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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, 1995
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. ( X )
Aggregate market value of Common Stock, $1 par value, held by nonaffil-
iates of the registrant as of the close of business at February 29, 1996:
$5,116,599,569.
Number of shares of Common Stock, $1 par value, outstanding as of the
close of business on February 29, 1996: 67,926,257.
Documents incorporated by reference:
Portions of the Transamerica Corporation 1995 Annual Report to
Stockholders are incorporated by reference into Parts I and II. With the
exception of those portions which are incorporated by reference, the Trans-
america Corporation 1995 Annual Report is not deemed filed as part of this
Report.
Portions of the Proxy Statement of Transamerica Corporation dated
March 18, 1996 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 ........................................ 21
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 ........... 27
Part IV:
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ................................................. 27
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PART I
ITEM I. BUSINESS
Transamerica Corporation is a financial services organization which
engages through its subsidiaries in life insurance, consumer lending,
commercial lending, leasing and real estate services. Transamerica was
incorporated in Delaware in 1928.
On May 2, 1995, Transamerica sold substantially all of the assets of
Criterion Investment Management Company for gross proceeds of $60,000,000
which were used to reduce debt. The transaction resulted in an after tax gain
of $4,800,000.
On March 31, 1995, Transamerica purchased for $1,027,300,000 in cash
substantially all the assets and assumed certain liabilities of the home
equity business of ITT Consumer Financial Corporation (ITT). The purchase
price was allocated as follows: consumer finance receivables of $966,400,000,
which were all real estate secured, of which 14% was located in California;
allowance for losses of $52,700,000; assets held for sale of $26,800,000;
customer renewal rights of $97,800,000; and assumed liabilities of
$11,000,000. Transamerica did not assume any borrowings, tax liabilities or
contingent liabilities of ITT. The initial financing of the acquisition was
provided through short-term bank loans which have been repaid and refinanced
with long-term debt.
On December 21, 1994, Transamerica sold its mutual fund subsidiary,
Transamerica Fund Management Company, for gross proceeds of $100,000,000 which
were used to reduce debt. The transaction resulted in an after tax gain of
$4,857,000.
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 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.
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.
Information concerning Transamerica's investment portfolio is
incorporated herein by reference to "Investment Portfolio" on page 61 and
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"Note E. Financial Instruments" on pages 70 through 75 of the Transamerica
Corporation 1995 Annual Report.
BUSINESS SEGMENT INFORMATION
"Note G. Business Segment Information" on page 77 of the Transamerica
Corporation 1995 Annual Report is incorporated herein by reference.
The business activities of Transamerica's principal subsidiaries are
more fully described below.
LIFE INSURANCE
Transamerica's life insurance business is generated through lines of
business which include life insurance, structured settlements, group pension,
living benefits, reinsurance and Canada. These lines of business conduct
their operations through one or more of the following entities: 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 engaged primarily 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.
The life insurance business is highly competitive. Competition arises
from numerous stock and mutual life insurance companies in the United States,
many of which offer products similar to those offered by the Transamerica Life
Companies. In the pension and annuity markets, competition also arises from
banks, mutual funds and other investment managers. Both product and price
competition are intense. The Transamerica Life Companies' key competitive
strengths are their financial position, broad product range, market position
and diversified distribution system.
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The following table sets forth certain statistical information relating
to the Transamerica Life Companies' operations.
Years Ended December 31,
________________________________________
1995 1994 1993
(Dollar amounts in thousands)
Insurance in force at
end of period:(1)(2)
Whole life and endowment .... $167,105,237 $153,162,434 $150,151,065
Individual term life ........ 197,703,190 187,841,222 172,441,372
Group life(3) ............... 16,048,712 9,630,184 7,838,176
Credit life(4) .............. 59,026 132,619 200,787
____________ ____________ ____________
Total ..................... $380,916,165 $350,766,459 $330,631,400
============ ============ ============
New insurance written:(2)
Whole life and endowment(5) . $ 23,891,802 $ 23,056,708 $ 29,303,712
Individual term life(6) ..... 50,502,861 37,823,218 46,724,456
Group life(3) ............... 7,856,432 2,369,123 2,057,706
Credit life(4) .............. 449
____________ ____________ ____________
Total ..................... $ 82,251,095 $ 63,249,049 $ 78,086,323
============ ============ ============
Premium income:(7)
Individual life and annui-
ties(8) ................... $ 663,387 $ 599,948 $ 543,580
Group life and annuities(9) . 190,392 137,913 95,004
Accident and health (individ-
ual, group and credit)(10) 286,255 280,587 227,640
____________ ____________ ____________
Total ..................... $ 1,140,034 $ 1,018,448 $ 866,224
============ ============ ============
Average individual life policy
in force at end of year
(actual dollar amounts) ..... $ 155,274 $ 149,064 $ 144,050
Average individual life policy
issued during year (actual
dollar amounts)(11) ......... $ 236,401 $ 243,634 $ 247,944
Number of individual life
policies in force at end of
year ........................ 1,227,603 1,221,765 1,200,076
Ratio of underwriting expenses
to premiums and other consid-
erations(12) ................ 7.5% 8.7% 8.9%
Lapse ratio--adjusted for de-
creases and expiries of
term insurance and rein-
surance assumed:(13)
Transamerica Life Companies . 7.8% 8.0% 8.9%
All U.S. stock life insur-
ance companies(14) ........ (15) 8.3% 9.8%
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_______
(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 were due to growth in sales of insurance through
salary deduction plans offered by employers.
(4) The company discontinued this line of business in 1988 and there
have been significant 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 1993
represents added business on existing policies.
(5) The 1995 increase was primarily attributable to increased marketing
efforts. The 1994 decrease was due to reduced sales of Trendsetter policies.
(6) The changes were due primarily to the varying level of reinsurance
assumed.
(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 increases were due primarily to increased sales of individual
annuity policies.
(9) The increases were due primarily to changing levels of sales of
group annuity policies, principally single premium pension contracts.
(10) The increases were primarily due to an increased level of
reinsurance assumed.
(11) The declines were primarily due to lower 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 the aggregate of (1) ordinary life insurance in
force at the beginning of the year plus (2) new business issued during the
prior year.
(14) Industry median, as provided by A.M. Best Company, Inc.
(15) Information not yet available for 1995.
_____________________
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Transamerica Life Companies' individual life insurance business is
generated through a system of 669 field sales offices primarily in the United
States and Canada, 48 of which are branch offices operated by employees and
the remainder are independent offices operated by independent general
agents. These offices house a sales force consisting of 68 employees of the
Transamerica Life Companies and approximately 2,100 independent agents
operating under contract on an exclusive or near exclusive basis, which
together generated approximately 35% of new premiums written in 1995. The
remaining 65% of the Transamerica Life Companies' individual life insurance
business was generated by more than 16,800 producing independent insurance
brokers operating under nonexclusive contracts.
In addition to its sales force, the Transamerica Life Companies have
approximately 1,925 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 246 field sales
office employees serving its sales force.
Of life insurance in force at December 31, 1995, 21% was on residents of
California, followed by Texas (8.2%), Illinois (5.4%), Florida (3.7%), New
York (3.2%) and Pennsylvania (3.1%). No other state accounted for more than
3% of life insurance in force. Canada accounted for 14.1% and all other
foreign operations accounted for 2.2% 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, 1995, the Transamerica
Life Companies were accepting business from 339 companies under automatic
reinsurance agreements and from approximately 175 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.
Investments. The Transamerica Life Companies' investments at
December 31, 1995 totaled $27,703,169,000 which was invested as follows: 93.8%
in fixed maturities; 2.4% in mortgage loans and real estate; 1.5% in policy
loans; 1.0% in common stocks; 0.8% in short-term investments; 0.2% in
nonredeemable preferred stocks; 0.2% in other long-term investments; and
0.1% in redeemable preferred stocks. Fixed maturities are invested as
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follows: 50.2% in industrial and other non-government bonds; 30.2% in United
States government bonds; 18.2% in public utility bonds; 0.5% in foreign
government bonds; and 0.9% 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.
Years Ended December 31,
________________________
1995 1994 1993
Fixed maturities, at amortized cost--gross(1) 8.30% 8.26% 9.16%
Equity securities, at market value--gross(2) 1.66 2.87 2.96
Mortgages--gross(3) ......................... 8.74 10.70 10.53
Total invested assets:
Gross ..................................... 8.13 8.08 8.81
Net ....................................... 7.93% 7.90% 8.67%
_______
(1) The decrease in 1994 reflects the lower yields on new investments.
(2) The decrease in the 1995 yield resulted primarily from an increase
in the market value of the portfolio.
(3) The decrease in the 1995 yield is primarily due to the funding of
new loans during 1995 at current market rates which were below the average of
the existing loans.
_____________________
FINANCE
The consumer lending operation and commercial lending operation have,
from time to time, entered into securitization arrangements whereby they have
securitized portfolios of receivables. The term "owned and serviced" is used
herein to describe their receivables portfolio and the securitized
receivables.
Consumer Lending
Consumer lending services are provided by Transamerica Financial
Services, based in Los Angeles, California, which has 555 branch lending
offices. Branch offices are located in the United States (528 in 42 states),
Canada (15) and the United Kingdom (12). Products offered by the consumer
lending operation include first and second mortgage loans, revolving real
estate secured lines of credit, secured and unsecured personal loans, sales
finance contracts, credit insurance and retail used automobile financing.
Since 1991, the consumer lending operation has continued to broaden its
receivable portfolio by expanding its revolving real estate secured lines of
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credit, its personal loan business (which includes loans secured by
automobiles or other property as well as unsecured loans), its purchase from
dealers of retail finance contracts covering principally appliances,
furniture and services, and retail used automobile financing. The products
offered by the consumer lending operation have traditionally been fixed rate;
in 1995 the company commenced offering variable rate products.
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, 1995, 82% are secured by real estate, principally
one to four family residential properties. Of the company's net finance
receivables secured by real estate, 63% 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.
The consumer lending operation's principal market involves the
origination and servicing of home equity loans for debt consolidation and
other purposes. Traditionally, the company has relied on an extensive loan-
by-mail program, currently involving approximately 50 million solicitation
pieces annually, to attract potential customers. However, competition has
been increasing in the U.S. home equity market, and competitors include
numerous other finance companies, banks, savings associations and mortgage
bankers as well as loan brokerage operations. In response, the company's
competitive strategies have included product diversification and emphasis on
superior service to better meet customer needs as well as exploration of
additional products and certain foreign markets.
The following table sets forth certain statistical information relating
to the consumer lending operation's finance receivables for the years
indicated.
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Years Ended December 31,
____________________________________
1995 1994 1993
(Dollar amounts in thousands)
Volume of finance receivables
acquired:
Instalment loans:
Secured by residential
real estate(1) .............. $2,067,889 $1,708,806 $1,039,394
Other(2) ...................... 655,312 623,619 524,241
__________ __________ __________
2,723,201 2,332,425 1,563,635
Other finance receivables(3) .... 104,080 72,708 29,181
__________ __________ __________
Total ....................... $2,827,281 $2,405,133 $1,592,816
========== ========== ==========
Finance receivables outstanding
at end of year:
Instalment loans:
Secured by residential
real estate(1) .............. $4,212,704 $3,522,966 $3,295,346
Other(2) ...................... 853,647 758,798 595,284
__________ __________ __________
5,066,351 4,281,764 3,890,630
Other finance receivables(3) .... 84,447 58,197 22,276
__________ __________ __________
5,150,798 4,339,961 3,912,906
Less unearned finance charges
and insurance premiums ........ 214,506 197,975 185,150
__________ __________ __________
Net finance receivables - owned . 4,936,292 4,141,986 3,727,756
Net finance receivables securi-
tized, sold and serviced(4) ... 59,437
__________ __________ __________
Net finance receivables owned
and serviced .................. $4,936,292 $4,141,986 $3,787,193
========== ========== ==========
Allowance for losses at end of
year(5) ......................... $ 164,066 $ 117,218 $ 107,175
Ratio to outstandings less
unearned finance charges and
insurance premiums(6) ......... 3.32% 2.83% 2.83%
Provision for credit losses
charged to income(7) ............ $ 97,835 $ 82,230 $ 63,946
Credit losses (net of recoveries):
Real estate secured instalment
loans(8) ...................... $ 64,817 $ 46,910 $ 45,229
Non-real estate secured
receivables(9) ................ 38,989 28,350 19,201
Ratio to average net finance
receivables outstanding(10):
Owned ........................... 2.15% 1.93% 1.68%
Owned and serviced .............. 2.15% 1.93% 1.69%
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_______
(1) Volume for 1995 includes $1,004,869,000 acquired from ITT on March
31, 1995, of which $676,078,000 (excluding renewals) remained outstanding at
December 31, 1995. Excluding the effects of that acquisition, 1995 loan
originations were less than in 1994 principally due to a decline in renewal
volume (which was caused in part by a return to higher rates in early 1995)
and increased competition. In 1994, in response to increased competition,
principally in California, the company introduced lower interest rates which
were not continued into 1995, which led to a high level of refinancing
activity in 1994. The 1994 and 1993 volume also included $117,000,000 and
$22,691,000 of purchased receivables.
(2) The increases reflect general expansion in consumer lending's
personal loan business.
(3) The increases resulted from expansion in the retail finance contract
business. The 1994 volume included $7,855,000 of bulk purchases of contracts.
(4) In 1990, $430,000,000 of real estate secured receivables were
securitized and accounted for as a sale. The runoff of this securitization
was completed in 1994.
(5) The increase in 1995 is due to the acquisition of the ITT portfolio
on March 31, 1995. The increase in 1994 was caused by growth in outstanding
finance receivables. The 1993 amount includes an allowance for losses of
$1,680,000 on the securitized, sold and serviced portfolio. This amount was
reported in other liabilities in the consolidated balance sheet.
(6) The increase in 1995 is due to the acquisition of the ITT portfolio
which had a higher ratio of allowance for losses to net consumer finance
receivables outstanding.
(7) The provision for credit losses increased due to increases in credit
losses (see notes 8 and 9 below) and, in 1994, increased growth in net finance
receivables.
(8) The increases were due to continued sluggishness in the California
economy and a continued weak California real estate market. Also, in 1995,
the company consolidated and accelerated California branch foreclosure
activity in the fourth quarter and also recognized credit losses that had been
anticipated in connection with the ITT acquisition, both of which contributed
to the increase over 1994. Credit losses exclude losses on the disposal of
repossessed assets, which amounted to $15,441,000 in 1995, $7,314,000 in 1994
and $5,952,000 in 1993, and which are classified as operating expenses. The
1995 increase in losses on the disposal of repossessed assets was mainly due
to the consolidation and acceleration of foreclosure activity in California.
(9) The increases were caused by growth in the related outstanding
receivables which tend to have a higher loss ratio than the real estate
secured portfolio. Because new receivables generally do not go into default
for some period of time after origination, the increases also reflect the
"seasoning" of this portfolio.
(10) The increased ratios were due to corresponding fluctuations in
credit losses (see notes 8 and 9 above).
_____________________
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Following is certain information regarding delinquent receivables,
nonearning receivables, accounts in foreclosure and repossessed assets.
Because future improvements may be impacted by factors such as economic
conditions and the state of the real estate market, particularly in
California, the extent and timing of any change in the trend of delinquent
receivables, nonearning receivables and foreclosures and repossessed assets
remains uncertain.
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:
As of December 31,
_____________________
1995 1994 1993
Instalment loans:
Secured by residential real
estate(1) .................. 2.35% 1.78% 1.87%
Other(2) ..................... 4.85 3.35 2.71
_____ _____ _____
Total instalment loans ....... 2.77 2.06 2.00
Other finance receivables(2) ... 4.10 3.65 3.96
_____ _____ _____
Total - owned ................ 2.79 2.08 2.01
Securitized, sold and serviced . 2.47
_____ _____ _____
Total owned and serviced ..... 2.79% 2.08% 2.02%
===== ===== =====
_______
(1) The increase in 1995 was due to worsening in the condition of the
non ITT portfolio and the ITT portfolio acquisition which included the
purchase of delinquent accounts at a discount.
(2) Typically loans do not go into default until some period of time
after they were originated. Therefore, in periods of rapidly increasing
volume the delinquency ratio tends to lag behind the growth in the portfolio.
The increase in 1995 reflects the "seasoning" of non real estate products that
were introduced in 1993. The increase in 1994 for other instalment loans
reflected the changing mix of products in the non real estate portfolio and
the introduction of new products with higher delinquency experience.
________________
Nonearning Receivables. Nonearning consumer finance receivables, which
are defined generally as those past due more than 29 days, amounted to
$308,050,000 and $194,272,000 at December 31, 1995 and 1994. Payments
received on nonearning receivables are applied to principal and interest
according to the terms of the loan; however, accrued interest receivable and
amortization of other finance charges are recognized in income only on
accounts past due less than 30 days. Nonearning receivables exclude accounts
in foreclosure.
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Accounts in Foreclosure and Repossessed Assets. When foreclosure
proceedings begin on an account secured by real estate, the account is moved
from finance receivables to other assets and is written down to the fair value
of the collateral, less estimated selling costs, 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 $207,323,000 at December 31, 1995
compared to $226,119,000 at December 31, 1994. The decrease in 1995 reflects
the consolidation and acceleration of California foreclosure activity in the
fourth quarter, which more than offset the increase caused by the acquisition
of the ITT portfolio.
Commercial Lending
Commercial lending services are provided by three core business units:
inventory finance, business credit and insurance premium finance. The
commercial lending business operates from 30 branch lending offices located in
the United States (21), Puerto Rico (1), Canada (4) and Europe (4). 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
include boats, recreational products, electronics and appliances,
manufactured housing, lawn and garden equipment and personal computers. 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 a repossession.
Business credit consists of secured loans, primarily revolving, to
manufacturers, distributors and selected service businesses and collateralized
equipment lending. The asset based lending 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. Credit risk is managed by monitoring
the quality and performance of the borrower's collateral and compliance with
financial covenants. The equipment finance and lease division of business
credit began operations in 1995 and provides collateralized equipment lending
to companies that acquire capital equipment for their own use. The financings
are structured as both leases and loans. Credit risk is managed by
structuring loans such that loan balances amortize at a faster rate than the
equipment depreciates, thus maintaining collateral value, and by structuring
most leases with guaranteed residuals. In addition, financed equipment must
be essential to the operations of the borrower.
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
<PAGE>
Page 14
managed generally 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.
In 1995, the commercial lending operation sold for cash a portfolio of
consumer rediscount loans totaling $118,000,000 of net outstanding
receivables which resulted in an after tax gain of $4,800,000. It also
liquidated and sold $56,858,000 in net receivables and other assets resulting
from the decision to exit its operations in Puerto Rico and sold substantially
all of its rent-to-own finance receivables. During 1995, it also entered into
a three-year arrangement in which it securitized a $475,000,000 participation
interest in a pool of its insurance premium finance receivables. This
agreement replaced a 1990 securitization of $375,000,000 which expired in
1995.
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.
The commercial lending industry is highly competitive and has seen
increasing numbers of new market entrants. In addition to competition from
other finance companies, there is competition from captive finance
subsidiaries of manufacturing companies and commercial banks. The commercial
lending operation competes by offering a variety of financing products,
superior customer service including prompt credit review, and competitive
pricing.
The following table sets forth certain statistical information relating
to the commercial lending operation's finance receivables for the years
indicated.
<PAGE>
Page 15
Years Ended December 31,
_______________________________________
1995 1994 1993
(Dollar amounts in thousands)
Volume of finance receivables
acquired:
Inventory finance(1) ............ $ 7,479,383 $ 7,347,448 $ 6,773,720
Business credit(2) .............. 8,929,780 6,602,199 3,696,180
Insurance premium finance(3) .... 1,804,514 1,813,157 1,967,242
___________ ___________ ___________
Core businesses ............... 18,213,677 15,762,804 12,437,142
Other(4) ........................ 18,815 74,860 170,705
___________ ___________ ___________
Total ......................... $18,232,492 $15,837,664 $12,607,847
=========== =========== ===========
Finance receivables outstanding
at end of year:
Inventory finance(5) ............ $ 2,242,238 $ 2,078,519 $ 1,959,757
Business credit(6) .............. 680,771 654,966 553,859
Insurance premium finance(7) .... 207,133 277,358 354,322
___________ ___________ ___________
Core businesses ............... 3,130,142 3,010,843 2,867,938
Other(8) ........................ 6,893 75,262 127,687
___________ ___________ ___________
3,137,035 3,086,105 2,995,625
Less unearned finance charges ... 74,379 50,264 55,644
___________ ___________ ___________
Net finance receivables - owned . 3,062,656 3,035,841 2,939,981
Net finance receivables securi-
tized, sold and serviced(9) ... 474,222 374,461 374,512
___________ ___________ ___________
Net finance receivables owned
and serviced .................. $ 3,536,878 $ 3,410,302 $ 3,314,493
=========== =========== ===========
Allowance for losses at end of
year(10)(11) .................. $ 77,944 $ 90,669 $ 80,668
Ratio to outstandings less
unearned finance charges:(12)
Owned ........................... 2.51% 2.96% 2.71%
Owned and serviced .............. 2.20% 2.66% 2.43%
Provision for credit losses
charged to income ............... $ 16,110 $ 18,320 $ 33,098
Credit losses (net of
recoveries)(13) ................. $ 9,998 $ 8,805 $ 43,515
Ratio to average net finance
receivables outstanding:(12)
Owned ........................... 0.34% 0.29% 1.49%
Owned and serviced .............. 0.29% 0.26% 1.32%
<PAGE>
Page 16
_______
(1) The increase in 1994 reflects the overall improvement in the economy
and increased sales and marketing programs.
(2) The increases 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.
(3) The decreases primarily reflect increased market competition and the
weak property and casualty insurance market.
(4) The decreases reflect reduced receivable activity in portfolios of
businesses which the company has sold or exited and are being liquidated.
(5) The 1995 increase was due mainly to increased volume and a slower
turnover in customer inventories. The 1994 increase was due to increased
volume in both consumer electronics and appliances, and home and recreational
products.
(6) The 1995 increase is primarily due to the addition of $123,852,000
of net receivables in the new equipment finance and lease division offset by
the sale of $118,000,000 of rediscount loans. The 1994 increase resulted from
a higher level of new business volume during the year.
(7) The 1995 decrease was due to the securitization of an additional
net $100,000,000 of receivables (see note 9 below). The 1994 decrease was due
to reduced volume particularly late in the year.
(8) The decreases reflect the liquidation of receivables from businesses
being exited.
(9) In 1995, $475,000,000 of insurance premium finance receivables were
securitized replacing a 1990 securitization agreement of $375,000,000 which
expired in 1995. The amounts of securitized receivables outstanding at year
end are shown in the table under the caption "Net finance receivables
securitized, sold and serviced."
(10) Includes $1,188,000 of allowance for losses on the securitized, sold
and serviced portfolio in 1995 and $938,000 in 1994 and 1993 which is
reported in other liabilities in the consolidated balance sheet.
(11) The 1995 decrease in the allowance for losses was attributable to
the sale of the Puerto Rico receivables portfolio which had a larger reserve
requirement and more than offset the increase due to growth in the core
businesses. The 1994 increase in the allowance for losses was primarily
attributable to receivables growth in the core businesses.
(12) The changes in ratios were due to corresponding fluctuations in the
allowance for losses and credit losses (see notes 11 and 13).
(13) The 1994 decrease was caused mainly by decreases in delinquent and
nonearning receivables resulting from improved economic conditions and the
effects in 1993 of stronger portfolio management procedures that were
implemented in late 1992.
_____________________
<PAGE>
Page 17
Delinquent Receivables. Delinquent receivables are defined as the
instalment balance for inventory finance and asset based lending receivables
and the outstanding loan balance for all other receivables over 60 days past
due.
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.
As of December 31,
______________________
1995 1994 1993
Inventory finance .............. 0.20% 0.11% 0.13%
Insurance premium finance(1) ... 1.40 0.51 0.54
______ ______ ______
Core businesses .............. 0.24 0.12 0.15
Other(2) ....................... 53.47 20.63 19.14
______ ______ ______
Total - owned ................ 0.35% 0.62% 0.96%
====== ====== ======
Total owned and serviced ..... 0.31% 0.55% 0.86%
====== ====== ======
_______
(1) The increase in the 1995 ratio is primarily due to lower receivables
outstanding at December 31, 1995 as a result of a $100,000,000 increase in
securitization during 1995 and a higher delinquency level associated with one
account.
(2) Represents finance receivables retained from businesses sold or
exited which are being liquidated. The increase in the 1995 ratio resulted
from the reduction in receivables outstanding due to the sale of the Puerto
Rico portfolio which had a lower delinquency ratio in relation to the other
receivables included in this caption. The remaining balance as of December
31, 1995 totals $6,893,000.
_____________________
Nonearning Receivables. Nonearning receivables are defined as balances
from borrowers that are over 90 days delinquent or at such earlier time as
full collectibility becomes doubtful. Accrual of finance charges is suspended
on nonearning receivables until such time as past due amounts are collected.
Nonearning receivables were $18,016,000 (0.57% of receivables outstanding) and
$23,276,000 (0.75% of receivables outstanding) at December 31, 1995 and 1994.
The decline in nonearning receivables was primarily due to the sale of the
Puerto Rico receivables.
Assets Held for Sale. Assets held for sale at December 31, 1995 totaled
$4,445,000, net of a $6,037,000 valuation allowance, and consisted of rent-
to-own finance receivables of $5,595,000 and other assets of $4,887,000.
Assets held for sale at December 31, 1994 totaled $10,908,000, net of a
$65,086,000 valuation allowance, and comprised rent-to-own finance receivables
of $72,381,000 and other assets of $3,613,000. Of the finance receivables
held for sale at December 31, 1995, none was classified as delinquent or
nonearning compared to $24,495,000 classified as both delinquent and
nonearning at December 31, 1994.
<PAGE>
Page 18
Leasing
Transamerica Leasing Inc. leases, services and manages containers,
chassis and trailers throughout the world. The leasing operation is based in
Purchase, New York and maintains approximately 400 offices, depots and other
facilities in 47 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.
The leasing operation is the second largest lessor of intermodal
transportation equipment in the industry based on units of equipment available
for hire. The leasing operation competes by providing a high level of service
through its worldwide network of offices and third party depots and a wide
offering of equipment and lease types. The leasing operation's management
information system provides employees and other users, including customers,
around the world, with on-line access to key billing and operational
information. The leasing operation's main competitors are other
transportation leasing companies.
At December 31, 1995, the leasing operation's fleet consisted of standard
containers, refrigerated containers, domestic containers, tank containers and
chassis totaling 708,400 units which are owned or managed, and leased from
approximately 360 depots worldwide; 36,900 rail trailers leased to all major
United States railroads and to roll on/roll off steamship operators, shippers,
shippers' agents and regional truckers; and 7,700 over-the-road trailers in
Europe.
The percent of the leasing operation's fleet on term lease or service
contract minimum lease was 51% in 1995, 47% in 1994 and 56% in 1993. The
decrease in 1994 reflects the impact of the acquisition of the Tiphook plc
container fleet. The increase in 1995 reflects the full integration of the
Tiphook container fleet into the leasing operation's fleet. At December 31,
1995 lease terms were one to 13 years.
The following table sets forth the leasing operation's fleet size, in
units, as of December 31, of the year indicated:
As of December 31,
_________________________
1995 1994 1993
Containers and chassis(1) 708,400 685,400 316,000
Rail trailers(2) ......... 36,900 39,300 36,500
European trailers(3) ..... 7,700 5,700 3,800
_______
(1) The 1994 increase was largely due to the acquisition of
substantially all of the operating assets of the container operations of
Tiphook plc.
<PAGE>
Page 19
(2) The 1995 decrease resulted from the sale of older units as
intermodal loadings declined year to year.
(3) The increases reflect entry and expansion into the European trailer
market.
___________________
The following table sets forth the leasing operation's fleet utilization
for the years indicated:
Years Ended December 31,
________________________
1995 1994 1993
Containers and chassis(1) ..... 85% 81% 83%
Rail trailers(2) .............. 77% 92% 91%
European trailers(3) .......... 95% 96% 89%
_______
(1) The 1995 increase was due to higher demand resulting from higher
export levels from China and the Far East. The 1994 decline was due to slow
economic growth in key European economies and Japan and the impact of the
Tiphook fleet acquisition.
(2) The 1995 decline was due to decreased U.S. intermodal loadings. The
1994 increase was primarily due to higher domestic economic activity and
because many shippers moved from trucks to rail transport for long-haul
shipments.
(3) The level of utilization for 1995 and 1994 exceeded 1993 due to a
greater number of units on long term lease in the United Kingdom and Europe,
and continued growth in the United Kingdom economy.
_____________________
REAL ESTATE SERVICES
Real estate services comprise Transamerica's real estate tax, real estate
investments, property management and other services. This segment also
includes Transamerica's asset management operation which comprised
Transamerica Fund Management Company which was sold in December 1994 for gross
proceeds of $100,000,000 which resulted in a $4,857,000 after tax gain, and
the operations of Criterion Investment Management Company, sold in 1995 for
gross proceeds of $60,000,000 which resulted in a $4,800,000 after tax gain.
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 and 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, 1995, 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
Transamerica Real Estate Tax Service is the leading tax service operation
in the U.S. based on the number of customers and loans serviced. Competition
is increasing in the tax service market, driving down fees at the same time
that customers are demanding more services. In response, Transamerica Real
Estate Tax Service has initiated a number of strategies to maintain its
industry leadership including development of new technology and
centralization of operations.
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:
1995 1994 1993
(Amounts in thousands)
Tax service contracts
under management ........ 17,664 16,694 15,496
New tax service contracts . 3,911 4,581 5,103
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.
REGULATION
Finance Activities
Transamerica'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.
Other Regulations
A number of jurisdictions in which the Corporation and its subsidiaries
operate, including California, have adopted laws and regulations imposing
<PAGE>
Page 21
environmental controls on the development of real estate and related business
activities.
EMPLOYEES
The Corporation and its subsidiaries employed approximately 10,400
persons at December 31, 1995.
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, 1995.
Years Ended December 31,
________________________________
1995 1994 1993 1992 1991
1.95 2.14 2.09 1.90 1.06
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.
Approximately 18% of the 460,000 square feet of rentable space is occupied by
Transamerica and its subsidiaries.
The Transamerica Center in Los Angeles, California, consists of a
32-story building, an 11-story building and a 10-story building. Transamerica
Center is the home office of Transamerica Financial Services, certain
divisions of Transamerica Life Companies and certain other subsidiaries of
Transamerica. Approximately 65% of the 1,210,000 square feet of rentable
space is occupied by Transamerica subsidiaries. During 1995, Transamerica
provided for an expected $21,500,000 after tax loss on the Transamerica Center
in anticipation of a planned sale and leaseback transaction that is subject to
regulatory approval.
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.
<PAGE>
Page 22
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 1995 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 1995 and 1994--"Supplementary Financial Information,"
page 81.
Frequency and amount of cash dividends declared during 1995 and
1994--"Selected Eleven-Year Financial Data--Note E," page 83.
Number of common stockholders of record as of the close of business
on February 29, 1996--"Supplementary Financial Information--Note A,"
page 81.
ITEM 6. SELECTED FINANCIAL DATA
The following items for each of the five years in the period ended
December 31, 1995, included in "Selected Eleven-Year Financial Data" on
pages 82 and 83 of the Transamerica Corporation 1995 Annual Report, are
incorporated herein by reference:
Revenues
Income from continuing operations
Earnings per share of common stock--Income from
continuing operations
Total assets
Notes and loans payable: Long-term debt
Dividends declared per share of common stock
<PAGE>
Page 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the caption "Financial Review" on
pages 44 through 61, of the Transamerica Corporation 1995 Annual Report, is
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 1995 Annual Report are incorporated herein by
reference:
Consolidated Balance Sheet--December 31, 1995 and 1994--pages 62 and
63.
Consolidated Statement of Income--Years ended December 31, 1995,
1994 and 1993--page 64.
Consolidated Statement of Cash Flows--Years ended December 31,
1995, 1994 and 1993--page 65.
Consolidated Statement of Stockholders' Equity--Years ended
December 31, 1995, 1994 and 1993--page 66.
Notes to Financial Statements--December 31, 1995--pages 67 through
79.
Supplementary Financial Information--Years ended December 31, 1995
and 1994--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 18, 1996 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* ..... Chairman of the Board, 53 Maureen Breakiron-Evans . Vice President and 41
President and Chief General Auditor
Executive Officer Burton E. Broome* ....... Vice President and 60
Thomas J. Cusack* ....... Executive Vice President, 40 Controller
Transamerica Corporation Kent L. Colwell* ........ Vice President--Real 65
and President and Chief Estate Services
Executive Officer, James B. Dox ............ Vice President--Taxes 56
Transamerica Life Richard H. Fearon ....... Vice President-- 40
Companies Corporate Development
Richard H. Finn* ........ Executive Vice President, 61 David H. Hawkins ........ Vice President, Trans- 55
Transamerica Corpor- america Corporation
ation and President and Senior Vice Presi-
and Chief Executive dent and Treasurer,
Officer, Transamerica Transamerica Finance
Finance Corporation Corporation
Edgar H. Grubb* ......... Executive Vice President 56 Robert R. Lindberg* ..... Vice President and 55
and Chief Financial Treasurer
Officer James B. Lockhart ....... Vice President-- 59
Robert A. Watson* ....... Executive Vice President 49 Public Affairs
Shirley H. Buccieri* .... Senior Vice President, 43 William H. McClave ...... Vice President-- 52
General Counsel and Corporate
Secretary Communications
Richard N. Latzer* ...... Senior Vice President 59 Richard J. Olsen ........ Vice President-- 57
and Chief Investment Corporate Relations
Officer, Transamerica Rona Pehrson ............ Vice President-- 48
Corporation, President Human Resources
and Chief Executive Ronald C. Petrunoff ..... Vice President-- 32
Officer, Transamerica Investor Relations
Investment Services, George B. Sundby ........ Vice President--Financial 44
Inc. and President, Planning and Analysis,
Transamerica Realty and Assistant Controller
Services, Inc. Judith M. Tornese ....... Vice President--Risk 53
Management
</TABLE>
<PAGE>
Page 25
Mr. Herringer was elected Chairman of the Board of the Corporation
effective January 1, 1996. He has been Chief Executive Officer of the
Corporation since 1991 and President since 1986.
Mr. Cusack was elected Executive Vice President of the Corporation in
1995. He was named President and Chief Executive Officer of the Transamerica
Life Companies in 1995. He was Senior Vice President of the Corporation from
1993 to 1995 and Vice President--Corporate Development from 1989 to 1993.
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
Chief Executive Officer of Transamerica Finance Corporation since 1990 and
President since 1988.
Mr. Grubb 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. Watson was elected Executive Vice President of the Corporation in
1995. He was with Westinghouse Electric Corporation from 1992 to 1995 where
he served as an Executive Vice President and as Chairman and Chief Executive
Officer of Westinghouse's financial services division. He was President and
Chief Executive officer of Transamerica Commercial Finance Corporation from
1990 to 1992.
Ms. Buccieri was elected Senior Vice President, General Counsel and
Secretary of the Corporation in 1995. She was with Gibson, Dunn & Crutcher
from 1983 to 1995 and served as a Partner from 1990 to 1995.
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. In 1995, he was
named President of Transamerica Realty Services, Inc.
Ms. Breakiron-Evans was elected Vice President and General Auditor of the
Corporation effective 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. From 1972 to 1995, he was President of Transamerica
Realty Services, Inc.
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. Fearon was elected Vice President--Corporate Development of the
Corporation in 1995. He was General Manager of Corporate Development and Vice
Chairman of NatSteel Chemicals from 1990 to 1995.
<PAGE>
Page 26
Mr. Hawkins was elected Vice President of the Corporation in 1993. He
has been Senior Vice President and Treasurer of Transamerica Finance
Corporation 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.
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. 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.
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 18, 1996
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 18, 1996 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 18, 1996 is incorporated herein by
reference.
<PAGE>
Page 27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The 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 18, 1996 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.
(3) List of Exhibits:
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).
3.(ii) Transamerica Corporation By-Laws, as amended.
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).
4.2*
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).
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).
_________
*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
10.3 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).
10.4 Form of Amended and Restated Consulting Agreement dated
January 31, 1995 (including Amendment No. 1) between
Transamerica Corporation and James R. Harvey.
10.5 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).
10.6 1995 Bonus Plan (incorporated by reference to Exhibit
EX-10.8 of the Registrant's Annual Report on Form 10-K
(File No. 1-2964) for the year ended December 31, 1994).
10.7 1996 Bonus Plan.
10.8 1985 Stock Option and Award Plan, as amended, (including
Amendments No. 1 through 7) (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 Exhibit 4.1 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, 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, and to Exhibit EX-10.1 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended June 30, 1995).
10.9 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).
10.10 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).
10.11 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).
10.12 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
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 Transamerica Corporation Deferred Compensation Plan, as
amended (including Amendment No. 1) (and 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, 1994).
10.20 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).
10.21 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
10.22 Form of Termination Agreement between Transamerica
Corporation and certain of its officers and of its
subsidiaries (incorporated by reference to Exhibit
EX-10.25 of the Registrant's Annual Report on Form 10-K
(File No. 1-2964) for the year ended December 31, 1994).
10.23 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).
10.24 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).
10.25 Transamerica Corporation 1995 Performance Stock Option
Plan (incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form S-8 (File
No. 33-64221) as filed with the Commission on November
14, 1995).
10.26 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).
10.27 Form of Nonqualified Stock Option Agreement under the
Registrant's 1995 Performance Stock Option Plan
(incorporated by reference to Exhibit EX-10.2 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended June 30, 1995).
10.28 Form of Nonqualified Stock Option Agreement granted with
Tandem Limited Stock Appreciation Right under the
Registrant's 1995 Performance Stock Option 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 June 30, 1995).
10.29 Form of Tandem Limited Stock Appreciation Right under
the Registrant's 1995 Performance Stock Option Plan
(incorporated by reference to Exhibit EX-10.4 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-1964) for the quarter ended June 30, 1995).
11 Statement Re: Computation of Per Share Earnings.
12 Ratio of Earnings to Fixed Charges Calculation.
<PAGE>
Page 31
13 Portions of the Transamerica Corporation 1995 Annual
Report (to the extent such portions are expressly
incorporated herein).
21 List of Subsidiaries of Transamerica Corporation.
23 Consent of Ernst & Young LLP to the incorporation by
reference of their report dated February 14, 1996 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, 33-55587 and
33-64221) and on Form S-3 (File Nos. 33-32419, 33-37889,
33-41008, 33-55047 and 33-63049).
24 Power of Attorney executed by the directors of the
Registrant.
27 Financial Data Schedule.
Exhibits will be furnished to stockholders of the
Corporation upon written request and, with the exception of
Exhibit 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 1995: None
(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 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 26, 1996 by the following persons on
behalf of the registrant and in the capacities indicated.
Signature Title
Principal Executive Officer:
FRANK C. HERRINGER* Chairman of the Board, President and
Chief Executive Officer
Principal Financial Officer:
Edgar H. Grubb Executive Vice President and Chief Financial
Officer
Principal Accounting Officer:
Burton E. Broome Vice President and Controller
Directors:
MYRON DU BAIN* Director
SAMUEL L. GINN* Director
JAMES R. HARVEY* Director
FRANK C. HERRINGER* Chairman of the Board and Director
GORDON E. MOORE* Director
TONI REMBE* Director
CONDOLEEZZA RICE* Director
CHARLES R. SCHWAB* Director
FORREST N. SHUMWAY* Director
PETER V. UEBERROTH* Director
*Shirley H. Buccieri
Attorney-in-Fact
<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, 1995
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 1995 Annual
Report, are incorporated by reference in Item 8:
Consolidated Balance Sheet--December 31, 1995 and 1994
Consolidated Statement of Income--Years ended December 31, 1995,
1994 and 1993
Consolidated Statement of Cash Flows--Years ended December 31, 1995,
1994 and 1993
Consolidated Statement of Stockholders' Equity--Years ended
December 31, 1995, 1994 and 1993
Notes to Financial Statements--December 31, 1995
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, 1995
II--Condensed Financial Information of Registrant--December 31,
1995 and 1994, and years ended December 31, 1995, 1994 and
1993
III--Supplementary Insurance Information--Years ended December 31,
1995, 1994 and 1993
IV--Reinsurance--Years ended December 31, 1995, 1994 and 1993
V--Valuation and Qualifying Accounts--Years ended December 31,
1995, 1994 and 1993
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 Stockholders
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, 1995. 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, 1995 and 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, 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 14, 1996
<PAGE>
Page 36
<TABLE>
SCHEDULE I
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE I--SUMMARY OF INVESTMENTS OTHER
THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1995
<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 . $ 98,906 $ 106,393 $ 106,393
Obligations of states and political
subdivisions ............................. 355,023 372,448 372,448
Foreign governments ........................ 110,254 119,409 119,409
Corporate securities ....................... 11,803,366 12,927,948 12,927,948
Mortgage-backed securities ................. 7,300,471 7,750,642 7,750,642
Public utilities ........................... 4,381,701 4,772,172 4,772,172
Redeemable preferred stocks .................. 23,684 27,046 27,046
___________ ___________ ___________
Total fixed maturities ............... 24,073,405 $26,076,058 26,076,058
===========
Equity securities:
Common stocks:
Banks, trust and insurance companies ....... 25,186 $ 32,000 32,000
Industrial, miscellaneous and all other .... 290,386 612,953 612,953
Nonredeemable preferred stocks ............... 34,376 58,280 58,280
___________ ___________ ___________
Total equity securities .............. 349,948 $ 703,233 703,233
===========
Mortgage loans on real estate .................. 550,076 523,653
Real estate .................................... 97,614 70,870
Loans to life insurance policyholders .......... 426,377 426,377
Short-term investments ......................... 226,531 226,531
___________ ___________
Total investments .................... $25,723,951 $28,026,722
=========== ===========
<FN>
_______
The differences between Column B and Column D as to mortgage loans on real estate
and real estate represent 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,
1995 1994
<S> <C> <C>
Assets:
Investments in subsidiaries ............................... $5,368,769 $3,727,923
Equity securities at fair value (cost: $174,404 in 1995
and $108,746 in 1994) ................................... 359,977 201,870
Short-term investments .................................... 3,599 11,166
Notes and accounts receivable from subsidiaries ........... 73,743 213,657
Cash and cash equivalents ................................. 1,590 2,828
Deferred income tax benefit, net of current tax liability
of $41,031 .............................................. 57,619
Other assets .............................................. 298,515 264,729
__________ __________
$6,163,812 $4,422,173
========== ==========
Liabilities and Stockholders' Equity:
Notes and loans payable ................................... $ 577,346 $ 506,951
Income taxes payable, net of deferred tax benefits of
$123,098 ................................................ 90,119
Income taxes due to subsidiaries .......................... 328,171 189,886
Notes and accounts payable to subsidiaries ................ 447,476 490,812
Accounts payable and other liabilities .................... 510,958 408,586
Stockholders' 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, 180,091 shares in 1995 and
181,642 shares in 1994 at liquidation preference of
$500 per share ...................................... 90,046 90,821
Common Stock ($1 par value):
Authorized--150,000,000 shares
Outstanding--67,989,508 shares in 1995 and 69,395,099
shares in 1994, after deducting 11,748,954 and
10,343,363 shares in treasury in 1995 and 1994 ...... 67,990 69,395
Additional paid-in capital .............................. 96,449
Retained earnings, including equity in undistributed net
income of subsidiaries of $1,688,016 in 1995 and
$1,488,709 in 1994 .................................... 2,866,037 2,557,444
Net unrealized gain (loss) from investments marked to
fair value ............................................ 1,079,888 (265,125)
Foreign currency translation adjustments ................ (29,100) (38,165)
__________ __________
4,299,861 2,735,819
__________ __________
$6,163,812 $4,422,173
========== ==========
</TABLE>
<PAGE>
Page 38
<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,
1995 1994 1993
(Amounts in thousands)
<S> <C> <C> <C>
Revenues:
Dividends from continuing operations ............. $329,775 $361,847 $115,350
Tax service fees ................................. 152,617 190,328 236,433
Interest, principally from continuing operations . 4,812 14,151 13,777
Investment income ................................ 15,112 8,988
Gain (loss) on investment transactions ........... 23,261 2,012 (5,909)
________ ________ ________
525,577 577,326 359,651
Expenses:
Interest ......................................... 99,311 101,992 87,382
General and administrative ....................... 233,363 177,779 170,155
________ ________ ________
332,674 279,771 257,537
________ ________ ________
192,903 297,555 102,114
Income tax benefit ................................. 78,322 26,333 88,747
________ ________ ________
Income before equity in undistributed income of
continuing operations, loss from discontinued
operations and extraordinary loss ................ 271,225 323,888 190,861
Equity in undistributed income of continuing
operations excluding discontinued operations and
extraordinary loss ............................... 199,307 104,038 256,658
________ ________ ________
Income from continuing operations .................. 470,532 427,926 447,519
Loss from discontinued operations .................. (699) (47,022)
Extraordinary loss on early extinguishment of
subsidiary debt .................................. (23,084)
________ ________ ________
Net income ..................................... $470,532 $427,227 $377,413
======== ======== ========
</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 CASH FLOWS
<CAPTION>
Years Ended December 31,
1995 1994 1993
(Amounts in thousands)
<S> <C> <C> <C>
Operating activities:
Income from continuing operations before extra-
ordinary item ................................... $ 470,532 $ 427,926 $ 447,519
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization ................... 4,517 4,044 4,018
Accounts payable and other liabilities .......... 47,645 48,286 34,720
Income taxes payable, including related accounts
with continuing operations .................... (33,870) 207,110 (120,424)
Equity in undistributed income of continuing
operations .................................... (199,307) (104,038) (256,658)
Net (gains) losses on investment transactions ... (23,261) (2,012) 5,909
Other ........................................... 4,753 26,047 (25,211)
_________ _________ __________
Net cash provided by continuing operations .... 271,009 607,363 89,873
Investing activities:
Capital contributions to continuing operations .... (146,000) (90,000) (54,200)
Sales of investments .............................. 99,377 46,477 9,643
Purchases of investments .......................... (138,237) (115,353) (212,426)
Decrease (increase) in short-term investments ..... 8,077 (11,166)
Proceeds from public offering of discontinued
operations ...................................... 1,031,788
Cash transactions with discontinued operations .... (409,296)
Decrease (increase) in accounts with continuing
operations ...................................... 108,694 426,205 62,133
Other ............................................. (13,985) (7,018) (4,093)
_________ _________ __________
Net cash provided (used) by investing
activities .................................. (82,074) 249,145 423,549
Financing activities:
Increase (decrease) in commercial paper obligations 195,395 (61,179) (138,067)
Payments of long-term notes ....................... (125,000) (132,000) (23,000)
Redemption of preferred stock ..................... (802) (115,921)
Treasury stock purchases .......................... (155,430) (386,983) (207,647)
Other common stock transactions ................... 51,036 7,973 33,618
Dividends ......................................... (155,372) (167,666) (179,766)
_________ _________ __________
Net cash used by financing activities ......... (190,173) (855,776) (514,862)
_________ _________ __________
Increase (decrease) in cash and cash equivalents .... (1,238) 732 (1,440)
Cash and cash equivalents at beginning of year .... 2,828 2,096 3,536
_________ _________ __________
Cash and cash equivalents at end of year .......... $ 1,590 $ 2,828 $ 2,096
========= ========= ==========
</TABLE>
<PAGE>
Page 40
<TABLE>
SCHEDULE II
(Continued)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
(Dollar amounts in thousands)
<CAPTION>
NOTE TO BALANCE SHEET December 31,
1995 1994
<S> <C> <C>
Notes and loans payable comprise the following amounts:
Short-term bank loans, commercial paper and current
portion of long-term debt ................................ $155,490 $286,351
Long-term debt due subsequent to one year:
Notes; interest at 9.375% to 9.875%; maturing through 2008 210,600 220,600
Commercial paper and other notes at various interest
rates and terms supported by credit agreements
expiring through 1998 .................................. 211,256
________ ________
$577,346 $506,951
======== ========
<FN>
The aggregate annual maturities for the five years subsequent to December 31,
1995 are: 1996--$155,490; 1997--$5,000; 1998--$311,256; 1999 and 2000--none.
Transamerica manages a portion of its interest rate risk by entering into
interest rate swap agreements. At December 31, 1995 and 1994 interest rate swap
agreements comprise:
<CAPTION>
Weighted Weighted
Notional Average Fixed Average Floating
Amount Interest Rate Interest Rate
<S> <C> <C> <C>
1995:
Interest rate swap agreements -
Transamerica pays:
Fixed rate interest expense, receives
floating rate interest income $175,000 8.33% 5.87%
Floating rate interest expense,
receives fixed rate interest income $ 50,000 9.13% 6.47%
1994:
Interest rate swap agreements -
Transamerica pays:
Fixed rate interest expense, receives
floating rate interest income $125,000 9.61% 5.87%
Floating rate interest expense,
receives fixed rate interest income $ 65,000 9.26% 6.89%
In 1994, an affiliate of Transamerica issued $200,000 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 41
<TABLE>
SCHEDULE II
(Continued)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
(Dollar amounts in thousands)
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 1995 Annual Report, comprises:
<CAPTION>
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Interest expense of Registrant .................. $(99,311) $(101,992) $(87,382)
Interest income of Registrant ................... 4,812 14,151 13,777
________ _________ ________
(94,499) (87,841) (73,605)
Income tax benefit .............................. 33,075 30,744 25,762
________ _________ ________
Net interest expense of Registrant, after taxes . (61,424) (57,097) (47,843)
Net interest expense, after taxes, of certain
subsidiaries .................................. (1,250) (6,257)
Intercompany eliminations ....................... 8,624 8,147
________ _________ ________
Unallocated interest, after taxes ........... $(52,800) $ (50,200) $(54,100)
======== ========= ========
</TABLE>
<PAGE>
Page 42
<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:
1995 ..................... $1,974,211 (A) $5,631,439 (B) $14,430 $22,262,009 $1,140,034
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
<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:
1995 ..................... $1,974,067 $2,858,717 $191,313 (C) $367,293 $286,115 (D)
1994 ..................... $1,773,254 $2,356,398 $182,312 (C) $353,916 $280,049 (D)
1993 ..................... $1,725,760 $2,145,865 $232,659 (C) $330,007 $227,833 (D)
<FN>
_______
(A) Includes a fair value adjustment of ($355,571,000) in 1995 and $351,344,000 in 1994 required
under Financial Accounting Standards Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities, which was adopted on January 1, 1994.
(B) Includes a fair value adjustment of $339,000,000 in 1995 required under Financial Accounting
Standards Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities,
which was adopted on January 1, 1994.
(C) Includes required accelerated amortization of deferred policy acquisition costs associated
with interest-sensitive products due to realized investment gains of $9,190,000 in 1995,
$6,279,000 in 1994 and $62,852,000 in 1993.
(D) Health insurance premiums written.
</TABLE>
<PAGE>
Page 43
<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, 1995:
Life insurance in force ... $206,722,573 $116,762,869 $174,193,592 $264,153,296 65.9%
============ ============ ============ ============
Premium revenue:
Life insurance .......... $ 935,006 $ 619,016 $ 537,991 $ 853,981 63.0%
Accident and health
insurance ............. 165,556 439,550 560,047 286,053 195.8%
____________ ____________ ____________ ____________
$ 1,100,562 $ 1,058,566 $ 1,098,038 $ 1,140,034 96.3%
============ ============ ============ ============
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%
============ ============ ============ ============
</TABLE>
<PAGE>
Page 44
<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, 1995:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 23,479 $ 1,963 (F) $ 21,516
Real estate .................... 26,281 $ 2,097 (B) 1,146 (G) 27,232
Consumer:
Finance receivables .......... 117,218 $ 97,835 52,819 (C) 103,806 (H) 164,066
Other assets ................. 2,282 2,282 (I)
Commercial:
Finance receivables .......... 90,669 16,110 (18,837)(D) 9,998 (H) 77,944 (K)
Other assets ................. 65,086 (20,100)(A) 21,372 (E) 60,321 (J) 6,037
________ ________ _______ ________ ________
$325,015 $ 93,845 $57,451 $179,516 $296,795
======== ======== ======= ======== ========
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 30,251 $ 197 (B) $ 6,969 (F) $ 23,479
Real estate .................... 40,426 2,124 (B) 16,269 (G) 26,281
Consumer:
Finance receivables .......... 107,175 $ 82,230 3,073 (C) 75,260 (H) 117,218
Other assets ................. 2,547 7,314 (L) 7,579 (I) 2,282
Commercial:
Finance receivables .......... 80,668 18,320 486 (D) 8,805 (H) 90,669 (K)
Other assets ................. 156,985 (5,211)(A) (1,308)(E) 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 (B) $ 6,085 (F) $ 30,251
Real estate .................... 44,134 9,455 (B) 13,163 (G) 40,426
Consumer:
Finance receivables .......... 107,183 $ 63,946 476 (C) 64,430 (H) 107,175 (M)
Other assets ................. 2,206 5,952 (L) 5,611 (I) 2,547
Commercial:
Finance receivables .......... 91,263 33,098 (178)(D) 43,515 (H) 80,668 (K)
Other assets ................. 121,549 50,000 (A) 365 (E) 14,929 (J) 156,985
________ ________ _______ ________ ________
$392,275 $152,996 $20,514 $147,733 $418,052
======== ======== ======= ======== ========
<PAGE>
Page 45
<FN>
_______
(A) Reversal of excess valuation allowance no longer required due to the favorable terms on disposition of assets
held for sale (principally operations in Puerto Rico) in 1995. 1994 includes $5,273,000 reversal of valuation
allowance from sale of the rent-to-own stores. 1993 includes a $50,000,000 provision to reduce the net
carrying value of repossessed rent-to-own stores.
(B) Included in gains on investment transactions.
(C) Increase in connection with purchase of receivables and other adjustments.
(D) The decrease in 1995 was associated with the transfer of Puerto Rico receivables to assets held for sale (see
note E). The 1994 increase and 1993 decrease were due to foreign exchange and other adjustments.
(E) The increase in 1995 was primarily associated with the transfer of Puerto Rico receivables from finance
receivables (see note D). The decrease in 1994 was associated with the settlement of litigation on previously
charged off accounts. The increase in 1993 was due to recoveries on assets held for sale.
(F) Reduction in reserves associated with the settlement of mortgage loan transactions.
(G) Reduction in reserves associated with the settlement of real estate transactions.
(H) Charges for net credit losses.
(I) Charges for losses on disposal of assets held for sale.
(J) Charges for losses on disposal of assets held for sale, which in 1995 includes $41,166,000 related to the
disposal of rent-to-own receivables and $17,752,000 related to the disposal of Puerto Rico receivables and in
1994 includes $78,735,000 related to the disposal of the rent-to-own stores.
(K) Includes $1,188,000 in 1995 and $938,000 in 1994 and 1993 related to securitized, sold and serviced
receivables reported in other liabilities in the consolidated balance sheet.
(L) Provision charged to operating expenses for losses on disposal of repossessed assets.
(M) Includes $1,680,000 in 1993 related to securitized, sold and serviced receivables included in other
liabilities in the consolidated balance sheet.
</TABLE>
<PAGE>
EXHIBIT 3.(ii)
________________________
Transamerica Corporation
By-Laws
________________________
I, JACLYN L. LARSON, Assistant Secretary of Transamerica Corporation, a
Delaware corporation, hereby certify that the following constitutes a true and
correct copy of the by-laws of said corporation now in force.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
corporation this __________ day of __________________________, 19_____.
_________________________________________
Jaclyn L. Larson
Assistant Secretary
[SEAL]
Amended
January 25, 1996
<PAGE>
BY-LAWS
OF
TRANSAMERICA CORPORATION
________________
OFFICES
1. The principal office shall be in the City of Wilmington, County of
New Castle, State of Delaware. The corporation may also have offices at such
other places as the Board of Directors may from time to time appoint or the
business of the corporation may require.
SEAL
2. The corporate seal shall have inscribed thereon the name of the
corporation, and the words "Incorporated October 11, 1928, Delaware." Said
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or otherwise reproduced. The Secretary may have duplicate seals made
and deposited for use with such officers as the Board of Directors may
designate.
It shall not be necessary to the validity of any instrument executed by
any authorized officer or officers of this corporation that the execution of
such instrument be evidenced by the corporate seal; and all documents,
instruments, contracts and writings of all kinds signed on behalf of the
corporation by any authorized officer or officers thereof shall be as
effectual and binding on the corporation without the corporate seal as if the
execution of the same had been evidenced by affixing the corporate seal
thereto.
STOCKHOLDERS' MEETINGS
3. All meetings of the stockholders shall be held at such office or
place, within or without the State of Delaware, as may be designated by the
Board of Directors and as shall be specified in the notice of the meeting.
4. The annual meeting of the stockholders shall be held on such day of
the year and at such time as may be designated by the Board of Directors and
as shall be specified in the notice of the meeting, provided, however, that in
the absence of such a designation and notice, the annual meeting shall be held
on the fourth Thursday of April in each year, if not a legal holiday under the
laws of said State, then on the next succeeding day not a legal holiday under
the laws of said State, at 11 o'clock A.M., when they shall elect by a
plurality vote, by ballot, a Board of Directors, and transact such other
business as may properly be brought before the meeting.
5. The holders of a majority of the stock issued and outstanding, and
entitled to vote thereat, present in person, or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders
for the transaction of business except as otherwise provided by law, by the
certificate of incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person, or by proxy, shall
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<PAGE>
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of voting stock shall
be present. At such adjourned meeting at which the requisite amount of voting
stock shall be represented any business may be transacted which might have
been transacted at the original meeting.
6. At each meeting of the stockholders every stockholder having the
right to vote shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such stockholder or by his duly authorized
attorney and submitted to the Secretary at or before such meeting, but no such
proxy shall be voted or acted upon after three years from its date, unless
said proxy provides for a longer period. Each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the
books of the corporation; provided, however, that, except where a date shall
have been fixed as a record date for the determination of stockholders
entitled to vote as hereinafter provided in these by-laws, no share of stock
shall be voted at any election for directors which has been transferred on the
books of the corporation after the close of business on the day next preceding
the day on which notice is given. The vote for directors, and upon the demand
of any stockholder, the vote upon any question before the meeting, shall be by
ballot. All actions shall be had and all questions decided by a plurality
vote, except as otherwise specifically provided by statute or by the
certificate of incorporation or by these by-laws.
7. Written notice of the annual meeting shall be mailed to each
stockholder entitled to vote thereat at such address as appears on the records
of the corporation, not less than ten nor more than sixty days prior to the
meeting.
8. Special meetings of the stockholders, for any purpose, or purposes,
may be called only by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directors (whether or not
there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board of Directors for adoption).
Such resolution shall state the purpose or purposes of the proposed meeting.
9. Business transacted at all special meetings shall be confined to
the objects stated in the call.
10. Written notice of a special meeting of stockholders, stating the
time and place and object thereof, shall be mailed, postage prepaid, at least
ten but not more than sixty days before such meeting, to each stockholder
entitled to vote thereat at such address as appears on the records of the
corporation.
10A. At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors or otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by
a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary, Transamerica Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
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<PAGE>
principal executive offices of the corporation, not less than thirty days nor
more than sixty days prior to the meeting; provided, however, that in the
event that less than forty days' notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder to
be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting, (i) a brief description of the business
desired to be before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares of
the corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at the annual meeting except in accordance with
the procedures set forth in this Section 10A; provided, however, that nothing
in this Section 10A shall be deemed to preclude discussion by any stockholder
of any business properly brought before the annual meeting in accordance with
said procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 10A, and
if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
10B. In addition to any other applicable requirements, only persons who
are nominated in accordance with the following procedures shall be eligible
for election as directors. Nominations of persons for election to the Board
of Directors of the corporation may be made at a meeting of stockholders by or
at the direction of the Board of Directors, by any nominating committee or
person appointed by the Board of Directors or by any stockholder of the
corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 10B. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the
Secretary, Transamerica Corporation. To be timely, a stockholder's notice
shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than thirty days nor more than sixty days
prior to the meeting; provided, however, that in the event that less than
forty days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made. Such stockholder's notice shall set forth (a) as
to each person whom the stockholder proposes to nominate for election or re-
election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of the corporation which are
beneficially owned by the person and (iv) any other information relating to
the person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Rule 14a under the Securities Exchange Act
of 1934; and (b) as to the stockholder giving the notice, (i) the name and
record address of stockholder and (ii) the class and number of shares of the
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<PAGE>
corporation which are beneficially owned by the stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation. No person shall
be eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth herein. These provisions shall not
apply to nomination of any persons entitled to be separately elected by
holders of preferred stock.
The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.
DIRECTORS
11. The property and business of this corporation shall be managed by
its Board of Directors, not less than seven nor more than twenty-two in number
as shall be determined by the Board of Directors. The Directors shall be
divided into three classes, designated Class I, Class II and Class III, and
each Class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. At the
1986 annual meeting of stockholders, Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders
beginning in 1987, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. In case the Board
of Directors shall change the number of Directors within the above limits, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible and any
additional Director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of Directors shorten the term of any incumbent Director. A Director shall
hold office until the annual meeting for the year in which such Director's
term expires and until his or her successor shall be elected and qualified,
subject, however, to such Director's prior death, resignation, retirement,
disqualification or removal from office.
12. Any vacancy in the Board of Directors that results from an increase
in the number of Directors may be filled by a majority of the Directors then
in office, provided that a quorum is present, and any other vacancy occurring
in the Board of Directors may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director, and each
Director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as that of such
Director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of preferred stock or preference stock issued by this
corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this corporation's certificate of
incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to Article IX of such certificate of
incorporation unless expressly provided by the terms thereof. The Directors
of this corporation need not be stockholders.
-5-
<PAGE>
13. The Directors may hold their meetings and have one or more offices,
and keep the books of the corporation outside of Delaware or at such other
offices of the corporation or other places as they may from time to time
determine.
14. Directors, in addition to expenses of attendance, shall be allowed
such compensation as may be fixed from time to time by resolution adopted by a
majority of the whole Board of Directors; provided that nothing herein
contained shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation therefor.
15. In addition to the powers and authorities by these by-laws
expressly conferred upon it, the Board may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders; provided, however that no portion of
the holdings of the corporation of voting securities in any subsidiary company
shall be sold or otherwise disposed of, if such sale or disposition would
reduce the voting power of the corporation in such subsidiary below a majority
of the total voting power thereof, without approval of at least a majority of
the whole Board of Directors, either expressed at a meeting by resolution
concurred in by a majority of the whole Board of Directors or by written
consent executed by at least a majority of all the members of the Board.
COMMITTEES
16. The Board of Directors, by resolution adopted by a majority of the
whole Board, may designate an Executive Committee to consist of three or more
Directors to hold office at the pleasure of the Board and by like resolution
may fill vacancies in, or reconstitute the membership of, the Executive
Committee. Meetings of the Executive Committee for any purpose or purposes
may be called by the Chairman of the Board, the Chief Executive Officer, the
President, or the Chairman of the Executive Committee, and shall be called by
any of them at the request in writing of at least two members of the Executive
Committee, to be held in such place in the City and County of San Francisco,
or at any other place within or without the State of California, as shall be
designated from time to time by the Chairman of the Board, the Chief Executive
Officer, the President, the Chairman of the Executive Committee or the
Executive Committee and indicated in the notice of such meetings.
At least twenty-four hours' notice of such meetings shall be given
to each member of the Executive Committee either personally or by telegram or
by telephone; provided, however, that if any such meeting is to be held at any
place other than in the City and County of San Francisco notice of such
meeting shall be given personally to each member of the Executive Committee or
may be given by mailing a notice in a postage prepaid envelope addressed to
each such member at his address registered on the books of the corporation, at
least three days before the time fixed for the meeting.
The Executive Committee shall, between sessions of the Board, have
such powers as may be delegated to it from time to time by the Board of
Directors.
The Secretary or a member of the Executive Committee shall keep
minutes of all its proceedings, all of which shall be reported as soon as
practicable to the Board of Directors and shall be subject to revision or
rescission by the Board of Directors provided no rights of third parties shall
-6-
<PAGE>
be affected thereby. The Chairman of the Executive Committee shall preside at
all meetings of the Executive Committee and in his absence the Executive
Committee shall select from its members a Chairman of each meeting. The
presence of a majority of the members of the Executive Committee (but in no
event less than three) shall be necessary to constitute a quorum for the
transaction of business.
17. The Board of Directors may from time to time by resolution create
such other committee or committees of directors, officers, employees or other
persons designated by it for the purpose, to advise with the Board, the
Executive Committee and the officers and employees of the corporation in all
such matters as the Board shall deem advisable and with such functions and
duties as the Board shall by resolution prescribe. A majority of all the
members of any such committee may determine its action and fix the time and
place of its meetings unless the Board of Directors shall otherwise provide.
The Board of Directors shall have power to change the members of any such
committee at any time, to fill vacancies, and to discharge any such committee,
either with or without cause, at any time.
18. Members of the Executive Committee and of any other special or
standing committee shall, in addition to expenses of attendance, be allowed
such compensation as may be fixed from time to time by resolution adopted by a
majority of the whole Board of Directors.
MEETINGS OF THE BOARD
19. The newly elected Board shall have its first meeting at such place
and time as shall be fixed by the vote of the stockholders at the annual
meeting, for the purpose of organization or otherwise, and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting; provided, a quorum of the whole Board shall be
present; or they may meet at such place and time as shall be fixed by the
consent in writing of all the Directors, or as shall be stated in the notice
of such meeting given as hereinafter provided in the case of special meetings
of the Board.
20. Regular meetings of the Board of Directors shall be held without
call or notice at such time and place as shall from time to time be fixed by
standing resolution of the Board.
21. Special meetings of the Board may be called by the Chairman of the
Board, by the Chief Executive Officer, or by the President, on twenty-four
hours' notice to each Director, either personally or in writing by mail, or by
telegram, or by telephone; special meetings shall be called by the Chairman of
the Board, the Chief Executive Officer, the President or the Secretary in like
manner and on like notice on the written request of three Directors. Notice
of special meetings of the Board shall state the time and place of the meeting
but need not state the purpose thereof except as otherwise expressly provided
in these by-laws.
22. At all meetings of the Board a majority of the total number of
Directors shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the act of a majority of the Directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by
the certificate of incorporation or by these by-laws.
-7-
<PAGE>
OFFICERS
23. The officers of the corporation shall be chosen by the Directors
and shall be a Chairman of the Board, a Chief Executive Officer, a President,
one or more Vice Presidents, a Treasurer, a Secretary, a Controller, Assistant
Vice Presidents, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers. The Board of Directors may also choose such other officers as
they may determine. Any number of offices may be held by the same person.
24. The Board of Directors shall annually at its organizational meeting
choose a Chairman of the Board, a Chief Executive Officer, a President, one or
more Vice Presidents, the Secretary, the Treasurer, the Controller, and such
other officers as they may determine, none of whom except the Chairman of the
Board and the Chief Executive Officer, need be members of the Board. The
Board of Directors shall also choose annually at its organizational meeting a
Chairman of the Executive Committee, who shall be a member of the Board.
25. The Board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board.
26. The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors.
27. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office
of any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the Board of Directors.
28. In the case of the absence of any officer of the corporation, or
for any other reason that the Board may deem sufficient, the Board may
delegate, for the time being, the powers or duties, or any of them, of such
officer to any other officer, or to any Director, provided, a majority of the
entire Board concur therein.
THE CHAIRMAN OF THE BOARD
29. The Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors and shall be ex-officio a member of
all standing committees with the exception of the Corporate Audit Committee
and the Management Development and Compensation Committee.
CHIEF EXECUTIVE OFFICER,
PRESIDENT AND VICE PRESIDENTS
30. (a) The Chief Executive Officer shall be the chief executive
officer of the corporation and, subject to the Board of Directors, shall have
general and active management of the business, affairs, and property of the
corporation. The Chief Executive Officer shall keep the Board of Directors
fully informed and shall freely consult with them concerning the matters in
his charge. The Chief Executive Officer shall be ex-officio a member of all
standing committees with the exception of the Corporate Audit Committee and
the Management Development and Compensation Committee. In the absence or
disability of the Chairman of the Board, if the Chairman of the Board not be
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the Chief Executive Officer, the Chief Executive Officer shall perform the
duties and exercise the powers of the Chairman of the Board.
(b) The President shall do and perform such duties and have such
powers as from time to time may be assigned to him by the Board of Directors,
or, if the President not be the Chief Executive Officer, the Chief Executive
Officer. If the President shall not be the Chief Executive Officer, the
President shall keep the Chief Executive Officer fully informed and shall
freely consult with him concerning the matters in his charge and, in the
absence or disability of the Chief Executive Officer, the President shall
perform the duties and exercise the powers of the Chief Executive Officer.
(c) In the absence or disability of the President, a Vice
President designated by the Board of Directors or by the Executive Committee
shall perform the duties and exercise the powers of the President.
(d) The Chairman of the Executive Committee shall preside at all
meetings of the Executive Committee and shall perform such other duties as may
be prescribed by the Board of Directors or the Executive Committee.
(e) The Vice Presidents shall respectively perform such duties as
may be prescribed by the Board of Directors or the Chief Executive Officer.
THE SECRETARY AND
ASSISTANT SECRETARIES
31. (a) The Secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose, and shall perform like
duties for the standing committees when required. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders, and the
Board of Directors, and shall perform such other duties as may be prescribed
by the Board of Directors, or by the Chairman of the Board, under whose
supervision the Secretary shall be. The Secretary shall keep in safe custody
the seal of the corporation, and shall have authority to affix the same to any
instrument requiring it.
(b) The Assistant Secretaries, in the order of their seniority,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary, and shall perform such other duties as
may be prescribed by the Board of Directors or the Chairman of the Board.
THE TREASURER AND
ASSISTANT TREASURERS
32. (a) The Treasurer shall have the custody of the corporate funds
and securities and shall deposit all moneys and other valuable effects in the
name and to the credit of the corporation, in such depositories as may be
designated by the Board of Directors.
(b) The Treasurer shall disburse the funds of the corporation as
may be ordered by the Board, taking proper vouchers for such disbursements,
and shall render to the Chairman of the Board, the Chief Executive Officer,
the President, and the Board of Directors, at the regular meetings of the
Board, or whenever they may require it, an account of all his transactions as
Treasurer.
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(c) The Treasurer shall give the corporation a bond if required by
the Board of Directors in a sum, and with one or more sureties, satisfactory
to the Board, for the faithful performance of the duties of his office, and
for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation; but the Board of Directors may, if they see fit,
dispense with such bond. The Treasurer shall perform such other duties as may
be prescribed by the Board of Directors or by the Chief Executive Officer.
(d) The Assistant Treasurers in the order of their seniority
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer, and shall perform such other duties as
may be prescribed by the Board of Directors or the Chief Executive Officer.
THE CONTROLLER AND
ASSISTANT CONTROLLERS
33. (a) The Controller shall act as the principal accounting officer
in charge of general accounting books and records of the corporation, and
shall have general supervision of the accounting practices of all
subsidiaries.
(b) The Controller shall cause to be prepared, compiled, and
filed, such reports, statements, statistics, and other data as may be required
by law or as may be prescribed by the Chief Executive Officer or the Board of
Directors.
(c) The Controller shall give the corporation a bond if required
by the Board of Directors in a sum, and with one or more sureties,
satisfactory to the Board, for faithful performance of the duties of his
office, and for restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation; but the Board of Directors may, if
they see fit, dispense with such bond.
(d) The Assistant Controllers in the order of their seniority
shall, in the absence or disability of the Controller, perform the duties and
exercise the powers of the Controller, and shall perform such other duties as
may be prescribed by the Board of Directors or the Chief Executive Officer.
INDEMNIFICATION OF DIRECTORS
OR OFFICERS
34. (a) Subject to subsection (d) of this section, any person who was
or is made a party or is threatened to be made a party to or is involved in
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a Director or
officer of the corporation, or is or was a Director or officer of the
corporation serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
another enterprise, whether the basis of such proceeding is alleged action in
an official capacity as a Director or officer or in any other capacity while
serving as a Director or officer, shall be indemnified and held harmless by
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the corporation to the fullest extent permitted by the Delaware General
Corporation Law as the same exists or, subject to subsection (o) of this
section, may hereafter be amended, against losses, liabilities and expenses
(including attorneys' fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred or suffered by him or her in connection with
such action, suit or proceeding; provided, however, that no indemnification
shall be provided to any such person if a judgment or other final adjudication
adverse to the Director or officer establishes that the Director or officer
did not act in good faith and in a manner such Director or officer reasonably
believed to be in or not opposed to the best interests of the corporation or,
with respect to any criminal action or proceeding, had reasonable cause to
believe his or her conduct was unlawful; and provided, further, that except as
to actions to enforce indemnification rights pursuant to subsection (f) of
this section, the corporation shall indemnify any such person seeking
indemnification in connection with an action, suit or proceeding (or part
thereof) initiated by such person only if the action, suit or proceeding (or
part thereof) was authorized by the Board of Directors of the corporation.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(b) Subject to subsection (d) of this section, any person who was
or is made a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he or she is or was
a Director or officer of the corporation, or is or was a Director or officer
of the corporation serving at the request of the corporation as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or another enterprise shall be indemnified by the corporation against
expenses (including attorneys' fees) actually and reasonably incurred by him
or her in connection with the defense or settlement of such action or suit if
he or she acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the
State of Delaware or such other court shall deem proper.
(c) Notwithstanding the other provisions of this section, to the
extent that a Director or officer of the corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of this section, or in defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation unless a
determination is made (1) by the Board of Directors by a majority vote of a
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quorum consisting of Directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable
a quorum of disinterested Directors so directs, by independent legal counsel
(who may be the regular counsel of the corporation) in a written opinion, or
(3) by the stockholders that indemnification of the Director or officer is not
proper in the circumstances because he or she has not met the applicable
standard of conduct set forth in subsections (a) and (b) of this section.
(e) Expenses incurred (including attorneys' fees) by a Director or
officer in defending a civil or criminal action, suit or proceeding shall be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding; provided, however, that the payment of such expenses
incurred by a Director or officer in his or her capacity as a Director or
officer (and not in any other capacity in which service was or is rendered by
such person while a Director or officer) in advance of the final disposition
of such action, suit or proceeding shall be made only upon receipt of an
undertaking by or on behalf of the Director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
incurred by other employees and agents of the corporation (or by the Directors
or officers not acting in their capacity as such, including service with
respect to employee benefit plans) may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(f) If a request to be indemnified under subsections (a) and (b)
of this section is made, the Board of Directors shall make a determination
pursuant to Section 145(d) of the Delaware General Corporation Law within
thirty days after such request as to whether the person so requesting
indemnification is entitled to indemnification under this section and the
Delaware General Corporation Law. If a claim under subsections (a), (b), (c)
or (e) of this section is not paid in full by the corporation within thirty
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense (including attorneys'
fees) of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending an action, suit or proceeding in advance of its final disposition
where the undertaking, if any is required, has been tendered to the
corporation) that the claimant has not met the standards of conduct that make
it permissible under the Delaware General Corporation Law or this section for
the corporation to indemnify the claimant for the amount claimed. The burden
of proving such a defense shall be on the corporation. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper under the
circumstances because he or she has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant had not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
claimant has not met the applicable standard of conduct.
(g) The rights provided by or granted pursuant to the other
subsections of this section shall be a contract right, and shall not be deemed
exclusive of any other rights to which those seeking indemnification and
advancement of expenses are or hereafter may be entitled under any statute,
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provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office, it being the policy of the corporation that indemnification of
the persons specified in subsections (a) and (b) of this section shall be made
to the fullest extent permitted by law the Delaware General Corporation Law,
as the same exists or, subject to subsection (o) of this section, may
hereafter be amended.
(h) The corporation may purchase and maintain insurance to protect
itself and any person who is or was a Director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability, expense or
loss asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such
liability, expense or loss under the provisions of this section or applicable
law.
(i) The rights provided by, or granted pursuant to, this section
shall, continue as to a person who has ceased to be a Director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(j) The corporation may provide rights to indemnification and to
the advancement of expenses to employees and agents of the corporation who are
not Directors or officers of the corporation with such scope and effect as
determined from time to time by the Board of Directors.
(k) For purposes of this section, references to the "corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or another
enterprise, shall stand in the same position under the provisions of this
section with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
(l) For the purposes of any determination under subsection (d) of
this section, a person shall be deemed to have acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his or her conduct was
unlawful, if his or her action is based on the records or books of account of
the corporation or another enterprise, or on information supplied to him or
her by the officers of the corporation or another enterprise in the course of
their duties, or on the advice of legal counsel for the corporation or another
enterprise or on information or records given or reports made to the
corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the corporation or another enterprise. The provisions of this subsection
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shall not be deemed to be exclusive or to limit in any way the circumstances
in which a person may be deemed to have met the applicable standard of conduct
set forth in subsections (a) or (b) of this section, as the case may be.
(m) For purposes of this section, references to "another
enterprise" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a Director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such Director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the corporation" as referred to
in this section.
(n) The Board of Directors is specifically authorized, without any
action on the part of the stockholders, to alter, amend or repeal this
section, to such an extent and in such manner as the law of Delaware, or other
applicable law, relating to indemnification of the Directors, officers,
employees and agents herein referred to may, at any time and from time to
time, authorize or permit; provided, however, that any amendment, repeal or
modification of this section shall not (i) in any way diminish or adversely
affect any right or protection of any Director, officer, employee or agent of
the Corporation existing at the time of such amendment, repeal, or
modification, or the obligations of the corporation arising hereunder, or (ii)
apply to the indemnification of any such person for liability, expense or loss
stemming from actions or omissions occurring prior to such amendment, repeal
or modification.
(o) Any person entitled to be indemnified or to the reimbursement
or advancement of expenses as a matter of right pursuant to this section shall
be entitled to the greater of the indemnification (or advancement of expenses)
provided (i) under the applicable law in effect at the time of the occurrence
of the event or events giving rise to the action or proceeding, to the extent
permitted by law, or (ii) under the applicable law in effect at the time
indemnification (or advancement of expenses) is sought.
CERTIFICATES OF STOCK
35. The certificates of stock of the corporation shall be numbered and
shall be entered in the books of the corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by
the Chairman of the Board, the Chief Executive Officer, the President, or a
Vice President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary. Where a certificate is countersigned (1)
by a transfer agent other than the corporation or its employee, or (2) by a
registrar other than the corporation or its employee, any other signature on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or registrar at the
date of issue.
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TRANSFERS OF STOCK
36. Transfers of stock shall be made on the books of the corporation
only by the person named in the certificate or by attorney, lawfully
constituted in writing, and upon surrender of the certificate therefor.
FIXING RECORD DATE
37. (a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the date on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect
of any change, conversion or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
REGISTERED STOCKHOLDERS
38. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the laws of
Delaware.
LOST CERTIFICATES
39. The Board of Directors may authorize the issue of a new certificate
of stock in the place of any certificate theretofore issued by the
corporation, alleged to have been lost or destroyed, and the Board of
Directors may, in their discretion, require the owner of the lost or destroyed
certificate, or his legal representatives, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss of any such certificate and to
furnish such proof of the loss or destruction of such certificate as they
shall deem proper and to comply with such other regulations as the Board shall
from time to time fix including advertising such loss or destruction in such
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manner as the Board of Directors may require. A new certificate may be issued
without requiring any bond when, in the judgment of the Board of Directors, it
is proper to do so.
INSPECTION OF BOOKS AND RECORDS
40. The Directors shall determine from time to time whether, and, if
allowed, when and under what conditions and regulations the books and records
of the corporation (except such as may by statute be specifically open to
inspection) or any of them shall be open to the inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
restricted and limited accordingly.
CHECKS
41. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers as the Board of Directors may from time
to time designate.
FISCAL YEAR
42. The fiscal year shall begin the first day of January each year.
DIVIDENDS
43. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock.
Before payment of any dividend there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interests of the
corporation.
DIRECTORS' ANNUAL STATEMENT
44. The Board of Directors shall present at each annual meeting, and
when called for by vote of the stockholders, at any special meeting of the
stockholders, a full and clear statement of the business and condition of the
corporation.
NOTICES
45. Whenever under the provisions of these by-laws notice is required
to be given to any Director, committee member, officer or stockholder, it
shall not be construed to mean personal notice, but such notice may be given,
in the case of stockholders, in writing, by mail, by depositing the same in
the post office or letter-box, in a postpaid sealed wrapper, addressed to such
stockholder, at such address as appears on the books of the corporation, or,
in default of other address, to such stockholder at the General Post Office in
the City of Wilmington, Delaware, and, in the case of Directors, committee
members and officers, by telephone, or by mail or by telegram to the last
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business address known to the Secretary of the corporation, and such notice
shall be deemed to be given at the time when the same shall be thus mailed or
telegraphed or telephoned.
WAIVER OF NOTICE
46. Whenever, under the provisions of these by-laws or of any law, the
stockholders, Directors or committees are authorized to hold any meeting after
notice or after a particular notice, or after the lapse of any prescribed
period of time, such meeting may be held without notice or without said
particular notice or without such lapse of time by the written waiver of
notice and written consent to act, signed by every person entitled to such
notice, or entitled to be present at any such meeting or participate in any
such action. Except as otherwise provided by law, attendance of a person at a
meeting shall constitute a waiver of notice of such meeting.
AMENDMENTS
47. These by-laws may be altered, amended or repealed or new by-laws
may be adopted by the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all of the then-outstanding shares of
capital stock of the corporation, or by the affirmative vote of a majority of
the Board of Directors, provided a quorum is present, at any regular meeting
of the stockholders or of the Board of Directors or at any special meeting of
the stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new by-laws be contained in the notice of
such special meeting.
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EXHIBIT 10.4
AMENDED AND RESTATED
CONSULTING AGREEMENT
This Amended and Restated Consulting Agreement ("Agreement") is made
as of the 31st day of January, 1995 by and between Transamerica Corporation, a
Delaware corporation ("Transamerica"), and James R. Harvey ("Harvey").
Recitals
A. Harvey is presently the Chairman of the Board of Directors of
Transamerica and retired as an executive officer and employee of Transamerica
effective December 1, 1992.
B. Transamerica recognizes the value of Harvey's services and has
determined that it is in its best interests that Harvey be available to
provide such consulting and advisory services to Transamerica as may be
requested by Transamerica from time to time, and Harvey is willing to make
such services available to Transamerica, on the terms and conditions
hereinafter set forth.
C. Transamerica and Harvey previously entered into a Consulting
Agreement dated January 31, 1994 ("Prior Agreement").
D. Transamerica and Harvey wish to amend and restate the Prior
Agreement effective May 1, 1995.
Now, Therefore, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties agree as follows:
1. Term. The term of this Agreement shall commence on May 1, 1995
and shall continue through April 30, 1996.
2. Services. During the Term, Harvey agrees to render to
Transamerica such consulting and advisory services and perform such special
assignments in connection with the business of Transamerica as may be
requested from time to time by the Board of Directors or the Chief Executive
Officer of Transamerica (the "Services"). Transamerica and Harvey agree that
the performance of the Services by Harvey is intended to require approximately
15% of Harvey's normal business hours (assuming full-time employment) and
Harvey agrees and undertakes to devote such amount of time to the performance
of the Services.
3. Compensation. In consideration of the performance of the
Services, Transamerica will pay to Harvey consulting fees in the amount of
$75,000 per annum. Such fees shall be payable quarterly in advance on the
first business day of each of May, August, November, and February.
4. Service on Board of Directors. In addition to the performance
of the Services, Harvey agrees to continue to serve as a member of the Board
of Directors of Transamerica and its committees, for which Harvey will be
compensated in the same manner as any other non-employee director.
<PAGE>
5. Expenses; Office; Automobile.
(a) Harvey will be reimbursed for all out-of-pocket expenses
reasonably incurred by him in the performance of the Services, provided that
such expenses are properly documented and incurred in amounts and in a manner
consistent with Transamerica's expense reimbursement policies as they may from
time to time exist.
(b) During the Term, Transamerica shall maintain an office for
Harvey at its headquarters and shall provide Harvey with appropriate
secretarial and other assistance.
(c) During the Term, Harvey will be entitled to the use of a
company automobile and parking at Transamerica's headquarters, on terms
consistent with the terms on which automobiles and parking are provided to
Transamerica officers.
6. Other Benefits. Nothing contained in this Agreement shall
affect the benefits available now or in the future to Harvey as a retired
employee or as a director of Transamerica.
7. Conflict of Interest. Nothing contained in this Agreement
shall be deemed to preclude Harvey from engaging in other professional
endeavors or employment not inconsistent with the terms of this Agreement.
Harvey hereby represents that he is not, nor during the Term will he become,
bound by any agreements, commitments or obligations, nor involved with any
professional endeavors, which restrict or may restrict his ability to perform
the Services. Harvey shall adhere to the conflict of interest policy
promulgated by Transamerica and shall direct to Transamerica any business
opportunities in the fields in which Transamerica or its direct or indirect
subsidiaries ("Affiliates") operate.
8. Independent Contractor. It is expressly understood and agreed
that, in rendering the Services, Harvey is an independent contractor and is
not an employee or agent of Transamerica and shall have sole discretion to
determine the time, manner and other details of rendering the Services.
Transamerica shall not have the right to control the manner and detail of the
performance of the Services and, subject to such regulations as Transamerica
may from time to time promulgate, Harvey shall exercise independent judgment
as to such performance. Harvey shall be responsible for all federal, state
and local taxes of every kind in connection with payments hereunder, provided
that Transamerica may withhold such amounts if and as required by any
applicable taxing authority.
9. Termination. This Agreement shall terminate upon Harvey's
death, or "permanent disability." The term "permanent disability" shall mean
a disability by reason of any physical or mental incapacity which prevents
Harvey from rendering the Services for a period of more than 120 days in any
consecutive 180-day period.
10. Non-Competition and Non-Solicitation. Harvey covenants and
agrees that during the Term and for a period of two years following the
termination of this Agreement, he will not directly or indirectly without the
prior written consent of Transamerica:
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(a) Consult with, advise or otherwise participate, render services
to or engage in any business similar to, or which competes with, the business
now or then being conducted by Transamerica or any of its Affiliates, or have
any interest (other than an interest of 1% or less of the stock of a publicly
traded corporation) or involvement in any such business, whether as an agent,
employee, consultant, advisor, creditor, proprietor, partner, stockholder,
officer, director or otherwise; notwithstanding the foregoing, Transamerica
acknowledges that Harvey currently serves, and will continue to serve, as a
director of The Charles Schwab Corporation and Transamerica hereby waives any
violation of Harvey's covenant set forth in this subparagraph (a) arising
from, and consents to, such service as a director.
(b) Solicit from any present or past customer, client or vendor of
Transamerica or any of its Affiliates any business similar to that now or
then being conducted by Transamerica or any of its Affiliates;
(c) Request or advise any present or future customer, client or
vendor of Transamerica or any of its Affiliates to withdraw, curtail or cancel
its business dealings with Transamerica or any of its Affiliates; or
(d) Solicit, suggest to or encourage any present or future
employee of Transamerica or any of its Affiliates to leave such employ for any
reason whatsoever.
Should any portion of this Section 10 be deemed unenforceable
because of its scope, duration or territory, and only in such event, then the
parties consent and agree to such limitation on scope, duration or territory
as may be finally adjudicated as enforceable in such jurisdiction by a court
of competent jurisdiction after exhaustion of all appeals, to give this
Section 10 its maximum permissible scope, duration and territory. It is
hereby agreed that each breach of this Section 10 is a distinct and material
breach of this Agreement and that solely a monetary remedy will be inadequate,
impractical and extremely difficult to prove, and that each such breach will
cause Transamerica irreparable harm. It is further agreed that, in addition
to any and all remedies available at law or equity (including monetary damages
and Transamerica's right to cease payments under this Agreement), Transamerica
shall be entitled to temporary and permanent injunctive relief to enforce the
provisions of this Section 10 without the necessity of proving actual damages.
Transamerica may pursue any of the remedies described in this Section 10
concurrently or consecutively in any order as to any such breach or violation,
and the pursuit of one of such remedies at any time will not be deemed an
election of remedies or waiver of the right to pursue any of the other of such
remedies.
11. Applicable Law. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the substantive laws of the State
of California.
12. Binding Agreement. This Agreement shall be binding upon the
parties hereto, their heirs, personal representatives, successors, transferees
and assigns; provided that Harvey may not assign any of his rights, duties or
obligations hereunder.
13. Notices. All notices given or made pursuant hereto shall be
in writing and shall be deemed to have been given or made if in writing and
-3-
<PAGE>
delivered personally or sent by registered or certified mail (postage prepaid,
return receipt requested), Federal Express or equivalent courier service (by
next day service), or facsimile transmission to the parties at the following
addresses:
To Harvey at his home address shown in the records of Transamerica.
To Transamerica at: Transamerica Corporation
600 Montgomery Street
San Francisco, CA 94111
Attention: General Counsel
Telecopier No. (415) 983-4164
or to such other address as shall be furnished by either party by like notice
to the other. Such notice or communication shall be deemed to have been given
or made (i) if personally delivered, on the date so delivered, (ii) if sent by
registered or certified mail, on the third business day after mailing, (iii)
if sent by Federal Express or equivalent courier service, on the next business
day following delivery to the courier service within its business hours
provided for next day delivery, or (iv) if sent by facsimile transmission, on
the date of confirmation.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Waiver. No waiver of any of the provisions of this Agreement
shall constitute a continuing waiver of such provision or a waiver of any
other provision hereof. No waiver shall be binding unless executed in writing
by the party making the waiver.
16. Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all other understandings and agreements relating
thereto, whether written or oral, including the Prior Agreement. This
Agreement cannot be changed, modified or terminated except by a written
agreement duly executed by the parties.
17. Severability. If any provision of this Agreement or
application thereof to any person or under any circumstances is adjudicated to
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provisions or applications of this
Agreement that can be given effect without the invalid or unenforceable
provision or application and shall not invalidate or render unenforceable such
provision in any other jurisdiction or under any other circumstance.
18. Remedies Cumulative. No remedy conferred by this Agreement is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to any other remedy given
hereunder or now or hereafter existing at law or in equity.
19. Titles. Titles of the sections of this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed
by reference to the title of any section.
-4-
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement
as of the day and year first written above.
Transamerica Corporation,
a Delaware corporation
_________________________________ By: ______________________________
James R. Harvey
Title: ___________________________
-5-
<PAGE>
AMENDMENT NO. 1
TO
AMENDED AND RESTATED
CONSULTING AGREEMENT
THIS AMENDMENT NO. 1 To Amended And Restated Consulting Agreement is
entered into as of the 1st day of March, 1996 by and between Transamerica
Corporation, a Delaware corporation ("Transamerica"), and James R. Harvey
("Harvey").
RECITALS
A. Harvey is currently the Chairman of the Executive Committee of the
Board of Directors of Transamerica and retired as an executive officer and
employee of Transamerica effective December 1, 1992.
B. Transamerica and Harvey previously entered into an Amended And
Restated Consulting Agreement (the "Agreement") dated January 31, 1995 and
they now wish to amend the Agreement to extend its term for an additional
period of one year.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements herein contained, the parties agree as follows:
1. Section 1 of the Agreement is hereby deleted and the following
Section 1 is substituted therein:
"1. Term. The term of this Agreement shall commence on
May 1, 1995 and shall continue through April 30, 1997."
2. As modified hereinabove, the Agreement shall continue in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
To Amended And Restated Consulting Agreement as of the day and year first
written above.
TRANSAMERICA CORPORATION,
a Delaware corporation
______________________________ By: _________________________________
James R. Harvey Chairman of the Board, President
and Chief Executive Officer
<PAGE>
EXHIBIT 10.7
TRANSAMERICA CORPORATION
1996 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 1996 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
summarized on Exhibit I. Bonuses under this component
will be calculated in accordance with the Value Added
Incentive Plan, as adopted by stockholders in 1994, under
the terms applicable to the 1996 plan year.
- 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, 1996 to receive a payout under the
Plan.
1996 Bonus Plan - Page 2
<PAGE>
EXHIBIT I
Value Added Component
_____________________________________________________________________________
Value Added is calculated in the same manner as for the 1996 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 1996 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 1996, 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-target 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 10.19
AMENDMENT NO. 1 TO THE TRANSAMERICA CORPORATION
DEFERRED COMPENSATION PLAN
TRANSAMERICA CORPORATION, having adopted the January 1, 1995
restatement of the Transamerica Corporation Deferred Compensation Plan (the
"Plan"), hereby amends the Plan as follows:
1. Effective as of December 1, 1995, Section 1.4 is amended in
its entirety to read as follows:
1.4 "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 Securities Exchange Act of
1934, as amended (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 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, or be
deemed to cause, a Change of Control: (i) any increase in such
percentage ownership of a Person to 20% or more resulting solely from any
acquisition of shares directly from Transamerica or any acquisition of
shares by Transamerica, 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 of Control, (ii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Transamerica or any
corporation controlled by Transamerica or (iii) 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 June 15, 1995, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to June 15, 1995 whose
election, or nomination for election by Transamerica'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 of Directors; or
Page 1
<PAGE>
(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, (1) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the then 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 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, (2) no Person (excluding
any corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of Transamerica 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 of
Directors, providing for such Business Combination; or
(d) Approval by the stockholders of Transamerica of a complete
liquidation or dissolution of Transamerica.
2. Effective as of December 31, 1995, Section 1.9 is amended in
its entirety to read as follows:
1.9 "Eligibility Amount" means the minimum annual rate of
base salary required to participate in the Plan. The Eligibility Amount
shall be determined annually by the Chief Executive Officer of
Transamerica. For 1996, the Eligibility Amount is $125,000.
3. Effective as of December 31, 1995, Section 1.10 is amended in
its entirety to read as follows:
1.10 "Eligible Employee" means, with respect to any Plan
Year, an employee of an Employer:
(a) whose annual base salary rate is greater than or equal
to the Eligibility Amount;
(b)(1) whose Employer is a Life Company, and (2) who is
classified by his or her Employer as a field manager with the title
of General Manager, Brokerage Director or Pension Office Manager;
Page 2
<PAGE>
(c) who deferred Compensation under the Plan (or the
Transamerica Deferred Compensation Policy) during one or more of
the three Plan Years preceding the Plan Year; and/or
(d) whose annual base salary rate at the time of hire is
greater than or equal to the Eligibility Amount (in the case of a
newly-hired individual).
Whether an employee's 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.
4. Effective as of December 31, 1995, the second sentence of
Section 3.1 is amended in its entirety to read as follows:
For each Plan Year, an Eligible Employee may elect to defer an amount
equal to any whole percentage or any specific dollar amount of his or
her Compensation, provided that the Participant's election shall result
in an expected deferral of (1) not less than $5,000 of his or her
Compensation, and (2) with respect to deferrals of base salary, not more
than 75% of his or her base salary for the Plan Year.
5. Effective as of December 31, 1995, Section 3.3 is amended in
its entirety to read as follows:
3.3 Deemed Interest on Accounts. Each Participant's Account
shall be credited with deemed interest as of the end of each calendar
month. The annual rate for crediting deemed interest shall equal the
Participant's "Deferral Interest Rate" for the Plan Year. The Deferral
Interest Rate shall be determined with reference to 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, if a Participant elected a term of deferral of 8 years or
more, his or her Deferral Interest Rate for a given Plan Year (which
rate shall be adjusted each Plan Year) shall be the sum of (a) the
simple average of the annual rates paid by ten-year U.S. Treasury notes
during September, October and November of the immediately preceding Plan
Year, plus (b) 3.00%.
3.3.2 Deferral Term of 5 to 7 Years. Subject to
Section 5, if a Participant elected a term of deferral of at least 5
years but less than 8 years, his or her Deferral Interest Rate for a
given Plan Year (which rate shall be adjusted each Plan Year) shall be
the sum of (a) the simple average of the annual rates paid by ten-year
U.S. Treasury notes during September, October and November of the
immediately preceding Plan Year, plus (b) 2.00%.
3.3.3 Deferral Term of less than 5 Years. Subject to
Section 5, if a Participant elected a term of deferral of less than 5
years, his or her Deferral Interest Rate for a given Plan Year (which
rate shall be adjusted each Plan Year) shall be the simple average of
the annual rates paid by ten-year U.S. Treasury notes during September,
October and November of the immediately preceding Plan Year.
Page 3
<PAGE>
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.
6. Effective as of December 1, 1995, the first sentence of
Section 5.1 is amended in its entirety to read as follows:
Subject to Sections 5.2, 5.3, 5.4, and 5.10, 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.
7. Effective as of December 31, 1995, the third sentence of
Section 5.4 is amended in its entirety to read as follows:
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 at the rate provided in
Section 3.3.3 (whether or not the term of deferral was for less than 5
years).
8. Effective as of December 1, 1995, the last sentence of
Section 9.1 is amended in its entirety to read as follows:
Accordingly, as provided in Sections 9.2 and 9.3, Transamerica at any
time may amend or terminate the Plan, with or without cause.
9. Effective as of December 1, 1995, Section 9.2 is amended in
its entirety to read as follows:
9.2 Right to Amend or Terminate. The Committee reserves the
right to amend or terminate the Plan, or any part thereof, at any time
and for any reason, provided that no amendment or termination of the Plan
shall, without the consent of the Participant, (a) reduce the balance
then credited to the Participant's Account, or (b) reduce the formula for
crediting deemed interest on Compensation Deferrals which already have
been made by the Participant. Exercise of the Committee's authority to
terminate the Plan and cause the accelerated distribution of
Participants' Accounts shall not be deemed to be a violation of the
provisos in the preceding sentence or of any other provision of the
Plan.
Page 4
<PAGE>
IN WITNESS WHEREOF, Transamerica Corporation, by its duly
authorized Chairman of its Management Development and Compensation Committee,
and by its duly authorized officer, has executed this Amendment No. 1
effective as of December 1, 1995.
TRANSAMERICA CORPORATION
By ____________________________
Peter V. Ueberroth,
Chairman,
Management Development and
Compensation Committee
And By ________________________
Title:
Page 5
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
TRANSAMERICA CORPORATION
(Amounts in thousands, except per share data)
Year ended December 31
1995 1994 1993
Primary
Average shares outstanding ............. 68,758 72,592 78,495
Net effect of dilutive stock options--
based on the treasury stock method
using average market price ........... 1,265* 1,246* 1,788*
______ ______ ______
TOTAL ...... 70,023 73,838 80,283
====== ====== ======
Net income ............................. $470,532 $427,227 $377,413
Preferred dividends .................... (18,036) (31,622)(1) (23,629)
________ ________ ________
Net income to common ................... $452,496 $395,605 $353,784
======== ======== ========
Per share amount ....................... $6.58 $5.45 $4.51
===== ===== =====
Fully Diluted
Average shares outstanding ............. 68,758 72,592 78,495
Net effect of dilutive stock options--
based on the treasury stock method
using the year-end market price, if
higher than average market price ..... 1,414* 1,246* 2,000*
______ _______ ______
TOTAL ...... 70,172 73,838 80,495
====== ======= ======
Net income ............................. $470,532 $427,227 $377,413
Preferred dividends .................... (18,036) (31,622)(1) (23,629)
________ ________ ________
Net income to common ................... $452,496 $395,605 $353,784
======== ======== ========
Per share amount ....................... $6.58 $5.45 $4.51
===== ===== =====
*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 12
TRANSAMERICA CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
<CAPTION>
Year Ended December 31,
________________________________________________________
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest and debt expense $ 716,714 $ 573,755 $ 511,649 $ 568,887 $631,106
One-third of rental
expense ................ 27,567 33,300 29,073 29,788 31,052
__________ __________ __________ __________ ________
Total ................. $ 744,281 $ 607,055 $ 540,722 $ 598,675 $662,158
========== ========== ========== ========== ========
Earnings:
Consolidated operating
income from continuing
operations ............. $ 470,532 $ 427,926 $ 447,519 $ 334,006 $ 5,659
Provision for income
taxes .................. 234,514 262,392 140,658 204,392 32,582
Fixed charges ........... 744,281 607,055 540,722 598,675 662,158
__________ __________ __________ __________ ________
Total ................. $1,449,327 $1,297,373 $1,128,899 $1,137,073 $700,399
========== ========== ========== ========== ========
Ratio of earnings from con-
tinuing operations to
fixed charges ........... 1.95 2.14 2.09 1.90 1.06
==== ==== ==== ==== ====
</TABLE>
<PAGE>
EXHIBIT 13
FINANCIAL REVIEW
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in life insurance, consumer lending, commercial
lending, leasing and real estate services.
____________________________________________________________________________
CONSOLIDATED RESULTS
Transamerica's income from continuing operations for 1995 increased $42.6
million (10%), compared to 1994. Income from continuing operations for 1995
included net after tax gains from investment transactions aggregating $34.4
million compared to $15 million in 1994. Operating income from continuing
operations, which excludes investment transactions, for 1995 includes a $30
million tax benefit from the satisfactory resolution of prior years' tax
matters, a $12.2 million after tax benefit from the reversal of a valuation
allowance no longer needed due to the favorable terms on disposition of assets
held for sale and a $2.9 million after tax benefit from the settlement of a
class action lawsuit involving an investment in fixed maturity securities
issued by Franklin Savings Association. These items were offset in part by a
$21.5 million after tax provision for an expected loss on the Transamerica
Center in downtown Los Angeles in anticipation of a planned sale and leaseback
transaction that is subject to regulatory approval, a charge of $12 million
after tax due to actions taken to consolidate and accelerate foreclosure
activity and dispose of certain repossessed real estate properties in
California and charges totaling $9.7 million after tax primarily for the
restructuring of the real estate services operations. Excluding these items
from the 1995 results, operating income from continuing operations for 1995
increased $21.3 million (5%) due primarily to increases in the operating
results of life insurance, leasing, commercial lending and consumer lending
(principally due to the ITT portfolio acquisition described later). Partially
offsetting these improvements were declines in real estate services operating
results and higher unallocated expenses.
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 decreased $9.3 million (2%) from 1993 due primarily to
decreases in real estate services 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 more than 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%).
Gains on investment transactions in 1995 included after tax gains of $55.7
million realized on the sale of investments, less $6 million after tax
accelerated amortization of deferred policy acquisition costs associated with
interest-sensitive products and loss provisions of $15.3 million after tax for
the impairment in value of investments. Gains on investment transactions in
1995 included an after tax gain of
44 Transamerica Corporation and Subsidiaries
<PAGE>
$15.3 million from the settlement of a class action lawsuit involving an
investment in fixed maturity securities issued by Franklin Savings
Association.
Gains on investment transactions in 1994 included after tax gains of $32.6
million realized on the sale of investments, less $4.1 million after tax
accelerated amortization of deferred policy acquisition costs associated with
interest-sensitive products and loss provisions of $13.5 million after tax for
the impairment in value of investments.
OPERATING INCOME BY BUSINESS SEGMENT
The following table summarizes Transamerica's operating results by business
segment. Additional business segment information is provided in footnote G of
the notes to financial statements.
____________________________________________________________________________
(Amounts in millions except for per share data) 1995 1994 1993
LIFE INSURANCE $290.8 $250.2 $215.7
FINANCE
Consumer lending 80.5 90.4 93.1
Commercial lending 75.2 53.7 (4.0)
Leasing 75.1 63.6 53.6
Amortization of goodwill (13.0) (13.0) (13.0)
______ ______ ______
Total finance 217.8 194.7 129.7
REAL ESTATE SERVICES 26.8 64.2 84.6
Amortization of goodwill (0.4) (1.8) (1.7)
______ ______ ______
Total real estate services 26.4 62.4 82.9
Unallocated interest and other expenses (98.9) (94.4) (6.1)
______ ______ ______
Operating income from continuing operations 436.1 412.9 422.2
Gain on investment transactions 34.4 15.0 25.3
______ ______ ______
Income from continuing operations 470.5 427.9 447.5
Loss from discontinued operations (0.7) (47.0)
Extraordinary loss on early extinguishment of debt (23.1)
______ ______ ______
Net income $470.5 $427.2 $377.4
====== ====== ======
EARNINGS PER SHARE OF COMMON STOCK
Income from continuing operations:
Operating income from continuing operations $ 6.08 $ 5.25 $ 5.08
Gain on investment transactions 0.50 0.21 0.32
______ ______ ______
Income from continuing operations 6.58 5.46 5.40
Loss from discontinued operations (0.01) (0.60)
Extraordinary loss on early extinguishment of debt (0.29)
______ ______ ______
Net income $ 6.58 $ 5.45 $ 4.51
====== ====== ======
Average shares outstanding 68.8 72.6 78.5
====== ====== ======
Transamerica Corporation and Subsidiaries 45
<PAGE>
LIFE INSURANCE
Transamerica's life insurance operation engages in the underwriting,
distribution and reinsurance of traditional and investment based life
insurance products.
Net income increased $46.2 million (17%) in 1995 and $19 million (8%) in 1994.
Net income included net after tax gains from investment transactions totaling
$19.3 million in 1995, $13.7 million in 1994, and $29.2 million in 1993.
Income before investment transactions increased $40.6 million (16%) in 1995
and $34.5 million (16%) in 1994. Income before investment transactions in 1995
included a $4.4 million tax benefit related to the favorable settlement of a
prior year tax matter and a $2.9 million after tax benefit related to the
settlement of a class action lawsuit concerning an investment in fixed
maturity securities, offset in part by a $900,000 after tax restructuring
charge. The individual life insurance, structured settlements, living
benefits, group pension and Canadian lines all experienced increases in income
before investment transactions in 1995 primarily as a result of relatively
stable interest spreads on a growing asset base. The individual life insurance
line continued to benefit from higher policy related income resulting from a
larger base of interest-sensitive policies. In 1995, the reinsurance line
benefited from higher revenues which increased at a faster rate relative to
total benefits and expenses.
The individual life insurance, structured settlements, living benefits, group
pension, reinsurance and Canadian lines all experienced increases in income in
1994, excluding net after tax 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 1995 included after tax gains of $40.6 million
realized on the sale of investments compared to $27.6 million for 1994 and
$106.1 million for 1993. Investment transactions for 1995 included an after
tax gain of $15.3 million from the settlement of a class action lawsuit
involving an investment in fixed maturity securities issued by Franklin
Savings Association. A portion of the investment gains is related to
interest-sensitive products. Adjustment to the amortization of deferred policy
acquisition costs related to interest sensitive products reduced these after
tax gains by $6 million in 1995, $4.1 million in 1994 and $40.8 million in
1993. Investment transactions in 1995 also reflected downward adjustments of
$15.3 million after tax compared to $9.8 million in 1994 and $36.1 million in
1993, primarily for impairment in the value of certain below investment grade
fixed maturity investments.
Premiums and other income increased $367.6 million (25%) in 1995 and $239.5
million (19%) in 1994 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 $200.8 million (11%) in 1995 and $47.6
million (3%) in 1994 due primarily to a higher level of invested assets.
Life insurance benefits and expenses increased $521.7 million (18%) in 1995
and $240.7 million (9%) in 1994 principally due to increases in policy
reserves and benefits paid or provided attributable to the larger base of life
insurance and annuities in force and higher commission expense, and higher
amortization of deferred policy acquisition costs (exclusive of accelerated
amortization related to investment gains). Other expenses included charges of
$8.7 million in 1995, $15.2 million in 1994 and $19.8 million in 1993 related
to anticipated guaranty fund assessments, expenses for the realignment and
relocation of certain operations and in 1994 and 1993 additional losses on the
1991 sale of a business unit.
Cash provided by operations for 1995 was $543.8 million which was $45.8
million (9%) above the 1994
46 Transamerica Corporation and Subsidiaries
<PAGE>
amount primarily as a result of growth in the underlying assets and
liabilities of the business.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.
LIFE INSURANCE
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
ASSETS
Investments $27,703.2 $22,329.1 $20,890.6
Deferred policy acquisition costs 1,974.2 2,480.5 1,929.3
Other assets 5,422.4 4,157.5 3,289.1
_________ _________ _________
$35,099.8 $28,967.1 $26,109.0
========= ========= =========
LIABILITIES AND EQUITY
Policy reserves and related items $27,893.4 $24,731.7 $21,951.8
Other liabilities 3,746.5 2,330.7 2,090.8
Equity* 3,459.9 1,904.7 2,066.4
_________ _________ _________
$35,099.8 $28,967.1 $26,109.0
========= ========= =========
REVENUES
Premiums and other income $ 1,862.8 $ 1,495.2 $ 1,255.7
Investment income, net of expenses 1,974.1 1,773.3 1,725.7
Gain on investment transactions 29.6 21.1 44.9
_________ _________ _________
3,866.5 3,289.6 3,026.3
EXPENSES
Policyholder benefits 2,858.7 2,356.4 2,145.9
Commissions and other expenses 549.4 530.0 499.8
Income taxes 148.3 139.3 135.7
_________ _________ _________
3,556.4 3,025.7 2,781.4
_________ _________ _________
Net income $ 310.1 $ 263.9 $ 244.9
========= ========= =========
SOURCE OF CASH
Cash provided by operations $ 543.8 $ 498.0 $ 604.3
Net receipts from interest-sensitive
policies 1,527.4 2,014.8 1,853.1
_________ _________ _________
$ 2,071.2 $ 2,512.8 $ 2,457.4
========= ========= =========
APPLICATION OF CASH
Net purchases of investments $ 1,986.1 $ 2,442.3 $ 2,434.3
Equity transactions 40.0 30.0 18.7
Other 45.1 40.5 4.4
_________ _________ _________
$ 2,071.2 $ 2,512.8 $ 2,457.4
========= ========= =========
*On January 1, 1994, Transamerica adopted Statement of Financial Accounting
Standards No. 115. Equity includes net unrealized gains (losses) from marking
investments to fair value of $946 million in 1995, $(321.2) million in 1994
and $67.1 million in 1993. See footnote E of the notes to the financial
statements for consolidated components of unrealized gains (losses).
Transamerica Corporation and Subsidiaries 47
<PAGE>
TRANSAMERICA FINANCE CORPORATION
Transamerica Finance Corporation includes Transamerica's consumer lending,
commercial lending (excluding insurance premium finance) and leasing
operations and provides funding for these operations. The principal assets of
Transamerica Finance Corporation comprise finance receivables and equipment
held for lease totaling $10.4 billion at December 31, 1995 and $9.3 billion at
December 31, 1994. Transamerica Finance Corporation's total notes and loans
payable were $9.7 billion at December 31, 1995 and $8.7 billion at December
31, 1994. Variable rate debt was $4.8 billion at December 31, 1995 compared to
$4.3 billion at the end of 1994. The ratio of debt to tangible equity was 7:1
at December 31, 1995 and 7.1:1 at December 31, 1994.
Transamerica Finance Corporation offers publicly, from time to time, senior or
subordinated debt securities. Public debt issued totaled $832 million in 1995,
$1,516 million in 1994, and $407 million in 1993. Under a shelf registration
statement filed in April 1995 with the Securities and Exchange Commission, the
company may offer up to $3 billion of senior or subordinated debt securities
(which may include medium-term notes) with varying terms, of which $2.6
billion had not been issued at December 31, 1995.
Liquidity is a characteristic of these operations since the majority of the
assets consist of finance receivables. Principal cash collections of finance
receivables totaled $17.4 billion during 1995, $14.8 billion during 1994, and
$11.5 billion during 1993.
48 Transamerica Corporation and Subsidiaries
<PAGE>
TRANSAMERICA FINANCE CORPORATION
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
ASSETS
Finance receivables less unearned fees
and allowance for losses:
Consumer $ 4,772.2 $ 4,024.8 $ 3,547.2
Commercial 2,798.5 2,686.0 2,524.3
_________ _________ _________
7,570.7 6,710.8 6,071.5
Equipment held for lease 2,862.0 2,606.6 1,306.5
Goodwill 339.9 351.6 372.4
Assets held for sale 99.1 157.7 226.8
Other assets 1,234.5 1,128.1 1,054.2
_________ _________ _________
$12,106.2 $10,954.8 $ 9,031.4
========= ========= =========
LIABILITIES AND EQUITY
Notes and loans payable $ 9,689.9 $ 8,724.3 $ 7,031.5
Other liabilities 701.8 648.2 550.3
Equity 1,714.5 1,582.3 1,449.6
_________ _________ _________
$12,106.2 $10,954.8 $ 9,031.4
========= ========= =========
REVENUES
Finance and leasing revenues $ 1,915.1 $ 1,677.8 $ 1,392.1
EXPENSES
Operating expenses 828.2 767.6 603.4
Interest 625.3 485.6 414.6
Provision for losses on receivables
and assets held for sale 91.8 99.1 144.1
Income taxes 145.5 125.6 95.4
_________ _________ _________
1,690.8 1,477.9 1,257.5
_________ _________ _________
Income from operations 224.3 199.9 134.6
Amortization of goodwill (11.7) (11.7) (11.7)
Extraordinary loss on early
extinguishment of debt (23.1)
_________ _________ _________
Net income $ 212.6 $ 188.2 $ 99.8
========= ========= =========
SOURCE OF CASH
Cash provided by operations $ 743.4 $ 639.4 $ 468.7
Finance receivables collected 17,444.6 14,807.5 11,535.7
Proceeds from debt financing 8,281.5 7,189.4 5,500.6
Other 76.8 39.9 (135.0)
_________ _________ _________
$26,546.3 $22,676.2 $17,370.0
========= ========= =========
APPLICATION OF CASH
Additions to equipment held for lease $ 573.3 $ 440.1 $ 405.4
Finance receivables originated 17,510.7 15,594.8 11,756.5
Payments of notes and loans 7,333.6 5,528.1 5,112.1
Purchase of finance receivables and
other assets from ITT Consumer
Financial Corporation 1,027.3
Purchase of Tiphook container assets 1,061.4
Equity transactions 101.4 51.8 96.0
_________ _________ _________
$26,546.3 $22,676.2 $17,370.0
========= ========= =========
Transamerica Corporation and Subsidiaries 49
<PAGE>
CONSUMER LENDING
On March 31, 1995, the consumer lending operation purchased for $1,027.3
million in cash substantially all the assets and assumed certain liabilities
of the home equity business of ITT Consumer Financial Corporation (ITT). The
purchase price was allocated as follows: consumer finance receivables of
$966.4 million, which were all real estate secured, of which 14% was located
in California; allowance for losses of $52.7 million; assets held for sale of
$26.8 million; customer renewal rights of $97.8 million; and assumed
liabilities of $11 million. The consumer lending operation did not assume any
borrowings, tax liabilities or contingent liabilities of ITT.
Consumer lending income from operations for 1995 decreased $9.9 million (11%)
from 1994. The decrease resulted from higher operating and interest expenses
and an increased provision for losses on receivables that more than offset
increased revenues. Additionally, the 1995 decrease includes a fourth quarter
charge of $12 million after tax which resulted from consolidating and
accelerating California branch foreclosure activity and disposing of certain
repossessed real estate in California.
Consumer lending income from operations 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
(less than 1%). The increase resulted from higher revenues, offset in part by
increased operating and interest expenses and an increased provision for
losses on receivables.
Revenues increased $91.9 million (13%) in 1995 and $36.3 million (6%) in
1994. The 1995 increase was mainly due to higher interest income resulting
from the effects of the ITT acquisition, which more than offset the effects of
lower fee income. The 1994 increase was mainly due to increased finance
charges resulting from higher average finance receivables outstanding and
higher fee income. In 1994, in response to increased competition, principally
in California, the company introduced lower interest rates which were not
continued into 1995. The lower rates produced a higher level of customer
renewals and related fee income in 1994 over 1995 and 1993 but a lower level
of interest income in 1995.
Interest expense increased $67.1 million (27%) in 1995 and $8.5 million (3%)
in 1994 primarily as a result of the higher levels of finance receivables
outstanding, and an increase in short-term interest rates.
The provision for losses on receivables increased $15.6 million (19%) in 1995
and $18.3 million (29%) in 1994 due to increases in credit losses and, in
1994, increased growth in net finance receivables over 1993. Credit losses,
net of recoveries, as a percentage of average net finance receivables
outstanding were 2.15% for 1995 compared to 1.93% for 1994 and 1.68% for 1993.
The 1995 and 1994 increases resulted from the effects of higher credit losses.
Credit losses (net of recoveries) increased $28.5 million (38%) in 1995 and
$10.8 million (17%) in 1994. Growth in the non real estate portfolio, which
tends to have a higher ratio of net credit losses than the real estate secured
portfolio, as well as continued sluggishness in the California economy and a
continued weak California real estate market contributed to increased credit
losses in both 1995 and 1994. The consolidation and acceleration of California
branch foreclosure activity also contributed to the 1995 increase in net
credit losses as did the recognition of credit losses anticipated in
connection with the ITT acquisition. Because future credit losses may be
impacted by factors such as economic conditions and the state of the real
estate market, particularly in California, the extent and timing of any change
in the recent trend remains uncertain.
Operating expenses increased $23.3 million (11%) in 1995 primarily due to
amortization of customer renewal rights associated with the ITT acquisition
and an increase in losses on disposition of repossessed real property in
California. Operating expenses for 1994 increased $20 million (11%).
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.
Consumer lending receivables grew 19% in 1995 due to the portfolio purchased
from ITT. Excluding the loans acquired from ITT, receivables declined by $16
million (less than 1%) in 1995. During 1994
50 Transamerica Corporation and Subsidiaries
<PAGE>
and 1993 the company acquired $124.9 million and $22.7 million of receivables
in bulk purchase transactions. Including these acquisitions, the portfolio
increased $414.2 million (11%) in 1994 and $66.2 million (2%) in 1993.
Net consumer finance receivables at December 31, 1995 and 1994 included $4
billion and $3.3 billion of real estate secured loans, principally first and
second mortgages secured by residential properties, of which approximately
37% and 45% were located in California. Real estate loans originated in 1995
were $1.1 billion compared to $1.7 billion in 1994, due to a decline in
renewal volume (which was caused in part by a return to higher rates in early
1995) and increased competition. The non real estate loan portfolio has grown
13% since December 31, 1994, reflecting management's strategy to pursue
growth in that area.
Delinquent finance receivables, which are defined as receivables
contractually past due 60 days or more, were $143.6 million (2.79% of finance
receivables outstanding) at December 31, 1995 compared to $90.2 million (2.08%
of finance receivables outstanding) at December 31, 1994. Approximately
two-thirds of the $53.4 million increase in delinquency during 1995 was
attributable to real estate secured receivables, of which approximately
one-half was due to the ITT portfolio acquisition which included the purchase
of delinquent receivables at a discount, with the remainder relating to non
real estate products which tend to have higher delinquency ratios than real
estate secured receivables. Management has established an allowance for
losses equal to 3.32% of net consumer finance receivables outstanding at
December 31, 1995 compared to 2.83% at December 31, 1994; the increase in the
percentage is due to the acquisition of the ITT portfolio which had a higher
ratio of allowance for losses to net consumer finance receivables outstanding.
When foreclosure proceedings begin on an account secured with real estate, 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 $207.3 million at December 31, 1995,
of which 69% pertained to California, compared to $226.1 million at December
31, 1994, of which 79% pertained to California. Because future improvements
may be impacted by factors such as economic conditions and the state of the
real estate market, particularly in California, the extent and timing of any
change in the trend of foreclosures and repossessed assets remains uncertain.
CONSUMER LENDING
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
REVENUES
Finance charges and related income $782.5 $690.6 $654.3
EXPENSES
Interest 317.9 250.8 242.3
Operating expenses 232.7 209.4 189.4
Provision for losses on receivables 97.8 82.2 63.9
Income taxes 53.6 57.8 65.6
______ ______ ______
702.0 600.2 561.2
______ ______ ______
Income from operations 80.5 90.4 93.1
Amortization of goodwill (0.1) (0.1) (0.1)
______ ______ ______
Net income $ 80.4 $ 90.3 $ 93.0
====== ====== ======
Transamerica Corporation and Subsidiaries 51
<PAGE>
COMMERCIAL LENDING
Income from operations increased $21.5 million (40%) in 1995 and $57.7 million
in 1994. Operating results for 1995 included a $12.2 million after tax benefit
from the reversal of a valuation allowance no longer required following the
sale of assets held for sale (principally in Puerto Rico), and a $4.8 million
after tax gain from the sale of a portfolio of consumer rediscount loans.
Results for 1994 included a $5.5 million after tax charge for the relocation
of the corporate home office, and a $4 million after tax gain from the sale of
the repossessed rent-to-own stores. Results for 1993 included: (i) a $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 portfolio; (iv)
a $4.2 million tax benefit from the resolution of prior years' tax matters;
and (v) a tax benefit of $1.4 million from the revaluation of the January 1,
1993 deferred tax liability for the effect of the one percent federal tax
increase.
Excluding the items discussed above, commercial lending income from operations
increased $3 million (6%) in 1995 and $15.8 million (40%) in 1994. The
increases resulted from increased margins, reduced operating expenses and a
lower provision for losses. Margins improved as a result of a greater spread
between the indices at which the commercial lending operation loaned to
customers and the indices at which funds were borrowed.
Revenues in 1995 increased $39.4 million (10%) due to a higher average
portfolio yield attributable to higher interest rates. Revenues in 1994
increased $13.6 million (4%) as a result of increased average net receivables
in the core businesses and a higher average portfolio yield attributable to
rising interest rates.
Interest expense increased $29.7 million (25%) in 1995 and $9.6 million (9%)
in 1994 due to a higher average interest rate on borrowings.
Operating expenses declined $7.8 million (5%) in 1995 and $21.3 million (11%)
in 1994. Expenses in 1994 included a $9 million ($5.5 million after tax)
charge for the relocation of the corporate home office, partially offset by
the $5.3 million ($4 million after tax) gain on the sale of the repossessed
rent-to-own stores. Operating expenses in 1993 include the previously
described 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). Excluding these items in both years,
operating expenses decreased $4.1 million (3%) in 1995 and $3.5 million (2%)
in 1994 mainly as a result of reduced expenses incurred in the management of
the liquidating receivables portfolio and receivables included in assets held
for sale which were disposed of in 1995.
The provision for losses on receivables declined $2.2 million (12%) in 1995
principally due to charges in 1994 related to the consumer rediscount loan
portfolio which was sold in 1995 and lower losses during 1995 in the
liquidating portfolio offset in part by an increased provision in the
insurance premium finance business. 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. Credit losses, net of recoveries,
as a percentage of average commercial finance receivables outstanding, net of
unearned finance charges, were 0.34% in 1995, 0.29% in 1994 and 1.49% in 1993.
Net commercial finance receivables outstanding at December 31, 1995 increased
$26.8 million (1%) from December 31, 1994. The higher net receivables reflect
receivables growth in inventory finance and equipment finance and leasing
operations. The equipment finance and leasing operation began operations
during 1995 and provides collateralized equipment lending. These increases
were offset in part by the 1995 sale of the consumer rediscount loan portfolio
comprising $118 million of net outstanding receivables, the securitization of
an additional $100 million of insurance premium finance receivables which
increased the eligible pool from $375 million to $475 million for a three year
term, and the liquidation and sale of $51.3 million in net receivables
outstanding resulting from the decision to exit the operations in Puerto Rico.
Management has established an allowance for losses equal to 2.51% of net
commercial finance receivables outstanding as of December 31, 1995 compared to
2.96% at December 31, 1994. This decrease is primarily the result of selling
the Puerto Rico receivables, which had a larger reserve requirement.
52 Transamerica Corporation and Subsidiaries
<PAGE>
Delinquent receivables, which are defined as the instalment balance for
inventory finance and asset based lending receivables and the receivable
balance for all other receivables over 60 days past due, were $11.1 million
(0.35% of receivables outstanding) at December 31, 1995 compared to $19.1
million (0.62% of receivables outstanding) at December 31, 1994.
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 $18 million (0.57% of receivables outstanding) at December 31,
1995 compared to $23.3 million (0.75% of receivables outstanding) at December
31, 1994. The decline in both delinquent and nonearning receivables was
primarily due to the sale of the Puerto Rico receivables.
Assets held for sale as of December 31, 1995 totaled $4.5 million, net of a $6
million valuation allowance, and consisted of rent-to-own receivables of $5.6
million and other assets of $4.9 million. In 1995, the commercial lending
operation sold substantially all of its rent-to-own receivables. 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 other assets of $3.6 million. Of the finance receivables held for
sale at December 31, 1995, none was classified as delinquent or nonearning
compared to $24.5 million classified as both delinquent and nonearning at
December 31, 1994.
During 1995, the commercial lending insurance premium finance operation
entered into a three year arrangement in which it securitized a $475 million
participation interest in a pool of its receivables. This agreement replaced a
1990 securitization of $375 million which expired in 1995. Proceeds from this
transaction were used primarily to reduce debt. At December 31, 1995, $475
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.
COMMERCIAL LENDING
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
REVENUES
Finance charges and related income $423.7 $384.3 $370.7
EXPENSES
Interest 148.7 119.0 109.4
Operating expenses 156.3 164.1 185.4
Provision for losses on receivables 16.1 18.3 33.1
Provision (benefit) for losses on assets
held for sale (20.1) 50.0
Income taxes (benefit) 47.5 29.2 (3.2)
______ ______ ______
348.5 330.6 374.7
______ ______ ______
Income (loss) from operations 75.2 53.7 (4.0)
Amortization of goodwill (10.9) (10.9) (10.9)
Extraordinary loss from early extinguishment
of debt (23.1)
______ ______ ______
Net income (loss) $ 64.3 $ 42.8 $(38.0)
====== ====== ======
Transamerica Corporation and Subsidiaries 53
<PAGE>
LEASING
The leasing operation has grown substantially since 1993 largely due to the
March 1994 acquisition of 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 for $1,061.4
million in cash. The acquired fleet of standard containers and tank
containers totaled 363,000 units which by December 31, 1994 were 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 income from operations for 1995 increased $11.5 million (18%) mainly
due to higher utilization and increased fleet size in the standard,
refrigerated and tank container fleet lines, as well as an increase in the
European trailer fleet. A 1995 increase in sales of used equipment resulted in
additional gains of $7.2 million after tax. Earnings in 1995 also benefited
from a $2.2 million after tax favorable depreciation adjustment resulting from
the final settlement of the Tiphook purchase price and a $1.8 million
resolution of an outstanding state tax issue. Partially offsetting these
increases were lower earnings in the rail trailer business which experienced a
downturn in utilization resulting from decreased U.S. intermodal loadings.
Leasing income from operations for 1994 increased $10 million (18%). Included
in the 1993 results was a $4.3 million additional tax provision
LEASING
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
REVENUES
Total leasing revenues $733.9 $637.9 $407.8
EXPENSES
Operating expenses 126.5 126.3 81.9
Depreciation on equipment held for lease 236.6 197.3 102.5
Selling and administrative expenses 95.1 94.6 65.5
Interest 154.0 115.7 64.4
Income taxes 46.6 40.4 39.9
______ ______ ______
658.8 574.3 354.2
______ ______ ______
Income from operations 75.1 63.6 53.6
Amortization of goodwill (2.0) (2.0) (2.0)
______ ______ ______
Net income $ 73.1 $ 61.6 $ 51.6
====== ====== ======
54 Transamerica Corporation and Subsidiaries
<PAGE>
from the revaluation of the January 1, 1993 deferred tax liability. Excluding
the effect of this adjustment, leasing income increased $5.7 million (10%) in
1994. 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.
Revenues for 1995 increased $96 million (15%). The increase was due to
additional on-hire standard, tank and refrigerated containers, chassis and
European trailers. Revenues also increased due to a larger standard and tank
container fleet, resulting from the acquisition of the container division
assets of Tiphook. Partially offsetting these increases were lower revenues in
the rail trailer business resulting from fewer units on-hire.
Revenues for 1994 increased $230.1 million (56%). The increase was due
primarily to the acquisition of the container division assets of Tiphook.
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.
Expenses increased $78.3 million (15%) in 1995 mainly due to higher
depreciation expense, interest expense and operating costs associated with
larger standard, tank and refrigerated container, chassis and European trailer
fleets.
Expenses increased $219.6 million (70%) in 1994 mainly due to higher
depreciation expense, interest expense and operating costs related to the
acquisition of the container division assets of Tiphook.
The combined utilization of standard containers, refrigerated containers,
domestic containers, tank containers and chassis averaged 85% in 1995, 81% in
1994, and 83% in 1993. Rail trailer utilization was 77% in 1995, 92% in 1994,
and 91% in 1993. European trailer utilization was 95% in 1995, 96% in 1994,
and 89% in 1993. Utilization of the company's fleet is dependent upon
worldwide economic conditions, market pressures and industry fleet size.
The company's standard container, refrigerated container, domestic container,
tank container and chassis fleet of 708,400 units increased by 23,000 units
(3%) in 1995, and 369,400 units (117%) in 1994. The 1994 increase was largely
due to the acquisition of the container division assets of Tiphook. The rail
trailer fleet of 36,900 units decreased by 2,400 units (6%) in 1995 after a
2,800 unit (8%) increase in 1994. The European over-the-road trailer fleet of
7,700 units increased by 2,000 units (35%) in 1995 and 1,900 units (50%) in
1994.
Transamerica Corporation and Subsidiaries 55
<PAGE>
REAL ESTATE SERVICES
Real estate services comprise Transamerica's real estate tax, real estate
investments, property management, and other services. This segment also
includes Transamerica's asset management operation which was sold in 1995. For
purposes of this discussion asset management's results have been segregated.
The real estate services' income from operations for 1995 decreased $35.6
million (64%). The 1995 decrease includes an $8.8 million after tax
restructuring charge principally in connection with the relocation and
consolidation of the real estate tax service business. Excluding the effect of
the restructuring charge, real estate services income from operations for 1995
and 1994 decreased $26.8 million (48%) and $28.4 million (34%), primarily due
to a significant decline in real estate tax service revenues caused by lower
mortgage refinancings.
Revenues decreased $37 million (13%) in 1995 and $32.2 million (10%) in 1994
as a result of decreased business at the real estate tax service operation.
Funds required for capital expenditures and working capital are generated by
operations. Cash, cash equivalents and accounts receivable, which totaled
$107.5 million at December 31, 1995 and $74.1 million at December 31, 1994,
are the real estate services' operations principal sources of liquidity.
Asset management in 1995 comprised Criterion Investment Management Company
(CIMC), which on May 2, 1995 sold substantially all of its assets for gross
proceeds of $60 million, and in 1994, Transamerica Fund Management Company
which was sold on December 21, 1994 for gross proceeds of $100 million. The
CIMC transaction resulted in a $4.8 million after tax gain. Asset management's
net income for 1995 was $6.2 million compared to $6.6 million for 1994 and a
net loss of $1.3 million for 1993. Operating results for 1995, 1994 and 1993
were income of $6.5 million, $8.3 million and $300,000. The 1994 improvement
was due primarily to a $4.9 million gain on sale of Transamerica Fund
Management Company and lower operating expenses within the mutual fund
business.
56 Transamerica Corporation and Subsidiaries
<PAGE>
REAL ESTATE SERVICES*
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
ASSETS
Cash, cash equivalents and accounts receivable $107.5 $ 74.1 $115.6
Investments 152.5 127.2 64.3
Land and buildings 168.4 149.2 166.4
Other assets 120.2 119.0 102.8
______ ______ ______
$548.6 $469.5 $449.1
====== ====== ======
LIABILITIES AND EQUITY
Loss and future service reserves $156.6 $137.9 $104.7
Notes and loans payable 149.2 109.2 96.9
Other liabilities 55.7 56.1 63.2
Equity 187.1 166.3 184.3
______ ______ ______
$548.6 $469.5 $449.1
====== ====== ======
REVENUES
Real estate services revenues $254.4 $291.4 $323.6
EXPENSES
Salaries and other operating expenses 223.6 199.6 187.2
Income taxes 10.5 35.9 52.1
______ ______ ______
234.1 235.5 239.3
______ ______ ______
Income from operations 20.3 55.9 84.3
Amortization of goodwill (0.1) (0.1) (0.1)
______ ______ ______
Net income $ 20.2 $ 55.8 $ 84.2
====== ====== ======
SOURCE OF CASH
Cash provided by operations $ 33.5 $133.6 $ 67.9
Proceeds from debt financing 22.6 11.5 12.8
______ ______ ______
$ 56.1 $145.1 $ 80.7
====== ====== ======
APPLICATION OF CASH
Equity transactions $ 15.1 $ 76.0 $ 55.2
Net purchases of investments 12.9 61.9 0.4
Payments of notes and loans 10.0 0.9 2.4
Other 18.1 6.3 22.7
______ ______ ______
$ 56.1 $145.1 $ 80.7
====== ====== ======
*Excludes Asset Management financial data.
Transamerica Corporation and Subsidiaries 57
<PAGE>
UNALLOCATED INTEREST AND OTHER EXPENSES
Unallocated costs, after related income taxes, are summarized as follows:
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
Interest expense $ 52.8 $ 50.2 $ 54.1
Other expenses
(income) 46.1 44.2 (48.0)
______ ______ ______
$ 98.9 $ 94.4 $ 6.1
====== ====== ======
Interest expense, after related income taxes, increased $2.6 million (5%) in
1995 and decreased $3.9 million (7%) in 1994. The 1995 increase was due to
higher outstanding debt. The 1994 decrease was 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, for 1995 included a $25.6 million
benefit from the satisfactory resolution of prior years' tax matters. This
benefit was partially offset by a $21.5 million after tax provision for an
expected loss on the Transamerica Center in downtown Los Angeles in
anticipation of a planned sale and leaseback transaction that is subject to
regulatory approval.
Excluding the items discussed above, other expenses increased $6 million in
1995 primarily due to the continuing centralization of certain administrative
functions which resulted in overall cost savings. These functions were
previously performed at the individual business units.
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 an additional tax provision
of $3.8 million from the revaluation of the January 1, 1993 deferred tax
liability. Excluding these items, other expenses increased $13 million (41%)
in 1994. The 1994 increase was primarily due to higher costs, principally
salary and benefits, as a result of centralizing certain administrative
functions.
58 Transamerica Corporation and Subsidiaries
<PAGE>
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 stockholders or purchase shares, reinvest in the
operations of its subsidiaries and pay corporate interest, expenses and taxes.
Reinvested funds are allocated among subsidiaries on the basis of expected
returns and creation of shareholder value. 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, 1995, Transamerica and its subsidiaries had short-term
borrowings, principally commercial paper, totaling $4.8 billion, supported by
credit agreements with 62 banks. It is the policy of the Corporation to
maintain credit line coverage at least equal to 100% of short-term borrowings.
Availability under such lines at December 31, 1995, amounted to $5.2 billion
or 110% of these borrowings; credit support equal to 82% 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. The notes will be
issued 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.
The Corporation's commercial paper, senior debt and preferred stock are rated
by independent rating agencies. The Corporation continues to maintain debt to
capital ratios consistent with its current ratings.
Additionally, Transamerica Finance Corporation, a wholly owned subsidiary of
Transamerica and also an SEC registrant, issues public debt to fund the
consumer lending, commercial lending and leasing operations.
In May 1995, Transamerica sold the assets of its investment management
subsidiary, Criterion Investment Management Company. Proceeds from the sale
were $60 million and were used by Transamerica to reduce debt.
As previously discussed, in March 1995 Transamerica acquired a portfolio of
approximately 40,000 home equity loans from ITT for $1,027.3 million in cash.
The purchase was funded primarily with long-term debt with the remainder
funded by short-term bank financing. For a discussion of this transaction see
"Consumer Lending."
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 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 April 1994, Transamerica sold its remaining 21% ownership interest in
Sedgwick Group plc. Proceeds from the sale were $326.4 million and were used
by Transamerica to purchase 4.5 million shares of its common stock and reduce
debt.
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.
Transamerica Corporation and Subsidiaries 59
<PAGE>
CORPORATE LIQUIDITY (continued)
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 extra-ordinary loss.
Stockholders' Equity
In June 1995, Transamerica announced that its board of directors had
authorized additional purchases of up to 2 million shares of the company's
common stock of which 1,445,000 had been purchased as of December 31, 1995. As
a result of this, and other previously announced share purchase programs,
during 1995 Transamerica purchased 2,386,200 shares for $148.1 million (an
average price of $62.06 per share).
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.
As a result of the June 1995 program and Dutch Auction tender discussed above,
and the purchase of 7.2 million shares under three previously announced share
purchase programs beginning in 1993, the number of common shares outstanding
at December 31, 1995 was 68 million compared to 69.4 million at December 31,
1994 and 76.4 million at December 31, 1993.
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
stockholders' equity and resulted in a 9 cent reduction in 1994 earnings per
share.
60 Transamerica Corporation and Subsidiaries
<PAGE>
INVESTMENT PORTFOLIO
Transamerica, principally through its life insurance subsidiaries, maintains
an investment portfolio aggregating $28 billion at December 31, 1995, of which
$26.1 billion was invested in fixed maturities. At December 31, 1995, 96% of
the fixed maturities was rated as "investment grade," with an additional 3% 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 $24.1 billion resulting in a net unrealized gain position,
before the effects of income taxes, of $2 billion at December 31, 1995. Fixed
maturity investments are used primarily to support insurance reserves. The
amortized cost of delinquent below investment grade securities before
provision for impairment in value was $6.9 million at December 31, 1995
compared to $12.4 million at December 31, 1994. Provision for impairment in
value has been made to reduce certain fixed maturity investments by $71.4
million at December 31, 1995 and $92.1 million at December 31, 1994.
The net unrealized gain/loss from investments marked to fair value, after
related taxes and deferred policy acquisition cost and policyholder liability
adjustments, which is included in stockholders' equity was a gain of $1.1
billion at December 31, 1995 compared to a loss of $265.1 million at December
31, 1994.
In 1994, Transamerica adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Accordingly, changes in stockholders' equity caused by changes in the fair
value of the investment portfolio in 1995 and 1994 are not comparable to 1993
because in 1993 investments in fixed maturities were carried at amortized
cost.
In addition to the investments in fixed maturities, $594.5 million (2% of the
investment portfolio) was invested in mortgage loans and real estate including
$544.9 million in commercial mortgage loans, $78.1 million in real estate
investments, $20 million in foreclosed real estate and $300,000 in residential
mortgage loans. Problem loans, defined as restructured loans yielding less
than 8% and delinquent loans, totaled $3.9 million at December 31, 1995 and
$7.7 million at December 31, 1994. Allowances for possible losses of $48.8
million at December 31, 1995 and $49.7 million at December 31, 1994 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 1995 1994
ASSETS
Investments, principally of life insurance
subsidiaries:
Fixed maturities $26,076.1 $21,037.0
Equity securities 703.2 427.2
Mortgage loans and real estate 594.5 455.5
Loans to life insurance policyholders 426.4 412.9
Short-term investments 226.5 163.7
_________ _________
28,026.7 22,496.3
Finance receivables, of which $3,821.1 in
1995 and $3,460.1 in 1994 matures within
one year 8,287.8 7,426.1
Less unearned fees ($289.7 in 1995 and $248.2
in 1994) and allowance for losses 529.7 455.2
_________ _________
7,758.1 6,970.9
Cash and cash equivalents 67.6 64.3
Trade and other accounts receivable 3,130.1 2,610.3
Property and equipment, less accumulated
depreciation of $1,140.6 in 1995 and
$974.9 in 1994:
Land, buildings and equipment 411.5 360.7
Equipment held for lease 2,862.0 2,606.6
Deferred policy acquisition costs 1,974.2 2,480.5
Separate accounts administered by life
insurance subsidiaries 2,533.4 1,666.5
Goodwill, less accumulated amortization of
$130.8 in 1995 and $123.2 in 1994 402.4 443.7
Other assets 778.5 694.0
_________ _________
$47,944.5 $40,393.8
========= =========
(Amounts in millions except for share data)
See notes to financial statements
62 Transamerica Corporation and Subsidiaries
<PAGE>
CONSOLIDATED BALANCE SHEET (continued)
____________________________________________________________________________
December 31 1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Life insurance policy liabilities $27,893.4 $24,731.7
Notes and loans payable, principally of
finance subsidiaries, of which $996.3 in
1995 and $1,684 in 1994 matures within
one year 10,337.8 9,173.1
Accounts payable and other liabilities 1,672.4 1,627.5
Income taxes, of which $891.5 in 1995
and $6.6 in 1994 is deferred 1,007.6 259.2
Separate account liabilities 2,533.4 1,666.5
Minority interest in preferred securities
of affiliate 200.0 200.0
Stockholders' 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, 180,091 shares in
1995 and 181,642 shares in 1994 at
liquidation preference of $500 per share 90.0 90.8
Common stock ($1 par value):
Authorized--150,000,000 shares
Outstanding--67,989,508 shares in 1995 and
69,395,099 shares in 1994, after deducting
11,748,954 and 10,343,363 shares in treasury
in 1995 and 1994 68.0 69.4
Additional paid-in capital 96.5
Retained earnings 2,866.0 2,557.4
Net unrealized gain (loss) from investments
marked to fair value 1,079.9 (265.1)
Foreign currency translation adjustments (29.0) (38.2)
_________ _________
4,299.9 2,735.8
_________ _________
$47,944.5 $40,393.8
========= =========
Transamerica Corporation and Subsidiaries 63
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
____________________________________________________________________________
Year ended December 31 1995 1994 1993
REVENUES
Life insurance premiums and related
income $1,862.8 $1,495.2 $1,255.7
Investment income 1,990.3 1,782.6 1,749.9
Finance charges and other fees 1,165.4 1,041.6 990.1
Leasing revenues 703.1 620.7 388.3
Real estate and tax service revenues 212.8 256.0 293.3
Gain on investment transactions 52.9 23.1 39.0
Other 113.8 135.3 97.0
________ ________ ________
6,101.1 5,354.5 4,813.3
EXPENSES
Life insurance benefits 2,858.7 2,356.4 2,145.9
Life insurance underwriting, acquisition
and other expenses 549.4 530.0 499.8
Leasing operating and maintenance costs 363.1 323.6 184.4
Interest and debt expense 716.7 573.7 511.6
Provision for losses on receivables
and assets held for sale 93.8 100.6 147.0
Other, including administrative and
general expenses 814.4 779.9 736.5
________ ________ ________
5,396.1 4,664.2 4,225.2
________ ________ ________
705.0 690.3 588.1
Income taxes 234.5 262.4 140.6
________ ________ ________
Income from continuing operations 470.5 427.9 447.5
Loss from discontinued operations (0.7) (47.0)
Extraordinary loss on early extinguishment
of debt (23.1)
________ ________ ________
Net income $ 470.5 $ 427.2 $ 377.4
======== ======== ========
EARNINGS PER SHARE OF COMMON STOCK
Income from continuing operations $ 6.58 $ 5.46 $ 5.40
Loss from discontinued operations (0.01) (0.60)
Extraordinary loss on early extinguishment
of debt (0.29)
________ ________ ________
Net income $ 6.58 $ 5.45 $ 4.51
======== ======== ========
(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 1995 1994 1993
OPERATING ACTIVITIES
Income from continuing operations $ 470.5 $ 427.9 $ 447.5
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 1,272.8 813.8 927.3
Amortization of policy acquisition
costs 191.3 182.3 232.7
Policy acquisition costs deferred (381.8) (394.9) (350.0)
Depreciation and amortization 306.5 263.2 159.8
Other (626.3) 81.6 (327.8)
_________ _________ _________
Net cash provided by continuing
operations 1,233.0 1,373.9 1,089.5
INVESTING ACTIVITIES
Finance receivables originated (19,247.3) (17,277.1) (13,664.0)
Finance receivables collected 19,251.2 16,639.5 13,375.2
Purchase of investments (6,256.3) (9,656.4) (12,102.5)
Sales and maturities of investments 4,204.9 7,151.4 9,647.5
Purchase of the container division
assets of Tiphook plc (1,061.4)
Purchase of finance receivables and
other assets from ITT Consumer
Financial Corporation (1,027.3)
Proceeds from sale of discontinued
operations 326.4 1,031.8
Cash transactions with discontinued
operations 5.4 (399.3)
Other (568.2) (506.3) (475.5)
_________ _________ _________
Net cash used by investing
activities (3,643.0) (4,378.5) (2,586.8)
FINANCING ACTIVITIES
Proceeds from debt financing 8,476.9 7,197.6 5,308.2
Payments of notes and loans (7,330.4) (5,766.2) (5,239.5)
Receipts from interest-sensitive
policies credited to policyholder
account balances 5,151.4 4,434.7 4,166.3
Return of policyholder balances on
interest-sensitive policies (3,624.0) (2,419.9) (2,313.2)
Proceeds from sale of preferred
securities of affiliate 192.6
Redemption of preferred stock (0.8) (115.9)
Treasury stock purchases (155.4) (387.0) (207.6)
Other common stock transactions 51.0 8.0 33.5
Dividends (155.4) (167.7) (179.7)
_________ _________ _________
Net cash provided by financing
activities 2,413.3 2,976.2 1,568.0
_________ _________ _________
Increase (decrease) in cash and
cash equivalents 3.3 (28.4) 70.7
Cash and cash equivalents at beginning
of year 64.3 92.7 22.0
_________ _________ _________
Cash and cash equivalents at end
of year $ 67.6 $ 64.3 $ 92.7
========= ========= =========
(Amounts in millions)
See notes to financial statements
Transamerica Corporation and Subsidiaries 65
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' 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 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)
Net income 470.5
Dividends declared:
On common stock (137.4)
On preferred stock (18.0)
Common stock issued 1.1 49.9
Treasury stock purchased (2.5) (146.4) (6.5)
Redemption of preferred stock (0.8)
Other changes 1,345.0 9.2
______ _____ ______ ________ ________ ______
BALANCE AT DECEMBER 31, 1995 $315.0 $68.0 $ $2,866.0 $1,079.9 $(29.0)
====== ===== ====== ======== ======== ======
<FN>
(Amounts in millions)
See notes to financial statements
</TABLE>
66 Transamerica Corporation and Subsidiaries
<PAGE>
NOTES TO FINANCIAL STATEMENTS December 31, 1995
____________________________________________________________________________
A SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in life insurance, consumer lending, commercial
lending, leasing and real estate services. The United States represents the
primary market for the services offered by most of Transamerica's subsidiaries
except for the leasing business which operates in the container shipping
business worldwide.
CONSOLIDATION
The consolidated financial statements include the accounts of Transamerica
Corporation and its subsidiaries. Certain amounts reported in the consolidated
financial statements are based on management estimates. The ultimate
resolution of these items may differ from those estimates.
INVESTMENTS
Investments in fixed maturities, comprising bonds, notes and redeemable
preferred stocks, are carried at 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
information obtained from independent pricing services. Investments in equity
securities, comprising corporate common and nonredeemable preferred stocks,
are carried at fair value based on quoted market prices. Changes to the
carrying amount of fixed maturity and equity securities are included in
stockholders' equity. Realized gains and losses on investment transactions are
determined generally on a specific identification basis and reflected in
earnings 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. Other
intangible assets, principally renewal, referral and other rights incident to
businesses acquired, are amortized over estimated future benefit periods
ranging from five to 25 years in proportion to acquired gross profits.
Goodwill is amortized over periods up to 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, except that accrual of finance charges is suspended on accounts that
become past due contractually in excess of 29 days for consumer loans or 90
days for commercial loans.
Leasing revenues are recognized in the period earned.
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.
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.
Life insurance premiums are generally recognized as earned over the premium
paying periods, with reserves for future benefits established from such
<PAGE>
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
Transamerica Corporation and Subsidiaries 67
<PAGE>
A SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Although realization of the benefits associated with deferred policy
acquisition costs is not assured, management believes it is more likely than
not that such amounts will be realized. Adequate provision is made for
reported and unreported claims and related expenses.
DERIVATIVES
Transamerica uses derivative financial instruments to hedge some of its
interest rate risk. The cost of each derivative contract is amortized over the
life of the contract. The amortization is classified with the results of the
underlying hedged item. Certain contracts are designated as hedges of specific
assets within the investment portfolio and to the extent those investments are
marked to market, the hedge contracts are also marked to market and included
as an adjustment to the underlying asset value. Other contracts are designated
and accounted for as hedges of certain of Transamerica's liabilities and
outstanding indebtedness and are not marked to market. Gains or losses on
terminated hedges are deferred and amortized over the remaining life of the
hedged item.
STOCK BASED COMPENSATION
Transamerica accounts for stock based compensation under the provisions of
Accounting Principles Board Opinion No. 25 and intends to continue to do so.
NEW ACCOUNTING STANDARDS
In 1995, Transamerica adopted the Financial Accounting Standards Board's new
standard on accounting for impairment of loans. The new standard 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. The new standard did not have a material effect on the
consolidated financial statements of Transamerica.
In March 1995, the Financial Accounting Standards Board issued a new standard
on accounting for the impairment of long lived assets and for long lived
assets to be disposed of. Transamerica will adopt this new standard in the
first quarter of 1996. The new standard requires that Transamerica assess
whether the carrying amount of an asset is recoverable whenever events or
changes in circumstances indicate that a significant change in the value of
the asset may have occurred. At adoption this new standard will not have a
material effect on the consolidated financial statements of Transamerica.
In May 1995, the Financial Accounting Standards Board issued a new standard on
accounting for mortgage servicing rights. Transamerica will adopt this new
standard in the first quarter of 1996. The new standard requires that mortgage
servicing rights be capitalized when acquired either through the purchase or
origination of mortgage loans that are subsequently sold or securitized with
the servicing rights retained and when the relative fair values of the loans
and the related mortgage servicing rights can be estimated. At adoption this
new standard will not have a material effect on the consolidated financial
statements of Transamerica.
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. In addition, the reserves for future benefits
are evaluated as if the unrealized gains on debt securities were realized, and
adjusted for any resultant premium deficiencies. The effect of these
adjustments, net of federal income taxes, is recorded in a separate component
of stockholders' equity. There is no effect on the income statement. Prior to
1994 investments in debt securities were carried at amortized cost.
EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of common stock are based on the weighted average number of
shares outstanding (68,758,000 in 1995, 72,592,000 in 1994, and 78,495,000 in
1993) 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. The affiliate may redeem the outstanding
MIPS, in whole or in part, on or after October 25, 1999. 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 redeemed by the affiliate. Interest on the outstanding MIPS is
cumulative and payable monthly in arrears. The fair value of this obligation
at December 31, 1995, and 1994 was $220 million and $199 million.
C STOCK OPTION PLANS
At December 31, 1995, under Transamerica's stock option plans, 15,389,110
shares of common stock (11,457,178 shares at December 31, 1994) were reserved
principally for sale to key employees of the Corporation and subsidiaries at
market value or higher on the option grant date. During 1995, options for
7,070,300 shares were granted, including options granted under the 1995
Performance Stock Option Plan discussed below, and options for 1,064,798
shares were cancelled due to forfeiture. Options were exercised for 1,068,068
shares in 1995, 194,823 shares in 1994 and 1,019,081 shares in 1993, at
aggregate option prices of $41.1 million, $7 million and $36 million. Of the
options for 11,615,958 shares outstanding at December 31, 1995 (6,678,524
shares at December 31, 1994) at an aggregate option price of $739.6 million,
options for 3,532,683 shares were exercisable. In February 1996, options for
1,406,900 shares were granted at an option price equal to market value on the
date granted.
In April 1995, the stockholders approved the 1995 Performance Stock Option
Plan and, under the terms of the Plan, Transamerica made three separate
one-time grants of nonqualified stock options totaling 5 million 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 4.49%, 5.10% and 4.40% at December 31, 1995 and 5.00%, 4.69% and
4.59% at December 31, 1994.
Transamerica also has outstanding 3,601,827 depositary shares at December 31,
1995 (3,632,827 shares at December 31, 1994) 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, 1995, 5,000,000 shares of preference stock (without par value)
were authorized but unissued.
Transamerica Corporation and Subsidiaries 69
<PAGE>
E FINANCIAL INSTRUMENTS
INVESTMENTS
The cost and fair value of fixed maturities and equity securities at December
31, 1995 and 1994 were as follows:
<TABLE>
______________________________________________________________________________________________________
<CAPTION>
(Amounts in millions) Gross Gross
Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
U.S. Treasury securities and obligations of
U.S. government authorities and agencies $ 98.9 $ 7.5 $ 106.4
Obligations of states and political subdivisions 355.0 18.0 $ 0.6 372.4
Foreign governments 110.2 9.2 119.4
Corporate securities 11,803.4 1,133.2 8.6 12,928.0
Mortgage-backed securities 7,300.5 487.2 37.1 7,750.6
Public utilities 4,381.7 393.4 2.9 4,772.2
Redeemable preferred stock 23.7 3.9 0.5 27.1
_________ ________ ________ _________
Total fixed maturities $24,073.4 $2,052.4 $ 49.7 $26,076.1
========= ======== ======== =========
Equity securities $ 349.9 $ 360.3 $ 7.0 $ 703.2
========= ======== ======== =========
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
========= ======== ======== =========
</TABLE>
The cost and fair value of fixed maturities at December 31, 1995 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 $ 594.5 $ 608.0
Due after one year through five years 2,988.3 3,115.0
Due after five years through ten years 3,778.1 4,031.6
Due after ten years 9,412.0 10,570.9
_________ _________
16,772.9 18,325.5
Mortgage-backed securities 7,300.5 7,750.6
_________ _________
$24,073.4 $26,076.1
========= =========
70 Transamerica Corporation and Subsidiaries
<PAGE>
The carrying values and estimated fair values of investments in mortgage loans
on real estate and loans to life insurance policyholders at December 31, 1995
and 1994 were as follows:
____________________________________________________________________________
(Amounts in millions) Carrying Estimated
Value Fair Value
DECEMBER 31, 1995
Mortgage loans on real estate $523.7 $630.4
====== ======
Loans to life insurance policyholders $426.4 $408.1
====== ======
DECEMBER 31, 1994
Mortgage loans on real estate $354.1 $369.0
====== ======
Loans to life insurance policyholders $412.9 $383.5
====== ======
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) 1995 1994 1993
Net gain on sale of investments $ 85.7 $ 50.1 $157.3
Provision for impairment in value (23.6) (20.7) (55.5)
Accelerated amortization of deferred policy
acquisition costs (9.2) (6.3) (62.8)
______ ______ ______
$ 52.9 $ 23.1 $ 39.0
====== ====== ======
Proceeds from sales of fixed maturities and equity securities were $4 billion
in 1995, $2.7 billion in 1994 and $5.2 billion in 1993. Gross gains of $95
million in 1995, $107.5 million in 1994 and $325.3 million in 1993, and gross
losses of $11.7 million in 1995, $67.5 million in 1994 and $163.6 million in
1993 were realized on those sales.
Transamerica and its subsidiaries use interest rate exchange and other
agreements to hedge the interest rate sensitivity of a small portion of its
fixed maturity investments.
The net unrealized gain (loss) included in stockholders' equity as a result of
marking the fixed maturities and equity securities to fair value at December
31, 1995 and 1994 were as follows:
____________________________________________________________________________
(Amounts in millions) 1995 1994
Net unrealized gain on equity securities $ 353.3 $ 151.8
Net unrealized gain (loss) on investments
in fixed maturities 1,990.3 (899.7)
Net unrealized gain (loss) on derivative
instruments which hedge a portion of
investments in fixed maturities 12.4 (11.3)
Adjustment to deferred policy acquisition costs (355.6) 351.3
Adjustment to life insurance policy liabilities (339.0)
Deferred income taxes (581.5) 142.8
________ _______
$1,079.9 $(265.1)
======== =======
Transamerica Corporation and Subsidiaries 71
<PAGE>
E FINANCIAL INSTRUMENTS (continued)
NOTES AND LOANS PAYABLE
____________________________________________________________________________
(Amounts in millions) 1995 1994
TRANSAMERICA FINANCE CORPORATION:
Short-term bank loans, commercial paper and
currentportion of long-term debt $ 743.3 $1,387.1
Long-term debt due subsequent to one year:
Notes and debentures; interest at 5.24% to
9.41%; maturing through 2010 3,603.7 2,477.3
Notes and debentures; interest at 13.8% to
13.88%; maturity value of $582.8 million;
maturing through 2012 162.0 154.2
Commercial paper and other notes at various
interest rates and terms supported by credit
agreements expiring through 2000 4,334.6 3,672.5
Subordinated notes and debentures; interest
at 5.57% to 9.95%; maturing through 2003 784.6 841.2
Loans due to parent company and other subsidiaries 61.7 192.0
_________ ________
9,689.9 8,724.3
PARENT COMPANY AND OTHER SUBSIDIARIES:
Short-term bank loans, commercial paper and
current portion of long-term debt 253.0 296.9
Long-term debt due subsequent to one year:
Notes and debentures; interest at 6.5% to 9.88%;
maturing through 2016 223.1 252.8
Commercial paper and other notes at various
interest rates and terms supported by credit
agreements expiring through 1998 211.3
Notes at variable interest rates; maturing
through 1998 22.2 91.1
Less loans to Transamerica Finance Corporation (61.7) (192.0)
_________ ________
647.9 448.8
_________ ________
$10,337.8 $9,173.1
========= ========
The weighted average interest rate on short-term borrowings at December 31,
1995 and 1994 was 5.80% and 5.81%.
Assets with a net book value of $423.4 million at December 31, 1995,
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,
1996 are $2 billion in 1997, $2.5 billion in 1998, $1.6 billion in 1999 and
$2.1 billion in 2000.
Under credit agreements with various banks, Transamerica and its subsidiaries
had the ability to borrow up to $5.2 billion with interest at variable rates
at December 31, 1995. There were no borrowings outstanding under these credit
lines at that date. These credit agreements, which expire through 2000,
require a fee on the commitment.
Transamerica and its subsidiaries use interest rate exchange agreements to
hedge the interest rate sensitivity of a portion of outstanding indebtedness.
Interest payments, net of amounts received from interest rate exchange
agreements, totaled $696 million in 1995, $661.8 million in 1994 and $623.4
million in 1993.
The estimated fair value of notes and loans payable, using rates currently
available for debt with similar terms and maturities, was $10,800 million at
December 31, 1995 and $9,108 million at December 31, 1994.
72 Transamerica Corporation and Subsidiaries
<PAGE>
CONCENTRATION OF RISK AND FAIR VALUE OF RECEIVABLES
Transamerica's consumer and commercial lending operations engage 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 $4 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 37% were located in California. The commercial finance
receivables portfolio represents lending arrangements with approximately
100,000 customers. At December 31, 1995, the portfolio included 15 customers
with individual balances in excess of $15 million. These accounts represented
11% of total commercial net finance receivables outstanding at December 31,
1995.
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.
The carrying amounts and estimated fair values of the finance receivable
portfolio at December 31, 1995 and 1994 were as follows:
____________________________________________________________________________
(Amounts in millions) Carrying Estimated
Value Fair Value
DECEMBER 31, 1995
Fixed rate receivables -
Consumer $4,772.2 $5,409.0
Commercial 344.7 355.4
Variable rate receivables -
Commercial 2,641.2 2,641.2
________ ________
$7,758.1 $8,405.6
======== ========
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
======== ========
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. The carrying amounts and estimated fair values of the liabilities
for investment-type contracts at December 31, 1995 and 1994 were as follows:
____________________________________________________________________________
(Amounts in millions) Carrying Estimated
Value Value Fair
DECEMBER 31, 1995
Single and flexible premium deferred annuities $ 8,080.1 $ 7,518.2
Single premium immediate annuities 4,124.0 4,677.7
Guaranteed investment contracts 2,958.9 2,998.0
Other deposit contracts 2,785.7 2,848.3
_________ _________
$17,948.7 $18,042.2
========= =========
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
========= =========
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). Transamerica does not use derivative financial instruments for
trading or speculative purposes, nor is Transamerica a party to any leveraged
derivative contracts. 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, 1995 and 1994,
all Transamerica's derivative financial instruments were with financial
institutions rated A or better by one or more of the major credit rating
agencies.
Asset and Liability 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.
At December 31, 1995 and 1994, the unamortized cost of the instruments that
hedge assets was $15.9 million and $18 million, and the fair value of these
asset hedges comprised gross obligations to counterparties of $9.7 million and
$5.4 million and gross benefits from counterparties of $38 million and $12.1
million. The net unrealized gain (loss) on derivative contracts that hedge
assets is included in stockholders' equity to offset the effect of changes to
the fair value of the underlying hedged asset. At December 31, 1995 and 1994
the net after tax unrealized gain (loss) included in stockholders' equity from
marking asset hedges to fair value was $8.1 million and $(7.3) million.
The unamortized cost of the liability hedges ($18.9 million at December 31,
1995 and $2.9 million at December 31, 1994) is amortized over the remaining
lives of the contracts, which range up to ten years. Transamerica's interest
rate cap agreements limit the amount of interest paid in the event interest
rates rise above specified levels. Transamerica pur-
74 Transamerica Corporation and Subsidiaries
<PAGE>
chases swaptions, which 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.
The net present value of the liability hedges offsets changes in the fair
value of the hedged liabilities, which are also carried at amortized cost. The
fair value of the liability hedges at December 31, 1995 and 1994 were gross
obligations of $32.9 million and $31.8 million and gross benefits of $84.5
million and $22.2 million resulting in a net benefit from counterparties of
$51.6 million at December 31, 1995 and a net obligation to counterparties of
$9.6 million at December 31, 1994.
At December 31, 1995 and 1994 asset hedges comprise:
<TABLE>
_______________________________________________________________________________________________________________
<CAPTION>
(Dollar amounts in millions) Weighted Weighted
Notional Average Fixed Average Floating
Amount Interest Rate Interest Rate
<S> <C> <C> <C>
1995
Interest rate swap agreements - Transamerica receives:
Floating rate interest income, pays fixed rate
interest expense $ 235.2 8.0% 6.3%
======== ==== ====
Fixed rate interest income, pays floating rate interest
expense $ 140.0 5.7% 5.9%
======== ==== ====
Floating rate interest income based on one index (6.3%)
and pays floating rate interest expense based on another
index (5.0%) $ 65.0
========
Interest rate floor agreements $ 560.5 6.5%
======== =====
1994
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%
======== ====
</TABLE>
At December 31, 1995 and 1994 liability hedges comprise:
<TABLE>
_______________________________________________________________________________________________________________
<CAPTION>
(Dollar amounts in millions) Weighted Weighted
Notional Average Fixed Average Floating
Amount Interest Rate Interest Rate
<S> <C> <C> <C>
1995
Interest rate swap agreements - Transamerica pays:
Floating rate interest expense, receives fixed rate
interest income $1,029.7 6.4% 5.9%
======== ==== ====
Fixed rate interest expense, receives floating rate
interest income $ 793.9 7.1% 5.8%
======== ==== ====
Floating rate interest expense based on one index (5.9%)
and receives floating rate interest income based on
another index (5.9%) $ 253.0
========
Swaptions $1,267.1 5.3%
======== ====
Interest rate cap agreements $ 250.0 6.5%
======== ====
Cross currency swaps and foreign interest rate swaps $ 144.5
========
<PAGE>
1994
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
========
Swaptions $ 100.0 7.0%
======== ====
Interest rate cap agreements $ 100.0 5.0%
======== ====
</TABLE>
Transamerica Corporation and Subsidiaries 75
<PAGE>
F INCOME TAXES
The provision for income taxes on income from continuing operations
comprises:
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
Federal current $ 69.9 $215.4 $213.0
Federal deferred tax provision (benefit) 128.8 12.1 (110.7)
State 19.1 22.6 27.1
Foreign 16.7 12.3 11.2
______ ______ ______
$234.5 $262.4 $140.6
====== ====== ======
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, 1995 and 1994
are as follows:
____________________________________________________________________________
(Amounts in millions) 1995 1994
Deferred tax assets:
Allowance for losses $ 75.7 $ 106.9
Impairment of investments 57.3 49.6
Life insurance policy liabilities 585.3 584.6
Unrealized loss on marking investments to fair value 142.8
Loss and tax credits carryforward 24.4 19.0
Other 212.5 191.5
________ ________
955.2 1,094.4
Deferred tax liabilities:
Deferred policy acquisition costs 696.8 650.3
Accelerated depreciation 446.4 320.7
Unrealized gain on marking investments to fair value 581.5
Discount amortization on notes and loans payable 68.7 66.2
Other 53.3 63.8
________ ________
1,846.7 1,101.0
________ ________
Net deferred tax liability $ 891.5 $ 6.6
======== ========
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) 1995 1994 1993
Federal income taxes at statutory rate $246.8 $241.6 $205.8
State income taxes 12.4 14.7 17.6
Prior year items (30.0) (94.2)
Effect of tax rate change on deferred tax
liability 8.4
Other 5.3 6.1 3.0
______ ______ ______
$234.5 $262.4 $140.6
====== ====== ======
Income tax payments totaled $148.3 million in 1995, $71.9 million in 1994 and
$135.5 million in 1993. The loss from discontinued operations includes an
income tax provision of $200,000 in 1994 and a tax benefit of $13 million in
1993.
76 Transamerica Corporation and Subsidiaries
<PAGE>
G BUSINESS SEGMENT INFORMATION
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
REVENUES
Life insurance $ 3,866.5 $ 3,289.6 $ 3,026.3
Consumer lending 782.5 690.6 654.3
Commercial lending 423.7 384.3 370.7
Leasing 733.9 637.9 407.8
Real estate services** 285.8 367.5 363.6
Other* 8.7 (15.4) (9.4)
_________ _________ _________
$ 6,101.1 $ 5,354.5 $ 4,813.3
========= ========= =========
OPERATING PROFIT AS DEFINED BY
FINANCIAL ACCOUNTING STANDARD NO. 14****
Life insurance $ 458.4 $ 403.2 $ 380.6
Consumer lending 134.0 148.1 158.6
Commercial lending 111.8 72.0 (18.1)
Leasing 119.7 101.9 91.5
Real estate services** 78.5 137.5 151.5
_________ _________ _________
902.4 862.7 764.1
Unallocated interest, expenses and
investment transactions (176.4) (156.5) (160.4)
Interest expense for real estate services (21.0) (15.9) (15.6)
Income tax expense (234.5) (262.4) (140.6)
_________ _________ _________
Income from continuing operations $ 470.5 $ 427.9 $ 447.5
========= ========= =========
ASSETS
Life insurance $35,099.8 $28,967.1 $26,109.0
Consumer lending 5,308.3 4,475.4 3,946.1
Commercial lending 3,423.4 3,363.9 3,508.5
Leasing 3,477.8 3,184.2 1,697.0
Real estate services** 548.6 524.0 557.2
Other*** 86.6 (120.8) 232.7
_________ _________ _________
$47,944.5 $40,393.8 $36,050.5
========= ========= =========
ADDITIONS, AT COST, TO PROPERTY AND EQUIPMENT
Leasing $ 573.3 $ 1,525.3 $ 411.0
Other 80.9 70.2 64.4
_________ _________ _________
$ 654.2 $ 1,595.5 $ 475.4
========= ========= =========
DEPRECIATION
Leasing $ 236.6 $ 201.7 $ 105.9
Other 53.9 46.7 39.2
_________ _________ _________
$ 290.5 $ 248.4 $ 145.1
========= ========= =========
*Includes intercompany eliminations.
**In 1995 Transamerica completed the sale of its asset management
operations. At December 31, 1995, 1994 and 1993 and for the years then
ended, revenues of the asset management operations were $31.4 million,
$76.1 million and $40 million, operating profit was $26.8 million, $30.9
million and $0.4 million and assets were $0, $54.5 million and $108.1
million.
***Includes intercompany eliminations and in 1993 net assets of discontinued
operations.
****For income by segment as used for management purposes, see table included
on page 45 of the financial review.
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. Transamerica's funding policy
is to make contributions as necessary to provide assets sufficient to meet its
obligation to plan members in accordance with the requirements of the Employee
Retirement Income Security Act of 1974.
A summary of the components of net periodic pension cost follows:
____________________________________________________________________________
(Amounts in millions) 1995 1994 1993
Service cost - benefits earned during the period $ 12.3 $ 15.4 $ 15.6
Interest cost on projected benefit obligation 50.9 46.4 43.6
Actual return (gain) loss on plan assets (259.2) 19.3 (145.7)
Deferral of current gains (losses) varying from
expected return 199.2 (71.7) 97.7
Amortization of prior service costs 3.4 5.7 5.0
______ ______ ______
Total pension cost $ 6.6 $ 15.1 $ 16.2
====== ====== ======
The following table sets forth the amounts recognized in the consolidated
statement of financial position for the pension plans:
____________________________________________________________________________
(Amounts in millions) 1995 1994
Actuarial present value of benefit obligations:
Vested benefit obligation* $687.1 $586.1
====== ======
Accumulated benefit obligation $695.4 $593.2
====== ======
Projected benefit obligation, including effects of
future salary increases $732.2 $650.1
Plan assets at fair value 991.5 746.8
______ ______
Excess of plan assets over projected benefit obligation $259.3 $ 96.7
====== ======
The excess of plan assets over projected benefit
obligation comprises:
Net pension liability $ (5.6) $ (3.6)
Unrecognized net gain arising since January 1, 1986 278.1 119.3
Unrecognized prior service cost (16.2) (21.8)
Unrecognized net obligation at January 1, 1986
net of amortization (6.0) (7.1)
Adjustment required to recognize minimum liability 9.0 9.9
______ ______
$259.3 $ 96.7
====== ======
*A portion of the vested benefit obligation is unconditionally guaranteed by
Transamerica Occidental Life Insurance Company, a wholly owned subsidiary of
Transamerica.
The projected benefit obligation was determined using a weighted average
discount rate of 7% (8% in 1994) and an assumed rate of compensation increase
of 5.50%. The expected long-term rate of return on plan assets was 8.25%
(8.75% in 1994 and 8% in 1993).
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, 1995 approximately $4.8 billion is so restricted,
and $0.4 billion is free for remittance to Transamerica subject to investment
and operating requirements.
J DISCONTINUED OPERATIONS
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 the Sedgwick investment were a loss of
$700,000 in 1994 representing results through the date of sale and income of
$3 million in 1993.
In 1993, Transamerica sold its former property and casualty insurance
subsidiary, Transamerica Insurance Group. The net proceeds 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.
K COMMITMENTS AND CONTINGENCIES
In connection with the sale of Transamerica Insurance Group, discussed in Note
J, a subsidiary of Transamerica 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,
1995 by providing letters of credit aggregating $160 million and by placing
$224 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.
Substantially all leases of Transamerica and its subsidiaries are operating
leases principally for the rental of real estate. Total rental expense
amounted to $82.7 million in 1995, $99.9 million in 1994 and $88.1 million in
1993.
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>
1995 March 31 June 30 September 30 December 31 1995 Total
<S> <C> <C> <C> <C> <C>
Revenues $1,420.5 $1,581.0 $1,581.2 $1,518.4 $6,101.1
======== ======== ======== ======== ========
Income from continuing
operations:
Operating income before
investment transactions $94.3 $111.2 $122.3 $108.3 $436.1
Gain on investment
transactions 2.0 6.6 24.7 1.1 34.4
_____ ______ ______ ______ ______
Net income $96.3 $117.8 $147.0 $109.4 $470.5
===== ====== ====== ====== ======
Earnings per share of common
stock:
Income from continuing operations:
Operating income before
investment transactions $1.30 $1.54 $1.72 $1.52 $6.08
Gain on investment
transactions 0.03 0.09 0.36 0.02 0.50
_____ _____ _____ _____ _____
Net income $1.33 $1.63 $2.08 $1.54 $6.58
===== ===== ===== ===== =====
High and low sales prices
for common shares $ 59-49 1/2 $61 1/8-55 3/4 $ 71 1/2-58 $77 1/2-65 3/4 $77 1/2-49 1/2
__________________________________________________________________________________________________________________
<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:
Operating income before
investment transactions $102.0 $102.6 $ 98.9 $109.4 $412.9
Gain on investment
transactions 1.7 3.1 6.0 4.2 15.0
______ ______ ______ ______ ______
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:
Operating income before
investment transactions $1.27 $1.30 $1.31 $1.37 $5.25
Gain on 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
<FN>
(Dollar amounts in millions except for share data)
Note A. On February 29, 1996 the closing sales price for Transamerica common
shares was $75 3/8 and there were 49,400 common stockholders of record.
</TABLE>
Transamerica Corporation and Subsidiaries 81
<PAGE>
<TABLE>
SELECTED ELEVEN-YEAR FINANCIAL DATA
______________________________________________________________________________________________________
<CAPTION>
(Dollar amounts in millions
except for share data) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Revenues $ 6,101.1 $ 5,354.5 $ 4,813.3 $ 4,550.9 $ 4,175.2
Income from continuing operations $ 470.5 $ 427.9 $ 447.5 $ 334.0 $ 5.6
Earnings per share of common
stock (Note A):
Income (loss) from continuing
operations $ 6.58 $ 5.46 $ 5.40 $ 4.00 $(0.08)
FINANCIAL POSITION
Total assets $47,944.5 $40,393.8 $36,050.5 $33,290.9 $31,133.6
Notes and loans payable:
Long-term debt $ 9,341.5 $ 7,489.1 $ 5,681.0 $ 6,510.5 $ 6,975.6
OTHER DATA
Per share of common stock:
Dividends declared (Note E) $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 1.98
<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 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 1995 and 1994.
</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, and Zurich.
88 Transamerica Corporation and Subsidiaries
<PAGE>
EXHIBIT 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
Pyramid Insurance Company, Ltd. Hawaii
Pacific Cable Ltd. Bermuda
TC Cable, Inc. (25% ownership) Delaware
River Thames Insurance Company Ltd. (51% ownership) United Kingdom
Transamerica Finance Group, Inc. Delaware
Transamerica Financial Services Finance Company Delaware
Transamerica HomeFirst, Inc. California
Transamerica Finance Corporation 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
Arcadia General Insurance Company Arizona
Arcadia National Life Insurance Company Arizona
Transamerica Insurance Administrators, Inc. Delaware
First Credit Corporation Delaware
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. Hawaii
Transamerica Financial Services, Inc. Kansas
Transamerica Financial Services Inc. Minnesota
-1-
<PAGE>
Jurisdiction of
Organization
of Named
Subsidiary
_______________
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
BWAC Twenty-One, Inc./Transamerica GmbH Inc. Germany
Transamerica Finanzierungs GmbH Germany
Transamerica Business Credit Corporation Delaware
Transamerica Inventory Finance Corporation Delaware
Transamerica Commercial Finance Corporation Delaware
TCF Asset Management Corporation Colorado
Transamerica Joint Ventures, Inc. Delaware
BWAC Seventeen, Inc. Delaware
Transamerica Commercial Finance Corporation,
Canada Canada
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% ownership) United Kingdom
Transamerica GmbH Inc. Delaware
Transamerica Financieringsmattschappij B.V. Netherlands
TA Leasing Holding Co., Inc. Delaware
Transamerica Leasing Inc. Delaware
Transamerica Leasing Holdings, Inc. Delaware
Greybox Services Ltd. United Kingdom
Greybox L.L.C. Delaware
Intermodal Equipment, Inc. Delaware
Transamerica Leasing N.V. Belgium
Transamerica Leasing Srl. Italy
Transamerica Container Acquisition
Corporation Delaware
Transamerica Distribution Services Inc. Delaware
Transamerica Leasing Coordination Center Belgium
Transamerica Leasing do Brasil 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 Proprietary Limited South Africa
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
-2-
<PAGE>
Jurisdiction of
Organization
of Named
Subsidiary
_______________
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 Information Management Services, Inc. Delaware
Transamerica Insurance Corporation of California California
Arbor Life Insurance Company Arizona
Plaza Insurance Sales, 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
Transamerica Financial Resources Insurance
Agency of Alabama, Inc. Alabama
Transamerica Financial Resources Insurance Agency
of Massachusetts, Inc. Massachusetts
Transamerica Securities Sales Corporation Maryland
Transamerica International Insurance Services, Inc. Delaware
Bulkrich Trading Limited (50% ownership) Hong Kong
Home Loans & Finance Limited United Kingdom
Transamerica Occidental Life Insurance Company California
Bulkrich Trading Limited (50% ownership) Hong Kong
First Transamerica Life Insurance Company New York
Transamerica Life Insurance and Annuity Company North Carolina
Transamerica Assurance Company Missouri
Transamerica Life Insurance Company of Canada Canada
Transamerica Variable Insurance Fund, Inc. Maryland
USA Administration Services, Inc. Kansas
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) Delaware
Transamerica Investment Services, Inc. Delaware
Transamerica Investors, Inc. Maryland
Transamerica LP Holdings Corp. Delaware
-3-
<PAGE>
Jurisdiction of
Organization
of Named
Subsidiary
_______________
Transamerica Realty Services, Inc. Delaware
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 Telecommunications Corporation Delaware
-4-
<PAGE>
EXHIBIT 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, 33-55587 and 33-64221 and Form S-3
Nos. 33-32419, 33-37889, 33-41008, 33-55047 and 33-63049) and related
Prospectuses, of Transamerica Corporation of our report dated February 14,
1996 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, 1995.
Ernst & Young LLP
San Francisco, California
March 25, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
Each of the undersigned hereby constitutes and appoints BURTON E. BROOME,
SHIRLEY H. BUCCIERI 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 1995 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 or her
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned directors have executed this Power of
Attorney effective as of the 22nd day of March, 1996.
MYRON DU BAIN TONI REMBE
______________________________ ______________________________
Myron Du Bain Toni Rembe
SAMUEL L. GINN CONDOLEEZZA RICE
______________________________ ______________________________
Samuel L. Ginn Condoleezza Rice
JAMES R. HARVEY CHARLES R. SCHWAB
______________________________ ______________________________
James R. Harvey Charles R. Schwab
FRANK C. HERRINGER FORREST N. SHUMWAY
______________________________ ______________________________
Frank C. Herringer Forrest N. Shumway
GORDON E. MOORE PETER V. UEBERROTH
______________________________ ______________________________
Gordon E. Moore Peter V. Ueberroth
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 68
<SECURITIES> 703
<RECEIVABLES> 3,130
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,274
<DEPRECIATION> 1,141
<TOTAL-ASSETS> 47,945
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
315
<COMMON> 68
<OTHER-SE> 3,917
<TOTAL-LIABILITY-AND-EQUITY> 47,945
<SALES> 0
<TOTAL-REVENUES> 6,101
<CGS> 0
<TOTAL-COSTS> 3,771
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 94
<INTEREST-EXPENSE> 717
<INCOME-PRETAX> 705
<INCOME-TAX> 235
<INCOME-CONTINUING> 470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 470
<EPS-PRIMARY> 6.58
<EPS-DILUTED> 6.58
</TABLE>
