SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20549


                                  FORM 10-Q

(Mark One)
/X/   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1998

                                     OR

/  /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period from                   to                  


                        Commission File No. 33-47472


                   ANCHOR NATIONAL LIFE INSURANCE COMPANY


              Incorporated in California               86-0198983       
                                                      IRS Employer 
                                                   Identification No.

1 SunAmerica Center, Los Angeles, California  90067-6022
Registrant's telephone number, including area code:     (310) 772-6000


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                    
                                               ---    ---
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANTS COMMON STOCK ON August 13,
1998 WAS AS FOLLOWS:

Common Stock (par value $1,000 per share)             3,511 shares outstanding






                   ANCHOR NATIONAL LIFE INSURANCE COMPANY

                                    INDEX



                                                                    Page
                                                                  Number(s)

Part I - Financial Information

      Item 1 - Financial Statements

        Consolidated Balance Sheet (Unaudited) -
        June 30, 1998 and September 30, 1997                        3 - 4


        Consolidated Income Statement (Unaudited) -
        Three Months and Nine Months Ended June 30, 1998 and 1997       5


        Consolidated Statement of Cash Flows (Unaudited) -
        Nine Months Ended June 30, 1998 and 1997                    6 - 7


        Notes to Consolidated Financial Statements (Unaudited)      8 - 9

      Item 2 - Management's Discussion and Analysis of Financial
        Condition and Results of Operations                        10 - 24

      Item 3 - Quantitative and Qualitative Disclosures About
        Market Risk                                                     25

Part II - Other Information                                             26 
<PAGE>
<TABLE>
                    ANCHOR NATIONAL LIFE INSURANCE COMPANY
                          CONSOLIDATED BALANCE SHEET
                          (In thousands - unaudited)
<CAPTION>
                                                     June 30,    September 30,
                                                         1998             1997
<S>                                           ---------------  ---------------
ASSETS                                        <C>              <C>  

Investments:
  Cash and short-term investments             $   186,129,000  $   113,580,000
  Bonds, notes and redeemable 
    preferred stocks available for sale,
    at fair value (amortized cost:
    June 1998, $2,111,864,000;
    September 1997, $1,942,485,000)             2,147,159,000    1,986,194,000
  Mortgage loans                                  376,974,000      339,530,000
  Common stocks available for sale, 
    at fair value (cost: June 1998, 
    $115,000; September 1997, $271,000)               251,000        1,275,000
  Real estate                                      24,000,000       24,000,000
  Other invested assets                            38,503,000      143,722,000
                                              ---------------  ---------------
  Total investments                             2,773,016,000    2,608,301,000

Variable annuity assets held in separate
  accounts                                     11,958,475,000    9,343,200,000
Accrued investment income                          27,249,000       21,759,000
Deferred acquisition costs                        639,078,000      536,155,000
Other assets                                       82,384,000       61,524,000
                                              ---------------  ---------------
TOTAL ASSETS                                  $15,480,202,000  $12,570,939,000
                                              ===============  ===============
















</TABLE>
                            See accompanying notes

                                       3

<TABLE>
                    ANCHOR NATIONAL LIFE INSURANCE COMPANY
                    CONSOLIDATED BALANCE SHEET (Continued)
                          (In thousands - unaudited)
<CAPTION>
                                                     June 30,    September 30,
                                                         1998             1997
                                              ---------------  ---------------
<S>                                           <C>              <C>
LIABILITIES AND SHAREHOLDER'S EQUITY

Reserves, payables and accrued liabilities:
  Reserves for fixed annuity contracts        $ 2,128,688,000  $ 2,098,803,000
  Reserves for guaranteed investment
    contracts                                     302,074,000      295,175,000
  Payable to brokers for purchases of 
    securities                                     14,190,000          263,000
  Income taxes currently payable                   62,270,000       32,265,000
  Other liabilities                                95,387,000      122,728,000
                                              ---------------  ---------------
  Total reserves, payables                                   
    and accrued liabilities                     2,602,609,000    2,549,234,000
                                              ---------------  ---------------
Variable annuity liabilities related to
  separate accounts                            11,958,475,000    9,343,200,000
                                              ---------------  ---------------
Subordinated notes payable to Parent               35,950,000       36,240,000
                                              ---------------  ---------------
Deferred income taxes                              62,249,000       67,047,000
                                              ---------------  ---------------
Shareholder's equity:
  Common Stock                                      3,511,000        3,511,000
  Additional paid-in capital                      509,083,000      308,674,000
  Retained earnings                               293,680,000      244,628,000
  Net unrealized gains on debt and
    equity securities available for sale           14,645,000       18,405,000
                                              ---------------  ---------------
  Total shareholder's equity                      820,919,000      575,218,000
                                              ---------------  ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY    $15,480,202,000  $12,570,939,000
                                              ===============  ===============









</TABLE>
                            See accompanying notes

                                       4
<TABLE>
                            ANCHOR NATIONAL LIFE INSURANCE COMPANY
                                 CONSOLIDATED INCOME STATEMENT
               FOR THE THREE MONTHS AND NINE MONTHS ENDED June 30, 1998 AND 1997
                                  (In thousands - unaudited)
<CAPTION>
                                            Three Months                Nine Months       
                                     -------------------------  --------------------------
                                        1998          1997          1998          1997    
                                     -----------   -----------  ------------  ------------
<S>                                  <C>           <C>          <C>           <C>
Investment income                    $47,869,000   $56,272,000  $162,226,000  $153,703,000
                                     -----------   -----------  ------------  ------------
Interest expense on:
  Fixed annuity contracts            (28,214,000)  (28,732,000)  (82,894,000)  (81,078,000)
  Guaranteed investment contracts     (4,544,000)   (6,196,000)  (13,586,000)  (18,182,000)
  Senior indebtedness                   (237,000)   (1,016,000)     (582,000)   (1,754,000)
  Subordinated notes payable                                  
    to Parent                           (752,000)     (809,000)   (2,325,000)   (2,333,000)
                                     -----------   -----------  ------------  ------------
Total interest expense               (33,747,000)  (36,753,000)  (99,387,000) (103,347,000)
                                     -----------   -----------  ------------  ------------
NET INVESTMENT INCOME                 14,122,000    19,519,000    62,839,000    50,356,000
                                     -----------   -----------  ------------  ------------
NET REALIZED INVESTMENT GAINS 
  (LOSSES)                             2,674,000    (2,400,000)   25,906,000   (22,690,000)
                                     -----------   -----------  ------------  ------------
Fee income:
  Variable annuity fees               53,850,000    35,229,000   145,512,000    98,168,000
  Net retained commissions            13,066,000    10,344,000    35,765,000    27,917,000
  Surrender charges                    2,150,000     1,339,000     5,305,000     3,794,000
  Asset management fees                7,707,000     6,202,000    21,753,000    18,925,000
  Other fees                           1,103,000       904,000     2,732,0000     2,649,000
                                     -----------   -----------  ------------  ------------
TOTAL FEE INCOME                      77,876,000    54,018,000   211,067,000   151,453,000
                                     -----------   -----------  ------------  ------------
GENERAL AND ADMINISTRATIVE 
  EXPENSES                           (24,103,000)  (24,483,000)  (71,573,000)  (71,679,000)
                                     -----------   -----------  ------------  ------------
AMORTIZATION OF DEFERRED 
  ACQUISITION COSTS                  (24,896,000)  (21,495,000)  (60,475,000)  (48,753,000)
                                     -----------   -----------  ------------  ------------
ANNUAL COMMISSIONS                    (5,027,000)   (2,508,000)  (12,701,000)   (5,942,000)
                                     -----------   -----------  ------------  ------------
PRETAX INCOME                         40,646,000    22,651,000   155,063,000    52,745,000
                                                
Income tax expense                   (15,053,000)   (7,531,000)  (54,811,000)  (18,034,000)
                                     -----------   -----------  ------------  ------------
NET INCOME                           $25,593,000   $15,120,000  $100,252,000  $ 34,711,000
                                     ===========   ===========  ============  ============
                                               
</TABLE>
                                    See accompanying notes
                                               5

<TABLE>
                    ANCHOR NATIONAL LIFE INSURANCE COMPANY
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                          (In thousands - unaudited)
<CAPTION>
                                                  Nine Months Ended June 30,
                                           ---------------------------------
                                                     1998               1997
                                           --------------     --------------
<S>                                        <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                               $  100,252,000     $   34,711,000
  Adjustments to reconcile net income to 
    cash provided by operating activities:
      Interest credited to: 
        Fixed annuity contracts                82,894,000         81,078,000
        Guaranteed investment contracts        13,586,000         18,182,000
      Net realized investment losses (gains)  (25,906,000)        22,690,000
      Amortization (accretion) of net 
        premiums/discounts on investments       1,136,000         (9,025,000)
      Amortization of goodwill                    907,000            876,000
      Provision for deferred income taxes      (2,775,000)       (20,960,000)
  Change in:
    Accrued investment income                  (5,490,000)        (4,068,000)
    Deferred acquisition costs                (99,423,000)       (82,110,000)
    Other assets                              (21,767,000)       (10,064,000)
    Income taxes currently payable             30,005,000          7,865,000
    Other liabilities                          (8,834,000)         9,403,000
  Other, net                                      110,000            273,000
                                           --------------     --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES      64,695,000         48,851,000
                                           --------------     --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of:
    Bonds, notes and redeemable preferred
      stocks                               (1,569,915,000)    (2,220,070,000)
    Mortgage loans                            (92,114,000)      (187,265,000)
    Other investments, excluding short-term
      investments                                     ---        (71,684,000)
  Sales of:
    Bonds, notes and redeemable preferred
      stocks                                1,016,824,000      1,960,229,000
    Other investments, excluding short-term
      investments                              42,141,000          1,233,000
  Redemptions and maturities of:
    Bonds, notes and redeemable preferred
      stocks                                  415,148,000        308,659,000
    Mortgage loans                             55,590,000         15,371,000
    Other investments, excluding short-term
      investments                              69,575,000         16,838,000
                                           --------------     --------------
NET CASH USED BY INVESTING ACTIVITIES         (62,751,000)      (176,689,000)
                                           --------------     --------------
</TABLE>
                            See accompanying notes
                                       6

<TABLE>
                    ANCHOR NATIONAL LIFE INSURANCE COMPANY
               CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
                          (In thousands - unaudited)
<CAPTION>
                                                  Nine Months Ended June 30,
                                                        ----------------------------------
                                                     1998               1997
                                           --------------       ------------
<S>                                        <C>                  <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Premium receipts on:  
    Fixed annuity contracts                $1,047,024,000       $877,884,000
    Guaranteed investment contracts             5,619,000         55,000,000 
  Net exchanges from the fixed 
    accounts of variable annuity contracts   (917,393,000)      (402,933,000)
  Withdrawal payments on:
    Fixed annuity contracts                  (152,058,000)      (188,979,000)
    Guaranteed investment contracts           (12,305,000)       (67,111,000)
  Claims and annuity payments on fixed
    annuity contracts                         (30,694,000)       (25,837,000)
  Net receipts from (repayments of)
    other short-term financings               (18,797,000)        24,970,000
  Capital contributions received              200,409,000         28,411,000
  Dividends paid                              (51,200,000)       (25,500,000)
                                             ------------       ------------

NET CASH PROVIDED BY FINANCING 
  ACTIVITIES                                   70,605,000        275,905,000
                                             ------------       ------------
NET INCREASE IN CASH AND SHORT-TERM
  INVESTMENTS                                  72,549,000        148,067,000

CASH AND SHORT-TERM INVESTMENTS AT 
  BEGINNING OF PERIOD                         113,580,000        122,058,000
                                             ------------       ------------
CASH AND SHORT-TERM INVESTMENTS AT 
  END OF PERIOD                            $  186,129,000       $270,125,000
                                           ==============       ============

SUPPLEMENTAL CASH FLOW INFORMATION:

  Interest paid on indebtedness            $    1,921,000       $  3,454,000
                                           ==============       ============
  Net income taxes paid                    $   27,586,000       $ 31,133,000
                                           ==============       ============









</TABLE>
                            See accompanying notes

                                       7

                   ANCHOR NATIONAL LIFE INSURANCE COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (In thousands - unaudited)

1.    Basis of Presentation
      ---------------------

      Anchor National Life Insurance Company (the "Company") is an indirect
      wholly owned subsidiary of SunAmerica Inc. (the "Parent").  In the
      opinion of the Company, the accompanying unaudited consolidated financial
      statements contain all adjustments (consisting of only normal recurring
      accruals) necessary to present fairly the Company's consolidated
      financial position as of June 30, 1998 and September 30, 1997, the
      results of its consolidated operations for the three months and nine
      months ended June 30, 1998 and 1997 and its consolidated cash flows for
      the nine months ended June 30, 1998 and 1997.  The results of operations
      for the three months and nine months ended June 30, 1998 are not
      necessarily indicative of the results to be expected for the full year. 
      The accompanying unaudited consolidated financial statements should be
      read in conjunction with the audited consolidated financial statements
      for the fiscal year ended September 30, 1997, contained in the Company's
      Annual Report on Form 10-K.  

2.    Surplus Note
      ------------

      On May 27, 1998, SunAmerica agreed to contribute $200,000,000 of capital
      to the Company's parent, which in turn agreed to contribute such amount
      to the Company.  Each contribution is subject to the provisions of a
      surplus note in favor of the contributing company.  A significant
      provision of each surplus note is that each contributing company may
      withdraw its respective surplus contribution (up to an amount equal to
      the economic effect of the coinsurance transaction described in Note 3
      below), upon closure of that coinsurance transaction.  Such capital is
      expected to be withdrawn in August 1998. 

3.    Subsequent Events
      -----------------

      On August 11, 1998, the Company entered into a modified coinsurance
      transaction, approved by the Arizona Department of Insurance, which
      involves the ceding of approximately $5,000,000,000 of variable annuities
      to ANLIC Insurance Company (Cayman), a Cayman Islands stock life
      insurance company. As a part of this transaction, the Company received
      cash amounting to approximately $188,700,000, and recorded a
      corresponding reduction of deferred acquisition costs related to the
      coinsured annuities.  

      On July 15, 1998, the Company entered into a definitive agreement to
      acquire the individual life business and the individual and group annuity
      business of MBL Life Assurance Corporation ("MBL Life") via a 100%
      coinsurance transaction for approximately $130,000,000 in cash.  The
      transaction will include approximately $2,000,000,000 of universal life
      reserves and $3,000,000,000 of fixed annuity reserves.  The Company plans
      to reinsure a large portion of the mortality risk associated with the
      acquired  block  of  universal  life  business.   Completion of this
      acquisition  is  expected by the end of calendar year 1998 and is subject

                                      8
                   ANCHOR NATIONAL LIFE INSURANCE COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (In thousands - unaudited)

3.    Subsequent Events (Continued)
      ----------------------------

      to customary conditions and required approvals.  Included in this block
      of business is approximately $250,000,000 of individual life business and
      $500,000,000 of group annuity business whose contractowners are residents
      of New York State ("the New York Business").  Approximately six months
      subsequent to completion of the transaction, the New York Business will
      be acquired by the Company's New York affiliate, First SunAmerica Life
      Insurance Company, and the remainder of the business will be acquired by
      the Company via assumption reinsurance agreements between MBL Life and
      the respective companies, which will supersede the coinsurance agreement. 
      The $130,000,000 purchase price will be allocated between the Company and
      its affiliate based on their respective assumed reserves.  








































                                      9

                   ANCHOR NATIONAL LIFE INSURANCE COMPANY

                     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 months and nine months ended June 30, 1998 and June 30, 1997 follows. 
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 upon 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 associated 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

      NET INCOME totaled $25.6 million in the third quarter of 1998, compared
with $15.1 million in the third quarter of 1997.  For the nine months, net
income amounted to $100.3 million in 1998, compared with $34.7 million in 1997.

      PRETAX INCOME totaled $40.6 million in the third quarter of 1998 and
$22.7 million in the third quarter of 1997.  For the nine months, pretax income
totaled $155.1 million in 1998, compared with $52.7 million in 1997.  The
significant improvements in the current periods over the prior periods
primarily resulted from increased fee income and net realized investment gains.

      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, decreased to $14.1 million in the third quarter
of 1998 from $19.5 million in the third quarter of 1997.  These amounts equal
2.18%  of  average invested assets (computed on a daily basis) of $2.59 billion
in  the  third  quarter  of  1998 and 2.82% of average invested assets of $2.77

                                     10
billion in the third quarter of 1997.  For the nine months, net investment
income increased to $62.8 million in 1998 from $50.4 million in 1997, equalling
3.29% of average invested assets of $2.55 billion in 1998 and 2.52% of average
invested assets of $2.66 billion in 1997.  

      Net investment spreads include the effect of income earned on the excess
of average invested assets over average interest-bearing liabilities. This
excess amounted to $139.5 million in the third quarter of 1998, $95.8 million
in the third quarter of 1997, $109.1 million in the nine months of 1998 and
$131.2 million in the nine months of 1997.  The difference between the
Company's yield on average invested assets and the rate paid on average
interest-bearing liabilities (the "Spread Difference") was 1.88% in the third
quarter of 1998, 2.63% in the third quarter of 1997, 3.06% in the nine months
of 1998 and 2.25% in the nine months of 1997.

      Investment income (and the related yields on average invested assets)
totaled $47.9 million (7.38%) in the third quarter of 1998, $56.3 million
(8.12%) in the third quarter of 1997, $162.2 million (8.49%) in the nine months
of 1998, and $153.7 million (7.70%) in the nine months of 1997.  The declines
in investment income and the related yield in the third quarter of 1998 reflect
losses from the Company's investments in limited partnerships.  Investment
income and the related yield in the nine months of 1998 primarily reflect the
higher returns realized in the first quarter of 1998 on the Company's
investments in limited partnerships.

      Partnership losses totaled $0.7 million (a yield of -21.17% on related
average assets of $14.0 million) in the third quarter of 1998, compared with
partnership income of $2.8 million (a yield of 26.42% on related average assets
of $42.8 million) in the third quarter of 1997.  For the nine months,
partnership income amounted to $21.4 million (a yield of 197.19% on related
average assets of $14.5 million) in 1998, compared with $5.0 million (a yield
of 15.32% on related average assets of $43.4 million) in 1997.  Partnership
income is based primarily upon cash distributions received from limited
partnerships, the operations of which the Company does not influence. 
Consequently, such income is not predictable and there can be no assurance that
the Company will realize comparable levels of such income in the future.

      Total interest expense equalled $33.7 million in the third quarter of
1998 and $36.8 million in the third quarter of 1997.  For the nine months,
interest expense aggregated $99.4 million in 1998, compared with $103.3 million
in 1997.  The average rate paid on all interest-bearing liabilities was 5.50%
in the third quarter of 1998 and 5.49% in the third quarter of 1997.  For the
nine months, the average rate paid on all interest-bearing liabilities was
5.43% for 1998 and 5.45% for 1997.  Interest-bearing liabilities averaged $2.45
billion during the third quarter of 1998, $2.68 billion during the third
quarter of 1997, $2.44 billion during the nine months of 1998 and $2.53 billion
during the nine months of 1997.

      The modest decline in average invested assets in the 1998 periods, which
results from the net effect of increased sales of the Company's fixed rate
products and net exchanges from fixed accounts into the separate accounts of
variable annuity contracts, reflects a similar modest decline in average
interest-bearing liabilities.  Fixed annuity premiums (comprised primarily of
premiums for the fixed accounts of variable annuities) totaled $417.1 million
in  the  third  quarter  of  1998, $188.9 million in the third quarter of 1997,
$1.05 billion in the nine months of 1998 and $877.9 million in the nine months
of 1997.  On an annualized basis, these amounts represent 79%, 35%, 67% and 65%

                                     11
of fixed annuity reserves at the beginning of the respective periods. A
substantial proportion of the fixed premiums received on Polaris annuity
contracts were allocated to the one-year fixed fund under an option to dollar
cost average into the variable funds.  Accordingly, a large portion of these
premiums have transferred into the separate accounts, resulting in the modest
decline in average interest-bearing liabilities.
                                      
      There were no guaranteed investment contract ("GIC") premiums received
during the third quarters of 1998 and 1997.  For the nine months, GIC premiums
totaled $5.6 million in 1998 and $55.0 million in 1997.  On an annualized
basis, for the nine months of 1998 and 1997, these amounts represent 3% and 18%
of GIC reserves at the beginning of the respective periods.  The Company does
not actively market GICs; consequently, premiums may vary substantially from
period to period.  The GICs issued by the Company generally guarantee the
payment of principal and interest at fixed or variable rates for a term of
three to five years.  Contracts 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 GAINS totaled $2.7 million in the third quarter
of 1998, compared with net realized investment losses of $2.4 million in the
third quarter of 1997 and include impairment writedowns of $0.7 million and
$3.9 million, respectively.  Thus, net gains from sales and redemptions of
investments totaled $3.4 million in the third quarter of 1998 and $1.5 million
in the third quarter of 1997.  For the nine months, net realized investment
gains totaled $25.9 million in 1998, compared with $22.7 million of net losses
realized in 1997, and include impairment writedowns of $2.2 million and $20.0
million, respectively.  Thus, for the nine months, net gains from sales and
redemptions of investments totaled $28.1 million in 1998, compared with net
losses of $2.7 million in 1997.  

      The Company sold or redeemed invested assets, principally bonds and
notes, aggregating $498.4 million in the third quarter of 1998, $609.8 million
in the third quarter of 1997, $1.58 billion in the nine months of 1998 and
$2.19 billion in the nine months of 1997, respectively.  Sales of investments
result from the active management of the Company's investment portfolio. 
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 0.52%, 0.21%, 1.47% and 0.14% of average
invested assets on an annualized basis for the third quarter of 1998, the third
quarter of 1997, the nine months of 1998 and the nine months of 1997,
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 and interest-
rate risk.

      Impairment writedowns in the nine months of 1997 reflect $15.7 million
of  provisions  applied  to  non-income  producing  land  owned in Arizona. The

                                     12
statutory carrying value of this land had been guaranteed by the Company's
ultimate Parent, SunAmerica Inc. ("SunAmerica").  SunAmerica made a capital
contribution of $28.4 million on December 31, 1996 to the Company through the
Company's direct parent in exchange for the termination of its guaranty with
respect to this land.  Accordingly, the Company reduced the carrying value of
this land to estimated fair value to reflect the termination of the guaranty. 
Impairment writedowns,  on an annualized basis, represent 0.11%, 0.56%, 0.11%
and 1.00% of average invested assets for the third quarter of 1998, the third
quarter of 1997, the nine months of 1998 and the nine months of 1997,
respectively.  For the 19 fiscal quarters beginning October 1, 1993, impairment
writedowns as a percentage of average invested assets have ranged up to 3.64%
and have averaged 0.80%. 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 $53.9
million in the third quarter of 1998 and $35.2 million in the third quarter of
1997.  For the nine months, variable annuity fees totaled $145.5 million in
1998, compared with $98.2 million in 1997.  These increased fees reflect growth
in average variable annuity assets, due to increased market values, 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. On an annualized basis, variable annuity fees represent 2% of
average variable annuity assets for each of the third quarters of 1998 and 1997
and the nine months of 1998 and 1997.  Variable annuity assets averaged $11.51
billion during the third quarter of 1998 and $7.62 billion during the third
quarter of 1997. For the nine months, variable annuity assets averaged $10.38
billion in 1998, compared with $7.11 billion in 1997.  

      Variable annuity premiums, which exclude premiums allocated to the fixed
accounts of variable annuity products, have aggregated $1.76 billion since June
30, 1997.  Variable annuity premiums increased to $517.3 million in the third
quarter of 1998 from $328.6 million in the third quarter of 1997.  For the nine
months, variable annuity premiums increased to $1.35 billion in 1998, compared
with $859.6 million in 1997.  On an annualized basis, these amounts represent
19%, 19%, 19% and 18% of variable annuity reserves at the beginning of the
respective periods.  

      Sales of variable annuity products (which include premiums allocated to
the fixed accounts) ("Variable Annuity Product Sales") amounted to $934.3
million, $517.5 million, $2.40 billion and $1.74 billion in the third quarters
of 1998 and 1997 and the nine months of 1998 and 1997, respectively, and
primarily reflect sales of the Company's flagship variable annuity, Polaris. 
Polaris is a multi-manager variable annuity that offers investors a choice of
26 variable funds and 7 guaranteed fixed-rate funds.  Increases in Variable
Annuity Product Sales in the 1998 periods over those in the 1997 periods are
due, in part, to market share gains through 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.  

      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 which could affect the taxation of variable
annuities and annuities generally (See "Regulation").
                                     13
      NET RETAINED COMMISSIONS are primarily derived from commissions on the
sales of nonproprietary investment products by the Company's broker-dealer
subsidiary, after deducting the substantial portion of such commissions that
is  passed   on  to  registered  representatives.    Net  retained  commissions
totaled $13.1 million in the third quarter of 1998 and $10.3 million in the
third quarter of 1997.  For the nine months, net retained commissions totaled
$35.8 million in 1998 and $27.9 million in 1997.  Broker-dealer sales (mainly
sales of general securities, mutual funds and annuities) totaled $3.05 billion
in the third  quarter  of  1998 and $2.98 billion in the third quarter of 1997. 
For the nine months, such sales totaled $11.19 billion in 1998 and $7.69
billion in 1997.  The increases in sales and net retained commissions in the
1998 periods over those in the 1997 periods reflect a greater number of
registered representatives, higher average production per representative and
generally favorable market conditions.  Increases in net retained commissions
may not be proportionate to increases in sales primarily due to differences in
sales mix.  

      SURRENDER CHARGES on fixed and variable annuities totaled $2.2 million
in  the  third quarter of 1998 and $1.3 million in the third quarter of 1997. 
For the nine months, surrender charges on fixed and variable annuities totaled
$5.3 million in 1998, compared with $3.8 million in 1997.  Surrender charges
generally are assessed on annuity withdrawals at declining rates during the
first seven years of an annuity contract.  Withdrawal payments, which include
surrenders and lump-sum annuity benefits, totaled $309.4 million in the third
quarter of 1998, compared with $262.3 million in the third quarter of 1997. 
These payments, annualized, represent 9.2% and 10.9%, respectively, of average
fixed and variable annuity reserves.  For the nine months, withdrawal payments
totaled $878.4 million in 1998 and $778.2 million in 1997 and, annualized,
represent 9.5% and 11.5%, respectively, of average fixed and variable annuity
reserves.  Withdrawals include variable annuity withdrawals from the separate
accounts totaling $258.8 million (9.0% of average variable annuity reserves),
$197.9 million (10.4% of average variable annuity reserves), $726.4 million
(9.4% of average variable annuity reserves) and $589.3 million (11.1% of
average variable annuity reserves) in the third quarters of 1998 and 1997 and
the nine months of 1998 and 1997, respectively. Management anticipates that
withdrawal rates will remain relatively stable for the foreseeable future.

      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 Corp.  Such fees totaled $7.7 million on
average assets managed of $3.01 billion in the third quarter of 1998 and $6.2
million on average assets managed of $2.31 billion in the third quarter of
1997.  For the nine months, asset management fees totaled $21.8 million on
average assets managed of $2.83 billion in 1998, compared with $18.9 million
on average assets managed of $2.27 billion in 1997.  Asset management fees are
not proportionate to average assets managed, principally due to changes in
product mix.  Sales of mutual funds, excluding sales of money market accounts,
have aggregated $759.4 million since June 30, 1997.  Mutual fund sales totaled
$241.5 million in the third quarter of 1998, up 111% from $114.4 million in the
third quarter of 1997. For the nine months, such sales totaled $601.3 million
in 1998, more than double the $296.7 million in 1997.  The significant
increases in sales during the 1998 periods principally resulted from the sales
of the Company's "Style Select Series" product, and the introduction in June
1998 of the "Dogs" of Wall Street fund and the Style Select Focus Fund.  The
"Style  Select  Series"  is a group  of mutual funds which are each managed by
three industry recognized fund managers.  The "Dogs" of Wall Street fund
contains  30  large  capitalization  value  stocks which are selected by strict

                                     14
criteria.  The Style Select Focus Fund also limits itself to 30 large
capitalization stocks primarily but holds only growth stocks.  Sales of these
products totaled $181.1 million, $76.1 million, $425.8 million and $161.1
million for the third quarters of 1998 and 1997 and the nine months of 1998 and
1997, respectively, reflecting the addition of five new Style Select funds,
which more than doubled the number of Style Select funds to nine, and generally
favorable market conditions.  Redemptions of mutual funds, excluding
redemptions of money market accounts, amounted to $112.5 million in the third
quarter of 1998 and $102.1 million in the third quarter of 1997.  For the nine
months, such redemptions amounted to $313.3 million in 1998 and $316.3 million
in 1997.  

      GENERAL AND ADMINISTRATIVE EXPENSES totaled $24.1 million in the third
quarter of 1998 and $24.5 million in the third quarter of 1997.  For the nine
months, general and administrative expenses totaled $71.6 million in 1998 and
$71.7 million in 1997.  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 $24.9 million in the
third quarter of 1998, compared with $21.5 million in the third quarter of
1997.  For the nine months, such amortization totaled $60.5 million in 1998,
compared with $48.8 million in 1997.  The increase in amortization was
primarily due to additional fixed and variable annuity and mutual fund sales
and the subsequent amortization of related deferred commissions and other
direct selling costs.
                                      
      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 $5.0
million in the third quarter of 1998, $2.5 million in the third quarter of 
1997, $12.7 million in the nine months of 1998 and $5.9 million in the nine
months of 1997.  The increase in annual commissions reflects increased sales
of annuities that offer this commission option.  The Company estimates that
approximately 50% 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.

      INCOME TAX EXPENSE totaled $15.1 million in the third quarter of 1998,
compared with $7.5 million in the third quarter of 1997, and $54.8 million in
the nine months of 1998, compared with $18.0 million in the nine months of
1997, representing effective tax rates of 37%, 33%, 35% and 34%, respectively.


FINANCIAL CONDITION AND LIQUIDITY

      SHAREHOLDER'S EQUITY increased 42.7% to $820.9 million at June 30, 1998
from $575.2 million at September 30, 1997, primarily due to the $200.4 million
capital contribution received by the Company in June 1998 and the $100.3
million of net income recorded in the six months of 1998, partially offset by
the $51.2 million dividend paid in June 1998. It is anticipated that a
substantial portion of the $200.4 million capital contribution will be
withdrawn during the fourth quarter of fiscal year 1998.

      INVESTED ASSETS at June 30, 1998 totaled $2.77 billion, compared with
$2.61  billion at September 30, 1997.  The Company manages most of its invested
                                     15
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.  

      THE BOND PORTFOLIO, which constitutes 77% of the Company's total
investment portfolio (at amortized cost), had an aggregate fair value that
exceeded its amortized cost by $35.3 million at June 30, 1998, compared with
an excess of $43.7 million at September 30, 1997.  The net unrealized gains on
the Bond Portfolio since September 30, 1997 principally reflect the lower
prevailing interest rates at June 30, 1998 and the corresponding effect on the
fair value of the Bond Portfolio.  

      At June 30, 1998, the Bond Portfolio (at amortized cost, excluding $6.1
million of redeemable preferred stocks) included $2.01 billion of bonds rated
by Standard & Poor's Corporation ("S&P"), Moody's Investors Service
("Moody's"), Duff & Phelps Credit Rating Co. ("DCR"), Fitch Investors Service,
L.P. ("Fitch")  or the National Association of Insurance Commissioners ("NAIC")
and $100.1 million of bonds rated by the Company pursuant to statutory ratings
guidelines established by the NAIC.  At June 30, 1998, approximately
$1.90 billion of the Bond Portfolio was investment grade, including $792.1
million of U.S. government/agency securities and mortgage-backed securities
("MBSs").

      At June 30, 1998, the Bond Portfolio included $202.0 million (at
amortized cost with a fair value of $202.0 million) of bonds that were not
investment grade. Based on their June 30, 1998 amortized cost, these non-
investment-grade bonds accounted for 1.3% of the Company's total assets and
7.4% 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 June 30, 1998. 

      The table on the following page summarizes the Company's rated bonds by
rating classification as of June 30, 1998 (dollars in thousands):














                                     16

<TABLE>
                                          RATED BONDS BY RATING CLASSIFICATION
                                                 (dollars in thousands)
<CAPTION>
                                                   Issues not rated by S&P/Moody's/
         Issues Rated by S&P/Moody's/DCR/Fitch          DCR/Fitch, by NAIC Category                               Total 
----------------------------------------------  ----------------------------------- -----------------------------------
 S&P/(Moody's)/                      Estimated      NAIC                  Estimated             Percent of    Estimated
  [DCR]/{Fitch}         Amortized         fair  category    Amortized          fair   Amortized   invested         fair
   category (1)              cost        value        (2)        cost         value        cost   assets(3)       value
---------------       -----------  -----------  --------  -----------  ------------ -----------  ---------  ----------- 
<S>                   <C>          <C>          <C>       <C>          <C>          <C>          <C>        <C>         
AAA+ to A-
  (Aaa to A3)
  [AAA to A-]
  {AAA to A-}         $ 1,102,727  $ 1,120,327       1    $   196,687  $   205,329  $ 1,299,414     47.47%  $ 1,325,656
BBB+ to BBB-
  (Baal to Baa3)
  [BBB+ to BBB-]
  {BBB+ to BBB-}          460,073      466,960       2        144,245      146,271      604,318     22.07       613,231
BB+ to BB-
  (Ba1 to Ba3)
  [BB+ to BB-] 
  {BB+ to BB-}             46,189       44,859       3          8,189        8,640       54,378      1.99        53,499
B+ to B-
  (B1 to B3)
  [B+ to B-]
  {B+ to B-}              119,987      120,062       4         25,531       26,260      145,518      5.32       146,322
CCC+ to C
  (Caa to C)
  [CCC]
  {CCC+ to C-}                510          502       5          1,500        1,551        2,010      0.07         2,053
C1 to D
  [DD]
  {D}                         ---          ---       6            101          101          101      0.00           101
                      -----------  -----------            -----------  -----------  -----------             -----------
TOTAL RATED ISSUES    $ 1,729,486  $ 1,752,710            $   376,253  $   388,152  $ 2,105,739             $ 2,140,862
                      ===========  ===========            ===========  ===========  ===========             ===========

Footnotes appear on the following page.
</TABLE>





                                                           17

      Footnotes to the table of rated bonds by rating classification
      --------------------------------------------------------------

(1)   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.  DCR rates
      debt securities in rating categories ranging from AAA (the highest) to
      DD (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.  Issues are categorized based on
      the highest of the S&P, Moody's, DCR or Fitch ratings if rated by
      multiple agencies.

(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/DCR/Fitch rating groups listed above, with categories 1 and
      2 considered investment grade.  The NAIC categories include $100.1
      million (at amortized cost) of assets that were rated by the Company
      pursuant to applicable NAIC rating guidelines.  

(3)   At amortized cost.





























                                     18

      Senior secured loans ("Secured Loans") are included in the Bond Portfolio
and their amortized cost aggregated $178.3 million at June 30, 1998.  Secured
Loans are senior to subordinated debt and equity, and are secured by assets of
the issuer.  At June 30, 1998, Secured Loans consisted of $83.7 million of
publicly traded securities and $94.6 million of privately traded securities. 
These Secured Loans are composed of loans to 63 borrowers spanning 20
industries, with 36% of these assets (at amortized cost) concentrated in
financial institutions.  No other industry concentration constituted more than
10% 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, DCR, Fitch, the NAIC or by
the Company, pursuant to comparable statutory ratings guidelines established
by the NAIC.

      MORTGAGE LOANS aggregated $377.0 million at June 30, 1998 and consisted
of 134 commercial first mortgage loans with an average loan balance of
approximately $2.8 million, collateralized by properties located in 28 states. 
Approximately 20% of this portfolio was office, 19% was multifamily
residential, 15% was hotel, 13% was manufactured housing, 10% was industrial
and 23% was other types.  At June 30, 1998, approximately 17% and 16% 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 June 30, 1998, there were three mortgage
loans with outstanding balances of $10 million or more, which loans
collectively aggregated approximately 11% of this portfolio.  At June 30, 1998,
approximately 28% of the mortgage loan portfolio consisted of loans with
balloon payments due before July 1, 2001.  During the third quarters and nine
months of 1998 and 1997, 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 June 30, 1998, approximately 11% 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 its emphasis on multifamily loans 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.

      OTHER INVESTED ASSETS aggregated $38.5 million at June 30, 1998,
including $12.3 million of investments in limited partnerships and an aggregate
of  $26.2  million  of  miscellaneous  investments,   including  policy  loans,
                                     19
residuals and leveraged leases.  The Company's limited partnership interests,
accounted for by using the cost method of accounting, are invested primarily
in a combination of debt and equity securities.

      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, 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 77% of
the Company's fixed annuity and GIC reserves had surrender penalties or other
restrictions at June 30, 1998.

      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 and are
accounted for by using the cost method.  At June 30, 1998, these assets had an
aggregate fair value of $2.66 billion with a duration of 3.9.  The Company's
fixed-rate liabilities include fixed annuities, subordinated notes and GICs. 
At June 30,1998, these liabilities had an aggregate fair value (determined by
discounting future contractual cash flows by related market rates of interest)
of $2.41 billion with a duration of 1.1.  The Company's potential exposure due
to a 10% increase in prevailing interest rates from their June 30, 1998 levels
is a loss of $41.8 million in fair value of its fixed-rate assets that is not
offset by a decrease in the fair value of its fixed-rate liabilities.  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.

      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 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.
                                     20

      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 June 30, 1998, the Company had one outstanding Swap Agreement
with a notional principal amount of $21.5 million.  This agreement matures in
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 prepayments 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.   

      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, news 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

                                     21
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 $2.4 million at June 30, 1998
(at amortized cost, with a fair value of $2.4 million), including $1.5 million
of bonds and notes and $0.9 million of mortgage loans.  At June 30, 1998,
defaulted investments constituted 0.1% of total invested assets.  At
September 30, 1997, defaulted investments totaled $1.4 million, including $0.5
million of bonds and notes and $0.9 million of mortgage loans, and constituted
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 June 30, 1998, approximately $1.67 billion of the Company's Bond
Portfolio had an aggregate unrealized gain of $44.6 million, while
approximately $446.0 million of the Bond Portfolio had an aggregate unrealized
loss of $9.3 million.  In addition, the Company's investment portfolio
currently provides approximately $24.1 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.

      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.

      The Company relies significantly on computer systems and applications in
its daily operations.  Many of these systems and applications are not presently
                                     22
year 2000 compliant.  The Company's business, financial condition and results
of operations could be materially and adversely affected by the failure of the
Company's systems and applications (and those operated by third parties
interfacing with the Company's systems and applications) to properly operate
or manage dates beyond the year 1999. The Company has a coordinated plan to
repair  or  replace these noncompliant systems and to obtain similar assurances
from third parties interfacing with the Company's systems and applications. In
Fiscal year 1997, the Company recorded a $6.2 million provision for estimated
programming costs to make necessary repairs of certain specific noncompliant
systems.  Management also expects to make expenditures totaling $5.0 million
to replace certain other specific noncompliant systems, which expenditures will
be capitalized as software costs and amortized over future periods.  Both
phases of the project are currently proceeding in accordance with the plan and
management expects them to be substantially completed by the end of 1998. 
Testing of both the repaired and replacement systems will be conducted during
calendar 1999.


REGULATION

      The Company is subject to regulation and supervision by the insurance
regulatory agencies of the states in which it is authorized to transact
business.  State insurance laws establish supervisory agencies with broad
administrative and supervisory powers.  Principal among these powers are
granting and revoking licenses to transact business, regulating marketing and
other trade practices, operating guaranty associations, licensing agents,
approving policy forms, regulating certain premium rates, regulating insurance
holding company systems, establishing reserve and valuation requirements,
prescribing the form and content of required financial statements and reports,
performing financial, market conduct and other examinations, determining the
reasonableness and adequacy of statutory capital and surplus, defining
acceptable accounting principles, regulating the type, valuation and amount of
investments permitted, and limiting the amount of dividends that can be paid
and the size of transactions that can be consummated without first obtaining
regulatory approval.

      During the last decade, the insurance regulatory framework has been
placed under increased scrutiny by various states, the federal government and
the National Association of Insurance Commissioners ("NAIC").  Various states
have considered or enacted legislation that changes, and in many cases 
increases,  the  states' authority to regulate insurance companies. 
Legislation has been introduced from time to time in Congress that could result
in the federal government assuming some role in the regulation of insurance
companies or allowing combinations between insurance companies, banks and other
entities.  In recent years, the NAIC has developed several model laws and
regulations designed to reduce the risk of insurance company insolvencies and
market conduct violations.  These initiatives include investment reserve
requirements, risk-based capital ("RBC") standards, codification of insurance
accounting principles, new investment standards and restrictions on an
insurance company's ability to pay dividends to its stockholders.  The NAIC is
also currently developing model laws or regulations relating to product design,
product reserving standards and illustrations of annuity products.   Current
proposals are still being debated and the Company is monitoring developments
in this area and the effects any changes would have on the Company.

      The RBC standards consist of formulas which establish capital
requirements  relating  to insurance, business, assets and interest rate risks,

                                     23
and which help to identify companies which are under-capitalized and require
specific regulatory actions in the event an insurer's RBC falls below specified
levels.  The Company has more than enough statutory capital to meet the NAIC's
RBC requirements as of the most recent calendar year-end.  Arizona, the
Company's domicile state, has adopted these RBC standards, and the Company is
in compliance with such laws.  Further, for statutory reporting purposes, the
annuity reserves of the Company are calculated in accordance with statutory
requirements and are adequate under current cash-flow testing models.

      SunAmerica Asset Management Corp., a subsidiary of the Company, is
registered  with the SEC as an investment adviser under the Investment Advisers
Act of 1940.  The mutual funds that it markets are subject to regulation under
the Investment Company Act of 1940.  SunAmerica Asset Management Corp. and the
mutual funds are 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 subsidiary, Royal Alliance Associates, Inc., 
is subject to regulation and supervision by the states in which it transacts
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 the
subsidiary's business and accounts at any time.

      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 such proposals have a small likelihood of
being enacted, because they would discourage retirement savings and there is
strong public and industry opposition to them.






















                                     24

                   ANCHOR NATIONAL LIFE INSURANCE COMPANY
                                      
                  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 Discussion
and Analysis of Financial Condition and Results of Operations on pages 20 and
21 herein.

















































                                     25

                   ANCHOR NATIONAL LIFE INSURANCE COMPANY

                              OTHER INFORMATION


Item 1.  Legal Proceedings
         -----------------
  Not applicable.

Item 2.  Changes in Securities
         ---------------------
  Not applicable.

Item 3.  Defaults Upon Senior Securities
         -------------------------------
  Not applicable.

Item 4.  Submissions of Matters to a Vote of Security Holders
         ----------------------------------------------------
  Not applicable.

Item 5.  Other Information
         -----------------
  Not applicable.

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

EXHIBITS

Exhibit                                                                   
 No.        Description
-------     -----------
10(a)       Subordinated Loan Agreement for Equity Capital, dated as of April
            29, 1998, between the Company's subsidiary, SunAmerica Capital
            Services, Inc. ("SACS"), and SunAmerica Inc. ("SAI"), defining
            SAI's rights with respect to the 8.5% notes due June 27, 2001.

10(b)       Subordinated Loan Agreement for Equity Capital, dated as of June
            3, 1998, between the Company's subsidiary, SACS, and SAI defining
            SAI's rights with respect to the 8.5% notes due July 30, 2001.

27          Financial Data Schedule



REPORTS ON FORM 8-K

No current report on Form 8-K was filed during the three months ended June 30,
1998.  However, on July 15, 1998, the Company filed a current report on Form
8-K concerning its proposed acquisition of MBL Life Assurance Corporation. 








                                     26
                                 SIGNATURES


      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:


                   ANCHOR NATIONAL LIFE INSURANCE COMPANY
                   --------------------------------------


Signature                  Title                          Date
---------                  -----                          ----

/s/   SCOTT L. ROBINSON    Senior Vice President and      August 13, 1998
------------------------    Director (Principal Financial ---------------
      Scott L. Robinson     Officer)
                            

/s/   N. SCOTT GILLIS      Senior Vice President and      August 13, 1998
------------------------    Controller (Principal         ---------------
      N. Scott Gillis       Accounting Officer)
                            
                                    
































                                     27
                   ANCHOR NATIONAL LIFE INSURANCE COMPANY

                           LIST OF EXHIBITS FILED



Exhibit
  No.       Description
-------     -----------

10(a)       Subordinated Loan Agreement for Equity Capital, dated as of April
            29, 1998, between the Company's subsidiary, SunAmerica Capital
            Services, Inc. ("SACS"), and SunAmerica Inc. ("SAI"), defining
            SAI's rights with respect to the 8.5% notes due June 27, 2001.

10(b)       Subordinated Loan Agreement for Equity Capital, dated as of June
            3, 1998, between the Company's subsidiary, SACS, and SAI defining
            SAI's rights with respect to the 8.5% notes due July 30, 2001.

27          Financial Data Schedule






































                                     28