and the types of investments that may be made. Insurance companies
are also required to file annual reports with the supervisory agencies in
states in which they do business and are subject to periodic examination by
such agencies.
<PAGE>
Page 21
Other Regulations
A number of jurisdictions in which the Corporation's subsidiaries
operate, including California, have adopted laws and regulations imposing
environmental controls on the development of real estate and related business
activities.
EMPLOYEES
The Corporation and its subsidiaries employed approximately 10,800
persons at December 31, 1994.
COMPETITION
The Corporation's subsidiaries operate in highly competitive industries
in virtually all of their activities, in many cases competing with companies
with long established operating histories and substantial financial resources.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings from
continuing operations to fixed charges of Transamerica Corporation and its
subsidiaries for each of the five years ended December 31, 1994.
Years Ended December 31,
________________________________
1994 1993 1992 1991 1990
2.14 2.09 1.90 1.06 1.37
The ratios of earnings from continuing operations to fixed charges were
computed by dividing earnings from continuing operations before fixed charges
and income taxes by the fixed charges. Fixed charges consist of interest and
debt expense and one-third of rent expense, which approximates the interest
factor.
ITEM 2. PROPERTIES
The executive offices of Transamerica Corporation are located in the
Transamerica Pyramid in San Francisco, California, a 48-story office building
owned by a subsidiary of Transamerica. In 1986 the subsidiary borrowed
$85,000,000, secured by a deed of trust on the property for ten years.
Approximately 17% of the 450,000 square feet of rentable space is occupied by
Transamerica and its subsidiaries.
Transamerica Life Companies own the Transamerica Center in Los Angeles,
California, which consists of a 32-story building, an 11-story building and a
10-story building. Transamerica Center is the home office of Transamerica
Life Companies, Transamerica Finance Group and certain other subsidiaries of
Transamerica. Approximately 71% of the 1,295,000 square feet of rentable
space is occupied by Transamerica subsidiaries.
<PAGE>
Page 22
ITEM 3. LEGAL PROCEEDINGS
Various pending or threatened legal proceedings by or against the
Corporation or one or more of its subsidiaries involve tax matters, alleged
breaches of contract, torts, employment discrimination, violations of
antitrust laws and miscellaneous other causes of action arising in the course
of their businesses. Some of these proceedings involve claims for punitive or
treble damages in addition to other specific relief.
Based upon information presently available, and in light of legal and
other defenses and insurance coverage available to the Corporation and its
subsidiaries, contingent liabilities arising from threatened and pending
litigation, income taxes and other matters are not expected to have a material
effect on the consolidated financial position or results of operations of the
Corporation and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
See Item 10 in Part III of this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following information in the Transamerica Corporation 1994 Annual
Report is incorporated herein by reference:
Markets on which the Corporation's common stock is traded--"Common
Stock Listed and Traded," page 88.
High and low sale prices for the Corporation's common stock for each
quarter in 1994 and 1993--"Supplementary Financial Information,"
page 81.
Frequency and amount of cash dividends declared during 1994 and
1993--"Selected Eleven-Year Financial Data--Note E," page 82.
There were approximately 53,200 common stockholders of record as of the
close of business on February 28, 1995.
ITEM 6. SELECTED FINANCIAL DATA
The following items for each of the five years in the period ended
December 31, 1994, included in "Selected Eleven-Year Financial Data" on
pages 82 and 83 of the Transamerica Corporation 1994 Annual Report, are
incorporated herein by reference:
Revenues
Income from continuing operations
Earnings per share of common stock--Income from
continuing operations
Dividends declared per share of common stock
Total assets
Notes and loans payable: Long-term debt
<PAGE>
Page 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The textual information set forth under the caption "Financial Review" on
pages 44 through 61, together with the tables under the headings "Operating
Income by Line of Business" on page 45 and "Unallocated Interest and Other
Expenses" on page 58 of the Transamerica Corporation 1994 Annual Report, are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and supplementary
financial information of the Corporation and its subsidiaries in the
Transamerica Corporation 1994 Annual Report are incorporated herein by
reference:
Consolidated Balance Sheet--December 31, 1994 and 1993--pages 62 and
63.
Consolidated Statement of Income--Years ended December 31, 1994,
1993 and 1992--page 64.
Consolidated Statement of Cash Flows--Years ended December 31,
1994, 1993 and 1992--page 65.
Consolidated Statement of Shareholders' Equity--Years ended
December 31, 1994, 1993 and 1992--page 66.
Notes to Financial Statements--December 31, 1994--pages 67 through
79.
Supplementary Financial Information--Years ended December 31, 1994
and 1993--page 81.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "(1) Election of Directors"
in the Proxy Statement of Transamerica Corporation dated March 17, 1995 is
incorporated herein by reference.
<PAGE>
Page 24
The officers of the Corporation are listed below. Executive officers are
designated by an asterisk.
<TABLE>
<CAPTION>
Name Position Age Name Position Age
____ ________ ___ ____ ________ ___
<S> <C> <C> <S> <C> <C>
Frank C. Herringer* ..... President and Chief 52 Kent L. Colwell* ........ Vice President--Real 64
Executive Officer Estate Services,
David R. Carpenter* ..... Executive Vice President, 55 Transamerica Corpor-
Transamerica Corpor- ation and President,
ation and Chairman Transamerica Realty
and Chief Executive Services, Inc.
Officer, Transamerica James B. Dox ............ Vice President--Taxes 55
Occidental Life David H. Hawkins ........ Vice President, Trans- 54
Insurance Company america Corporation
Richard H. Finn* ........ Executive Vice President, 60 and Senior Vice Presi-
Transamerica Corpor- dent and Treasurer,
ation and President Transamerica Finance
and Chief Executive Group, Inc.
Officer, Transamerica Robert R. Lindberg* ..... Vice President and 54
Finance Group, Inc. Treasurer
Edgar H. Grubb* ......... Executive Vice President, 55 James B. Lockhart ....... Vice President-- 59
Chief Financial Officer Public Affairs
and Secretary William H. McClave ...... Vice President-- 51
Thomas J. Cusack* ....... Senior Vice President 39 Corporate
Richard N. Latzer* ...... Senior Vice President 58 Communications
and Chief Investment Richard J. Olsen ........ Vice President-- 56
Officer, Transamerica Corporate Relations
Corporation and Rona King Pehrson ....... Vice President-- 47
President and Chief Human Resources
Executive Officer, James C. Peirano ........ Vice President 64
Transamerica Invest- Ronald C. Petrunoff ..... Vice President-- 31
ment Services, Inc. Investor Relations
Maureen Breakiron-Evans . Vice President and 40 George B. Sundby ........ Vice President--Financial 43
General Auditor Planning and Analysis
Burton E. Broome* ....... Vice President and 59 and Assistant Controller
Controller Judith M. Tornese ....... Vice President--Risk 52
Management
</TABLE>
<PAGE>
Page 25
Mr. Herringer was elected Chief Executive Officer in 1991. He has been
President of the Corporation since 1986.
Mr. Carpenter was elected Executive Vice President of the Corporation in
1993. He was Group Vice President of the Corporation from 1990 to 1993. He
has been Chairman and Chief Executive Officer of Transamerica Occidental Life
Insurance Company since 1985.
Mr. Finn was elected Executive Vice President of the Corporation in 1993.
He was Group Vice President of the Corporation from 1990 to 1993. He has been
President of Transamerica Finance Group, Inc. since 1988 and was elected its
Chief Executive Officer in 1990.
Mr. Grubb was elected Secretary of the Corporation in 1995. He was
elected Executive Vice President and Chief Financial Officer of the
Corporation in 1993. He was Senior Vice President of the Corporation from
1989 to 1993.
Mr. Cusack was elected Senior Vice President of the Corporation in 1993.
He was Vice President--Corporate Development of the Corporation from 1989 to
1993.
Mr. Latzer was elected Senior Vice President and Chief Investment Officer
of the Corporation in 1988. Since 1988, he has been President and Chief
Executive Officer of Transamerica Investment Services, Inc.
Ms. Breakiron-Evans was elected Vice President and General Auditor of the
Corporation in 1994. She was with Arthur Andersen & Co. from 1980 to 1994
where she served as an Audit Partner in the San Francisco office from 1990 to
1994.
Mr. Broome was elected Vice President and Controller of the Corporation
in 1979.
Mr. Colwell was elected Vice President--Real Estate Services of the
Corporation in 1977. Since 1972, he has been President of Transamerica Realty
Services, Inc., a subsidiary of the Corporation.
Mr. Dox was elected Vice President--Taxes of the Corporation in 1993. He
was a Tax Partner with Ernst & Young LLP from 1977 to 1993, serving in the Los
Angeles office from 1983 to 1993.
Mr. Hawkins was elected Vice President of the Corporation in 1993. He
has been Senior Vice President and Treasurer of Transamerica Finance Group,
Inc. since 1989.
Mr. Lindberg was elected Vice President and Treasurer of the Corporation
in 1987.
Mr. Lockhart was elected Vice President--Public Affairs of the
Corporation in 1979.
Mr. McClave was elected Vice President--Corporate Communications of the
Corporation in 1981.
<PAGE>
Page 26
Mr. Olsen was elected Vice President--Corporate Relations of the
Corporation in 1981.
Ms. Pehrson was elected Vice President--Human Resources of the
Corporation in 1989.
Mr. Peirano was elected Vice President of the Corporation in 1993. He
was Vice President--Taxes of the Corporation from 1983 to 1993.
Mr. Petrunoff was elected Vice President--Investor Relations of the
Corporation in 1994. He held a number of positions within the commercial
lending operation between 1990 and 1994, most recently serving as managing
director of the European operations of commercial lending's inventory finance
unit. He was a marketing manager for GE Capital Corporation from 1989 to
1990.
Mr. Sundby was elected Vice President--Financial Planning and Analysis in
1995. He was Assistant Controller and Director of Accounting of the
Corporation from 1989 to 1995. He continues to serve as Assistant Controller.
Ms. Tornese was elected Vice President--Risk Management of the
Corporation in 1987.
There is no family relationship among any of the foregoing officers or
between any of the foregoing officers and any director of the Corporation.
The information set forth under the caption "Securities Exchange Act of
1934" in the Proxy Statement of Transamerica Corporation dated March 17, 1995
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Director Compensation and
Benefits" and "Executive Compensation and Other Information" in the Proxy
Statement of Transamerica Corporation dated March 17, 1995 is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Principal Stockholders"
and "Stockholdings of Directors and Executive Officers" in the Proxy Statement
of Transamerica Corporation dated March 17, 1995 is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The textual information set forth under the captions "Director
Compensation and Benefits," "Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions" in the Proxy Statement of
Transamerica Corporation dated March 17, 1995 is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report.
<PAGE>
Page 27
(3) List of Exhibits:
EX-3(i) Transamerica Corporation Certificate of Incorporation,
as amended (incorporated by reference to Exhibit 4.5 of
the Registrant's Registration Statement on Form S-3
(File No. 33-43921) as filed with the Commission on
November 13, 1991 and to Exhibits 3 and 4 contained in
Form 8-A filed January 21, 1992, as amended by Form 8
filed January 27, 1992).
EX-3(ii) Transamerica Corporation By-Laws, as amended
(incorporated by reference to Exhibit 3 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended June 30, 1992).
EX-4.1 Stock Purchase Rights Agreement dated as of July 17,
1986 together with Amendment dated January 24, 1991
(incorporated by reference to Exhibit 4.1 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1991).
EX-4.2*
EX-10.1 Form of Non-Qualified Stock Option Agreement under the
Registrant's 1971 and 1979 Non-Qualified Stock Option
Plan (incorporated by reference to Exhibit 10.4 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1988).
EX-10.2 Executive Benefit Plan for Transamerica Corporation and
Affiliates, as amended (incorporated by reference to
Exhibit EX-10.2 of the Registrant's Annual Report on
Form 10-K (File No. 1-2964) for the year ended December
31, 1992).
EX-10.3 Form of Amended and Restated Consulting Agreement
effective January 1, 1994 between Transamerica
Airlines, Inc. and Glenn A. Cramer (incorporated by
reference to Exhibit EX-10.3 of the Registrant's Annual
Report on Form 10-K (File No. 1-2964) for the year
ended December 31, 1993).
EX-10.4 Form of Consulting Agreement dated November 30, 1992,
between Transamerica Corporation and James R. Harvey
(incorporated by reference to Exhibit EX-10.4 of the
Registrant's Annual Report on Form 10-K (File No. 1-
2964) for the year ending December 31, 1992).
_________
*Neither the Corporation nor its subsidiaries are
parties to any instrument with respect to long-term debt for
which securities authorized thereunder exceed 10% of the total
assets of the Corporation and its subsidiaries on a consolidated
basis. Copies of instruments with respect to long-term debt of
lesser amounts will be provided to the Commission upon request.
<PAGE>
Page 28
EX-10.5 Form of Amended and Restated Consulting Agreement dated
January 31, 1994 between Transamerica Corporation and
James R. Harvey (incorporated by reference to Exhibit
EX-10.5 of the Registrant's Annual Report on Form 10-K
(File No. 1-2964) for the year ended December 31,
1993).
EX-10.6 1993 Bonus Plan (incorporated by reference to
Exhibit EX-10.7 of the Registrant's Annual Report on
Form 10-K (File No. 1-2964) for the year ended December
31, 1992).
EX-10.7 1994 Bonus Plan (incorporated by reference to Exhibit
EX-10.1 of the Registrant's Quarterly Report on Form
10-Q (File No. 1-2964) for the quarter ended March 31,
1994).
EX-10.8 1995 Bonus Plan.
EX-10.9 1985 Stock Option and Award Plan, as amended,
(including Amendments No. 1 through 6) (incorporated by
reference to Exhibit EX-10.5 of the Registrant's
Quarterly Report on Form 10-Q (File No. 1-2964) for the
quarter ended March 31, 1994, to Post-Effective
Amendment No. 3 of the Registrant's Registration
Statement on Form S-8 (File No. 33-26317) as filed with
the Commission on March 30, 1990, and to Exhibit 10.11
of the Registrant's Annual Report on Form 10-K (File
No. 1-2964) for the year ended December 31, 1990).
EX-10.10 Form of Non-Qualified Stock Option Agreement under the
Registrant's 1985 Stock Option and Award Plan
(incorporated by reference to Exhibit EX-10.3 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended March 31, 1994).
EX-10.11 Form of Incentive Stock Option Agreement under the
Registrant's 1985 Stock Option and Award Plan
(incorporated by reference to Exhibit 10.9 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1990).
EX-10.12 Form of Restricted Stock Award Agreement under the 1985
Stock Option and Award Plan (incorporated by reference
to Exhibit EX-10.11 of the Registrant's Annual Report
on Form 10-K (File No. 1-2964) for the year ended
December 31, 1993).
EX-10.13 Form of Non-Qualified Stock Option Agreement for
Nonemployee Directors under the 1985 Stock Option and
Award Plan (incorporated by reference to Exhibit EX-
10.4 of the Registrant's Quarterly Report on Form 10-Q
(File No. 1-2964) for the quarter ended March 31,
1994).
<PAGE>
Page 29
EX-10.14 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1987
(incorporated by reference to Exhibit 10.12 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1991).
EX-10.15 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1988
(incorporated by reference to Exhibit EX-10.14 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1992).
EX-10.16 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1989
(incorporated by reference to Exhibit 10.17 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1989).
EX-10.17 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1990
(incorporated by reference to Exhibit 10.18 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1989).
EX-10.18 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective July 1, 1992
(incorporated by reference to Exhibit EX-10.17 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1992).
EX-10.19 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1994
(incorporated by reference to Exhibit EX-10.18 of the
Registrant's Annual Report on Form 10-K (File No. 1-
2964) for the year ended December 31, 1993).
EX-10.20 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1995.
EX-10.21 1971 Non-Qualified Stock Option Plan of Transamerica
Corporation, as amended (including Amendment Nos. 1 and
2) (incorporated by reference to Exhibit EX-10.20 of
the Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1992).
EX-10.22 1979 Stock Option Plan of Transamerica Corporation, as
amended (including Amendment Nos. 1 and 2)
(incorporated by reference to Exhibit EX-10.21 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1992).
<PAGE>
Page 30
EX-10.23 Form of Termination Agreement between Transamerica
Corporation and certain of its executive officers
(incorporated by reference to Exhibit 10.23 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1989).
EX-10.24 Form of Termination Agreement between Transamerica
Corporation and certain officers of certain of its
subsidiaries (incorporated by reference to
Exhibit 10.24 of the Registrant's Annual Report on
Form 10-K (File No. 1-2964) for the year ended
December 31, 1989).
EX-10.25 Form of Termination Agreement between Transamerica
Corporation and certain of its officers and of its
subsidiaries.
EX-10.26 Public Offering Agreement (and Exhibits thereto) dated
January 28, 1993 by and among the Registrant, TIG
Holdings, Inc., and Jon W. Rotenstreich (incorporated
by reference to Exhibits 10.1, 10.2, 10.3, 10.4, 10.5
and 10.6 of the Registration Statement on Form S-1
(File No. 33-58122) as filed with the Commission on
February 10, 1993).
EX-10.27 Separation Agreement (and Exhibits thereto) dated
January 28, 1993 by and among the Registrant, TIG
Holdings, Inc., and Transamerica Insurance Group
(incorporated by reference to Exhibits 3.3, 3.4 and
10.2 of the Registration Statement on Form S-1 (File
No. 33-58122) as filed with the Commission on
February 10, 1993).
EX-10.28 Reinsurance Agreement dated December 31, 1992 by and
between ARC Reinsurance Corporation and Transamerica
Insurance Company, as amended (incorporated by
reference to Exhibit EX-10.26 of the Registrant's
Annual Report on Form 10-K (File No. 1-2964) for the
year ended December 31, 1992).
EX-10.29 Letter dated December 31, 1992 from the Registrant to
Transamerica Insurance Company regarding ARC
Reinsurance Corporation (incorporated by reference to
Exhibit EX-10.27 of the Registrant's Annual Report on
Form 10-K (File No. 1-2964) for the year ended
December 31, 1992).
EX-10.30 Transamerica Corporation 1995 Performance Stock Option
Plan.
EX-10.31 Transamerica Corporation Value Added Incentive Plan
(incorporated by reference to Exhibit EX-10.2 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-1964) for the quarter ended March 31, 1994).
<PAGE>
Page 31
EX-11 Statement Re: Computation of Per Share Earnings.
EX-12 Ratio of Earnings to Fixed Charges Calculation.
EX-13 Portions of the Transamerica Corporation 1994 Annual
Report (to the extent such portions are expressly
incorporated herein).
EX-21 List of Subsidiaries of Transamerica Corporation.
EX-23 Consent of Ernst & Young LLP to the incorporation by
reference of their report dated February 15, 1995 in
the Registrant's Registration Statements on Form S-8
(File Nos. 2-80934, 2-83724, 33-3722, 33-12324,
33-13389, 33-18911, 33-26317, 33-38267, 33-43927 and
33-55587) and on Form S-3 (File Nos. 33-32419,
33-37889, 33-41008 and 33-55047).
EX-24 Power of Attorney executed by the directors of the
Registrant.
EX-27 Financial Data Schedule.
Exhibits will be furnished to shareholders of the
Corporation upon written request and, with the exception of
Exhibit EX-13, upon payment of a fee of 30 cents per page, which
fee covers the Corporation's reasonable expenses in furnishing
such exhibits.
(b) Reports on Form 8-K filed in the fourth quarter of 1994: During the
quarter ended December 31, 1994, the Registrant filed a Report on Form 8-K,
dated October 27, 1994, announcing its results for the quarter and nine month
periods ending September 30, 1994. In addition, the 8-K announced that the
Registrant had initiated a tender offer to purchase up to 6.4 million
depositary shares representing interests in its 8.5% Preferred Stock,
Series D.
(c) Exhibits: Certain of the exhibits listed in Item (a)(3) above have
been submitted under separate filings, as indicated.
(d) Financial Statement Schedules: The response to this portion of
Item 14 is submitted as a separate section of this report.
<PAGE>
Page 32
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TRANSAMERICA CORPORATION
Registrant
Burton E. Broome
Vice President and Controller
Date: March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 27, 1995 by the following persons on
behalf of the registrant and in the capacities indicated.
Signature Title
Principal Executive Officer:
FRANK C. HERRINGER* President and Chief Executive Officer
Principal Financial Officer:
Edgar H. Grubb Executive Vice President, Chief Financial
Officer and Secretary
Principal Accounting Officer:
Burton E. Broome Vice President and Controller
Directors:
SAMUEL L. GINN* Director
JAMES R. HARVEY* Chairman of the Board and Director
FRANK C. HERRINGER* Director
GORDON E. MOORE* Director
RAYMOND F. O'BRIEN* Director
TONI REMBE* Director
CONDOLEEZZA RICE* Director
FORREST N. SHUMWAY* Director
PETER V. UEBERROTH* Director
*Robert D. Myers
Attorney-in-Fact
A majority of the members of the Board of Directors.
<PAGE>
Page 33
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2) and ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
and
FINANCIAL STATEMENT SCHEDULES
Year Ended December 31, 1994
TRANSAMERICA CORPORATION AND SUBSIDIARIES
SAN FRANCISCO, CALIFORNIA
<PAGE>
Page 34
FORM 10-K--ITEM 14(a)(1) AND (2)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements:
The following consolidated financial statements of Transamerica Corpora-
tion and subsidiaries, included in the Transamerica Corporation 1994 Annual
Report, are incorporated by reference in Item 8:
Consolidated Balance Sheet--December 31, 1994 and 1993
Consolidated Statement of Income--Years ended December 31, 1994,
1993 and 1992
Consolidated Statement of Cash Flows--Years ended December 31, 1994,
1993 and 1992
Consolidated Statement of Shareholders' Equity--Years ended
December 31, 1994, 1993 and 1992
Notes to Financial Statements--December 31, 1994
Financial Statement Schedules:
The following consolidated financial statement schedules of Transamerica
Corporation and subsidiaries are included in Item 14(d).
I--Summary of Investments Other Than Investments in Related
Parties--December 31, 1994
II--Condensed Financial Information of Registrant--December 31,
1994 and 1993, and years ended December 31, 1994, 1993 and
1992
III--Supplementary Insurance Information--Years ended December 31,
1994, 1993 and 1992
IV--Reinsurance--Years ended December 31, 1994, 1993 and 1992
V--Valuation and Qualifying Accounts--Years ended December 31,
1994, 1993 and 1992
All other schedules provided for in the applicable accounting regulation
of the Securities and Exchange Commission pertain to items which do not appear
in the financial statements of Transamerica Corporation and subsidiaries or to
items which are not significant or to items as to which the required disclos-
ures have been made elsewhere in the financial statements and supplementary
notes, and such schedules have therefore been omitted.
<PAGE>
Page 35
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Transamerica Corporation
We have audited the consolidated financial statements of Transamerica
Corporation and subsidiaries listed in Item 14(a)(1) and (2) of the Annual
Report on Form 10-K of Transamerica Corporation for the year ended
December 31, 1994. Our audits also included the financial statement
schedules listed in the index at Item 14(a)(1) and (2). These financial
statements and schedules are the responsibility of Transamerica Corporation's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and related
schedules are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements and related schedules. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Transamerica Corporation and subsidiaries at December 31, 1994 and 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material
respects the information set forth therein.
As discussed in Note A to the consolidated financial statements,
Transamerica Corporation changed its method of accounting for certain debt
securities effective January 1, 1994.
Ernst & Young LLP
San Francisco, California
February 15, 1995
<PAGE>
Page 36
<TABLE>
SCHEDULE I
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE I--SUMMARY OF INVESTMENTS OTHER
THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1994
<CAPTION>
Column A Column B Column C Column D
_____________________________________________________________________________________________
Amount at
which shown in
Type of Investment Cost Value the balance sheet
_____________________________________________________________________________________________
(Amounts in thousands)
<S> <C> <C> <C>
Fixed maturities available for sale:
Bonds and notes:
U.S. Treasury securities and obligations of
U.S. government authorities and agencies . $ 224,091 $ 204,609 $ 204,609
Obligations of states and political
subdivisions ............................. 341,895 335,527 335,527
Foreign governments ........................ 211,390 206,573 206,573
Corporate securities ....................... 9,384,415 9,119,602 9,119,602
Mortgage-backed securities ................. 7,792,522 7,367,375 7,367,375
Public utilities ........................... 3,990,051 3,800,162 3,800,162
Redeemable preferred stocks .................. 3,575 3,101 3,101
___________ ___________ ___________
Total fixed maturities ............... 21,947,939 $21,036,949 21,036,949
===========
Equity securities:
Common stocks:
Banks, trust and insurance companies ....... 10,659 $ 10,205 10,205
Industrial, miscellaneous and all other .... 219,423 368,897 368,897
Nonredeemable preferred stocks ............... 45,343 48,084 48,084
___________ ___________ ___________
Total equity securities .............. 275,425 $ 427,186 427,186
===========
Mortgage loans on real estate .................. 377,583 354,104
Real estate .................................... 127,640 101,359
Loans to life insurance policyholders .......... 412,938 412,938
Short-term investments ......................... 163,715 163,715
___________ ___________
Total investments .................... $23,305,240 $22,496,251
=========== ===========
<FN>
_______
The differences between Column B and Column D as to mortgage loans on real estate
and real estate represents write downs and allowances for possible permanent impairment
in value.
</TABLE>
<PAGE>
Page 37
<TABLE>
SCHEDULE II
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
(Amounts in thousands except share data)
BALANCE SHEET
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Assets:
Investments in continuing operations ...................... $3,727,923 $3,916,897
Equity securities at fair value (cost: $108,746 in 1994
and $110,608 in 1993) ................................... 201,870 198,244
Short-term investments .................................... 11,166
Notes and accounts receivable from continuing operations .. 213,657 508,611
Cash and cash equivalents ................................. 2,828 2,096
Other assets .............................................. 264,729 209,447
__________ __________
$4,422,173 $4,835,295
========== ==========
Liabilities and Shareholders' Equity:
Notes and loans payable ................................... $ 506,951 $ 700,130
Income taxes payable, net of deferred tax benefits of
$123,098 in 1994 and $121,587 in 1993 ................... 90,119 43,719
Income taxes due to continuing operations ................. 189,886 27,255
Notes and accounts payable to continuing operations ....... 490,812 346,014
Accounts payable and other liabilities .................... 408,586 354,681
Shareholders' equity:
Preferred Stock ($100 par value):
Authorized--1,200,000 shares; issuable in series
Outstanding--Dutch Auction Rate Transferable
Securities, 2,250 shares, at liquidation preference
of $100,000 per share ............................... 225,000 225,000
Outstanding--Series D, 181,642 shares in 1994 and
400,000 shares in 1993 at liquidation preference of
$500 per share ...................................... 90,821 200,000
Common Stock ($1 par value):
Authorized--150,000,000 shares
Outstanding--69,395,099 shares in 1994 and 76,398,888
shares in 1993, after deducting 10,343,363 and
3,339,574 shares in treasury in 1994 and 1993 ....... 69,395 76,399
Additional paid-in capital .............................. 96,449 475,198
Retained earnings, including equity in undistributed net
income of subsidiaries of $1,934,498 in 1994 and
$1,831,159 in 1993 .................................... 2,557,444 2,297,883
Net unrealized gain (loss) from investments marked to
fair value ............................................ (265,125) 124,082
Foreign currency translation adjustments ................ (38,165) (35,066)
__________ __________
2,735,819 3,363,496
__________ __________
$4,422,173 $4,835,295
========== ==========
<PAGE>
Page 38
<CAPTION>
NOTE TO BALANCE SHEET December 31,
1994 1993
<S> <C> <C>
Notes and loans payable comprise the following amounts:
Short-term bank loans, commercial paper and current
portion of long-term debt ............................... $286,351
Long-term debt due subsequent to one year:
Notes; interest at 9.11% to 9.875%; maturing through 2008 220,600 $445,600
Commercial paper and other notes at various interest
rates and terms supported by credit agreements
expiring through 1996.................................. 254,530
________ ________
$506,951 $700,130
======== ========
<FN>
The aggregate annual maturities for the five years subsequent to December 31,
1994 are: 1995--$286,351; 1996--$10,000; 1997--$5,000; 1998--$100,000; and 1999--
none.
Transamerica hedges a portion of its variable interest rate obligations through
the use of interest rate exchange agreements which call for the payment of fixed rate
interest by Transamerica in return for the assumption by other contracting parties of
the variable rate cost. At December 31, 1994, exchange agreements covering the
notional amount of $160,000 at a weighted average fixed interest rate of 9.36%
expiring through 2009 were outstanding.
In 1994, an affiliate of Transamerica issued $200 million of 9.125% cumulative
Monthly Income Preferred Securities (MIPS). Interest on the outstanding MIPS is
cumulative and payable monthly in arrears. Transamerica has agreed to guarantee to
pay in full any accrued and unpaid dividends declared, or the redemption price
including accrued and unpaid dividends, if the securities are called by the affiliate.
</TABLE>
<PAGE>
Page 39
<TABLE>
SCHEDULE II
(Continued)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
STATEMENT OF INCOME
<CAPTION>
Years Ended December 31,
1994 1993 1992
(Amounts in thousands)
<S> <C> <C> <C>
Revenues:
Dividends from continuing operations ............. $361,847 $115,350 $131,070
Tax service fees ................................. 190,328 236,433 193,734
Interest, principally from continuing operations . 14,151 13,777 16,014
Investment income ................................ 8,988
Gain (loss) on investment transactions ........... 2,012 (5,909)
________ ________ ________
577,326 359,651 340,818
Expenses:
Interest ......................................... 101,992 87,382 98,652
General and administrative ....................... 177,779 170,155 138,701
________ ________ ________
279,771 257,537 237,353
________ ________ ________
297,555 102,114 103,465
Income tax benefit ................................. 26,333 88,747 9,015
________ ________ ________
Income before equity in undistributed income of
continuing operations, income of discontinued
operations and extraordinary loss ................ 323,888 190,861 112,480
Equity in undistributed income of continuing
operations excluding discontinued operations and
extraordinary loss ............................... 104,038 256,658 221,526
________ ________ ________
Income from continuing operations .................. 427,926 447,519 334,006
Loss from discontinued operations .................. (699) (47,022) (90,805)
Extraordinary loss on early extinguishment of
subsidiary debt .................................. (23,084)
________ ________ ________
Net income ..................................... $427,227 $377,413 $243,201
======== ======== ========
NOTE TO STATEMENT OF INCOME
Transamerica has financed a portion of its investment in certain major operating
subsidiaries through borrowings by several other subsidiaries. In recognition of the
cost of these borrowings, unallocated interest, after taxes, discussed on page 58 of
the Transamerica Corporation 1994 Annual Report, comprises:
Years Ended December 31,
1994 1993 1992
(Amounts in thousands)
<S> <C> <C> <C>
Interest expense of Registrant ................... $(101,992) $(87,382) $(98,652)
Interest income of Registrant .................... 14,151 13,777 16,014
_________ ________ ________
(87,841) (73,605) (82,638)
Income tax benefit ............................... 30,744 25,762 28,097
_________ ________ ________
Net interest expense of Registrant, after taxes .. (57,097) (47,843) (54,541)
Net interest expense, after taxes, of certain
subsidiaries ................................... (1,250) (6,257) (6,959)
Intercompany eliminations ........................ 8,147
_________ ________ ________
Unallocated interest, after taxes ............ $ (50,200) $(54,100) $(61,500)
========= ======== ========
</TABLE>
<PAGE>
Page 40
<TABLE>
SCHEDULE II
(Continued)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
STATEMENT OF CASH FLOWS
<CAPTION>
Years Ended December 31,
1994 1993 1992
(Amounts in thousands)
<S> <C> <C> <C>
Operating activities:
Income from continuing operations before extra-
ordinary item ................................... $ 427,926 $ 447,519 $334,006
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization ................... 4,044 4,018 3,665
Accounts payable and other liabilities .......... 48,286 34,720 (24,850)
Income taxes payable, including related accounts
with continuing operations .................... 207,110 (120,424) 23,469
Equity in undistributed income of continuing
operations .................................... (104,038) (256,658) (221,526)
Net (gains) losses on investment transactions ... (2,012) 5,909
_________ _________ ________
Net cash provided by continuing operations .... 581,316 115,084 114,764
Investing activities:
Capital contributions to continuing operations .... (90,000) (54,200) (16,185)
Proceeds from public offering of discontinued
operations ...................................... 1,031,788
Cash transactions with discontinued operations .... (409,296)
Decrease (increase) in accounts with continuing
operations ...................................... 426,205 (137,867) (42,507)
Other ............................................. (61,013) (32,087) 15,519
_________ _________ ________
Net cash provided (used) by investing
activities .................................. 275,192 398,338 (43,173)
Financing activities:
Payments of commercial paper and other notes
supported by long-term credit agreements ........ (93,179) (161,067) (157,388)
Payment of long-term note ......................... (100,000)
Proceeds from sale of preferred stock ............. 193,187
Redemption of preferred stock ..................... (115,921)
Treasury stock purchases .......................... (386,983) (207,647)
Other common stock transactions ................... 7,973 33,618 70,182
Dividends ......................................... (167,666) (179,766) (178,569)
_________ _________ ________
Net cash used by financing activities ......... (855,776) (514,862) (72,588)
_________ _________ ________
Increase (decrease) in cash and cash equivalents .... 732 (1,440) (997)
Cash and cash equivalents at beginning of year .... 2,096 3,536 4,533
_________ _________ ________
Cash and cash equivalents at end of year .......... $ 2,828 $ 2,096 $ 3,536
========= ========= ========
</TABLE>
<PAGE>
Page 41
<TABLE>
SCHEDULE III
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE III--SUPPLEMENTARY INSURANCE INFORMATION
<CAPTION>
Column A Column B Column C Column D Column E Column F
Future policy
Deferred benefits, Other policy
policy losses, claims and
acquisition claims and Unearned benefits Premium
Segment costs loss expenses premiums payable revenue
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Life insurance:
Year ended December 31:
1994 ..................... $2,480,474 (A) $5,153,073 $7,300 $19,571,363 $1,018,448
1993 ..................... $1,929,332 $4,925,855 $6,758 $17,019,213 $ 866,224
1992 ..................... $1,811,992 $4,609,664 $9,213 $14,636,379 $ 813,729
<CAPTION>
Column G Column H Column I Column J Column K
Benefits, Amortization
claims, of deferred
Net losses and policy Other
investment settlement acquisition operating Premiums
income expenses costs expenses written
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Life insurance:
Year ended December 31:
1994 ..................... $1,773,254 $2,356,398 $182,312 (B) $353,916 $280,049 (C)
1993 ..................... $1,725,760 $2,145,865 $232,659 (B) $330,007 $227,833 (C)
1992 ..................... $1,577,637 $2,059,243 $135,286 (B) $315,900 $226,381 (C)
<FN>
_______
(A) Includes a required fair value adjustment of $351,344,000 related to the adoption of Financial
Accounting Standards Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities.
(B) Includes required accelerated amortization of deferred policy acquisition costs associated
with interest-sensitive products due to realized investment gains of $6,279,000 in 1994,
$62,852,000 in 1993 and $33,208,000 in 1992.
(C) Health insurance premiums written.
</TABLE>
<PAGE>
Page 42
<TABLE>
SCHEDULE IV
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE IV--REINSURANCE
<CAPTION>
Column A Column B Column C Column D Column E Column F
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
Segment amount companies companies amount to net
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Life insurance in force ... $191,884,093 $115,037,553 $158,882,366 $235,728,906 67.4%
============ ============ ============ ============
Premium revenue:
Life insurance .......... $ 620,522 $ 394,303 $ 511,642 $ 737,861 69.3%
Accident and health
insurance ............. 8,573 295,311 567,325 280,587 202.2%
____________ ____________ ____________ ____________
$ 629,095 $ 689,614 $ 1,078,967 $ 1,018,448 105.9%
============ ============ ============ ============
Year ended December 31, 1993:
Life insurance in force ... $180,902,966 $ 95,719,350 $149,728,434 $234,912,050 63.7%
============ ============ ============ ============
Premium revenue:
Life insurance .......... $ 808,589 $ 663,959 $ 493,954 $ 638,584 77.4%
Accident and health
insurance ............. 80,469 251,685 398,856 227,640 175.2%
____________ ____________ ____________ ____________
$ 889,058 $ 915,644 $ 892,810 $ 866,224 103.1%
============ ============ ============ ============
Year ended December 31, 1992:
Life insurance in force ... $168,475,016 $ 92,052,408 $138,293,429 $214,716,037 64.4%
============ ============ ============ ============
Premium revenue:
Life insurance .......... $ 881,298 $ 928,817 $ 641,963 $ 594,444 108.0%
Accident and health
insurance ............. 39,633 173,492 353,144 219,285 161.0%
____________ ____________ ____________ ____________
$ 920,931 $ 1,102,309 $ 995,107 $ 813,729 122.3%
============ ============ ============ ============
</TABLE>
<PAGE>
Page 43
<TABLE>
SCHEDULE V
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
----------Additions----------
Balance at Charged to Charged to Balance at
beginning costs and other accounts - Deductions - end of
Description of period expenses describe describe period
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 30,251 $ 197 (C) $ 6,969 (G) $ 23,479
Real estate .................... 40,426 2,124 (C) 16,269 (H) 26,281
Consumer:
Finance receivables .......... 107,175 $ 82,230 3,073 (D) 75,260 (I) 117,218 (K)
Other assets ................. 2,547 7,314 (A) 7,579 (J) 2,282
Commercial:
Finance receivables .......... 80,668 18,320 486 (E) 8,805 (I) 90,669 (L)
Other assets ................. 156,985 (5,211)(B) (1,308)(F) 85,380 (J) 65,086
________ ________ _______ ________ ________
$418,052 $102,653 $ 4,572 $200,262 $325,015
======== ======== ======= ======== ========
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 25,940 $10,396 (C) $ 6,085 (F) $ 30,251
Real estate .................... 44,134 9,455 (C) 13,163 (H) 40,426
Consumer:
Finance receivables .......... 107,183 $ 63,946 476 (D) 64,430 (I) 107,175 (K)
Other assets ................. 2,206 5,952 (A) 5,611 (J) 2,547
Commercial:
Finance receivables .......... 91,263 33,098 (178)(E) 43,515 (I) 80,668 (L)
Other assets ................. 121,549 50,000 365 (F) 14,929 (J) 156,985
________ ________ _______ ________ ________
$392,275 $152,996 $20,514 $147,733 $418,052
======== ======== ======= ======== ========
Year ended December 31, 1992:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 26,643 $21,260 (C) $ 21,963 (G) $ 25,940
Real estate .................... 18,143 29,088 (C) 3,097 (H) 44,134
Consumer:
Finance receivables .......... 107,235 $ 48,897 (3,275)(M) 45,674 (I) 107,183 (K)
Other assets ................. 3,021 (A) 1,200 (N) 2,015 (J) 2,206
Commercial:
Finance receivables .......... 172,718 41,816 (2,134)(E) 121,137 (I) 91,263 (L)
Other assets ................. 142,062 2,030 (F) 22,543 (J) 121,549
________ ________ _______ ________ ________
$466,801 $ 93,734 $48,169 $216,429 $392,275
======== ======== ======= ======== ========
<FN>
(A) Provision charged to operating expenses for losses on disposal of repossessed assets.
(B) Includes $5,273,000 reversal of valuation allowance from sale of the rent-to-own stores.
(C) Included in gains on investment transactions.
(D) Increase in connection with purchase of receivables and other adjustments.
(E) The 1994 increase and decreases in 1993 and 1992 were due to foreign exchange and other adjustments.
(F) The decrease in 1994 was associated with the settlement of litigation on previously charged off accounts.
The increases in 1993 and 1992 were due to recoveries on assets held for sale.
(G) Reduction in reserves associated with the settlement of mortgage loan transactions.
(H) Reduction in reserves associated with the settlement of real estate transactions.
(I) Charges for net credit losses.
(J) Charges for losses on disposal of assets held for sale, which in 1994 for commercial lending includes
$78,735,000 related to the disposal of the rent-to-own stores.
(K) Includes $1,680,000 in 1993 and $3,561,000 in 1992 related to securitized, sold and serviced receivables
included in other liabilities in the consolidated balance sheet.
(L) Includes $938,000 related to securitized, sold and serviced receivables reported in other liabilities in the
consolidated balance sheet.
(M) Decrease in amount included in other liabilities for securitized, sold and serviced receivables related to the
run off of the securitized outstandings and other adjustments.
(N) Reclassification of allowance for losses on receivables in process of foreclosure.
</TABLE>
<PAGE>
Page 44
Differences Between the Circulated Document and the Electronically Filed
Document
1. The document which is filed with the New York and Pacific Stock Exchanges
will be a printed copy of the electronic document. However, the document
which will be mass produced for general distribution will have different
page numbering and page breaks than the electronically filed document.
<PAGE>
EXHIBIT EX-10.8
TRANSAMERICA CORPORATION
1995 CORPORATE BONUS PLAN
Purpose: To provide a variable pay element that serves as an
incentive to achieve planned performance; and
To recognize individual contributions to annual operating
results and achievement of the Corporation's strategic
goals.
To complement the Value Added Incentive Plan described in
the 1994 proxy statement.
Eligibility and
Participation: Senior corporate and subsidiary executives selected by the
Chief Executive Officer and Corporate Vice Presidents are
eligible to participate in the Plan. Individuals will be
notified of their participation, target bonuses, the
percentage weighting of the components described below, and
applicable payout tables in a letter as soon as possible
after the Plan has been adopted.
Inclusion of any individual as a participant in the Plan
will not be a guarantee that any bonus will be paid to that
person or that the person's employment will be continued for
any period.
Individual
Bonuses: Individual target bonuses will be a predetermined percentage
of 1995 base salary. A percentage of each executive's
target bonus will be based on performance achieved in the
following areas as appropriate:
- The level of Value Added achieved. Value Added is
described on Exhibit I.
- The level of Business Unit Financial Performance
achieved. Business Unit Financial Performance is
described on Exhibit II.
- Management's evaluation of accomplishment of Strategic
Goals or other management objectives.
Actual awards will be calculated after results are known and
will take into account performance in the above areas.
Bonuses may be further modified to reflect the individual's
personal performance.
<PAGE>
Approval of Plan
and Payouts: The Plan is established by, and may be modified or
terminated at any time by, the Management Development and
Compensation Committee of the Corporation's Board of
Directors (the "Compensation Committee"). Individual awards
under the Plan shall be subject to review and approval by
the Compensation Committee. The Compensation Committee
reserves the right to modify the formula for individual
target bonuses (both as to the components and the
percentage mix) for particular individuals and exclude non-
recurring items as appropriate.
Bonus Committee: The Plan will be administered by the Bonus Committee
composed of the Corporation's President and Chief Executive
Officer, Executive Vice President (Finn), Executive Vice
President and Chief Financial Officer and Director of
Compensation. The Bonus Committee is responsible for
interpreting the Plan and recommending methods to deal with
unforeseen circumstances.
Payment of
Bonuses: Bonuses will be paid in cash as soon as possible after Value
Added and Business Unit Financial Performance for the
Corporation and each subsidiary have been determined and
bonus recommendations have been approved by the Compensation
Committee.
Participants must be continuously employed by the
Corporation or one of its subsidiaries from January 1
through December 31, 1995 to receive a payout under the
Plan.
1995 Bonus Plan - Page 2
<PAGE>
EXHIBIT I
Value Added Component
_____________________________________________________________________________
Value Added is calculated in the same manner as for the 1995 profit plan and
is defined as Adjusted Net Income minus a capital charge, expressed as a
percentage of the Corporation's Average Adjusted Equity. The capital charge
is determined by multiplying the Corporation's Average Adjusted Equity by the
Cost of Equity. Each of these terms is further defined for 1995 as follows:
- - "Adjusted Net Income" means the Corporation's net income, in accordance
with generally accepted accounting principles, as reported for the year,
adjusted for (i) cumulative effects of changes in accounting standards,
(ii) the economic amount of interest and depreciation (levelized over the
life of the equipment) and any economic gains and losses on the
disposition of equipment held for lease in lieu of reported interest,
depreciation and gains and losses, (iii) amortized bond, equity and other
portfolio gains and losses in lieu of realized gains and losses as
reported, and (iv) the exclusion of goodwill amortized during the year.
- - "Adjusted Equity" means the Corporation's reported shareholders' equity,
adjusted to exclude (i) preferred stock and (ii) net unrealized gains and
losses on marketable equity and debt securities and foreign currency
translation adjustments, and to include accumulated goodwill amortization
related to assets still owned by the Company.
- - "Average Adjusted Equity" means the "five-point" quarterly average of the
Adjusted Equity, the first point being the preceding year end.
- - "Cost of Equity" means the Corporation's imputed equity cost based on a
formula approved by the Bonus Committee prior to the start of the year.
For 1995, the cost of equity will be determined by adding (a) the
Corporation's risk premium (the long-term market growth in equity
securities over the risk-free rate multiplied by the Corporation's beta)
and (b) the trend risk-free rate.
i
<PAGE>
EXHIBIT II
Business Unit Financial Performance Component
_____________________________________________________________________________
Bonuses under the Business Unit Financial Performance Component will be based
on either (i) Value Added or (ii) actual after-tax operating income, excluding
investment gains and losses, compared to the profit plan operating income for
the relevant subsidiary or group of subsidiaries.
The leverage for below- and above-target performance will take into account
the expected degree of difficulty in achieving target performance level and is
not necessarily the same for each organization. The applicable payout table
will be communicated to participants as soon as possible after the Plan has
been adopted.
ii
<PAGE>
EXHIBIT EX-10.20
TRANSAMERICA CORPORATION
DEFERRED COMPENSATION PLAN
(Effective January 1, 1995)
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1
DEFINITIONS
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Beneficiary" . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "Board of Directors" . . . . . . . . . . . . . . . . . . . 1
1.4 "Change of Control" . . . . . . . . . . . . . . . . . . . . 1
1.5 "Committee" . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Compensation" . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Compensation Deferrals" . . . . . . . . . . . . . . . . . 3
1.8 "Disability" . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Eligibility Amount" . . . . . . . . . . . . . . . . . . . 3
1.10 "Eligible Employee" . . . . . . . . . . . . . . . . . . . . 3
1.11 "Employer" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Nonemployee Director" . . . . . . . . . . . . . . . . . . 3
1.14 "Participant" . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Participant's Account" or "Account" . . . . . . . . . . . 3
1.16 "Plan Year" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "Retirement" . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 "SSP" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 "Transamerica" . . . . . . . . . . . . . . . . . . . . . . 4
1.21 "Transamerica Group" . . . . . . . . . . . . . . . . . . . 4
SECTION 2
PARTICIPATION
2.1 Participation . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.1 Initial Elections by Current Eligible
Employees and Nonemployee Directors . . . . . . . 4
2.1.2 Initial Elections by Newly Eligible
Employees . . . . . . . . . . . . . . . . . . . . 4
2.1.3 Elections by New Directors . . . . . . . . . . . . 4
2.1.4 Elections for Subsequent Plan Years . . . . . . . 4
2.1.5 Separate Election to Defer Bonuses . . . . . . . . 5
2.1.6 No Election Changes During Plan Year . . . . . . . 5
2.1.7 Specific Timing and Method of Election . . . . . . 5
2.2 Hardship Suspension of Participation . . . . . . . . . . . 5
2.2.1 Automatic Suspension . . . . . . . . . . . . . . . 5
2.2.2 Permissible Suspension . . . . . . . . . . . . . . 5
2.3 Termination of Participation . . . . . . . . . . . . . . . 5
SECTION 3
COMPENSATION DEFERRAL ELECTIONS
3.1 Compensation Deferrals . . . . . . . . . . . . . . . . . . 6
3.2 Crediting of Compensation Deferrals . . . . . . . . . . . . 6
i
<PAGE>
Page
3.3 Deemed Interest on Accounts . . . . . . . . . . . . . . . . 6
3.3.1 Deferral Term of 8 Years or More . . . . . . . . . 6
3.3.2 Deferral Term of 5 to 7 Years . . . . . . . . . . 6
3.3.3 Deferral Term of less than 5 Years . . . . . . . . 6
3.3.4 Interest Crediting Rules . . . . . . . . . . . . . 7
3.4 Form of Payment . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Term of Deferral . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4
ACCOUNTING
4.1 Participants' Accounts . . . . . . . . . . . . . . . . . . 7
4.2 Participants Remain Unsecured Creditors . . . . . . . . . . 7
4.3 Accounting Methods . . . . . . . . . . . . . . . . . . . . 7
4.4 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5
DISTRIBUTIONS
5.1 Normal Distribution Timing and Rules . . . . . . . . . . . 8
5.2 Change of Control . . . . . . . . . . . . . . . . . . . . . 8
5.3 Special Rule for Death or Disability . . . . . . . . . . . 8
5.4 Termination of Employment . . . . . . . . . . . . . . . . . 8
5.5 Beneficiary Designations . . . . . . . . . . . . . . . . . 9
5.5.1 Spousal Consent . . . . . . . . . . . . . . . . . 9
5.5.2 Changes and Failed Designations . . . . . . . . . 9
5.6 Financial Hardship . . . . . . . . . . . . . . . . . . . . 9
5.7 Payments to Incompetents . . . . . . . . . . . . . . . . . 10
5.8 Undistributable Accounts . . . . . . . . . . . . . . . . . 10
5.9 Payment in Cash or Its Equivalent . . . . . . . . . . . . . 10
5.10 Committee Discretion . . . . . . . . . . . . . . . . . . . 10
SECTION 6
PARTICIPANT'S INTEREST IN ACCOUNT
6.1 Compensation Deferral Contributions . . . . . . . . . . . . 10
SECTION 7
ADMINISTRATION OF THE PLAN
7.1 Plan Administrator . . . . . . . . . . . . . . . . . . . . 10
7.2 Committee . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3 Actions by Committee . . . . . . . . . . . . . . . . . . . 11
7.4 Powers of Committee . . . . . . . . . . . . . . . . . . . . 11
7.5 Decisions of Committee . . . . . . . . . . . . . . . . . . 11
7.6 Administrative Expenses . . . . . . . . . . . . . . . . . . 12
7.7 Eligibility to Participate . . . . . . . . . . . . . . . . 12
7.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 8
ii
<PAGE>
Page
FUNDING
8.1 Unfunded Plan . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 9
MODIFICATION OR TERMINATION OF PLAN
9.1 Employers' Obligation is Limited . . . . . . . . . . . . . 12
9.2 Right to Amend or Terminate . . . . . . . . . . . . . . . . 12
9.3 Effect of Termination . . . . . . . . . . . . . . . . . . . 12
SECTION 10
GENERAL PROVISIONS
10.1 Inalienability . . . . . . . . . . . . . . . . . . . . . . 13
10.2 Participation by Affiliates . . . . . . . . . . . . . . . . 13
10.3 Rights and Duties . . . . . . . . . . . . . . . . . . . . . 13
10.4 Apportionment of Costs and Duties . . . . . . . . . . . . . 13
10.5 No Effect on Service . . . . . . . . . . . . . . . . . . . 13
10.6 Compensation Deferrals Not Counted Under Other
Employee Benefit Plans . . . . . . . . . . . . . . . . . . 13
10.7 Applicable Law . . . . . . . . . . . . . . . . . . . . . . 14
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . 14
10.9 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 14
iii
<PAGE>
TRANSAMERICA CORPORATION
DEFERRED COMPENSATION PLAN
TRANSAMERICA CORPORATION, a Delaware corporation, having previously
adopted the Transamerica Deferred Compensation Policy (the "Policy"), and
having amended and restated the Policy on several occasions hereby amends and
restates the last version of the Policy in the form of this Transamerica
Corporation Deferred Compensation Plan (the "Plan"). The Plan is effective as
of January 1, 1995. The Plan was established and is maintained for the
benefit of (a) a select group of management and highly compensated employees
of Transamerica and its participating Affiliates, and (b) members of the Board
of Directors who are employees of neither Transamerica nor its Affiliates, in
order to provide such employees and directors with certain deferred
compensation benefits. The Plan is an unfunded deferred compensation plan
that is intended to qualify for the exemptions provided in sections 201, 301,
and 401 of ERISA.
SECTION 1
DEFINITIONS
The following words and phrases shall have the following meanings
unless a different meaning is plainly required by the context:
1.1 "Affiliate" means any corporation, trade or business which is,
together with Transamerica, a member of a controlled group of corporations or
an affiliated service group or under common control (within the meaning of
section 414(b), (c) or (m) of the Internal Revenue Code of 1986, as amended),
but only for the period during which such other entity is so affiliated with
Transamerica.
1.2 "Beneficiary" means the person or persons entitled to receive
the balance credited to a Participant's Account upon the death of a
Participant, as provided in Section 5.5.
1.3 "Board of Directors" means the Board of Directors of
Transamerica, as constituted from time to time.
1.4 "Change of Control" means the occurrence of any of the
following:
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares of
common stock of Transamerica (the "Outstanding Company Common Stock") or
(2) the combined voting power of the then outstanding voting securities
of Transamerica entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this paragraph (a), the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly from
Transamerica, (ii) any acquisition by Transamerica, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained
by Transamerica or any corporation controlled by Transamerica or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2) and (3) of paragraph (c);
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(b) During the term of any deferral elected by a Participant
pursuant to his or her deferral election under Section 3.1, individuals
who, at the beginning of such term, constitute the entire Board of
Directors (the "Incumbent Board"), cease for any reason to constitute a
majority of the membership thereof; provided, however, that any
individual becoming a director after the beginning of such term whose
election, or nomination for election by Transamerica's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors;
(c) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
Transamerica (a "Business Combination"), in each case, unless, following
such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Transamerica or
all or substantially all of Transamerica's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan
(or related trust) of Transamerica or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board of Directors, providing for such Business
Combination; or
(d) approval by the shareholders of Transamerica of a complete
liquidation or dissolution of Transamerica.
1.5 "Committee" means the Management Development and Compensation
Committee of the Board of Directors, as it may be constituted from time to
time. The members of the Committee are appointed by, and serve at the
pleasure of, the Board of Directors.
1.6 "Compensation" means (a) in the case of an Eligible Employee,
his or her base salary and bonuses (if any) eligible to be deferred under the
Plan, and (b) in the case of a Nonemployee Director, his or her annual
retainer, retainer for serving as a committee chairperson (if any), and
meeting fees. The Committee, in its discretion, shall from time to time
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designate the types of bonuses which shall be eligible for deferral under the
Plan. A Participant's Compensation shall not include any other type of
remuneration.
1.7 "Compensation Deferrals" means the amounts credited to
Participants' Accounts under the Plan pursuant to their deferral elections
made pursuant to Section 2.1.
1.8 "Disability" or "Disabled" means the mental or physical
inability of a Participant to perform the regularly assigned duties of his or
her service, provided that such inability (a) has continued or is expected to
continue for a period of at least twelve (12) months and (b) is evidenced by
the certificate of a physician satisfactory to the Committee stating that such
inability exists and is likely to be permanent.
1.9 "Eligibility Amount" means the amount of Compensation required
to participate in the Plan as determined annually by the Chief Executive
Officer of Transamerica. For 1995, the Eligibility Amount is $150,000.
1.10 "Eligible Employee" means an employee of an Employer (a) whose
Compensation for the year preceding the Plan Year was at least equal to the
Eligibility Amount; (b)(1) whose Compensation for the Plan Year is at least
$122,000, and (2) who deferred Compensation under the Transamerica Deferred
Compensation Policy for a term which, when added to the number of years over
which the Participant's Account was scheduled to be paid, exceeded five (5)
years; or (c) whose annual base salary rate at the time of hire is greater
than or equal to the Eligibility Amount (in the case of an individual who is
hired during a Plan Year). Whether an employee's Compensation or annual base
salary rate is at least equal to the Eligibility Amount shall be determined
pursuant to procedures adopted by the Committee from time to time.
1.11 "Employer" means Transamerica and each of its Affiliates that
adopts the Plan as a participating Employer. With respect to an individual
Participant, Employer means (a) in the case of an Eligible Employee,
Transamerica or the Affiliate that has adopted the Plan and that directly
employs such Participant, and (b) in the case of a Nonemployee Director,
Transamerica.
1.12 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended. Reference to a specific section of ERISA shall include such
section, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation or regulation amending, supplementing or
superseding such section or regulation.
1.13 "Nonemployee Director" means a member of the Board of
Directors who is an employee of neither Transamerica nor of any Affiliate.
1.14 "Participant" means an Eligible Employee or Nonemployee
Director who (a) has become a Participant in the Plan pursuant to Section 2.1
and (b) has not ceased to be a Participant pursuant to Section 2.3.
1.15 "Participant's Account" or "Account" means as to any
Participant the separate account maintained on the books of Transamerica in
order to reflect his or her interest under the Plan.
1.16 "Plan Year" means the calendar year.
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1.17 "Plan" means the Transamerica Corporation Deferred
Compensation Plan, as set forth in this instrument and as hereafter amended
from time to time.
1.18 "Retirement" means (a) in the case of an Eligible Employee,
the Participant's termination of employment with Transamerica and all of its
Affiliates on account of his or her retirement at or after his or her earliest
permissible retirement date under his or her Employer's tax-qualified
retirement plan, and (b) in the case of a Nonemployee Director, the
Participant's termination of service on the Board of Directors at or after his
or her earliest permissible retirement date under Transamerica's Nonemployee
Director Retirement Plan.
1.19 "SSP" means the Transamerica Corporation Employees Stock
Savings Plan, as hereafter amended from time to time.
1.20 "Transamerica" means Transamerica Corporation, a Delaware
corporation.
1.21 "Transamerica Group" means the group of corporations including
Transamerica and its 50% or more owned Affiliates.
SECTION 2
PARTICIPATION
2.1 Participation. The decision of each Eligible Employee and
Nonemployee Director to become a Participant shall be entirely voluntary.
2.1.1 Initial Elections by Current Eligible Employees and
Nonemployee Directors. An Eligible Employee or Nonemployee Director may elect
to become a Participant for the 1995 Plan Year by electing, no later than
December 31, 1994, to make Compensation Deferrals. An election under this
Section 2.1.1 to make Compensation Deferrals shall be effective only for the
1995 Plan Year.
2.1.2 Initial Elections by Newly Eligible Employees. Each
Eligible Employee who is hired during the 1995 Plan Year or a subsequent Plan
Year may elect to become a Participant for that Plan Year by electing, within
thirty calendar days of the date of his or her hire, to make Compensation
Deferrals. An election under this Section 2.1.2 to make Compensation
Deferrals shall be effective only for the remainder of the Plan Year with
respect to which the election is made.
2.1.3 Elections by New Directors. Each individual who is
elected a Nonemployee Director during a Plan Year may elect to become a
Participant in the Plan for that Plan Year by electing, within thirty calendar
days of the effective date of his or her election to the Board of Directors,
to make Compensation Deferrals under the Plan. An election under this
Section 2.1.3 to make Compensation Deferrals shall be effective only for the
remainder of the Plan Year with respect to which the election is made.
2.1.4 Elections for Subsequent Plan Years. An Eligible
Employee or Nonemployee Director may elect to become a Participant (or to
continue or reinstate his or her active participation) in the Plan for any
subsequent Plan Year by electing, no later than December 31 of the preceding
Plan Year, to make Compensation Deferrals under the Plan. An election under
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this Section 2.1.4 to make Compensation Deferrals shall be effective only for
the Plan Year with respect to which the election is made.
2.1.5 Separate Election to Defer Bonuses. Each Eligible
Employee shall make a separate Compensation Deferral election with respect to
the bonus portion(s) (if any) of his or her Compensation. An Eligible
Employee's Compensation Deferral election with respect to his or her bonus(es)
shall be made no later than December 31 of the Plan Year immediately
preceding the Plan Year during which the Eligible Employee will perform the
services for which a bonus may be paid, except to the limited extent provided
in Section 2.1.2.
2.1.6 No Election Changes During Plan Year. After the
beginning of a Plan Year, a Participant shall not be permitted to change or
revoke his or her deferral election for such Plan Year, except to the limited
extent provided in Section 2.2.
2.1.7 Specific Timing and Method of Election.
Notwithstanding any contrary provision of this Section 2.1, the Director of
Compensation of Transamerica (the "Director"), in his or her sole discretion,
shall determine the manner and deadlines for Participants to make Compensation
Deferral elections. The deadlines prescribed by the Director may be earlier
than the deadlines specified in Sections 2.1.1, 2.1.2, 2.1.3, 2.1.4, and
2.1.5, but shall not be later than such specified deadlines.
2.2 Hardship Suspension of Participation.
2.2.1 Automatic Suspension. In the event that a
Participant receives a financial hardship withdrawal from the SSP or any other
plan which is maintained by one or more members of the Transamerica Group and
which contains a qualified cash or deferred arrangement under section 401(k)
of the Code (collectively, the "Plans"), the Participant's Compensation
Deferrals under the Plan (if any) shall be suspended for a period of twelve
(12) months from the date that the Participant received such hardship
withdrawal.
2.2.2 Permissible Suspension. In the event that a
Participant incurs a "financial hardship" (as defined in this Section 2.2.2),
the Committee, in its sole discretion, may suspend the Participant's
Compensation Deferrals for the remainder of the Plan Year. However, an
election to make Compensation Deferrals under Section 2.1 shall be irrevocable
as to amounts deferred as of the effective date of any suspension in
accordance with this Section 2.2.2. For purposes of the Plan, a "financial
hardship" shall mean a severe financial emergency which is caused by a sudden
and unexpected accident, illness or other event beyond the control of the
Participant which would, if no suspension of deferrals (or accelerated
distribution under Section 5.6) were made, result in severe financial burden
to the Participant or a member of his or her immediate family. Also, a
financial hardship does not exist to the extent that the hardship may be
relieved by (a) reimbursement or compensation by insurance, (b) liquidation of
the Participant's other assets (to the extent such liquidation would not
itself cause severe financial hardship), or (c) any loan available to the
Participant (to the extent the payments on such loan would not themselves
cause severe financial hardship).
2.3 Termination of Participation. An Eligible Employee or
Nonemployee Director who has become a Participant shall remain a Participant
until his or her entire vested Account balance is distributed. However, an
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individual who has become a Participant may or may not be an active
Participant making Compensation Deferrals for a particular Plan Year,
depending upon whether he or she has elected to make Compensation Deferrals
for such Plan Year.
SECTION 3
COMPENSATION DEFERRAL ELECTIONS
3.1 Compensation Deferrals. At the times and in the manner
prescribed in Section 2.1, each Eligible Employee or Nonemployee Director may
elect to defer portions of his or her Compensation and to have the amounts of
such deferrals credited to his or her Account. For each Plan Year, an
Eligible Employee may elect to defer an amount equal to any percentage or any
specific dollar amount of his or her Compensation, provided that the
percentage or dollar amount elected by the Participant shall result in an
expected deferral of not less than $5,000 of his or her Compensation. For
each Plan Year, a Nonemployee Director may elect to defer an amount equal to
any percentage or specific dollar amount of his or her Compensation, provided
that (a) the percentage or dollar amount elected by the Participant shall
result in an expected deferral of not less than $5,000 of his or her
Compensation, and (b) the Participant shall elect a percentage with respect to
his or her meeting fees, and such percentage shall be either 0% or 100%.
Notwithstanding any contrary provision of the Plan, the Committee may reduce a
Participant's Compensation Deferrals to the extent necessary to satisfy any
required deductions for welfare plans or any deductions required by law.
3.2 Crediting of Compensation Deferrals. The amounts deferred
pursuant to Section 3.1 shall reduce the Participant's Compensation for the
Plan Year and shall be credited to the Participant's Account as of the last
day of the month in which the amounts (but for the deferral) would have been
paid to the Participant. For each Plan Year, the exact dollar amount to be
deferred from each Compensation payment shall be determined by the Committee
under such formulae as it shall adopt from time to time.
3.3 Deemed Interest on Accounts. Each Participant's Account shall
be credited with deemed interest as of the end of each month. The annual rate
for crediting deemed interest shall be based on the term of deferral elected
by the Participant pursuant to Section 3.5, as follows:
3.3.1 Deferral Term of 8 Years or More. Subject to Section
5, amounts deferred from a Participant's Compensation for 8 years or more
shall be credited at the end of each month with interest at an annual rate
(which rate shall be adjusted annually) equal to the Moody's A Rated Corporate
Bond Yield average for November of the immediately preceding Plan Year,
plus 3%.
3.3.2 Deferral Term of 5 to 7 Years. Subject to Section 5,
amounts deferred from a Participant's Compensation for 5, 6 or 7 years shall
be credited at the end of each month with interest at an annual rate (which
rate shall be adjusted annually) equal to the Moody's A Rated Corporate Bond
Yield average for November of the immediately preceding Plan Year, plus 2%.
3.3.3 Deferral Term of less than 5 Years. Subject to
Section 5, amounts deferred from a Participant's Compensation for less than 5
years shall be credited at the end of each month with interest at an annual
rate equal to the average rate paid by 10-year U.S. Treasury Notes during that
month; provided, however, that, for the month of deferral which immediately
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precedes payout of amounts deferred for less than 5 years (the "Last Month"),
interest will be credited at the rate in effect for the month which
immediately precedes the Last Month.
3.3.4 Interest Crediting Rules. Deemed interest under this
Section 3.3 shall be calculated using a 360-day year and shall be compounded
on a monthly basis. The exact dollar amount to be credited as deemed interest
to any Participant's Account shall be determined by the Committee under such
formulae as it shall adopt from time to time.
3.4 Form of Payment. Each Participant shall indicate on his or
her deferral election made pursuant to Section 3.1 the form of payment for
Compensation Deferrals made pursuant to such election. A Participant may
elect (a) a lump sum payment, or (b) a fixed number of annual installment
payments (not to exceed 10); provided, however, that a Participant who elects
to receive annual installments shall receive payment in a lump sum if:
(a) the Participant terminates his or her service with the Transamerica and
all Affiliates for a reason other than Retirement, death or disability, or
(b) distribution to the Participant is accelerated due to a change of control,
or the Participant's death or Disability. A Participant's election as to the
form of payment shall be irrevocable and shall apply to all amounts credited
to the Participant's Account during the Plan Year with respect to which the
election is made.
3.5 Term of Deferral. Each Participant shall indicate on his or
her deferral election made pursuant to Section 3.1 the time for payment for
Compensation Deferrals (and deemed interest thereon) made pursuant to such
election. A Participant may elect a term of deferral equal to any whole
number (not less than one) of calendar years specified in his or her deferral
election. In addition, pursuant to such procedures as the Committee may adopt
from time to time, a Participant may elect a term of deferral which ends upon
the later of the expiration of a specified period or the occurrence of a
specific event (for example, the later of ten years or Retirement). If a
Participant makes such an alternative election, the rate for crediting deemed
interest on the deferral shall be based on the elected term of years for such
deferral, but subject to Section 5.4. A Participant's election as to the term
of deferral shall be irrevocable and shall apply to all amounts credited to
the Participant's Account during the Plan Year with respect to which the
election is made.
SECTION 4
ACCOUNTING
4.1 Participants' Accounts. For each Plan Year, at the direction
of the Committee, there shall be established and maintained on the books of
Transamerica, a separate Account for each Participant to which shall be
credited all Compensation Deferrals made by the Participant during such Plan
Year, and the deemed interest on such Compensation Deferrals.
4.2 Participants Remain Unsecured Creditors. All amounts credited
to a Participant's Account under the Plan shall continue for all purposes to
be a part of the general assets of Transamerica. Each Participant's interest
in the Plan shall make him or her only a general, unsecured creditor of
Transamerica.
4.3 Accounting Methods. The accounting methods or formulae to be
used under the Plan for the purpose of maintaining the Participants'
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Accounts, including the calculation and crediting of any deemed interest
shall be determined by the Committee in its sole discretion. The accounting
methods or formulae selected by the Committee may be revised from time to
time.
4.4 Reports. Each Participant shall be furnished with periodic
statements of his or her Account, reflecting the status of his or her
interest in the Plan, at least annually.
SECTION 5
DISTRIBUTIONS
5.1 Normal Distribution Timing and Rules. Subject to Sections
5.2, 5.3, and 5.4, distribution of the balance credited to a Participant's
Account shall commence as soon as administratively practicable after the end
of the term(s) of deferral elected by the Participant under Section 3.5, in
accordance with the following rules. If the Participant elected a lump sum,
payment shall be made as of the first business day of the calendar year next
following the last year of the term of deferral, in an amount equal to the
amount credited to the Participant's Account as of the end of the last year of
deferral. If the Participant elected annual installments, the first
installment shall be paid as of the first business day of the calendar year
next following the last year of the term of deferral, and subsequent
installments shall be paid to the Participant as near as administratively
practicable to each anniversary of the first installment payment. The amount
of each installment shall equal the amount credited to the Participant's
Account as of the December 31 next preceding the date of payment, divided by
the number of installments remaining to be made. While a Participant's
Account is in installment payout status, the unpaid balance credited to the
Participant's Account shall continue to be credited with deemed interest under
Section 3.3.
5.2 Change of Control. If there is a Change of Control, the
balance then credited to a Participant's Account shall be distributed to him
or her in a lump sum as soon as administratively practicable after the date of
the Change of Control. Deemed interest shall be credited prior to any such
accelerated distribution in accordance with the terms of the Participant's
deferral election. The amount of any such accelerated lump sum distribution
shall be equal to (a) the amount credited to the Participant's Account as of
the end of the month next preceding the month in which payment is made, plus
(b) any amount that the Participant deferred but which has not yet been
credited to his or her Account.
5.3 Special Rule for Death or Disability. If a Participant dies
or becomes Disabled, the balance then credited to his or her Account shall be
distributed to the Participant (or his or her Beneficiary) at the time and in
the form elected by the Participant pursuant to Sections 3.4 and 3.5;
provided, however, that the Committee, in its sole discretion, may elect to
distribute such amount in a lump sum as soon as administratively practicable
after the date of death or Disability. Deemed interest shall be credited
prior to any such accelerated distribution in accordance with the terms of the
Participant's deferral election.
5.4 Termination of Employment. If a Participant terminates his or
her employment with Transamerica and all of its Affiliates for a reason other
than death, Disability or Retirement, the balance then credited to his or her
Account shall be distributed to him or her in a lump sum as soon as
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administratively practicable after such termination. Deemed interest shall
be credited prior to any such accelerated distribution in accordance with the
terms of the Participant's deferral election. Notwithstanding the preceding
sentence, if (a) distribution of the Participant's Account has not commenced
prior to the date of such termination, and (b) either (1) the Participant
voluntarily terminated employment or service, or (2) the Participant's
employment was terminated for "cause", deemed interest shall be recomputed and
credited prior to any such accelerated distribution based on the average
10-year U.S. Treasury Note rate (in the manner described in Section 3.3.3).
For purposes of this Section 5.4, termination of employment for "cause" shall
mean termination on account of the Participant's (a) commission of any
criminal act (other than minor traffic violations), and/or (b) gross
negligence or willful misconduct in the performance of his or her duties of
employment.
A transfer of employment between any two corporations within the
Transamerica Group shall not be deemed to be a termination of employment for
purposes of this Section 5.4. A transfer of employment shall include a
transfer on account of the sale of assets by one member of the Transamerica
Group to another member of the Transamerica Group. In the event that a
Participant's Employer ceases to be a member of the Transamerica Group by
reason of the sale (or spin-off) of the stock of the Employer by Transamerica,
such cessation shall not in itself be deemed to constitute a termination of
employment for purposes of this Section 5.4.
5.5 Beneficiary Designations. Each Participant may, pursuant to
such procedures as the Committee may specify, designate one or more
Beneficiaries.
5.5.1 Spousal Consent. If a Participant does not designate
his or her spouse as sole primary Beneficiary, the beneficiary designation
shall be ineffective unless such spouse consents to the designation. Any
spousal consent required under this Section 5.5 shall be ineffective unless it
is set forth in writing and signed by the spouse. Notwithstanding the
preceding, if the Participant establishes to the satisfaction of Transamerica
that written spousal consent may not be obtained because the spouse cannot be
located, his or her designation shall be effective without a spousal consent.
Any spousal consent required under this Section 5.5 shall be valid only with
respect to the spouse who signs the consent.
5.5.2 Changes and Failed Designations. A Participant may
change or revoke Beneficiary designations by delivering a new designation (or
revocation) in the manner described in Section 5.5.1. Any designation or
revocation shall be effective only if it is received by Transamerica.
However, when so received, the designation or revocation shall be effective as
of the date the notice is executed (whether or not the Participant still is
living), but without prejudice to Transamerica on account of any payment made
before the change is recorded. The last effective designation received by
Transamerica shall supersede all prior designations. If a Participant dies
without having effectively designated a Beneficiary, or if no Beneficiary
survives the Participant, the Participant's Account shall be payable (a) to
his or her surviving spouse, or (b) if the Participant is not survived by his
or her spouse, to his or her beneficiary under the Employer's group-term life
insurance program (if any), or (c) if no one survives or no such program
exists, to his or her estate.
5.6 Financial Hardship. In the event that a Participant incurs a
"financial hardship" (as defined in Section 2.2), the Committee, in its sole
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discretion and notwithstanding any contrary provision of the Plan, may
determine that all or part of the Participant's Account shall be paid to him
or her immediately; provided, however, that (a) the amount paid to the
Participant pursuant to this Section 5.6 shall be limited to the amount
reasonably necessary to alleviate the Participant's hardship, and (b) payment
under this Section 5.6 may not be made to the extent that the hardship may be
relieved by suspension of the Participant's Compensation Deferrals in
accordance with Section 2.2.
5.7 Payments to Incompetents. If any individual to whom a
benefit is payable under the Plan is a minor or legally incompetent, the
Committee shall determine whether payment shall be made directly to the
individual, any person acting as his or her custodian or legal guardian under
the California Uniform Transfers to Minors Act, his or her legal
representative or a near relative, or directly for his or her support,
maintenance or education.
5.8 Undistributable Accounts. Each Participant (and in the event
of the Participant's death, his or her Beneficiary) shall keep the Committee
advised of his or her current address. If the Committee is unable to locate
the Participant or Beneficiary to whom a Participant's Account is payable
under this Section 5, the Participant's Account shall continue to be credited
with deemed interest pursuant to Section 3.3. Accounts that, in accordance
with the preceding sentence, have been undistributable for a period of 35
months shall be forfeited as of the end of the 35th month. If a Participant
whose Account was forfeited under this Section 5.8 (or his or her Beneficiary)
files a claim for distribution of the Account after the date that it was
forfeited, and if the Committee determines that such claim is valid, then the
forfeited balance shall be paid in a lump sum cash payment as soon as
practicable thereafter.
5.9 Payment in Cash or Its Equivalent. All payments from the Plan
shall be made in cash or its equivalent.
5.10 Committee Discretion. Within the specific time periods
described in this Section 5, the Committee shall have sole discretion to
determine the specific timing of the payment of any Account balance under the
Plan.
SECTION 6
PARTICIPANT'S INTEREST IN ACCOUNT
6.1 Compensation Deferral Contributions. Subject to Sections 8.1
(relating to creditor status) and 9.2 (relating to amendment and/or
termination of the Plan), a Participant's interest in the balance credited to
his or her Account at all times shall be 100% vested and nonforfeitable.
SECTION 7
ADMINISTRATION OF THE PLAN
7.1 Plan Administrator. Transamerica is hereby designated as the
administrator of the Plan (within the meaning of section 3(16)(A) of ERISA).
7.2 Committee. The Plan shall be administered by the Committee.
The Committee shall have the authority to control and manage the operation and
administration of the Plan.
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7.3 Actions by Committee. Each decision of a majority of the
members of the Committee then in office shall constitute the final and binding
act of the Committee. The Committee may act with or without a meeting being
called or held and shall keep minutes of all meetings held and a record of all
actions taken by written consent.
7.4 Powers of Committee. The Committee shall have all powers and
discretion necessary or appropriate to supervise the administration of the
Plan and to control its operation in accordance with its terms, including, but
not by way of limitation, the following powers:
(a) To interpret and determine the meaning and validity of the
provisions of the Plan and to determine any question arising under, or in
connection with, the administration, operation or validity of the Plan or
any amendment thereto;
(b) To determine any and all considerations affecting the
eligibility of any employee or director to become a Participant or remain
a Participant in the Plan;
(c) To cause one or more separate Accounts to be maintained for
each Participant;
(d) To cause Compensation Deferrals and deemed interest to be
credited to Participants' Accounts;
(e) To establish and revise an accounting method or formula for
the Plan, as provided in Section 4.3;
(f) To determine the status and rights of Participants and their
spouses, Beneficiaries or estates;
(g) To employ such counsel, agents and advisers, and to obtain
such legal, clerical and other services, as it may deem necessary or
appropriate in carrying out the provisions of the Plan;
(h) To establish, from time to time, rules for the performance
of its powers and duties and for the administration of the Plan;
(i) To arrange for annual distribution to each Participant of a
statement of benefits accrued under the Plan;
(j) To publish a claims and appeal procedure satisfying the
minimum standards of section 503 of ERISA pursuant to which individuals
or estates may claim Plan benefits and appeal denials of such claims;
(k) To delegate to any one or more of its members or to any
other person, severally or jointly, the authority to perform for and on
behalf of the Committee one or more of the functions of the Committee
under the Plan; and
(l) To decide all issues and questions regarding Account
balances, and the time, form, manner, and amount of distributions to
Participants.
7.5 Decisions of Committee. All actions, interpretations, and
decisions of the Committee shall be conclusive and binding on all persons, and
shall be given the maximum deference permitted by law.
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7.6 Administrative Expenses. All expenses incurred in the
administration of the Plan by the Committee, or otherwise, including legal
fees and expenses, shall be paid and borne by the Employers.
7.7 Eligibility to Participate. No member of the Committee who
also is an Eligible Employee or Nonemployee Director shall be excluded from
participating in the Plan, but as a member of the Committee, he or she shall
not be entitled to act or pass upon any matters pertaining specifically to his
or her own Account.
7.8 Indemnification. Each of the Employers shall, and hereby
does, indemnify and hold harmless the members of the Committee, from and
against any and all losses, claims, damages or liabilities (including
attorneys' fees and amounts paid, with the approval of the Board of Directors,
in settlement of any claim) arising out of or resulting from the
implementation of a duty, act or decision with respect to the Plan, so long as
such duty, act or decision does not involve gross negligence or willful
misconduct on the part of any such individual.
SECTION 8
FUNDING
8.1 Unfunded Plan. All amounts credited to a Participant's
Account under the Plan shall continue for all purposes to be a part of the
general assets of Transamerica. The interest of the Participant in his or her
Account, including his or her right to distribution thereof, shall be an
unsecured claim against the general assets of Transamerica. Nothing contained
in the Plan shall give any Participant or Beneficiary any interest in or claim
against any specific assets of Transamerica.
SECTION 9
MODIFICATION OR TERMINATION OF PLAN
9.1 Employers' Obligation is Limited. The Employers intend to
continue the Plan indefinitely, and to maintain each Participant's Account
until it is scheduled to be paid to him or her in accordance with the
provisions of the Plan. However, the Plan is voluntary on the part of the
Employers, and the Employers do not guarantee to continue the Plan.
Transamerica at any time may amend the Plan, suspend Compensation Deferrals,
or discontinue Compensation Deferrals, with or without cause.
9.2 Right to Amend or Terminate. The Board of Directors reserves
the right to alter, amend or terminate the Plan, or any part thereof, at any
time and for any reason.
9.3 Effect of Termination. If the Plan is terminated pursuant to
this Section 9, the balances credited to the Accounts of the affected
Participants shall be distributed to them at the time and in the manner set
forth in Section 5; provided, however, that the Committee, in its sole
discretion, may authorize accelerated distribution of Participants' Accounts
as of any earlier date.
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SECTION 10
GENERAL PROVISIONS
10.1 Inalienability. In no event may either a Participant, a
former Participant or his or her Beneficiary, spouse or estate sell, transfer,
anticipate, assign, hypothecate, or otherwise dispose of any right or interest
under the Plan; and such rights and interests shall not at any time be subject
to the claims of creditors nor be liable to attachment, execution or other
legal process. Accordingly, for example, a Participant's interest in the Plan
is not transferable pursuant to a domestic relations order.
10.2 Participation by Affiliates. One or more Affiliates of
Transamerica may become participating Employers by adopting the Plan. By
adopting the Plan, an Affiliate is deemed to agree to all of its terms,
including (but not limited to) the provisions granting exclusive authority to
the Board of Directors to amend the Plan and the provisions granting exclusive
authority to the Committee to administer and interpret the Plan. Any
Affiliate may terminate its participation in the Plan at any time by
resolution of its board of directors. The liabilities incurred under the Plan
to the Participants shall be solely the liabilities of Transamerica, and no
other Employer shall be liable for benefits accrued under the Plan. An
Affiliate's participation in the Plan shall be deemed terminated if it ceases
to be a member of the Transamerica Group.
10.3 Rights and Duties. Neither the Employers nor the Committee
shall be subject to any liability or duty under the Plan except as expressly
provided in the Plan, or for any action taken, omitted or suffered in good
faith.
10.4 Apportionment of Costs and Duties. All acts required of the
Employers under the Plan may be performed by Transamerica for itself and its
Affiliates, and the costs of the Plan may be equitably apportioned by the
Committee among Transamerica and the other Employers.
10.5 No Effect on Service. Neither the establishment or
maintenance of the Plan, the making of any Compensation Deferrals nor any
action of any Employer or the Committee, shall be held or construed to confer
upon any individual any right to be continued as an employee or Nonemployee
Director, upon dismissal, any right or interest in any specific assets of the
Employers other than as provided in the Plan. Each Employer expressly
reserves the right to discharge any employee at any time, with or without
cause.
10.6 Compensation Deferrals Not Counted Under Other Employee
Benefit Plans. Compensation Deferrals under the Plan will not be considered
for purposes of contributions or benefits under any other employee benefit
plan sponsored by the Employers, except that (a) to the extent specifically
provided in the Transamerica Corporation Supplemental Pension Plan and the
Transamerica Corporation Nonemployee Director Retirement Plan, Compensation
Deferrals will be considered for purposes of determining an individual's
benefit (if any) under such Plans, and (b) pursuant to such procedures as the
Committee, in its discretion, may adopt from time to time, Compensation
Deferrals will be eligible to be credited with employer matching
contributions under the SSP+ (or such other plan as the Committee may
designate).
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10.7 Applicable Law. The provisions of the Plan shall be
construed, administered and enforced in accordance with ERISA, and to the
extent not preempted by ERISA, with the laws of the State of California.
10.8 Severability. If any provision of the Plan is held invalid
or unenforceable, its invalidity or unenforceability shall not affect any
other provisions of the Plan, and in lieu of each provision which is held
invalid or unenforceable, there shall be added as part of the Plan a provision
that shall be as similar in terms to such invalid or unenforceable provision
as may be possible and be valid, legal, and enforceable.
10.9 Captions. The captions contained in and the table of contents
prefixed to the Plan are inserted only as a matter of convenience and for
reference and in no way define, limit, enlarge or describe the scope or
intent of the Plan nor in any way shall affect the construction of any
provision of the Plan.
EXECUTION
IN WITNESS WHEREOF, Transamerica, by its duly authorized officers,
has executed the Plan on the date indicated below.
TRANSAMERICA CORPORATION
Dated: ____________, 1994 By: _____________________________
Title:
Dated: ____________, 1994 And By: _________________________
Title:
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EXHIBIT EX-10.25
[Date]
[Name]
[Title]
Transamerica [__________________]
[Street Address]
[City, State, Zip]
Dear [Name]:
The Board of Directors (the "Board") of Transamerica Corporation
(the "Company") considers it to be in the best interests of its stockholders
to foster the continuous employment of key management personnel of the Company
and its subsidiaries in the event of a possible change in control of the
Company.
In order to induce you, in the event of a possible change in control
of the Company, to remain in the employ of the Company or its subsidiaries and
to give your continued attention and dedication to your assigned duties
without distraction, and in consideration of your agreement to remain in the
employ of the Company or its subsidiaries under circumstances as set forth in
Subsection 2(iii) hereof, the Company agrees that (i) in the event your
employment is terminated in accordance with Section 3 hereof subsequent to a
"change in control of the Company" (as defined in Subsection 2(i) hereof) or a
"deemed change in control of the Company" (as defined in Section 1(iii)
hereof), you shall receive the severance benefits described in Section 4
hereof, and (ii) regardless of whether or not your employment with the Company
or its subsidiaries is terminated, if you receive a payment or benefit that is
subject to the Excise Tax (as defined in Section 5 hereof), you shall receive
the gross-up payments described in Section 5 hereof.
1. Term of Agreement.
(i) Basic Term and Extensions. This letter agreement (the
"Agreement") shall commence on the date hereof and shall continue in effect
through December 31, 1995; provided, however, that commencing on January 1,
1996 and on each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless not later than
September 30 of the preceding year, the Company shall have given notice that
it does not wish to extend this Agreement, in which case this Agreement shall
expire as of December 31st of that year; and provided, further, that
notwithstanding any such notice by the Company, if a change in control of the
Company shall occur during the term of this Agreement, this Agreement shall
automatically be extended until the earlier to occur of (A) the expiration of
three years beyond the then existing term, or (B) your Normal Retirement Date
(as defined in Subsection 3(i) hereof).
(ii) Early Termination. This Agreement shall terminate immediately
if prior to a change in control of the Company (as defined in Subsection 2(i)
hereof) (A) your primary position with the Company or its subsidiaries changes
to one that is not covered by a severance agreement in a form substantially
similar to this Agreement, or (B) you are employed by a subsidiary of the
Company and such subsidiary ceases to be majority owned (directly or
indirectly) by the Company, or such subsidiary (or a principal operating unit
of such subsidiary for which you work) disposes of a majority of its assets or
(C) your employment with the Company and its subsidiaries is terminated.
<PAGE>
(iii) Special Extension. Notwithstanding the foregoing, if, within
12 months prior to the date on which a change in control of the Company
occurs, (A) any of the events described in clauses (A), (B) or (C) of
Subsection 1(ii) above occurred or (B) the Company gave notice that it did not
intend to extend the term of this Agreement as provided in Subsection 1(i)
above, then, if you can reasonably demonstrate that each of the events
described in clauses (A) and (B) of this Subsection (iii) that did occur arose
in connection with or in anticipation of a change in control of the Company,
(Y) a "deemed change in control of the Company" shall be deemed to have
occurred on the date immediately prior to the first to occur of such events
and (Z) this Agreement shall automatically be extended until the earlier to
occur of (i) the expiration of three years beyond the then existing term or
(ii) your Normal Retirement Date.
2. Change in Control Matters.
(i) Change of Control. For purposes of this Agreement, a "change
in control of the Company" shall occur if any of the following occur:
(A) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this Subsection (A), the
following acquisitions shall not constitute, or be deemed to cause, a change
in control of the Company: (i) any increase in such percentage ownership of a
Person to 20% or more resulting solely from any acquisition of shares directly
from the Company or any acquisition of shares by the Company, provided,
however, that any subsequent acquisitions of shares by such Person that would
add, in the aggregate, 2% or more (measured as of the date of each such
subsequent acquisition) to such Person's beneficial ownership of Outstanding
Company Common Stock or Outstanding Company Voting Securities shall be deemed
to constitute a change in control of the Company, (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iii) any acquisition
by any corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of Subsection (C) below; or
(B) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors, or other actual or threatened
solicitation of proxies or consents, by or on behalf of a Person other than
the Board; or
(C) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
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Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be,
of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(D) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(ii) Deemed Change in Control. A "deemed change in control of the
Company" is defined in Subsection 1(ii) hereof.
(iii) Potential Change in Control. For purposes of this Agreement,
a "potential change in control of the Company" shall occur if (A) the Company
enters into an agreement, the consummation of which would result in the
occurrence of a change in control of the Company, (B) any person (including
the Company) publicly announces an intention to take or to consider taking
actions which if consummated would constitute a change in control of the
Company, or (C) the Board adopts a resolution to the effect that a potential
change in control of the Company for purposes of this Agreement has occurred.
You agree that, subject to the terms and conditions of this Agreement, in the
event of a potential change in control of the Company, you will remain in the
employ of the Company or its subsidiaries during the pendency of any such
potential change in control and for a period of one year after the occurrence
of a change in control of the Company, unless you terminate for Good Reason
pursuant to Section 3 hereof. However, you acknowledge that you are an "at
will" employee and nothing in this Agreement shall confer upon you any right
to continue in the employ of the Company or its subsidiaries prior to a change
in control of the Company or shall interfere with or restrict in any way the
rights of the Company or its subsidiaries, which are hereby expressly
reserved, to discharge you at any time prior to a change in control of the
Company for any reason whatsoever, with or without cause.
3. Termination Following Change in Control. If a change in
control of the Company shall have occurred, you shall be entitled to the
benefits provided in Subsection 4(iii) hereof upon the subsequent termination
of your employment with the Company or its subsidiaries within three years
thereafter (or, if applicable, in the case of a deemed change in control of
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the Company, within three years after the date of such deemed change in
control), unless such termination is (A) because of your death or Retirement,
(B) by the Company for Cause or Disability, or (C) by you other than for Good
Reason.
(i) Disability; Retirement. If you become permanently and totally
disabled (as defined under the long-term disability plan sponsored by the
Company or its subsidiaries) and are unable to return to the full-time
performance of your duties, the Company may terminate your employment for
"Disability". Termination by the Company or you of your employment with the
Company or its subsidiaries based on "Retirement" shall mean termination by
reason of your retirement at or after your "Normal Retirement Date" under the
Retirement Plan for Salaried U.S. Employees of Transamerica Corporation and
Affiliates (or any successor thereto).
(ii) Cause. Termination by the Company of your employment with the
Company or its subsidiaries for "Cause" shall mean termination upon the
willful engaging by you in misconduct which is demonstrably and materially
injurious to the Company and its subsidiaries taken as a whole. No act, or
failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company or its
subsidiaries. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a meeting of the
Board called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you were guilty of
misconduct as set forth above in this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any material breach of this Agreement by the Company or any of the
following events which occurs without your express written consent:
(A) the assignment to you of any duties inconsistent with, or a
substantial alteration in the nature or status of, your responsibilities
from those in effect immediately prior to a change in control of the
Company or, if applicable, a deemed change in control of the Company;
(B) a reduction in your annual base salary as in effect on the
date hereof or as the same may be increased from time to time, except for
across-the-board salary reductions similarly affecting all executives of
the Company and its subsidiaries and all executives of any person in
control of the Company;
(C) the Company or its subsidiaries requiring (i) you to be based
other than in the Metropolitan Area where your employment was based prior
to a change in control of the Company or, if applicable, a deemed change
in control of the Company, or (ii) business travel to an extent
substantially inconsistent with your travel obligations in effect prior
to a change in control of the Company or, if applicable, a deemed change
in control of the Company;
(D) (i) the failure by the Company or its subsidiaries to continue
in effect any compensation plan of the Company or its subsidiaries in
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which you were participating at the time of a change in control of the
Company or, if applicable, a deemed change in control of the Company,
including but not limited to both annual and long-term incentive plans,
or replacements therefor, which provide competitive levels of
compensation, unless an equitable arrangement (embodied in ongoing
substitute or alternative plans) has been made with respect to any such
plan in connection with the change in control of the Company, or (ii) the
failure by the Company or its subsidiaries to continue your participation
therein;
(E) (i) the failure by the Company or its subsidiaries to continue
to provide you with benefits of a type and at a level substantially
similar to those enjoyed by you under the Company's Employees Stock
Savings Plan, Stock Savings Plan Plus, or any of the pension, life
insurance, medical, health and accident, or disability plans of the
Company or its subsidiaries in which you were participating at the time
of a change in control of the Company or, if applicable, a deemed change
in control of the Company, or (ii) the taking of any action by the
Company or its subsidiaries which would directly or indirectly
materially reduce any of such benefits or deprive you of any material
fringe benefit or perquisite enjoyed by you at the time of a change in
control of the Company or, if applicable, a deemed change in control of
the Company, or (iii) the failure by the Company or its subsidiaries to
provide you with the number of paid vacation days to which you are
entitled on the basis of years of service with the Company or its
subsidiaries in accordance with the normal vacation policy of the Company
or its subsidiaries as in effect at the time of the change in control of
the Company or, if applicable, the deemed change in control of the
Company;
(F) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Subsection 7(i) hereof; or
(G) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements
of Subsection (iv) below (and, if applicable, Subsection (ii) above); and
for purposes of this Agreement, no such purported termination shall be
effective.
Your right to terminate your employment pursuant to this Subsection (iii)
shall not be affected by your incapacity due to physical or mental illness.
For purposes of this Subsection 3 (iii), any good faith determination of "Good
Reason" made by you shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by you for any reason during the 30-
day period immediately following the first anniversary of the date of a change
in control of the Company shall be deemed to be a termination for Good Reason
for all purposes of this Agreement.
(iv) Notice of Termination. Any purported termination of your
employment by the Company or its subsidiaries or by you pursuant to this
Section 3 shall be communicated by written Notice of Termination to the other
party in accordance with Section 8 hereof. A "Notice of Termination" shall
mean a notice which indicates the specific termination provision in this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment.
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(v) Date of Termination, Etc. "Date of Termination" shall mean
(A) if your employment is terminated for Disability, 30 days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such 30-day period),
and (B) if your employment is terminated for any other reason, the date
specified in the Notice of Termination (which shall be not less than 30 days
from the date such Notice of Termination is given).
4. Compensation Upon Termination or During Disability.
(i) Disability. During any period that you fail to perform your
duties hereunder as a result of incapacity due to physical or mental illness,
you shall continue to receive your full base salary at the rate then in effect
unless and until your employment is terminated pursuant to Subsection 3(i)
hereof. Thereafter, your benefits shall be determined in accordance with the
Company's disability program (without regard to any amendment to such
disability program made subsequent to a change in control of the Company and
on or prior to the Date of Termination, which amendment adversely affects in
any way the computation of benefits thereunder).
(ii) Termination for Cause. If your employment by the Company or
its subsidiaries shall be terminated for Cause, the Company shall pay you your
full base salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given and the Company shall have no further
obligations to you under this Agreement.
(iii) Certain Termination Benefits. If prior to the earlier to
occur of (i) the expiration of this Agreement or (ii) the expiration of three
years after a change in control of the Company, your employment by the Company
or its subsidiaries shall be terminated (a) by the Company or its subsidiaries
other than for Cause, Retirement or Disability or (b) by you for Good Reason,
then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given;
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you, not later than the fifth day following the Date of
Termination, a lump sum severance payment (together with the payments
provided in Subsections (C), (E) and (F) below, the "Severance Payments")
equal to the product of (x) [three, two, one] and (y) your highest
target annual cash compensation during the last three fiscal years of the
Company immediately preceding the year in which the change in control of
the Company occurs; which shall consist of the sum of (I) your annual
base salary and (II) your target annual bonus for each such year;
provided that, in the event there are fewer than [36, 24, 12] whole or
partial months remaining from the Date of Termination to your Normal
Retirement Date, the amount provided for in this Subsection (B) will be
reduced by multiplying it by a fraction the numerator of which is the
number of whole or partial months so remaining to your Normal Retirement
Date and the denominator of which is [36, 24, 12]; provided, however,
that if (i) the payment to be made to you pursuant to this Subsection
(iii)(B) would result in the application to you of the Excise Tax (as
defined in Section 5 hereof), and (ii) a reduction of up to $25,000 in
the amount of such payment would result in your not being subject to the
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application of the Excise Tax, then the Company may withhold, and you
shall have no entitlement to receive, such portion of such payment (not
in excess of $25,000) as is required to preclude the application of the
Excise Tax to you;
(C) notwithstanding any provision of the Company's or any
subsidiary's bonus plans, the Company shall pay to you, not later than
the fifth day following the Date of Termination, a lump sum amount equal
to the sum of (x) any incentive compensation for the fiscal year
preceding that in which the Date of Termination occurs but has not yet
been paid, which shall be the greater of (I) your target bonus for such
fiscal year, or (II) any amount determined prior to your Date of
Termination to be due you for such fiscal year, and (y) the product of
(I) your target bonus for the fiscal year in which the Date of
Termination occurs, and (II) a fraction, the numerator of which is the
number of days in the fiscal year in which the Date of Termination occurs
through the Date of Termination, and the denominator of which is 365;
(D) the Company shall also pay to you as incurred all legal fees
and expenses incurred by you as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or disputing
any such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement);
(E) the Company shall arrange to provide you, for a [36, 24,
12]-month period after such termination (or such lesser number of months
to your Normal Retirement Date), with life, disability, accident and
health insurance substantially similar to that which you are receiving at
the time of a change in control of the Company, or, if applicable, a
deemed change in control of the Company. Benefits otherwise receivable
by you pursuant to this Subsection (E) shall be reduced to the extent
comparable benefits are actually received by you from any other source
during the [36, 24, 12]-month period following your termination (or such
lesser number of months to your Normal Retirement Date), and any such
benefits actually received by you shall be reported by you to the
Company; and
(F) in addition to the retirement benefits to which you are
entitled under the qualified and supplemental pension plans of the
Company or any of its subsidiaries in which you participate or any
successor plans thereto (the "Pension Plans"), the Company shall pay to
you, not later than the fifth day following the Date of Termination, a
lump sum amount in cash equal to the actuarial equivalent of the excess
of (x) the retirement pension (determined as a single life annuity
commencing at your normal retirement date) which you would have accrued
under the terms of the Pension Plans (without regard to any amendment to
the Pension Plans made subsequent to a change in control of the Company
and on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder), determined as if you were fully vested thereunder and had
accumulated (after the Date of Termination) [36, 24, 12] additional
months of benefit service credit (as defined in the Company's tax
qualified retirement plan) thereunder at your highest annual rate of
compensation (annual base salary and target annual bonus) during the 12
months immediately preceding the Date of Termination (but in no event
shall you be deemed to have accumulated additional months of benefit
service credit after your normal retirement date), over (y) the vested
retirement pension (determined as a single life annuity commencing at
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your normal retirement date) which you had then accrued pursuant to the
provisions of the Pension Plans. For purposes of clause (x), your
highest annual rate of compensation during the 12 months immediately
preceding the Date of Termination shall be determined without regard to
the amounts payable pursuant to Subsection 4(iii)(B) hereof. For
purposes of this Subsection, "actuarial equivalent" shall be determined
using the same methods and assumptions utilized under the Pension Plans
immediately prior to the change in control of the Company.
(iv) No Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor, except as provided in Subsection 4(iii)(E)
above, shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer or by retirement benefits after the Date of
Termination or otherwise.
(v) Retirement Benefits. In addition to all other amounts payable
to you under this Section 4, you shall be entitled to receive all benefits
payable to you under the Pension Plans, and any other plan or agreement
relating to retirement benefits.
5. Gross-Up Payments. In the event that you become entitled to
any payment or benefit in connection with a change in the ownership or
effective control of the Company, or a change in the ownership of a
substantial portion of the assets of the Company (including but not limited to
payments or benefits that you become entitled to in connection with a "change
in control of the Company" as defined in Section 2 hereof), whether payable
pursuant to the terms of this Agreement or any other plan (including
specifically, but without limitation, the 1995 Performance Stock Option Plan),
arrangement or agreement with the Company, any successor to the Company, any
person whose actions result in a change in control of the Company, or any
corporation ("Affiliate") that is or becomes affiliated with the Company or
such person (collectively with the Severance Payments, "Payments"), if any of
the Payments will be subject to the tax (the "Excise Tax") imposed by section
4999 of the Code, the Company shall pay to you, not later than the fifth day
following each date ("Payment Date") on which you become entitled to receive
any Payment (whether payable immediately or at a future date) that will be
subject to the Excise Tax (but in no event later than the fifth day following
your Date of Termination), an additional amount (collectively, the "Gross-Up
Payments") such that the net amount retained by you, after deduction of any
Excise Tax on the aggregate Payments received (or that you have become
entitled to receive) as of such Payment Date and any federal, state or local
income tax and Excise Tax upon the payment provided for by this Section 5, and
after taking into account any Gross-Up Payments previously made pursuant to
this Section 5, shall be equal to the aggregate Payments received (or that you
have become entitled to receive) as of such Payment Date. For purposes of
determining whether any Payment will be subject to the Excise Tax and the
amount of such Excise Tax, (i) all amounts received in connection with your
employment by the Company or one of its subsidiaries or to be received by you
in connection with a change in the ownership or effective control of the
Company, or a change in the ownership of a substantial portion of the assets
of the Company (including but not limited to payments or benefits that you
become entitled to in connection with a "change in control of the Company" as
defined in Section 2 hereof) shall be treated as "parachute payments" within
the meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be
treated as subject to the Excise Tax, except to the extent that in the written
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opinion of independent tax counsel selected by the Company's independent
auditors and approved by you (which approval shall not be unreasonably
withheld) ("Tax Counsel") which opinion shall be obtained at the Company's
expense, any such payments or benefits (in whole or in part) do not constitute
parachute payments or excess parachute payments (in whole or in part), or
represent reasonable compensation for personal services to be rendered or
actually rendered before the change in control in excess of the base amount,
within the meaning of section 280G(b)(4)(B) of the Code, and (ii) the value
of any non-cash benefit or any deferred cash payment included in the Payments
shall be determined by the Company's independent auditors in accordance with
the principles of section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of each Gross-Up Payment, you shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation
in effect during the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of taxation in
effect in the state and locality of your residence on the date of payment, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes, but assuming that you have no other
deductions or credits available to reduce such taxes.
6. Indemnity and Contest.
(a) Additional Gross-Up Payments. If you are required to pay
Excise Tax in addition to the amount reimbursed pursuant to Section 5 (any
such event hereafter being referred to as a "Loss"), you shall notify the
Company and the Company shall pay to you an amount (the "Additional Gross-Up
Payment") which, after deduction of all income taxes and additional federal,
state and local taxes (including, without limitation, any additional Excise
Tax) required to be paid by you in respect of receipt of such amount
(assuming, for this purpose, that you are subject to the highest marginal rate
of federal income taxation in effect during the calendar year in which the
Additional Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rates of taxation in effect in the state and locality of
your residence on the date of payment, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes, but assuming that you have no other deductions or credits available to
reduce such taxes), shall be equal to the sum of (i) the Excise Tax resulting
in the Loss, and (ii) the net amount of any interest, penalties or additions
to tax payable to any taxing authority (after allowing for the deduction of
such amounts, to the extent properly deductible, for federal, state or local
income tax purposes) as a result of the Loss. Each Additional Gross-Up
Payment by the Company shall be made within 30 days after receipt of a written
demand therefor from you accompanied by a written statement describing in
reasonable detail the Loss in question, the amount of additional tax,
interest, penalties or additions to tax and the calculation of the payment due
in respect thereof; provided that, if a contest of the Loss is being conducted
pursuant to Subsection 6(b) below, payment shall not be required by the
Company until 30 days after the completion or termination of such contest.
(b) Contest. If you shall receive a written notification from
federal taxing authorities of a proposed Excise Tax for which an amount may be
payable by the Company in accordance with this Section 6, then you shall
notify the Company of such proposed Excise Tax promptly after receipt of
(which notice shall be accompanied by a copy of) such written notification.
If (i) within 30 days after receipt by the Company of such notice from you,
the Company shall deliver to you a written request that you contest such
proposed Excise Tax, which written request shall be accompanied by an opinion
(obtained at the Company's expense) of Tax Counsel that there exists
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<PAGE>
substantial authority in support of a favorable outcome of a contest of such
proposed Excise Tax, and (ii) the Company shall (A) have fully performed its
prior obligations under this Agreement, (B) acknowledge in writing its
liability under Subsection 6(a) above to make an Additional Gross-Up Payment
in the event that the taxing authority prevails in its position regarding the
proposed Excise Tax, and (C) deliver to you in writing an indemnity,
satisfactory to you, for any and all expenses that you may incur as a result
of contesting such proposed Excise Tax, including, without limitation,
indemnification and prompt payment of all costs, expenses, losses, legal and
accounting fees and disbursements, bonding fees, penalties and interest so
incurred (the "Indemnified Amount"):
(1) You may, in your sole discretion, choose to pursue or to
forego any and all administrative appeals, proceedings, hearings and
conferences with the relevant taxing authorities with respect to such matter
(unless and to the extent that pursuance of any such appeal, proceedings,
hearing or conference shall be required to secure judicial remedies, in which
case you shall pursue the same), but will (unless there shall be a settlement
or compromise as permitted in Subsection 6(b)(4) hereof) in good faith contest
such proposed Excise Tax in a court of competent jurisdiction selected by the
Company, in its sole discretion.
(2) You shall be required to appeal an adverse judicial
determination only if (A) an appeal is timely requested in writing by the
Company, and (B) you are furnished, at the Company's expense, with an opinion
of Tax Counsel, to the effect that it is more likely than not that an
appellate court would reverse such adverse determination.
(3) If the Company shall elect to contest a proposed Excise
Tax by paying the tax claimed (including interest, penalties or additions to
tax) and seeking a refund, then the Company shall advance to you on an
interest-free basis the aggregate amount of such taxes, interest, penalties
and additions to tax; provided, however, that if you are required to include
in income any amount with respect to such loan or the imputation of interest
thereon in any taxable year prior to final determination of the contest, then
the Company, within 30 days of written notice thereof by you, shall pay to you
an amount which, after deduction of all additional federal, state and local
taxes required to be paid by you in respect of the receipt of such amount
(assuming, for this purpose, that you are subject to the highest marginal rate
of federal income taxation in effect during the calendar year in which the
payment is to be made and state and local income taxes at the highest marginal
rates of taxation in effect in the state and locality of your residence on the
date of payment, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes, but assuming
that you have no other deductions or credits available to reduce such taxes),
shall be equal to the aggregate additional federal and state income taxes
payable by you with respect to such taxable year as a result of such
inclusion. If you subsequently receive a refund of any taxes, interest,
penalties or additions to tax which were previously advanced to you by the
Company pursuant to the preceding sentence, you shall pay to the Company
within 60 days of receipt of such refunded taxes, interest, penalties or
additions to tax, the amount thereof plus the amount of any interest received
by you and fairly attributable thereto (which amount shall be deemed to be in
repayment of the loan advanced by the Company to the extent fairly
attributable thereto); provided, however, that you may offset the amount of
such refund against any amount due and owing by the Company to you pursuant to
this Agreement. Upon disallowance of any such refund, the Company shall
forgive the amount of the advance fairly attributable thereto (which
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<PAGE>
forgiveness shall be deemed to be in satisfaction of a portion of the
Additional Gross-Up Payment due under Subsection 6(a) hereof).
(4) If, in the course of contesting any proposed Excise Tax
referred to in this Section 6, any taxing authority advises you that it is
willing to agree to a settlement with respect to such matter, you shall notify
the Company of such settlement proposal. If the settlement proposal is
acceptable to the Company, the Company shall so notify you and you shall agree
to the settlement proposal; provided, however, that you shall not be obligated
to agree to the settlement proposal if you release the Company from any
further obligations pursuant to this Section 6 with respect to any further
action to be taken by you to contest such proposed Excise Tax and if you agree
that the Additional Gross-Up Payment and Indemnified Amount determined under
this Section 6 in respect of such proposed Excise Tax that the Company shall
be required to pay to you shall not exceed the amount of such payments that
would have been required if you had agreed to the settlement proposal.
7. Successors; Binding Agreement. (i) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms as you would be entitled
pursuant to Sections 4 and 5 hereof if you terminate your employment for Good
Reason and a change in control of the Company has occurred, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
(iii) You acknowledge that the letter agreement between you and the
Company dated ___________________, 19___, relating to certain severance
matters, has been terminated and is of no further force or effect.
(iv) If pursuant to Section 3 hereof you become entitled to the
benefits provided in Subsection 4(iii) hereof, you agree that (i) all rights
you may then have under the Separation Pay Plan of the Company or any of its
subsidiaries, or any successor plan, shall lapse and you shall have no rights
thereunder, and (ii) if you were, as of your Date of Termination, an employee
of a subsidiary of the Company, you shall not be entitled to receive any
payments or other benefits from such subsidiary not specifically contemplated
by Section 4 hereof.
8. Notice. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Board with a copy to the
Secretary of the Company, or to such other address as either party may have
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<PAGE>
furnished to the other in writing in accordance herewith, except that notice
of change of address shall be effective only upon receipt. If, as of the date
you give any notice under this Agreement, you are then an employee of a
subsidiary of the Company, you shall provide such notice to such subsidiary,
directed to the attention of the Board of Directors of such subsidiary with a
copy to the Secretary of such subsidiary, as well as to the Company in the
manner set forth in this Section 8.
9. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless in writing and signed by you and such
officer as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of the State of California.
10. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
TRANSAMERICA CORPORATION
_______________________________
[Name]
[Title]
Agreed to as of _____________, 19__
_____________________________
[Name]
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EXHIBIT EX-10.30
TRANSAMERICA CORPORATION
1995 PERFORMANCE STOCK OPTION PLAN
TRANSAMERICA CORPORATION, hereby adopts the Transamerica Corporation
1995 Performance Stock Option Plan, effective as of January 26, 1995, as
follows:
Section 1. Background and Purpose
1.1 Background and Effective Date. The Plan permits the grant of
Options and Tandem Limited Stock Appreciation Rights. The Plan is effective as
of January 26, 1995, subject to ratification by an affirmative vote of the
holders of a majority of the Shares which are present in person or by proxy
and entitled to vote at the 1995 Annual Meeting of Stockholders. Awards may be
granted prior to the receipt of such vote, but such grants shall be null and
void if such vote is not in fact received.
1.2 Purpose of the Plan. The Plan is intended to attract, motivate,
and retain key executives of the Corporation and its Affiliates. The Plan is
intended to motivate Participants to manage the Corporation to provide a
superior return to stockholders. The Plan is further intended to align
Participants' interests with those of the Corporation's stockholders.
Section 2. Definitions
The following words and phrases shall have the following meanings unless
a different meaning is plainly required by the context:
2.1 "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under
such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
2.2 "Affiliate" means any corporation or any other entity (including,
but not limited to, partnerships and joint ventures) controlling, controlled
by, or under common control with the Corporation.
2.3 "Award" means, individually or collectively, a grant under the
Plan of Options and/or TLSARs.
2.4 "Award Agreement" means the written agreement setting forth the
terms and provisions applicable to each Award.
2.5 "Board" means the Board of Directors of the Corporation.
2.6 "Change of Control" means the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of 20% or more of either (1) the then-outstanding shares of common
<PAGE>
stock of the Corporation (the "Outstanding Corporation Common Stock") or (2)
the combined voting power of the then-outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); provided, however, that for
purposes of this paragraph (a) the following acquisitions shall not
constitute, or be deemed to cause, a Change of Control: (i) any acquisition
directly from the Corporation, (ii) any acquisition by the Corporation, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the Corporation
or (iv) any acquisition by any corporation pursuant to a transaction which
complies with clauses (1), (2) and (3) of paragraph (c) below; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Corporation's stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless, following such
Business Combination, (1) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the then outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (2) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Corporation or of such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then-outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (3) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(d) approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
2
<PAGE>
2.7 "Change of Control Value" means the greater of (a) the highest Fair
Market Value of a Share during the period of 60 consecutive days which ends on
the date of a Change of Control, or (b) the highest price per Share paid in
the transaction which gives rise to the Change of Control.
2.8 "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under
such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
2.9 "Committee" means the Management Development and Compensation
Committee of the Board, or any other committee appointed by the Board
(pursuant to Section 3.1) to administer the Plan.
2.10 "Corporation" means Transamerica Corporation, a Delaware
corporation, or any successor thereto.
2.11 "Director" means any individual who is a member of the Board.
2.12 "Disability" means a Termination of Employment by reason of the
Executive's becoming permanently and totally disabled. An Executive shall be
deemed to have become permanently and totally disabled for purposes of the
Plan if (and only if) he or she has become permanently and totally disabled
under the long-term disability plan sponsored by his or her employer.
2.13 "Early Retirement" means a Termination of Employment by reason of
the Executive's early retirement at or after his or her "Early Retirement
Date" under the Retirement Plan for Salaried U.S. Employees of Transamerica
Corporation and Affiliates (or any successor thereto).
2.14 "Executive" means an employee of the Corporation or of an
Affiliate who is a member of the SEC and/or the SMC, whether such employee is
a member at the time the Plan is adopted or becomes a member subsequent to the
adoption of the Plan.
2.15 "Exercise Price" means the price at which a Share may be purchased
by a Participant pursuant to the exercise of an Option or TLSAR.
2.16 "Fair Market Value" means the last quoted per Share selling price
for Shares on the relevant date, as quoted in the New York Stock Exchange
Composite Transactions Index published in The Wall Street Journal, or if there
were no sales on such date, the last quoted selling price on the nearest day
after the relevant date, as determined by the Committee.
2.17 "Grant Date" means, with respect to an Award, the date that the
Award was granted.
2.18 "Normal Retirement" means a Termination of Employment by reason of
the Executive's retirement at or after his or her "Normal Retirement Date"
under the Retirement Plan for Salaried U.S. Employees of Transamerica
Corporation and Affiliates (or any successor thereto).
2.19 "Option" means an option to purchase Shares which is granted under
Section 5 and which is not intended to be an Incentive Stock Option under
Section 422 of the Code.
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2.20 "Participant" means an Executive who has an outstanding Award.
2.21 "Plan" means the Transamerica Corporation 1995 Performance Stock
Option Plan, as set forth in this instrument and as hereafter amended from
time to time.
2.22 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act.
2.23 "SEC" means the Corporation's Senior Executive Committee (or any
successor thereto).
2.24 "SMC" means the Corporation's Senior Management Council (or any
successor thereto).
2.25 "Section 16 Person" means a person who, with respect to the
Shares, is subject to Section 16 of the 1934 Act.
2.26 "Shares" means the shares of common stock of the Corporation.
2.27 "Tandem Limited Stock Appreciation Right" or "TLSAR" means an
Award granted under Section 6 in connection with a related Option, the
exercise of which shall require forfeiture of the related Option or portion
thereof (and when the Option is exercised, the TLSAR shall be similarly
cancelled).
2.28 "Termination of Employment" means a cessation of the employee-
employer relationship between an Executive and the Corporation or an Affiliate
for any reason, including, but not by way of limitation, a termination by
resignation, discharge, death, Disability, Early Retirement, Normal
Retirement, or the disaffiliation of an Affiliate, but excluding any such
termination where there is a simultaneous reemployment by the Corporation or
an Affiliate.
Section 3. Administration
3.1 The Committee. The Plan shall be administered by the Committee.
The Committee shall consist of not less than two Directors. The members of the
Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board. The Committee shall be comprised solely of Directors
who both are (a) "disinterested persons" under Rule 16b-3, and (b) "outside
directors" under section 162(m) of the Code.
3.2 Authority of the Committee. It shall be the duty of the Committee
to administer the Plan in accordance with the Plan's provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer
the Plan and to control its operation, including, but not limited to, the
power to (a) determine which Executives shall be granted Awards, (b) prescribe
the terms and conditions of the Awards, (c) interpret the Plan and the Awards,
(d) adopt such procedures and subplans as are necessary or appropriate to
permit participation in the Plan by Executives who are foreign nationals or
employed outside of the United States, (e) adopt rules for the administration,
interpretation and application of the Plan as are consistent therewith, and
(f) interpret, amend or revoke any such rules. Except as provided in Section
4.3, after an Award has been granted, the Committee shall not reduce the
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<PAGE>
Exercise Price of the Award (or cancel the Award and grant a substitute Award
having a lower Exercise Price).
3.3 Delegation by the Committee. The Committee, in its sole
discretion and on such terms and conditions as it may provide, may delegate
all or any part of its authority and powers under the Plan to one or more
directors or officers of the Corporation; provided, however, that the
Committee may not delegate its authority and powers (a) with respect to
Section 16 Persons, or (b) in any way which would jeopardize the Plan's
qualification under section 162(m) of the Code or Rule 16b-3.
3.4 Decisions Binding. All determinations and decisions made by the
Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.
Section 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section
4.3, the total number of Shares available for grant under the Plan shall not
exceed 5,000,000. Shares granted under the Plan may be either authorized but
unissued Shares or treasury Shares.
4.2 Lapsed Awards. If an Award (or portion thereof) is cancelled,
terminates, expires, or lapses for any reason other than failure of an Option
to become exercisable due to the price of the Shares not reaching the Fair
Market Value specified in the Award Agreement for the required time during the
specified period, any Shares subject to such Award again shall be available to
be the subject of an Award. If an Option (or portion thereof) is cancelled,
terminates, expires, or lapses due to failure of the Option to become
exercisable on account of the price of the Shares not reaching the Fair Market
Value specified in the Award Agreement for the required time during the
specified period, any Shares subject to such Option shall not be available to
be the subject of another Award.
4.3 Adjustments in Awards and Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, distribution or
other change in the corporate structure of the Corporation affecting the
Shares, the Committee shall adjust the number and class of securities which
may be delivered under the Plan, the number, class, and price of the
securities subject to outstanding Awards, the prices set forth in Sections
5.4.1 and 5.4.2 (and if applicable, of Options granted pursuant to Section
5.4.6) and the numerical limit of Section 5.1, in such manner as the Committee
(in its sole discretion) shall determine to be appropriate to prevent the
dilution or diminution of Awards. Notwithstanding the preceding sentence, the
number of Shares subject to any Award shall always be a whole number.
Section 5. Options
5.1 Grant of Options. Subject to the terms and provisions of the
Plan, Options may be granted to Executives at any time and from time to time
as determined by the Committee in its sole discretion. The Committee, in its
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<PAGE>
sole discretion, shall determine the number of Shares subject to each Option,
provided that during any calendar year, no Participant shall be granted
Options covering more than 1,700,000 Shares.
5.2 Option Agreement. Each Option shall be evidenced by an Award
Agreement. The Award Agreement shall specify the Exercise Price, the
expiration date of the Option, the number of Shares to which the Option
pertains, any conditions to exercise of the Option, and such other terms and
conditions as the Committee, in its sole discretion, shall determine.
5.3 Exercise Price. The Exercise Price for each Option shall be
determined by the Committee in accordance with the provisions of this Section
5.3.
5.3.1 Options Granted to SEC Members. The Exercise Price of Options
that are granted on January 26, 1995, to members of the SEC shall be
determined as follows. (The Fair Market Value of a Share on January 26,1995,
was $50.75 per Share.)
(a) The Exercise Price for one of the Options granted to each such
Executive shall be $60 per Share. The Option shall cover not more than 30% of
the total Shares covered by all Options granted to the Executive on January
26, 1995.
(b) The Exercise Price for one of the Options granted to each such
Executive shall be $82 per Share. The Option shall cover not more than 30% of
the total Shares covered by all Options granted to the Executive on January
26, 1995.
(c) The Exercise Price for one of the Options granted to each such
Executive shall be $100 per Share. The Option shall cover not less than 40% of
the total Shares covered by all Options granted to the Executive on January
26, 1995.
(d) Notwithstanding the preceding, in the case of a member of the SEC
who is expected to be eligible for Normal Retirement prior to January 1, 2002,
(1) one of the Options granted to the Executive shall have an Exercise Price
of $60 per Share and shall cover not more than 30% of the Shares covered by
all Options granted to the Executive on January 26, 1995, and (2) the other
Option granted to the Executive shall have an Exercise Price of $82 per Share
and shall cover the remaining balance of the Shares covered by all Options
granted to the Executive on January 26, 1995.
5.3.2 Options Granted to Other SMC Members. In the case of each
Option that is granted on January 26, 1995, to a member of the SMC (but not of
the SEC), the Exercise Price for 100% of the Shares covered by the Option
shall be $100 per Share. (The Fair Market Value of a Share on January 26,
1995, was $50.75 per Share.)
5.3.3 Options Granted After January 26, 1995. In the case of each
Option that is granted after January 26, 1995, the Exercise Price(s) of the
Option shall be determined by the Committee in its discretion, provided that
any such Exercise Prices shall represent an appropriate premium over the then
Fair Market Value of a Share, as determined by the Committee.
6
<PAGE>
5.4 Exercisability of Options. Each Option shall become exercisable
in accordance with the provisions of this Section 5.4.
5.4.1 Options Granted to SEC Members. Each Option that is granted on
January 26, 1995, to an Executive who is a member of the SEC shall become
exercisable in accordance with the provisions of this Section 5.4.1, but
subject to the special rules of Sections 5.4.3, 5.4.4, and 5.4.5.
(a) With respect to an Option that has an Exercise Price of $60 per
share, the right to exercise 33-1/3% of the Shares covered by the Option shall
accrue on the third anniversary of the Grant Date, the right to exercise an
additional 33-1/3% of such Shares shall accrue on the fourth anniversary of
the Grant Date, and the right to exercise the remaining Shares shall accrue on
the fifth anniversary of the Grant Date, provided in each case that the
Participant remains an Executive on the applicable anniversary date.
(b) With respect to an Option that has an Exercise Price of $82 per
share, the right to exercise 100% of the Shares covered by the Option shall
accrue on the tenth trading day (occurring within a period of 30 consecutive
trading days) on which the Fair Market Value of a Share is at least $82,
provided that such tenth trading day occurs not later than five years after
the Grant Date.
(c) With respect to an Option that has an Exercise Price of $100 per
share, the right to exercise 100% of the Shares covered by the Option shall
accrue on the tenth trading day (occurring within a period of 30 consecutive
trading days) on which the Fair Market Value of a Share is at least $100,
provided that such tenth trading day occurs not later than seven years after
the Grant Date.
5.4.2 Options Granted to Other SMC Members. Each Option that is
granted on January 26, 1995, to an Executive who is a member of the SMC (but
not of the SEC) shall become exercisable as to 100% of the Shares covered by
the Option on the tenth trading day (occurring within a period of 30
consecutive trading days) on which the Fair Market Value of a Share is at
least $100, provided that such tenth trading day occurs within seven years of
the Grant Date.
5.4.3 Special Rule for Normal Retirement. If a Participant incurs a
Termination of Employment on account of Normal Retirement, the following
special rules shall apply (subject to Section 5.5). If within six months after
the Participant's Normal Retirement, the right to exercise any particular
Shares would have accrued (had the Participant not incurred a Termination of
Employment), by virtue of additional service, changes in the Fair Market Value
of the Shares or the occurrence of a Change of Control the right to exercise
such Shares shall accrue on the date that such right otherwise would have
accrued. If more than six months following the Participant's Normal
Retirement, the right to exercise any particular Shares would have accrued
(had the Participant not incurred a Termination of Employment), by virtue of
additional service, changes in the Fair Market Value of the Shares or the
occurrence of Change of Control the right to exercise a portion of such Shares
shall accrue on the date that such right otherwise would have accrued. The
Committee shall determine such portion on a pro-rata basis, based on the time
elapsed from the Grant Date to the date of Normal Retirement and the vesting
date.
7
<PAGE>
5.4.4 Special Rule for Disability or Death. If a Participant incurs a
Termination of Employment on account of Disability or death, the following
special rules shall apply (subject to Section 5.5). If the date of the
Participant's Disability or death is within six months of the date when the
right to exercise any Shares would have accrued (had the Participant not
incurred a Termination of Employment), by virtue of additional service,
changes in the Fair Market Value of the Shares or the occurrence of a Change
of Control the right to exercise such Shares shall accrue on the date that
such right otherwise would have accrued. If the date of the Participant's
Disability or death is more than six months prior to the date when the right
to exercise any particular Shares would have accrued (had the Participant not
incurred a Termination of Employment), by virtue of additional service,
changes in the Fair Market Value of the Shares or the occurrence of a Change
of Control the right to exercise a portion of such Shares shall accrue on the
date that such right otherwise would have accrued. The Committee shall
determine such portion on a pro-rata basis, based on the time elapsed from the
Grant Date to the date of Disability or death and the vesting date.
5.4.5 Special Rule for Change of Control. With respect to each Option
with an Exercise Price of $60 per share, if a Change of Control occurs prior
to the Participant's Termination of Employment, the right to exercise 100% of
the Shares subject to such Option shall accrue on the date that the Change of
Control occurs.
5.4.6 Options Granted After January 26, 1995. The periods of
exercisability of each Option that is granted after January 26, 1995, shall be
determined by the Committee in its sole discretion.
5.5 Expiration of Options. The expiration date for each Option shall
be determined in accordance with the provisions of this Section 5.5.
5.5.1 Options Granted to SEC and SMC Members. Each Option (or portion
thereof) that is granted on January 26, 1995, to a Participant who is a member
of the SEC or SMC shall terminate upon the first to occur of the following
events:
(a) The expiration of ten years from the Grant Date (12 years in the
case of Options with an Exercise Price of $100 per share); or
(b) The expiration of three months from the date of the Optionee's
Termination of Employment for a reason other than Early Retirement, Normal
Retirement, Disability or death; or
(c) The expiration of three years from the date of the Optionee's
Termination of Employment by reason of Disability; or
(d) The expiration of five years from the date of the Optionee's
Termination of Employment by reason of Early or Normal Retirement; or
(e) In the case of an Option referred to in Sections 5.4.1(b), 5.4.1(c)
or 5.4.2 (or, if applicable, 5.4.6) which has not been exercised, the date on
which the Option no longer may become exercisable (due to the failure of the
Shares to reach the specified Fair Market Value for the required time during
the specified period).
8
<PAGE>
In addition, an Option (or applicable portion thereof) with respect to
which a related TLSAR has been granted shall terminate upon exercise of the
related TLSAR.
5.5.2 Special Rule for Death. Notwithstanding any contrary provision
of Section 5.5.1, if the Optionee dies prior to the expiration of his or her
Option in accordance with Section 5.5.1, the Option shall terminate three
years after his or her death.
5.5.3 Options Granted After January 26, 1995. The provisions for
expiration of each Option that is granted after January 26, 1995, shall be
determined by the Committee in its sole discretion.
5.6 Payment. Options shall be exercised by the Participant's delivery
of a written notice of exercise to the Secretary of the Corporation (or his or
her designee), setting forth the number of Shares with respect to which the
Option is to be exercised, and accompanied by full payment for the Shares.
Upon the exercise of any Option, the Exercise Price shall be payable to the
Corporation in full in cash. The Committee, in its sole discretion, also may
permit exercise (a) by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan. As soon as practicable after
receipt of a written notification of exercise and full payment for the Shares
purchased, the Corporation shall deliver to the Participant (or the
Participant's designated broker), Share certificates (which may be in book
entry form) representing such Shares.
5.7 Restrictions on Share Transferability. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
as needed to comply with applicable federal securities laws, the requirements
of any national securities exchange or system upon which Shares are then
listed or traded, or any blue sky or state securities laws.
Section 6. Tandem Limited Stock Appreciation Rights
6.1 Grant of TLSARs. Subject to the terms and provisions of the Plan,
TLSARs may be granted to Executives at any time and from time to time as
determined by the Committee in its sole discretion, provided that such grants
shall be only in conjunction with all or any part of any Option, and may be
granted either at or after the Grant Date of the Option. A TLSAR (or
applicable portion thereof) granted with respect to a given Option shall
terminate upon the termination or exercise of the related Option. The
Committee, in its sole discretion, shall determine the number of Shares
subject to each TLSAR, provided that during any calendar year, no Participant
shall be granted TLSARs covering more than 235,000 Shares.
6.2 TLSAR Agreement. Each TLSAR shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the expiration date of the
TLSAR, the number of Shares to which the TLSAR pertains, any conditions to
exercise of the TLSAR, and such other terms and conditions as the Committee,
in its sole discretion, shall determine.
9
<PAGE>
6.3 Exercise Price. The Committee, subject to the provisions of the
Plan, shall have sole discretion to determine the Exercise Price of each
TLSAR, provided that such Exercise Price shall be not less than 100% of the
Fair Market Value of a Share on the Grant Date.
6.4 Exercisability. Each TLSAR which has not otherwise expired shall
become exercisable immediately upon the occurrence of a Change of Control,
provided that in no event may a TLSAR granted to a Section 16 Person become
exercisable until at least six months after the Grant Date (or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3).
6.5 Expiration of TLSARs. The Committee, in its sole discretion,
shall determine when each TLSAR shall expire, provided that (a) no TLSAR may
have a term longer than would be permitted by applying the rules of Section
5.5 (regarding the expiration of Options), and (b) each TLSAR shall terminate
no later than the last day of the period of 60 consecutive days which begins
on the date of the Change of Control.
6.6 Payment of TLSAR Amount. Upon exercise of a TLSAR, the
Participant shall be entitled to receive payment from the Corporation in an
amount determined by multiplying:
(a) The amount by which the Change of Control Value of a Share on the
date of exercise exceeds the Exercise Price; times
(b) The number of Shares with respect to which the TLSAR is exercised.
Each TLSAR shall be paid in cash, provided that if the Committee
determines that any such payment would cause a Change of Control transaction
to be ineligible for pooling of interests accounting under APB No. 16, which
transaction (but for such payment) otherwise would have been eligible for such
accounting treatment, the Committee, in its sole discretion, may determine
that any TLSAR shall be paid in Shares having a Fair Market Value equal to the
cash amount foregone.
Section 7. Miscellaneous
7.1 No Effect on Employment. Nothing in the Plan shall interfere with
or limit in any way the right of the Corporation to terminate any
Participant's employment at any time, with or without cause. For purposes of
the Plan, transfer of employment of a Participant between the Corporation and
any one of its Affiliates (or between Affiliates) shall not be deemed a
Termination of Employment.
7.2 Participation. No Executive shall have the right to be selected
to receive an Option, or, having been so selected, to be selected to receive a
future Option.
7.3 Indemnification. Each person who is or shall have been a member
of the Committee, or of the Board, shall be indemnified and held harmless by
the Corporation against and from (a) any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him or her in connection
with or resulting from any claim, action, suit, or proceeding to which he or
she may be a party or in which he or she may be involved by reason of any
10
<PAGE>
action taken or failure to act under the Plan or any Award Agreement, and (b)
from any and all amounts paid by him or her in settlement thereof, with the
Corporation's approval, or paid by him or her in satisfaction of any judgment
in any such claim, action, suit, or proceeding against him or her, provided he
or she shall give the Corporation an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Certificate of Incorporation or By-laws, by
contract, as a matter of law, or otherwise, or under any power that the
Corporation may have to indemnify them or hold them harmless.
7.4 Successors. All obligations of the Corporation under the Plan,
with respect to Awards granted hereunder, shall be binding on any successor to
the Corporation, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or other acquisition, of
all or substantially all of the business or assets of the Corporation.
7.5 Beneficiary Designations. If permitted by the Committee, a
Participant may name a beneficiary or beneficiaries to whom any vested but
unpaid Award shall be transferred in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant
and shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, and subject to the terms of
the Plan and of the applicable Award Agreement, any unexercised vested Option
may be exercised by the administrator or executor of the Participant's estate.
This Section 7.5 shall not be effective until specifically authorized by the
Committee.
7.6 Domestic Relations Orders. If permitted by the Committee, and
under such procedures as the Committee may adopt from time to time, an Award
may be transferred to a Participant's spouse, former spouse or dependent
pursuant to a court-approved domestic relations order which relates to the
provision of child support, alimony payments or marital property rights. This
Section 7.6 shall not be effective until specifically authorized by the
Committee.
7.7 Bona Fide Gifts. If permitted by the Committee, and under such
procedures as the Committee may adopt from time to time, an Award may be
transferred, by bona fide gift and not for any consideration, to a member of
the Participant's immediate family or tax-qualified, not-for-profit
organization. This Section 7.7 shall not be effective until specifically
authorized by the Committee.
7.8 Nontransferability of Awards. No Award granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than (a) by will, (b) by the laws of descent and
distribution, or (c) to the limited extent provided in Sections 7.5, 7.6, and
7.7. Except as provided in Sections 7.6 and 7.7, all rights with respect to an
Award granted to a Participant shall be available during his or her lifetime
only to the Participant.
7.9 No Rights as Stockholder. No Participant (nor any beneficiary)
shall have any of the rights or privileges of a stockholder of the Corporation
with respect to any Shares issuable pursuant to an Award (or exercise
11
<PAGE>
thereof), unless and until certificates representing such Shares shall have
been issued, recorded on the records of the Corporation or its transfer agents
or registrars, and delivered to the Participant (or beneficiary).
Section 8. Amendment, Termination, and Duration
8.1 Amendment, Suspension, or Termination. The Board, in its sole
discretion, may amend or terminate the Plan, or any part thereof, at any time
and for any reason. However, (a) if and to the extent required to maintain the
Plan's qualification under Rule 16b-3 and/or Section 162(m) of the Code, any
such amendment shall be subject to stockholder approval, and (b) the amendment
or termination of the Plan shall not, without the consent of the Participant,
alter or impair any rights or obligations under any Award theretofore granted
to any Participant.
8.2 Duration of the Plan. The Plan shall commence on the date
specified herein, and subject to Section 8.1 (regarding the Board's right to
amend or terminate the Plan), shall remain in effect thereafter.
Section 9. Tax Withholding
9.1 Withholding Requirements. Prior to the delivery of any Shares or
cash pursuant to an Award (or exercise thereof), the Corporation shall have
the power and the right to deduct or withhold, or require a Participant to
remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required to be
withheld with respect to such Award (or exercise thereof).
9.2 Withholding Arrangements. The Committee, in its sole discretion
and pursuant to such procedures as it may specify from time to time, may
permit a Participant to satisfy such tax withholding obligation, in whole or
in part by (a) electing to have the Corporation withhold otherwise deliverable
Shares, or (b) delivering to the Corporation already-owned Shares having a
Fair Market Value equal to the amount required to be withheld. The amount of
the withholding requirement shall be deemed to include any amount which the
Committee agrees may be withheld at the time the election is made, not to
exceed the amount determined by using the maximum federal, state or local
marginal income tax rates applicable to the Participant with respect to the
Award on the date that the amount of tax to be withheld is to be determined.
The Fair Market Value of the Shares to be withheld or delivered shall be
determined as of the date that the taxes are required to be withheld.
Section 10. Legal Construction
10.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
10.2 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
12
<PAGE>
10.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
10.4 Securities Law Compliance. With respect to Section 16 Persons
and unless otherwise specifically determined by the Committee, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3. To the extent any provision of the Plan, Award Agreement or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
10.5 Governing Law. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of
California.
10.6 Captions. Captions are provided herein for convenience only, and
shall not serve as a basis for interpretation or construction of the Plan.
13
<PAGE>
EXHIBIT EX-11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
TRANSAMERICA CORPORATION
Year ended December 31
1994 1993 1992
(Amounts in thousands,
except per share data)
Primary
Average shares outstanding ............. 72,592 78,495 78,050
Net effect of dilutive stock options--
based on the treasury stock method
using average market price ........... 1,246* 1,788* 1,721*
______ ______ ______
TOTAL ...... 73,838 80,283 79,771
====== ====== ======
Net income ............................. $427,227 $377,413 $243,201
Preferred dividends .................... (31,622)(1) (23,629) (21,949)
________ ________ _______
Net income to common ................... $395,605 $353,784 $221,252
======== ======== =======
Per share amount ....................... $5.45 $4.51 $2.83
===== ===== =====
Fully Diluted
Average shares outstanding ............. 72,592 78,495 78,050
Net effect of dilutive stock options--
based on the treasury stock method
using the year-end market price, if
higher than average market price ..... 1,246* 2,000* 2,176*
______ _______ ______
TOTAL ...... 73,838 80,495 80,226
====== ======= ======
Net income ............................. $427,227 $377,413 $243,201
Preferred dividends .................... (31,622)(1) (23,629) (21,949)
________ ________ _______
Net income to common ................... $395,605 $353,784 $221,252
======== ======== =======
Per share amount ....................... $5.45 $4.51 $2.83
===== ===== =====
*Not included in per share calculation because effect is less than 3%.
(1) Includes expenses of $6,743 associated with redemption of Series D
preferred stock.
<PAGE>
<TABLE>
EXHIBIT EX-12
TRANSAMERICA CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
<CAPTION>
Year Ended December 31,
________________________________________________________
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest and debt expense $ 573,755 $ 511,649 $ 568,887 $631,106 $ 751,808
One-third of rental
expense ................ 33,300 29,073 29,788 31,052 28,096
__________ __________ __________ ________ __________
Total ................. $ 607,055 $ 540,722 $ 598,675 $662,158 $ 779,904
========== ========== ========== ======== ==========
Earnings:
Consolidated operating
income from continuing
operations ............. $ 427,926 $ 447,519 $ 334,006 $ 5,659 $ 190,466
Provision for income
taxes .................. 262,392 140,658 204,392 32,582 97,705
Fixed charges ........... 607,055 540,722 598,675 662,158 779,904
__________ __________ __________ ________ __________
Total ................. $1,297,373 $1,128,899 $1,137,073 $700,399 $1,068,075
========== ========== ========== ======== ==========
Ratio of earnings from con-
tinuing operations to
fixed charges ........... 2.14 2.09 1.90 1.06 1.37
==== ==== ==== ==== ====
</TABLE>
<PAGE>
EXHIBIT EX-13
FINANCIAL REVIEW
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in consumer lending, commercial lending, leasing,
life insurance, real estate services and asset management.
CONSOLIDATED RESULTS
Transamerica's net income for 1994 increased $49.8 million (13%) compared to
1993. Net income included after tax losses from discontinued operations of
$700,000 in 1994 and $47 million in 1993. For a discussion of Transamerica's
discontinued operations see Note J on page 79. Net income in 1993 also
included a $23.1 million extraordinary loss from early extinguishment of debt.
Transamerica's income from continuing operations for 1994 decreased $19.6
million (4%) compared to 1993. Income from continuing operations for 1994
included net after tax gains from investment transactions aggregating $15
million compared to $25.3 million in 1993. In 1994 operating income from
continuing operations, which excludes investment transactions, decreased $9.3
million (2%) from 1993 due primarily to decreases in real estate services and
asset management and consumer lending operating results and higher unallocated
expenses. Partially offsetting these declines were improvements in commercial
lending, life insurance and leasing operating results. Operating income from
continuing operations for 1993 included a $36 million after tax writedown of
repossessed rent-to-own rental stores in commercial lending, charges totaling
$24.7 million after tax primarily for the restructuring of the commercial
lending and real estate services operations and for the realignment of certain
corporate-wide administrative functions and an $8.4 million additional tax
provision from the revaluation of the January 1, 1993 deferred tax liability
for the effect of the federal income tax rate increase. These items were
offset by a $94.2 million tax benefit from the satisfactory resolution of
prior years' tax matters. Excluding these 1993 items, operating income from
continuing operations for 1994 increased $15.8 million (4%).
Investment transactions in 1994 included after tax gains of $32.6 million
realized on the sale of investments, less the required accelerated
amortization of deferred policy acquisition costs associated with interest-
sensitive products of $4.1 million after tax and loss provisions of $13.5
million after tax for the impairment in value of investments. Investment
transactions in 1993 included after tax gains of $102.2 million realized on
the sale of investments, less accelerated amortization of deferred policy
acquisition costs
44 Transamerica Corporation and Subsidiaries
<PAGE>
associated with interest-sensitive products of $40.8 million after tax and
loss provisions of $36.1 million after tax for the impairment in value of
investments.
Operating income from continuing operations increased $93.3 million (28%) in
1993 compared to 1992 due primarily to increases in life insurance, real
estate services and asset management operating results and lower unallocated
interest and other expenses. Partially offsetting these improvements were
declines in commercial lending, as a result of the 1993 items described on
page 44, consumer lending and leasing operating results. Excluding the 1993
items, adjusted operating income from continuing operations for 1993
increased $68.2 million (21%) compared to 1992.
OPERATING INCOME BY LINE OF BUSINESS
Changes in the earnings, capital requirements and liquidity of the
Corporation's consolidated operations are best understood by considering the
Corporation's separate business segments, which are shown below:
____________________________________________________________________________
(Amounts in millions except for share data) 1994 1993 1992
FINANCE
Consumer lending $ 90.4 $ 93.1 $101.2
Commercial lending 53.7 (4.0) 22.2
Leasing 63.6 53.6 58.1
Amortization of goodwill (13.0) (13.0) (13.0)
______ ______ ______
Total finance 194.7 129.7 168.5
LIFE INSURANCE 250.2 215.7 190.8
REAL ESTATE SERVICES AND ASSET MANAGEMENT 64.2 84.6 73.3
Amortization of goodwill (1.8) (1.7) (1.7)
______ ______ ______
Total real estate services and asset management 62.4 82.9 71.6
Unallocated interest and other expenses (94.4) (6.1) (102.0)
______ ______ ______
Operating income from continuing operations 412.9 422.2 328.9
Investment transactions 15.0 25.3 5.1
______ ______ ______
Income from continuing operations 427.9 447.5 334.0
Loss from discontinued operations (0.7) (47.0) (90.8)
Extraordinary loss on early extinguishment of debt (23.1)
______ ______ ______
Net income $427.2 $377.4 $243.2
====== ====== ======
EARNINGS PER SHARE OF COMMON STOCK
Income from continuing operations:
Operating income from continuing operations $ 5.25 $ 5.08 $ 3.94
Investment transactions 0.21 0.32 0.06
______ ______ ______
Income from continuing operations 5.46 5.40 4.00
Loss from discontinued operations (0.01) (0.60) (1.17)
Extraordinary loss on early extinguishment of debt (0.29)
______ ______ ______
Net income $ 5.45 $ 4.51 $ 2.83
====== ====== ======
Transamerica Corporation and Subsidiaries 45
<PAGE>
TRANSAMERICA FINANCE GROUP
Transamerica Finance Group includes primarily Transamerica's consumer lending,
commercial lending and leasing operations and provides funding for these
operations. The principal assets of Transamerica Finance Group comprise
finance receivables and equipment held for lease totaling $9.6 billion at
December 31, 1994 and $7.8 billion at December 31, 1993. Transamerica Finance
Group's total notes and loans payable were $8.7 billion at December 31, 1994
and $7 billion at December 31, 1993. Variable rate debt was $4.3 billion at
December 31, 1994 compared to $4 billion at the end of 1993. The ratio of debt
to debt plus equity was 84.2% at December 31, 1994 and 82.2% at December 31,
1993.
Transamerica Finance Group, through its wholly owned subsidiary Transamerica
Finance Corporation, offers publicly, from time to time, senior or
subordinated debt securities. Public debt issued totaled $1,516 million in
1994, $407 million in 1993 and $538.7 million in 1992. Under a shelf
registration statement filed in July 1993 with the Securities and Exchange
Commission, the company may offer up to $2 billion of senior or subordinated
debt securities (which may include medium-term notes) with varying terms, of
which $337.2 million had not been issued at December 31, 1994.
During 1990, Transamerica Finance Group entered into a 5-year arrangement in
which it securitized a $375 million participation interest in a pool of its
insurance premium finance receivables. This securitization, which has been
accounted for as a sale, allowed Transamerica Finance Group to improve its
capital management and liquidity. Proceeds from this transaction were used
primarily to reduce debt. At December 31, 1994, $375 million of securitized
insurance premium finance receivables remained outstanding. The commercial
lending operation continues to service this portfolio and remains partially at
risk through limited recourse provisions.
Liquidity is a characteristic of these operations since the majority of the
assets consist of finance receivables. Principal cash collections of finance
receivables totaled $16.6 billion during 1994, $13.4 billion during 1993 and
$11.1 billion during 1992.
46 Transamerica Corporation and Subsidiaries
<PAGE>
CONSUMER LENDING
Consumer lending net income for 1994 was $90.3 million compared to $93 million
for 1993. Consumer lending income before the amortization of goodwill in 1994
decreased $2.7 million (3%) from 1993. Excluding a $5.3 million benefit ($3.1
million after tax) recorded in 1993 from the reversal of reserves related to a
1990 securitization and sale of real estate secured receivables, income for
1994 increased $400,000 (-%). The increase resulted from higher revenues
offset in part by increased operating and interest expenses, and an increased
provision for losses on receivables. Revenues in 1994 increased $36.3 million
(6%) over 1993 mainly due to increased finance charges resulting from higher
average finance receivables outstanding and higher fees due to an increased
volume of real estate secured loans.
Interest expense for 1994 increased $8.5 million (3%) from 1993 mainly due to
an increase in short-term rates and the cost of increased borrowings as a
result of the higher level of receivables outstanding. Operating expenses for
1994 increased $20 million (11%) over 1993. Excluding the $5.3 million reserve
reversal recorded in 1993, operating expenses in 1994 increased $14.7 million
(8%). The increase was mainly due to the higher level of finance receivables
outstanding, an increase in the average number of branches during 1994, and
costs of developing new loan information systems to handle additional loan
products.
The provision for losses on receivables for 1994 increased $18.3 million (29%)
due to increased credit losses and increased growth in net finance
receivables over 1993. Credit losses, net of recoveries, as a percentage of
average consumer finance receivables outstanding, net of unearned finance
charges and insurance premiums, were 1.93% for 1994 compared to 1.68% for
1993. Credit losses increased in 1994 mainly due to continued sluggishness in
the California economy and a continued weak California real estate market. Any
change in the trend of credit losses is somewhat dependent upon overall
changes in economic conditions and the California real estate market. Although
recent trends in the economy are encouraging, the outlook for the California
real estate market remains uncertain, particularly in Southern California.
Consumer lending income from operations in 1993 decreased $8.1 million (8%)
from 1992. The decrease was principally due to increased operating expenses,
an increased provision for losses on receivables and lower revenues that more
than offset lower interest expense and the $5.3 million benefit ($3.1 million
after tax) included in operating expenses from the reversal of reserves
related to the 1990 securitization and sale of receivables. Revenues in 1993
decreased $5.8 million (1%) from 1992 principally because of lower servicing
and other fees on securitized receivables as a result of the runoff, which was
completed in 1994, of the securitized receivables and lower fees due to
reduced volume of real estate secured loans. Interest expense declined $24.4
million (9%) in 1993 from 1992 due to a lower average interest rate which
more than offset the effect of higher borrowings due to increased average
receivables outstanding. Operating expenses increased in 1993 mainly due to
investments in new branches and losses on the disposal of repossessed assets.
The provision for losses on receivables increased $15 million (31%) in 1993
over 1992 due to increased credit losses. Credit losses, net of recoveries,
as a percentage of average consumer finance receivables outstanding, net of
unearned finance charges and insurance premiums, were 1.68% in 1993 compared
to 1.21% in 1992. Credit losses increased mainly due to continued sluggishness
in the domestic economy and a weak California real estate market.
Net consumer finance receivables outstanding increased $414.2 million (11%) in
1994 and $66.2 million (2%) in 1993.
Net consumer finance receivables at December 31, 1994 included $3.3 billion of
real estate
48 Transamerica Corporation and Subsidiaries
<PAGE>
secured loans, principally first and second mortgages secured by residential
properties, of which 45% are located in California. Company policy generally
limits the amount of cash advanced on any one loan, plus any existing
mortgage, to between 70% and 80% (depending on location) of the appraised
value of the mortgaged property, as determined by qualified independent
appraisers at the time of loan origination.
Delinquent finance receivables, which are defined as receivables contractually
past due 60 days or more, were $90.2 million (2.08% of finance receivables
outstanding) at December 31, 1994 compared to $78.8 million (2.01% of finance
receivables outstanding) at December 31, 1993. The increase in the percentage
reflects higher delinquent non-real estate secured receivables offset in part
by a decline in the percentage of delinquent real estate secured receivables.
The increase in delinquent non-real estate secured receivables reflects the
changing mix of products offered and the introduction of new products with
higher delinquency experience. Management has established an allowance for
losses equal to 2.83% of net consumer finance receivables outstanding at
December 31, 1994 and 1993.
Generally, by the time an account secured by residential real estate becomes
past due 90 days, foreclosure proceedings have begun, at which time the
account is moved from finance receivables to other assets and is written down
to the estimated realizable value of the collateral if less than the account
balance. After foreclosure, repossessed assets are carried at the lower of
cost or fair value less estimated selling costs. Accounts in foreclosure and
repossessed assets held for sale totaled $226.1 million at December 31, 1994
compared to $214.7 million at December 31, 1993. The increase primarily
reflects higher inventory in California due to California's continuing weak
real estate market and resultant longer disposal times. Since future
improvement may be impacted by factors such as economic conditions and the
state of the real estate market, the extent and timing of any change in the
trend of foreclosures and repossessed assets remains uncertain.
Transamerica Corporation and Subsidiaries 49
<PAGE>
COMMERCIAL LENDING
Commercial lending net income for 1994 was $42.8 million compared to a net
loss of $38 million for 1993. Commercial lending results, before the
amortization of goodwill and a $23.1 million after tax extraordinary loss on
early extinguishment of debt in 1993, increased $57.7 million over 1993.
Results for 1993 included: (i) a $50 million ($36 million after tax) provision
to reduce the net carrying value of repossessed rent-to-own stores to their
estimated realizable value; (ii) an $8.8 million after tax charge for the
restructuring of the commercial lending unit's infrastructure; (iii) a $4.2
million after tax provision for anticipated legal and other costs associated
with the runoff of the liquidating portfolios; (iv) a $4.2 million tax benefit
from the resolution of prior years' tax matters; and (v) a tax benefit of $1.4
million due to the one percent federal tax increase applied to deferred taxes.
Excluding these items and the 1993 extraordinary loss on early extinguishment
of debt, commercial lending income increased $14.3 million (36%) over 1993.
This improvement was primarily due to a lower provision for losses on
receivables and stronger margins during 1994. Stronger margins were a result
of the higher spread between the indices at which the commercial lending
operation lent to customers and the indices at which funds were borrowed.
Commercial lending results, before the extraordinary item and the amortization
of goodwill, were a loss of $4 million for 1993 compared to income of $22.2
million in 1992. Excluding the 1993 items discussed above, commercial lending
income, before the amortization of goodwill and extraordinary item, increased
$17.2 million (77%) in 1993 over 1992. This improvement was primarily due to
lower operating expenses, a lower provision for losses on receivables and
stronger margins. During 1993, the interest rates at which commercial lending
borrowed funds for its business had declined more quickly than the rates at
which it lent to its customers. As a result, margins were enhanced during the
declining rate environment in 1993.
Revenues in 1994 increased $13.6 million (4%) over 1993 as a result of
increased average net receivables in the core businesses and a higher average
portfolio yield attributable to rising interest rates. Revenues decreased
$22.1 million (6%) in 1993 from 1992 principally due to reduced yields
attributable to the low interest rate environment in 1993.
Interest expense increased $9.6 million (9%) in 1994 over 1993 due to a higher
average interest rate on borrowings. Interest expense in 1993 decreased $25.5
million (19%) compared to 1992 due to lower average interest rates.
Operating expenses in 1994 were $21.3 million (11%) lower than 1993 due to the
previously described 1993 restructuring charge and provision for anticipated
legal and other costs associated with the runoff of the liquidating
portfolios, aggregating $21.5 million ($13 million after tax). Expenses in
1994 included a $9 million ($5.5 million after tax) charge for the relocation
of the commercial lending home office, partially offset by the gain described
below on the sale of the repossessed rent-to-own stores. In 1994, the
commercial lending operation sold its U.S. and Canadian repossessed rent-to-
own stores with a net carrying value of $17.7 million for $23 million. The
transaction resulted in a $5.3 million ($4 million after tax) gain. Excluding
the items discussed above, operating expenses decreased $3.5 million (2%) in
1994 from 1993, primarily due to reduced expenses related to the management of
the liquidating portfolios.
Operating expenses in 1993 increased $11.2 million (6%) over 1992 due to the
$21.5 million of costs described above, partially offset by cost reduction
efforts in the core businesses. Excluding the $21.5 million, 1993 operating
expenses decreased $10.3 million (6%) compared to 1992. The provision for
losses on receivables in 1994 was $14.8 million (45%) less than in 1993 due to
lower credit losses and lower delinquent and nonearning receivables. The
provision for losses on receivables in 1993 was $8.7 million (21%) less than
in 1992 primarily due to lower credit losses in the liquidating portfolios.
Credit losses, net of recoveries, as a percentage of average commercial
finance receivables outstanding, net of unearned finance charges, were 0.29%
in 1994, 1.49% in 1993 and 4.18% in 1992.
50 Transamerica Corporation and Subsidiaries
<PAGE>
Net commercial finance receivables outstanding increased $95.9 million (3%) in
1994 and $64.9 million (2%) in 1993. In the core businesses of inventory
finance, business credit and insurance premium finance, receivables increased
$139.4 million (5%) in 1994 and $136.1 million (5%) in 1993, which more than
offset the decline in the liquidating portfolios in both years. Management has
established an allowance for losses equal to 2.96% of net commercial finance
receivables outstanding at December 31, 1994 compared to 2.71% at December 31,
1993.
Delinquent receivables, which are defined as the instalment balance for
inventory finance and business credit receivables and the receivable balance
for all other receivables over 60 days past due, were $19.1 million (0.62% of
receivables outstanding) at December 31, 1994 compared to $28.9 million (0.96%
of receivables outstanding) at December 31, 1993.
Nonearning receivables, which are defined as balances from borrowers that are
over 90 days delinquent or at such earlier time as full collectibility becomes
doubtful, were $23.3 million (0.75% of receivables outstanding) at December
31, 1994 compared to $33.6 million (1.12% of receivables outstanding) at
December 31, 1993.
Assets held for sale at December 31, 1994 totaled $10.9 million, net of a
$65.1 million valuation allowance, and consisted of rent-to-own finance
receivables of $72.4 million and repossessed assets of $3.6 million. Assets
held for sale at December 31, 1993 totaled $90.1 million, net of a $157
million valuation allowance, and comprised rent-to-own finance receivables of
$120.5 million, repossessed rent-to-own stores of $107.2 million and other
repossessed assets of $19.4 million. At December 31, 1994, $24.5 million of
the rent-to-own finance receivables were classified as both delinquent and
nonearning compared to $27.5 million at December 31, 1993.
Transamerica Corporation and Subsidiaries 51
<PAGE>
LEASING
In March 1994, the leasing operation acquired substantially all the operating
assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based
transportation equipment rental company, including certain dry cargo
containers, tank containers, tank chassis, operating leases and other assets
(collectively the "Container Operations") for $1,061.4 million in cash. The
leasing operation assumed certain specified liabilities of the Container
Operations including trade accounts payable. The leasing operation did not
assume any borrowings, tax liabilities or contingent liabilities of Tiphook.
The acquired fleet of standard containers and tank containers totaled 363,000
units which have been integrated into the leasing operation. The transaction
has been accounted for as a purchase and the revenues and expenses associated
with operating the assets acquired have been included in the results of the
leasing operation from the date of acquisition. This acquisition is the
primary reason revenues and expenses increased by more than 50% in 1994.
Leasing net income for 1994 was $61.6 million compared to $51.6 million for
1993. Leasing income, before the amortization of goodwill, for 1994 increased
$10 million (18%) and decreased $4.5 million (8%) in 1993. Included in the
1993 results was a $4.3 million tax provision for the revaluation of the
deferred tax liability. Excluding the effect of this adjustment, leasing
income increased $5.7 million (10%) in 1994 compared to 1993. The increase was
primarily due to a larger fleet size, more on-hire rail trailer and chassis
units and an increased finance lease portfolio, partially offset by lower
utilization and rates in the standard container line. Excluding the additional
tax provision, results for 1993 were comparable to 1992 as higher fleet
utilization and per diem rates in the rail trailer
52 Transamerica Corporation and Subsidiaries
<PAGE>
business, a larger finance lease portfolio and a larger fleet of refrigerated
containers were offset by a decline in standard container utilization.
In 1994 and 1993, the leasing operation experienced higher utilization rates
for rail trailer and chassis due to improved economic conditions in the U.S.,
however, the standard container line experienced lower utilization rates due
to slow economic growth in some key European economies and Japan.
Revenues for 1994 increased $230.1 million (56%) over 1993. The increase was
due primarily to the acquisition of the Container Operations. Revenue
increases were also generated by a larger fleet of new standard and
refrigerated containers, more on-hire rail trailer and chassis units and
a larger finance lease portfolio.
Revenues for 1993 decreased $12.7 million (3%) from 1992. The decline was
mainly due to the sale of the domestic over-the-road trailer business in
November 1992 and a decline in standard container utilization. The decrease
was partially offset by higher fleet utilization and rental rates
in the rail trailer business, an increased finance lease portfolio, and a
larger fleet of standard containers, refrigerated containers and European
trailers.
Expenses increased $219.6 million (70%) in 1994 over 1993 mainly due to higher
depreciation expense, interest expense and operating costs related to the
acquisition of the Container Operations.
Expenses decreased $12.1 million (4%) in 1993 from 1992 due to the sale of the
domestic over-the-road trailer business. The decrease was partially offset by
higher ownership costs due to a larger fleet.
The combined utilization of standard containers, refrigerated containers,
domestic containers, tank containers and chassis averaged 81% in 1994, 83% in
1993 and 85% in 1992. Rail trailer utilization was 92% in 1994, 91% in 1993
and 84% in 1992. European trailer utilization was 96% in 1994, 89% in 1993 and
84% in 1992.
The company's standard container, refrigerated container, domestic container,
tank container and chassis fleet of 685,400 units increased by 369,400 units
(117%) in 1994, largely due to the acquisition of the Container Operations,
and 36,000 units (13%) in 1993. The rail trailer fleet of 39,300 units
increased by 2,800 units (8%) in 1994 and 2,100 units (6%) in 1993. The
company also operates a fleet of 5,700 over-the-road trailers in Europe.
Transamerica Corporation and Subsidiaries 53
<PAGE>
LIFE INSURANCE
Transamerica's life insurance operation, principally through its subsidiaries,
Transamerica Occidental Life Insurance Company, Transamerica Life Insurance
and Annuity Company, First Transamerica Life Insurance Company, Transamerica
Life Insurance Company of Canada and Transamerica Assurance Company, engages
in the underwriting, distribution and reinsurance of investment based and
traditional life insurance products.
Net income increased $19 million (8%) in 1994 and $49.1 million (25%) in 1993.
Net income included net after tax gains from investment transactions totaling
$13.7 million in 1994, $29.2 million in 1993 and $5.1 million in 1992. Income
before investment transactions increased $34.5 million (16%) in 1994 and $24.9
million (13%) in 1993. The individual life insurance, structured settlements,
living benefits, group pension, reinsurance and foreign lines all experienced
increases in income in 1994, excluding net gains from investment transactions,
resulting primarily from maintained interest spreads on a larger asset base,
increased charges on a larger base of interest-sensitive policies and
controlled operating expenses. Income before investment transactions for 1993
also included a $3.6 million charge for the effect of the one percent increase
in the federal income tax rate on the deferred tax liability.
Investment transactions for 1994 included after tax gains of $27.6 million
realized on the sale of investments compared to $106.1 million for 1993. As
required by generally accepted accounting principles, the amortization of
deferred policy acquisition costs was accelerated due to the investment gains
by $4.1 million in 1994 compared to $40.8 million in 1993. The accelerated
amortization of deferred policy acquisition costs has been included in
investment transactions as an offset to the related gain. Investment
transactions also reflected loss provisions of $9.8 million in 1994 and $36.1
million in 1993 primarily for impairment in the value of certain nonperforming
fixed maturity investments.
Premiums and other income increased $239.5 million (19%) in 1994 and $73.3
million (6%) in 1993 primarily due to higher sales of annuity products, an
increase in reinsurance assumed and an increase in charges on interest-
sensitive policies.
In November 1994, the life insurance operation sold its interest in Osborn
Laboratories, a business providing medical testing for life insurance
companies, for gross proceeds of $23.3 million. The transaction resulted in an
after tax gain of $8.6 million which is included in income before investment
transactions. Offsetting this gain were after tax charges of $9.9 million
($15.2 million pretax) primarily attributable to anticipated guaranty fund
assessments and a loss related to the 1991 sale of a business unit.
Net investment income increased $47.6 million (3%) in 1994 and $148.1 million
(9%) in 1993 due primarily to increased investments. Net investment income
includes $1.1 million in 1994, $55.7 million in 1993 and $9.4 million in 1992
related to the accelerated accretion of discounts on securities called or
expected to be called. Investment income for 1993 also included a $4.7 million
reversal of accrued investment income on defaulted securities. Partially
offsetting the accelerated accretion of bond discounts were charges of $19.8
million in 1993 and $9.2 million in 1992, which are included in other expenses
and are primarily attributable to a provision for the realignment and
relocation of certain back office support functions, and in 1993, anticipated
guaranty fund assessments and the establishment of an allowance for possible
loss related to the 1991 sale of a business unit.
Life insurance benefits and expenses increased $240.7 million (9%) in 1994 and
$168.5 million (7%) in 1993 principally due to increases in policy reserves
and benefits paid or provided attributable to the larger base of life
insurance and annuities in force, higher commission expense on increased life
insurance premiums and annuity considerations, and higher amortization of
deferred policy acquisition costs (exclusive of accelerated amortization
related to investment gains). As previously discussed, other expenses included
charges of $15.2 million in 1994, $19.8 million in 1993 and $9.2 million in
1992 related to anticipated guaranty fund assessments, additional losses on
the 1991 sale of a business unit and expenses for the realignment and
relocation of certain back office support functions.
Cash provided by operations for 1994 was $498 million which was $106.3 million
(18%) below the 1993 amount primarily as a result of the timing in the
settlement of certain receivables and payables, including reinsurance
receivables and payables. The life insurance operation continues to maintain a
sufficiently liquid portfolio to cover its operating requirements, with
remaining funds being invested in longer term securities.
54 Transamerica Corporation and Subsidiaries
<PAGE>
REAL ESTATE SERVICES AND ASSET MANAGEMENT
Real estate services comprise Transamerica's real estate tax, property
management, and other related services.
The real estate services' operations net income for 1994 was $55.8 million
compared to $84.2 million in 1993. Income before goodwill amortization
decreased $28.4 million (34%) in 1994 primarily due to a significant decline
in real estate tax service revenues caused by lower mortgage refinancings
resulting from higher interest rates. Income from the real estate services'
operations increased $11.1 million (15%) in 1993, due principally to increased
real estate tax service revenues from continued high levels of mortgage
refinancings resulting from lower interest rates. The 1993 increase was offset
in part by a $3.7 million after tax provision for restructuring of certain
functions.
Funds required for capital expenditures and working capital are generated by
operations. Cash, cash equivalents and accounts receivable, which totaled
$74.1 million at December 31, 1994 and $115.6 million at December 31, 1993,
are the real estate services' operations principal sources of liquidity.
Asset management in 1994 consisted of Criterion Investment Management Company
(Criterion) and, through the date of its sale, Transamerica Fund Management
Company. On December 21, 1994, Transamerica Fund Management Company was sold
for $100 million resulting in a $4.9 million after tax gain. Asset
management's net income for 1994 was $6.6 million compared to net losses of
$1.3 million for 1993 and $1.6 million for 1992. Operating results, before
goodwill amortization, for 1994, 1993 and 1992 were income of $8.3 million,
$300,000 and $100,000. The 1994 improvement was due primarily to the $4.9
million gain on sale of Transamerica Fund Management Company and lower
operating expenses within the mutual fund business. The 1993 improvement was
primarily due to higher revenues from increased assets under management. The
principal business of Criterion is serving as investment advisor to public and
private retirement funds. At December 31, 1994 Criterion had $10 billion under
management.
56 Transamerica Corporation and Subsidiaries
<PAGE>
UNALLOCATED INTEREST AND OTHER EXPENSES
Unallocated costs, after related income taxes, are summarized as follows:
____________________________________________________________________________
(Amounts in millions) 1994 1993 1992
Interest expense $ 50.2 $ 54.1 $ 61.5
Other expenses (income) 44.2 (48.0) 40.5
______ ______ ______
$ 94.4 $ 6.1 $102.0
====== ====== ======
Interest expense, after related income taxes, decreased $3.9 million (7%) in
1994 and $7.4 million (12%) in 1993 due to a lower level of borrowings and
lower average interest rates. The lower borrowing level in 1994 was primarily
due to the repayment of debt with proceeds from the 1993 sale of the
discontinued property and casualty insurance operation and the sale of
Transamerica's investment in Sedgwick Group plc in April 1994.
Other expenses, after related income taxes, in 1993 included a tax benefit of
$90 million for the reversal of certain tax reserves, offset in part by a $4
million after tax provision for restructuring corporate-wide administrative
functions, a $3 million additional after tax provision to increase the
supplemental (nonqualified) pension liability and a $3.8 million revaluation
of the deferred tax liability. Excluding these items, other expenses increased
$13 million (41%) in 1994 and decreased $9.3 million (23%) in 1993. The 1994
increase was primarily due to higher costs, principally salary and benefits,
as a result of centralizing certain administrative functions. The 1993
decrease was primarily due to lower salary and benefits expense.
CORPORATE LIQUIDITY
Transamerica Corporation receives funds from its subsidiaries in the form of
dividends, income taxes and interest on loans. The Corporation uses these
funds to pay dividends to its shareholders, reinvest in the operations of its
subsidiaries and pay corporate interest, expenses and taxes. Reinvested funds
are allocated among subsidiaries on the basis of capital requirements and
expected returns. Reinvestment may be accomplished by allowing a subsidiary to
retain all or a portion of its earnings, or by making capital contributions or
loans.
The Corporation also borrows funds to finance acquisitions or to lend to
certain of its subsidiaries to finance their working capital needs.
Subsidiaries are required to maintain prudent financial ratios consistent with
other companies in their respective industries and retain the capacity through
committed credit lines to repay working capital loans from the Corporation. At
December 31, 1994, Transamerica and its subsidiaries had short-term
borrowings, principally commercial paper, totaling $4.5 billion, supported by
credit agreements with 61 banks. It is the policy of the Corporation to
maintain credit line coverage at least equal to 100%
58 Transamerica Corporation and Subsidiaries
<PAGE>
of short-term borrowings. Availability under such lines at December 31, 1994,
amounted to $4.7 billion or 104% of these borrowings; credit support equal to
67% of the borrowings was with banks rated AAA/AA or the equivalent by one or
more of the major credit rating agencies.
The Corporation has established a program to offer publicly, from time to
time, $200 million of its Medium-Term Notes, Series B, pursuant to a shelf
registration filed with the Securities and Exchange Commission that enables
the Corporation to offer publicly up to $500 million of debt securities with
varying terms. None of these debt securities has been issued. The securities
may be senior or subordinated and, if subordinated, may be convertible into
common stock. The proceeds from the sale of the debt securities, including the
notes, may be used for general corporate purposes.
As previously discussed, in March 1994, Transamerica acquired substantially
all the operating assets of the Container Operations of Tiphook plc, a London-
based transportation equipment rental company, for $1,061.4 million in cash.
The initial financing of the acquisition was provided through short-term bank
loans which have been repaid and refinanced with long-term debt.
In April 1994, Transamerica sold its remaining 21% ownership interest in
Sedgwick Group plc. Proceeds from the sale were $326.4 million which were used
by Transamerica to purchase 4.5 million shares of its common stock (see
following section) and reduce debt.
In December 1994, Transamerica sold its former mutual fund subsidiary,
Transamerica Fund Management Company. Proceeds from the sale were $100 million
and were used by Transamerica to reduce debt.
In 1993, the Corporation sold its former property and casualty insurance
subsidiary, Transamerica Insurance Group, through an initial public offering
in April 1993 and a secondary offering in December 1993. Proceeds from the
sales of stock, after underwriting discounts and issuance costs, totaled $1
billion. The proceeds were used to reduce indebtedness, including $409.3
million incurred to fund cash transactions with the property and casualty
insurance operation in connection with the initial public offering, and to
commence a common stock purchase program.
In December 1993 the commercial lending operation redeemed $125 million of
deep discount, long-term debt with a book value of $90.7 million, which
resulted in a $23.1 million after tax extraordinary loss.
Transamerica Corporation and Subsidiaries 59
<PAGE>
SHAREHOLDERS' EQUITY
In June 1994, Transamerica completed a "Dutch Auction" tender offer to
purchase 4.5 million shares of its common stock, at a price of $54.75 per
share. Transamerica used a portion of the net proceeds from the sale of its
remaining 21% ownership interest in Sedgwick Group plc to purchase these
shares.
In September 1994, Transamerica announced a program to purchase up to an
additional 2 million shares of the Corporation's common stock of which
1.1 million shares were acquired by December 31, 1994. As a result of this
program, the Dutch Auction tender and the purchase of 5.1 million shares
beginning in 1993 under two previously announced share purchase programs, the
number of common shares outstanding at December 31, 1994 was 69.4 million
compared to 76.4 million at December 31, 1993 and 79.2 million at December 31,
1992.
In October 1994, Transamerica Delaware, LP, an affiliate of Transamerica,
issued $200 million of 9.125% cumulative Monthly Income Preferred Securities
(MIPS). Proceeds from the issuance were invested by the affiliate in Series A
Subordinated Debentures issued by Transamerica, bearing interest at 9.125% and
maturing October 25, 2024. Proceeds to Transamerica were used for general
corporate purposes, including the repayment or redemption of other of its
securities. The MIPS obligation outstanding is shown as minority interest in
the consolidated balance sheet of Transamerica and its subsidiaries.
In November 1994, Transamerica completed a tender offer to redeem for cash 4.4
million depositary shares of its 8.5% Series D Preferred Stock at a price of
$26 per depositary share. As a result of the tender offer, $6.7 million of
premium and expenses related to the transaction was charged directly to
shareholders' equity and resulted in a 9 cent reduction in 1994 earnings per
share.
INVESTMENT PORTFOLIO
Transamerica, principally through its life insurance subsidiaries, maintains
an investment portfolio aggregating $22.5 billion at December 31, 1994, of
which $21 billion was invested in fixed maturities. At December 31, 1994, 96%
of the fixed maturities was rated as "investment grade," with an additional
2.9% in the BB category or its equivalent. "Investment grade" is generally
defined as any issue rated above the Ba category by Moody's Investors Service
or above the BB category by Standard & Poor's Corporation. The amortized cost
of fixed maturities was $21.9 billion resulting in a net unrealized loss
position, before the effects of income taxes, of $911 million at December 31,
1994. Fixed maturity investments are generally held for long-term investment
and used primarily to support insurance reserves. The amortized cost of
delinquent below investment grade securities before provision for impairment
in value was $12.4 million at December 31, 1994
60 Transamerica Corporation and Subsidiaries
<PAGE>
compared to $31.1 million at December 31, 1993. Provision for impairment in
value has been made to reduce certain fixed maturity investments by $92.1
million at December 31, 1994 and $104 million at December 31, 1993.
In 1994, Transamerica adopted Statement of Financial Accounting Standards No.
115, Accounting for Certain Investments in Debt and Equity Securities.
Beginning in 1994 with the adoption of this standard, all of Transamerica's
investments in debt securities and equity securities have been classified as
available for sale and reported at fair value. To the extent the securities
marked to fair value relate to interest-sensitive insurance products an
adjustment to deferred policy acquisition costs is also made. The effect of
these adjustments, net of federal income taxes, is recorded in a separate
component of shareholders' equity. There is no effect on the income statement.
Prior to 1994 only those fixed maturity investments which were expected to be
called by the issuer or sold in connection with Transamerica's portfolio
management strategies in the next three months were classified as investments
available for sale and carried at the lower of amortized cost or fair value.
At December 31, 1993, $872.4 million of fixed maturities were classified as
investments available for sale and were carried at amortized cost which was
less than fair value.
The net unrealized gain/loss from investments marked to fair value, after
related taxes and deferred policy acquisition cost adjustments, which is
included in shareholders' equity was a loss of $265.1 million at December 31,
1994. As discussed in the preceding paragraph, Transamerica in 1994 adopted
Statement of Financial Accounting Standards No. 115. Accordingly, changes in
shareholders' equity caused by changes in the fair value of the investment
portfolio in 1994 and 1993 are not comparable because in 1993 investments in
fixed maturities were carried at amortized cost.
In addition to the investments in fixed maturities, $455.5 million (2% of the
investment portfolio) was invested in mortgage loans and real estate including
$369.6 million in commercial mortgage loans, $105.3 million in real estate
investments, $22.3 million in foreclosed real estate and $8 million in
residential mortgage loans. Problem loans, defined as restructured loans
yielding less than 8% and delinquent loans, totaled $7.7 million at December
31, 1994 and $18.5 million at December 31, 1993. Allowances for possible
losses of $49.7 million at December 31, 1994 and $70.7 million at December 31,
1993 have been established to cover the possible losses from mortgage loans
and real estate investments.
Transamerica Corporation and Subsidiaries 61
<PAGE>
CONSOLIDATED BALANCE SHEET
_____________________________________________________________________________
December 31 1994 1993
ASSETS
Investments, principally of life insurance
subsidiaries:
Fixed maturities $21,037.0 $19,425.4
Mortgage loans and real estate 455.5 493.0
Equity securities 427.2 466.1
Loans to life insurance policyholders 412.9 396.5
Short-term investments 163.7 190.8
_________ _________
22,496.3 20,971.8
Finance receivables, of which $3,460.1 in 1994
and $3,023.9 in 1993 matures within one year 7,426.1 6,908.5
Less unearned fees ($248.2 in 1994 and $240.8 in
1993) and allowance for losses 455.2 426.0
_________ _________
6,970.9 6,482.5
Cash and cash equivalents 64.3 92.7
Trade and other accounts receivable 2,610.3 2,015.4
Property and equipment, less accumulated
depreciation of $974.9 in 1994 and $831.6 in
1993:
Land, buildings and equipment 360.7 345.7
Equipment held for lease 2,606.6 1,306.5
Deferred policy acquisition costs 2,480.5 1,929.3
Separate accounts administered by life
insurance subsidiaries 1,666.5 1,366.5
Net assets of discontinued operations 310.2
Goodwill, less accumulated amortization of
$123.2 in 1994 and $113.4 in 1993 443.7 495.4
Other assets 694.0 734.5
_________ _________
$40,393.8 $36,050.5
========= =========
(Amounts in millions except for share data)
See notes to financial statements
62 Transamerica Corporation and Subsidiaries
<PAGE>
CONSOLIDATED BALANCE SHEET (CONTINUED)
_____________________________________________________________________________
December 31 1994 1993
LIABILITIES AND SHAREHOLDERS' EQUITY
Life insurance policy liabilities $24,731.7 $21,951.8
Notes and loans payable, principally of
finance subsidiaries, of which $1,684 in 1994 and
$2,023 in 1993 matures within one year 9,173.1 7,704.0
Accounts payable and other liabilities 1,627.5 1,352.4
Income taxes, of which $6.6 in 1994 and $301.4 in
1993 is deferred 259.2 312.3
Separate account liabilities 1,666.5 1,366.5
Minority interest in preferred securities
of affiliate 200.0
Shareholders' equity:
Preferred stock ($100 par value):
Authorized-1,200,000 shares; issuable in series
Outstanding-Dutch Auction Rate Transferable
Securities, 2,250 shares, at liquidation
preference of $100,000 per share 225.0 225.0
Outstanding-Series D, 181,642 shares in 1994
and 400,000 shares in 1993 at liquidation
preference of $500 per share 90.8 200.0
Common stock ($1 par value):
Authorized-150,000,000 shares
Outstanding-69,395,099 shares in 1994 and
76,398,888 shares in 1993, after deducting
10,343,363 and 3,339,574 shares in treasury
in 1994 and 1993 69.4 76.4
Additional paid-in capital 96.5 475.2
Retained earnings 2,557.4 2,297.9
Net unrealized gain (loss) from investments
marked to fair value (265.1) 124.1
Foreign currency translation adjustments (38.2) (35.1)
_________ _________
2,735.8 3,363.5
_________ _________
$40,393.8 $36,050.5
========= =========
Transamerica Corporation and Subsidiaries 63
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
____________________________________________________________________________
Year ended December 31 1994 1993 1992
REVENUES
Life insurance premiums and related income $1,495.2 $1,255.7 $1,182.3
Investment income 1,782.6 1,749.9 1,600.0
Finance charges and other fees 1,041.6 990.1 1,013.9
Leasing revenues 620.7 388.3 402.2
Real estate and tax service revenues 256.0 293.3 249.6
Gain on investment transactions 23.1 39.0 7.7
Other 135.3 97.0 95.2
________ ________ ________
5,354.5 4,813.3 4,550.9
EXPENSES
Life insurance benefits 2,356.4 2,145.9 2,059.2
Life insurance underwriting, acquisition
and other expenses 530.0 499.8 418.0
Leasing operating and maintenance costs 323.6 184.4 198.0
Interest and debt expense 573.7 511.6 568.9
Provision for losses on receivables and
assets held for sale 100.6 147.0 90.7
Other, including administrative and
general expenses 779.9 736.5 677.7
________ ________ ________
4,664.2 4,225.2 4,012.5
________ ________ ________
690.3 588.1 538.4
Income taxes 262.4 140.6 204.4
________ ________ ________
Income from continuing operations 427.9 447.5 334.0
Loss from discontinued operations (0.7) (47.0) (90.8)
Extraordinary loss on early
extinguishment of debt (23.1)
________ ________ ________
Net income $ 427.2 $ 377.4 $ 243.2
======== ======== ========
EARNINGS PER SHARE OF COMMON STOCK
Income from continuing operations $ 5.46 $ 5.40 $ 4.00
Loss from discontinued operations (0.01) (0.60) (1.17)
Extraordinary loss on early
extinguishment of debt (0.29)
________ ________ ________
Net income $ 5.45 $ 4.51 $ 2.83
======== ======== ========
(Amounts in millions except for share data)
See notes to financial statements
64 Transamerica Corporation and Subsidiaries
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
____________________________________________________________________________
Year ended December 31 1994 1993 1992
OPERATING ACTIVITIES
Income from continuing operations $ 427.9 $ 447.5 $ 334.0
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Increase in life insurance policy
liabilities, excluding policyholder
balances on interest-sensitive
policies 813.8 927.3 912.5
Amortization of policy acquisition
costs 182.3 232.7 135.3
Policy acquisition costs deferred (394.9) (350.0) (256.3)
Depreciation and amortization 263.2 159.8 150.7
Other 81.6 (327.8) (277.4)
_________ _________ _________
Net cash provided by continuing
operations 1,373.9 1,089.5 998.8
INVESTING ACTIVITIES
Finance receivables originated (17,277.1) (13,664.0) (11,388.0)
Finance receivables collected 16,639.5 13,375.2 11,121.9
Purchase of investments (9,656.4) (12,102.5) (6,527.2)
Sales and maturities of investments 7,151.4 9,647.5 5,090.7
Purchase of the container division
assets of Tiphook plc (1,061.4)
Proceeds from sale of discontinued
operations 326.4 1,031.8
Cash transactions with discontinued
operations 5.4 (399.3) 47.4
Other (506.3) (475.5) (157.0)
_________ _________ _________
Net cash used by investing activities (4,378.5) (2,586.8) (1,812.2)
FINANCING ACTIVITIES
Proceeds from debt financing 7,197.6 5,308.2 4,100.9
Payments of notes and loans (5,766.2) (5,239.5) (4,276.4)
Receipts from interest-sensitive
policies credited to policyholder
account balances 4,434.7 4,166.3 2,572.0
Return of policyholder balances on
interest-sensitive policies (2,419.9) (2,313.2) (1,688.5)
Proceeds from sale of preferred stock 193.2
Proceeds from sale of preferred
securities of affiliate 192.6
Redemption of preferred stock (115.9)
Treasury stock purchases (387.0) (207.6)
Other common stock transactions 8.0 33.5 70.3
Dividends (167.7) (179.7) (178.6)
_________ _________ _________
Net cash provided by financing
activities 2,976.2 1,568.0 792.9
_________ _________ _________
Increase (decrease) in cash and
cash equivalents (28.4) 70.7 (20.5)
Cash and cash equivalents at beginning
of year 92.7 22.0 42.5
_________ _________ _________
Cash and cash equivalents at end of year $ 64.3 $ 92.7 $ 22.0
========= ========= =========
(Amounts in millions)
See notes to financial statements
Transamerica Corporation and Subsidiaries 65
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
___________________________________________________________________________________________________________
<CAPTION>
Net Unrealized
Gain (Loss) from Foreign
Additional Investments Currency
Preferred Common Paid-in Retained Marked Translation
Stock Stock Capital Earnings to Fair Value Adjustments
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1992 $225.0 $77.2 $585.0 $2,035.6 $ 100.8 $ 2.2
Net income 243.2
Dividends declared:
On common stock (156.7)
On preferred stock (21.9)
Common stock issued 2.0 68.3
Preferred stock issued 200.0 (6.8)
Other changes (17.3) (36.5)
______ _____ ______ ________ ________ ______
BALANCE AT DECEMBER 31, 1992 425.0 79.2 646.5 2,100.2 83.5 (34.3)
Net income 377.4
Dividends declared:
On common stock (156.1)
On preferred stock (23.6)
Common stock issued 0.9 32.6
Treasury stock purchased (3.7) (203.9)
Other changes 40.6 (0.8)
______ _____ ______ ________ ________ ______
BALANCE AT DECEMBER 31, 1993 425.0 76.4 475.2 2,297.9 124.1 (35.1)
Effect of adopting Statement
of Financial Accounting
Standards No. 115 804.5
Net income 427.2
Dividends declared:
On common stock (142.8)
On preferred stock (24.9)
Common stock issued 0.2 7.8
Treasury stock purchased (7.2) (379.8)
Redemption of preferred stock (109.2) (6.7)
Other changes (1,193.7) (3.1)
______ _____ ______ ________ ________ ______
BALANCE AT DECEMBER 31, 1994 $315.8 $69.4 $ 96.5 $2,557.4 $ (265.1) $(38.2)
====== ===== ====== ======== ======== ======
<FN>
(Amounts in millions)
See notes to financial statements
</TABLE>
66 Transamerica Corporation and Subsidiaries
<PAGE>
NOTES TO FINANCIAL STATEMENTS December 31, 1994
_____________________________________________________________________________
[A] SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Transamerica
Corporation and its subsidiaries.
INVESTMENTS
As discussed further under New Accounting Standards, investments in fixed
maturities, comprising bonds, notes and redeemable preferred stocks, are
carried at fair value in 1994 and amortized cost in 1993. Prior to 1994 those
fixed maturity investments which were expected to be called by the issuer or
sold in connection with Transamerica's portfolio management strategies in the
next three months were classified as investments available for sale and
carried at the lower of amortized cost or fair value. At December 31, 1993,
$872.4 million of fixed maturities were classified as investments available
for sale and were carried at amortized cost which was less than fair value.
Fair value for actively traded securities is based on quoted market prices.
For fixed maturity securities not actively traded, including private
placements, fair value is estimated using values obtained from independent
pricing services. Changes to the carrying amount of securities available for
sale are included in shareholders' equity. Investments in equity securities,
comprising corporate common and nonredeemable preferred stocks, are carried at
fair value based on quoted market prices. Realized gains and losses on
investment transactions are determined generally on a specific identification
basis and included in income on the trade date.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include money market funds and marketable securities
with original maturities of three months or less except for such securities
held by the life insurance operation which are included in short-term
investments.
DEPRECIATION AND AMORTIZATION
Property and equipment, which are stated on the basis of cost, are depreciated
by use of the straight-line method over their estimated useful lives. Goodwill
is amortized over 40 years.
INCOME TAXES
Transamerica provides deferred taxes based on enacted tax rates in effect on
the dates temporary differences between the book and tax bases of assets and
liabilities reverse.
FINANCE
Finance charges are generally recognized as earned on an effective yield
method.
Leasing revenues are recognized as rentals become due.
REAL ESTATE
Tax service revenues are recognized as income generally when contracts are
executed with a portion of the revenues amortized over the estimated lives of
the contracts.
Asset management and advisory fees are recorded in revenue during the period
such services are performed.
LIFE INSURANCE
The accounts of the life insurance operation have been included in the
consolidated financial statements on the basis of generally accepted
accounting principles which differ in some respects from those followed in
reports to regulatory authorities.
Transamerica Corporation and Subsidiaries 67
<PAGE>
[A] SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LIFE INSURANCE (CONTINUED)
Life insurance premiums are generally recognized as earned over the premium
paying periods, with reserves for future benefits established from such
premiums on a net-level premium method based upon estimated investment yields,
withdrawals, mortality and other assumptions which were appropriate at the
time the policies were issued. Premiums and deposits for universal life and
other interest-sensitive life insurance products that do not involve
significant mortality or morbidity risk are recorded as liabilities. Costs of
acquiring new life insurance business, principally commissions and certain
variable underwriting and field office expenses, all of which vary with and
are primarily related to the production of new business, are deferred.
Deferred policy acquisition costs for universal life and other interest-
sensitive life insurance products are amortized in proportion to the present
value of gross profit. Deferred policy acquisition costs for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized. Adequate provision is
made for reported and unreported claims and related expenses.
NEW ACCOUNTING STANDARDS
In 1994, Transamerica adopted the Financial Accounting Standards Board's new
standard on accounting for certain investments in debt and equity securities.
Beginning in 1994 with the adoption of this standard, all of Transamerica's
investments in debt securities have been classified as available for sale and
reported at fair value. To the extent the securities marked to fair value
relate to interest-sensitive products, an adjustment to deferred policy
acquisition costs is also made. The effect of these adjustments, net of
federal income taxes, is recorded in a separate component of shareholders'
equity. There is no effect on the income statement.
In May 1993, the Financial Accounting Standards Board issued a new standard on
accounting for impairment of loans which Transamerica will adopt in the first
quarter of 1995. The new standard, which was amended in October 1994,
requires that impaired loans be measured based on either the fair value of the
loan, if discernible, the present value of expected cash flows discounted at
the loan's effective interest rate or the fair value of the collateral if the
loan is collateral dependent. At adoption, the new standard will not have a
material effect on the consolidated financial statements of Transamerica.
EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of common stock are based on the weighted average number of
shares outstanding (72,592,000 in 1994, 78,495,000 in 1993 and 78,050,000 in
1992) after deduction of preferred dividends and, in 1994, premium and
expenses of $6.7 million on the redemption of the Series D preferred stock.
68 Transamerica Corporation and Subsidiaries
<PAGE>
[B] MINORITY INTEREST
In October 1994, Transamerica Delaware, LP, an affiliate of Transamerica,
issued $200 million of 9.125% cumulative Monthly Income Preferred Securities
(MIPS) payable October 25, 2024. This obligation represents a minority
interest in Transamerica. The affiliate may redeem the outstanding MIPS, in
whole or in part, on or after October 25, 1999. Interest on the outstanding
MIPS is cumulative and payable monthly in arrears.
[C] STOCK OPTION PLANS
At December 31, 1994, under Transamerica's stock option plans, 11,457,178
shares of common stock (11,660,839 shares at December 31, 1993) were reserved
principally for sale to key employees of the Corporation and subsidiaries at
market value on the date options are granted. During 1994, options for
1,549,850 shares were granted, and options for 233,600 shares were cancelled
due to forfeiture. Options were exercised for 194,823 shares in 1994,
1,019,081 shares in 1993 and 1,567,553 shares in 1992, at aggregate option
prices of $7 million, $36 million and $52.1 million. Of the options for
6,678,524 shares outstanding at December 31, 1994 (5,557,097 shares at
December 31, 1993) at an aggregate option price of $286.8 million, options for
3,311,226 shares were exercisable. In February 1995, options for 1,215,300
shares were granted at an option price equal to market value on the date
granted.
Additionally, the Board of Directors on January 26, 1995 unanimously approved,
subject to stockholder approval, the 1995 Performance Stock Option Plan, and,
under the terms of the Plan made three separate, one-time grants of
nonqualified stock options totaling 5,000,000 shares. Options for 1,025,000
shares were granted at an exercise price of $60 per share, which vest ratably
on the third, fourth and fifth anniversaries of the date of grant. Options for
1,325,000 shares were granted with an exercise price of $82 per share, all of
which will be forfeited if the Corporation's common stock does not reach $82
within five years from the date of grant. Options for 2,650,000 shares were
granted with an exercise price of $100, all of which will be forfeited if the
Corporation's common stock does not reach $100 within seven years from the
date of grant.
[D] CAPITAL STOCK
Transamerica has outstanding 2,250 shares of Dutch Auction Rate Transferable
Securities Preferred Stock (DARTS) ($100 par value, $100,000 liquidation
value) in Series A-1, B-1 and C-1 of 750 shares each. Dividends, which are
cumulative and are based on par value, are normally determined every 49 days
through auction procedures. The dividend rates for Series A-1, B-1 and C-1
shares were 5.00%, 4.69% and 4.59% at December 31, 1994 and 3.15%, 2.90% and
3.09% at December 31, 1993.
Transamerica also has outstanding 3,632,827 Depositary shares at December 31,
1994 and 8,000,000 Depositary shares at December 31, 1993 each representing a
1/20 interest in a share of its Series D Preferred Stock ($100 par value, $500
liquidation preference). Dividends, which are cumulative, are at the rate of
8.5% of the liquidation preference per annum.
One preference stock purchase right accompanies each share of common stock
outstanding. Each right will entitle the holder to buy from Transamerica a
unit consisting of 1/100 of a share of Series A Participating Preference Stock
at an exercise price of $135 per unit. The rights become exercisable ten days
after a public announcement that a person or group has acquired 20% or more of
Transamerica's common stock or has commenced a tender offer for 30% or more of
the common stock. The rights may be redeemed prior to becoming exercisable by
action of the Board of Directors at a redemption price of $0.05 per right. If
Transamerica is acquired by any person after the rights become exercisable,
each right will entitle its holder to purchase stock of the acquiring company
having a market value of twice the exercise price of each right. The rights
expire on August 8, 1996.
At December 31, 1994, 5,000,000 shares of preference stock (without par value)
were authorized but unissued.
Transamerica Corporation and Subsidiaries 69
<PAGE>
[E] FINANCIAL INSTRUMENTS
INVESTMENTS
In 1994 investments in fixed maturities are carried at fair value, while in
1993 these investments were carried at amortized cost. The cost and fair value
of fixed maturities and equity securities at December 31, 1994 and 1993 are as
follows:
<TABLE>
___________________________________________________________________________________________________________
<CAPTION>
(Amounts in millions) Gross Gross
Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. Treasury securities and obligations of
U.S. government authorities and agencies $ 224.1 $ 0.7 $ 20.2 $ 204.6
Obligations of states and political subdivisions 341.9 3.6 10.0 335.5
Foreign governments 211.4 1.6 6.4 206.6
Corporate securities 9,384.4 134.1 398.9 9,119.6
Mortgage-backed securities 7,792.5 105.2 530.3 7,367.4
Public utilities 3,990.1 48.6 238.5 3,800.2
Redeemable preferred stock 3.6 0.5 3.1
_________ ________ ________ _________
Total fixed maturities $21,948.0 $ 293.8 $1,204.8 $21,037.0
========= ======== ======== =========
Equity securities $ 275.4 $ 167.2 $ 15.4 $ 427.2
========= ======== ======== =========
DECEMBER 31, 1993
U.S. Treasury securities and obligations of
U.S. government authorities and agencies $ 205.3 $ 15.3 $ 0.8 $ 219.8
Obligations of states and political subdivisions 181.9 19.6 0.2 201.3
Foreign governments 148.5 12.6 161.1
Corporate securities 6,846.9 751.3 18.6 7,579.6
Mortgage-backed securities 8,571.2 571.2 24.4 9,118.0
Public utilities 3,467.8 287.4 8.4 3,746.8
Redeemable preferred stock 3.8 0.2 3.6
_________ ________ ________ _________
Total fixed maturities $19,425.4 $1,657.4 $ 52.6 $21,030.2
========= ======== ======== =========
Equity securities $ 275.1 $ 194.5 $ 3.5 $ 466.1
========= ======== ======== =========
</TABLE>
The cost and fair value of fixed maturities at December 31, 1994 by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
_____________________________________________________________________________
(Amounts in millions) Cost Fair Value
Due in one year or less $ 338.0 $ 336.7
Due after one year through five years 2,071.2 2,042.0
Due after five years through ten years 2,656.5 2,562.1
Due after ten years 9,089.8 8,728.8
_________ _________
14,155.5 13,669.6
Mortgage-backed securities 7,792.5 7,367.4
_________ _________
$21,948.0 $21,037.0
========= =========
70 Transamerica Corporation and Subsidiaries
<PAGE>
[E] FINANCIAL INSTRUMENTS (CONTINUED)
INVESTMENTS (CONTINUED)
The carrying values and estimated fair values of investments in mortgage loans
on real estate and loans to life insurance policyholders at December 31, 1994
and 1993 are as follows:
______________________________________________________________________________
(Amounts in millions) Carrying Estimated
Value Fair Value
DECEMBER 31, 1994
Mortgage loans on real estate $354.1 $369.0
====== ======
Loans to life insurance policyholders $412.9 $383.5
====== ======
DECEMBER 31, 1993
Mortgage loans on real estate $368.9 $402.4
====== ======
Loans to life insurance policyholders $396.5 $373.1
====== ======
The fair values for mortgage loans on real estate and policyholder loans are
estimated using discounted cash flow calculations, based on interest rates
currently being offered for similar loans to borrowers with similar credit
ratings. Loans with similar characteristics are aggregated for calculation
purposes.
Gain on investment transactions, included in consolidated revenues, comprises:
______________________________________________________________________________
(Amounts in millions) 1994 1993 1992
Net gain on sale of investments $ 50.1 $157.3 $136.1
Provision for impairment in value (20.7) (55.5) (95.2)
Accelerated amortization of deferred policy
acquisition costs (6.3) (62.8) (33.2)
______ ______ ______
$ 23.1 $ 39.0 $ 7.7
====== ====== ======
Proceeds from sales of fixed maturities and equity securities were $2.7
billion in 1994, $5.2 billion in 1993 and $2.7 billion in 1992. Gross gains of
$107.5 million in 1994, $325.3 million in 1993 and $196.6 million in 1992,
and gross losses of $67.5 million in 1994, $163.6 million in 1993 and $76.3
million in 1992 were realized on those sales.
Transamerica and its subsidiaries use interest rate exchange and other
agreements to hedge the interest rate sensitivity of their fixed maturity
investments.
The net unrealized gain (loss) included in shareholders' equity as a result of
marking the fixed maturities and equity securities to fair value at December
31, 1994 and 1993 are as follows:
______________________________________________________________________________
(Amounts in millions) 1994 1993
Net unrealized gain on equity securities $ 151.8 $191.0
Net unrealized loss on investments in fixed maturities (911.0)
Adjustment to deferred policy acquisition costs 351.3
Deferred income taxes 142.8 (66.9)
_______ ______
$(265.1) $124.1
======= ======
Transamerica Corporation and Subsidiaries 71
<PAGE>
[E] FINANCIAL INSTRUMENTS (CONTINUED)
NOTES AND LOANS PAYABLE
_____________________________________________________________________________
(Amounts in millions) 1994 1993
TRANSAMERICA FINANCE GROUP, INC.:
Short-term bank loans, commercial paper and current
portion of long-term debt $1,387.1 $1,910.8
Long-term debt due subsequent to one year:
Notes and debentures; interest at 5.32% to 9.1%;
maturing through 2004 2,477.3 1,618.6
Notes and debentures; interest at 13.80% to 13.88%;
maturity value of $582.8 million; maturing
through 2012 154.2 146.8
Commercial paper and other notes at various interest
rates and terms supported by credit agreements
expiring through 1999 3,672.5 2,505.0
Subordinated notes and debentures; interest at
6.75% to 8.13%; maturing through 2003 841.2 582.8
Loans due to parent company and other subsidiaries 192.0 267.5
________ ________
8,724.3 7,031.5
PARENT COMPANY AND OTHER SUBSIDIARIES:
Short-term bank loans, commercial paper and current
portion of long-term debt 296.9 112.2
Long-term debt due subsequent to one year:
Notes and debentures; interest at 7.1% to 10%;
maturing through 2007 252.8 458.6
Commercial paper and other notes at various interest
rates and terms supported by credit agreements
expiring through 1996 254.5
Notes at variable interest rates; maturing
through 1998 91.1 114.7
Less loans to Transamerica Finance Group, Inc. (192.0) (267.5)
________ ________
448.8 672.5
________ ________
$9,173.1 $7,704.0
======== ========
The weighted average interest rate on short-term borrowings at December 31,
1994 and 1993 was 5.81% and 3.17%.
Assets with a net book value of $285.8 million at December 31, 1994,
consisting primarily of land, buildings and equipment, are collateral for
certain of the above debt.
The aggregate annual maturities for the four years subsequent to December 31,
1995 are $1.5 billion in 1996, $3.1 billion in 1997, $0.6 billion in 1998 and
$1.5 billion in 1999.
In 1993 Transamerica Finance Group redeemed $125 million of deep discount
long-term debt with a book value of $90.7 million, which resulted in a $23.1
million extraordinary loss, after related taxes of $11.4 million.
Under credit agreements with various banks, Transamerica and its subsidiaries
had the ability to borrow up to $4.7 billion with interest at variable rates
at December 31, 1994. There was $62 million outstanding under these credit
lines at that date. These credit agreements, which expire through 1999,
require a fee on the commitment.
Transamerica and its subsidiaries use interest rate exchange agreements to
hedge the interest rate sensitivity of their outstanding indebtedness.
Interest payments, net of amounts received from interest rate exchange
agreements, totaled $661.8 million in 1994, $623.4 million in 1993 and $661
million in 1992.
The estimated fair value of notes and loans payable, using rates currently
available for debt with similar terms and maturities, is $9,108 million at
December 31, 1994 and $8,141.3 million at December 31, 1993.
72 Transamerica Corporation and Subsidiaries
<PAGE>
[E] FINANCIAL INSTRUMENTS (CONTINUED)
CONCENTRATION OF RISK, SECURITIZATION AND FAIR VALUE OF RECEIVABLES
During the normal conduct of its consumer and commercial lending operations,
Transamerica engages in the extension of credit to homeowners, electronics and
appliance dealers, retail recreational products dealers, computer stores and
others. The risk associated with that credit is subject to economic,
competitive and other influences. While a substantial portion of the risk is
diversified, certain operations are concentrated in one industry or geographic
area.
Transamerica's finance receivables include $3.3 billion, net of unearned
finance charges and insurance premiums, of real estate secured loans,
principally first and second mortgages secured by residential properties of
which approximately 45% is located in California. The commercial finance
receivables portfolio represents lending arrangements with over 167,000
customers. At December 31, 1994, the portfolio included 19 customers with
individual balances in excess of $15 million. These accounts represented 12.2%
of total commercial net finance receivables outstanding at December 31, 1994.
In July 1990, Transamerica entered into a 5-year arrangement under which it
securitized and sold, with limited recourse, a $375 million participation
interest in a pool of its eligible insurance finance receivables, which
Transamerica continues to service. Newly originated eligible receivables are
added to the pool. Cash collected on receivables is reinvested in the
pool to maintain an aggregate outstanding balance of approximately $375
million.
The carrying amounts and estimated fair values of the finance receivable
portfolio at December 31, 1994 and 1993 are as follows:
_____________________________________________________________________________
(Amounts in millions) Carrying Estimated
Value Fair Value
DECEMBER 31, 1994
Fixed rate receivables-
Consumer $4,024.8 $4,500.1
Commercial 386.0 395.7
Variable rate receivables-
Commercial 2,560.1 2,560.1
________ ________
$6,970.9 $7,455.9
======== ========
DECEMBER 31, 1993
Fixed rate receivables-
Consumer $3,622.3 $4,391.2
Commercial 469.9 478.3
Variable rate receivables-
Commercial 2,390.3 2,390.3
________ ________
$6,482.5 $7,259.8
======== ========
The estimated fair values of consumer finance receivables, substantially all
of which are fixed rate instalment loans collateralized by residential real
estate, and the fixed rate commercial finance loans are based on the
discounted value of the future cash flows expected to be received using
available secondary market prices for securities backed by similar loans after
adjustment for differences in loan characteristics. In the absence of readily
available market prices, the expected future cash flows are discounted at
effective rates currently offered by Transamerica for similar loans. For
variable rate commercial loans, which comprise the majority of the commercial
loan portfolio, the carrying amount represents a reasonable estimate of fair
value.
Transamerica Corporation and Subsidiaries 73
<PAGE>
[E] FINANCIAL INSTRUMENTS (CONTINUED)
FAIR VALUE OF INVESTMENT CONTRACTS
Investment-type contracts are included in life insurance policy liabilities.
Fair value of investment-type contracts is estimated using discounted cash
flow calculations, based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued. The carrying amounts and estimated fair values of the
liabilities for investment-type contracts at December 31, 1994 and 1993 are as
follows:
______________________________________________________________________________
(Amounts in millions) Carrying Estimated
Value Fair Value
DECEMBER 31, 1994
Single and flexible premium deferred annuities $ 7,425.8 $ 6,898.5
Single premium immediate annuities 3,735.7 3,510.8
Guaranteed investment contracts 2,382.2 2,336.7
Other deposit contracts 2,319.3 2,244.0
_________ _________
$15,863.0 $14,990.0
========= =========
DECEMBER 31, 1993
Single and flexible premium deferred annuities $ 6,630.9 $ 6,378.2
Single premium immediate annuities 3,354.6 3,796.9
Guaranteed investment contracts 1,994.5 2,093.9
Other deposit contracts 1,544.4 1,584.4
_________ _________
$13,524.4 $13,853.4
========= =========
Investment-type contracts and other life insurance policy reserves generally
provide a natural hedge against fair value changes in the investments held to
fund those reserves.
DERIVATIVES
The operations of Transamerica are subject to risk of interest rate
fluctuations to the extent that there is a difference between the cash flows
from Transamerica's interest-earning assets and the cash flows related to its
liabilities that mature or are repriced in specified periods. In the normal
course of its operations, Transamerica hedges some of its interest rate risk
with derivative financial instruments. These derivatives comprise primarily
interest rate swap agreements, interest rate floor agreements, interest rate
cap agreements and options to enter into interest rate swap agreements
(swaptions).
ASSET HEDGES
Interest rate floor agreements purchased by Transamerica provide for the
receipt of payments in the event interest rates fall below specified levels.
Interest rate floors are intended to mitigate Transamerica's risk of
reinvesting the cash flow it receives from calls and redemptions on its
investment portfolio at lower interest rates. Interest rate swap agreements
are intended to help Transamerica to more closely match the cash flow
received from its assets to the payments on its liabilities. Transamerica's
interest rate swap agreements generally provide that one party pays interest
at a floating rate in relation to movements in an underlying index and the
other party pays interest at a fixed rate.
The interest rate floor contracts and certain of the interest rate swap
contracts are designated as hedges of a portion of the investment portfolio
and to the extent those investments are marked to market, the hedge
agreements are also marked to market. The cost of these items is amortized
over the lives of the contracts.
74 Transamerica Corporation and Subsidiaries
<PAGE>
[E] FINANCIAL INSTRUMENTS (CONTINUED)
ASSET HEDGES (CONTINUED)
At December 31, 1994 contracts designated as hedges of the investment
portfolio comprise:
_____________________________________________________________________________
(Amounts in millions) Weighted Weighted
Average Average
Notional Fixed Floating
Amount Interest Rate Interest Rate
Interest rate swap agreements-
Transamerica receives:
Floating rate interest income,
pays fixed rate interest
expense $178.8 7.2% 6.7%
====== ==== ====
Fixed rate interest income,
pays floating rate interest
expense $ 96.0 5.0% 6.2%
====== ==== ====
Interest rate floor agreements $560.5 6.5%
====== ====
At December 31, 1994 the unamortized cost of the interest rate floors was $18
million and the fair value of all asset hedges was $6.7 million resulting in a
net unrealized loss of $11.3 million ($7.3 million after tax) included in
shareholders' equity.
LIABILITY HEDGES
The interest rate cap contracts, the swaptions and the remaining interest rate
swap contracts are designated and accounted for as hedges of a portion of
Transamerica's liabilities and outstanding indebtedness. These agreements are
accounted for as hedges, and their cost ($2.9 million at December 31, 1994) is
amortized over the lives of the contracts. Transamerica's interest rate cap
agreements limit the amount of interest paid in the event interest rates rise
above specified levels. Transamerica purchases swaptions to help manage the
risk of interest rate fluctuations by providing an option to enter into an
interest rate swap in the event of unfavorable interest rate movements.
At December 31, 1994 contracts designated as hedges of outstanding
indebtedness comprise:
______________________________________________________________________________
(Amounts in millions) Weighted Weighted
Average Average
Notional Fixed Floating
Amount Interest Rate Interest Rate
Interest rate swap agreements -
Transamerica pays:
Floating rate interest expense,
receives fixed rate interest
income $569.5 6.4% 6.2%
====== ==== ====
Fixed rate interest expense,
receives floating rate interest
income $810.1 7.1% 5.9%
====== ==== ====
Floating rate interest expense
based on one index (6.1%) and
receives floating rate interest
income based on another index
(5.0%) $221.0
======
Interest rate caps and swaptions $200.0 6.0%
====== ====
The net present value of these interest rate swap agreements offsets changes
in the fair value of the hedged liabilities and indebtedness, which are also
carried at amortized cost. The fair value of the liability hedges at December
31, 1994 was a net obligation to counterparties of $9.6 million.
While Transamerica is exposed to credit risk in the event of nonperformance by
the other party, nonperformance is not anticipated due to the credit rating of
the counterparties. At December 31, 1994, the interest rate swap and floor
agreements are with banks rated A or better by one or more of the major credit
rating agencies.
Transamerica Corporation and Subsidiaires 75
<PAGE>
[F] INCOME TAXES
The provision for income taxes on income from continuing operations comprises:
_____________________________________________________________________________
(Amounts in millions) 1994 1993 1992
Federal current $215.4 $213.0 $214.1
Federal deferred tax provision (benefit) 12.1 (110.7) (42.5)
State 22.6 27.1 28.7
Foreign 12.3 11.2 4.1
______ ______ ______
$262.4 $140.6 $204.4
====== ====== ======
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the deferred tax assets and liabilities as of December 31, 1994 and 1993
are as follows:
_____________________________________________________________________________
(Amounts in millions) 1994 1993
Deferred tax assets:
Allowance for losses $ 106.9 $ 120.6
Impairment of investments 49.6 36.2
Life insurance policy liabilities 707.6 453.8
Unrealized loss on marking investments to
fair value 142.8
Loss and tax credits carryforward 19.0 41.1
Other 191.5 118.1
________ ________
1,217.4 769.8
Deferred tax liabilities:
Deferred policy acquisition costs 773.3 609.2
Accelerated depreciation 320.7 196.6
Unrealized gain on marking investments to
fair value 66.9
Discount amortization on notes and loans payable 66.2 55.8
Other 63.8 142.7
________ ________
1,224.0 1,071.2
________ ________
Net deferred tax liability $ 6.6 $ 301.4
======== ========
The difference between federal income taxes on income from continuing
operations computed at the statutory rate and the provision for income taxes
is:
_____________________________________________________________________________
(Amounts in millions) 1994 1993 1992
Federal income taxes at statutory rate $241.6 $205.8 $183.1
State income taxes 14.7 17.6 15.9
Prior year items (94.2)
Effect of tax rate change on deferred
tax liability 8.4
Other 6.1 3.0 5.4
______ ______ ______
$262.4 $140.6 $204.4
====== ====== ======
Income tax payments totaled $71.9 million in 1994, $135.5 million in 1993 and
$174.8 million in 1992. Included in the loss from discontinued operations are
income tax provisions (benefits) of $200,000, $(13) million and $(263.8)
million for 1994, 1993 and 1992.
76 Transamerica Corporation and Subsidiaries
<PAGE>
[G] BUSINESS SEGMENT INFORMATION
_____________________________________________________________________________
(Amounts in millions) 1994 1993 1992
REVENUES
Consumer lending $ 690.6 $ 654.3 $ 660.1
Commercial lending 384.3 370.7 392.8
Leasing 637.9 407.8 420.5
Life insurance 3,289.6 3,026.3 2,767.6
Real estate services and asset management 367.5 362.8 309.9
Other* (15.4) (8.6)
_________ _________ _________
$ 5,354.5 $ 4,813.3 $ 4,550.9
========= ========= =========
OPERATING PROFIT***
Consumer lending $ 148.1 $ 158.6 $ 172.0
Commercial lending 72.0 (18.1) 31.0
Leasing 101.9 91.5 92.1
Life insurance 403.2 380.6 290.4
Real estate services and asset management 137.5 151.5 129.7
_________ _________ _________
862.7 764.1 715.2
Unallocated expenses (156.5) (160.4) (163.2)
Interest expense for real estate services
and asset management (15.9) (15.6) (13.6)
Income tax expense (262.4) (140.6) (204.4)
_________ _________ _________
Income from continuing operations $ 427.9 $ 447.5 $ 334.0
========= ========= =========
ASSETS
Consumer lending $ 4,475.4 $ 3,946.1 $ 3,875.9
Commercial lending 3,363.9 3,508.5 3,625.6
Leasing 3,184.2 1,697.0 1,339.8
Life insurance 28,967.1 26,109.0 22,739.3
Real estate services and asset management 524.0 557.2 456.6
Other** (120.8) 232.7 1,253.7
_________ _________ _________
$40,393.8 $36,050.5 $33,290.9
========= ========= =========
ADDITIONS, AT COST, TO PROPERTY
AND EQUIPMENT
Leasing $ 1,525.3 $ 411.0 $ 337.1
Other 70.2 64.4 75.1
_________ _________ _________
$ 1,595.5 $ 475.4 $ 412.2
========= ========= =========
DEPRECIATION
Leasing $ 201.7 $ 105.9 $ 102.9
Other 46.7 39.2 33.1
_________ _________ _________
$ 248.4 $ 145.1 $ 136.0
========= ========= =========
*Includes intercompany eliminations.
**Includes intercompany eliminations and in 1993 and 1992 net assets of
discontinued operations.
***Operating profit is total revenue less operating expenses. Interest expense
has been deducted only from consumer lending, commercial lending and
leasing operations. Neither unallocated expenses nor income tax has been
deducted from the operations of any segment in computing operating profit.
Transamerica Corporation and Subsidiaries 77
<PAGE>
[H] PENSION PLANS
Transamerica Corporation and its subsidiaries have a number of noncontributory
defined benefit pension plans covering substantially all employees. Plans
covering salaried employees provide pension benefits that are based on the
employee's compensation during the highest paid 60 consecutive months during
the 120 months before retirement. The general policy is to fund current
service costs currently and prior pension service costs over periods ranging
from 10 to 30 years.
A summary of the components of net periodic pension cost follows:
_____________________________________________________________________________
(Amounts in millions) 1994 1993 1992
Service cost-benefits earned during the period $ 15.4 $ 15.6 $ 17.7
Interest cost on projected benefit obligation 46.4 43.6 39.2
Actual return (gain) loss on plan assets 19.3 (145.7) (100.4)
Deferral of current gains (losses) varying
from expected return (71.7) 97.7 55.1
Amortization of prior service costs 5.7 5.0 3.5
______ ______ ______
Total pension cost $ 15.1 $ 16.2 $ 15.1
====== ====== ======
The following table sets forth the amounts recognized in the consolidated
statement of financial position for the pension plans:
_____________________________________________________________________________
(Amounts in millions) 1994 1993
Actuarial present value of benefit obligations:
Vested benefit obligation* $586.1 $601.0
====== ======
Accumulated benefit obligation $593.2 $609.1
====== ======
Projected benefit obligation, including effects
of future salary increases $650.1 $651.9
Plan assets at fair value 746.8 777.2
______ ______
Excess of plan assets over projected benefit obligation $ 96.7 $125.3
====== ======
The excess of plan assets over projected benefit
obligation comprises:
Net pension liability $ (3.6) $ (2.3)
Unrecognized net gain arising since January 1, 1986 119.3 146.0
Unrecognized prior service cost (21.8) (20.6)
Unrecognized net obligation at January 1, 1986
net of amortization (7.1) (8.3)
Adjustment required to recognize minimum liability 9.9 10.5
______ ______
$ 96.7 $125.3
====== ======
*A portion of the vested benefit obligation is
unconditionally guaranteed by Transamerica Occidental
Life Insurance Company, a subsidiary of Transamerica.
The projected benefit obligation was determined using a weighted average
discount rate of 8.0% (7.25% in 1993) and an assumed rate of compensation
increase of 5.5%. The expected long-term rate of return on plan assets was
8.75% (8.0% in 1993 and 8.5% in 1992).
78 Transamerica Corporation and Subsidiaries
<PAGE>
[I] RETAINED EARNINGS RESTRICTIONS
Under certain circumstances, the provisions of loan agreements and statutory
requirements place limitations on the amount of funds which can be remitted to
Transamerica by its consolidated subsidiaries. Of the net assets of
Transamerica's consolidated subsidiaries, as adjusted for intercompany account
balances, at December 31, 1994, approximately $3.8 billion is so restricted,
and $0.9 billion is free for remittance to Transamerica subject to investment
and operating requirements.
[J] DISCONTINUED 0PERATIONS
In April 1994, Transamerica sold its remaining 21% ownership interest in
Sedgwick Group plc. Proceeds from the sale were $326.4 million and resulted in
no gain or loss. Transamerica's investment in Sedgwick and its share of
Sedgwick's operating results and related goodwill amortization have been
separated from those of Transamerica's continuing operations and are
classified as discontinued operations. Amounts included in loss from
discontinued operations related to Sedgwick were a loss of $700,000 in 1994
representing results through the date of sale and income of $3 million
and $8.9 million in 1993 and 1992.
In 1993, Transamerica sold its property and casualty insurance subsidiary,
Transamerica Insurance Group, through public offerings. The net proceeds,
after underwriting discounts and issuance costs, totaled $1 billion in cash,
resulting in a $125 million after tax loss on the sale of which $75 million
was recorded in 1992 on an estimated basis and $50 million in 1993 upon
completion of the final public offering.
In connection with the offering a subsidiary of Transamerica, in 1992, assumed
responsibility by means of a reinsurance agreement for certain assumed treaty
reinsurance business written prior to 1986 for which it received assets which
are expected to be sufficient to fund the liquidation of the business.
Transamerica has collateralized the estimated ultimate obligation of
approximately $380 million at December 31, 1994 by providing letters of credit
aggregating $190 million and by placing $193 million of its assets in a trust.
Additionally Transamerica agreed to pay up to $89.3 million in adverse loss
development on certain paid environmental losses and has provided for these
losses.
[K] COMMITMENTS AND CONTINGENCIES
Substantially all leases of Transamerica and its subsidiaries are operating
leases principally for the rental of real estate. Total rental expense
amounted to $99.9 million in 1994, $88.1 million in 1993 and $89.4 million in
1992.
Contingent liabilities arising from litigation, income taxes and other matters
are not expected to have a material effect on the consolidated financial
position or results of operations of Transamerica and its subsidiaries.
Transamerica Corporation and Subsidiaries 79
<PAGE>
<TABLE>
SUPPLEMENTARY FINANCIAL INFORMATION
________________________________________________________________________________________________________________
SELECTED QUARTERLY
FINANCIAL DATA
<CAPTION>
1994 March 31 June 30 September 30 December 31 1994 Total
<S> <C> <C> <C> <C> <C>
Revenues $1,235.4 $1,363.0 $1,371.3 $1,384.8 $5,354.5
======== ======== ======== ======== ========
Income from continuing
operations $ 103.7 $ 105.7 $ 104.9 $ 113.6 $ 427.9
Loss from
discontinued operations (0.7) (0.7)
________ ________ ________ ________ ________
Net income $ 103.0 $ 105.7 $ 104.9 $ 113.6 $ 427.2
======== ======== ======== ======== ========
Earnings per share
of common stock:
Income from continuing
operations:
Income before investment
transactions $ 1.27 $ 1.30 $ 1.31 $ 1.37 $ 5.25
Investment transactions 0.02 0.04 0.09 0.06 0.21
________ ________ ________ ________ ________
Income from continuing
operations 1.29 1.34 1.40 1.43 5.46
Loss from discontinued
operations (0.01) (0.01)
________ ________ ________ ________ ________
Net income $ 1.28 $ 1.34 $ 1.40 $ 1.43 $ 5.45
======== ======== ======== ======== ========
High and low sales prices
for common shares $57 5/8-49 1/4 $54 5/8-48 7/8 $53 5/8-49 1/2 $51 1/4-46 3/8 $57 5/8-46 3/8
________________________________________________________________________________________________________________
<CAPTION>
1993 March 31 June 30 September 30 December 31 1993 Total
<S> <C> <C> <C> <C> <C>
Revenues $1,149.0 $1,213.5 $1,209.2 $1,241.6 $4,813.3
Income from
continuing operations $ 93.0 $ 117.3 $ 141.1 $ 96.1 $ 447.5
Income (loss) from
discontinued operations (1.2) 6.6 (2.2) (50.2) (47.0)
Extraordinary loss on early
extinguishment of debt (23.1) (23.1)
________ ________ ________ ________ ________
Net income $ 91.8 $ 123.9 $ 138.9 $ 22.8 $ 377.4
======== ======== ======== ======== ========
Earnings per share
of common stock:
Income from continuing
operations:
Income before investment
transactions $ 1.07 $ 1.16 $ 1.61 $ 1.24 $ 5.08
Investment transactions 0.03 0.24 0.12 (0.07) 0.32
________ ________ ________ ________ ________
Income from continuing
operations 1.10 1.40 1.73 1.17 5.40
Income (loss) from discontinued
operations (0.02) 0.09 (0.03) (0.64) (0.60)
Extraordinary loss on early
extinguishment of debt (0.29) (0.29)
________ ________ ________ ________ ________
Net income $ 1.08 $ 1.49 $ 1.70 $ 0.24 $ 4.51
======== ======== ======== ======== ========
High and low sales prices
for common shares $53 7/8-45 5/8 $ 56 1/8-47 $61 3/8-52 1/2 $62 3/8-53 5/8 $62 3/8-45 5/8
<FN>
(Dollar amounts in millions except for share data)
Note A. On February 28, 1995 the closing sales price for Transamerica common
shares was $54 5/8 and there were 53,200 common shareholders of record.
</TABLE>
Transamerica Corporation and Subsidiaries 81
<PAGE>
<TABLE>
SELECTED ELEVEN-YEAR FINANCIAL DATA
____________________________________________________________________________________________________________
(Dollar amounts in millions except for share data)
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Revenues $ 5,354.5 $ 4,813.3 $ 4,550.9 $ 4,175.2 $ 4,097.7
Income from continuing operations $ 427.9 $ 447.5 $ 334.0 $ 5.6 $ 190.5
Earnings per share of common stock (Note A):
Income (loss) from continuing operations $ 5.46 $ 5.40 $ 4.00 $ (0.08) $ 2.30
FINANCIAL POSITION
Total assets $40,393.8 $36,050.5 $33,290.9 $31,133.6 $29,260.9
Notes and loans payable:
Long-term debt $ 7,489.1 $ 5,681.0 $ 6,510.5 $ 6,975.6 $ 6,602.5
OTHER DATA
Per share of common stock:
Dividends declared (Note E) $ 2.00 $ 2.00 $ 2.00 $ 1.98 $ 1.94
<FN>
Note A. Earnings per share of common stock are based on the weighted average number of shares outstanding in
each year after deduction of preferred dividends in 1985-1994 and in 1994, premium and expenses on the
redemption of the Series D preferred stock.
Note E. Quarterly dividends per share were 50 cents in 1994 and 1993.
</TABLE>
82 Transamerica Corporation and Subsidiaries
<PAGE>
COMMON STOCK LISTED AND TRADED
Transamerica's common stock (symbol: TA) is listed and traded in the U.S. on
the New York and Pacific Stock Exchanges and outside the U.S. on the following
exchanges: Amsterdam, Basel, Frankfurt, Geneva, London, Paris, Tokyo and
Zurich.
88 Transamerica Corporation and Subsidiaries
<PAGE>
EXHIBIT EX-21
LIST OF SUBSIDIARIES OF TRANSAMERICA CORPORATION
All majority owned subsidiaries are included in the consolidated
financial statements of the Corporation (all voting securities owned 100%
directly or indirectly by the Corporation).
Jurisdiction of
Organization
of Named
Subsidiary
_______________
ARC Reinsurance Corporation Hawaii
Coast Service Company California
Inter-America Corporation California
Mortgage Corporation of America California
Pyramid Insurance Company, Ltd. Hawaii
Pacific Cable Ltd. Bermuda
TC Cable, Inc. (25% ownership) Delaware
River Thames Insurance Company Ltd. (51% ownership) United Kingdom
RTI Holdings, Inc. Delaware
TCS Inc. Delaware
Trans International Entities Inc. Delaware
Transamerica Airlines, Inc. Delaware
Transamerica Asset Management Group, Inc. Delaware
Criterion Investment Management Company Texas
Criterion Rogge Global Advisers, Inc.
(50% ownership) Texas
Transamerica Corporation (Oregon) Oregon
Transamerica Delaware, L.P. Delaware
Transamerica Finance Group, Inc. Delaware
BWAC Twelve, Inc. Delaware
Transamerica Insurance Finance Corporation Maryland
Transamerica Insurance Finance
Corporation, California California
Transamerica Insurance Finance
Corporation, Canada Canada
Transamerica Insurance Finance Company (U.K.) Maryland
Transamerica Financial Services Finance Company Delaware
Transamerica HomeFirst, Inc. California
-1-
<PAGE>
Jurisdiction of
Organization
of Named
Subsidiary
_______________
Transamerica Finance Corporation Delaware
Arcadia General Insurance Company Arizona
Arcadia National Life Insurance Company Arizona
Transamerica Insurance Administrators, Inc. Delaware
First Credit Corporation Delaware
Pacific Agency, Inc. Indiana
Pacific Finance Loans California
Pacific Service Escrow Inc. Delaware
Transamerica Acceptance Corporation Delaware
Transamerica Credit Corporation Nevada
Transamerica Credit Corporation Washington
Transamerica Financial Consumer Discount Company Pennsylvania
Transamerica Financial Corporation Nevada
Transamerica Financial Professional Services, Inc. California
Transamerica Financial Services, Inc. British Columbia
Transamerica Financial Services California
NAB Services, Inc. California
Transamerica Financial Services Wyoming
Transamerica Financial Services Company Ohio
Transamerica Financial Services, Inc. Alabama
Transamerica Financial Services, Inc. Arizona
Transamerica Financial Services, Inc. Kansas
Transamerica Financial Services Inc. Minnesota
Transamerica Financial Services, Inc. New Jersey
Transamerica Financial Services, Inc. Texas
Transamerica Financial Services (Inc.) Oklahoma
Transamerica Financial Services of Dover, Inc. Delaware
TELCO Holding Co., Inc. Delaware
Transamerica Commercial Finance Corporation, I Delaware
BWAC Credit Corporation Delaware
BWAC International Corporation Delaware
Transamerica Business Credit Corporation Delaware
Transamerica Inventory Finance Corporation Delaware
Transamerica Commercial Finance Corporation Delaware
TCF Asset Management Corporation Colorado
BWAC Seventeen, Inc. Delaware
Transamerica Commercial Finance Corporation,
Canada Canada
TCF Commercial Leasing Corporation,
Canada Ontario
Transamerica Commercial Finance Canada,
Limited Ontario
Transamerica Commercial Finance France S.A. France
BWAC Twenty-One, Inc. Delaware
Transamerica Commercial Holdings Limited United Kingdom
Transamerica Commercial Finance Limited United Kingdom
Transamerica Trailer Leasing Limited (51%) United Kingdom
Transamerica GmbH Inc. Delaware
Transamerica Financieringsmattschappij B.V. Netherlands
Transamerica Finanzierungs GmbH Germany
-2-
<PAGE>
Jurisdiction of
Organization
of Named
Subsidiary
_______________
(BWAC Twenty-One, Inc./Transamerica GmbH Inc.)
Transamerica Finanzierungs GmbH Germany
TA Leasing Holding Co., Inc. Delaware
Transamerica Leasing Inc. Delaware
Transamerica Leasing Holdings, Inc. Delaware
Intermodal Equipment, Inc. Delaware
Transamerica Leasing N.V. Belgium
Transamerica Leasing Srl. Italy
Transamerica Container Acquisition
Corporation Delaware
Transamerica Container Acquisition II
Corporation Delaware
Transamerica Distribution Services Inc. Delaware
Transamerica Leasing Coordination Center Belgium
Transamerica Leasing do Brasil S/C Ltda. Brazil
Transamerica Leasing GmbH Germany
Transamerica Leasing (HK) Ltd. Hong Kong
Transamerica Leasing Limited United Kingdom
ICS Terminals (U.K.) Limited United Kingdom
Transamerica Leasing Pty. Ltd. Australia
Transamerica Leasing (Canada) Inc. Canada
Transamerica Tank Container Leasing Pty.
Limited Australia
Transamerica Trailer Holdings I Inc. Delaware
Transamerica Trailer Holdings II Inc. Delaware
Transamerica Trailer Holdings III Delaware
Transamerica Trailer Leasing AB Sweden
Transamerica Trailer Leasing (Belgium) N.V. Belgium
Transamerica Trailer Leasing (Netherlands)
B.V. Netherlands
Transamerica Trailer Leasing A/S Denmark
Transamerica Trailer Leasing GmbH Germany
Transamerica Trailer Leasing S.A. France
Transamerica Trailer Leasing S.p.A. Italy
Transamerica Trailer Spain, S.A. Spain
Transamerica Transport Inc. New Jersey
Transamerica Homes, Inc. Delaware
Transamerica Information Management Services, Inc. Delaware
Transamerica Insurance Corporation of California California
Arbor Life Insurance Company Arizona
Plaza Insurance Sales, Inc. California
Transamerica Advisors, Inc. California
Transamerica Annuity Service Corporation New Mexico
Transamerica Financial Resources, Inc. Delaware
Financial Resources Insurance Agency of Texas, Inc. Texas
TBK Insurance Agency of Ohio Ohio
-3-
<PAGE>
Jurisdiction of
Organization
of Named
Subsidiary
_______________
Transamerica Financial Resources Insurance Agency
of Alabama, Inc. Alabama
Transamerica Financial Resources Insurance Agency
of Massachusetts, Inc. Massachusetts
Transamerica Insurance Securities Sales Corporation Maryland
Transamerica International Insurance Services, Inc. Delaware
Home Loans & Finance Limited United Kingdom
Transamerica Occidental Life Insurance Company California
First Transamerica Life Insurance Company New York
NEF Investment Company Delaware
Transamerica Life Insurance and Annuity Company California
Transamerica Assurance Company Colorado
Transamerica Occidental Life Insurance Company
of Illinois Illinois
Transamerica Life Insurance Company of Canada Canada
USA Administration Services, Inc. California
Transamerica Products, Inc. California
Transamerica Leasing Ventures, Inc. California
Transamerica Products I, Inc. California
Transamerica Products II, Inc. California
Transamerica Products IV, Inc. California
Transamerica Service Company Delaware
Transamerica International Holdings, Inc. Delaware
TC Cable, Inc. (75% ownership)
Transamerica International Limited Canada
Transamerica Investment Services, Inc. Delaware
Transamerica Land Capital, Inc. California
Bankers Mortgage Company of California California
Transamerica Overseas Finance Corporation N.V. Netherlands
Antilles
Transamerica Realty Services, Inc. Delaware
The Gilwell Company California
Pyramid Investment Corporation Delaware
Transamerica Minerals Company California
Transamerica Oakmont Corporation California
Transamerica Properties, Inc. Delaware
Transamerica Real Estate Management Co. California
Transamerica Retirement Management Corporation Delaware
Ventana Inn, Inc. California
Transamerica Systems Corporation Delaware
Transamerica Telecommunications Corporation Delaware
-4-
<PAGE>
EXHIBIT EX-23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-80934, 2-83724, 33-3722, 33-12324, 33-13389, 33-18911,
33-26317, 33-38267, 33-43927 and 33-55587 and Form S-3 Nos. 33-32419,
33-37889, 33-41008 and 33-55047) and related Prospectuses, of Transamerica
Corporation of our report dated February 15, 1995 with respect to the
consolidated financial statements and schedules of Transamerica Corporation
included or incorporated by reference in this Annual Report (Form 10-K) for
the year ended December 31, 1994.
Ernst & Young LLP
San Francisco, California
March 23, 1995
<PAGE>
EXHIBIT EX-24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
Each of the undersigned hereby constitutes and appoints BURTON E.
BROOME and ROBERT D. MYERS and each of them with power to act alone, his or
her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign (either manually or
electronically through the EDGAR System of the United States Securities and
Exchange Commission) the 1994 Annual Report on Form 10-K for Transamerica
Corporation and any and all amendments thereto, and to file the same, together
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-in-fact full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises hereof, as fully to all
intents and purposes as he or she might do or could do in person, hereby
ratifying and confirming all that said attorney-in-fact or his substitutes may
lawfully do or cause to be done by virtue hereof.
Executed on the 26th day of January, 1995.
R. F. O'BRIEN
___________________________ ___________________________
Myron Du Bain Raymond F. O'Brien
SAM GINN TONI REMBE
___________________________ ___________________________
Sam Ginn Toni Rembe
JAMES R. HARVEY CONDOLEEZZA RICE
___________________________ ___________________________
James R. Harvey Condoleezza Rice
FRANK C. HERRINGER
___________________________ ___________________________
Frank C. Herringer Charles R. Schwab
G. E. MOORE FORREST N. SHUMWAY
___________________________ ___________________________
Gordon E. Moore Forrest N. Shumway
PETER V. UEBERROTH
___________________________
Peter V. Ueberroth
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<FISCAL-YEAR-END> DEC-31-1994
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