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Proc-Type: 2001,MIC-CLEAR
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SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C.
20549 FORM 10-K (Mark
One)
/X/ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES |
|
EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996] |
For the fiscal year ended December
31, 2000 OR
/ / |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES |
|
EXCHANGE ACT OF 1934 [No Fee Required] |
For the
transition period
from
to Commission File No.
33-47472 ANCHOR NATIONAL LIFE INSURANCE
COMPANY
Incorporated in Arizona |
86-0198983 |
|
IRS Employer |
|
Identification No. |
1 SunAmerica Center, Los Angeles, California |
90067-6022 |
Registrant's telephone number, including area code: |
(310) 772-6000 |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None 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 FILES 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. THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANTS COMMON STOCK ON MARCH 26, 2001 WAS AS FOLLOWS: |
Common Stock (par value $1,000 per share) |
3,511 shares |
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PART I ITEM 1.
BUSINESS GENERAL
DESCRIPTION Anchor
National Life Insurance Company, including its wholly owned subsidiaries,
(the "Company") is an indirect wholly-owned subsidiary of American
International Group, Inc. ("AIG"), an international insurance and
financial services holding company. At December 31, 1998, the
Company was a wholly owned indirect subsidiary of SunAmerica Inc., a
Maryland Corporation. On January 1, 1999, SunAmerica Inc. merged with and
into AIG in a tax-free reorganization that has been treated as a pooling
of interests for accounting purposes. Thus, SunAmerica Inc. ceased
to exist on that date. However, immediately prior to the date of the
merger, substantially all of the net assets of SunAmerica Inc. were
contributed to a newly formed subsidiary of AIG named SunAmerica Holdings,
Inc., a Delaware Corporation. SunAmerica Holdings, Inc. subsequently
changed its name to SunAmerica Inc. ("SunAmerica"). The Company
is incorporated in Arizona and maintains its principal executive offices
at 1 SunAmerica Center, Los Angeles, California 90067-6022, telephone
(310) 772-6000. The Company has no employees; however, employees of
SunAmerica and its other subsidiaries perform various services for the
Company. SunAmerica had approximately 2,400 employees at December
31, 2000, approximately 1,700 of whom perform services for the Company as
well as for certain of its affiliates. The Company
is a life insurance company and conducts its business through three
segments: annuity operations, asset management operations, and
broker-dealer operations. Annuity operations focus primarily on the
marketing, sale and administration of fixed and variable annuity products,
the universal life business acquired from MBL Life in 1998 (See Note 4 of
Notes to Consolidated Financial Statements) and guaranteed investment
contracts ("GICs"). The Company's variable annuity products offer
investors a broad spectrum of fund alternatives, with a choice of
investment managers, as well as guaranteed fixed-rate account
options. The Company earns fee income on investments in the variable
account options and net investment income on the fixed-rate account
options. Asset management operations, which include the sale and
management of mutual funds, are conducted by SunAmerica Asset Management
Corp. ("SunAmerica Asset Management"), the Company's registered investment
advisor subsidiary and its related distributor, SunAmerica Capital
Services, Inc. ("SACS"). SunAmerica Asset Management earns fee
income by managing a diversified family of mutual funds and certain
subaccounts within the Company's variable annuity products and by
providing professional management of individual, corporate and pension
plan portfolios. SACS earns commissions and distribution fees by
selling proprietary mutual funds and variable annuities.
Broker-dealer operations are conducted by the Company's broker-dealer
subsidiary, Royal Alliance Associates, Inc. ("Royal"), which sells
proprietary annuities and mutual funds, as well as a full range of
non-proprietary investment products. Net retained commissions are
derived from the commissions on the sales of these products after
deducting the substantial portion of such commissions that is passed on to
registered representatives.
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The Company ranks among the largest U.S. issuers of variable annuities. At December 31, 2000, the Company managed $33.81 billion of assets through its fixed-rate business and asset management operations, consisting of $27.19 billion of assets on its balance sheet and $6.62 billion of assets managed in mutual funds. Its asset management operations provide a broad range of financial planning and investment services through more than 8,600 independent registered representatives nationwide. The Company also distributes its products and services through an extensive network of independent broker-dealers, full-service securities firms, independent general insurance agents, major financial institutions and, in the case of its GICs, by marketing directly to banks, municipalities, asset management firms and direct plan sponsors and through intermediaries, such as managers or consultants servicing these groups. The Company believes that demographic trends have produced strong consumer demand for long-term, investment-oriented products. According to U.S. Census Bureau projections, the number of individuals between the ages of 45 to 64 grew from 46 million to 60 million during the 1990s, making this age group the fastest-growing segment of the U.S. population. Between 1989 and 1999, annual industry premiums from fixed and variable annuities and fund deposits increased from $113.8 billion to $270.2 billion. During the same period, annual industry sales of mutual funds, excluding money market accounts, rose from $125.34 billion to $1.27 trillion. Benefiting from continued strong growth of the retirement savings market, industry sales of tax-deferred savings products have represented, for a number of years, a significantly larger source of new premiums for the U.S. life insurance industry than have traditional life insurance products. Recognizing the growth potential of this market, the Company focuses its life insurance operations on the sale of annuities and GICs. In recent years, the Company has enhanced its marketing efforts and expanded its offerings of fee-based products such as variable annuities and mutual funds, resulting in significantly increased fee income. Fee income has also expanded through the receipt of broker-dealer net retained commissions, resulting primarily from increased demand for long-term investment products. The Company's fee-generating businesses entail no portfolio credit risk and require significantly less capital support than its fixed-rate business, which generates net investment income. The Company and its affiliates have made significant investments in technology over the past several years in order to lower operating costs and enhance their marketing efforts. Its use of optical disk imaging and artificial intelligence has substantially reduced the more traditional paper-intensive life insurance processing procedures, reducing annuity processing and servicing costs and improving customer service. This has also enabled the Company to more efficiently assimilate acquired business. The Company has also implemented technology to interface with its wholly owned or affiliated broker-dealers, which enables the Company to more effectively market its products and help the affiliated financial professionals to better serve their clients. |
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The following table shows the Company's net investment income (including net realized investment losses) and fee income for the year ended December 31, 2000 by business segment: |
NET INVESTMENT AND FEE INCOME | ||||||||||||||||||||
Annuity Operations | Asset Management Operations | Broker- Dealer Operations | Total | Total by Percent | ||||||||||||||||
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(In thousands) | ||||||||||||||||||||
Net investment income | ||||||||||||||||||||
(including net realized | ||||||||||||||||||||
investment losses) | $ | 112,482 | $ | 6,016 | $ | 827 | $ | 119,325 | 16.8 | % | ||||||||||
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Fee income: | ||||||||||||||||||||
Variable annuity fees | $ | 385,436 | $ | 15,059 | $ | --- | 400,495 | 56.4 | % | |||||||||||
Net retained commissions | $ | --- | $ | 3,878 | $ | 58,324 | 62,202 | 8.8 | % | |||||||||||
Asset management fees | $ | --- | $ | 73,922 | $ | --- | 73,922 | 10.4 | % | |||||||||||
Universal life insurance | ||||||||||||||||||||
fees | $ | 20,258 | $ | --- | $ | --- | 20,258 | 2.9 | % | |||||||||||
Surrender charges | $ | 20,963 | $ | --- | $ | --- | 20,963 | 2.9 | % | |||||||||||
Other fees | $ | 3,832 | $ | 6,708 | $ | 2,419 | 12,959 | 1.8 | % | |||||||||||
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Total fee income | $ | 430,489 | $ | 99,567 | $ | 60,743 | 590,799 | 83.2 | % | |||||||||||
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Total | $ | 542,971 | $ | 105,583 | $ | 61,570 | $ | 710,124 | 100.0 | % | ||||||||||
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For additional financial information on the Company's business segments, see "Notes to Consolidated Financial Statements - Note 13, Business Segments". ANNUITY OPERATIONS Founded in 1965, the Company is an Arizona-chartered company licensed in 49 states and the District of Columbia which markets flexible-premium variable annuities and GICs. It has a "AAA" (Extremely Strong) financial strength rating from Standard & Poor's ("S&P"), a "Aaa" (Exceptional) rating from Moody's Investors Service ("Moody's"), a "AAA" (Exceptionally Strong) rating from Fitch ("Fitch") and an "A++" (Superior) rating from industry analyst A.M. Best Company. In addition to distributing its variable annuity products through its six wholly-owned or affiliated broker-dealers, the Company distributes its products through over 900 independent broker-dealers, full-service securities firms and financial institutions as well as through independent general insurance agents. In total, more than 52,000 independent sales representatives nationally are licensed to sell the Company's annuity products. On December 31, 1998, the Company acquired the individual life business and the individual and group annuity business of MBL Life Assurance Corporation ("MBL Life"), via a 100% coinsurance transaction. The Company assumed reserves in this acquisition totaling $5,793,256,000, including $3,460,503,000 of fixed annuity contracts, $2,308,742,000 of universal life insurance contracts and |
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$24,011,000 of guaranteed investment contracts. Policyholders of MBL annuity products were required to transfer their funds into an existing product of the Company or one of its affiliates by December 31, 1999 in order to receive the policy enhancements due under the MBL Life rehabilitation agreement. Over 92% of the deferred annuity reserves had either been transferred or surrendered by December 31, 1999. Included in the block of business acquired from MBL Life were policies whose owners are residents of New York State (the "New York Business"). On July 1, 1999, the New York Business was acquired by the Company's New York affiliate, First SunAmerica Life Insurance Company ("FSA"), via an assumption reinsurance agreement, and the remainder of the business converted to assumption reinsurance, which superseded the coinsurance agreement. As part of this transfer, invested assets equal to $678,272,000, universal life reserves equal to $282,247,000, group pension reserves equal to $406,118,000, and other net assets of $10,093,000 were transferred to FSA. VARIABLE ANNUITIES The variable annuity products of the Company offer investors a broad spectrum of fund alternatives, with a choice of investment managers, as well as guaranteed fixed-rate account options. The Company earns fee income through the sale, administration and management of the variable account options of its variable annuity products. The Company also earns investment income on monies allocated to the fixed-rate account options of these products. Variable annuities offer retirement planning features similar to those offered by fixed annuities, but differ in that the contractholder's rate of return is generally dependent upon the investment performance of the particular equity, fixed-income, money market or asset allocation fund selected by the contractholder. Because the investment risk is borne by the customer in all but the fixed-rate account options, these products require significantly less capital support than fixed annuities. The Company's flagship Polaris variable annuity products are multimanager variable annuities that offer investors a choice of more than 30 variable funds and a number of guaranteed fixed-rate funds. Polaris sales have increased significantly in recent years due to enhanced distribution efforts and growing consumer demand for flexible retirement savings products that offer a variety of equity, fixed-income and guaranteed fixed account investment choices. At December 31, 2000, total variable product reserves were $22.43 billion, of which $20.39 billion were held in separate accounts and $2.04 billion were the liabilities of the fixed-rate account options which are held in the general accounts. The Company's variable annuity products incorporate surrender charges to encourage persistency. At December 31, 2000, 81% of the Company's variable annuity reserves held in the separate accounts were subject to surrender penalties or other restrictions. The Company's variable annuity products also generally limit the number of transfers made in a specified period between account options without the assessment of a fee. The average size of a new variable annuity contract sold by the Company in 2000 was approximately $58,000. |
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FIXED ANNUITIES AND GICs The Company's general account obligations are fixed-rate products, including fixed annuities issued in prior years, universal life insurance contracts assumed in the Acquisition and fixed-rate options of its variable annuity contracts. Such fixed-rate account options on its variable annuity contracts provide interest rate guarantees of one, two, three, five, seven or ten years. Although the Company's annuity contracts remain in force an average of seven to ten years, a majority (approximately 81% at December 31, 2000) of the annuity contracts, as well as the universal life contracts, reprice annually at discretionary rates determined by the Company. In repricing, the Company takes into account yield characteristics of its investment portfolio, surrender assumptions and competitive industry pricing, among other factors. The Company augments its retail annuity business with the sale of institutional products. At December 31, 2000, the Company had $591.4 million of fixed-maturity, variable-rate GIC obligations that reprice periodically based upon certain defined indexes and $19.3 million of fixed-maturity, fixed-rate GICs acquired from MBL Life. Of the total GIC portfolio at December 31, 2000, approximately 92% was sold to asset management firms, 5% was sold to state and local government entities and 3% was sold to corporations. The Company designs its fixed-rate products and conducts its investment operations in order to closely match the duration of the assets in its investment portfolio to its fixed annuity, universal life and GIC obligations. The Company seeks to achieve a predictable spread between what it earns on its assets and what it pays on its liabilities by investing principally in fixed-rate securities. The Company's fixed annuity and universal life products incorporate surrender charges and its GIC products incorporate other restrictions in order to encourage persistency. Approximately 82% of the Company's fixed annuity, universal life and GIC reserves had surrender penalties or other restrictions at December 31, 2000. The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed-rate investments that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its rates of return vary over time depending on a variety of factors, including the current interest rate environment, the slope of the yield curve, the spread at which fixed-rate investments are priced over the yield curve, default rates and general economic conditions. The Company manages most of its invested assets internally. Its portfolio strategy is constructed with a view to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety. As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-rate assets and liabilities under commonly used stress-test interest rate scenarios. With the results of these computer simulations, the Company can measure the potential gain or loss in fair value of its interest-rate sensitive instruments and seek to protect its economic value and achieve a predictable spread between what it earns on its invested assets and what it pays on its liabilities by designing its fixed-rate products and conducting investment operations to closely match the duration of the fixed-rate assets to that of |
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its fixed-rate liabilities. The Company's fixed-rate assets include: cash and short-term investments; bonds, notes and redeemable preferred stocks; mortgage loans; and investments in limited partnerships that invest primarily in fixed-rate securities. At December 31, 2000, these assets had an aggregate fair value of $5.20 billion with a duration of 2.9. See further discussion of duration under Financial Condition and Liquidity - Asset Liability Matching section. The Company's fixed-rate liabilities include fixed annuity, GIC and universal life reserves and subordinated notes. At December 31, 2000, these liabilities had an aggregate fair value (determined by discounting future contractual cash flows by related market rates of interest) of $4.77 billion with a duration of 3.2. For the years ended December 31, 2000, December 31, 1999 and September 30, 1998, the Company's yields on average invested assets were 7.15%, 6.95% and 8.42%, respectively; its average rates paid on all interest-bearing liabilities were 4.96%, 4.98% and 5.45%, respectively; it realized net investment spreads of 2.35%, 2.08% and 3.25%, respectively; on average invested assets. Net realized investment losses were 0.28% and 0.27% of average invested assets in 2000 and 1999 respectively. Net realized investment gains were 0.77% of average invested assets in 1998. The Company's general investment philosophy is to hold fixed-rate assets for long-term investment. Thus, it does not have a trading portfolio. However, the Company has determined that all of its portfolio of bonds, notes and redeemable preferred stocks (the "Bond Portfolio") is available to be sold in response to changes in market interest rates, changes in relative value of asset sectors and individual securities, changes in prepayment risk, changes in credit quality outlook for certain securities, and the Company's need for liquidity and other similar factors. The following table summarizes the Company's investment portfolio at December 31, 2000: |
SUMMARY OF INVESTMENTS | ||||||||||||||||
Carrying |
Percent
of |
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(In thousands) | ||||||||||||||||
Cash and short-term investments | $ | 169,701 | 3.2 | % | ||||||||||||
U.S. government securities | 18,868 | 0.4 | ||||||||||||||
Mortgage-backed securities | 1,636,304 | 31.0 | ||||||||||||||
Other bonds, notes and redeemable preferred | ||||||||||||||||
stocks | 2,352,730 | 44.7 | ||||||||||||||
Mortgage loans | 684,174 | 13.0 | ||||||||||||||
Policy loans | 244,436 | 4.6 | ||||||||||||||
Separate account seed money | 104,678 | 2.0 | ||||||||||||||
Common stocks | 974 | 0.0 | ||||||||||||||
Partnerships | 8,216 | 0.2 | ||||||||||||||
Real estate | 24,139 | 0.5 | ||||||||||||||
Other invested assets | 18,514 | 0.4 | ||||||||||||||
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Total investments | $ | 5,262,734 | 100.0 | % | ||||||||||||
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At December 31, 2000, the Bond Portfolio (excluding $1.4 million of redeemable preferred stocks) included $3.94 billion of bonds rated by S&P, Moody's, Fitch or the National Association of Insurance Commissioners ("NAIC"), and $65.7 million of bonds rated by the Company pursuant to statutory ratings guidelines established by the NAIC. At December 31, 2000, approximately $3.74 billion of the Bond Portfolio was investment grade, including $1.66 billion of the U.S. government/agency securities and mortgage-backed securities. At December 31, 2000, the Bond Portfolio included $267.9 million of bonds that were not investment grade. These non-investment-grade bonds accounted for approximately 1.0% of the Company's total assets and approximately 5.1% of its invested assets. Senior secured loans ("Secured Loans") are included in the Bond Portfolio and aggregated $255.8 million at December 31, 2000. Secured Loans are senior to subordinated debt and equity, and are secured by assets of the issuer. At December 31, 2000, Secured Loans consisted of loans to 48 borrowers spanning 14 industries, with 19% of these assets concentrated in utilities, 9% concentrated in financial institutions and 9% concentrated in technology. No other industry constituted more than 8% of these assets. Mortgage loans aggregated $684.2 million at December 31, 2000 and consisted of 130 commercial first mortgage loans with an average loan balance of approximately $5.3 million, collateralized by properties located in 30 states. Approximately 31% of this portfolio was office, 18% was multifamily residential, 17% was manufactured housing, 10% was hotels, 9% was industrial, 5% was retail and 10% was other types. At December 31, 2000, approximately 33% and 10% of this portfolio were secured by properties located in California and New York, respectively, and no more than 8% of this portfolio was secured by properties located in any other single state. At December 31, 2000, the carrying value (after impairment writedowns) of all investments in default as to the payment of principal or interest totaled $11.2 million, which constituted less than 1% of total invested assets. For more information concerning the Company's investments, including the risks inherent in such investments, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition and Liquidity." ASSET MANAGEMENT OPERATIONSThrough its registered investment advisor subsidiary, SunAmerica Asset Management, and its related distributor, SACS, the Company earns fee income by distributing and managing a diversified family of mutual funds and by providing professional management of individual, corporate and pension plan portfolios. The Company offers investors an array of equity, fixed-income, money market and tax-exempt mutual funds. Founded in 1983 and acquired by the Company in January 1990, SunAmerica Asset Management managed approximately $8.98 billion of assets at December 31, 2000, including mutual fund assets, private accounts and certain of the variable annuity assets of the Company and its affiliates. SACS acts as a distributor for the Company's proprietary mutual funds and variable annuities and does not sell to the public. |
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Sales growth in recent years is primarily due to sales of the Company's "Style Select Series" product, which was introduced in November 1996. The "Style Select Series" is a group of mutual funds that are each managed by three industry-recognized fund managers. Several "Focus Portfolios in the "Style Select Series" were added in 1999 and 2000 bringing the total number of "style select series" portfolios to eleven. The Focus Portfolios utilize three leading independent money managers, each of whom manages one-third of the portfolio by choosing ten favorite stocks. In 2000, the Company introduced the Focused TechNet Portfolio. This portfolio, along with the three existing Focus Portfolios, climbed to over $2.30 billion in assets. The SunAmerica mutual funds are distributed nationally through a network of approximately 400 financial institutions and unaffiliated broker-dealers, as well as by the Company's broker-dealer subsidiary and affiliated broker-dealers. BROKER-DEALER OPERATIONSBroker-dealer operations are conducted by the Company's broker-dealer subsidiary, Royal, which sells proprietary annuities and mutual funds, as well as a full range of non-proprietry investment products. Net retained commissions are derived from the commissions on the sales of these products after deducting the substantial portion of such commissions that is passed on to registered representatives. Royal currently has a network of approximately 2,900 representatives. Royal, along with the Company's five affiliated broker-dealers, comprise the largest network of independent registered representatives in the nation and the fifth-largest securities sales force, based on industry data. Its wholly-owned or affiliated broker-dealers accounted for approximately one-third of the Company's total annuity sales in 2000. REGULATION The Company, in common with other insurers, is subject to regulation and supervision by the states and other jurisdictions in which it does business. Within the United States, the method of such regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to an insurance official. The regulation and supervision relate primarily to approval of policy forms and rates, the standards of solvency that must be met and maintained, including risk based capital measurements, the licensing of insurers and their agents, the nature of and limitations on investments, restrictions on the size of risks which may be insured under a single policy, deposits on securities for the benefit of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, the form and content of reports of financial condition required to be filed, and reserves for unearned premiums, losses and other purposes. In general, such regulation is for the protection of policyholders rather than security holders. Risk-based capital ("RBC") standards are designed to measure the adequacy of an insurer's statutory capital and surplus in relation to the risks inherent in its business. The RBC standards consist of formulas that |
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establish capital requirements relating to asset, insurance, interest rate risks and business. The standards are intended to help identify companies which are under-capitalized and require specific regulatory actions in the event an insurer's RBC is deficient. The RBC formula develops a risk-adjusted target level of adjusted statutory capital and surplus by applying certain factors to various asset, premium and reserve items. Higher factors are applied to more risky items and lower factors are applied to less risky items. Thus, the target level of statutory surplus varies not only as a result of the insurer's size, but also on the risk profile of the insurer's operations. The statutory capital and surplus of the Company exceeded its RBC requirements by a considerable margin as of December 31, 2000. In 1998, the NAIC adopted the codification of statutory accounting principles ("Codification") which replaced the current Accounting Practices and Procedures Manual as the NAIC's primary guidance on statutory accounting, effective January 1, 2001. Codification changes prescribed statutory accounting practices and will result in changes to the accounting practices that the Company uses to prepare its statutory basis financial statements. Codification has been adopted by all fifty states as the prescribed basis of accounting, including Arizona. The impact of any Codification on the Company's statutory surplus has not yet been determined. Federal legislation has been enacted allowing combinations between insurance companies, banks and other entities. It is not yet known what effect this legislation will have on insurance companies. In addition, from time to time, Federal initiatives are proposed that could affect the Company's businesses. Such initiatives include employee benefit plan regulations and tax law changes affecting the taxation of insurance companies and the tax treatment of insurance and other investment products. Proposals made in recent years to limit the tax deferral of annuities or otherwise modify the tax rules related to the treatment of annuities have not been enacted. While certain of such proposals, if implemented, could have an adverse effect on the Company's sales of affected products, and, consequently, on its results of operations, the Company believes these proposals have a small likelihood of being enacted, because they would discourage retirement savings and there is strong public and industry opposition to them. SunAmerica Asset Management, a subsidiary of the Company, is registered with the Securities and Exchange Commission ("SEC") as an investment adviser under the Investment Advisers Act of 1940. The mutual funds that it markets are subject to regulations under the Investment Company Act of 1940. SunAmerica Asset Management and the mutual funds are also subject to regulation and examination by the SEC. In addition, variable annuities and the related separate accounts of the Company are subject to regulation by the SEC under the Securities Act of 1933 and the Investment Company Act of 1940. The Company's broker-dealer subsidiaries are subject to regulation and supervision by the states in which they transact business, as well as by the SEC and the National Association of Securities Dealers ("NASD"). The SEC and the NASD have broad administrative and supervisory powers relative to all aspects of business and may examine each subsidiary's business and accounts at any time. The SEC also has broad jurisdiction to oversee various activities of the Company and its other subsidiaries. |
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COMPETITION The businesses conducted by the Company are highly competitive. The Company competes with other life insurers, and also compete for customers' funds with a variety of investment products offered by financial services companies other than life insurance companies, such as banks, investment advisors, mutual fund companies and other financial institutions. In 1999, net annuity premiums written among the top 100 companies ranged from approximately $65 million to approximately $18 billion annually. The Company together with its affiliates ranks in the top quartile of this group. The Company believes the primary competitive factors among life insurance companies for investment-oriented insurance products, such as annuities and GICs, include product flexibility, net return after fees, innovation in product design, the claims-paying ability rating and the name recognition of the issuing company, the availability of distribution channels and service rendered to the customer before and after a contract is issued. Other factors affecting the annuity business include the benefits (including before-tax and after-tax investment returns) and guarantees provided to the customer and the commissions paid. Competitors of SunAmerica Asset Management include a large number of mutual fund organizations, both independent and affiliated with other financial service companies, including banks and insurance companies. The Company's broker-dealer faces competition from regional firms and large, national full service and discount brokerage firms. ITEM 2. PROPERTIES The Company's executive offices and its principal office are in leased premises at 1 SunAmerica Center, Los Angeles, California 90067. The Company, through an affiliate, also leases office space in Woodland Hills, California. The Company's asset management and broker-dealer subsidiaries lease offices in New York, New York. The Company believes that such properties, including the equipment located therein, are suitable and adequate to meet the requirements of its businesses. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various kinds of litigation common to its businesses. These cases are in various stages of development and, based on reports of counsel, management believes that provisions made for potential losses relating to such litigation are adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position, results of operations or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS No matters were submitted during the quarter ending December 31, 2000 to a vote of security-holders, through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS Not applicable. |
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data of the Company and its subsidiaries should be read in conjunction with the consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are included elsewhere herein. |
Years Ended December 31, | Three Months Ended | Years Ended September 30, | |||||||||||||||||
2000 | 1999 | December 31, 1998 | 1998 | 1997 | 1996 | ||||||||||||||
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(In thousands) | |||||||||||||||||||
RESULTS OF OPERATIONS | |||||||||||||||||||
Net investment income | $ | 134,502 | $ | 158,264 | $ | 25,858 | $ | 83,699 | $ | 70,048 | $ | 53,802 | |||||||
Net realized investment | |||||||||||||||||||
gains (losses) | (15,177 | ) | (19,620 | ) | 271 | 19,482 | (17,394 | ) | (13,355 | ) | |||||||||
Fee income | 590,799 | 453,362 | 83,330 | 290,362 | 213,146 | 169,505 | |||||||||||||
General and administrative | |||||||||||||||||||
expenses | (171,627 | ) | (146,683 | ) | (21,268 | ) | (92,929 | ) | (95,649 | ) | (78,511 | ) | |||||||
Amortization of deferred | |||||||||||||||||||
acquisition costs | (158,007 | ) | (116,840 | ) | (27,070 | ) | (72,713 | ) | (66,879 | ) | (57,520 | ) | |||||||
Annual commissions | (56,473 | ) | (40,760 | ) | (6,624 | ) | (18,209 | ) | (8,977 | ) | (4,613 | ) | |||||||
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Pretax income | 324,017 | 287,723 | 54,497 | 209,692 | 94,295 | 69,308 | |||||||||||||
Income tax expense | (108,445 | ) | (103,025 | ) | (20,106 | ) | (71,051 | ) | (31,169 | ) | (24,252 | ) | |||||||
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NET INCOME | $ | 215,572 | $ | 184,698 | $ | 34,391 | $ | 138,641 | $ | 63,126 | $ | 45,056 | |||||||
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The results of operations of the Company for 1999 are affected by the acquisition of business from MBL Life on December 31, 1998 (See Note 4 of the accompanying consolidated financial statements). |
11
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (Continued) |
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At December 31, |
At September 30, | |||||||||||||||||
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2000 |
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1999 |
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1998 |
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1998 |
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1997 |
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1996 |
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(In thousands) | |||||||||||||||||||
FINANCIAL POSITION | |||||||||||||||||||
Investments | $ | 5,262,734 | $ | 5,554,701 | $ | 8,306,943 | $ | 2,734,742 | $ | 2,608,301 | $ | 2,329,232 | |||||||
Variable annuity assets held | |||||||||||||||||||
in separate accounts | 20,393,820 | 19,949,145 | 13,767,213 | 11,133,569 | 9,343,200 | 6,311,557 | |||||||||||||
Deferred acquisition costs | 1,286,456 | 1,089,979 | 866,053 | 539,850 | 536,155 | 443,610 | |||||||||||||
Deferred income taxes | --- | 53,445 | --- | --- | --- | --- | |||||||||||||
Other assets | 246,468 | 227,224 | 206,124 | 142,107 | 85,573 | 144,578 | |||||||||||||
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TOTAL ASSETS | $ | 27,189,478 | $ | 26,874,494 | $ | 23,146,333 | $ | 14,550,268 | $ | 12,573,229 | $ | 9,228,977 | |||||||
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Reserves for fixed annuity | |||||||||||||||||||
contracts | $ | 2,778,229 | $ | 3,254,895 | $ | 5,500,157 | $ | 2,189,272 | $ | 2,098,803 | $ | 1,789,962 | |||||||
Reserves for universal life | |||||||||||||||||||
insurance contracts | 1,832,667 | 1,978,332 | 2,339,194 | --- | --- | --- | |||||||||||||
Reserves for guaranteed | |||||||||||||||||||
investment contracts | 610,672 | 305,570 | 306,461 | 282,267 | 295,175 | 415,544 | |||||||||||||
Variable annuity liabilities | |||||||||||||||||||
related to separate accounts | 20,393,820 | 19,949,145 | 13,767,213 | 11,133,569 | 9,343,200 | 6,311,557 | |||||||||||||
Other payables and accrued | |||||||||||||||||||
liabilities | 304,324 | 413,610 | 171,143 | 157,551 | 157,546 | 120,638 | |||||||||||||
Subordinated notes payable to | |||||||||||||||||||
affiliates | 55,119 | 37,816 | 209,367 | 39,182 | 36,240 | 35,832 | |||||||||||||
Deferred income taxes | 85,978 | --- | 105,772 | 95,758 | 67,047 | 70,189 | |||||||||||||
Shareholder's equity | 1,128,669 | 935,126 | 747,026 | 652,669 | 575,218 | 485,255 | |||||||||||||
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TOTAL LIABILITIES AND | |||||||||||||||||||
SHAREHOLDER'S EQUITY | $ | 27,189,478 | $ | 26,874,494 | $ | 23,146,333 | $ | 14,550,268 | $ | 12,573,229 | $ | 9,228,977 | |||||||
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The financial position of the Company as of December 31, 1998 and thereafter is affected by the acquisition of business from MBL Life (See Note 4 of the accompanying consolidated financial statements). |
12
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations of Anchor National Life Insurance Company (the "Company") for the three years ended December 31, 2000 and 1999 and September 30, 1998 follows. Effective December 31, 1998, the Company changed its fiscal year end from September 30 to December 31. Accordingly, the three-month period ended December 31, 1998 was a transition period. Certain prior period amounts have been restated to conform to the current period's presentation. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding certain forward-looking statements contained in this report and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (the "SEC"). Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Statements using verbs such as "expect," "anticipate," "believe" or words of similar import generally involve forward-looking statements. Without limiting the foregoing, forward-looking statements include statements which represent the Company's beliefs concerning future levels of sales and redemptions of the Company's products, investment spreads and yields, or the earnings and profitability of the Company's activities. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which are subject to change. These uncertainties and contingencies could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable developments. Some may be national in scope, such as general economic conditions, changes in tax law and changes in interest rates. Some may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation. Others may relate to the Company specifically, such as credit, volatility and other risks associates with the Company's investment portfolio. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC. The Company disclaims any obligation to update forward-looking information. RESULTS OF OPERATIONS The Company has three business segments, as descrubed in Note 13 of Notes to Consolidated Financial Statements: annuity operations, asset management operations and broker-dealer operations. Annuity operations consist of the sale and administration of deposit-type insurance contracts, such as fixed and variable annuities, universal life insurance contracts and guaranteed investment contracts. The operations focus primarily on the marketing of variable annuity products and the administration of the universal life business acquired from MBL Life Assurance Corporation ("MBL Life") in 1998 (See Note 4 of Notes to Consolidated Financial Statements). |
13
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The variable annuity products offer investors a broad spectrum of fund alternatives, with a choice of investment managers, as well as guaranteed fixed-rate account options. The Company earns fee income on investments in the variable account options and net investment income on the fixed-rate account options. The asset management operations are conducted by the Company's registered investment advisor subsidiary, SunAmerica Asset Management Corp. ("SunAmerica Asset Management"), and its related distributor. These companies earn fee income by distributing and managing a diversified family of mutual funds, managing certain subaccounts within the Company's variable annuity products and providing professional management of individual, corporate and pension plan portfolios. The broker-dealer operations are conducted by the Company's broker-dealer subsidiary, Royal Alliance Associates, Inc. ("Royal"), which sells proprietary annuities and mutual funds, as well as a full range of non-proprietary investment products through approximately 2,900 independent registered representatives. Royal is a registered broker-dealer under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers. NET INCOME totaled $215.6 million in 2000, compared with $184.7 million in 1999 and $138.6 million in 1998. On December 31, 1998, the Company acquired the individual life business and the individual and group annuity business of MBL Life Assurance Corporation (the "Acquisition"). Since the Acquisition was accounted for under the purchase method of accounting, results of operations include those of the Acquisition only from its date of acquisition. Consequently, the operating results for 2000 and 1999 are not comparable with those of 1998. On a pro forma basis, using the historical financial information of the acquired business and assuming that the Acquisition had been consummated on October 1, 1997, the beginning of the prior-year period discussed herein, net income would have been $162.6 million for the year ended September 30, 1998. PRETAX INCOME totaled $324.0 million in 2000, $287.7 million in 1999 and $209.7 million in 1998. The 12.6% improvement in 2000 over 1999 primarily resulted from increased fee income from the Company's variable annuity and asset management operations, partially offset by increased operating expenses and amortization of related deferred acquisition costs. The 37.2% improvement in 1999 over 1998 primarily resulted from increased fee income from variable annuities and mutual funds and higher net investment income resulting from the Acquisition. These were partially offset by increased general and administrative expenses, increased amortization of deferred acquisition costs and net realized investment losses. INCOME TAX EXPENSE totaled $108.4 million in 2000, $103.0 million in 1999 and $71.1 million in 1998, representing effective tax rates of 33% in 2000, 36% in 1999 and 34% in 1998. ANNUITY OPERATIONS PRETAX INCOME totaled $266.2 million in 2000, $252.0 million in 1999 and $183.2 million in 1998. The increase in 2000 over 1999 primarily resulted from increased variable annuity fee income, partially offset by increased amortization of deferred acquisition costs, lower net investment income, increased general & administative expenses and increased annual commissions. |
14
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The 37.6% improvement in 1999 over 1998 primarily resulted from increased fee income and higher net investment income, partially offset by net realized investment losses sustained in 1999, increased general and administrative expenses and increased amortization of deferred acquisition costs. As a result of the Acquisition, the results of operations for 2000 and 1999 are not comparable to those of 1998. On a pro forma basis, using the historical financial information of the acquired business and assuming that the Acquisition had been consummated on October 1, 1997, the beginning of the prior year periods discussed herein, pretax income would have been $220.0 million for the year ended September 30, 1998. NET INVESTMENT INCOME, which is the spread between the income earned on invested assets and the interest paid on fixed annuities and other interest-bearing liabilities, totaled $127.7 million in 2000, $151.7 million in 1999 and $82.9 million in 1998. These amounts equal 2.35% on average invested assets (computed on a daily basis) of $5.43 billion in 2000, 2.08% on average invested assets of $7.28 billion in 1999, and 3.25% on average invested assets of $2.55 billion in 1998. On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, net investment income on related average invested assets would have been 1.28% on average invested assets of $7.80 billion in 1998. The improvement in the 1999 net investment yield over the 1998 pro forma amount reflects a redeployment of assets received in the Acquisition into higher yielding investment categories. Net investment spreads include the effect of income earned or interest paid on the difference between average invested assets and average interest-bearing liabilities. Average invested assets exceeded average interest-bearing liabilities by $169.9 million in 2000, $159.2 million in 1999 and 128.8 million in 1998. The difference between the Company's yield on average invested assets and the rate paid on average interest-bearing liabilities (the "Spread Difference") was 2.19% in 2000, 1.97% in 1999 and 2.97% in 1998. On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, the Spread Difference would have been 1.15% for 1998, reflecting primarily the effect of the lower yielding assets received in the Acquisition. Investment income (and the related yields on average invested assets) totaled $388.4 million (7.15%) in 2000, compared with $506.0 million (6.95%) in 1999 and $214.9 million (8.42%) in 1998. The decrease in investment income in 2000 compared to 1999 resulted primarily from the surrender or rollover into a variable product of most of the fixed annuities received in the Acquisition. The increase in the investment yield in 2000 compared to 1999 is due primarily to a generally increasing interest rate environment. Both the significant increase in investment income and the decrease in the related yield in 1999 as compared to 1998 principally resulted from the Acquisition. The invested assets acquired in the Acquisition included high-grade corporate, government and government/agency bonds and cash and short-term investments, which are lower yielding than a significant portion of the invested assets that comprised the remainder of the Company's portfolio. On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, the yield on related average invested assets would have been 6.54% in 1998. |
15
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Expenses incurred to manage the investment portfolio amounted to $7.1 million in 2000, $6.0 million in 1999 and $3.2 million in 1998. These expenses are included as a reduction to investment income in the income statement. Investment expenses were significantly higher in 2000 and 1999 due to the increase in the size of the portfolio as a result of the Acquisition. Total interest expense equaled $260.7 million in 2000, $354.3 million in 1999 and $132.0 million in 1998. The average rate paid on all interest-bearing liabilities was 4.96% in 2000, compared with 4.98% in 1999 and 5.45% in 1998. Interest-bearing liabilities averaged $5.26 billion during 2000, compared with $7.12 billion during 1999 and $2.42 billion during 1998. On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, the average rate paid on all interest-bearing liabilities would have been 5.39% and interest-bearing liabilities would have averaged $7.62 billion in 1998. The decreases in the overall rates paid in 1999 result primarily from a generally lower interest rate environment in 1999. DECLINE IN AVERAGE INVESTED ASSETS largely results from the surrenders and rollovers to variable products of the fixed annuity liabilities related to the Acquisition. Changes in average invested assets also reflect sales of fixed annuities and the fixed account options of the Company's variable annuity products ("Fixed Annuity Premiums"), and renewal premiums on its universal life product ("UL Premiums") acquired in the Acquisition, partially offset by net exchanges from fixed accounts into the separate accounts of variable annuity contracts. Fixed Annuity Premiums and UL Premiums totaled $1.82 billion in 2000, $2.10 billion in 1999 and $1.51 billion in 1998, and are largely premiums for the fixed accounts of variable annuities. These premiums represent 35%, 27% and 72%, respectively, of the related reserve balances at the beginning of the respective periods. The lower levels of 2000 and 1999 premiums when expressed as a percentage of related reserve balances results from the impact of the Acquisition. When premium and reserve balances resulting from the Acquisition are excluded, the resulting premiums represent 66% and 94% of the beginning fixed annuity reserve balances in 2000 and 1999. Guaranteed investment contract ("GIC") premiums totaled $350.0 million in 2000 and $5.6 million in 1998. There were no GIC premiums in 1999. GIC surrenders and maturities totaled $78.3 million in 2000, $19.7 million in 1999 and $36.3 million in 1998. The GICs issued by the Company are generally variable rate contracts which guarantee the payment of principal and interest for a term of three to five years. GICS that are purchased by banks for their long-term portfolios or by state and local governmental entities either prohibit withdrawals or permit scheduled book value withdrawals subject to the terms of the underlying indenture or agreement. GICs purchased by asset management firms for their short-term portfolios either prohibit withdrawals or permit withdrawals with notice ranging from 90 to 270 days. In pricing GICs, the Company analyzes cash flow information and prices accordingly so that it is compensated for possible withdrawals prior to maturity. NET REALIZED INVESTMENT LOSSES totaled $15.2 million in 2000 and $19.6 million in 1999, compared with net realized investment gains of $19.6 million in 1998 and include impairment writedowns of $20.6 million in 2000, $6.1 million in 1999 and $13.1 million in 1998. Thus, net realized gains (losses) from sales and redemptions of investments included $5.4 million of gains in 2000, $13.5 million of losses in 1999 and $32.7 million of gains in 1998. |
16
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The Company sold or redeemed invested assets, principally bonds and notes, aggregating $1.14 billion in 2000, $4.43 billion in 1999 and $2.23 billion in 1998. Sales of investments result from the active management of the Company's investment portfolio, including assets received as part of the Acquisition. Because redemptions of investments are generally involuntary and sales of investments are made in both rising and falling interest rate environments, net gains and losses from sales and redemptions of investments fluctuate from period to period, and represent 0.10%, 0.19%, and 1.28% of average invested assets for 2000, 1999 and 1998, respectively. Active portfolio management involves the ongoing evaluation of asset sectors, individual securities within the investment portfolio and the reallocation of investments from sectors that are perceived to be relatively overvalued to sectors that are perceived to be relatively undervalued. The intent of the Company's active portfolio management is to maximize total returns on the investment portfolio, taking into account credit, option, liquidity and interest-rate risk. Impairment writedowns include $20.6 million and $6.1 million of provisions applied to bonds in 2000 and 1999, respectively, and $9.4 million of provisions applied to partnerships and $3.7 million applied to bonds in 1998. Impairment writedowns represent 0.38%, 0.08% and 0.51% of average invested assets for 2000, 1999 and 1998, respectively. For the five years ended December 31, 2000, impairment writedowns as a percentage of average invested assets have ranged from 0.10% to 0.80% and have averaged 0.42%. Such writedowns are based upon estimates of the net realizable value of the applicable assets. Actual realization will be dependent upon future events. VARIABLE ANNUITY FEES are based on the market value of assets in separate accounts supporting variable annuity contracts. Such fees totaled $385.4 million in 2000, $296.1 million in 1999 and $195.9 million in 1998. The increased fees reflect growth in average variable annuity assets, principally due to the receipt of variable annuity premiums and net exchanges into the separate accounts from the fixed accounts of variable annuity contracts, partially offset by surrenders and decreases in market values. Variable annuity fees represent 1.8% of average variable annuity assets in all periods presented. Variable annuity assets averaged $21.07 billion in 2000, $16.15 billion during 1999 and $10.70 billion during 1998. Variable annuity premiums, which exclude premiums allocated to the fixed accounts of variable annuity products, totaled $1.88 billion in 2000, $1.70 billion in 1999 and $1.82 billion in 1998. These amounts represent 9%, 12% and 19% of variable annuity reserves at the beginning of the respective periods. Transfers from the fixed accounts of the Company's variable annuity products to the separate accounts (see "Decline in Average Invested Assets") are not classified as variable annuity premiums. Accordingly, changes in variable annuity premiums are not necessarily indicative of the ultimate allocation by customers among fixed and variable account options of the Company's variable annuity products. Sales of variable annuity products (which include premiums allocated to the fixed accounts) ("Variable Annuity Product Sales") amounted to $3.64 billion, $3.66 billion and $3.33 billion in 2000, 1999 and 1998, respectively. Variable Annuity Product Sales primarily reflect sales of the Company's flagship variable annuity line, Polaris. Polaris is a multi-manager variable annuity that offers investors a choice of more than 30 variable funds and a number of guaranteed fixed-rate funds. |
17
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The Company has encountered increased competition in the variable annuity marketplace during recent years and anticipates that the market will remain highly competitive for the foreseeable future. Also, from time to time, Federal initiatives are proposed that could affect the taxation of variable annuities and annuities generally (See "Regulation" in Item 1). UNIVERSAL LIFE INSURANCE FEES, NET result from the universal life insurance contract reserves acquired in the Acquisition and the ongoing receipt of renewal premiums on such contracts, and consist of mortality changes, up-front fees earned on premiums received and administrative fees, net of the excess mortality expense on these contracts. The Company does not actively market universal life insurance contracts. Universal life insurance fees amounted to $20.3 million and $28.9 million in 2000 and 1999, respectively. Such fees represent 1.08% and 1.34% of average reserves for universal life insurance contracts in the respective periods. The decrease in fees in 2000 as compared to 1999 result principally from the ceding to an affiliate on July 1, 1999 of approximately 12.2% of the universal life reserves received in the Acquisition. Since the Acquisition occurred on December 31, 1998, there were no such fees earned in 1998. SURRENDER CHARGES on fixed and variable annuity contracts and universal life contracts totaled $21.0 million in 2000, $17.1 million in 1999 (including $1.6 million attributable to the Acquisition) and $7.4 million in 1998. Surrender charges generally are assessed on withdrawals at declining rates during the first seven years of a contract. Withdrawal payments, which exclude claims and lump-sum annuity benefits, totaled $2.22 billion in 2000, $3.12 billion in 1999 (including $1.58 billion attributable to the Acquisition) and $1.14 billion in 1998. These payments when expressed as a percentage of average fixed and variable annuity and universal life reserves represent 8.7%, 16.2% (7.9% attributable to the Acquisition) and 9.0% for 2000, 1999 and 1998, respectively. The very high surrender rate in 1999 was due to the Acquisition, which occurred on July 1, 1999 and provided these policyholders the ability to surrender their policies without a moratorium fee for the first time since 1991. Withdrawal rates in this block of business continued to be relatively high for the remainder of 1999. Withdrawals include variable annuity payments from the separate accounts totaling $1.76 billion (8.4% of average variable annuity reserves), $1.34 billion (8.3% of average variable annuity reserves) and $952.1 million (8.9% of average variable annuity reserves) in 2000, 1999 and 1998, respectively. Management anticipates that withdrawal rates will gradually rise for the foreseeable future. GENERAL AND ADMINISTRATIVE EXPENSES totaled $95.3 million in 2000, $93.4 million in 1999 and $49.7 million in 1998. The increases in 2000 over 1999 and 1998 principally reflect the expenses related to managing the Company's growing block of variable annuity policies. General and administrative expenses remain closely controlled through a company-wide cost containment program and continue to represent less than 1% of average total assets. AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $125.0 million in 2000 (including $11.9 million attributable to the Acquisition), compared with $94.9 million (including $8.9 million attributable to the Acquisition) in 1999 and $58.8 million in 1998. The increases in amortization were primarily due to additional fixed and variable annuity sales and the subsequent amortization of related deferred commissions and other direct selling costs. |
18
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ANNUAL COMMISSIONS represent renewal commissions paid quarterly in arrears to maintain the persistency of certain of the Company's variable annuity contracts. Substantially all of the Company's currently available variable annuity products allow for an annual commission payment option in return for a lower immediate commission. Annual commissions totaled $56.5 million in 2000, $40.8 million in 1999 and $18.2 million in 1998. The increases in annual commissions since 1998 reflect increased sales of annuities that offer this commission option and gradual expiration of the initial fifteen-month periods before such payments begin. The Company estimates that approximately 58% of the average balances of its variable annuity products is currently subject to such annual commissions. Based on current sales, this percentage is expected to increase in future periods. ASSET MANAGEMENT OPERATIONS PRETAX INCOME totaled $28.3 million in 2000, $15.1 million in 1999 and $4.1 million in 1998. The 87.9% improvement in 2000 over 1999 primarily resulted from substantial increases in asset management and variable annuity fee income, partially offset by corresponding increases in related and administrative expenses and amortization of deferred acquisition costs. The significant improvement in 1999 over 1998 also resulted principally from increased asset management fee income, and higher net investment income, partially offset by increased amortization of deferred acquisition costs and increased general and administrative expenses. VARIABLE ANNUITY FEES totaled $15.1 million in 2000, $10.3 million in 1999 and $4.9 million in 1998. Premiums from variable annuities sold by the Company are held in trusts that are owned by the Company, with the assets directly supporting policyholder obligations. SunAmerica Asset Management is the investment advisor for all of the trusts as well as trusts owned by an affiliate, First SunAmerica Life Insurance Company. SunAmerica Asset Management also serves as the subadvisor for several of these trusts, for which it receives variable annuity fees which are direct expenses of the trusts. ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1 distribution fees, are based on the market value of assets managed in mutual funds by SunAmerica Asset Management. Such fees totaled $73.9 million on average assets managed of $6.62 billion in 2000, $43.5 million on average assets managed of $4.19 billion in 1999 and $29.6 million on average assets managed of $2.89 billion in 1998. Asset management fees are not necessarily proportionate to average assets managed, principally due to changes in product mix. Mutual fund sales, excluding sales of money market accounts, totaled $2.89 billion in 2000, compared with $1.48 billion in 1999 and $853.6 million in 1998. The increase in sales in 2000 and 1999 principally resulted from increased sales of the Company's "Style Select Series" product. The "Style Select Series" is a group of mutual funds that are each managed by three industry-recognized fund managers. Additional "Focus Portfolios" in the Style Select Series were added in 1999 and 2000. The Focus Portfolios utilize three leading independent money managers, each of whom manages one-third of the portfolio by choosing ten favorite stocks. Sales of the "Style Select Series" products totaled $2.05 billion in 2000, compared to $938.5 million in 1999 and $550.6 million in 1998. Redemptions of mutual funds, excluding redemptions of money market accounts, amounted to $819.9 million in 2000, $571.5 million in 1999 and $402.5 million in 1998, which represent 14.3%, 16.8% and 17.5%, respectively, of average related mutual fund assets. |
19
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GENERAL AND ADMINISTRATIVE EXPENSES totaled $44.3 million in 2000, compared with $24.9 million in 1999 and $18.6 million in 1998. The consecutive increases in expenses principally reflect the higher costs related to servicing the Company's rapidly growing blocks of mutual funds, as well as certain costs of marketing such products. AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $33.0 million in 2000, compared with $21.9 million in 1999 and $13.9 million in 1998. The increases in amortization were primarily due to additional mutual fund sales and the subsequent amortization of related deferred commissions and other direct selling costs. BROKER DEALER OPERATIONS PRETAX INCOME totaled $29.5 million in 2000, $20.6 million in 1999 and $22.4 million in 1998. The 43.2% improvement in 2000 over 1999 primarily resulted from increased net retained commissions, partially offset by increased general and administrative expenses. The 8.0% decrease in 1999 as compared to 1998 resulted from increased general and administrative expenses and lower net investment income, offset by increased fee income. NET RETAINED COMMISSIONS are derived from commissions on the sales of proprietary and nonproprietary investment products, after deducting the substantial portion of such commissions that is passed on to registered representatives. Approximately 90% of commission payments Royal receives is paid to its registered representatives. Net retained commissions totaled $58.3 million in 2000, $49.0 million in 1999 and $46.9 million in 1998. Broker-dealer sales (mainly sales of general securities, mutual funds and annuities) totaled $13.25 billion in 2000, $13.40 billion in 1999 and $14.37 billion in 1998. Fluctuations in net retained commissions may not be proportionate to fluctuations in sales primarily due to changes in sales mix. GENERAL AND ADMINISTRATIVE EXPENSES totaled $32.1 million in 2000, compared with $28.4 million in 1999 and $24.6 million in 1998. The increases in 2000 over 1999 and in 1999 over 1998 principally reflect increases in marketing expenses and technology expenses. FINANCIAL CONDITION AND LIQUIDITY SHAREHOLDER'S EQUITY increased to $1.13 billion at December 31, 2000 from $935.1 million at December 31, 1999, due principally to $215.6 million of net income recorded in 2000 and a $47.0 million decrease in accumulated other comprehensive loss, offset by a $69.0 million dividend paid to the Parent. INVESTED ASSETS at December 31, 2000 totaled $5.26 billion, compared with $5.55 billion at December 31, 1999. The Company manages most of its invested assets internally. The Company's general investment philosophy is to hold fixed-rate assets for long-term investment. Thus, it does not have a trading portfolio. However, the Company has determined that all of its portfolio of bonds, notes and redeemable preferred stocks (the "Bond Portfolio") is available to be sold in response to changes in market interest rates, changes in relative value of asset sectors and individual securities, changes in prepayment risk, changes in the credit quality outlook for certain securities, the Company's need for liquidity and other similar factors. |
20
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THE BOND
PORTFOLIO, which constituted 76% of the Company's total investment
portfolio at December 31, 2000, had an amortized cost that was $122.7
million greater than its aggregate fair value at December 31, 2000 and
$202.6 million greater than its aggregate fair value at December 31,
1999. The decrease in net unrealized losses on the Bond Portfolio
during 2000 principally reflects the decline in prevailing interest rates
and the corresponding effect on the fair value of the Bond Portfolio at
December 31, 2000. At December
31, 2000, the Bond Portfolio (excluding $1.4 million of redeemable
preferred stocks) included $3.94 billion of bonds rated by Standard &
Poor's ("S&P"), Moody's Investors Service ("Moody's"), Fitch ("Fitch")
or the National Association of Insurance Commissioners ("NAIC"), and $65.7
million of bonds rated by the Company pursuant to statutory ratings
guidelines established by the NAIC. At December 31, 2000,
approximately $3.74 billion of the Bond Portfolio was investment grade,
including $1.66 billion of U.S. government/agency securities and
mortgage-backed securities ("MBS"). At December
31, 2000, the Bond Portfolio included $267.9 million of bonds that were
not investment grade. These non-investment-grade bonds accounted for
approximately 1.0% of the Company's total assets and approximately 5.1% of
its invested assets.
Non-investment-grade securities generally provide higher yields and
involve greater risks than investment-grade securities because their
issuers typically are more highly leveraged and more vulnerable to adverse
economic conditions than investment-grade issuers. In addition, the
trading market for these securities is usually more limited than for
investment-grade securities. The Company had no material
concentrations of non-investment-grade securities at December 31,
2000. The table on
the next page summarizes the Company's rated bonds by rating
classification as of December 31, 2000.
Footnotes to the table of Rated
Bonds by Rating Classification S&P and Fitch rate debt securities in rating
categories ranging from AAA (the highest) to D (in payment default).
A plus (+) or minus (-) indicates the debt's relative standing within the
rating category. A security rated BBB- or higher is considered
investment grade. Moody's rates debt securities in rating categories
ranging from Aaa (the highest) to C (extremely poor prospects of ever
attaining any real investment standing). The number 1,2 or 3 (with 1
the highest and 3 the lowest) indicates the debt's relative standing
within the rating category. A security rated Baa3 or higher is
considered investment grade. Issues are categorized based on the highest
of the S&P, Moody's and Fitch ratings if rated by multiple
agencies.
Senior
secured loans ("Secured Loans") are included in the Bond Portfolio and
aggregated $255.8 million at December 31, 2000. Secured Loans are
senior to subordinated debt and equity and are secured by assets of the
issuer. At December 31, 2000, Secured Loans consisted of $74.9
million of publicly traded securities and $180.9 million of privately
traded securities. These Secured Loans are composed of loans to 48
borrowers spanning 14 industries, with 19% of these assets concentrated in
utilities, 9% concentrated in financial institutions and 9% concentrated
in technology. No other industry constituted more than 8% of these
assets. While the
trading market for the Company's privately traded Secured Loans is more
limited than for publicly traded issues, management believes that
participation in these transactions has enabled the Company to improve its
investment yield. As a result of restrictive financial covenants,
these Secured Loans involve greater risk of technical default than do
publicly traded investment-grade securities. However, management
believes that the risk of loss upon default for these Secured Loans is
mitigated by such financial covenants and the collateral values underlying
the Secured Loans. The Company's Secured Loans are rated by S&P,
Moody's, Fitch, the NAIC or by the Company, pursuant to comparable
statutory ratings guidelines established by the NAIC. MORTGAGE
LOANS aggregated $684.2 million at December 31, 2000 and consisted of 130
commercial first mortgage loans with an average loan balance of
approximately $5.3 million, collateralized by properties located in 30
states. Approximately 31% of this portfolio was office, 18% was
multifamily residential, 17% was manufactured housing, 10% was hotels, 9%
was industrial, 5% was retail, and 10% was other types. At December
31, 2000, approximately 33% and 10% of this portfolio were secured by
properties located in California and New York, respectively, and no more
than 8% of this portfolio was secured by properties located in any other
single state. At December 31, 2000, there were 14 mortgage loans with
outstanding balances of $10 million or more, which collectively aggregated
approximately 41% of this portfolio. At December 31, 2000,
approximately 26% of the mortgage loan portfolio consisted of loans with
balloon payments due before January 1, 2004. During 2000, 1999 and
1998, loans delinquent by more than 90 days, foreclosed loans and
restructured loans have not been significant in relation to the total
mortgage loan portfolio. At December
31, 2000, approximately 10% of the mortgage loans were seasoned loans
underwritten to the Company's standards and purchased at or near par from
other financial institutions. Such loans generally have higher
average interest rates than loans that could be originated today.
The balance of the mortgage loan portfolio has been originated by the
Company under strict underwriting standards. Commercial mortgage
loans on properties such as offices, hotels and shopping centers generally
represent a higher level of risk than do mortgage loans secured by
multifamily residences. This greater risk is due to several factors,
including the larger size of such loans and the more immediate effects of
general economic conditions on these commercial property types.
However, due to the seasoned nature of the Company's mortgage loan
portfolio and its strict underwriting standards, the Company believes that
it has prudently managed the risk attributable to its mortgage loan
portfolio while maintaining attractive
yields.
21
RATED BONDS BY RATING
CLASSIFICATION
(Dollars in thousands)
Issues Rated
by S& P/Moody's/DCR/Fitch
Issues not rated by
S&P/Moody's
DCR/Fitch, by NAIC Category
Total
S&P/(Moody's)
[DCR] {Fitch}
category
(1)
Amortized
cost
Estimated
fair
value
NAIC
category
(2)
Amortized
cost
Estimated
fair
value
Amortized
cost
Estimated
fair
value
Percent of
invested
assets
AAA+ to
A-
(Aaa to A3)
[AAA to A-]
{AAA to A-}
$2,947,732
$2,920,444
1
$104,582
$107,012
$3,052,314
$3,027,456
57.53
%
BBB+ to
BBB-
(Baa1 to Baa3)
[BBB+ to BBB-]
{BBB+ to BBB-}
610,893
594,116
2
120,087
117,064
730,980
711,180
13.51
%
BB+ to
BB-
(Ba1 to Ba3)
[BB+ to BB-]
{BB+ to BB-}
70,213
59,893
3
11,839
9,320
82,052
69,213
1.32
%
B+ to
B-
(B1 to B3)
[B+ to B-]
{B+ to B-}
209,959
168,882
4
8,000
7,524
217,959
176,406
3.35
%
CCC+ to
C
(Caa to C)
[CCC]
{CCC+ to C-}
39,850
16,420
5
6,000
5,807
45,850
22,227
0.42
%
CI to
D
[DD]
{D}
40
40
6
---
5
40
45
0.00
%
TOTAL RATED
ISSUES
$3,878,687
$3,759,795
$250,508
$246,732
$4,129,195
$4,006,527
Footnotes appear on the following
page.
22
(1)
(2)
Bonds and short-term promissory instruments
are divided into six quality categories for NAIC rating purposes, ranging
from 1 (highest) to 5 (lowest) for nondefaulted bonds plus one category,
6, for bonds in or near default. These six categories correspond
with the S&P/Moody's/Fitch rating groups listed above, with categories
1 and 2 considered investment grade. The NAIC categories include
$65.7 million of assets that were rated by the Company pursuant to
applicable NAIC rating guidelines.
23
24
|
SEPARATE ACCOUNT SEED MONEY totaled $104.7 million at December 31, 2000, compared to $144.2 million at December 31, 1999, and consists of seed money for mutual funds used as investment vehicles for the Company's variable annuity separate accounts and for SunAmerica Asset Management's mutual funds. OTHER INVESTED ASSETS aggregated $18.5 million at December 31, 2000, compared with $31.6 million at December 31, 1999, and consist of collateralized bond obligations and other investments. ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks of interest rate fluctuations and disintermediation. The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed-rate investments that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its rates of return vary over time depending on the current interest rate environment, the slope of the yield curve, the spread at which fixed-rate investments are priced over the yield curve, default rates and general economic conditions. Its portfolio strategy is constructed with a view to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety. The Company's fixed-rate products incorporate surrender charges or other restrictions in order to encourage persistency. Approximately 82% of the Company's fixed annuity, universal life and GIC reserves had surrender penalties or other restrictions at December 31, 2000. As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-rate assets and liabilities under commonly used stress-test interest rate scenarios. With the results of these computer simulations, the Company can measure the potential gain or loss in fair value of its interest-rate sensitive instruments and seek to protect its economic value and achieve a predictable spread between what it earns on its invested assets and what it pays on its liabilities by designing its fixed-rate products and conducting its investment operations to closely match the duration of the fixed-rate assets to that of its fixed-rate liabilities. The Company's fixed-rate assets include: cash and short-term investments; bonds, notes and redeemable preferred stocks; mortgage loans; and investments in limited partnerships that invest primarily in fixed-rate securities. At December 31, 2000, these assets had an aggregate fair value of $5.20 billion with a duration of 2.9. The Company's fixed-rate liabilities include fixed annuity, GIC and universal life reserves and subordinated notes. At December 31, 2000, these liabilities had an aggregate fair value (determined by discounting future contractual cash flows by related market rates of interest) of $4.77 billion with a duration of 3.2. The Company's potential exposure due to a 10% decrease in prevailing interest rates from their December 31, 2000 levels is a loss of approximately $2.3 million, representing the increase in the fair value of its fixed-rate liabilities that is not offset by an increase in the fair value of its fixed-rate assets. Because the Company actively manages its assets and liabilities and has strategies in place to minimize its exposure to loss as interest rate changes occur, it expects that actual losses would be less than the estimated potential loss. |
25
|
Duration is a common option-adjusted measure for the price sensitivity of a fixed-maturity portfolio to changes in interest rates. It measures the approximate percentage change in the market value of a portfolio if interest rates change by 100 basis points, recognizing the changes in cash flows resulting from embedded options such as policy surrenders, investment prepayments and bond calls. It also incorporates the assumption that the Company will continue to utilize its existing strategies of pricing its fixed annuity, universal life and GIC products, allocating its available cash flow amongst its various investment portfolio sectors and maintaining sufficient levels of liquidity. Because the calculation of duration involves estimation and incorporates assumptions, potential changes in portfolio value indicated by the portfolio's duration will likely be different from the actual changes experienced under given interest rate scenarios, and the differences may be material. As a component of its asset and liability management strategy, the Company utilizes interest rate swap agreements ("Swap Agreements") to match assets more closely to liabilities. Swap Agreements are agreements to exchange with a counterparty interest rate payments of differing character (for example, variable-rate payments exchanged for fixed-rate payments) based on an underlying principal balance (notional principal) to hedge against interest rate changes. The Company typically utilizes Swap Agreements to create a hedge that effectively converts floating-rate assets and liabilities into fixed-rate instruments. At December 31, 2000, the Company had two outstanding Swap Agreements with a total notional principal of $125.7 million. These agreements mature in June 2002 and December 2024. The Company also seeks to provide liquidity from time to time by using reverse repurchase agreements ("Reverse Repos") and by investing in MBSs. It also seeks to enhance its spread income by using Reverse Repos. Reverse Repos involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed upon price and are generally over-collateralized. MBSs are generally investment-grade securities collateralized by large pools of mortgage loans. MBSs generally pay principal and interest monthly. The amount of principal and interest payments may fluctuate as a result of repayments of the underlying mortgage loans. There are risks associated with some of the techniques the Company uses to provide liquidity, enhance its spread income and match its assets and liabilities. The primary risk associated with the Company's Reverse Repos and Swap Agreements is counterparty risk. The Company believes, however, that the counterparties to its Reverse Repos and Swap Agreements are financially responsible and that the counterparty risk associated with those transactions is minimal. It is the Company's policy that these agreements are entered into with counterparties who have a debt rating of A/A2 or better from both S&P and Moody's. The Company continually monitors its credit exposure with respect to these agreements. In addition to counterparty risk, Swap Agreements also have interest rate risk. However, the Company's Swap Agreements typically hedge variable-rate assets or liabilities, and interest rate fluctuations that adversely affect the net cash received or paid under the terms of a Swap Agreement would be offset by increased interest income earned on the variable-rate assets or reduced interest expense paid on the variable-rate liabilities. The primary risk associated with MBSs is that a changing interest rate environment might cause prepayment of the underlying obligations at speeds slower or faster than anticipated at the time of their purchase. As part of its decision to purchase an MBS, the Company assesses the risk of prepayment by analyzing the security's projected performance over an array of interest-rate scenarios. Once an MBS is purchased, the Company monitors its actual prepayment experience monthly to reassess the relative attractiveness of the security with the intent to maximize total return. |
26
|
INVESTED ASSETS EVALUATION is routinely conducted by the Company. Management identifies monthly those investments that require additional monitoring and carefully reviews the carrying values of such investments at least quarterly to determine whether specific investments should be placed on a nonaccrual basis and to determine declines in value that may be other than temporary. In making these reviews for bonds, management principally considers the adequacy of any collateral, compliance with contractual covenants, the borrower's recent financial performance, new reports and other externally generated information concerning the creditor's affairs. In the case of publicly traded bonds, management also considers market value quotations, if available. For mortgage loans, management generally considers information concerning the mortgaged property and, among other things, factors impacting the current and expected payment status of the loan and, if available, the current fair value of the underlying collateral. For investments in partnerships, management reviews the financial statements and other information provided by the general partners. The carrying values of investments that are determined to have declines in value that are other than temporary are reduced to net realizable value and, in the case of bonds, no further accruals of interest are made. The provisions for impairment on mortgage loans are based on losses expected by management to be realized on transfers of mortgage loans to real estate, on the disposition and settlement of mortgage loans and on mortgage loans that management believes may not be collectible in full. Accrual of interest is suspended when principal and interest payments on mortgage loans are past due more than 90 days. DEFAULTED INVESTMENTS, comprising all investments that are in default as to the payment of principal or interest, totaled $3.6 million of bonds at December 31, 2000, and constituted less than 0.1% of total invested assets. At December 31, 1999, defaulted investments totaled $0.9 million ($0.2 million of bonds and $0.7 million of mortgage loans) and constituted less than 0.1% of total invested assets. SOURCES OF LIQUIDITY are readily available to the Company in the form of the Company's existing portfolio of cash and short-term investments, Reverse Repo capacity on invested assets and, if required, proceeds from invested asset sales. At December 31, 2000, approximately $1.60 billion of the Company's Bond Portfolio had an aggregate unrealized gain of $34.4 million, while approximately $2.41 billion of the Bond Portfolio had an aggregate unrealized loss of $157.1 million. In addition, the Company's investment portfolio currently provides approximately $50.6 million of monthly cash flow from scheduled principal and interest payments. Historically, cash flows from operations and from the sale of the Company's annuity and GIC products have been more than sufficient in amount to satisfy the Company's liquidity needs. |
27
|
Management is aware that prevailing market interest rates may shift significantly and has strategies in place to manage either an increase or decrease in prevailing rates. In a rising interest rate environment, the Company's average cost of funds would increase over time as it prices its new and renewing annuities and GICs to maintain a generally competitive market rate. Management would seek to place new funds in investments that were matched in duration to, and higher yielding than, the liabilities assumed. The Company believes that liquidity to fund withdrawals would be available through incoming cash flow, the sale of short-term or floating-rate instruments or Reverse Repos on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding the sale of fixed-rate assets in an unfavorable bond market. In a declining rate environment, the Company's cost of funds would decrease over time, reflecting lower interest crediting rates on its fixed annuities and GICs. Should increased liquidity be required for withdrawals, the Company believes that a significant portion of its investments could be sold without adverse consequences in light of the general strengthening that would be expected in the bond market. CONTINGENT LIABILITIES are discussed in Note 9 of the accompanying consolidated financial statements. RECENTLY ISSUED ACCOUNTING STANDARDS are discussed in Note 2 of the accompanying consolidated financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The quantitative and qualitative disclosures about market risk are contained in the Asset-Liability Matching section of Management's Disclosure and Analysis of Financial Condition and Results of Operations on pages 25 and 26 herein. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's consolidated financial statements begin on page F-3. Reference is made to the Index to Financial Statements on page F-1 herein. ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. |
28
|
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS The directors and principal officers of Anchor National Life Insurance Company (the "Company") as of March 26, 2001 are listed below, together with information as to their ages, dates of election and principal business occupation during the last five years (if other than their present business occupation). |
|
|
|
|
Other Positions and |
|
|
|
|
Year |
Other Business |
|
|
|
Present |
Assumed |
Experience Within |
|
Name |
Age |
Position |
Position |
Last Five Years** |
From-To |
|
|
|
|
|
|
Jay S. Wintrob* |
43 |
President and |
2000 |
Vice Chairman and |
1998-2000 |
|
|
Chief Executive |
2001 |
Chief Operating |
|
|
|
Officer of the |
|
Officer of SAI |
|
|
|
Company |
|
Executive Vice |
1991 |
|
|
President and |
2000 |
President of the |
|
|
|
Chief Executive |
2001 |
Company |
|
|
|
Officer of |
|
(Joined SAI in 1987) |
|
|
|
SunAmerica Inc. |
|
|
|
|
|
("SAI") |
|
|
|
|
|
|
|
|
|
James R. Belardi* |
43 |
Senior Vice |
1992 |
(Joined SAI in 1986) |
|
|
|
President of |
|
|
|
|
|
the Company |
|
|
|
|
|
Executive Vice |
1995 |
|
|
|
|
President of |
|
|
|
|
|
SAI |
|
|
|
|
|
|
|
|
|
Marc H. Gamsin* |
45 |
Senior Vice |
1999 |
Executive Vice President, |
1998 to |
|
|
President of the |
|
SunAmerica Investments, |
Present |
|
|
Company |
|
Inc. (GA) |
|
|
|
Executive Vice |
2001 |
Executive Vice President, |
1997-1998 |
|
|
President of SAI |
|
SunAmerica Investments, |
|
|
|
|
|
Inc. (DE) |
|
|
|
|
|
Partner, O'Melveny & |
1976-1996 |
|
|
|
|
Myers, LLP |
|
|
|
|
|
|
|
Jana W. Greer* |
48 |
Senior Vice |
1994 |
(Joined SAI in 1974) |
|
|
|
President of the |
|
|
|
|
|
Company |
|
|
|
|
|
Senior Vice |
1992 |
|
|
|
|
President of |
|
|
|
|
|
SAI |
|
|
|
_______________________________ * Also serves as a director **Unless otherwise indicated, officers and positions are with SunAmerica Inc. |
29
|
|
|
|
|
Other Positions and |
|
|
|
|
Year |
Other Business |
|
|
|
Present |
Assumed |
Experience Within |
|
Name |
Age |
Position |
Position |
Last Five Years** |
From-To |
|
|
|
|
|
|
N. Scott Gillis* |
47 |
Senior Vice |
1994 |
Senior Vice President |
1994-1999 |
|
|
President |
|
and Controller, |
|
|
|
of the Company |
|
SunAmerica Life Insurance |
|
|
|
Vice President |
1997 |
Companies ("SLC") |
|
|
|
and Controller |
2000 |
(Joined SAI in 1985) |
|
|
|
of SAI |
|
|
|
|
|
|
|
|
|
Gregory M. Outcalt |
38 |
Senior Vice |
2000 |
Vice President, SLC |
1993-1999 |
|
|
President of the |
|
(Joined SAI in 1986) |
|
|
|
Company |
|
|
|
|
|
|
|
|
|
Edwin R. Raquel |
43 |
Senior Vice |
1995 |
Vice President, |
1990-1995 |
|
|
President and |
|
Actuary, SLC |
|
|
|
Chief Actuary |
|
|
|
|
|
of the Company |
|
|
|
|
|
|
|
|
|
Mark A. Zaeske |
33 |
Treasurer of |
2001 |
Assistant Treasurer, |
1999-2000 |
|
|
the Company |
|
Citigroup |
|
|
|
Treasurer of |
2000 |
Associate Director, |
1996-1999 |
|
|
SAI |
|
Citigroup |
|
|
|
|
|
Treasury Financial |
1994-1996 |
|
|
|
|
Analyst, |
|
|
|
|
|
Atlantic Richfield Company |
|
|
|
|
|
|
|
P. Daniel Demko, Jr. |
51 |
Vice President |
1999 |
Executive Vice President, |
1998 to |
|
|
of the Company |
|
SunAmerica Retirement |
Present |
|
|
|
|
Markets, Inc. |
|
|
|
|
|
President & Vice |
1995-1998 |
|
|
|
|
Chairman, Global Health |
|
|
|
|
|
Network, LLC |
|
|
|
|
|
Owner, P. Demko Company |
1992-1995 |
|
|
|
|
|
|
Lawrence M. Goldman |
39 |
Vice President, |
2000 |
Associate General |
1998-2000 |
|
|
Co-General Counsel |
|
Counsel of SAI |
|
|
|
and Assistant |
|
Senior Vice President, |
1995-1998 |
|
|
Secretary of |
|
Imperial Premium |
|
|
|
the Company |
|
Finance, Inc. |
|
|
|
Vice President, |
2000 |
|
|
|
|
Co-General Counsel |
|
|
|
|
|
and Assistant |
|
|
|
|
|
Secretary of SAI |
|
|
|
|
|
|
|
|
|
J. Franklin Grey |
48 |
Vice President |
1994 |
Vice President of |
1994 to |
|
|
of the Company |
|
Certain SLC |
Present |
_______________________________ * Also serves as a director **Unless otherwise indicated, officers and positions are with SunAmerica Inc. |
30
|
|
|
|
|
Other Positions and |
|
|
|
|
Year |
Other Business |
|
|
|
Present |
Assumed |
Experience Within |
|
Name |
Age |
Position |
Position |
Last Five Years** |
From-To |
|
|
|
|
|
|
Maurice S. Hebert |
38 |
Vice President |
2000 |
Vice President and |
1998-2000 |
|
|
and Controller |
|
Assistant Controller, |
|
|
|
of the Company |
|
SunAmerica Financial |
|
|
|
|
|
Director, Investment |
1997-1998 |
|
|
|
|
Accounting, SAI |
|
|
|
|
|
Manager, Investment |
1993-1997 |
|
|
|
|
Accounting, SAI |
|
|
|
|
|
|
|
Christine A. Nixon |
36 |
Vice President, |
2000 |
Associate General |
1997-2000 |
|
|
Co-General |
|
Counsel of SAI |
|
|
|
Counsel and |
|
Associate Counsel |
1993-1997 |
|
|
Secretary of |
|
of SAI |
|
|
|
the Company |
|
|
|
|
|
Vice President, |
2000 |
|
|
|
|
Co-General |
|
|
|
|
|
Counsel and |
|
|
|
|
|
Secretary |
|
|
|
|
|
of SAI |
|
|
|
|
|
|
|
|
|
Edward P. Nolan, Jr. |
51 |
Vice President |
1993 |
(Joined SAI in 1989) |
|
|
|
of the Company |
|
|
|
|
|
|
|
|
|
Stewart R. Polakov |
41 |
Vice President |
2000 |
Vice President, |
1997-1999 |
|
|
of the Company |
|
SunAmerica Financial, |
|
|
|
|
|
Director, Investment |
1994-1997 |
|
|
|
|
Accounting, SAI |
|
|
|
|
|
(Joined SAI in 1991) |
|
|
|
|
|
|
|
Scott H. Richland |
38 |
Vice President |
1994 |
Senior Vice President |
1997-1998 |
|
|
of the Company |
|
and Treasurer of SAI |
|
|
|
Senior Vice |
1997 |
Vice President and |
1995-1997 |
|
|
President of SAI |
|
Treasurer of SAI |
|
|
|
|
|
(Joined SAI in 1990) |
|
|
|
|
|
|
|
Ron H. Tani |
38 |
Vice President |
2000 |
Vice President, |
2000- |
|
|
of the Company |
|
SunAmerica Financial |
Present |
|
|
|
|
Director of Product |
1995-2000 |
|
|
|
|
Development, SLC |
|
_______________________________ * Also serves as a director **Unless otherwise indicated, officers and positions are with SunAmerica Inc. |
31
|
ITEM 11. EXECUTIVE COMPENSATION All of the executive officers of the Company also serve as employees of SunAmerica Inc. or its affiliates and receive no compensation directly from the Company. The following table shows the cash compensation paid or earned, based on these allocations, to the chief executive officer and top four executive officers of the Company whose allocated compensation exceeds $100,000 for services rendered in all capacities to the Company during 2000: |
Name of Individual or |
Capacities In |
Allocated Cash |
Number in Group |
Which Served |
Compensation |
|
|
|
Jay S. Wintrob |
President and Chief Executive |
$ 435,648 |
|
Officer |
|
Eli Broad |
Chairman |
$ 340,938 |
Jana Waring Greer |
Senior Vice President |
$ 571,211 |
Daniel P. Demko |
Vice President |
$ 496,724 |
James Belardi |
Senior Vice President |
$ 203,843 |
Directors of the Company who are also employees of SunAmerica Inc. or its affiliates receive no compensation in addition to their compensation as employees of SunAmerica Inc. or its affiliates. ITEM 12. SECURITY OWNERSHIP OR CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company is an indirect wholly owned subsidiary of American International Group, Inc. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. |
32
|
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Reference is made to the index set forth on page F-1 of this report. |
EXHIBITS |
|
2(a) |
Purchase and Sale Agreement, dated as of July 15, 1998, by and among the Company, SunAmerica Inc. ("SAI"), First SunAmerica Life Insurance Company and MBL Life Assurance Corporation, is incorporated herein by reference to Exhibit 2(e) to SAI's 1998 Annual Report on Form 10-K, filed December 21, 1998. |
3(a) |
Amended and Restated Articles of Incorporation and Articles of Redomestication, filed with the Arizona Department of Insurance on December 22, 1995, is incorporated herein by reference to Exhibit 3(a) to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1995, filed February 14, 1996. |
3(b) |
Amended and Restated Bylaws, as adopted January 1, 1996, is incorporated herein by reference to Exhibit 3(b) to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1995, filed February 14, 1996. |
3(c) |
Amended and Restated Bylaws, as amended January 2, 2001. |
4(a) |
Amended and Restated Articles of Incorporation and Articles of Redomestication, filed with the Arizona Department of Insurance on December 12, 1996. See Exhibit 3(a). |
4(b) |
Amended and Restated Bylaws, as adopted January 1, 1996. See Exhibit 3(b). |
4(c) |
Amended and Restated Bylaws, as amended January 2, 2001. See Exhibit 3(c). |
10(a) |
Subordinated Loan Agreement for Equity Capital, dated August 4, 1999, between the Company's subsidiary, Royal Alliance Associates, Inc., and SAI, defining SAI's rights with respect to the 8.0% notes due September 23, 2002. |
10(b) |
Second Amendment to Subordinated Loan Agreement for Equity Capital, dated as of September 13, 1999, between the Company's subsidiary, SunAmerica Asset Management Corp., and SAI, extending the maturity date to September 13, 2002 and adjusting the interest rate to 8% for the unpaid principal under the Amendment to Subordinated Loan Agreement for Equity Capital, dated September 3, 1996, with a maturity date of September 13, 1999. |
10(c) |
Amendment to Subordinated Loan Agreement for Equity Capital, dated as of May 22, 2000, between the Company's subsidiary, SunAmerica Capital Services, Inc. ("SACS") and SAI, extending the maturity date to June 30, 2002 and changing the interest rate to 9.5% of a Subordinated Loan Agreement for Equity Capital, dated as of April 29, 1998, defining SAI's rights with respect to the 8.5% notes due June 27, 2001. |
33
|
EXHIBITS |
|
10(d) |
Amendment to Subordinated Loan Agreement for Equity Capital, dated as of May 22, 2000, between the Company's subsidiary, SACS, and SAI, extending the maturity date to July 30, 2002 and changing the interest rate to 9.5% of a Subordinated Loan Agreement for Equity Capital, dated as of June 3, 1998, defining SAI's rights with respect to the 8.5% notes due July 30, 2001. |
10(e) |
Amendment to Subordinated Loan Agreement for Equity Capital, dated as of September 30, 2000, between the Company's subsidiary, SACS, and SAI, extending the maturity date to October 31, 2004 and changing the interest rate to 9.5% of a Subordinated Loan Agreement for Equity Capital, dated as of August 25, 1998, defining SAI's rights with respect to the 8.5% notes due October 30, 2001. |
10(f) |
Subordinated Loan Agreement for Equity Capital, dated as of March 12, 1999, between the Company's subsidiary, SACS, and SAI, defining SAI's rights with respect to the 8.5% notes due April 30, 2002, is incorporated herein by reference to Exhibit 10(a) to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1999, filed May 14, 1999. |
10(g) |
Subordinated Loan Agreement for Equity Capital, dated as of August 9, 1999, between the Company's subsidiary, SACS, and SAI, defining SAI's rights with respect to the 8% notes due September 30, 2002, incorporated herein by reference to Exhibit 10(a) to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1999, filed November 15, 1999. |
10(h) |
Subordinated Loan Agreement for Equity Capital, dated as of March 17, 2000, between the Company's subsidiary, SACS, and SAI, defining SAI's rights with respect to the 8.75% notes due April 30, 2003, is incorporated herein by reference to Exhibit 10(a) to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2000, filed May 12, 2000. |
10(i) |
Subordinated Loan Agreement for Equity Capital, dated February 21, 2000, between the Company's subsidiary, SACS, and SAI, defining SAI's rights with respect to the 8.5% notes due March 31, 2003, is incorporated herein by reference to Exhibit 10(b) to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2000, filed May 12, 2000. |
10(j) |
Asset Lease Agreement, dated June 26, 1998, between the Company and Aurora National Life Assurance Company ("Aurora"), relating to a lease from Aurora of certain information relating to single premium deferred annuities, is incorporated herein by reference by Exhibit 10(h) to the Company's Form 10-K, filed December 23, 1998. |
21 |
Subsidiaries of the Company |
REPORTS ON FORM 8-K No current report on Form 8-K was filed during the three months ended December 31, 2000. |
34
|
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY |
|
|
|
|
|
|
|
BY /S/ N. SCOTT GILLIS |
|
N. Scott Gillis |
|
Senior Vice President and Director |
March 26, 2001
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated: |
Signature |
Title |
Date |
|
|
|
/s/ N. SCOTT GILLIS |
Senior Vice President and |
March 26, 2001 |
N. Scott Gillis |
Director (Principal |
|
|
Financial Officer) |
|
|
|
|
/s/ MAURICE S. HEBERT |
Vice President & Controller |
March 26, 2001 |
Maurice S. Hebert |
(Principal Accounting |
|
|
Officer) |
|
|
|
|
/s/ JAY S. WINTROB |
President, Chief Executive |
March 26, 2001 |
Jay S. Wintrob |
Officer and Director |
|
|
|
|
/s/ JAMES R. BELARDI |
Senior Vice President |
March 26, 2001 |
James R. Belardi |
and Director |
|
|
|
|
/s/ MARC H. GAMSIN |
Senior Vice President |
March 26, 2001 |
Marc H. Gamsin |
and Director |
|
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|
|
/s/ JANA W. GREER |
Senior Vice President |
March 26, 2001 |
Jana W. Greer |
and Director |
|
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|
|
/s/ EDWIN R. RAQUEL |
Senior Vice President |
March 26, 2001 |
Edwin R. Raquel |
and Chief Actuary |
|
35
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
|
Page |
|
Number(s) |
|
|
Report of Independent Accountants |
F-2 |
|
|
Consolidated Balance Sheet - December 31, 2000 and |
|
December 31, 1999 |
F-3 to F-4 |
|
|
Consolidated Statement of Income and Comprehensive |
|
Income - Years Ended December 31, 2000 and 1999, |
|
Three Months Ended December 31, 1998 and Year |
|
Ended September 30, 1998 |
F-5 to F-6 |
|
|
Consolidated Statement of Cash Flows - Years Ended |
|
December 31, 2000 and 1999, Three Months Ended |
|
December 31, 1998 and Year Ended September 30, 1998 |
F-7 to F-8 |
|
|
Notes to Consolidated Financial Statements |
F-9 to F-37 |
F-1
|
Report of Independent Accountants To the Board of Directors and Shareholder
of In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income and comprehensive income and of cash flows present fairly, in all material respects, the financial position of Anchor National Life Insurance Company and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for the years ended December 31, 2000 and 1999, for the three months ended December 31, 1998 and for the year ended September 30, 1998, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits on these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP |
F-2
|
ANCHOR NATIONAL LIFE INSURANCE
COMPANY CONSOLIDATED BALANCE SHEET | |||||||||
|
December
31, 2000 |
December
31, 1999 |
|||||||
---|---|---|---|---|---|---|---|---|---|
(In thousands) | |||||||||
ASSETS | |||||||||
Investments: | |||||||||
Cash and short-term investments | $ | 169,701 | $ | 462,915 | |||||
Bonds, notes and redeemable | |||||||||
preferred stocks available for sale, | |||||||||
at fair value (amortized cost: | |||||||||
December 2000, $4,130,570; | |||||||||
December 1999, $4,155,728) | 4,007,902 | 3,953,169 | |||||||
Mortgage loans | 684,174 | 674,679 | |||||||
Policy loans | 244,436 | 260,066 | |||||||
Separate account seed money | 104,678 | 144,231 | |||||||
Common stocks available for sale, | |||||||||
at fair value (cost: December 2000, | |||||||||
$1,001; December 1999, $0) | 974 | --- | |||||||
Partnerships | 8,216 | 4,009 | |||||||
Real estate | 24,139 | 24,000 | |||||||
Other invested assets | 18,514 | 31,632 | |||||||
|
|
|
|||||||
Total investments | 5,262,734 | 5,554,701 | |||||||
Variable annuity assets held in separate | |||||||||
accounts | 20,393,820 | 19,949,145 | |||||||
Accrued investment income | 57,555 | 60,584 | |||||||
Deferred acquisition costs | 1,286,456 | 1,089,979 | |||||||
Receivable from brokers for sales of | |||||||||
securities | 15 | 54,760 | |||||||
Income taxes currently receivable from Parent | 60,992 | --- | |||||||
Deferred income taxes | --- | 53,445 | |||||||
Other assets | 127,906 | 111,880 | |||||||
|
|
|
|||||||
TOTAL ASSETS | $ | 27,189,478 | $ | 26,874,494 | |||||
|
|
See accompanying notes to consolidated financial statements |
F-3
|
ANCHOR NATIONAL LIFE INSURANCE
COMPANY CONSOLIDATED BALANCE SHEET (Continued) | |||||||||
|
December
31, 2000 |
December
31, 1999 |
|||||||
---|---|---|---|---|---|---|---|---|---|
(In thousands) | |||||||||
LIABILITIES AND SHAREHOLDER'S EQUITY | |||||||||
Reserves, payables and accrued liabilities: | |||||||||
Reserves for fixed annuity contracts | $ | 2,778,229 | $ | 3,254,895 | |||||
Reserves for universal life insurance | |||||||||
contracts | $ | 1,832,667 | $ | 1,978,332 | |||||
Reserves for guaranteed investment | |||||||||
contracts | 610,672 | 305,570 | |||||||
Payable to brokers for purchases of | |||||||||
securities | 3,662 | 139 | |||||||
Income taxes currently payable | --- | 23,490 | |||||||
Modified coinsurance deposit liability | 97,647 | 140,757 | |||||||
Other liabilities | 203,015 | 249,224 | |||||||
|
|
|
|||||||
Total reserves, payables and accrued | |||||||||
liabilities | 5,525,892 | 5,952,407 | |||||||
|
|
|
|||||||
Variable annuity liabilities related to | |||||||||
separate accounts | 20,393,820 | 19,949,145 | |||||||
|
|
|
|||||||
Subordinated notes payable to affiliates | 55,119 | 37,816 | |||||||
|
|
|
|||||||
Deferred income taxes | 85,978 | --- | |||||||
|
|
|
|||||||
Shareholder's equity: | |||||||||
Common Stock | 3,511 | 3,511 | |||||||
Additional paid-in capital | 493,010 | 493,010 | |||||||
Retained earnings | 697,730 | 551,158 | |||||||
Accumulated other comprehensive loss | (65,582 | ) | (112,553 | ) | |||||
|
|
|
|||||||
Total shareholder's equity | 1,128,669 | 935,126 | |||||||
|
|
|
|||||||
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | $ | 27,189,478 | $ | 26,874,494 | |||||
|
|
See accompanying notes to consolidated financial statements |
F-4
|
ANCHOR NATIONAL LIFE INSURANCE
COMPANY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| |||||||||||||||
|
Years Ended
December 31,
|
Three
Months Ended December 31, 1998
|
Year
Ended September 30, 1998
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2000
|
1999
|
|||||||||||||
(In thousands) | |||||||||||||||
Investment income | $ | 399,355 | $ | 516,001 | $ | 53,553 | $ | 218,793 | |||||||
|
|
|
|
||||||||||||
Interest expense on: | |||||||||||||||
Fixed annuity contracts | (140,322 | ) | (231,929 | ) | (22,828 | ) | (112,695 | ) | |||||||
Universal life insurance | |||||||||||||||
contracts | (86,263 | ) | (102,486 | ) | --- | --- | |||||||||
Guaranteed investment contracts | (34,124 | ) | (19,649 | ) | (3,980 | ) | (17,787 | ) | |||||||
Senior indebtedness | --- | (199 | ) | (34 | ) | (1,498 | ) | ||||||||
Subordinated notes payable to | |||||||||||||||
affiliates | (4,144 | ) | (3,474 | ) | (853 | ) | (3,114 | ) | |||||||
|
|
|
|
||||||||||||
Total interest expense | (264,853 | ) | (357,737 | ) | (27,695 | ) | (135,094 | ) | |||||||
|
|
|
|
||||||||||||
NET INVESTMENT INCOME | 134,502 | 158,264 | 25,858 | 83,699 | |||||||||||
|
|
|
|
||||||||||||
NET REALIZED INVESTMENT GAINS (LOSSES) | (15,177 | ) | (19,620 | ) | 271 | 19,482 | |||||||||
|
|
|
|
||||||||||||
Fee income: | |||||||||||||||
Variable annuity fees | 400,495 | 306,417 | 58,806 | 200,867 | |||||||||||
Net retained commissions | 62,202 | 51,039 | 11,479 | 48,561 | |||||||||||
Asset management fees | 73,922 | 43,510 | 8,068 | 29,592 | |||||||||||
Universal life insurance fees, net | 20,258 | 28,932 | --- | --- | |||||||||||
Surrender charges | 20,963 | 17,137 | 3,239 | 7,404 | |||||||||||
Other fees | 12,959 | 6,327 | 1,738 | 3,938 | |||||||||||
|
|
|
|
||||||||||||
TOTAL FEE INCOME | 590,799 | 453,362 | 83,330 | 290,362 | |||||||||||
|
|
|
|
||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES | (171,627 | ) | (146,683 | ) | (21,268 | ) | (92,929 | ) | |||||||
|
|
|
|
||||||||||||
AMORTIZATION OF DEFERRED | |||||||||||||||
ACQUISITION COSTS | (158,007 | ) | (116,840 | ) | (27,070 | ) | (72,713 | ) | |||||||
|
|
|
|
||||||||||||
ANNUAL COMMISSIONS | (56,473) | ) | (40,760 | ) | (6,624 | ) | (18,209 | ) | |||||||
|
|
|
|
||||||||||||
PRETAX INCOME | 324,017 | 287,723 | 54,497 | 209,692 | |||||||||||
|
|
|
|
||||||||||||
Income tax expense | (108,445 | ) | (103,025 | ) | (20,106 | ) | (71,051 | ) | |||||||
|
|
|
|
||||||||||||
NET INCOME | $ | 215,572 | $ | 184,698 | $ | 34,391 | $ | 138,641 | |||||||
|
|
|
|
See accompanying notes to consolidated financial statements |
F-5
|
ANCHOR NATIONAL LIFE INSURANCE
COMPANY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Continued) | |||||||||||||||
|
Years Ended
December 31,
|
Three
Months Ended December 31, 1998
|
Year
Ended September 30, 1998
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2000
|
1999
|
|||||||||||||
(In thousands) | |||||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||
NET OF TAX: | |||||||||||||||
Net unrealized gains (losses) | |||||||||||||||
on debt and equity securities | |||||||||||||||
available for sale identified in the | |||||||||||||||
current period (net of income | |||||||||||||||
tax expense of $20,444 and | |||||||||||||||
income tax benefit of $63,900, | |||||||||||||||
$5,517 and $2,168 for the | |||||||||||||||
years ended December 31, | |||||||||||||||
2000 and 1999, the three | |||||||||||||||
months ended December 31, | |||||||||||||||
1998 and the year ended | |||||||||||||||
September 30, 1998, | |||||||||||||||
respectively) | $ | 37,968 | $ | (118,669 | ) | $ | (10,249 | ) | $ | (4,027 | ) | ||||
Less reclassification | |||||||||||||||
adjustment for net realized | |||||||||||||||
losses (gains) included in net | |||||||||||||||
income (net of income tax | |||||||||||||||
expense of $4,848, $4,165 and | |||||||||||||||
$116 and income tax benefit | |||||||||||||||
of $3,210 for the years ended | |||||||||||||||
December 31, 2000 and 1999, | |||||||||||||||
the three months ended | |||||||||||||||
December 31, 1998 and the | |||||||||||||||
year ended September 30, 1998, | |||||||||||||||
respectively) | 9,003 | 7,735 | 215 | (5,963 | ) | ||||||||||
|
|
|
|
||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | 46,971 | (110,934 | ) | (10,034 | ) | (9,990 | ) | ||||||||
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME | $ | 262,543 | $ | 73,764 | $ | 24,357 | $ | 128,651 | |||||||
|
|
|
|
See accompanying notes to consolidated financial statements |
F-6
|
ANCHOR NATIONAL LIFE INSURANCE
COMPANY | ||||||||||||||||||||||
| ||||||||||||||||||||||
Years Ended December 31, | Three Months Ended December 31, 1998 | Year Ended September 30, 1998 | ||||||||||||||||||||
|
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||||||||||
|
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|
|
|
|
|
|
|
|
2000 |
|
1999 |
|
||||||||
|
|
|
|
|||||||||||||||||||
(In thousands) | ||||||||||||||||||||||
CASH FLOWS FROM OPERATING | ||||||||||||||||||||||
ACTIVITIES: | ||||||||||||||||||||||
Net income | $ | 215,572 | $ | 184,698 | $ | 34,391 | $ | 138,641 | ||||||||||||||
Adjustments to reconcile net | ||||||||||||||||||||||
income to net cash provided | ||||||||||||||||||||||
by operating activities: | ||||||||||||||||||||||
Interest credited to: | ||||||||||||||||||||||
Fixed annuity contracts | 140,322 | 231,929 | 22,828 | 112,695 | ||||||||||||||||||
Universal life insurance | ||||||||||||||||||||||
contracts | 86,263 | 102,486 | --- | --- | ||||||||||||||||||
Guaranteed investment | ||||||||||||||||||||||
contracts | 34,124 | 19,649 | 3,980 | 17,787 | ||||||||||||||||||
Net realized investment | ||||||||||||||||||||||
(gains)losses | 15,177 |
19,620 |
(271 | ) | (19,482 | ) | ||||||||||||||||
Amortization (accretion) of | ||||||||||||||||||||||
net premiums (discounts) | ||||||||||||||||||||||
on investments | (2,198 | ) | (18,343 | ) | (1,199 | ) | 447 | |||||||||||||||
Universal life insurance fees | (20,258 | ) | (28,932 | ) | --- | --- | ||||||||||||||||
Amortization of goodwill | 1,455 | 776 | 356 | 1,422 | ||||||||||||||||||
Provision for deferred | ||||||||||||||||||||||
income taxes | 114,127 | (100,013 | ) | 15,945 | 34,087 | |||||||||||||||||
Change in: | ||||||||||||||||||||||
Accrued investment income | 3,029 | 9,155 | (1,512 | ) | (4,649 | ) | ||||||||||||||||
Deferred acquisition costs | (204,077 | ) | (208,228 | ) | (34,328 | ) | (160,926 | ) | ||||||||||||||
Other assets | (16,628 | ) | (5,661 | ) | (21,070 | ) | (19,374 | ) | ||||||||||||||
Income taxes currently | ||||||||||||||||||||||
receivable/ payable | (84,482 | ) | 12,367 | 16,992 | (38,134 | ) | ||||||||||||||||
Other liabilities | (12,520 | ) | 49,504 | 5,617 | (2,248 | ) | ||||||||||||||||
Other, net | 43,376 | 20,729 | 5,510 | (5,599 | ) | |||||||||||||||||
|
|
|
|
|||||||||||||||||||
NET CASH PROVIDED BY OPERATING | ||||||||||||||||||||||
ACTIVITIES | 313,282 | 289,736 | 47,239 | 54,667 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||
CASH FLOWS FROM INVESTING | ||||||||||||||||||||||
ACTIVITIES: | ||||||||||||||||||||||
Purchases of: | ||||||||||||||||||||||
Bonds, notes and redeemable | ||||||||||||||||||||||
preferred stocks | (881,647 | ) | (4,130,682 | ) | (392,515 | ) | (1,970,502 | ) | ||||||||||||||
Mortgage loans | (144,303 | ) | (331,398 | ) | (4,962 | ) | (131,386 | ) | ||||||||||||||
Other investments, excluding | ||||||||||||||||||||||
short-term investments | (66,722 | ) | (227,268 | ) | (1,992 | ) | --- | |||||||||||||||
Sales of: | ||||||||||||||||||||||
Bonds, notes and redeemable preferred stocks | 468,221 | 2,660,931 | 265,039 | 1,602,079 | ||||||||||||||||||
Other investments, excluding | ||||||||||||||||||||||
short-term investments | 60,538 | 65,395 | 142 | 42,458 | ||||||||||||||||||
Redemptions and maturities of: | ||||||||||||||||||||||
Bonds, notes and redeemable preferred stocks | 429,347 | 1,274,764 | 37,290 | 424,393 | ||||||||||||||||||
Mortgage loans | 136,277 | 46,760 | 7,699 | 80,515 | ||||||||||||||||||
Other investments, excluding | ||||||||||||||||||||||
short-term investments | 122,195 | 21,256 | 853 | 67,213 | ||||||||||||||||||
Cash and short-term investments | ||||||||||||||||||||||
acquired in coinsurance | ||||||||||||||||||||||
transaction with MBL Life | ||||||||||||||||||||||
Assurance Corporation | --- | --- | 3,083,211 | --- | ||||||||||||||||||
Net cash and short-term investments | ||||||||||||||||||||||
transferred from (to) affiliates | ||||||||||||||||||||||
in assumption with MBL Life | ||||||||||||||||||||||
Assurance Corporation | (3,314 | ) | (371,634 | ) | --- | --- | ||||||||||||||||
|
|
|
|
|||||||||||||||||||
NET CASH PROVIDED (USED IN) BY | ||||||||||||||||||||||
INVESTING ACTIVITIES | $ | 120,592 | $ | (991,876 | ) | $ | 2,994,765 | $ | 114,770 | |||||||||||||
|
|
|
|
See accompanying notes to consolidated financial statements |
F-7
|
ANCHOR NATIONAL LIFE INSURANCE
COMPANY | ||||||||||||||||||||||
| ||||||||||||||||||||||
Years Ended December 31, | Three Months Ended December 31, 1998 | Year Ended September 30, 1998 | ||||||||||||||||||||
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|
2000 |
|
1999 |
|
||||||||
|
|
|
|
|||||||||||||||||||
(In thousands) | ||||||||||||||||||||||
CASH FLOWS FROM FINANCING | ||||||||||||||||||||||
ACTIVITIES: | ||||||||||||||||||||||
Premium receipts on: | ||||||||||||||||||||||
Fixed annuity contracts | $ | 1,764,600 | $ | 2,016,851 | $ | 351,616 | $ | 1,512,994 | ||||||||||||||
Universal life insurance | ||||||||||||||||||||||
contracts | 58,738 | 78,864 | --- | --- | ||||||||||||||||||
Guaranteed investment | ||||||||||||||||||||||
contracts | 350,000 | --- | --- | 5,619 | ||||||||||||||||||
Net exchanges from the fixed | ||||||||||||||||||||||
accounts of variable annuity | ||||||||||||||||||||||
contracts | (1,994,710 | ) | (1,821,324 | ) | (448,762 | ) | (1,303,790 | ) | ||||||||||||||
Withdrawal payments on: | ||||||||||||||||||||||
Fixed annuity contracts | (320,778 | ) | (2,232,374 | ) | (41,554 | ) | (191,690 | ) | ||||||||||||||
Universal life insurance | ||||||||||||||||||||||
contracts | (145,067 | ) | (81,634 | ) | --- | --- | ||||||||||||||||
Guaranteed investment | ||||||||||||||||||||||
contracts | (78,312 | ) | (19,742 | ) | (3,797 | ) | (36,313 | ) | ||||||||||||||
Claims and annuity payments on: | ||||||||||||||||||||||
Fixed annuity contracts | (114,761 | ) | (46,578 | ) | (9,333 | ) | (40,589 | ) | ||||||||||||||
Universal life insurance | ||||||||||||||||||||||
contracts | (118,302 | ) | (158,043 | ) | --- | --- | ||||||||||||||||
Net receipts from (repayments | ||||||||||||||||||||||
of) other short-term | ||||||||||||||||||||||
financings | (33,689 | ) | (129,512 | ) | 9,545 | (10,944 | ) | |||||||||||||||
Net receipt (payment) related | ||||||||||||||||||||||
to a modified coinsurance | ||||||||||||||||||||||
transaction | (43,110 | ) | 140,757 | (170,436 | ) | 166,631 | ||||||||||||||||
Net receipts from issuances of | ||||||||||||||||||||||
subordinated notes payable | ||||||||||||||||||||||
to affiliate | 17,303 | --- | 170,436 | --- | ||||||||||||||||||
Change in capital | --- | 114,336 | 70,000 | --- | ||||||||||||||||||
Dividends paid to Parent | (69,000 | ) | --- | --- | (51,200 | ) | ||||||||||||||||
|
|
|
|
|||||||||||||||||||
NET CASH PROVIDED (USED IN) BY | ||||||||||||||||||||||
FINANCING ACTIVITIES | (727,088 | ) | (2,138,399 | ) | (72,285 | ) | 50,718 | |||||||||||||||
|
|
|
|
|||||||||||||||||||
NET INCREASE (DECREASE) IN CASH | ||||||||||||||||||||||
AND SHORT-TERM INVESTMENTS | (293,214 | ) | (2,840,539 | ) | 2,969,719 | 220,155 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||
CASH AND SHORT-TERM INVESTMENTS | ||||||||||||||||||||||
AT BEGINNING OF PERIOD | 462,915 | 3,303,454 | 333,735 | 113,580 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||
CASH AND SHORT-TERM INVESTMENTS | ||||||||||||||||||||||
AT END OF PERIOD | $ | 169,701 | $ | 462,915 | $ | 3,303,454 | $ | 333,735 | ||||||||||||||
|
|
|
|
|||||||||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||||||||||||
Interest paid on indebtedness | $ | 1,841 | $ | 3,787 | $ | 1,169 | $ | 3,912 | ||||||||||||||
|
|
|
|
|||||||||||||||||||
Net income taxes paid (refunded) | ||||||||||||||||||||||
to Parent | $ | 78,796 | $ | 190,126 | $ | (12,302 | ) | $ | 74,932 | |||||||||||||
|
|
|
|
See accompanying notes to consolidated financial statements |
F-8
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
1. |
NATURE OF OPERATIONS |
The Company is an indirect wholly owned subsidiary of American International Group, Inc. ("AIG"), an international insurance and financial services holding company. At December 31, 1998, the Company was a wholly owned indirect subsidiary of SunAmerica Inc., a Maryland Corporation. On January 1, 1999, SunAmerica Inc. merged with and into AIG in a tax-free reorganization that has been treated as a pooling of interests for accounting purposes. Thus, SunAmerica Inc. ceased to exist on that date. However, immediately prior to the date of the merger, substantially all of the net assets of SunAmerica Inc. were contributed to a newly formed subsidiary of AIG named SunAmerica Holdings, Inc., a Delaware Corporation. SunAmerica Holdings, Inc. subsequently changed its name to SunAmerica Inc. ("SunAmerica"). The operations of the Company are influenced by many factors, including general economic conditions, monetary and fiscal policies of the federal government, and policies of state and other regulatory authorities. The level of sales of the Company's financial products is influenced by many factors, including general market rates of interest, the strength, weakness and volatility of equity markets, and terms and conditions of competing financial products. The Company is exposed to the typical risks normally associated with a portfolio of fixed-income securities, namely interest rate, option, liquidity and credit risk. The Company controls its exposure to these risks by, among other things, closely monitoring and matching the duration of its assets and liabilities, monitoring and limiting prepayment and extension risk in its portfolio, maintaining a large percentage of its portfolio in highly liquid securities, and engaging in a disciplined process of underwriting, reviewing and monitoring credit risk. The Company also is exposed to market risk, as market volatility may result in reduced fee income in the case of assets managed in mutual funds and held in separate accounts. |
F-9
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reports in the financial statements and the accompanying notes. Actual results could differ from those estimates. INVESTMENTS: Cash and short-term investments primarily include cash, commercial paper, money market investments, repurchase agreements and short-term bank participations. All such investments are carried at cost plus accrued interest, which approximates fair value, have maturities of three months or less and are considered cash equivalents for purposes of reporting cash flows. Bonds, notes and redeemable preferred stocks available for sale and common stocks are carried at aggregate fair value and changes in unrealized gains or losses, net of tax, are credited or charged directly to shareholder's equity. Bonds, notes and redeemable preferred stocks are reduced to estimated net realizable value when necessary for declines in value considered to be other than temporary. Estimates of net realizable value are subjective and actual realization will be dependent upon future events. Mortgage loans are carried at amortized unpaid balances, net of provisions for estimated losses. Policy loans are carried at unpaid balances. Separate account seed money consists of seed money for mutual funds used as investment vehicles for the Company's variable annuity separate accounts and is valued at market. Limited partnerships are accounted for by the cost method of accounting. Real estate is carried at cost, reduced by impairment provisions. Common stock is carried at fair value. Other invested assets include collateralized bond obligations and investments in mutual funds for the Company's asset management operations. Realized gains and losses on the sale of investments are recognized in operations at the date of sale and are determined by using the specific cost identification method. Premiums and discounts on investments are amortized to investment income by using the interest method over the contractual lives of the investments. |
F-10
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and amortized, with interest, in relation to the incidence of estimated gross profits to be realized over the estimated lives of the annuity contracts. Estimated gross profits are composed of net interest income, net unrealized investment gains and losses, variable annuity fees, universal life insurance fees, surrender charges and direct administrative expenses. Costs incurred to sell mutual funds are also deferred and amortized over the estimated lives of the funds obtained. Deferred acquisition costs ("DAC") consist of commissions and other costs that vary with, and are primarily related to, the production or acquisition of new business. The Company capitalized DAC of $362,085,000 and $312,764,000 for the years ended December 31, 2000 and 1999, respectively. As debt and equity securities available for sale are carried at aggregate fair value, an adjustment is made to DAC equal to the change in amortization that would have been recorded if such securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. The change in this adjustment, net of tax, is included with the change in net unrealized gains or losses on debt and equity securities available for sale which is a component of accumulated other comprehensive income (loss) and is credited or charged directly to shareholder's equity. DAC has been increased by $21,800,000 and $29,400,000 at December 31, 2000 and 1999, respectively, for this adjustment. |
F-11
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
GOODWILL: Goodwill, amounted to $21,604,000 (including accumulated amortization of $18,101,000) and $22,206,000 (including accumulated amortization of $16,350,000) at December 31, 2000 and 1999 respectively. Goodwill is amortized by using the straight-line method over periods averaging 25 years and is included in Other Assets in the balance sheet. Goodwill is evaluated for impairment when events or changes in economic conditions indicate that the carrying amount may not be recoverable. CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity contracts and guaranteed investment contracts are accounted for as investment-type contracts in accordance with Statement of Financial Accounting Standards No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments," and are recorded at accumulated value (premiums received, plus accrued interest, less withdrawals and assessed fees). Contractholder reserves for universal life insurance contracts are equal to the policyholder account values before surrender charges. MODIFIED COINSURANCE DEPOSIT LIABILITY: Cash received as part of the modified coinsurance transaction described in Note 8 is recorded as a deposit liability. Premiums from the reinsured business is allocated to pay down the liability pursuant to a repayment schedule. FEE INCOME: Variable annuity fees, asset management fees, universal life insurance fees and surrender charges are recorded in income as earned. Net retained commissions are recognized as income on a trade date basis. INCOME TAXES: The Company files as a "life insurance company" under the provisions of the Internal Revenue Code of 1986. Its federal income tax return is consolidated with those of its direct parent, SunAmerica Life Insurance Company (the "Parent"), and its affiliate, First SunAmerica Life Insurance Company ("FSA"). Income taxes have been calculated as if the Company filed a separate return. Deferred income tax assets and liabilities are recognized based on the difference between financial statement carrying amounts and income tax bases of assets and liabilities using enacted income tax rates and laws. |
F-12
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). The Company has reviewed and continues to review the effect of the implementation of SFAS 133, as amended by SFAS 138 and related implementation guidance. This statement requires the Company to recognize all derivatives in the consolidated balance sheet measuring these derivatives at fair value. The recognition of the change in the fair value of a derivative depends on a number of factors, including the intended use of the derivative and, to the extent it is effective as part of a hedge transaction. SFAS 133 was postponed by SFAS 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133, and now will be effective for the Company as of January 1, 2001. Because of the Company's minimal use of derivatives, management does not anticipate that the new statement will have a significant effect on either the earnings or the financial position of the Company. | |
3. |
FISCAL YEAR CHANGE |
Effective December 31, 1998, the Company changed its fiscal year end from September 30 to December 31. Accordingly, the consolidated financial statements include the results of operations and cash flows for the three-month transition period ended December 31, 1998. Such results are not necessarily indicative of operations for a full year. The consolidated financial statements as of and for the three months ended December 31, 1998 were originally filed as the Company's unaudited Transition Report on Form 10-Q. Results for the comparable prior year period are summarized below. |
Three Months
Ended December 31, 1997 |
|||||||||||||
|
|||||||||||||
(In thousands) |
|||||||||||||
|
|||||||||||||
Investment income |
$ | 59,062 | |||||||||||
Net investment income |
25,689 |
||||||||||||
Net realized investment gains |
20,935 |
||||||||||||
Total fee income | 63,984 | ||||||||||||
Pretax income | 67,654 | ||||||||||||
Net income | $ | 44,348 | |||||||||||
|
4. | ACQUISITION |
|
F-13
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
4. |
ACQUISITION (Continued) |
Included in the block of business acquired from MBL Life were policies whose owners are residents of New York State ("the New York Business"). On July 1, 1999, the New York Business was acquired by the Company's New York affiliate, FSA, via an assumption reinsurance agreement, and the remainder of the business converted to assumption reinsurance in the Company, which superseded the coinsurance agreement. As part of this transfer, invested assets equal to $678,272,000, life reserves equal to $282,247,000, group pension reserves equal to $406,118,000, and other net assets of $10,093,000 were transferred to FSA. The $128,420,000 purchase price was allocated between the Company and FSA based on the estimated future gross profits of the two blocks of business. The portion allocated to FSA was $10,000,000. As part of the Acquisition, the Company received $242,473,000 from MBL Life to pay policy enhancements guaranteed by the MBL Life rehabilitation agreement to policyholders meeting certain requirements. Of this amount, the Company was required to transfer $20,055,000 to the Parent for enhancements on policies which customers elected to convert to fixed annuity policies of the Parent. Included in the Company's reserves transferred to FSA in 1999 were $34,657,000 of such policy enhancement reserves. Based upon final actuarial calculations performed in the first quarter of 2000, $16,741,000 of such reserves were returned to the Company by FSA. A primary requirement was that annuity policyholders must have converted their MBL Life policy to a policy type currently offered by the Company or one of its affiliates by December 31, 1999. Pursuant to the agreement, the enhancements were scheduled to be credited in four installments on January 1, 2000, June 30, 2001, June 30, 2002 and June 30, 2003, to eligible policies still active on each of those dates. |
F-14
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
4. |
ACQUISITION (Continued) |
|
F-15
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
5. |
INVESTMENTS |
|
Amortized
Cost
|
Estimated Fair
Value
|
|||||||||||
| ||||||||||||
(In thousands) | ||||||||||||
| ||||||||||||
AT DECEMBER 31, 2000: | ||||||||||||
Securities of the United States | ||||||||||||
Government | $ | 19,164 | $ | 18,868 | ||||||||
Mortgage-backed securities | 1,651,581 | 1,636,304 | ||||||||||
Securities of public utilities | 154,076 | 151,209 | ||||||||||
Corporate bonds and notes | 1,426,845 | 1,329,001 | ||||||||||
Redeemable preferred stocks | 1,375 | 1,375 | ||||||||||
Other debt securities | 877,529 | 871,145 | ||||||||||
|
|
|||||||||||
Total | $ | 4,130,570 | $ | 4,007,902 | ||||||||
|
|
|||||||||||
AT DECEMBER 31, 1999: | ||||||||||||
Securities of the United States | ||||||||||||
Government | $ | 24,688 | $ | 22,884 | ||||||||
Mortgage-backed securities | 1,505,729 | 1,412,134 | ||||||||||
Securities of public utilities | 114,933 | 107,596 | ||||||||||
Corporate bonds and notes | 1,676,006 | 1,596,469 | ||||||||||
Redeemable preferred stocks | 4,375 | 4,547 | ||||||||||
Other debt securities | 829,997 | 809,539 | ||||||||||
|
|
|||||||||||
Total | $ | 4,155,728 | $ | 3,953,169 | ||||||||
|
|
The amortized cost and estimated fair value of bonds, notes and redeemable preferred stocks available for sale by contractual maturity, as of December 31, 2000, follow: |
Amortized
Cost
|
Estimated Fair
Value
|
|||||||||||
| ||||||||||||
(In thousands) | ||||||||||||
| ||||||||||||
Due in one year or less | $ | 66,156 | $ | 64,269 | ||||||||
Due after one year through | ||||||||||||
five years | 805,277 | 795,040 | ||||||||||
Due after five years through | ||||||||||||
ten years | 1,023,591 | 938,495 | ||||||||||
Due after ten years | 583,965 | 573,794 | ||||||||||
Mortgage-backed securities | 1,651,581 | 1,636,304 | ||||||||||
|
|
|||||||||||
Total | $ | 4,130,570 | $ | 4,007,902 | ||||||||
|
|
Actual maturities of bonds, notes and redeemable preferred stocks will differ from those shown above due to prepayments and redemptions. |
F-16
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
5. |
INVESTMENTS (Continued) |
|
Gross Unrealized Gains |
Gross Unrealized Losses |
|||||||||||
| ||||||||||||
(In thousands) | ||||||||||||
| ||||||||||||
AT DECEMBER 31, 2000: | ||||||||||||
Securities of the United States | ||||||||||||
Government | $ | 17 | $ | (313 | ) | |||||||
Mortgage-backed securities | 10,000 | (25,277 | ) | |||||||||
Securities of public utilities | 267 | (3,134 | ) | |||||||||
Corporate bonds and notes | 12,682 | (110,526 | ) | |||||||||
Other debt securities | 11,482 | (17,866 | ) | |||||||||
|
|
|||||||||||
Total | $ | 34,448 | $ | (157,116 | ) | |||||||
|
|
|||||||||||
AT DECEMBER 31, 1999: | ||||||||||||
Securities of the United States | ||||||||||||
Government | $ | 47 | $ | (1,852 | ) | |||||||
Mortgage-backed securities | 3,238 | (96,832 | ) | |||||||||
Securities of public utilities | 13 | (7,350 | ) | |||||||||
Corporate bonds and notes | 10,222 | (89,758 | ) | |||||||||
Redeemable preferred stocks | 172 | --- | ||||||||||
Other debt securities | 4,275 | (24,734 | ) | |||||||||
|
|
|||||||||||
Total | $ | 17,967 | $ | (220,526 | ) | |||||||
|
|
Gross unrealized gains on equity securities available for sale aggregated $18,000 at December 31, 2000. Gross unrealized losses on equity securities available for sale aggregated $45,000 at December 31, 2000. There were no unrealized gains or losses on equity securities available for sale at December 31, 1999. |
F-17
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
5. |
INVESTMENTS (Continued) |
|
Years Ended December 31, | Three Months Ended | Year Ended | |||||||||||||||||
2000 |
1999 |
December 31,
1998 |
September 30,
1998 |
||||||||||||||||
(In thousands) | |||||||||||||||||||
BONDS, NOTES AND | |||||||||||||||||||
REDEEMABLE PREFERRED | |||||||||||||||||||
STOCKS: | |||||||||||||||||||
Realized gains | $ | 9,608 | $ | 8,333 | $ | 6,669 | $ | 28,086 | |||||||||||
Realized losses | (5,573 | ) | (26,113 | ) | (5,324 | ) | (4,627 | ) | |||||||||||
MORTGAGE LOANS: | |||||||||||||||||||
Realized losses | (276 | ) | --- | --- | --- | ||||||||||||||
COMMON STOCKS: | |||||||||||||||||||
Realized gains | 610 | 4,239 | 12 | 337 | |||||||||||||||
Realized losses | --- | (11 | ) | (9 | ) | --- | |||||||||||||
OTHER INVESTMENTS: | |||||||||||||||||||
Realized gains | 1,091 | --- | 573 | 8,824 | |||||||||||||||
IMPAIRMENT WRITEDOWNS | (20,637 | ) | (6,068 | ) | (1,650 | ) | (13,138 | ) | |||||||||||
|
|
|
|
||||||||||||||||
Total net realized | |||||||||||||||||||
investment gains | |||||||||||||||||||
(losses) | $ | (15,177 | ) | $ | (19,620 | ) | $ | 271 | $ | 19,482 | |||||||||
|
|
|
|
The sources and related amounts of investment income are as follows: |
Years Ended December 31, | Three Months Ended | Year Ended | |||||||||||||||||
2000 |
1999 |
December 31,
1998 |
September 30,
1998 |
||||||||||||||||
(In thousands) | |||||||||||||||||||
Short-term investments | $ | 21,683 | $ | 61,764 | $ | 4,649 | $ | 12,524 | |||||||||||
Bonds, notes and | |||||||||||||||||||
redeemable preferred | |||||||||||||||||||
stocks | 290,157 | 348,373 | 39,660 | 156,140 | |||||||||||||||
Mortgage loans | 60,608 | 47,480 | 7,904 | 29,996 | |||||||||||||||
Common stocks | --- | 7 | --- | 34 | |||||||||||||||
Real estate | 121 | (525 | ) | 13 | (467 | ) | |||||||||||||
Partnerships | 7,031 | 6,631 | 352 | 24,311 | |||||||||||||||
Other invested assets | 26,868 | 58,223 | 1,700 | (572 | ) | ||||||||||||||
Less: investment expenses | (7,113 | ) | (5,952 | ) | (725 | ) | (3,173 | ) | |||||||||||
|
|
|
|
||||||||||||||||
Total investment | |||||||||||||||||||
income | $ | 399,355 | $ | 516,001 | $ | 53,553 | $ | 218,793 | |||||||||||
|
|
|
|
F-18
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
5. |
INVESTMENTS (Continued) |
At December 31, 2000, mortgage loans were collateralized by properties located in 30 states, with loans totaling approximately 33% of the aggregate carrying value of the portfolio secured by properties located in California and approximately 10% by properties located in New York. No more than 8% of the portfolio was secured by properties in any other single state. At December 31, 2000, bonds, notes and redeemable preferred stocks included $267,891,000 of bonds and notes not rated investment grade. The Company had no material concentrations of non-investment-grade assets at December 31, 2000. At December 31, 2000, the carrying value of investments in default as to the payment of principal or interest was $3,563,000 of bonds which approximates its estimated fair value. As a component of its asset and liability management strategy, the Company utilizes Swap Agreements to match assets more closely to liabilities. Swap Agreements are agreements to exchange with a counterparty interest rate payments of differing character (for example, variable-rate payments exchanged for fixed-rate payments) based on an underlying principal balance (notional principal) to hedge against interest rate changes. The Company typically utilizes Swap Agreements to create a hedge that effectively converts floating-rate assets and liabilities to fixed-rate instruments. At December 31, 2000, the Company had one outstanding asset Swap Agreement with a notional principal amount of $97,000,000 and one outstanding liability Swap Agreement with a notional principal amount of $28,688,000. The asset Swap Agreement was entered into in May 2000 and matures in June 2002. The liability Swap Agreement was entered into in December 1996 and matures in December 2024. The interest income on the asset Swap Agreement is included in Investment Income in the income statement, while the interest paid on the liability Swap Agreement is included in Interest Expense on Guaranteed Investment Contracts in the income statement. The net interest income (paid) amounted to $43,000 for the year ended December 31, 2000, $(215,000) for the year ended December 31, 1999, $(54,000) for the three months ended December 31, 1998 and $(278,000) for the year ended September 30, 1998. At December 31, 2000, $8,955,000 of bonds, at amortized cost, were on deposit with regulatory authorities in accordance with statutory requirements. |
F-19
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
6. |
FAIR VALUE OF FINANCIAL STATEMENTS |
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Selling expenses and potential taxes are not included. The estimated fair value amounts were determined using available market information, current pricing information and various valuation methodologies. If quoted market prices were not readily available for a financial instrument, management determined an estimated fair value. Accordingly, the estimates may not be indicative of the amounts the financial instruments could be exchanged for in a current or future market transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:CASH AND SHORT-TERM INSTRUMENTS: Carrying value is considered to be a reasonable estimate of fair value. BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based principally on independent pricing services, broker quotes and other independent information. MORTGAGE LOANS: Fair values are primarily determined by discounting future cash flows to the present at current market rates, using expected prepayment rates. SEPARATE ACCOUNT SEED MONEY: Fair value is considered to be the market value of the underlying securities.COMMON STOCKS: Fair value is based principally on independent pricing services, broker quotes and other independent information. POLICY LOANS: Carrying value is considered to be a reasonable estimate of fair value. PARTNERSHIPS: Fair value of partnerships accounted for by using the cost method is based upon the fair value of the net assets of the partnerships as determined by the general partners. |
F-20
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
6. |
FAIR VALUE OF FINANCIAL STATEMENTS (Continued) |
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts are assigned a fair value equal to current net surrender value. Annuitized contracts are valued based on the present value of future cash flows at current pricing rates. RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the present value of future cash flows at current pricing rates and is net of the estimated fair value of a hedging Swap Agreement, determined from independent broker quotes. VARIABLE ANNUITY LIABILITIES RELATED TO SEPARATE ACCOUNTS: Variable annuity liabilities are carried at the market value of the underlying securities of the variable annuity assets held in separate accounts. SUBORDINATED NOTES PAYABLE TO AFFILIATES: Fair value is estimated based on the quoted market prices for similar issues. |
F-21
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
6. |
FAIR VALUE OF FINANCIAL STATEMENTS (Continued) |
|
Carrying Value |
Fair Value |
|||||||||||
(In thousands) | ||||||||||||
DECEMBER 31, 2000: | ||||||||||||
ASSETS: | ||||||||||||
Cash and short-term investments | $ | 169,701 | $ | 169,701 | ||||||||
Bonds, notes and redeemable | ||||||||||||
preferred stocks | 4,007,902 | 4,007,902 | ||||||||||
Mortgage loans | 684,174 | 711,543 | ||||||||||
Policy loans | 244,436 | 244,436 | ||||||||||
Separate account seed money | 104,678 | 104,678 | ||||||||||
Common stocks | 974 | 974 | ||||||||||
Partnerships | 8,216 | 9,915 | ||||||||||
Variable annuity assets held in | ||||||||||||
separate accounts | 20,393,820 | 20,393,820 | ||||||||||
Receivable from brokers for sales | ||||||||||||
of securities | 15 | 15 | ||||||||||
LIABILITIES: | ||||||||||||
Reserves for fixed annuity contracts | 2,778,229 | 2,618,719 | ||||||||||
Reserves for guaranteed investment | ||||||||||||
contracts | 610,672 | 610,672 | ||||||||||
Payable to brokers for purchases of | ||||||||||||
securities | 3,662 | 3,662 | ||||||||||
Variable annuity liabilities related | ||||||||||||
to separate accounts | 20,393,820 | 20,393,820 | ||||||||||
Subordinated notes payable to | ||||||||||||
affiliates | 55,119 | 57,774 |
F-22
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
6. |
FAIR VALUE OF FINANCIAL STATEMENTS (Continued) |
Carrying Value |
Fair Value |
|||||||||||
(In thousands) | ||||||||||||
DECEMBER 31, 1999: | ||||||||||||
ASSETS: | ||||||||||||
Cash and short-term investments | $ | 462,915 | $ | 462,915 | ||||||||
Bonds, notes and redeemable | ||||||||||||
preferred stocks | 3,953,169 | 3,953,169 | ||||||||||
Mortgage loans | 674,679 | 673,781 | ||||||||||
Policy loans | 260,066 | 260,066 | ||||||||||
Separate account seed money | 144,231 | 144,231 | ||||||||||
Common stocks | --- | --- | ||||||||||
Partnerships | 4,009 | 9,114 | ||||||||||
Variable annuity assets held in | ||||||||||||
separate accounts | 19,949,145 | 19,949,145 | ||||||||||
Receivable from brokers for sales | ||||||||||||
of securities | 54,760 | 54,760 | ||||||||||
LIABILITIES: | ||||||||||||
Reserves for fixed annuity contracts | 3,254,895 | 3,053,660 | ||||||||||
Reserves for guaranteed investment | ||||||||||||
contracts | 305,570 | 305,570 | ||||||||||
Payable to brokers for purchases of | ||||||||||||
securities | 139 | 139 | ||||||||||
Variable annuity liabilities related | ||||||||||||
to separate accounts | 19,949,145 | 19,949,145 | ||||||||||
Subordinated notes payable to | ||||||||||||
affiliates | 37,816 | 38,643 |
7. |
SUBORDINATED NOTES PAYABLE TO AFFILIATES |
|
F-23
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
8. |
REINSURANCE |
Certain of the Company's variable annuities provide for a Guaranteed Minimum Income Benefit in the form of guaranteed benefit payout upon annuitization. All of the annuitization benefit at risk has been reinsured as of December 31, 2000. The business which was assumed from MBL Life as part of the Acquisition is subject to existing reinsurance ceded agreements. At December 31, 1998, the maximum retention on any single life was $2,000,000, and a total credit of $5,057,000 was taken against the life insurance reserves, representing predominantly yearly renewable term reinsurance. In order to limit even further the exposure to loss on any single insured and to recover an additional portion of the benefits paid over such limits, the Company entered into a reinsurance treaty effective January 1, 1999 under which the Company retains no more than $100,000 of risk on any one insured life. At December 31, 2000, a total reserve credit of $4,160,000 was taken against the life insurance reserves. With respect to these coinsurance agreements, the Company could become liable for all obligations of the reinsured policies if the reinsurers were to become unable to meet the obligations assumed under the respective reinsurance agreements. The Company monitors its credit exposure with respect to these agreements. However, due to the high credit ratings of the reinsurers, such risks are considered to be minimal.On August 1, 1999, the Company entered into a modified coinsurance transaction, approved by the Arizona Department of Insurance, which involved the ceding of approximately $6,000,000,000 of variable annuities to ANLIC Insurance Company (Hawaii), a non-affiliated stock life insurer. The transaction is accounted for as reinsurance for statutory reporting purposes. As part of the transaction, the Company received cash in the amount of $150,000,000 and recorded a corresponding deposit liability. As payments are made to the reinsurer, the deposit liability is relieved. The cost of this program, which amounted to $12,026,000 for the year ended December 31, 2000 and $3,621,000 for the year ended December 31, 1999, is classified as General and Administrative Expenses in the Consolidated Statement of Income. On August 11, 1998, the Company entered into a similar modified coinsurance transaction, approved by the Arizona Department of Insurance, which involved the ceding of approximately $6,000,000,000 of variable annuities to ANLIC Insurance Company (Cayman), a Cayman Islands Stock life insurance company, effective December 31, 1997. |
F-24
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
8. |
REINSURANCE (Continued) |
On December 31, 1998, the Company recaptured this business. As part of this recapture, the Company paid cash of $170,436,000 and recorded an increase in DAC of $167,202,000 with the balance of $3,234,000 being recorded as DAC amortization in the income statement. |
9. |
COMMITMENTS AND CONTINGENT LIABILITIES |
In the ordinary course of business, the Company is obligated to purchase approximately $86,000,000 of asset backed securities as of December 31, 2000. The Company is involved in various kinds of litigation common to its businesses. These cases are in various stages of development and, based on reports of counsel, management believes that provisions made for potential losses relating to such litigation are adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position, results of operations or cash flows. The Company's current financial strength and counterparty credit ratings from Standard & Poor's are based in part on a guarantee (the "Guarantee") of the Company's insurance policy obligations by American Home Assurance Company ("American Home"), a subsidiary of AIG, and a member of an AIG intercompany pool, and the belief that the Company is viewed as a strategically important member of AIG. The Guarantee is unconditional and irrevocable, and policyholders have the right to enforce the Guarantee directly against American Home. |
F-25
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
9. |
COMMITMENTS AND CONTINGENT LIABILITIES (Continued) |
The Company's current financial strength rating from Moody's is based in part on a support agreement between the Company and AIG (the "Support Agreement"), pursuant to which AIG has agreed that AIG will cause the Company to maintain a policyholder's surplus of not less than $1 million or such greater amount as shall be sufficient to enable the Company to perform its obligations under any policy issued by it. The Support Agreement also provides that if the Company needs funds not otherwise available to it to make timely payment of its obligations under policies issued by it, AIG will provide such funds at the request of the Company. The Support Agreement is not a direct or indirect guarantee by AIG to any person of any obligations of the Company. AIG may terminate the Support Agreement with respect to outstanding obligations of the Company only under circumstances where the Company attains, without the benefit of the Support Agreement, a financial strength rating equivalent to that held by the Company with the benefit of the support agreement. Policyholders have the right to cause the Company to enforce its rights against AIG and, if the Company fails or refuses to take timely action to enforce the Support Agreement or if the Company defaults in any claim or payment owed to such policyholder when due, have the right to enforce the Support Agreement directly against AIG. American Home does not publish financial statements, although it files statutory annual and quarterly reports with the New York State Insurance Department, where such reports are available to the public. AIG is a reporting company under the Securities Exchange Act of 1934, and publishes annual reports on Form 10-K and quarterly reports on Form 10-Q, which are available from the Securities and Exchange Commission. |
F-26
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
10. |
SHAREHOLDER'S EQUITY |
|
Years Ended December 31, | Three Months Ended | Year Ended | |||||||||||||||||
2000 |
1999 |
December 31,
1998 |
September 30,
1998 |
||||||||||||||||
(In thousands) | |||||||||||||||||||
ADDITIONAL PAID-IN | |||||||||||||||||||
CAPITAL: | |||||||||||||||||||
Beginning balances | $ | 493,010 | $ | 378,674 | $ | 308,674 | $ | 308,674 | |||||||||||
Reclassification of | |||||||||||||||||||
Note by the Parent | --- | 170,436 | --- | --- | |||||||||||||||
Return of capital | --- | (170,500 | ) | --- | --- | ||||||||||||||
Capital contributions | |||||||||||||||||||
received | --- | 114,250 | 70,000 | --- | |||||||||||||||
Contribution of | |||||||||||||||||||
partnership | |||||||||||||||||||
investment | --- | 150 | --- | --- | |||||||||||||||
|
|
|
|
||||||||||||||||
Ending balances | $ | 493,010 | $ | 493,010 | $ | 378,674 | $ | 308,674 | |||||||||||
|
|
|
|
||||||||||||||||
RETAINED EARNINGS: | |||||||||||||||||||
Beginning balances | $ | 551,158 | $ | 366,460 | $ | 332,069 | $ | 244,628 | |||||||||||
Net income | 215,572 | 184,698 | 34,391 | 138,641 | |||||||||||||||
Dividends paid | (69,000 | ) | --- | --- | (51,200 | ) | |||||||||||||
|
|
|
|
||||||||||||||||
Ending balances | $ | 697,730 | $ | 551,158 | $ | 366,460 | $ | 332,069 | |||||||||||
|
|
|
|
||||||||||||||||
ACCUMULATED OTHER | |||||||||||||||||||
COMPREHENSIVE INCOME | |||||||||||||||||||
(LOSS): | |||||||||||||||||||
Beginning balances | $ | (112,553 | ) | $ | (1,619 | ) | $ | 8,415 | $ | 18,405 | |||||||||
Change in net | |||||||||||||||||||
unrealized gains | |||||||||||||||||||
(losses) on debt | |||||||||||||||||||
securities | |||||||||||||||||||
available for sale | 79,891 | (198,659 | ) | (23,791 | ) | (23,818 | ) | ||||||||||||
Change in net | |||||||||||||||||||
unrealized gains | |||||||||||||||||||
(losses) on equity | |||||||||||||||||||
securities | |||||||||||||||||||
available for sale | (27 | ) | (10 | ) | (44 | ) | (950 | ) | |||||||||||
Change in adjustment | |||||||||||||||||||
to deferred | |||||||||||||||||||
acquisition costs | (7,600 | ) | 28,000 | 8,400 | 9,400 | ||||||||||||||
Tax effects of net | |||||||||||||||||||
changes | (25,293 | ) | 59,735 | 5,401 | 5,378 | ||||||||||||||
|
|
|
|
||||||||||||||||
Ending balances | $ | (65,582 | ) | $ | (112,553 | ) | $ | (1,619 | ) | $ | 8,415 | ||||||||
|
|
|
|
F-27
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
10. |
SHAREHOLDER'S EQUITY (Continued) |
Under statutory accounting principles utilized in filings with insurance regulatory authorities, the Company's net income for the years ended December 31, 2000 and 1999 was approximately $168,367,000 and $261,539,000, respectively. The statutory net loss for the year ended December 31, 1998 was $98,766,000. The Company's statutory capital and surplus totaled approximately $719,946,000 at December 31, 2000 and $694,621,000 at December 31, 1999. In 1998, the NAIC adopted the codification of statutory accounting principles ("Codification") which replaced the current Accounting Practices and Procedures Manual as the NAIC's primary guidance on statutory accounting, effective January 1, 2001. Codification changes prescribed statutory accounting practices and will result in changes to the accounting practices that the company uses to prepare its statutory basis financial statements. Codification has been adopted by all fifty states as the prescribed basis of accounting, including Arizona. The impact of Codification on the Company's statutory surplus has not yet been determined. On June 30, 1999, the Parent cancelled the Company's surplus note payable of $170,436,000 and funds received were reclassified to Additional Paid-in Capital in the accompanying consolidated balance sheet. On September 9, 1999, the Company paid $170,500,000 to its Parent as a return of capital. On September 14, 1999 and October 25, 1999, the Parent contributed additional capital to the Company in the amounts of $54,250,000 and $60,000,000, respectively. Also on December 31, 1999, the Parent made a $150,000 contribution of partnership investments to the Company. |
F-28
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
11. |
INCOME TAXES |
|
Net
Realized Investment Gains (Losses) |
Operations |
Total |
|||||||||||||||
(In thousands) | |||||||||||||||||
YEAR ENDED DECEMBER 31, 2000: | |||||||||||||||||
Currently payable | $ | 2,791 | $ | (8,473 | ) | $ | (5,682 | ) | |||||||||
Deferred | (8,103 | ) | 122,230 | 114,127 | |||||||||||||
|
|
|
|||||||||||||||
Total income tax expense | $ | (5,312 | ) | $ | 113,757 | $ | 108,445 | ||||||||||
|
|
|
|||||||||||||||
YEAR ENDED DECEMBER 31, 1999: | |||||||||||||||||
Currently payable | $ | 6,846 | $ | 196,192 | $ | 203,038 | |||||||||||
Deferred | (13,713 | ) | (86,300 | ) | (100,013 | ) | |||||||||||
|
|
|
|||||||||||||||
Total income tax expense | |||||||||||||||||
(benefit) | $ | (6,867 | ) | $ | 109,892 | $ | 103,025 | ||||||||||
|
|
|
|||||||||||||||
THREE MONTHS ENDED DECEMBER 31, 1998: | |||||||||||||||||
Currently payable | $ | 740 | $ | 3,421 | $ | 4,161 | |||||||||||
Deferred | (620 | ) | 16,565 | 15,945 | |||||||||||||
|
|
|
|||||||||||||||
Total income tax expense | $ | 120 | $ | 19,986 | $ | 20,106 | |||||||||||
|
|
|
|||||||||||||||
YEAR ENDED SEPTEMBER 30, 1998: | |||||||||||||||||
Currently payable | $ | 4,221 | $ | 32,743 | $ | 36,964 | |||||||||||
Deferred | (550 | ) | 34,637 | 34,087 | |||||||||||||
|
|
|
|||||||||||||||
Total income tax expense | $ | 3,671 | $ | 67,380 | $ | 71,051 | |||||||||||
|
|
|
F-29
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
11. |
INCOME TAXES (Continued) |
|
Years Ended December 31, | Three Months Ended | Year Ended | |||||||||||||||||
2000 |
1999 |
December 31,
1998 |
September 30,
1998 |
||||||||||||||||
(In thousands) | |||||||||||||||||||
Amount computed at | |||||||||||||||||||
statutory rate | $ | 113,406 | $ | 100,703 | $ | 19,074 | $ | 73,392 | |||||||||||
Increases (decreases) | |||||||||||||||||||
resulting from: | |||||||||||||||||||
Amortization of | |||||||||||||||||||
differences between | |||||||||||||||||||
book and tax bases | |||||||||||||||||||
of net assets | |||||||||||||||||||
acquired | 597 | 609 | 146 | 460 | |||||||||||||||
State income taxes, | |||||||||||||||||||
net of federal tax | |||||||||||||||||||
benefit | 9,718 | 7,231 | 1,183 | 5,530 | |||||||||||||||
Dividends-received | |||||||||||||||||||
deduction | (10,900 | ) | (3,618 | ) | (345 | ) | (7,254 | ) | |||||||||||
Tax credits | (2,382 | ) | (1,346 | ) | (1,296 | ) | |||||||||||||
Other, net | (1,994 | ) | (554 | ) | 48 | 219 | |||||||||||||
|
|
|
|
||||||||||||||||
Total income tax | |||||||||||||||||||
expense | $ | 108,445 | $ | 103,025 | $ | 20,106 | $ | 71,051 | |||||||||||
|
|
|
|
For United States federal income tax purposes, certain amounts from life insurance operations are accumulated in a memorandum policyholders' surplus account and are taxed only when distributed to shareholders or when such account exceeds prescribed limits. The accumulated policyholders' surplus was $14,300,000 at December 31, 2000. The Company does not anticipate any transactions which would cause any part of this surplus to be taxable. | |
|
F-30
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
11. |
INCOME TAXES (Continued) |
|
December
31, 2000 |
December
31, 1999 |
|||||||||||
(In thousands) | ||||||||||||
DEFERRED TAX LIABILITIES: | ||||||||||||
Investments | $ | 18,738 | $ | 23,208 | ||||||||
Deferred acquisition costs | 317,995 | 272,697 | ||||||||||
State income taxes | 9,640 | 5,203 | ||||||||||
Other liabilities | 55,101 | 18,658 | ||||||||||
|
|
|||||||||||
Total deferred tax liabilities | 401,474 | 319,766 | ||||||||||
|
|
|||||||||||
DEFERRED TAX ASSETS: | ||||||||||||
Contractholder reserves | (247,591 | ) | (261,781 | ) | ||||||||
Guaranty fund assessments | (3,610 | ) | (2,454 | ) | ||||||||
Deferred income | (28,982 | ) | (48,371 | ) | ||||||||
Net unrealized losses on debt and equity | ||||||||||||
securities available for sale | (35,313 | ) | (60,605 | ) | ||||||||
|
|
|||||||||||
Total deferred tax assets | (315,496 | ) | (373,211 | ) | ||||||||
|
|
|||||||||||
Deferred income taxes | $ | 85,978 | $ | (53,445 | ) | |||||||
|
|
12. |
RELATED-PARTY MATTERS |
The Company purchases administrative, investment management, accounting, marketing and data processing services from its Parent and SunAmerica, an indirect parent. Amounts paid for such services totaled $132,034,000 for the year ended December 31, 2000, $105,059,000 for the year ended December 31, 1999, $21,593,000 for the three months ended December 31, 1998 and $84,975,000 for the year ended September 30, 1998. The marketing component of such costs during these periods amounted to $61,954,000, $53,385,000, $9,906,000 and $39,482,000, respectively, and are deferred and amortized as part of Deferred Acquisition Costs. The other components of such costs are included in General and Administrative Expenses in the income statement. |
F-31
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
12. |
RELATED-PARTY MATTERS (Continued) |
During the year ended December 31, 2000, FSA transferred $16,741,000 of cash to the Company related to policy enhancements of the New York Business from the Acquisition (see Note 4). During the year ended December 31, 2000, the Company transferred $20,055,000 of cash to the Parent as a result of policy enhancements granted to annuity policyholders who converted their MBL Life policies to policies of the Parent (see Note 4). During the year ended December 31, 2000, the Company sold various invested assets from the Parent for cash equal to their current market value of $6,362,000. During the year ended December 31, 1999, the Company transferred short-term investments and bonds to FSA with an aggregate fair value of $634,596,000 as part of the transfer of the New York Business from the Acquisition (See Note 4). The Company recorded a net realized loss of $5,144,000 on the transfer of these assets. During the year ended December 31, 1999, the Company purchased certain invested assets from SunAmerica for cash equal to their current market value of $161,159,000. During the year ended September 30, 1998, the Company sold various invested assets to SunAmerica for cash equal to their current market value of $64,431,000. The Company recorded a net gain aggregating $16,388,000 on such transactions. During the year ended September 30, 1998, the Company purchased certain invested assets from SunAmerica, the Parent and CalAmerica Life Insurance Company, a wholly-owned subsidiary of the Parent that has since merged into the Parent, for cash equal to their current market value which aggregated $20,666,000, $10,468,000 and $61,000, respectively. |
F-32
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
13. | BUSINESS SEGMENTS |
Products for the annuity operations and asset management operations are marketed through affiliated and independent broker-dealers, full-service securities firms and financial institutions. One independent selling organization in the annuity operations represented 16.9% of sales in the year ended December 31, 2000, 12.0% of sales in the year ended December 31, 1999, 14.7% in the three months ended December 31, 1998 and 16.8% in the year ended September 30, 1998. No other independent selling organization was responsible for 10% of sales for any such period. There was no single independent selling organization that accounted for 10% of sales in the asset management operations. Registered representatives sell products offered by the broker-dealer operations. Revenue from any single registered representative or group of registered representatives do not compose a material percentage of total revenues in the broker-dealer operations. |
F-33
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
13. |
BUSINESS SEGMENTS (Continued) |
|
Annuity Operations |
Asset Management Operations |
Broker- Dealer Operations |
Total |
||||||||||||||||
(In thousands) | |||||||||||||||||||
YEAR ENDED | |||||||||||||||||||
DECEMBER 31, 2000: | |||||||||||||||||||
Investment income | $ | 388,368 | $ | 9,800 | $ | 1,187 | $ | 399,355 | |||||||||||
Interest expense | (260,709 | ) | (3,784 | ) | (360 | ) | (264,853 | ) | |||||||||||
|
|
|
|
||||||||||||||||
Net investment income | 127,659 | 6,016 | 827 | 134,502 | |||||||||||||||
Net realized investment | |||||||||||||||||||
losses | (15,177 | ) | --- | --- | (15,177 | ) | |||||||||||||
Total fee income | 430,489 | 99,567 | 60,743 | 590,799 | |||||||||||||||
General and | |||||||||||||||||||
administrative expenses | (95,303 | ) | (44,266 | ) | (32,058 | ) | (171,627 | ) | |||||||||||
Amortization of deferred | |||||||||||||||||||
acquisition costs | (125,035 | ) | (32,972 | ) | --- | (158,007 | ) | ||||||||||||
Annual commissions | (56,473 | ) | --- | --- | (56,473 | ) | |||||||||||||
|
|
|
|
||||||||||||||||
Pretax income | $ | 266,160 | $ | 28,345 | $ | 29,512 | $ | 324,017 | |||||||||||
|
|
|
|
||||||||||||||||
Total assets | $ | 26,908,888 | $ | 199,075 | $ | 81,515 | $ | 27,189,478 | |||||||||||
|
|
|
|
||||||||||||||||
Expenditures for long- | |||||||||||||||||||
lived assets | $ | --- | $ | 454 | $ | 1,600 | $ | 2,054 | |||||||||||
|
|
|
|
F-34
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
13. |
BUSINESS SEGMENTS (Continued) |
Annuity Operations |
Asset Management Operations |
Broker- Dealer Operations |
Total |
||||||||||||||||
(In thousands) | |||||||||||||||||||
YEAR ENDED | |||||||||||||||||||
DECEMBER 31, 1999: | |||||||||||||||||||
Investment income | $ | 505,962 | $ | 9,072 | $ | 967 | $ | 516,001 | |||||||||||
Interest expense | (354,263 | ) | (3,085 | ) | (389 | ) | (357,737 | ) | |||||||||||
|
|
|
|
||||||||||||||||
Net investment income | 151,699 | 5,987 | 578 | 158,264 | |||||||||||||||
Net realized investment | |||||||||||||||||||
losses | (19,620 | ) | --- | --- | (19,620 | ) | |||||||||||||
Total fee income | 349,066 | 55,885 | 48,411 | 453,362 | |||||||||||||||
General and | |||||||||||||||||||
administrative expenses | (93,449 | ) | (24,856 | ) | (28,378 | ) | (146,683 | ) | |||||||||||
Amortization of deferred | |||||||||||||||||||
acquisition costs | (94,910 | ) | (21,930 | ) | --- | (116,840 | ) | ||||||||||||
Annual commissions | (40,760 | ) | --- | --- | (40,760 | ) | |||||||||||||
|
|
|
|
||||||||||||||||
Pretax income | $ | 252,026 | $ | 15,086 | $ | 20,611 | $ | 287,723 | |||||||||||
|
|
|
|
||||||||||||||||
Total assets | $ | 26,649,310 | $ | 150,966 | $ | 74,218 | $ | 26,874,494 | |||||||||||
|
|
|
|
||||||||||||||||
Expenditures for long- | |||||||||||||||||||
lived assets | $ | --- | $ | 2,271 | $ | 2,728 | $ | 4,999 | |||||||||||
|
|
|
|
F-35
|
ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
13. |
BUSINESS SEGMENTS |
Annuity Operations |
Asset Management Operations |
Broker- Dealer Operations |
Total |
||||||||||||||||
(In thousands) | |||||||||||||||||||
THREE MONTHS ENDED | |||||||||||||||||||
DECEMBER 31, 1998: | |||||||||||||||||||
Investment income | $ | 52,424 | $ | 971 | $ | 158 | $ | 53,553 | |||||||||||
Interest expense | (26,842 | ) | (752 | ) | (101 | ) | (27,695 | ) | |||||||||||
|
|
|
|
||||||||||||||||
Net investment income | 25,582 | 219 | 57 | 25,858 | |||||||||||||||
Net realized investment | |||||||||||||||||||
gains (losses) | (238 | ) | 509 | --- | 271 | ||||||||||||||
Total fee income | 60,876 | 11,333 | 11,121 | 83,330 | |||||||||||||||
General and | |||||||||||||||||||
administrative expenses | (9,363 | ) | (5,171 | ) | (6,734 | ) | (21,268 | ) | |||||||||||
Amortization of deferred | |||||||||||||||||||
acquisition costs | (23,111 | ) | (3,959 | ) | --- | (27,070 | ) | ||||||||||||
Annual commissions | (6,624 | ) | --- | --- | (6,624 | ) | |||||||||||||
|
|
|
|
||||||||||||||||
Pretax income | $ | 47,122 | $ | 2,931 | $ | 4,444 | $ | 54,497 | |||||||||||
|
|
|
|
||||||||||||||||
Total assets | $ | 22,982,323 | $ | 104,473 | $ | 59,537 | $ | 23,146,333 | |||||||||||
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Expenditures for long- | |||||||||||||||||||
lived assets | $ | --- | $ | 308 | $ | 1,005 | $ | 1,313 | |||||||||||
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F-36
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ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
13. |
BUSINESS SEGMENTS |
Annuity Operations |
Asset Management Operations |
Broker- Dealer Operations |
Total |
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(In thousands) | |||||||||||||||||||
YEAR ENDED | |||||||||||||||||||
SEPTEMBER 30, 1998: | |||||||||||||||||||
Investment income | $ | 214,871 | $ | 2,839 | $ | 1,083 | $ | 218,793 | |||||||||||
Interest expense | (131,980 | ) | (2,709 | ) | (405 | ) | (135,094 | ) | |||||||||||
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Net investment income | 82,891 | 130 | 678 | 83,699 | |||||||||||||||
Net realized investment | |||||||||||||||||||
gains (losses) | 19,615 | (133 | ) | --- | 19,482 | ||||||||||||||
Total fee income | 207,450 | 36,632 | 46,280 | 290,362 | |||||||||||||||
General and | |||||||||||||||||||
administrative expenses | (49,732 | ) | (18,640 | ) | (24,557 | ) | (92,929 | ) | |||||||||||
Amortization of deferred | |||||||||||||||||||
acquisition costs | (58,833 | (13,880 | --- | (72,713 | |||||||||||||||
Annual commissions | (18,209 | ) | --- | --- | (18,209 | ||||||||||||||
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Pretax income | $ | 183,182 | $ | 4,109 | $ | 22,401 | $ | 209,692 | |||||||||||
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Total assets | $ | 14,389,922 | $ | 104,476 | $ | 55,870 | $ | 14,550,268 | |||||||||||
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Expenditures for long- | |||||||||||||||||||
lived assets | $ | --- | $ | 205 | $ | 5,289 | $ | 5,494 | |||||||||||
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F-37
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AMENDED AND RESTATED BYLAWS of ANCHOR NATIONAL LIFE INSURANCE COMPANY ARTICLE I. Shareholders.
Section 1. Annual Meetings. The annual meeting of the shareholders of the Corporation shall be held on the fourth Thursday in April of each year or such other dates and times as may be determined. Not less than ten (10) nor more than fifty (50) days' written or printed notice stating the place, day and hour of each annual meeting shall be given in the manner provided in Section 1 of Article IX hereof. The business to be transacted at the annual meeting shall include the election of directors, consideration and action upon the reports of officers and directors and any other business within the power of the Corporation. All annual meetings shall be general meetings. Section 2. Special Meetings Called by President or Board of Directors. At any time in the interval between annual meetings, special meetings of shareholders may be called by the President, the Secretary or by two (2) or more directors, upon ten (10) days' written or printed notice, stating the place, day and hour of such meeting and the business proposed to be transacted thereat. Such notice shall be given in the manner provided in Section 1 of Article IX. No business shall be transacted at any special meeting except that named in the notice. Section 3. Special Meeting Called by Shareholders. Upon the request in writing delivered to the President or Secretary of the Corporation by the holders of ten percent (10%) or more of all shares outstanding and entitled to vote, it shall be the duty of the President or Secretary of the Corporation to call forthwith a special meeting of the shareholders. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. The Secretary of the Corporation shall inform such shareholders of the reasonably estimated cost of preparing and mailing the notice of the meeting. If upon payment of such costs to the corporation, the person to whom such request in writing shall have been delivered shall fail to issue a call for such meeting within ten (10) days after the receipt of such request and payment of costs, then the shareholders owning ten percent (10%) or more of the voting shares may do so upon giving fifteen (15) days' notice of the time, place and object of the meeting in the manner provided in Section 1 of Article IX. |
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Section 4. Removal of Directors. At any special meeting of the shareholders called in the manner provided for by this Article, the shareholders, by a vote of a majority of all shares of stock outstanding and entitled to vote, may remove any director or the entire Board of Directors from office and may elect a successor or successors to fill any resulting vacancies for the remainder of his or their terms. Section 5. Voting; Proxies; Record Date. At all meetings of shareholders any shareholder entitled to vote may vote by proxy. Such proxy shall be in writing and signed by the shareholder or by his duly authorized attorney in fact. It shall be dated, but need not be sealed, witnessed or acknowledged. The Board of Directors may fix the record date for the determination of shareholders entitled to vote in the manner provided in Section 4 of Article IX hereof. Section 6. Quorum. The presence in person or by proxy of the persons entitled to vote a majority of the voting shares of any meeting shall constitute a quorum for the transaction of business. If at any annual or special meeting of shareholders a quorum shall fail to attend in person or by proxy, a majority in interest attending in person or by proxy may adjourn the meeting from time to time, not exceeding thirty (30) days in all, and thereupon any business may be transacted which might have been transacted at the meeting originally called had the same been held at the time so called. Section 7. Filing Proxies. At all meetings of shareholders, the proxies shall be filed with and be verified by the Secretary of the Corporation or, if the meeting shall so decide, by the Secretary of the meeting. Section 8. Place of Meetings. All meetings of shareholders shall be held at such place, either within or without the State of Arizona, on such date and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors). Section 9. Order of Business. The order of business at all meetings of shareholders shall be as determined by the Chairman of the meeting. Section 10. Action Without Meeting. Directors may be elected without a shareholders' meeting by a consent in writing, setting forth the action so taken, signed by all persons entitled to vote for the election of directors; provided, however, that the foregoing shall not limit the power of directors to fill vacancies in the Board of Directors, and that a director may be elected to fill a vacancy not filled by the directors by written consent in the manner provided by the General Corporation Law. |
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Any other action, which under any provision of the General Corporation Law, may be taken at a meeting of the shareholders, may be taken without a meeting, and without notice except as hereinafter set forth, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All written consents shall be filed with the Secretary of the Corporation. Any shareholder giving a written consent, or the shareholder's proxyholders, or a transferee of the shares of a personal representative of the shareholder or their respective proxyholders, may revoke the consent by a writing receiving by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the Corporation. ARTICLE II. Directors. Section 1. Powers. The Board of Directors shall have the control and management of the affairs, business and properties of the Corporation. They shall have and exercise in the name of the Corporation and on behalf of the Corporation all the rights and privileges legally exercisable by the Corporation, except as otherwise provided by law, by the Charter or by these Bylaws. A director need not be a shareholder or a resident of Arizona. Section 2. Number; Term of Office; Removal. The number of directors of the Corporation shall be not less than five (5) nor more than fifteen (15). The number to be elected at each annual meeting shall be fixed by resolution of the directors and stated in the notice of the meeting, subject, however, to approval by the shareholders voting at the meeting. The directors shall hold office for the term of one year, or until their successors are elected and qualify. A director may be removed from office as provided in Section 4 of Article I hereof. Section 3. Vacancies. If the office of a director becomes vacant, or if the number of directors is increased, such vacancy may be filled by the Board by a vote of a majority of directors then in office though not less than a quorum. The shareholders may, however, at any time during the term of such director, elect some other person to fill said vacancy and thereupon the election by the Board shall be superseded and such election by the shareholders shall be deemed a filling of the vacancy and not a removal and may be made at any special meeting called for that purpose. |
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Section 4. Organization Meetings; Regular Meetings. The Board of Directors shall meet for the election of officers and any other business as soon as practicable after the adjournment of the annual meeting of the shareholders. No notice of the organization meeting shall be required if it is held at the same place and immediately following the annual meeting of the shareholders. Other regular meetings of the Board of Directors may be held at such intervals as the Board may from time to time prescribe. Any action required or permitted to be taken at a meeting of the Board of Directors or of a committee of the Board may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the Board or committee and filed with the minutes of proceedings of the Board or committee. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of telephone conference or similar communications equipment by means of which are persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 5. Special Meetings. Special meetings of the Board may be called by the President or by a majority of the directors. At least twenty-four (24) hours' notice shall be given of all special meetings; with the consent of the majority of the directors, a shorter notice may be given. Section 6. Quorum. A majority of the Board of Directors shall constitute a quorum for the transaction of business, but such number may be decreased and/or increased at any time or from time to time by vote of a majority of the entire Board to any number not less than two (2) directors or not less than one-third of the directors, whichever is greater. Section 7. Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or without the State of Arizona, and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors). Section 8. Rules and Regulations. The Board of Directors may adopt such rules and regulations for the conduct of its meetings and the management of the affairs of the Corporation as the Board may deem proper and not inconsistent with the laws of the State of Arizona or these Bylaws or the Charter. |
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Section 9. Compensation. The directors, as such, may receive a stated salary for their services and/or a fixed sum and expenses of attendance may be allowed for attendance at each regular or special meeting of the Board of Directors. Such stated salary and/or attendance fee shall be determined by resolution of the Board unless the shareholders have adopted a resolution relating thereto, provided that nothing herein contained shall be construed to preclude a director from serving in any other capacity and receiving compensation therefor. Section 10. Investment Committee. There shall be an Investment Committee consisting of the President of the Corporation ex officio and such members of the Board of Directors and/or officers and employees as the Board may by resolution prescribe. No investments or loans (other than policy loans or annuity contract loans) shall be made unless the same be authorized or approved by the Board of Directors or the Investment Committee. The Investment Committee shall maintain minutes of its meetings and shall submit regular reports to the Board of Directors. Section 11. Executive Committee. The Board of Directors may appoint from among its members an executive Committee composed of three (3) or more directors, and may delegate to such Committee, in the interval between the meetings of the Board of Directors, any and all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, except the power to declare dividends, issue stock, select directors to fill vacancies in the membership of the Board of Directors or any committee of the Board of Directors, amend or repeal the bylaws, or adopt new Bylaws, fix the compensation of directors for serving on the Board of Directors, or any committee of the board of Directors, or recommend to shareholders any action requiring shareholders' approval. The members of such Committee shall constitute a quorum for the transaction of business at any meeting and the act of a majority of the members present at any meeting at which the quorum requirement is satisfied shall be the act of the Board of Directors. In the absence of any member of the Executive Committee necessary to constitute a quorum, the members thereof present at any meeting, whether or not they constitute a quorum, may, with telephonic approval of one of the absent members of the Executive Committee, appoint a member of the Board of Directors to act in place of such absent member. Section 12. Other Committees. The Board of Directors may appoint from its own members and, where permitted by law, from the Corporation's officers and/or employees, such standing, temporary, special or adhoc committee as the Board may determine, investing such committees with such powers, duties and functions as the Board may prescribe. All such committees shall include the President, ex officio. |
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Section 13.
Advisory Board. The Board of Directors may elect an Advisory
Board to serve until the next annual meeting of the Board of Directors or
until their successors are elected and qualified. Such Board shall consist
of a number as determined from time to time by the Board of Directors, and
they shall be advised of the meetings of the Board of Directors and
authorized to attend the meetings and counsel with them, but shall have no
vote. The Board of Directors (and between meetings of the Board of
Directors, the Executive Committee) shall have the authority to increase
or decrease the number of members to the Advisory Board and to elect one
or more members to the Advisory Board to serve until the next meeting of
the Board of Directors and until their successors are elected and
qualified, and may provide for the compensation and other rules and
regulations with respect to such Board.
Section 14.
Procedures; Meetings. The Committees shall keep minutes of
their proceedings and shall report the same to the Board of Directors at
the meeting next succeeding, and any action by the Committees shall be
subject to revision and alteration by the Board of Directors, provided
that no rights of third persons shall be affected by any such revision or
alteration. ARTICLE III Officers
Section 1. In
General. The officers of the Corporation shall consist of a
President, one or more Vice Presidents, a Secretary, a Treasurer, and one
or more Assistant Secretaries and as may be fixed pursuant to these
Bylaws. The President, Vice Presidents, Secretary, and Treasurer shall be
chosen by the Board of Directors and, except those persons holding
contracts for fixed terms, shall hold office only at the pleasure of the
Board or until their successors are chosen and qualified. The President
may from time to time appoint Assistant Vice Presidents, Assistant
Secretaries, Assistant Treasurers, and other officers bearing such titles
and exercising such authority as he may from time to time deem
appropriate, and except those persons holdings contracts for fixed terms,
those officers appointed by the President shall hold office only at his
pleasure or until their successors are appointed and qualify. Any two (2)
officers, except those of President, Executive Vice President and
Secretary, may be held by the same persons, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity when such
instrument is required to be executed, acknowledged, or verified by any
two (2) or more officers. The Board of Directors or the President may from
time to time appoint other agents and employees, with such powers and
duties as they may deem
proper.
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Section
2.
President. The President shall be Chief Executive Officer of
the Corporation and shall have the general management of the Corporation's
business in all departments. In the absence of the Chairman of the Board,
the President shall preside at all meetings of the Board of Directors and
shall call to order all meetings of shareholders. The President shall
perform such other duties as the Board of Directors may direct.
Section
3. Vice
Presidents. In the absence or disability of the President, the
Vice Presidents, if any, in order of their rank as designated by the Board
of Directors or, if not ranked, the Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so
acting shall have all the powers of, and be subject to all the
restrictions upon, the President. The Vice Presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board of Directors or the
Bylaws.
Section
4. Treasurer.
Unless there shall be a financial Vice President designated by the Board
of Directors as the chief financial officer of the Corporation, having
general supervision over its finances, the Treasurer shall be the chief
financial officer with such authority. He shall also have authority to
attest to the seal of the Corporation and shall perform such other duties
as may be assigned to him by the Board of Directors.
Section
5.
Secretary of the Corporation. The
Secretary of the Corporation shall keep the minutes of the meetings of the
shareholders and of the Board of Directors, and shall attend to the giving
and serving of all notices of the Corporation required by law or these
Bylaws. The Secretary shall maintain at all times in the principal office
of the Corporation at least one copy of the Bylaws with all amendments to
date, and shall make the same, together with the minutes of the meetings
of the shareholders, the annual statement of the affairs of the
Corporation and any voting trust agreement on file at the office of the
Corporation, available for inspection by any officer, director, or
shareholder during reasonable business hours. The Secretary shall have
authority to attest to the seal of the Corporation and shall perform such
other duties as may be assigned to the Secretary by the Board of
Directors.
Section
6.
Other Secretaries, Assistant Treasurers and Assistant
Secretaries. Secretaries other than the Secretary of the
Corporation, the Assistant Treasurers and the Assistant Secretaries shall
have authority to attest to the seal of the Corporation and shall perform
such other duties as may from time to time be assigned to them by the
Board of Directors or the
President.
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Section 7. Substitutes. The Board of Directors may from time to time in the absence of any one of said officers or, at any other time, designate any other person or persons on behalf of the Corporation, to sign any contracts, deeds, notes, or other instruments in the place or stead of any of said officers, and designate any person to fill any one of said offices, temporarily or for any particular purpose; and any instruments so signed in accordance with a resolution of the Board shall be the valid act of this Corporation as fully as if executed by any regular officer. ARTICLE IV. Resignation. Any director or officer may resign his office at any time. Such resignation shall be made in writing and shall take effect from the time of its receipt by the Corporation, unless some time be fixed in the resignation, and then from that date. The acceptance of a resignation shall not be required to make it effective. ARTICLE V. Indemnification of Directors and Officers. The Corporation shall indemnify any and all of its existing and former directors and officers and their spouses against all expenses incurred by them and each of them, including but not confined to legal fees, judgments and penalties which may be incurred, rendered or levied in any legal or administrative action brought against any of then, for or on account of any action or omission alleged to have been committed while acting within the scope of employment as director of officer of the Corporation to the fullest extent allowable pursuant to the Arizona General Corporation Law as may be amended from time to time. Whenever any such person has grounds to believe that he may incur any such aforementioned expense, he shall promptly make a full report of the matter to the President and the Secretary of the Corporation. Thereafter, the Board of Directors of the Corporation shall, within a reasonable time, determine if such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. If the Board of Directors determines that such person acted, or failed to act, in good faith and in a manner he 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 no reasonable cause to believe his conduct was unlawful, then indemnification shall be mandatory and shall be automatically extended as specified herein, provided, however, that the Corporation shall have the right to refuse indemnification, wholly or partially, in any instance in which the person to whom indemnification would otherwise have been applicable shall have unreasonably refused to permit the Corporation, at its own expense and through counsel of its own choosing, to defend him in the action, or shall have unreasonably refused to cooperate in the defense of such action. |
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ARTICLE VI. Fiscal Year. The fiscal year of the Corporation shall be the calendar year. ARTICLE VII. Seal.
The seal of the Corporation shall be a circular disc inscribed with the name of the Corporation, "Anchor National Life Insurance Company," and the word "Incorporated."
ARTICLE VIII. Miscellaneous Provisions - Stock.
Section 1. Issue. All certificates of shares of the Corporation shall be signed by the manual or facsimile signatures of the President or any Vice President, and countersigned by the Treasurer or Secretary of the Corporation and sealed with the seal or facsimile seal of the Corporation. Any stock certificates bearing the facsimile signatures of the officers above named shall be manually signed by an authorized representative of the Corporation's duly constituted transfer agent. If an officer whose signature appears on a certificate ceases to be an officer before the certificate is issued, it may, nevertheless, be issued with the same effect as if such officer were still in office. Section 2. Transfers. No transfers of shares shall be recognized or binding upon the Corporation until recorded on the transfer books of the Corporation upon surrender and cancellation of certificates for a like number of shares. All transfers shall be effected only by the holder of record of such shares or by his legal representative, or by his attorney thereunto authorized by power of attorney duly executed. The person in whose name shares shall stand on the books of the Corporation may be deemed by the Corporation the owner thereof for all purposes. The Corporation's transfer agent shall maintain a stock transfer book, shall record therein all stock transfers and shall forward copies of all transfer sheets at regular prompt intervals to the Corporation's registrar, if there be one, or, if not, then to the Corporation's principal office for transcription on the stock registry books. |
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Section 3. Form of Certificates; Procedure. The Board of Directors shall have power and authority to determine the form of stock certificates (except insofar as prescribed by law), and to make all such rules and regulations as the Board may deem expedient concerning the issue; transfer and registration of said certificate, and to appoint one or more transfer agents and/or registrars to countersign and register the same. The transfer agent and registrar may be the same party. Section 4. Record Dates for Dividends and Shareholders' Meetings. The Board of Directors may fix the time, not exceeding twenty (20) days preceding the date of any meeting of shareholders, any dividend payment date or any date for the allotment of rights, during which the books of the Corporation shall be closed against transfers of stock, or the Board of Directors may fix a date not exceeding forty (40) days preceding the date of any meeting of shareholders, any dividend payment date or any date for the allotment of rights, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting, or entitled to receive such dividends or rights, as the case may be, and only shareholders of record on such date shall be entitled to notice of and to vote at such meeting or to receive such dividends or rights, as the case may be. In the case of a meeting of shareholders, the record date shall be fixed not less than ten (10) days prior to the date of the meeting. Section 5. Lost Certificates. In case any certificate of shares is lost, mutilated or destroyed, the Board of Directors may issue a new certificate in place thereof, upon indemnity to the Corporation against loss and upon such other terms and conditions as the Board of Directors may deem advisable.
ARTICLE IX. Notice. Section 1. Notice to Shareholders. Whenever by law or these Bylaws notice is required to be given to any shareholder, such notice may be given to each shareholder, whether or not such shareholder is entitled to vote, by leaving the sane with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to him at his address as it appears on the books of the Corporation. Such leaving or mailing of notice shall be deemed the time of giving such notice. Section 2. Notice to Directors and Officers. Whenever by law of these Bylaws notice is required to be given to any director or officer, such notice may be given in any one of |
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the following ways: by personal notice to such director or officer; by telephone communication with such director or officer personally; by wire, addressed to such director or officer at his then address or at his address as it appears on the books of the Corporation; or by depositing the same in writing in the post office or in a letter box in a postage paid, sealed wrapper addressed to such director or officer at his then address or at his address as it appears on the books of the Corporation; and the time when such notice shall be mailed or consigned to a telegraph company for delivery shall be deemed to be the time of the giving of such notice. ARTICLE X. Voting of Securities in Other Corporations. Any stock or other voting securities in other corporations, which may from time to time be held by the Corporation, may be represented and voted at any meeting of shareholders of such other corporation by the President, any Vice President, or the Treasurer, or by proxy or proxies appointed by the President, any Vice President, or the Treasurer, or otherwise pursuant to authorization thereunto given by a resolution of the Board of Directors.
ARTICLE XI. Amendments. These Bylaws may be added to, altered, amended or repealed by a majority vote of the entire Board of Directors at any regular meeting of the Board or at any special meeting called for that purpose. Any action of the Board of Directors in adding to, altering, amending or repealing these Bylaws shall be reported to the shareholders at the next annual meeting and may be changed or rescinded by majority vote of all of the stock then outstanding and entitled to vote, without, however, affecting the validity of any action taken in the meanwhile in reliance on these Bylaws so added to, altered, amended or repealed as aforesaid by the Board of Directors. In no event shall the Board of Directors have any power to amend this Article.
Amended and Restated, January 1, 1996 As amended, January 2, 2001 |
11
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Exhibit 10(a)
NASD SUBORDINATED LOAN AGREEMENT FOR EQUITY CAPITAL SL-5 AGREEMENT BETWEEN:
Lender SunAmerica
Inc.
1 SunAmerica Center 1999 Avenue of
the Stars, 38th
Floor
Los
Angeles
California
90067- 6002 AND
Broker-Dealer Royal Alliance Associates,
Inc
733 Third
Avenue
New
York
New
York
10017
NASD ID No: 023131 Date Filed: August 18, 1999 NASD NASD FORM SL-5 |
1
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SUBORDINATED LOAN AGREEMENT FOR EQUITY CAPITAL
AGREEMENT dated August 4, 1999 to be effective August 23, 1999 between SunAmerica Inc. (the "Lender")and Royal Alliance Associates, Inc. (the "Broker-Dealer"). In consideration of the sum of $ 4,500,000.00 and subject to the terms and conditions hereinafter set forth, the Broker-Dealer promises to pay to the Lender or assigns on Sept. 23, 2002 (the "Scheduled Maturity Date") (the last day of the month at least three years from the effective date of this Agreement) at the principal office of the Broker-Dealer the aforedescribed sum and Interest theron payable at the rate of 8.0* % per annum from the effective date of this Agreement, which date shall be the date so agreed upon by the Lender and the Broker-Dealer unless otherwise determined by the National Association of Securities Dealers, Inc. (the "NASD"). This Agreement shall not be considered a satisfactory subordination agreement pursuant to the provisions of 17 CFR 240.15c3-d unless and until the NASD has found the Agreement acceptable and such Agreement has become effective in the form found acceptable. The cash proceeds covered by this Agreement shall be used and dealt with by the Broker-Dealer as part of its capital and shall be subject to the risks of the business. The Broker-Dealer shall have the right to deposit any cash proceeds of the Subordinated Loan Agreement in an account or accounts in its own name in any bank or trust company. The Lender irrevocably agrees that the obligations of the Broker-Dealer under this Agreement with respect to the payment of principal and interest shall be and are subordinate in right of payment and subject to the prior payment or provision for payment in full of all claims of all other present and future creditors of the Broker-Dealer arising out of any matter occurring prior to the date on which the related Payment Obligation (as defined herein) matures consistent with the provisions of 17 CFR 240.15c3-1 and 240.15c3-d, except for claims which are the subject of subordination agreements which rank on the same priority as or are junior to the claim of the Lender under such subordination agreements. I. PERMISSIVE PREPAYMENTS (OPTIONAL) At the option of the Broker-Dealer, but not at the option of the Lender, payment of all or any part of the "Payment Obligation" amount hereof prior to the maturity date
NASD FORM SL-5 *Interest to be paid quarterly from and after the effective date of this Agreement. |
2
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may be made by the Broker-Dealer only upon receipt of the prior written approval of the NASD, but in no event may any prepayment be made before the expiration of one year from the date this Agreement became effective. No prepayment shall be made if, after given effect thereto (and to all payments of Payment Obligations under any other subordination agreements than outstanding, the maturity of which are scheduled to fall due either within six months after the date such prepayment is to occur or on or prior to the date on which the Payment Obligation hereof is scheduled to mature, whichever date is earlier), without reference to any projected profit or loss of the Broker-Dealer, either aggregate indebtedness of the Broker-Dealer would exceed 1000 percent of its net capital or such lesser percent as may be made applicable to the Broker-Dealer from time to time by the NASD, or a governmental agency or self-regulatory body having time to time by the NASD, or a governmental agency or self-regulatory body having appropriate authority, or if the Broker-Dealer is operating pursuant to paragraph (a)(1)(ii)of 17 CFR 240.15c3-1, its net capital would be less than five percent of aggregate debit items computed in accordance with 17 CFR 240.15c3-3a, or if registered as a futures commission merchant, 7 percent of the funds required to be segregated pursuant to the Commodity Exchange Act and the regulations thereunder, (less the market value of commodity options purchased by option customers on or subject to the rules of a contract market, provided, however, the deduction for each option customer shall be limited to the amount of customer funds in such option customer's account,) if greater, or its net capital would be less than 120 percent of the minimum dollar amount required by 17 CFR 15c3-1 including paragraph (a)(1)(ii), if applicable, or such greater dollar amount as may be made applicable to the Broker-Dealer by the NASD, or a governmental agency or self-regulatory body having appropriate authority. II. SUSPENDED REPAYMENTS (a) The Payment Obligation of the Broker-Dealer shall be suspended and shall not mature if after giving effect to such payment (together with the payment of any Payment Obligation of the Broker-Dealer under any other subordination agreement scheduled to mature on or before such Payment Obligation) the aggregate indebtedness of the Broker-Dealer would exceed 1200 percent of its net capital or such lesser percent as may be made applicable to the Broker-Dealer from time to time by the NASD, or a governmental agency or self-regulatory body having appropriate authority, or if the Broker-Dealer is operating pursuant to paragraph (a)(1)(ii) of 17 CFR 240.15c3-1, its net capital would be less than 5 percent of aggregate debit items computed in accordance with 17 CFR 240.15c3-3a, or if registered as a futures commission merchant, 6 percent of the funds required to be segregated pursuant to the Commodity Exchange Act and the regulations thereunder, (less the market value of commodity options purchased by option customers on or subject to the rules of a contract market, provided, however, the deduction for each option customer shall be limited to the amount of customer funds in such option customer's account), if greater, or its net capital would be less than 120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if applicable, or such greater dollar amount as may be made applicable to the Broke-Dealer by the NASD, or a governmental agency or self-regulatory body having appropriate authority. NASD FORM SL-5 |
3
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III. NOTICE OF MATURITY The Broker-Dealer shall immediately notify the NASD if, after giving affect to all payments of Payment Obligations under subordination agreements then outstanding which are then due or mature within six months without reference to any projected profit or loss of the Broker-Dealer, either the aggregate indebtedness of the Broker-Dealer would exceed 1200 percent of its net capital, or in the case of a Broker-Dealer operating pursuant to paragraph (a)(1)(ii) of 17 CFR 240.15c3-1, its net capital would be less than 5 percent of aggregate debit items computed in accordance with 17 CFR 240.15c3-3a, or if registered as a futures commission merchant, 6 percent of the funds required to be segregated pursuant to the Commodity Exchange Act and the regulations thereunder, (less the market value of commodity options purchased by option customers on or subject to the rules of a contract market, provided, however, the deduction for each option customer shall be limited to the amount of customer funds in such option customer' s account, if greater, and in either case, if its net capital would be less than 120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if applicable, or such greater dollar amount as may be made applicable to the Broker-Dealer by the NASD, or a governmental agency or self-regulatory body having appropriate authority. IV. BROKER DEALERS CARRYING THE ACCOUNTS OF SPECIALISTS AND MARKET MAKERS IN LISTED OPTIONS A Broker-Dealer who guarantees, endorses, carries or clears specialist or market-maker transactions in options listed on a national securities exchange or facility of a national securities association shall not permit a reduction, prepayment, or repayment of the unpaid principal amount if the effect would cause the equity required in such specialist or market-maker accounts to exceed 1000 percent of the Broker-Dealer's net capital or such percent as may be made applicable to the Broker-Dealer from time to time by the NASD or a governmental agency or self-regulatory body having appropriate authority. NASD FORM SL-5 |
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V. LIMITATION ON WITHDRAWAL OF EQUITY CAPITAL The proceeds covered by this Agreement shall in all respects be subject to the provisions of paragraph (a) of 17 CFR. 15c3-1. Pursuant thereto no equity capital of the Broker-Dealer or a subsidiary or affiliate consolidated pursuant to 17 CFR 240.15c3-1, whether in the form of capital contributions by partners, par or stated value of capital stock, paid-in capital in excess of par, retained earnings or other capital accounts, may be withdrawn by action of a stockholder or partner, or by redemption or repurchase of shares of stock by any of the consolidated entities or through the payment of dividends or any similar distribution, nor may any unsecured advance or loan be made to a stockholder, partner, sole proprietor, or employee if, after giving effect thereto and to any other such withdrawals, advances or loans and any payments of Payment Obligations under withdrawal, advances or loan, either aggregate indebtedness of any of the consolidated satisfactory subordination agreements which are scheduled to occur within six months following such withdrawal, advances or loan, either aggregate indebtedness of any of the consolidated entities exceed 1000 percent of its net capital, or in the case of a Broker-Dealer operating pursuant to paragraph (a)(1)(ii) of 17 CFR 240.15c3-1, its net capital would be less than 5 percent of aggregate debit items computed in accordance with 17 CFR 240.15c3-3a, or if registered as a futures commission merchant, 7 percent of the funds required to be segregated pursuant to the Commodity Exchange Act, and the regulations thereunder, (less the market value of commodity options purchased by option customers on or subject to the rules of a contract market, provided, however, the deduction for each option customer shall be limited to the amount of customer funds in such option customer's account,) if greater, and in either case, if is net capital would be less than 120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if applicable, or such greater dollar amount as may be made applicable to the Broker-Dealer by the NASD, or a governmental agency or self-regulatory body having appropriate authority; or should the Broker-Dealer be included within such consolidation, if the total outstanding principal amounts of satisfactory subordination agreements of the Broker-Dealer (other than such agreements which qualify as equity under paragraph (a) of 17 CFR 240.15c3-1) would exceed 70 percent of its debt/equity total, as this term is defined in paragraph (d) of 17 CFR 240.15c3-1, for a period in excess of 90 days, or for such longer period which the Commission may upon application of the Broker-Dealer grant in the public interest or for the protection of investors. VI. BROKER DEALERS REGISTERED WITH CFTC If the Broker-Dealer is a futures commission merchant or introductory broker as that term is defined in the Commodity Exchange Act, the Organization agrees, consistent with the requirements of Section 1.17(h) of the regulations of the CFTC (17 CFR 1.17(h)), that NASD FORM SL-5 |
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(a) Whenever prior written notice by the Broker-Dealer to the NASD is required pursuant to the provisions of this Agreement, the same prior written notice shall be given by the Broker-Dealer to (i) the CFTC at its principal office in Washington, D.C. attention Chief Account of Division of Trading and Markets, and/or (ii) the commodity exchange of which the Organization is a member and which is then designated by the CFTC as the Organization's designated self-regulatory organization (the DSRO); (b) Whenever prior written consent, permission or approval of the NASD is required pursuant to the provisions of this Agreement, the Broker-Dealer shall also obtain the prior written consent, permission or approval of the CFTC and/or of the DSRO; and, (c) Whenever the Broker-Dealer receives written notice of acceleration of maturity pursuant to the provisions of this Agreement, the Broker-Dealer shall promptly give written notice thereof to the CFTC at the address above stated and/or to the DSRO. VIII. GENERAL In the event of the appointment of a receiver or trustee of the Broker-Dealer or in the event of its insolvency, liquidation pursuant to the Securities Investor Protection Act of 1970 or otherwise, bankruptcy, assignment for the benefit of creditors, reorganizations whether or not pursuant to bankruptcy laws, or any other marshaling of the assets and liabilities of the Broker-Dealer, the Payment Obligation of the Broker-Dealer shall mature, and the holder hereof shall not be entitled to participate or share, ratably or otherwise in the distribution of the assets of the Broker-Dealer until all claims of all other present and future creditors of the Broker-Dealer, whose claims are senior hereto, have been fully satisfied. This Agreement shall not be subject to cancellation by either the Lender of the Broker-Dealer, and no payment shall be made, nor the Agreement terminated, rescinded or modified by mutual consent or otherwise if the effect thereof would be insistent with the requirements of 17 CFR 240.15c3-1 and 240.15c3-d. NASD FORM SL-5 |
6
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This Agreement may not be transferred, sold, assigned, pledged, or otherwise encumbered or otherwise disposed of, and no lien, charge or other encumbrance may be created or permitted to be created thereof without the prior written consent of the NASD. The Lender irrevocably agrees that the loan evidenced hereby is not being made in reliance upon the standing of the Broker-Dealer as a member organization of the NASD or upon the NASD surveillance of the Broker-Dealer's financial position or its compliance with the By-laws, rules and practices of the NASD. The Lender has made such investigation of the Broker-Dealer and its partners, officers, directors, and stockholders as the Lender deems necessary and appropriate under the circumstances. The Lender is not relying upon the NASD to provide any information concerning or relating to the Broker-Dealer and agrees that the NASD has no responsibility to disclose to the Lender any information concerning or relating to the Broker-Dealer which it may now, or at any future time, have. The term "Broker-Dealer", as used in this Agreement, shall include the broker-dealer, its heirs, executors, administrators, successors and assigns. The term "Payment Obligation" shall mean the obligation of the Broker-Dealer to repay cash loaned to it pursuant to this Subordinated Loan Agreement. The provisions of this Agreement shall be binding upon the Broker-Dealer and the Lender, and their respective heirs, executors, administrators, successors, and assigns. Any controversy arising out of or relating to this Agreement may be submitted to and settled by arbitration pursuant to the By-Laws and rules of the NASD. The Broker-Dealer and the Lender shall be conclusively bound by such arbitration. This instrument embodies the entire agreement between the Broker-Dealer and the Lender and no other evidence of such agreement has been or will be executed without prior written consent of the NASD. This Agreement shall be deemed to have been made under, and shall be governed by, the laws of the State of California in all respects. NASD FORM SL-5 |
7
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IN WITNESS WHEREOF the parties have set their hands and seal this 4th day of August 1999
Royal Alliance Associates, Inc. (Name or Broker-Dealer)
By Bettyann Sullivan 8/4/99 L.S. (Authorized Person) Chief Financial Officer
SunAmerica, Inc. L.S. (Lender)
By ___James R. Belardi L.S. Executive Vice President
FOR NASD USE ONLY
ACCEPTED BY: Gerald Dougherty (Name)
Assistant Director (Title)
EFFECTIVE DATE: 8/23/99 LOAN NUMBER: 10-E-SLA-11033 NASD FORM SL-5 |
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SUBORDINATED LOAN AGREEMENT LENDER'S ATTESTATION
It is recommended that you discuss the merits of this investment with an attorney, accountant or some other person who has knowledge and experience in financial and business matters prior to executing this Agreement. |
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1. |
I have received and reviewed NASD Form SLD, which is a reprint of Appendix D of 17 CFR 240.15c3-1, and am familiar with its provisions. |
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2. |
I am aware that the funds or securities subject to this Agreement are not covered by the Securities Investor Protection Act of 1970. |
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3. |
I understand that I will be furnished financial statements pursuant to SEC Rule 17a-5(c). |
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4. |
On the date this Agreement was entered into, the broker-dealer carried funds or securities for my account. (State Yes or No) ____No__________. |
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5. |
Lender's business relationship to the broker-dealer is: Lender is an intermediate holding company of Broker-Dealer and continuously monitors fiscal status and reports of Broker-Dealer. |
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6. |
If the partner or stockholder is not actively engaged in the business of the broker-dealer, acknowledge receipt of the following: |
|
|
a. |
Certified audit and accountant's certificate dated ___________ |
|
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b. |
Disclosure of financial and/or operational problems since the last certified audit which required reporting pursuant to SEC Rule 17a-11. ( If no such reporting was required, state "none") _______________________ |
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c. |
Balance sheet and statement of ownership equity dated _____________ |
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d. |
Most recent computation of net capital and aggregate indebtedness or aggregate debit items dated ______________ reflecting a net capital of $___________ and a ratio of ___________. |
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e. |
Debt/equity ratio as of _____________ of ____________. |
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f. |
Other disclosures: ______________________
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Dated: August 4,
1999
James R.
Belardi
L.S. NASD FORM SL-5 |
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SUNAMERICA INC. CERTIFICATE OF SECRETARY
I, Susan L. Harris, the duly appointed, qualified and acting Secretary of SunAmerica Inc., a Delaware corporation (the "Corporation"), do hereby certify that the following is a true and correct copy of the resolutions duly adopted by the Executive Committee of the Board of Directors of the Corporation, effective as of March 10, 1999, and that such resolutions are in full force and effect as of the date hereof: |
WHEREAS, this Corporation, from time to time, reviews the net capital infusion needs of its wholly-owned broker-dealer subsidiaries, registered with the Securities and Exchange Commission and members of the National Association of Securities Dealers, Inc., which include, but not limited to, SunAmerica Capital Services, Inc., Advantage Capital Corporation, SunAmerica Securities, Inc., Royal Alliance Associates, Inc., Sentra Securities Corporation, Spelman & Co., Inc. and FSC Securities Corporation, and in conjunction with such review intends to provide subordinated loans to such subsidiaries pursuant to Subordinated Loan Agreements for Equity Capital; WHEREAS, it is in the best interests of this Corporation to provide blanket authorization fur such subordinated loan transactions; NOW, THEREFORE, BE IT RESOLVED that the Chairman, any Vice Chairman, any Executive Vice President, or the Treasurer (the "Designated Officers"), acting alone, be, and each hereby is authorized to effect subordinated loans to the wholly-owned broker-dealer subsidiaries of the Corporation, in an aggregate principal amount not to exceed Fifty Million Dollars ($50,000,000), and to make, execute and deliver such loan agreements and other documents evidencing such loans, including any Subordinated Loan Agreement for Equity Capital, as deemed necessary or appropriate; RESOLVED FURTHER that each of the Designated Officers are hereby authorized to make such changes in the terms and conditions of such Subordinated Loan Agreements as may be necessary to conform to the requirements of Title 17 CFR §240.15c 3-ld and the rules of the National Association of Securities Dealers; and |
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RESOLVED FURTHER that the Executive Committee hereby ratifies any and all action that may have been taken by the officers of this Corporation in connection with the foregoing resolutions and authorizes the officers of this Corporation to take any and all such further actions as may be deemed appropriate to reflect these resolutions and to carry out their tenor, effect and intent. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Corporation this 12th day of August 1999.
/s/ Susan L.
Harris
(SEAL) |
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OFFICER'S CERTIFICATE I, James Belardi, Executive Vice President of SunAmerica Inc., a Delaware corporation (this "Corporation"), do hereby certify that the execution of the Subordinated Loan Agreement for Equity Capital entered into by and between this Corporation and its broker-dealer subsidiary Royal Alliance Associates, Inc., dated August 4, 1999, does not cause the aggregate principal amount of all outstanding loans made by this Corporation to its broker-dealer subsidiaries to exceed $50 million.
/s/ James Belardi
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Exhibit 10(b)
SECOND AMENDMENT TO SUBORDINATED LOAN AGREEMENT FOR EQUITY CAPITAL
This SECOND AMENDMENT TO SUBORDINATED LOAN AGREEMENT FOR EQUITY CAPITAL (this "Amendment") is entered into and effective as of September 13, 1999, (the "Effective Date"), by and between Sun America Inc. ("Lender") and Sun America Asset Management Corporation, Inc. ("Borrower"), with reference to the following recitals: RECITALS. A. Effective September 13, 1993, Lender and Borrower entered into a Subordinated Loan Agreement for Equity Capital (the "Agreement"), pursuant to the terms of which Lender loaned to Borrower the sum of $14,000,000.00 (the "Principle Amount") and upon which interest was to be paid quarterly at the rate of seven percent (7%) per annum from the effective date of that Agreement (the "Loan"). B. The Loan was scheduled to mature on September 13, 1996. However, pursuant to a Subordinated Loan Agreement Amendment Extending the Maturity Date dated September 3. 1996 (the "September 1996 Amendment"), the parties agreed to extend the maturity date of the Loan to September 13, 1999 and to change the interest payable thereon from seven percent (7%) to nine percent (9%) per annum. C. On the Effective Date, Borrower has paid to Lender the sum of $7,000,000.00, constituting partial repayment of the Principle Amount, leaving an unpaid principle balance of $7,000,000.00 (the "Unpaid Principle Amount") plus interest payable thereon as calculated in accordance with this Amendment. D. In accordance with the terms and conditions of this Amendment, Lender and Borrower desire to amend the Agreement to extend the maturity date with respect to the Unpaid Principle Amount and to amend the interest rate payable thereon. NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the Agreement as follows: Section 1. Amendment to the Agreement. The second paragraph on the first page of the Agreement is amended to read in full as follows: |
"In consideration of the sum of $7,000,000.00 and subject to the terms and conditions hereinafter set forth, the Borrower promises to pay to the Lender or assigns on September 13, 2002 (the "Scheduled Maturity Date") (the last day of the month at least three years from the effective date of this Agreement) at the principal office of the Lender the above-mentioned sum and interest thereon payable at the rate of eight percent (8%) per annum (interest to be paid quarterly) from the effective date of this Agreement, which date shall be the date so agreed upon by the Lender and Borrower." |
Section 3. Conflicts. Except as specifically amended by this Amendment, the provisions of the September 1996 Amendment shall be superseded by this Amendment and the Agreement shall continue in effect and shall bind the parties hereto. In the event there is a conflict between the provisions of the Agreement and this Amendment, the provisions of this Amendment shall in all respects control. Section 4. Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original and all of which, taken together, shall constitute one and the same agreement.
(The signature page follows)
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective as of the Effective Date. |
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LENDER: | SUNAMERICA INC |
By: /s/James R. Belardi | |
Name: James R.
Belardi |
BORROWER: | SUNAMERICA ASSET MANAGEMENT CORPORATION, INC. |
By: /s/Debbie Potash-Turner | |
Name: Debbie
Potash-Turner Title: Chief Financial Officer |
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EXHIBIT 10(c)
NASD
SL-A
AGREEMENT BETWEEN: Lender: SunAmerica Inc. 1 SunAmerica Center, 1999
Avenue of the Stars, 38th
Floor
AND Broker-Dealer: SunAmerica Capital Services, Inc.
NASD ID Number: 13158 |
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SUBORDINATED LOAN
AGREEMENT Amendment dated as of May 22, 2000 between SunAmerica Inc. (the "Lender") and SunAmerica Capital Services, Inc. (the "Broker-Dealer'). In consideration of the sum of $3,500,000 (the unpaid principal amount) and subject to the terms and conditions set forth in the Subordination Agreement approved by the National Association of Securities Dealers, Inc., scheduled to mature on June 27, 2001 bearing Loan Number 10-E-SLA-10749, the Broker-Dealer and the Lender agree to extend the maturity date until June 30, 2002. This Amendment shall not become effective unless and until the NASD has found the Amendment acceptable. The interest rate on this Subordination Agreement is changed from 8.5% to 9.5% percent -per annum, effective as of the date of this Agreement
Signature page follows
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IN WITNESS WHEREOF the parties have set their hands and seal this 22nd day of May, 2000. |
BROKER-DEALER: SUNAMERICA CAPITAL SERVICES. INC. [Seal]
LENDER: SUNAMERICA INC. [Seal] FOR NASD USE ONLY
Assistant
Director
EFFECTIVE DATE: JUN 27 2001
LOAN NUMBER: 10-E-SLA-10749 |
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SUBORDINATED LOAN
AGREEMENT
It is recommended that you discuss the merits of this investment with an attorney, accountant or some other person who has knowledge and experience in financial and business matters prior to executing this Agreement
|
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1. |
I have received and reviewed a copy of Appendix D of 17 CFR 240.15c3-l, and am familiar with its provisions. |
|
2. |
I am aware that the funds or securities subject to this Agreement are not covered by the Securities Investor Protection Act of 1970. |
|
3. |
I understand that I will be furnished financial statements pursuant to SEC Rule 17a-5(c). |
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4. |
On the date this Agreement was entered into, the broker-dealer carried funds or securities for my account. (State Yes or No): No. |
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5. |
Lender's business relationship to the broker-dealer is: Lender is an intermediate holding company of Broker-Dealer and continuously monitors fiscal status and reports of Broker-Dealer. |
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6. |
If the partner or stockholder is not actively engaged in the business of the broker-dealer, acknowledge receipt of the following: |
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|
a. |
Certified audit and accountant's certificate dated ___________ |
|
|
b. |
Disclosure of financial and/or operational problems since the last certified audit which required reporting pursuant to SEC Rule 17a-11. ( If no such reporting was required, state "none") _______________________ |
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c. |
Balance sheet and statement of ownership equity dated _____________ |
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d. |
Most recent computation of net capital and aggregate indebtedness or aggregate debit items dated ______________ reflecting a net capital of $___________ and a ratio of ___________. |
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e. |
Debt/equity ratio as of _____________ of ____________. |
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f. |
Other disclosures:
______________________
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Dated: May 22,2000 SUNAMERICA INC. (Lender)
By:
/s/ James R.
Belardi
|
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OFFICER'S CERTIFICATE I, James R. Belardi, Executive Vice President of SunAmerica Inc., a Delaware corporation (this "Corporation"), do hereby certify that the $3,500,000 subordinated loan made by this Corporation to SunAmerica Capital Services, Inc., amended to mature on June 30,2002, does not cause the aggregate principal amount of all outstanding loans made by this Corporation to its broker-dealer subsidiaries to exceed $75 million.
Dated: May 22,2000
/s/ James R.
Belardi
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SUNAMERICA INC. CERTIFICATE OF SECRETARY I, the undersigned, the duly elected, qualified and acting Assistant Secretary of SunAmerica Inc., a Delaware corporation (the "Corporation"), do hereby certify that the following resolutions were adopted by unanimous written consent by the Executive Committee of the Board of Directors of the Corporation on the 16th day of March 2000, and that said resolutions are in full force and effect as of the date hereof: Blanket Authorization of Subordinated Loan Agreements for Equity Capital |
WHEREAS, this Corporation, from time to time, reviews the net capital infusion needs of its wholly-owned broker-dealer subsidiaries, registered with the Securities and Exchange Commission and members of the National Association of Securities Dealers, Inc., which include, but not limited to, SunAmerica Capital Services, Inc., Advantage Capital Corporation, SunAmerica Securities, Inc., Royal Alliance Associates, Inc., Sentra Securities Corporation, Spelman & Co., Inc. and FSC Securities Corporation, and in conjunction with such review intends to provide subordinated loans to such subsidiaries pursuant to Subordinated Loan Agreements for Equity Capital; WHEREAS, it is in the best interests of this Corporation to provide blanket authorization for such subordinated loan transactions, which authorization shall supercede any prior authorization; NOW, THEREFORE, BE IT RESOLVED that the Chairman, any Vice Chairman, any Executive Vice President, or the Treasurer (the "Designated Officers"), acting alone, be, and each hereby is authorized to effect subordinated loans to the wholly-owned broker-dealer subsidiaries of the Corporation, in an aggregate principal amount not to exceed Seventy-five Million Dollars ($75,000,000), and such authority shall supercede any prior authorization; and to make, execute and deliver such loan agreements and other documents evidencing such loans, including any Subordinated Loan Agreement for Equity Capital, as deemed necessary or appropriate; RESOLVED FURTHER that each of the Designated Officers are hereby authorized to make such changes in the terms and conditions of such Subordinated Loan Agreements as may be necessary to conform to the requirements of Title 17 CFR §240.15c 3-id and the rules of the National Association of Securities Dealers; and |
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RESOLVED FURTHER that the Executive Committee hereby ratifies any and all action that may have been taken by the officers of this Corporation in connection with the foregoing resolutions and authorizes the officers of this Corporation to take any and all such further actions as may be deemed appropriate to reflect these resolutions and to carry out their tenor, effect and intent. IN WITNESS WHEREOF, the undersigned has executed this Certificate and affixed the seal of the Corporation this the 23rd day of May, 2000.
/s/ Lawrence M.
Goldman
[CORPORATE SEAL] |
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EXHIBIT 10(d)
NASD SUBORDINATED AGREEMENT AMENDMENT EXTENDING MATURITY DATE
SL-A
AGREEMENT BETWEEN:
Lender: SunAmerica Inc. 1 SunAmerica Center, 1999
Avenue of the Stars, 38th Floor
Los Angeles
California
90067-6002
AND
Broker-Dealer: SunAmerica Capital Services, Inc. 733 Third Avenue, 3rd
Floor
New
York
New
York
10017
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SUBORDINATED LOAN AGREEMENT AMENDMENT EXTENDING THE MATURITY DATE Amendment dated as of May 22, 2000 between SunAmerica Inc. (the "Lender") and SunAmerica Capital Services, Inc. (the "Broker-Dealer"). In consideration of the sum of $3,500,000 (the unpaid principal amount) and subject to the terms and conditions set forth in the Subordination Agreement approved by the National Association of Securities Dealers, Inc., scheduled to mature on July 30,2001 bearing Loan Number 10-E-SLA-10761, the Broker-Dealer and the Lender agree to extend the maturity date until July 30, 2002. This Amendment shall not become effective unless and until the NASD has found the Amendment acceptable. The interest rate on this Subordination Agreement is changed from 8.5% to 9.5% percent per annum, effective as of the date of this Agreement.
Signature page follows |
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IN WITNESS WHEREOF the parties have set their hands and seal this 22nd day of May, 2000.
BROKER-DEALER: SUNAMERICA CAPITAL SERVICES. INC.
LENDER: SUNAMERICA INC. [Seal]
By: /s/ James R.
Belardi FOR NASD USE ONLY ACCEPTED BY: /s/ Gerald Dougherty (Name)
Assistant Director (Titled)
EFFECTIVE DATE: JUN 30, 2001 |
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SUBORDINATED LOAN AGREEMENT LENDER'S ATTESTATION It is recommended that you discuss the merits of this investment with an attorney, accountant or some other person who has knowledge and experience in financial and business matters prior to executing this Agreement. |
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1. |
I have received and reviewed a copy of Appendix D of 17 CFR 240.15c3-l, and am familiar with its provisions. |
|
2. |
I am aware that the funds or securities subject to this Agreement are not covered by the Securities Investor Protection Act of 1970. |
|
3. |
I understand that I will be furnished financial statements pursuant to SEC Rule 17a-5(c). |
|
4. |
On the date this Agreement was entered into, the broker-dealer carried funds or securities for my account. (State Yes or No) ____No__________. |
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5. |
Lender's business relationship to the broker-dealer is: Lender is an intermediate holding company of Broker-Dealer and continuously monitors fiscal status and reports of Broker-Dealer. |
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6. |
If the partner or stockholder is not actively engaged in the business of the broker-dealer, acknowledge receipt of the following: |
|
|
a. |
Certified audit and accountant's certificate dated ___________ |
|
|
b. |
Disclosure of financial and/or operational problems since the last certified audit which required reporting pursuant to SEC Rule 17a-11. ( If no such reporting was required, state "none") _______________________ |
|
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c. |
Balance sheet and statement of ownership equity dated _____________ |
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|
d. |
Most recent computation of net capital and aggregate indebtedness or aggregate debit items dated ______________ reflecting a net capital of $___________ and a ratio of ___________. |
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e. |
Debt/equity ratio as of _____________ of ____________. |
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f. |
Other disclosures:
______________________
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Dated: May 22, 2000 SUNAMERICA INC. (Lender)
By: /s/ James R.
Belardi
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OFFICER'S CERTIFICATE I, James R. Belardi, Executive Vice President of SunAmerica Inc., a Delaware corporation (this "Corporation"), do hereby certify that the $3,500,000 subordinated loan made by this Corporation to SunAmerica Capital Services, Inc., amended to mature on July 30, 2002, does not cause the aggregate principal amount of all outstanding loans made by this Corporation to its broker-dealer subsidiaries to exceed $75 million.
Dated: May
22, 2000
/s/ James R.
Belardi
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SUNAMERICA INC. CERTIFICATE OF SECRETARY I, the undersigned, the duly elected, qualified and acting Assistant Secretary of SunAmerica Inc., a Delaware corporation (the "Corporation"), do hereby certify that the following resolutions were adopted by unanimous written consent by the Executive Committee of the Board of Directors of the Corporation on the 16th day of March 2000, and that said resolutions are in full force and effect as of the date hereof: Blanket Authorization of Subordinated Loan Agreements for Equity Capital |
WHEREAS, this Corporation, from time to time, reviews the net capital infusion needs of its wholly-owned broker-dealer subsidiaries, registered with the Securities and Exchange Commission and members of the National Association of Securities Dealers, Inc., which include, but not limited to, SunAmerica Capital Services, Inc., Advantage Capital Corporation, SunAmerica Securities, Inc., Royal Alliance Associates, Inc., Sentra Securities Corporation, Spelman & Co., Inc. and FSC Securities Corporation, and in conjunction with such review intends to provide subordinated loans to such subsidiaries pursuant to Subordinated Loan Agreements for Equity Capital; WHEREAS, it is in the best interests of this Corporation to provide blanket authorization for such subordinated loan transactions, which authorization shall supercede any prior authorization; NOW, THEREFORE, BE IT RESOLVED that the Chairman, any Vice Chairman, any Executive Vice President, or the Treasurer (the "Designated Officers"), acting alone, be, and each hereby is authorized to effect subordinated loans to the wholly-owned broker-dealer subsidiaries of the Corporation, in an aggregate principal amount not to exceed Seventy-five Million Dollars ($75,000,000), and such authority shall supercede any prior authorization; and to make, execute and deliver such loan agreements and other documents evidencing such loans, including any Subordinated Loan Agreement for Equity Capital, as deemed necessary or appropriate; RESOLVED FURTHER that each of the Designated Officers are hereby authorized to make such changes in the terms and conditions of such Subordinated Loan Agreements as may be necessary to conform to the requirements of Title 17 CFR §240.15c 3-id and the rules of the National Association of Securities Dealers; and |
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RESOLVED FURTHER that the Executive Committee hereby ratifies any and all action that may have been taken by this Corporation in connection with the foregoing resolutions and authorizes the officers of this Corporation to take any and all such further actions as may be deemed appropriate to reflect these resolutions and to carry out their tenor, effect and intent. IN WITNESS WHEREOF, the undersigned has executed this Certificate and affixed the seal of the Corporation this the 23rd day of May, 2000.
/s/ Lawrence M.
Goldman
[CORPORATE SEAL] |
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Exhibit 10(e)
NASD SUBORDINATED AGREEMENT AMENDMENT EXTENDING MATURITY DATE
SL-A
AGREEMENT BETWEEN:
Lender: SunAmerica Inc.
1 SunAmerica Center. 1999
Avenue of the Stars, 38th
Floor
Los
Angeles
California
90067-6002
Broker-Dealer: SunAmerica Capital Services, Inc. 733 Third Avenue, 3rd F1oor
New
York
New
York
10017 |
NASD ID Number 13158 DATE FILED: September 30, 2000 |
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SUBORDINATED LOAN AGREEMENT AMENDMENT EXTENDING THE MATURITY DATE
Amendment dated as of September 30, 2000, between SunAmerica Inc. (the "Lender") and SunAmerica Capital Services, Inc. (the "Broker-Dealer"). In consideration of the sum of $3,000,000 (the unpaid principal amount) and subject to the terms and conditions set forth in the Subordination Agreement approved by the National Association of Securities Dealers, Inc., scheduled to mature on October 31, 2001 bearing Loan Number 10-E-SLA-10810, the Broker-Dealer and the Lender agree to extend the maturity date until October 31, 2004. This Amendment shall not become effective unless and until the NASD has found the Amendment acceptable. Effective November l, 2001, the interest rate on this Subordination Agreement will change from 8.5% to 9.5% percent per annum.
Signature page follows |
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IN WITNESS WHEREOF the parties have set their hands and seal
this 22nd day of September, 2000. BROKER-DEALER:
SUNAMERICA CAPITAL SERVICES,
INC. [Seal]
By: /s/ Debbie Potash Turner
Name: Debbie Potash Turner
Title: Chief Financial
Officer
LENDER |
SUNAMERICA INC. |
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[Seal] |
By: /s/ James R. Belardi |
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Name: James R. Belardi |
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Title: Executive Vice President |
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FOR NASD USE ONLY
ACCEPTED BY: /S/ Gerald Dougherty (Name) Assistant Director
(Titled) EFFECTIVE DATE: October 30, 2001 LOAD NUMBER: 10-E-SLA-10810 |
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SUBORDINATED LOAN AGREEMENT LENDER'S ATTESTATION
It is recommended that you discuss the merits of this investment with an attorney, accountant or some other person who has knowledge and experience in financial and business matters prior to executing this Agreement. |
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1. |
I have received and reviewed NASD Form SLD, which is a reprint of Appendix D of 17 CFR 240.15c3-1, and am familiar with its provisions. |
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2. |
I am aware that the funds or securities subject to this Agreement are not covered by the Securities Investor Protection Act of 1970. |
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3. |
I understand that I will be furnished financial statements pursuant to SEC Rule 17a-5(c). |
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4. |
On the date this Agreement was entered into, the broker-dealer carried funds or securities for my account. (State Yes or No) ____No__________. |
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5. |
Lender's business relationship to the broker-dealer is: Lender is an intermediate holding company of Broker-Dealer and continuously monitors fiscal status and reports of Broker-Dealer. |
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6. |
If the partner or stockholder is not actively engaged in the business of the broker-dealer, acknowledge receipt of the following: |
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a. |
Certified audit and accountant's certificate dated ___________ |
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b. |
Disclosure of financial and/or operational problems since the last certified audit which required reporting pursuant to SEC Rule 17a-11. ( If no such reporting was required, state "none") _______________________ |
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c. |
Balance sheet and statement of ownership equity dated _____________ |
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d. |
Most recent computation of net capital and aggregate indebtedness or aggregate debit items dated ______________ reflecting a net capital of $___________ and a ratio of ___________. |
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e. |
Debt/equity ratio as of _____________ of ____________. |
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f. |
Other disclosures:
______________________
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-4-
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Dated: September 22, 2000 |
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SUNAMERICA INC. (Lender) |
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By: /s/ James R. Belardi |
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Name: James R. Belardi |
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Title: Executive Vice President |
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OFFICER'S CERTIFICATE I, James R. Belardi, Executive Vice President of SunAmerica Inc., a Delaware corporation (this "Corporation"), do hereby certify that the $3,000,000 subordinated loan made by this Corporation to SunAmerica Capital Services, Inc., amended to mature on October 31, 2004, does not cause the aggregate principal amount of all outstanding loans made by this Corporation to its broker-dealer subsidiaries to exceed $75 million. Dated: September 22, 2000
By: /s/
James R. Belardi |
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SUNAMERICA INC. CERTIFICATE OF ASSISTANT SECRETARY I, the undersigned, the duly elected, qualified and acting Assistant Secretary of SunAmerica Inc., a Delaware corporation (the "Corporation", do hereby certify that the following resolutions were adopted by unanimous written consent by the Executive Committee of the Board of Directors of the Corporation on the 16th day of March 2000, and that said resolutions are in full force and effect as of the date hereof:
Blanket Authorization of Subordinated Loan Agreements for Equity Capital |
WHEREAS, this Corporation, from time to time, reviews the net capital infusion needs of its wholly-owned broker-dealer subsidiaries, registered with the Securities and Exchange Commission and members of the National Association of Securities Dealers, Inc., which include, but not limited to, SunAmerica Capital Services, Inc., Advantage Capital Corporation, SunAmerica Securities, Inc., Royal Alliance Associates, Inc., Sentra Securities Corporation, Spelmmn & Co., Inc. and FSC Securities Corporation, and in conjunction with such review intends to provide subordinated loans to such subsidiaries pursuant to Subordinated Loan Agreements for Equity Capital; WHEREAS, it is in the best interests of this Corporation to provide blanket authorization for such subordinated loan transactions, which authorization shall supercede any prior authorization; NOW, THEREFORE, BE IT RESOLVED that the Chairman, any Vice Chairman, any Executive Vice President, or the Treasurer (the "Designated Officers"), acting alone, be, and each hereby is authorized to effect subordinated loans to the wholly-owned broker-dealer subsidiaries of the Corporation, in an aggregate principal amount not to exceed Seventy-five Million Dollars ($75,000,000), and such authority shall supercede any prior authorization; and to make, execute and deliver such loan agreements and other documents evidencing such loans, including any Subordinated Loan Agreement for Equity Capital, as deemed necessity or appropriate; RESOLVED FURTHER that each of the Designated Officers are hereby authorized to make such changes in the terms and conditions of such Subordinated Loan Agreements as may be necessary to conform to the requirements of Title 17 CFR §240.lSc 3-id and the rules of the National Association of Securities Dealers; and |
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RESOLVED FURTHER that the Executive Committee hereby ratifies any and all action that may have been taken by the officers of this Corporation in connection with the foregoing resolutions and authorizes the officers of this Corporation to take any and all such further actions as may be deemed appropriate to reflect these resolutions and to carry out their tenor, effect and intent. IN WITNESS WHEREOF, the undersigned has executed this Certificate and affixed the seal of the Corporation this the 23rd day of May, 2000.
/s/ Lawrence M.
Goldman
[CORPORATE SEAL] |
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EXHIBIT 21
ANCHOR NATIONAL LIFE INSURANCE COMPANY AND CONSOLIDATED SUBSIDIARIES
LIST OF SUBSIDIARIES
List of subsidiaries and certain other affiliates with percentage of voting securities owned by Anchor National Life Insurance Company or Anchor National Life Insurance Company's subsidiary which is the immediate parent.
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PERCENTAGE OF VOTING |
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SECURITIES OWNED BY |
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COMPANY OR COMPANY'S |
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SUBSIDIARY WHICH IS |
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THE IMMEDIATE PARENT |
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NAME OF COMPANY |
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% |
CALIFORNIA CORPORATIONS: |
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Sam Holding Corporation |
100 |
Sun Royal Holdings Corporation |
100 |
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DELAWARE CORPORATIONS: |
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Saamsun Holdings Corp. |
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Royal Alliance Associated, Inc. |
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SunAmerica Asset Management Corp. |
100 |
SunAmerica Capital Services, Inc. |
100 |
SunAmerica Fund Services, Inc. |
100 |