-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RjTwt1zDP31yesWKgZQA5JOIhSFI2OlnbytDs+fyudlymiLj7sJ2bmedN1TcRuzF NYylRtt1e5KLG3dnxHdKTQ== 0000006342-99-000008.txt : 19990315 0000006342-99-000008.hdr.sgml : 19990315 ACCESSION NUMBER: 0000006342-99-000008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 ITEM INFORMATION: FILED AS OF DATE: 19990312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANCHOR NATIONAL LIFE INSURANCE CO CENTRAL INDEX KEY: 0000006342 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 860198983 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-47472 FILM NUMBER: 99563995 BUSINESS ADDRESS: STREET 1: 1 SUNAMERICA CENTER STREET 2: C/O THOMAS B PHILLIPS CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3107726000 MAIL ADDRESS: STREET 1: 1 SUN AMERICA CENTER CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: ANCHOR LIFE INSURANCE CO DATE OF NAME CHANGE: 19600201 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) December 31, 1998 ANCHOR NATIONAL LIFE INSURANCE COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) ARIZONA 33-47472 86-0198983 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 1 SUNAMERICA CENTER LOS ANGELES, CALIFORNIA 90067-6022 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code (310) 772-6000 Item 2. Acquisition or Disposition of Assets ---------------------------------------- On July 15, 1998, SunAmerica Inc., Anchor National Life Insurance Company, and First SunAmerica Life Insurance Company entered into a definitive agreement to acquire the individual life and individual and group annuity businesses of MBL Life Assurance Corporation (The "MBL Business") for a cash purchase price of $128,420,000. As part of this transaction, the Company acquired assets having an aggregate fair value of $5,718,227,000, composed primarily of investments totaling $5,663,318,000. Approximately $5,801,879,000 in reserves were assumed under a reinsurance contract, and included $2,317,365,000 of reserves for universal life policies, $3,413,827,000 of fixed annuity reserves and $70,687,000 of guaranteed investment contract reserves. The purchase price was agreed to by the parties on an arms-length basis and the entire transaction was approved by the New Jersey Superior Court, which has jurisdiction over the plan of rehabilitation under which MBL Life Assurance Corporation is operating. The acquisition was completed through Anchor National Life Insurance Company on December 31, 1998. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------- (a) Financial statements of businesses acquired. Historical financial statements prepared pursuant to Rule 3-05 of Regulation S-X concerning the MBL Business have not been filed herewith. Under a 100% coinsurance transaction, the coinsurer agrees to indemnify the issuing insurer for all of its obligations under the relevant annuity contracts. However, the issuing insurer remains the only party obligated to the insured party. In consideration for its indemnification, the coinsurer receives assets, usually composed of cash and/or marketable securities, in an amount equal to the annuity liabilities, computed on a statutory basis, less a negotiated fee. Such assets are not specifically associated with the annuity liabilities on a historical basis. The coinsurance of the MBL Business (The "MBL Transaction") reflects the assumption of certain annuity liabilities as to which the parties to the transaction matched assets at a particular point in time. Separate historical financial statements do not exist for these assets and liabilities. Further, it is not possible to make meaningful historical financial statements concerning this portion of the transaction because the various assets acquired may not be properly associated with the various liabilities assumed at any historical point in time. Accordingly, historical financial statements prepared pursuant to Rule 3-05 of Regulation S-X concerning this transaction have not been filed. However, an audited Statement of Assets Acquired and Liabilities Assumed in this transaction, as of December 31, 1998, the effective date of the transaction, is included herewith as Exhibit 99-1. Such audited financial statement includes related notes and a report of independent accountants. (b) Pro Forma Financial Information As more fully described under Item 2 of the Current Report on Form 8-K/A, on December 31, 1998, the Registrant acquired certain assets and assumed certain liabilities of MBL Life Assurance Corporation ("MBL Life") in a 100% coinsurance 2 (b) Pro Forma Financial Information (Continued) transaction. A pro forma condensed balanced sheet is not filed herewith because the entire transaction is fully reflected in the Registrant's December 31, 1998 consolidated balance sheet, which was filed on February 16, 1998 as part of the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998. The pro forma condensed income statement set forth in Exhibit 99-2 herein reflects the effects of the MBL Transaction as if it had been consummated on October 1, 1997, the beginning of the Registrant's most recent fiscal year end. The pro forma condensed income statement set forth in Exhibit 99-3 herein reflects the effects of the MBL Transaction as if it had been consummated on October 1, 1998, the beginning of the Registrant's most recent fiscal interim period. (c) Exhibits Exhibit No. Description of Exhibit - ------------ ------------------------ 99-1 Statement of Assets Acquired and Liabilities Assumed in the MBL Transaction. 99-2 Pro Forma Condensed Income Statement for the year ended September 30, 1998. 99-3 Pro Forma Condensed Income Statement for the three months ended December 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SUNAMERICA INC. Date: March 12, 1999 By: /S/ Scott L. Robinson ------------------------ Scott L. Robinson Senior Vice President and Controller 3
EXHIBIT 99-1 ANCHOR NATIONAL LIFE INSURANCE COMPANY STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN THE MBL TRANSACTION DECEMBER 31, 1998 ASSETS ACQUIRED Cash $ 6,173,000 Investments 5,663,318,000 Accrued investment income 45,521,000 Deferred acquisition cost 113,039,000 Other assets 3,215,000 -------------- Total assets acquired $5,831,266,000 ============== LIABILITIES ASSUMED Accumulated value of fixed annuity contracts $3,413,827,000 Accumulated value of universal life contracts 2,317,365,000 Reserves for guaranteed investment contracts 70,687,000 Other liabilities 29,387,000 -------------- Total liabilities assumed $5,831,266,000 ============== See accompanying notes
4 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN THE MBL TRANSACTION 1. Description of the Transaction --------------------------------- On December 31, 1998, Anchor National Life Insurance Company (The "Company"), completed the acquisition of a block of annuity contracts and universal life contracts from MBL Life Assurance Corporation ("MBL Life") for a total cash consideration of $128,420,000. As part of this transaction, the Company acquired assets having an aggregate fair value of $5,718,227,000, composed primarily of investments totaling $5,663,318,000. Liabilities assumed included $3,413,827,000 of fixed annuity contracts, $2,317,365,000 of universal life contracts and $70,687,000 of guaranteed investment contracts from MBL Life. The transfer of assets necessary to support these liabilities was effected pursuant to a 100% coinsurance agreement entered into by MBL Life and the Company. Under a 100% coinsurance agreement, the coinsurer agrees to indemnify the issuing issurer for all of its obligations under the relevant annuity contracts. However, the issuing insurer remains the only party obligated to the insured party. In consideration for its indemnification, the coinsurer receives assets, usually composed of cash and/or marketable securities, in an amount equal to the liabilities assumed, computed on a statutory basis, less a negotiated fee. The acquisition has been accounted for by using the purchase method of accounting, and, accordingly, all assets and liabilities presented in the accompanying Statement of Assets Acquired and Liabilities Assumed in the MBL Transaction (the "Statement") have been stated at their estimated fair values to present the balance sheet impact of assuming the fixed annuity and universal life insurance liabilities of MBL Life as of December 31, 1998. 2. Investments ----------- Investments acquired, at December 31, 1998, are summarized as follows:
Weighted Average Yield to Fair Value Maturity ------------- -------- Bonds, notes and redeemable preferred stocks $ 2,276,895,000 5.80% Short-term investments 3,077,037,000 5.50 Policy loans 309,386,000 8.00 ------------------- ----- Total $ 5,663,318,000 5.76% =================== =====
All of the portfolio of bonds, notes and redeemable preferred stocks acquired have been designated by the Company as available to be sold in response to changes in market interest rates, changes in prepayment risk, the Company's need for liquidity and other similar factors. A summary of the fair value of bonds, notes and redeemable preferred 5 2. Investments (Continued) -----------
stocks acquired, at December 31, 1998, by major category follows: Securities of public utilities $ 176,456,000 Corporate bonds and notes 1,583,637,000 Other debt 516,802,000 -------------- Total $2,276,895,000 ==============
A summary of the fair value of bonds, notes and redeemable preferred stocks acquired, at December 31, 1998, by contractual maturity follows: Due in one year or less $ 850,566,000 Due after one year through five years 1,208,364,000 Due after five years through ten years 51,149,000 Due after ten years 166,816,000 -------------- Total $2,276,895,000 ==============
Actual maturities of bonds, notes and redeemable preferred stocks acquired will differ from those shown above due to prepayments and redemptions. At December 31, 1998, no single investment acquired exceeded 10% of the Company's consolidated shareholder's equity. At December 31, 1998, bonds having a fair value of $5,798,000 were not rated investment grade by nationally recognized credit rating authorities. Such bonds were less than 1% of the bonds acquired. At December 31, 1998, there were no investments in default as to the payment of principal or interest. 3. Deferred Acquisition Cost --------------------------- An amount equal to the sum of the allocated purchase price and the fair value of the related net liabilities assumed in the coinsurance transaction has been recorded as Deferred Acquisition Cost in the accompanying Statement. Such amount, totaling $113,039,000 at December 31, 1998, will be amortized, with interest, in relation to the incidence of estimated gross profits to be realized over the estimated lives of the annuity contracts assumed. Estimated gross profits are composed of net interest income, net realized investment gains and losses, surrender charges and direct administrative expenses. The deferred acquisition cost attributable to the coinsurance 6 3. Deferred Acquisition Cost (Continued) --------------------------- transaction is substantially less than a computation of the present value of estimated future gross profits discounted at the applicable current average credit rate. 4. Fixed Annuity Contracts ------------------------- The fair value of fixed annuity contracts assumed was $3,413,827,000, The crediting rate for these annuities is 5.10%. The fair values of fixed annuity contracts assumed are summarized by applicable surrender charge as follows:
Reserves --------------- Surrenderable: With a surrender charge of 5.4% $ 2,989,911,000 With a minimal surrender charge 54,815,000 Not surrenderable 369,101,000 --------------- Total $ 3,413,827,000 ===============
5. Universal Life Contracts -------------------------- The total fair value of universal life contracts assumed was $2,317,365,000. The crediting rates per policy under the rehabilitation agreement approved by the New Jersey Superior Court were determined by the amount of premium paid by each policyholder. The average crediting rate on the universal life policies assumed is 5.20%.
The fair value and face amount of universal life contracts assumed by applicable surrender charge is as follows: Surrender Charge Reserves Face Amount ----------------- ----------- -------------- 0% $ 485,000 $ 13,133,000 5.40 2,089,080,000 9,587,821,000 7.10 76,957,000 439,035,000 28.00 15,923,000 42,766,000 35.00 244,000 627,000 No surrender value 134,676,000 21,773,000 --------------- -------------- 2,317,365,000 $10,105,155,000 =============== ===============
7 6. Guaranteed Investment Contracts --------------------------------- The fair value of guaranteed investment contract ("GIC") reserves assumed was $70,687,000. Of these GIC contract reserves, $24,011,000 related to structured payment contracts that were reaffirmed as part of the MBL Life rehabilitation and had an average interest crediting rate of 16.11%. The fair value summarized by maturity is as follows:
Maturity Reserves -------- --------- 2001 $15,534,000 2007 813,000 2011 7,664,000 ----------- 24,011,000 ===========
The remaining $46,676,000 of the GIC reserves were pension GIC contracts that were restructured in the rehabilitation and had an average crediting rate of 5.10% and no specified maturity date. 8 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Anchor National Life Insurance Company In our opinion, the accompanying statement of assets acquired and liabilities assumed in the MBL Life Assurance Corporation transaction presents fairly, in all material respects, the assets acquired and liabilities assumed by Anchor National Life Insurance Company, in the coinsurance transaction at December 31, 1998 in conformity with generally accepted accounting principles. This financial statement is the responsibility of the Company's management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this statement in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether this financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Los Angeles, California March 11, 1999 9
Exhibit 99-2 PRO FORMA CONDENSED INCOME STATEMENT FOR THE YEAR ENDED SEPTEMBER 30, 1998 (IN THOUSANDS) Pro Forma Adjustments ----------------------------- Anchor National Estimated Pro Forma as Reported Full-Year Results for the Results of for the Year ended Coinsurance Other Year Ended 9/30/98 Transaction Adjustments 9/30/98 ----------------------- -------------- ------------- ------------ Investment income $ 221,966 $ 326,047 (1) $ (7,063) (4) $ 540,950 Interest expense (135,094) (298,213) (2) --- (433,307) ----------------------- -------------- ------------- ------------ Net investment income 86,872 27,834 (7,063) 107,643 Net realized investment gains 19,482 --- --- 19,482 Fee income 290,362 --- --- 290,362 General and administrative expenses (96,102) --- --- (96,102) Amortization of deferred acquisition costs (72,713) (5,900) (3) --- (78,613) Other income (expense), net (18,209) --- --- (18,209) ----------------------- -------------- ------------- ------------ Pretax income 209,692 21,934 (7,063) 224,563 Income tax benefit (expense) (71,051) (7,677) (5) 2,472 (5) (76,256) ----------------------- -------------- ------------- ------------ Net income $ 138,641 $ 14,257 $ (4,591) $ 148,307 ======================= ============== ============= ============
See accompanying explanatory notes 10 ANCHOR NATIONAL LIFE INSURANCE COMPANY PRO FORMA CONDENSED INCOME STATEMENT EXPLANATORY NOTES FOR THE YEAR ENDED SEPTEMBER 30, 1998 (1) To record investment income on assets received (before deduction of the allocated purchase price) in the coinsurance transaction at 5.76%, the weighted average yield to maturity on the assets on the date of acquisition. (2) To record interest expense on the assumed annuity and universal life contracts at 5.14%, the weighted average rate credited to contract holders on the date of assumption. (3) To record amortization of the deferred acquisition cost arising from this transaction based upon the investment income and interest expense recorded above, as described in Notes (1) and (2), and the Registrant's estimate of related future gross profits. (4) To reflect lost interest income on the $128,420,000 purchase price at the Registrant's average short-term portfolio yield of 5.50%. (5) To record the income tax effect on the pro forma adjustments at the statutory rate of 35%. 11
Exhibit 99-3 PRO FORMA CONDENSED INCOME STATEMENT FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 (IN THOUSANDS) Pro Forma Adjustments ----------------------------- Anchor National Pro Forma as Reported Estimated Results for the Three-Month for the Three Months Results of Three Months Ended Coinsurance Other Ended 12/31/98 Transaction Adjustments 12/31/98 ----------------------- ------------- -------------- ---------- Investment income $ 54,278 $ 81,512 (1) $ (1,766) (4) $ 134,024 Interest expense (27,313) (74,553) (2) --- (101,866) ----------------------- ------------- -------------- ---------- Net investment income 26,965 6,959 (1,766) 32,158 Net realized investment gains 271 --- --- 271 Fee income 83,330 --- --- 83,330 General and administrative expenses (22,375) --- --- (22,375) Amortization of deferred acquisition costs (27,070) (1,475) (3) --- (28,545) Other income (expense), net (6,624) --- --- (6,624) ----------------------- ------------- -------------- ---------- Pretax income 54,497 5,484 (1,766) 58,215 Income tax benefit (expense) (20,106) (1,919) (5) 618 (5) (21,407) ----------------------- ------------- -------------- ---------- Net income $ 34,391 $ 3,565 $ (1,148) $ 36,808 ======================= ============= ============== ==========
See accompanying explanatory notes 12 ANCHOR NATIONAL LIFE INSURANCE COMPANY PRO FORMA CONDENSED INCOME STATEMENT EXPLANATORY NOTES FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 (1) To record investment income on assets received (before deduction of the allocated purchase price) in the coinsurance transaction at 5.76%, the weighted average yield to maturity on the assets on the date of acquisition. (2) To record interest expense on the assumed annuity and universal life contracts at 5.14%, the weighted average rate credited to contract holders on the date of assumption. (3) To record amortization of the deferred acquisition cost arising from this transaction based upon the investment income and interest expense recorded above, as described in Notes (1) and (2), and the Registrant's estimate to related future gross profits. (4) To reflect lost interest income on the $128,420,000 purchase price at the Registrant's average short-term portfolio yield of 5.50%. (5) To record the income tax effect of the pro forma adjustments at the statutory rate of 35%. 13 -----END PRIVACY-ENHANCED MESSAGE-----