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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1999
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
incorporation or organization) Identification No.)
600 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices)
(Zip Code)
(415) 983-4000
(Registrant's telephone number, including area code)
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
Number of shares of Common Stock, $1 par value, outstanding as of close of
business on April 23, 1999: 124,647,439 shares.
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TRANSAMERICA CORPORATION
FORM 10-Q
Part I. Financial Information
Item 1. Financial Statements.
The following unaudited consolidated financial statements of Transamerica
Corporation and Subsidiaries, for the periods ended March 31, 1999 and 1998, and
the balance sheet as of December 31, 1998 do not include complete financial
information and should be read in conjunction with the Consolidated Financial
Statements filed with the Commission in Transamerica's Annual Report on Form
10-K for the year ended December 31, 1998. The financial information presented
in the financial statements included in this report reflects all adjustments,
consisting only of normal recurring accruals, which are, in the opinion of
management, necessary for a fair statement of results for the interim periods
presented. Results for the interim periods are not necessarily indicative of the
results for the entire year for most of the Corporation's businesses.
* * * * * * *
On February 18, 1999, Transamerica announced that it had signed a merger
agreement with AEGON N.V. (AEGON) providing for AEGON's acquisition of all of
Transamerica's outstanding common stock for a combination of cash and AEGON
stock worth $9.7 billion. The merger is expected to close during the summer of
1999.
Earnings per share are calculated by dividing income available to common
stockholders by the average number of common, and for diluted earnings per share
common stock equivalent, shares outstanding. Basic earnings per share are based
upon the weighted average number of common shares outstanding of 124,571,000 and
126,099,000 for the three months ended March 31, 1999 and 1998. Diluted earnings
per share are based upon the weighted average number of common shares
outstanding during the period plus the effect of common stock options
outstanding, using the treasury stock method, of 130,344,000 and 131,135,000 for
the three months ended March 31, 1999 and 1998.
Prior to January 1, 1999 Transamerica's tax service operation recognized
revenue as new contracts were received and deferred a portion of that revenue
sufficient to cover the future service liability over the average life of the
loan portfolio serviced. Effective January 1, 1999 Transamerica adopted
prospectively a new policy which requires a greater level of revenue deferral,
and which reduced net income for the three months ended March 31, 1999 by $9.5
million ($0.07 diluted earnings per share). Had this new accounting policy been
adopted on January 1, 1998, net income for the three months ended March 31, 1998
would have been lower by $7.1 million ($0.05 diluted earnings per share) and net
income for the three months ended March 31, 1999 would have been lower by $6.8
million ($0.05 diluted earnings per share), instead of the $9.5 million ($0.07
diluted earnings per share) noted above. The new method defers a portion of the
profit previously recognized in the first year of a tax service contract to
future years in proportion to the cost of providing the service, thereby more
closely matching the recognition of revenues and expense over the average life
of the contracts. Although this accounting change will cause a reduction in tax
service revenues and earnings recognized in the early years of each tax service
contract, revenues and earnings in later years will be increased. It is
anticipated that by the sixth year following its adoption the differences from
revenues and earnings reported under the former accounting method will be
minimal. The change will have no effect on cash flow from operations.
Transamerica is currently considering with the staff of the Securities and
Exchange Commission a possible further modification to the manner in which
companies in this industry account for revenues. While the impact of a change is
not yet determinable Transamerica's preliminary estimate is that if the
additional change had been effective January 1, 1999 it would have resulted in a
further deferral of net income from the first quarter of 1999 to future periods
of approximately $14 million ($0.11 diluted earnings per share). If the effect
of this additional deferral, when determined, is material to net income for the
three months ended March 31, 1999, an amendment to Transamerica's Quarterly
Report on Form 10-Q for the three months ended March 31, 1999 will be filed. Any
additional change would not affect cash flow.
The consolidated ratios of earnings to fixed charges were computed by
dividing income before fixed charges and income taxes by the fixed charges.
Fixed charges consist of interest and debt expense, costs related to guaranteed
preferred beneficial interest in Transamerica's junior subordinated debentures,
and one-third of rent expense, which approximates the interest factor.
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<TABLE>
TRANSAMERICA CORPORATION AND SUBSIDIARIES
-----------------
CONSOLIDATED BALANCE SHEET
Assets
<CAPTION>
March 31, December 31,
1999 1998
<S> <C> <C>
Investments, principally of life insurance subsidiaries:
Fixed maturities $ 29,708.0 $ 29,009.4
Equity securities 2,805.5 2,187.9
Mortgage loans and real estate 791.8 790.7
Loans to life insurance policyholders 456.2 455.5
Short-term investments 516.8 1,212.6
----------- -----------
34,278.3 33,656.1
Finance receivables 7,277.1 6,943.7
Less unearned fees ($517.4 in 1999 and
$521.2 in 1998) and allowance for losses 646.2 645.3
----------- -----------
6,630.9 6,298.4
Cash and cash equivalents 95.8 159.5
Trade and other accounts receivable 2,602.5 2,254.2
Property and equipment, less accumulated
depreciation of $1,681.4 in 1999 and
$1,614.8 in 1998:
Land, buildings and equipment 509.7 489.1
Equipment held for lease 3,040.5 3,038.0
Deferred policy acquisition costs 2,238.2 2,094.7
Separate account assets 10,106.4 9,101.0
Goodwill, less accumulated amortization of
$177.6 in 1999 and $172.6 in 1998 426.5 423.4
Assets held for sale 177.7 180.8
Other assets 775.6 807.4
----------- -----------
$ 60,882.1 $ 58,502.6
=========== ===========
<FN>
(Amounts in millions)
</FN>
</TABLE>
<PAGE>
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<TABLE>
TRANSAMERICA CORPORATION AND SUBSIDIARIES
-----------------
CONSOLIDATED BALANCE SHEET (Continued)
Liabilities and Stockholders' Equity
<CAPTION>
March 31, December 31,
1999 1998
<S> <C> <C>
Life insurance policy liabilities $ 31,161.0 $ 30,336.3
Notes and loans payable, principally of
finance subsidiaries, of which $1,691.1
in 1999 and $1,924.8 in 1998 matures
within one year 8,581.6 8,197.9
Accounts payable and other liabilities 2,370.8 2,394.4
Income taxes 2,057.3 2,052.1
Separate account liabilities 10,106.4 9,101.0
Guaranteed preferred beneficial interest in
Transamerica's junior subordinated debentures 715.0 715.0
Stockholders' equity:
Preferred Stock ($100 par value):
Preference Stock (without par value)--
5,000,000 shares authorized; none
outstanding
Common Stock ($1 par value):
Authorized--300,000,000 shares
Outstanding -- 124,634,739 shares in 1999
and 124,490,670 shares in 1998,
after deducting 34,842,185 shares
and 34,986,254 shares in treasury 124.6 124.5
Additional Paid in Capital 5.5
Retained earnings 3,831.3 3,693.1
Components of other cumulative
comprehensive income:
Net unrealized gain from investments
marked to fair value 1,998.2 1,943.4
Foreign currency translation adjustments (69.6) (55.1)
----------- -----------
5,890.0 5,705.9
----------- -----------
$ 60,882.1 $ 58,502.6
=========== ===========
<FN>
(Amounts in millions except for share data)
</FN>
</TABLE>
<PAGE>
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TRANSAMERICA CORPORATION AND SUBSIDIARIES
-----------------
CONSOLIDATED STATEMENT OF INCOME
Three months ended
March 31,
1999 1998
REVENUES
Investment income $ 565.7 $ 564.5
Life insurance premiums and related income 454.8 456.9
Finance charges and other fees 196.1 167.1
Leasing revenues 170.3 185.7
Real estate and tax service revenues 92.7 74.6
Gain on investment transactions 63.2 84.3
Other 45.3 25.8
------------ ------------
1,588.1 1,558.9
EXPENSES
Life insurance benefits 702.8 724.4
Life insurance underwriting, acquisition
and other expenses 176.6 178.0
Interest and debt expense 122.7 104.9
Leasing operating and maintenance costs 115.6 111.9
Provision for losses on receivables 20.9 13.6
Other, including administrative and general
expenses 238.7 197.2
------------ ------------
1,377.3 1,330.0
------------ ------------
210.8 228.9
Income taxes 41.4 75.2
------------ ------------
Net income $ 169.4 $ 153.7
============ ============
Basic earnings per share of common stock:
Income before gain on investment
transactions $ 1.03 $ 0.79
Gain on investment transactions 0.33 0.43
------------ ------------
Net income $ 1.36 $ 1.22
============ ============
Diluted earnings per share of common stock:
Income before gain on investment
transactions $ 0.99 $ 0.76
Gain on investment transactions 0.31 0.41
------------ ------------
Net income $ 1.30 $ 1.17
============ ============
Dividends per share of common stock $ 0.25 $ 0.25
============ ============
Ratio of earnings to fixed charges 2.45 2.79
============ ============
(Amounts in millions except for share data)
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<TABLE>
TRANSAMERICA CORPORATION AND SUBSIDIARIES
-----------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Three months ended March 31,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 169.4 $ 153.7
Adjustments to reconcile net income to
net cash provided by operating activities:
Increase in insurance related
liabilities, excluding policyholder
balances on interest-sensitive policies 496.5 449.2
Change in accounts receivable and
accrued investment income (322.3) (192.6)
Change in accounts payable and
other liabilities (245.5) (202.6)
Amortization of policy acquisition costs 95.8 75.6
Policy acquisition costs deferred (184.4) (133.8)
Depreciation and amortization 92.2 83.4
Other (121.4) 100.9
---------- ----------
Net cash provided (used) by operations (19.7) 333.8
INVESTING ACTIVITIES
Finance receivables originated (5,716.8) (4,791.9)
Finance receivables collected 5,361.9 4,582.7
Purchase of investments (1,477.8) (896.8)
Sales and maturities of investments 1,097.6 943.5
Purchase of finance receivables from
Whirlpool Financial Corporation (351.9)
Other (55.4) (83.5)
---------- ----------
Net cash used by investing activities (790.5) (597.9)
FINANCING ACTIVITIES
Proceeds from debt financing 2,310.9 957.1
Payment of notes and loans (1,916.5) (578.2)
Receipts from interest-sensitive policies
credited to policyholder account balances 2,349.1 1,705.7
Return of policyholder balances on
interest-sensitive policies (1,971.4) (1,779.8)
Treasury stock purchased (1.8) (79.4)
Proceeds from issuance of common stock 7.4 50.0
Dividends (31.2) (31.6)
---------- ----------
Net cash provided by financing activities 746.5 243.8
---------- ----------
Decrease in cash and cash
equivalents (63.7) (20.3)
Cash and cash equivalents at beginning
of year 159.5 132.9
---------- ----------
Cash and cash equivalents at end of period $ 95.8 $ 112.6
========== ==========
<FN>
(Amounts in millions)
</FN>
</TABLE>
<PAGE>
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TRANSAMERICA CORPORATION AND SUBSIDIARIES
-----------------
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Three months ended March 31,
1999 1998
Balance at beginning of year $ 3,693.1 $ 3,267.9
Net income 169.4 153.7
Dividends on common stock (31.2) (31.6)
Treasury stock purchased (29.7)
---------- ----------
Balance at end of period $ 3,831.3 $ 3,360.3
========== ==========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Consolidated Results
Transamerica's net income for the first quarter of 1999 increased $15.7
million (10%), compared to the first quarter of 1998.
Net income for the first quarter of 1999 included net after tax gains from
investment transactions aggregating $41 million compared to $54.7 million in the
first quarter of 1998. Income before investment transactions for the first
quarter of 1999 included a $31 million benefit from the resolution of prior year
tax matters partially offset by $6.7 million of initial expenses associated with
the AEGON transaction and $9.5 million related to the change in accounting
policy for revenue recognition at the real estate tax service. Excluding these
items, income before investment transactions for the first quarter of 1999
increased $14.6 million (15%) due primarily to increases in life insurance, real
estate and commercial lending operating results. Partially offsetting these
favorable variances were decreased leasing operating results and higher
unallocated interest and other expenses.
Gain on investment transactions, pretax, included in consolidated revenues,
comprised (amounts in millions):
Three months ended March 31,
1999 1998
Net gain on sale of investments $ 92.2 $ 93.0
Adjustment for impairment in value (7.7) (7.9)
Amortization of acquisition costs (21.3) (0.8)
------- -------
$ 63.2 $ 84.3
======= =======
The amortization of deferred policy acquisition costs is adjusted due to
gains or losses realized on the sale of certain investments. The adjustment to
the amortization of deferred policy acquisition costs is included in investment
transactions as an offset to the related gains or losses. Investment
transactions also reflected downward adjustments primarily for impairment in the
value of certain nonperforming fixed maturity investments, mortgage loans, real
estate investments and real estate acquired through foreclosure.
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<TABLE>
REVENUES AND INCOME BY LINE OF BUSINESS
<CAPTION>
Three months ended March 31
Revenues Income
1999 1998 1999 1998
(Amounts in millions)
<S> <C> <C> <C> <C>
Life insurance revenue and income
before investment transactions $ 1,012.4 $ 1,014.6 $ 91.2 $ 77.9
Commercial lending 205.4 164.6 18.6 18.0
Leasing 202.9 203.2 12.9 15.6
Real estate services revenue and income
before investment transactions 117.4 98.7 19.9 18.4
Amortization of goodwill (4.7) (3.4)
---------- ---------- -------- --------
Total finance 525.7 466.5 46.7 48.6
Unallocated interest and
other expenses 14.3 18.5 (9.5) (27.5)
Consolidation eliminations (27.5) (25.0)
---------- ---------- -------- --------
Revenues and income before
investment transactions 1,524.9 1,474.6 128.4 99.0
Gains on investment transactions:
Life insurance 18.0 26.2 11.7 17.1
Real estate 45.2 58.1 29.3 37.6
---------- ---------- -------- --------
Total investment gains 63.2 84.3 41.0 54.7
---------- ---------- -------- --------
Total revenues and income $ 1,588.1 $ 1,558.9 $ 169.4 $ 153.7
========== ========== ======== ========
</TABLE>
Life insurance
In the first quarter of 1999, the life insurance operations reported net
income of $102.9 million compared to $95 million in the first quarter of 1998.
Net income included after tax gains from investment transactions of $11.7
million in the first quarter of 1999 compared to $17.1 million in the first
quarter of 1998. First quarter income before investment transactions for the
life insurance operations was $13.3 million (17%) higher than in the first
quarter of 1998.
The life insurance products division's 1999 first quarter income before
investment transactions increased $2 million (10%) over the first quarter of
1998. Improved interest spreads, greater fee and surrender charge revenue and
reduced mortality benefits all contributed to the earnings gain and more than
offset increased technology expenses.
At the annuities division, income before investment transactions was $1.7
million (14%) higher in the first quarter of 1999 than the comparable period of
1998 due to improved interest spreads and higher fee income. First quarter
operating expenses were higher in 1999 than 1998 due to higher technology
expenses and new product initiatives.
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The asset management group's first quarter 1999 income before investment
transactions was $2.8 million (17%) better than the first quarter of 1998. This
was primarily due to favorable changes in interest rate spreads and increased
fee income from a larger asset base.
Within the reinsurance line, lower loss claims on its accident and health
business as well as reduced traditional life claims and higher premium revenue
during the first quarter of 1999 resulted in $5.2 million (41%) higher income
before investment transactions than the first quarter of 1998.
The international division improved income before investment transactions
by $400,000 (6%) in the first quarter of 1999 as compared to the first quarter
of 1998. This increase was primarily due to business growth in Taiwan, favorable
mortality benefits in Hong Kong and asset management growth in Canada.
For the corporate line, income before investment transactions in the first
quarter of 1999 was $1.2 million (13%) higher than the comparable 1998 period
due primarily to reduced guarantee fund assessments.
After tax gains on investment transactions by the life insurance operations
comprised:
1999 1998
Net gain on sale of investments $ 30.5 $ 22.8
Provision for impairment in value (5.0) (5.2)
Amortization of acquisition costs (13.8) (0.5)
------- -------
$ 11.7 $ 17.1
======= =======
The life insurance companies net investment income for the first quarter of
1999 of $557.6 million was unchanged from to the first quarter of 1998.
Premiums and related income for the life insurance companies decreased $2.1
million (less than 1%) for the first quarter of 1999 from the first quarter of
1998. The decline was due to greater ceding of reinsurance premiums which offset
increases in traditional life premiums, as well as declines in group and single
premium annuities. Increased income from fees and charges on interest-sensitive
policies compensated for premium decline in the international division,
primarily Canada. The life insurance operation's benefits paid or provided
decreased $21.6 million (3%) primarily due to reduced mortality benefits and
lower interest credited on interest-sensitive policies.
Cash provided by the life insurance companies for the first quarter of 1999
decreased $243.3 million compared with the same period of 1998 primarily due to
the timing of the settlement of certain receivables and payables, including
reinsurance receivables and payables. The life insurance companies continue to
maintain a sufficiently liquid investment portfolio to cover operating
requirements, with remaining funds invested in long-term securities.
Commercial Lending
Commercial lending net income for the first quarter of 1999 was $14.4
million compared to $15.1 million for the first quarter of 1998. Income, before
the amortization of goodwill, for the first quarter of 1999 increased $600,000
(3%) from the first quarter of 1998. Operating results for 1999 include after
tax gains of $500,000 on the sale and securitization of inventory floorplan and
equipment lease finance receivables. Prior year operating results included a $3
million tax benefit from tax matters resolved in 1998, a $2.1 million after tax
charge for losses and restructuring of the insurance premium finance business
and a $2.1 million gain on the sale and securitization of floorplan finance
receivables. Excluding the above items, commercial lending income before the
amortization of goodwill increased $3.1 million (21%) over the first quarter of
1998. Higher average net receivables outstanding contributed to the growth in
operating income.
Revenues in the first quarter of 1999 increased $40.8 million (25%) over
the first quarter of 1998 principally as a result of growth in average net
receivables outstanding and higher servicing and other income on securitized
receivables.
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Interest expense increased $15.4 million (32%) in the first quarter of 1999
as compared to the first quarter of 1998 due to a higher average interest rate
on borrowings and to higher average outstanding debt as a result of growth in
average net receivables. Operating expenses rose $15.7 million (20%) mainly as
result of startup costs related to product line expansion and servicing of
receivables. The provision for losses on receivables increased $4.3 million
(31%) due primarily to higher credit losses. Credit losses, net of recoveries,
on an annualized basis as a percentage of average net receivables outstanding
were 1.02% for the first quarter of 1999 compared to 0.57% for the first quarter
of 1998.
Net commercial finance receivables outstanding at March 31,1999, increased
$327.4 million (6%) from December 31, 1998 due to continued growth in each
business unit. During the first quarter of 1999, the commercial lending
operation securitized $275 million of floorplan and equipment lease finance
receivables. Management has established an allowance for losses equal to 1.91%
of net commercial finance receivables outstanding as of March 31, 1999 compared
to 1.99% at December 31, 1998.
Delinquent receivables are defined as the instalment balance for inventory
finance and business credit asset based lending receivables more than 60 days
past due, and the receivables balance for all other receivables over 60 days
past due. At March 31,1999, delinquent receivables were $74.8 million (1.18% of
receivables outstanding) compared to $98.6 million (1.63% of receivables
outstanding) at December 31, 1998. The decline resulted from lower delinquency
in the equipment leasing portfolio.
Nonearning receivables are defined as balances from borrowers that are more
than 90 days delinquent for non credit card receivables or at such earlier time
as full collectibility becomes doubtful. Nonearning receivables on revolving
credit card accounts are defined as balances from borrowers in bankruptcy and
accounts for which full collectibility is doubtful. Accrual of finance charges
is suspended on nonearning receivables until such time as past due amounts are
collected. Nonearning receivables were $59.7 million (0.94% of receivables
outstanding) at March 31, 1999 compared to $65.7 million (1.09% of receivables
outstanding) at December 31, 1998.
Leasing
In the first quarter of 1999, the leasing operation reported net income of
$12.4 million compared to $15.1 million in the first quarter of 1998. Income,
before the amortization of goodwill, for the first quarter of 1999 decreased
$2.7 million (18%) primarily due to fewer container units on hire and higher
operating costs which were partially offset by a $4.9 million benefit from the
termination of a tax-based leveraged lease and improved earnings from a larger
portfolio of finance leases.
Revenues were flat between the first quarter of 1999 and 1998. Trade
imbalances between Asia, the United States and Europe reduced revenues due to
lower levels of containers on-hire and per diem rates. Offsetting these
decreases were increased revenue from a larger portfolio of finance leases, more
on-hire chassis and the previously mentioned favorable termination of a
tax-based leveraged lease arrangement.
Expenses for 1999 increased from 1998 as a result of more strategic
positioning expenditures associated with the movement of container equipment to
meet anticipated demand in the Asian market and higher interest costs on the
larger portfolio of finance leases.
The combined utilization of standard containers, refrigerated containers,
domestic containers, tank containers and chassis averaged 77% for the first
quarter of 1999 compared to 79% in the first quarter of 1998. Rail trailer
utilization was 81% for the first quarter of 1999 compared to 79% in the first
quarter of 1998. European trailer utilization was 80% for the first quarter of
1999 compared to 90% in the first quarter of 1998. However, European trailer
revenue was unaffected as higher long-term rental revenues offset lower short
term rental revenues associated with less on hires due to a softness in
industrial economic activity in key European markets.
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Real Estate Services
This segment includes Transamerica's real estate information businesses as
well as certain real estate and other investments.
Net income for the first quarter of 1999 decreased $6.8 million (12%) from
the first quarter of 1998. Net income included net after tax gains from
investment transactions of $29.3 million and $37.6 million in the first quarters
of 1999 and 1998. Income before investment transactions in the first quarter of
1999 increased $1.5 million (8%) over the first quarter of 1998 primarily due to
higher operating income at the real estate tax service due to increased new
contract volume caused by higher loan originations which was offset in part by
the effects of the change in accounting for revenue recognition.
Revenues for the first quarter of 1999 increased $5.8 million (4%) over the
first quarter of 1998 primarily due to increased volume at the real estate tax
service business offset in part by lower gains from investment transactions and
the change in accounting for revenue recognition.
Unallocated Interest and Expenses
Unallocated interest and other expenses, after related income taxes, for
the first three months of 1999 included a $31 million tax benefit from the
resolution of prior year tax matters offset in part by $6.7 million of initial
expenses associated with the AEGON transaction. Excluding these items
unallocated interest and other expenses increased $6.3 million (23%). The
increase was primarily due to higher interest costs.
Comprehensive Income
In accordance with Financial Accounting Standard No. 130, Reporting
Comprehensive Income, comprehensive income for the three months ended March 31,
1999 and 1998 comprised:
1999 1998
Net income $ 169.4 $ 153.7
Other comprehensive income, net of tax:
Unrealized gains (losses) from
investments marked to fair value:
Unrealized holding gains (losses)
arising during period:
Equity securities 390.7 131.9
Fixed maturities (295.1) 33.5
Less: reclassification adjustment
for gains included in net income (40.8) (54.7)
-------- --------
54.8 110.7
Foreign currency translation adjustments (14.5) (0.9)
-------- --------
Comprehensive income (loss) $ 209.7 $ 263.5
======== ========
Transamerica is required to mark its equity securities and fixed maturities
portfolios to fair value. These investments support liabilities that are not
marked to fair value.
Transamerica manages its exposure to interest rate fluctuations by managing
the characteristics of the assets and liabilities so that changes are offset.
Transamerica's objectives for asset liability management are to provide maximum
levels of finance and investment income and to minimize funding costs while
maintaining acceptable levels of interest rate and liquidity risk and
facilitating its funding needs.
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Corporate Liquidity and Capital Requirements
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, purchase shares of its common stock,
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, creation of shareholder value and capital needs.
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.
Investment Portfolio
Transamerica, principally through its life insurance subsidiaries,
maintains an investment portfolio aggregating $34.3 billion at March 31, 1999,
of which $29.7 billion was invested in fixed maturities. At March 31, 1999,
93.8% of the fixed maturities was rated as "investment grade" with an additional
4.0% in the BB category or its equivalent. The amortized cost of fixed
maturities was $27.9 billion resulting in a net unrealized gain position, before
the effect of income taxes and adjustments to deferred acquisition costs and
policy liabilities, of $1.8 billion at March 31, 1999. The amortized cost of
delinquent below investment grade securities, before provision for impairment in
value, was $1.9 million at March 31, 1999 and December 31, 1998. Adjustment for
impairment in value has been made to reduce the amortized cost of certain fixed
maturity investments by $83.7 million at March 31, 1999 and $78.9 million at
December 31, 1998.
In addition to the investments in fixed maturities, $791.8 million (2% of
the investment portfolio), net of allowance for losses of $30.4 million, was
invested in mortgage loans and real estate including $694.8 million in
commercial mortgage loans, $81.1 million in real estate investments, $400,000 in
foreclosed real estate and $45.9 million in residential mortgage loans. Problem
loans, defined as restructured loans yielding less than 8% and delinquent loans,
totaled $4.1 million at March 31, 1999 and $3.5 million at December 31, 1998.
Allowances for possible losses of $3.3 million at March 31, 1999 and $1.6
million at December 31, 1998 have been established to cover possible losses from
mortgage loans and real estate investments.
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, and options to
enter into interest rate swap agreements (swaptions).
Derivative financial instruments with a notional amount of $10.7 billion at
March 31, 1999 and $10 billion at December 31, 1998 and designated as hedges of
portions of Transamerica's investment portfolio were outstanding. In addition,
derivative financial instruments with a notional amount of $5.6 billion at March
31, 1999 and $4.9 billion at December 31, 1998 and designated as hedges of
Transamerica's liabilities were outstanding.
<PAGE>
Page 13
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 March 31, 1999, the derivative financial instruments
discussed above were issued by financial institutions rated A or better by one
or more of the major credit rating agencies. The fair value of Transamerica's
derivative financial instruments at March 31, 1999 and December 31, 1998 was a
net benefit of $271.3 million and $331.7 million comprising agreements with
aggregate gross benefits of $347.8 million and $364.1 million and agreements
with aggregate gross obligations of $76.5 million and $32.4 million.
Year 2000 Issue
Transamerica has developed a plan to modify its information systems to
ensure the readiness of our business applications, operating systems and
hardware on mainframes, servers and personal computers, and wide and local area
networks to recognize the Year 2000. The plan also addresses non-information
technology embedded software and equipment, the readiness of key business
partners, and updating business continuity plans.
The project has four phases: (1) problem determination, (2) planning and
resource acquisition, (3) remediation and (4) testing and acceptance. During
phase one, Transamerica determined the size and scope of the problem and
prepared an inventory of the hardware, software, interfaces and other items that
may be affected. In addition, software code was scanned and third parties were
contacted to determine the status of their efforts. During phase two,
Transamerica assessed the risks and decided whether to fix, replace, discard, or
test the items identified in the inventory, prepared a project plan and
allocated appropriate resources as necessary. Phase three covers remediation
where date occurrences in internally maintained systems are analyzed and
corrected and software and hardware are replaced where necessary. In addition,
operating systems that interface with outside parties are examined in more
detail and modified if required. Phase four includes testing and acceptance of
all software, hardware, third party interfaces and related items to ensure they
will work in a number of different Year 2000 scenarios.
The most significant categories of outside parties to Transamerica are
agents and brokers, financial institutions, software vendors, governmental
agencies, third party service providers and utility providers (gas, electric and
telecommunications). Transamerica's assessment of its key business partners
continues. Surveys have been mailed, follow up contacts are underway and
strategies are being developed to address issues as they are identified. This
effort is expected to continue well into 1999.
Following is the status of Transamerica's Year 2000 compliance efforts for
critical systems at each of its business segments.
The life insurance operation had completed substantially all of the
remediation phase as of March 31, 1999. As of March 31, 1999, testing was well
underway and is expected to be substantially complete by June 1999.
The commercial lending operation had completed substantially all of the
remediation phase as of March 31, 1999. As of March 31, 1999, testing was well
underway and is expected to be substantially finished by June 1999. The
commercial lending operating systems in Europe, which affect a small percentage
of the business, are being developed and tested for implementation in July 1999.
The leasing operation had completed the remediation and testing phases as
of March 31, 1999. In addition to the systems remediated and tested, the
customer service, fleet management and equipment repair and maintenance system
is scheduled for replacement in June 1999.
The major business in the real estate segment, Transamerica Real Estate Tax
Service, and most of the other businesses in this segment had completed the
remediation phase as of March 31, 1999. At March 31, 1999, testing had commenced
and the testing phase, including testing with numerous governmental agencies, is
expected to be substantially complete by September 1999.
<PAGE>
Page 14
The projected total cost associated with required modifications to become
ready for the Year 2000 is approximately $40 million. These costs are being
expensed as incurred and funded through operations. At this time there can be no
assurance that these estimates will not be exceeded and actual results may
differ significantly from those projected. Some factors that may cause actual
expenditures to differ include the availability and cost of trained personnel
and the ability to locate and correct all relevant computer problems. This
estimate includes internal costs, but excludes the costs to upgrade and replace
systems in the normal course of business. The total amount expended on the
project through March 31, 1999, was $27 million. Transamerica does not expect
the project to have a significant effect on its financial condition or results
of operations.
Transamerica believes it will achieve Year 2000 readiness; however, the
size and complexity of its systems and the need for them to interface with other
systems internally and with those of customers, vendors, partners, governmental
agencies and other outside parties, creates the possibility that some of these
systems may experience Year 2000 problems. Specific factors that give rise to
this concern include a possible loss of qualified resources, failure to identify
and remediate all affected systems, noncompliance by third parties whose systems
and operations interface with Transamerica's systems and other similar
uncertainties. Transamerica is developing contingency plans to minimize any
possible disruptions.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Form of Transamerica Corporation Value Added Incentive Plan
(January 1, 1999 Restatement)
10.2 Form of Amendment No. 3 To The Transamerica Corporation 1995
Performance Stock Option Plan
10.3 Form of Amendment No. 4 To The Transamerica Corporation 1996
Stock Option and Award Plan
10.4 Form of Amendment No. 10 To The 1985 Stock Option And Award
Plan Of Transamerica Corporation
12 Computation of Ratio of Earnings to Fixed Charges.
18 Change in Accounting Principles.
27 Financial Data Schedule.
(b) Reports on Form 8K
On February 22, 1999 Transamerica reported that it had agreed to be
acquired by AEGON N.V.
<PAGE>
Page 15
Signatures
Pursuant to the requirements 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
(Chief Accounting Officer)
Date: April 29, 1999
TRANSAMERICA CORPORATION
VALUE ADDED INCENTIVE PLAN
(January 1, 1999 Restatement)
* * * * *
<PAGE>
TRANSAMERICA CORPORATION
VALUE ADDED INCENTIVE PLAN
(January 1, 1999 Restatement)
TABLE OF CONTENTS
Page
Section 1. Establishment and Purpose..........................................1
1.1 Purpose...................................................................1
1.2 Effective Date............................................................1
Section 2. Definitions........................................................1
2.1 Defined Terms.............................................................1
Section 3. Awards and Committee Determinations................................3
3.1 Opportunity...............................................................3
3.2 Awards....................................................................3
3.3 Determination.............................................................3
3.4 Adjustments Prior to Payment..............................................3
3.5 Certification.............................................................3
Section 4. Payment of Awards..................................................3
4.1 Right to Receive Payment..................................................3
4.2 Payment Options...........................................................4
4.3 Beneficiaries.............................................................4
Section 5. Administration.....................................................4
5.1 Committee.................................................................4
5.2 Rules and Interpretation..................................................4
5.3 Records...................................................................4
5.4 Tax Withholding...........................................................4
Section 6. General Provisions.................................................4
6.1 Nonassignability..........................................................4
6.2 Employment Rights/Participation...........................................4
6.3 No Individual Liability...................................................5
6.4 Severability; Governing Law...............................................5
6.5 Affiliates of the Company.................................................5
Section 7. Amendment and Termination..........................................5
7.1 Amendment and Termination.................................................5
7.2 Change in Control of the Company..........................................5
<PAGE>
TRANSAMERICA CORPORATION
VALUE ADDED INCENTIVE PLAN
(January 1, 1999 Restatement)
Section 1. Establishment and Purpose
1.1 Purpose. Transamerica Corporation (the "Company") having adopted the
Transamerica Corporation Value Added Incentive Plan (the "Plan"), effective as
of January 1, 1994, hereby amends and restates the Plan, effective as of January
1, 1999. The Plan is intended to attract and retain the services of executives
who are in a position to influence the success of the Company by providing an
award based on the financial performance of the total Company. Further, this
Plan is designed to motivate key executives to increase shareholder value by
improving operating results and efficiently employing the Company's capital.
1.2 Effective Date. The Plan is effective as of January 1, 1999.
Section 2. Definitions
2.1 Defined Terms. When used in the Plan, the following terms shall have
the meanings specified below:
2.1.1 "Adjusted Net Income" means the Company's net income in accordance
with Generally Accepted Accounting Principles as reported for the Plan Year
adjusted for (i) the elimination of the cumulative effects of changes in
accounting standards, (ii) the amortization of gains or losses on equipment
disposition in lieu of reported gains or losses, (iii) amortization of gains or
losses from repurchasing and refinancing of debt (including costs associated
with preferred stock redemption) in lieu of realized gains and losses, (iv)
amortized bond, equity and other portfolio gains and losses in lieu of realized
gains and losses as reported, and (v) the exclusion of pretax amortization of
intangibles, including goodwill, related to assets acquired in a business
acquisition that is still owned by the Company.
2.1.2 "Adjusted Equity" means the Company's shareholders' equity as
reported for the Plan Year, 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, as an add-back, accumulated
intangibles, including goodwill, amortization adjustment related to assets
acquired in a business acquisition that is still owned by the Company.
2.1.3 "Average Adjusted Equity" means the "five-point" quarterly average of
the Adjusted Equity for the Plan Year, the first point being the preceding year
end.
2.1.4 "Base Salary" means as to any Plan Year the Participant's annualized
salary rate on the last day of the Plan Year. Such Base Salary shall be before
both (i) deductions for taxes or benefits and (ii) deferrals of compensation
pursuant to Company-sponsored plans.
2.1.5 "Board" means the Company's Board of Directors.
<PAGE>
2.1.6 "Change in Control" means a change in control of the Company (as
defined in the severance agreements between the Company and certain of its
officers, as such agreements were in effect as of January 1, 1999 (i.e., the
effective date of the Plan)).
2.1.7 "Change in Control Target Award" means the target incentive
opportunity for an individual in the event of a Change in Control, expressed as
a percentage of his or her Base Salary for a specific Plan Year. The schedule of
individual Change in Control Target Awards shall be determined by the Committee
in accordance with Section 3.1.
2.1.8 "Committee" means the Management Development and Compensation
Committee of the Board of Directors of Transamerica Corporation.
2.1.9 "Cost of Equity" means the Company's imputed equity cost based on a
formula approved by the Committee.
2.1.10 "Disability" has the meaning assigned to that term in the
Transamerica Disability Income Plan in effect from time to time.
2.1.11 "Maximum Award" means the maximum award pursuant to this Plan to any
individual Participant for any one Plan Year, which shall not exceed $5.0
million.
2.1.12 "Retirement" means any termination of employment (other than by
death or Disability) after a Participant's normal or early retirement date (as
defined in the Company's tax-qualified retirement plan).
2.1.13 "Participant" means as to any Plan Year a key executive of the
Company who is likely to have a significant impact on the value added
performance of the Company. An employee must be approved as a Participant by the
Committee.
2.1.14 "Performance Goals" means the goal(s) (or combined goal(s))
determined by the Committee (in its discretion) to be applicable to a
Participant for a Target Award for a Plan Year. As determined by the Committee,
the Performance Goals for any Target Award applicable to a Participant may
require achievement of (i) a targeted level of Value Added, (ii) specified
strategic goals, and/or (iii) targeted levels for the financial or operating
performance of one or more subsidiaries. The Performance Goals may differ from
Participant to Participant and from award to award.
2.1.15 "Plan Year" means the 1999 calendar year and each succeeding
calendar year.
2.1.16 "Target Award" means the target incentive opportunity for an
individual, expressed as a percentage of his or her Base Salary for a specific
Plan Year. The schedule of individual Target Awards shall be determined by the
Committee in accordance with Section 3.1.
2.1.17 "Value Added", expressed as a percentage of the Company's Average
Adjusted Equity, means Adjusted Net Income minus a capital charge. The capital
charge is determined by multiplying the Company's Average Adjusted Equity by the
Cost of Equity.
<PAGE>
Section 3. Awards and Committee Determinations
3.1 Opportunity. The Committee shall approve participation in the Plan and
establish a Target Award and Change in Control Target Award for each
Participant, based on his or her role and responsibilities.
3.2 Awards. Payment under this Plan will be based on a payout table adopted
by the Committee in writing. The payout table will provide for the payment of
100% of a Participant's Target Award if the applicable Performance Goals are
exactly 100% achieved, and provide for an actual award greater than or less than
the Participant's Target Award, depending upon the extent to which actual
performance exceeds or falls below the Performance Goals. No Participant's award
under this Plan may exceed three times his or her Target Award, and in no event
may a Participant's award under this Plan exceed his or her Maximum Award.
3.3 Determination. For each Plan Year, the Committee shall determine
whether any significant non-recurring item (e.g. an acquisition or the gain or
loss on a divestiture of a business, one-time changes including changes in
accounting standards, effect of financings, settlement of prior years tax items,
etc.) will be excluded from the calculation of Value Added for the Plan Year.
3.4 Adjustments Prior to Payment. The Committee, in its sole discretion,
may eliminate or reduce the award for any Participant below the award that would
otherwise be payable in accordance with the Plan.
3.5 Certification. After the end of each Plan Year and prior to payment of
any awards for that Plan Year, the Committee shall certify in writing (i) the
extent to which the Performance Goals applicable to each Participant were
achieved or exceeded, and (ii) the respective percentage of Target Awards earned
for the Plan Year.
Section 4. Payment of Awards
4.1 Right to Receive Payment. Any award that may become due under this Plan
shall be made solely from the general assets of the Company, normally on or
before the March 20th next following the end of the Plan Year during which the
award was earned. Nothing in this Plan shall be construed to create a trust or
to establish or evidence any Participant's claim of any right other than as an
unsecured general creditor with respect to any payment to which he or she may be
entitled.
4.1.1 Employment for Plan Year. If a Participant's employment
with the Company continues for the entire Plan Year, the Participant shall be
entitled to receive payment of the award amount determined under Section 3 for
the Plan Year in accordance with the terms of the Plan.
4.1.2 Retirement, Disability or Death. In the event of death, Disability or
Retirement of a Participant during a Plan Year, the Committee (in its sole
discretion) will determine on a pro rata basis the amount of the partial award
(if any) to be paid to such Participant (or to his or her personal
representative) for such Plan Year. Payments will be made in cash at the same
time as other awards to Participants are made for the same Plan Year.
<PAGE>
4.1.3 Resignation or Discharge. Unless otherwise expressly determined by
the Committee, if a Participant's employment with the Company terminates during
a Plan Year by reason of resignation or discharge, then the Participant will not
be eligible for and shall forfeit any award under this Plan for that Plan Year.
4.2 Payment Options. Generally, awards under this Plan will be made in
cash. However, the Committee reserves the right to declare any award, in whole
or in part, payable in restricted stock, awarded under the terms of the 1985 or
1996 Stock Option and Award Plan in an amount equivalent to the cash amount
foregone with the restricted stock valued at fair market value on the date that
the cash payment otherwise would have been made. Any restricted stock so awarded
shall vest ratably in annual increments over a period of not more than four
years, subject to acceleration for termination of employment due to death,
Disability, Retirement and change in control.
4.3 Beneficiaries. Each Participant may designate, in writing and on such
form as the Company may prescribe, one or more beneficiaries to receive any
amount that is payable after the individual's death. In the event of a
Participant's death, any award (whether cash or restricted stock) that is
payable to such Participant shall be paid to his or her beneficiary or, in the
event that no beneficiary has been designated, to his or her estate.
Section 5. Administration
5.1 Committee. The Plan shall be administered by the Committee.
5.2 Rules and Interpretation. The Committee shall be vested with all
discretion and authority as it deems necessary or appropriate to administer the
Plan and to interpret the provisions of the Plan. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive and binding
upon all persons.
5.3 Records. The records of the Committee with respect to the Plan shall be
conclusive on all Participants and their beneficiaries and on all other persons.
5.4 Tax Withholding. The Company shall withhold all applicable taxes
required by law from any payment, including any federal, FICA, state and local
taxes.
Section 6. General Provisions
6.1 Nonassignability. Prior to the time of any payment under the Plan, a
Participant shall have no right by way of anticipation or otherwise to assign or
transfer any interest under this Plan.
6.2 Employment Rights/Participation. The establishment and subsequent
operation of the Plan, including eligibility as a Participant, shall not be
construed as conferring any legal or other rights upon any Participant or any
other individual for the continuation of his or her employment for any Plan Year
or any other period. Subject to any written employment contract signed by an
authorized officer or director of the Company which specifically includes any
limitation on the Company's right, the Company expressly reserves the right,
which may be exercised at any time and without regard to when during a Plan Year
or other accounting period such exercise occurs, to discharge any individual
and/or treat him or her without regard to the effect which such treatment might
have upon him or her as a Participant in this Plan. Being a Participant in any
one Plan Year does not confer any right to be named as a Participant for any
succeeding Plan Year.
<PAGE>
6.3 No Individual Liability. No member of the Committee or the Board, or
any officer of the Company, shall be liable for any determination, decision or
action made in good faith with respect to the Plan or any award made under the
Plan.
6.4 Severability; Governing Law. If any particular provision of this Plan
is found to be invalid or unenforceable, such provision shall not affect the
other provisions of the Plan, but the Plan shall be construed in all respects as
if such invalid provision had been omitted. The provisions of the Plan shall be
governed by and construed in accordance with the laws of the State of California
(with the exception of its conflict of laws provisions).
6.5 Affiliates of the Company. Requirements referring to employment with
the Company or payment of awards can be performed through the Company or any
affiliate of the Company.
Section 7. Amendment and Termination
7.1 Amendment and Termination. The Committee may prospectively amend or
terminate the Plan at any time and for any reason; provided, however, that such
amendment shall not relieve the Company of its obligations under Section 7.2.
7.2 Change in Control of the Company. In the event of a change in control
of the Company (as defined in the severance agreements in effect at the time of
adoption of this Plan between the Company and certain executive officers,
including Plan Participants, the "Agreements"), and unless otherwise determined
by the Committee at the time Target Awards are set, not later than the 20th
business day following the date of such event, the Company shall pay each
Participant an award that is the greater of (i) an award calculated in
accordance with Section 3 above, but using (a) the Participant's Change in
Control Target Award instead of his or her Target Award, and (b) the period
ending on the day immediately prior to the day a change in control occurred as
the last day of the fiscal year for purposes of determining the achievement of
the Performance Goals, or (ii) a pro rata amount of each Participant's Change in
Control Target Award for the Plan Year, based upon the portion of the fiscal
year that has elapsed as of the date of the change in control.
AMENDMENT NO. 3 TO
THE TRANSAMERICA CORPORATION
1995 PERFORMANCE STOCK OPTION PLAN
TRANSAMERICA CORPORATION, having adopted the Transamerica Corporation 1995
Performance Stock Option Plan (the "Plan") effective as of January 26, 1995, and
having amended the Plan on two prior occasions, hereby amends the Plan,
effective as of January 15, 1999, as follows:
1. The first sentence of Section 4.1 is hereby amended in its entirety to
read as follows:
Subject to adjustment as provided in Section 4.3, the total number of
Shares available for grant under the Plan shall not exceed 14,000,000.
2. The last sentence of Section 5.1 is hereby amended in its entirety to
read as follows:
The Committee, in its sole discretion, shall determine the number of Shares
subject to each Option, provided that during any calendar year, no
Participant shall be granted Options covering more than 3,400,000 Shares.
3. The last sentence of Section 6.1 is hereby amended in its entirety to
read as follows:
The Committee, in its sole discretion, shall determine the number of Shares
subject to each TLSAR, provided that during any calendar year, no
Participant shall be granted TLSARs covering more than 470,000 Shares.
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. 3 on the date(s)
indicated below.
TRANSAMERICA CORPORATION
Dated: __________, 1999 By: __________________________
Peter V. Ueberroth,
Chairman, Management
Development and Compensation
Committee
Dated: __________, 1999 By: __________________________
Title
AMENDMENT NO. 4 TO
THE TRANSAMERICA CORPORATION
1996 STOCK OPTION AND AWARD PLAN
TRANSAMERICA CORPORATION, having adopted the Transamerica Corporation 1996
Stock Option and Award Plan (the "Plan") effective as of December 16, 1996, and
having amended the Plan on three prior occasions, hereby amends the first
sentence of Section 4.1 of the Plan, effective as of January 15, 1999, to read
as follows:
Subject to adjustment as provided in Section 4.3, the total number of
Shares available for grant under the Plan shall not exceed 12,000,000.
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. 4 on the date(s)
indicated below.
TRANSAMERICA CORPORATION
Dated: __________, 1999 By: __________________________
Peter V. Ueberroth,
Chairman, Management
Development and Compensation
Committee
Dated: __________, 1999 By: __________________________
Title
AMENDMENT NO. 10 TO
THE 1985 STOCK OPTION AND AWARD PLAN
OF TRANSAMERICA CORPORATION
TRANSAMERICA CORPORATION, having adopted 1985 Stock Option and Award Plan
of Transamerica Corporation (the "Plan") effective as of March 1, 1985, and
having amended the Plan on nine prior occasions, hereby amends the Plan,
effective as of January 15, 1999, as follows:
1. Section 3(a) is hereby amended in its entirety to read as follows:
The shares of stock issuable pursuant to Options, Restricted Stock
Awards, or restricted Unit Awards shall be shares of the Company's Common
Stock, $1.00 par value. The total number of such shares which may be
subjected to Options and Awards granted under the Plan shall not exceed
25,261,596 in the aggregate.
2. Section 4(a)(2)(A)(i) is hereby amended in its entirety to read as
follows:
Select from among the eligible key Employees the Employees to whom
Options should be granted and determine the number of shares of Common
Stock to be subject to such Options, provided that during any fiscal year
of the Company, no key Employee shall be granted Option which cover over
more than 1,000,000 shares.
3. Section 7(a)(v) is hereby amended by adding the following sentence to
the end thereof to read as follows:
Effective as of January 15, 1999, each Nonemployee Director who becomes a
Nonemployee Director after January 27, 1994 and who is such as of the next
occurring Grant Date, automatically will receive, as of such Grant Date
only, an Option to purchase 3,000 shares of Common Stock.
4. Section 7(a)(vi) is hereby amended by adding the following sentence to
the end thereof to read as follows:
Effective as of January 15, 1999, each continuing Nonemployee Director
(i.e., a Nonemployee Director who, pursuant to Section 7(a)(iv) or (v), has
received an initial grant of an Option to purchase shares of Common Stock)
automatically will receive, on each subsequent Grant Date on which the
Nonemployee Director is such, an Option to purchase 3,000 shares of Common
Stock.
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. 3 on the date(s)
indicated below.
TRANSAMERICA CORPORATION
Dated: __________, 1999 By: __________________________
Peter V. Ueberroth,
Chairman, Management
Development and Compensation
Committee
Dated: __________, 1999 By: __________________________
Title
TRANSAMERICA CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three months ended March 31,
1998 1997
(Dollar amounts in millions)
Fixed charges:
Interest and debt expense $ 122.7 $ 104.9
One-third of rental expense 8.7 9.0
Dividends declared on preferred
securities issued by affiliates 13.6 14.1
--------- ---------
Total $ 145.0 $ 128.0
========= =========
Earnings:
Net income $ 169.4 $ 153.7
Provision for income taxes 41.4 75.2
Fixed charges 145.0 127.9
--------- ---------
Total $ 355.8 $ 356.8
========= =========
Ratio of earnings to fixed charges 2.45 2.79
========= =========
Burton E. Broome
Vice President and Controller
Transamerica Corporation
600 Montgomery Street
San Francisco, CA 94111
Dear Mr. Broome:
Part I, Item 1 of Transamerica Corporation's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999 describes a change in the method of accounting
for tax service revenue. You have advised us that you believe that the change is
to a preferable method in your circumstances because it results in a
proportional recognition of income over the service period in relation to the
effort required to perform the related services.
There are no authoritative criteria for determining a `preferable' tax service
revenue recognition method based on the particular circumstances; however, we
conclude that the change in the method of accounting for tax service revenue is
to an acceptable alternative method which, based on your business judgement to
make this change for the reason cited above, is preferable in your
circumstances. We have not conducted an audit in accordance with generally
accepted auditing standards of any financial statements of the Transamerica
Corporation as of any date or for any period subsequent to December 31, 1998,
and therefore we do not express any opinion on any financial statements of
Transamerica Corporation subsequent to that date.
Very truly yours,
/s/ ERNST & YOUNG LLP
San Francisco, California
April 28, 1999
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