<PAGE>   1
 
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                       ----------------------------------
 
                                   FORM 10-K
   FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
(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 September 30, 1997
 
                                       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 Number 1-4618
 
                                SUNAMERICA INC.
 
<TABLE>
<S>                                           <C>
           INCORPORATED IN MARYLAND                             86-0176061
                                                              (IRS EMPLOYER
                                                           IDENTIFICATION NO.)
</TABLE>
 
            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:
 
<TABLE>
<CAPTION>
                                                                    NAME OF EACH EXCHANGE
                        TITLE OF EACH CLASS                          ON WHICH REGISTERED
-------------------------------------------------------------------------------------------
<S>                                                                <C>
Common Stock (par value $1.00 per share)                           New York Stock Exchange
                                                                   Pacific Stock Exchange
$3.10 Depositary Shares representing Series E
  Mandatory Conversion Premium Dividend Preferred Stock            New York Stock Exchange
8 1/2% Premium Equity Redemption Cumulative
  Security Units                                                   New York Stock Exchange
</TABLE>
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE
 
     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No  ___
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  Yes  X   No  ___
 
     The aggregate market value of voting stock held by non-affiliates of the
Company on November 30, 1997 was $7,188,895,000.
 
     The number of shares outstanding of each of the registrant's classes of
common stock on November 30, 1997 was as follows:
 
Common Stock (par value $1.00 per share)          178,727,821 shares
Nontransferable Class B Stock
  (par value $1.00 per share)                      16,272,702 shares
 
                      DOCUMENTS INCORPORATED BY REFERENCE
       NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
                          (INCORPORATED INTO PART III)
 
================================================================================
<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL DESCRIPTION
 
     SunAmerica Inc. (the "Company") is incorporated in Maryland and maintains
its principal executive offices at 1 SunAmerica Center, Los Angeles, California
90067-6022, telephone (310) 772-6000. As used herein, the "Company" or
"SunAmerica" refers to SunAmerica Inc. and, unless the context requires
otherwise, its subsidiaries. The Company employs approximately 2,000 people.
 
     SunAmerica is a financial services company specializing in retirement
savings and investment products and services. Together, the SunAmerica life
insurance companies rank among the largest U.S. issuers of tax-deferred fixed
and variable annuities and guaranteed investment contracts ("GICs").
Complementing these annuity and GIC operations are the Company's asset
management operations; its four broker-dealers, which provide a broad range of
financial planning and investment services through more than 9,000 independent
registered representatives nationwide; its trust company, which provides
administrative and custodial services to qualified retirement plans; and its
premium finance company, one of the nation's leaders in its field. At September
30, 1997, the Company held $51.98 billion of assets, consisting of $35.64
billion of assets on its balance sheet; $2.59 billion of assets managed in
mutual funds; and $13.75 billion of assets under custody in retirement trust
accounts.
 
     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 will
grow from 46 million to 60 million during the 1990s, making this age group the
fastest-growing segment of the U.S. population. Between 1986 and 1996, annual
industry premiums from fixed and variable annuities and fund deposits increased
from $82 billion to $179 billion. During the same period, annual industry sales
of mutual funds, excluding money market accounts, rose from $216 billion to $685
billion.
 
     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.
 
     The Company's four wholly-owned broker-dealers comprise the largest network
of independent registered representatives in the nation and the fourth-largest
securities sales force, based on industry data. Its wholly owned broker-dealers
accounted for approximately one-third of the Company's total annuity sales in
fiscal 1997. 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, certain trusts and direct plan sponsors and through
intermediaries, such as managers or consultants servicing these groups.
 
     The Company has made significant investments in technology over the past
several years in order to lower operating costs and enhance its marketing
efforts. Its use of optical disk imaging and artificial intelligence has
substantially eliminated 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 is also implementing
technology to interface with its wholly owned broker-dealers, which will enable
the Company to more effectively market its products and help the affiliated
financial professionals to better serve their clients.
 
                                        1
<PAGE>   3
 
     In recent years, the Company has enhanced its marketing efforts and
expanded its offerings of fee-based products and services such as variable
annuities, mutual funds, trust services and premium financing through both
internal growth and acquisition, resulting in significantly increased fee
income. Fee income has also expanded through the receipt of broker-dealer net
retained commissions, resulting primarily from the expansion of the Company's
wholly owned broker-dealer network, through both acquisitions and internal
recruiting, and 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.
 
     For the year ended September 30, 1997, the Company's net investment income
(including net realized investment losses) and fee income by primary product
line or service are as follows:
 
                         NET INVESTMENT AND FEE INCOME
 
<TABLE>
<CAPTION>
                                        Amount         Percent        Primary product or service
                                    --------------     -------     ---------------------------------
                                    (In thousands)
<S>                                 <C>                <C>         <C>
Net investment income (including
  net realized investment
  losses).........................     $650,174           67.2%    Fixed-rate products
                                       --------          -----
Fee income:
  Variable annuity fees...........      141,204           14.6     Variable annuities
  Net retained commissions........       64,911            6.7     Broker-dealer sales
  Surrender charges...............       35,241            3.6     Fixed- and variable-rate products
  Asset management fees...........       25,764            2.7     Mutual funds
  Loan servicing fees.............       24,264            2.5     Premium finance
  Trust fees......................       17,912            1.8     Self-directed retirement accounts
  Other fees......................        8,407            0.9
                                       --------          -----
  Total fee income................      317,703           32.8
                                       --------          -----
          Total...................     $967,877          100.0%
                                       ========          =====
</TABLE>
 
     For financial information on the Company's business segments, see Part
IV -- "Notes to Consolidated Financial Statements -- Note 13 -- Business
Segments."
 
ACQUISITIONS
 
     Acquisitions have been significant to the Company's growth strategy. In
October 1997, subsequent to the Company's fiscal year-end, the Company acquired
Financial Service Corporation, the parent company of FSC Securities Corporation,
a national securities broker-dealer, licensing approximately 1,500
representatives at the date of acquisition. In March 1997, the Company acquired
the annuity operations of John Alden Financial Corporation (including John Alden
Life Insurance Company of New York ("JANY")) for approximately $238.3 million in
cash. Assets acquired totaled $5.06 billion and annuity reserves assumed totaled
$5.16 billion at the date of acquisition. On October 31, 1997, JANY was merged
with and into First SunAmerica Life Insurance Company ("First SunAmerica"). In
January 1997, the Company acquired The Financial Group, Inc., the parent company
of Keogler Morgan & Company, an independent broker-dealer, and Keogler
Investment Advisory Services, Inc., a fee-based registered investment advisor.
At the date of acquisition, Keogler Morgan & Company had approximately 400
representatives.
 
     In April 1996, the Company assumed a block of annuity contracts aggregating
$958.7 million and acquired related assets aggregating $918.2 million at the
date of acquisition from The Central National Life Insurance Company of Omaha, a
subsidiary of Beneficial Corp. In February 1996, the Company acquired Ford Life
Insurance Company ("Ford Life") from a subsidiary of Ford Motor Company ("Ford")
for $172.5 million in cash. At the date of acquisition, Ford Life had assets of
$3.15 billion and reserves for fixed annuity contracts of $3.05 billion. Ford
Life was merged with and
 
                                        2
<PAGE>   4
 
into SunAmerica Life Insurance Company in December 1996. In January 1996, the
Company acquired Advantage Capital Corporation ("Advantage Capital"), a
Houston-based broker-dealer with more than 1,000 affiliated independent
registered representatives at the date of acquisition. In December 1995, the
Company acquired CalAmerica Life Insurance Company (formerly known as CalFarm
Life Insurance Company) ("CalAmerica"), from its parent, Zenith National
Insurance Corp. for $120 million in cash. At the date of acquisition, CalAmerica
had assets of $739.9 million and annuity reserves of $645.4 million.
 
     In November 1994, the Company acquired substantially all of the assets of
Imperial Premium Finance, Inc. ("Imperial"), the fourth largest insurance
premium finance company in the United States, based on premiums financed (see
"Premium Finance"). In October 1994, the Company's subsidiary, Resources Trust
Company ("Resources Trust"), acquired the account servicing rights to
approximately 44,500 individual retirement plan accounts ("IRAs"), representing
approximately $1.55 billion in plan assets at September 30, 1997, from New
England Securities Corporation, the broker-dealer subsidiary of New England Life
Insurance Company.
 
LIFE INSURANCE COMPANIES
 
     SunAmerica's five life insurance subsidiaries have combined assets of
$31.75 billion at September 30, 1997. Based on the latest available industry
data, the Company believes that its life insurance group ranks among the largest
issuers of fixed and variable annuities in the nation, as measured by 1996
annuity premiums and deposits, and among the top 2% of all U.S. life insurance
companies, as measured by 1996 total assets.
 
     The Company's flagship life insurance subsidiary is 107-year old SunAmerica
Life Insurance Company, acquired by the Company in 1971. Chartered in Arizona
and licensed in 48 states and the District of Columbia, it had $16.98 billion of
assets at September 30, 1997 and markets single- and flexible-premium fixed-rate
annuities and GICs. Anchor National Life Insurance Company ("Anchor"), founded
in 1965 and acquired by the Company in 1986, had $12.57 billion of assets at
September 30, 1997 and is chartered in Arizona and licensed in 49 states and the
District of Columbia. Anchor markets flexible-premium variable annuities and
GICs. CalAmerica, founded in 1951 and acquired by the Company in 1996, had
$884.5 million of assets at September 30, 1997 and is chartered in California
and licensed in 8 states. CalAmerica markets single- and flexible-premium
fixed-rate annuities. First SunAmerica, founded by the Company in 1978, had
$1.98 billion of assets (after giving effect to the merger with JANY) at
September 30, 1997 and is chartered and licensed in New York and also licensed
in New Mexico and Nebraska. First SunAmerica markets fixed-rate annuities and
flexible-premium variable annuities. SunAmerica National Life Insurance Company
("SunAmerica National"), formed by the Company in 1995 to market GICs, had
$295.6 million of assets at September 30, 1997 and is licensed in 31 states and
the District of Columbia. SunAmerica National is currently seeking authority to
transact life insurance business in an additional 18 states.
 
     SunAmerica Life Insurance Company and Anchor each have a "AA-" (Excellent)
claims-paying ability rating from Standard & Poor's Corporation ("S&P"), a "AA"
(Very High) rating from Duff & Phelps Credit Rating Co. ("DCR") an "A2" (Good)
rating from Moody's Investors Service ("Moody's") and an "A+" (Superior) rating
from industry analyst A.M. Best Company. CalAmerica has an "A" rating from A.M.
Best Company. First SunAmerica has an "A2" (Good) rating from Moody's and an
"A+" (Superior) rating from A.M. Best Company. SunAmerica National has a "AAA"
(Superior) rating, the highest rating issued by S&P.
 
     In addition to distributing its fixed and variable annuity products through
its four wholly owned broker-dealers, the Company distributes its products
through over 700 other independent broker-dealers, full-service securities firms
and financial institutions as well as through independent general insurance
agents. In total, more than 65,000 independent sales representatives nationally
are licensed to sell the Company's annuity products.
 
                                        3
<PAGE>   5
 
Fixed Annuities and GICs
 
     The Company offers single-premium and flexible-premium deferred annuities
that provide one-, three-, five-, seven-, or ten-year fixed interest rate
guarantees. Although the Company's contracts remain in force an average of seven
to ten years, a majority (approximately 81% at September 30, 1997) reprice
annually at discretionary rates determined by the Company. In repricing, the
Company takes into account yield characteristics of its investment portfolio,
annuity surrender assumptions and competitive industry pricing, among other
factors. Its fixed-rate annuity products offer many of the same features as
conventional certificates of deposit from financial institutions, giving
investors a choice of interest period and yield as well as additional advantages
particularly applicable to retirement planning, such as tax-deferred
accumulation and flexible payout options (including the option of payout over
the life of the annuitant). The average size of a new single-premium fixed
annuity contract sold by the Company in 1997 was approximately $34,000.
 
     The Company augments its retail annuity sales effort with the marketing of
institutional products. At September 30, 1997, the Company had $5.55 billion of
GIC obligations. At that date, approximately 67% of these obligations were
fixed-rate and approximately 33% were variable-rate obligations that reprice
periodically based upon certain defined indexes. Of the total GIC portfolio at
September 30, 1997, approximately 30% was sold to pension plans, 23% was sold to
banks and long-term portfolio asset management firms, 19% was sold to state and
local governmental entities, 16% was sold to short-term portfolio asset
management firms and 12% was sold to certain trusts. The average size of a new
GIC contract sold by the Company in 1997 was approximately $25.6 million.
 
     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 annuity 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-rate products incorporate surrender charges, two-tiered interest
rate structures or other restrictions in order to encourage persistency.
Approximately 87% of the Company's fixed annuity and GIC reserves had surrender
penalties or other restrictions at September 30, 1997.
 
Variable Annuities
 
     The variable annuity products of Anchor and First SunAmerica offer
investors a broad spectrum of fund alternatives, with a choice of investment
managers, as well as guaranteed fixed-rate account options. These companies earn
fee income through the sale, administration and management of the variable
account options of their variable annuity products. They also earn 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. At September 30, 1997, total variable
product reserves were $11.26 billion, of which $9.51 billion were in the
separate accounts. The Company's variable annuity products incorporate surrender
charges to encourage persistency. At September 30, 1997, 78% of the Company's
variable annuity reserves held in the separate account were subject to surrender
penalties. 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 1997 was approximately $45,500.
 
Investment Operations
 
     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
 
                                        4
<PAGE>   6
 
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. 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 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 September 30, 1997, these assets had an
aggregate fair value of $23.06 billion with a duration of 3.5. The Company's
fixed-rate liabilities include: fixed annuities; GICs; trust deposits; long-term
notes and debentures; and preferred securities of subsidiary grantor trusts. At
September 30, 1997, these liabilities had an aggregate fair value (determined by
discounting future contractual cash flows by related market rates of interest)
of $21.43 billion with a duration of 3.0. For the years ended September 30,
1997, 1996 and 1995, the Company's yields on average invested assets were 8.61%,
8.74% and 9.15%, respectively; its average rates paid on all interest-bearing
liabilities were 5.66%, 5.73%, and 5.90%, respectively; and it realized net
investment spreads of 3.26%, 3.43% and 3.69%, respectively, on average invested
assets. Net realized investment losses were 0.14%, 0.21% and 0.33% of average
invested assets in 1997, 1996 and 1995, respectively.
 
     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, the Company's need for liquidity and
other similar factors.
 
 The following table summarizes the Company's investment portfolio at September
                        30, 1997: SUMMARY OF INVESTMENTS
 
<TABLE>
<CAPTION>
                                                                                        Percent
                                                                        Amortized         of
                                                                           cost        portfolio
                                                                      --------------   ---------
                                                                      (In thousands)
<S>                                                                   <C>              <C>
Cash and short-term investments.....................................   $    993,349        4.2%
U.S. government securities..........................................      1,111,064        4.7
Mortgage-backed securities..........................................      6,208,610       25.9
Other bonds, notes and redeemable preferred stocks..................     10,805,163       45.1
Mortgage loans......................................................      3,139,309       13.1
Partnerships........................................................      1,286,793        5.4
Real estate.........................................................         81,569        0.3
Common stocks.......................................................         32,821        0.1
Other invested assets...............................................        286,962        1.2
                                                                        -----------      -----
Total investments...................................................   $ 23,945,640      100.0%
                                                                        ===========      =====
</TABLE>
 
                                        5
<PAGE>   7
 
     At September 30, 1997, the Bond Portfolio (at amortized cost, excluding
$136.4 million of redeemable preferred stocks) included $17.28 billion of bonds
rated by S&P, Moody's, DCR, Fitch Investors Service, L.P. ("Fitch") the National
Association of Insurance Commissioners ("NAIC") and $707.2 million of bonds
rated by the Company pursuant to statutory ratings guidelines established by the
NAIC. At September 30, 1997, approximately $16.10 billion of the Bond Portfolio
was investment grade, including $7.27 billion of U.S. government/agency
securities and mortgage-backed securities.
 
     At September 30, 1997, the Bond Portfolio included $1.89 billion, (at
amortized cost, with a fair value of $1.97 billion) of bonds that were not
investment grade. Based on their September 30, 1997 amortized cost, these
non-investment-grade bonds accounted for 5.3% of the Company's total assets and
7.9% of its invested assets. In addition to its direct investment in
non-investment-grade bonds, the Company has entered into total return bond swap
agreements with an aggregate notional principal amount of $439.1 million at
September 30, 1997.
 
     Senior secured loans ("Secured Loans") are included in the Bond Portfolio
and their amortized cost aggregated $2.46 billion at September 30, 1997. Secured
Loans are senior to subordinated debt and equity, and are secured by assets of
the issuer. At September 30, 1997, Secured Loans consisted of loans to 338
borrowers spanning 45 industries, with 21% of these assets (at amortized cost)
concentrated in financial institutions and 14% concentrated in utilities. No
other industry concentration constituted more than 5% of these assets.
 
     Mortgage loans aggregated $3.14 billion at September 30, 1997 and consisted
of 1,267 commercial first mortgage loans with an average loan balance of
approximately $2.5 million, collateralized by properties located in 45 states.
Approximately 29% of the portfolio was multifamily residential, 27% was retail,
15% was office, 9% was manufactured housing, 7% was industrial and 13% was other
types.
 
     Partnership investments totaled $1.29 billion at September 30, 1997,
constituting investments in approximately 550 separate partnerships with an
average size of approximately $2.3 million. This portfolio includes: (i) $664.6
million of partnerships managed by independent money managers that invest in a
broad selection of equity and fixed-income securities; (ii) $516.2 million of
partnerships that make tax-advantaged investments in affordable housing
properties; and (iii) $106.0 million of partnerships that invest in mortgage
loans and income-producing real estate.
 
     At September 30, 1997, the amortized cost (after impairment writedowns) of
all investments in default as to the payment of principal or interest totaled
$38.5 million (fair value $38.0 million), which constituted 0.2% 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."
 
MUTUAL FUNDS AND INVESTMENT SERVICES
 
     Through its registered investment advisor, SunAmerica Asset Management
Corp. ("SunAmerica Asset Management"), and its related distributor, 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. SunAmerica offer 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 $3.03 billion of assets at September 30, 1997, including mutual
fund assets, private accounts and certain of the Company's variable annuity
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 subsidiaries.
 
                                        6
<PAGE>   8
 
RETIREMENT TRUST SERVICES
 
     Through Resources Trust, acquired in January 1990, the Company earns fee
income by providing administrative and custodial services for approximately
210,000 self-directed retirement accounts. These self-directed retirement
accounts, including IRAs, Keoghs, 401(k) plans, and pension and profit sharing
plans, had combined account assets at September 30, 1997 of approximately $13.75
billion.
 
     Resources Trust also earns investment income on customer cash balances that
are interest-bearing and insured by the Federal Deposit Insurance Corporation.
Resources Trust's services are sold nationally through approximately 17,500
registered representatives affiliated with 1,000 broker-dealers, including the
Company's broker-dealer subsidiaries.
 
BROKER-DEALERS
 
     The Company owns four broker-dealers: Royal Alliance, acquired in January
1990; SunAmerica Securities, which commenced business in 1989; Advantage
Capital, acquired in 1996; and FSC Securities Corporation, acquired by the
Company in October 1997, subsequent to its fiscal year-end. As a result of the
Company's ongoing recruitment of independent registered representatives and the
acquisition of The Financial Group, Inc. and FSC Securities Corporation, the
Company has increased its network of representatives from approximately 6,600 at
September 30, 1996 to approximately 9,000 currently.
 
PREMIUM FINANCE
 
     Through its premium finance company, Imperial, the Company earns fee income
by servicing loans that Imperial has originated and sold. Imperial provides
short-term installment loans for borrowers to fund their property and casualty
insurance premiums. These loans are substantially secured by the unearned
premiums associated with the underlying insurance policies. Currently, Imperial
sells and services most of the short-term loans that it originates. Founded in
1972 and acquired in November 1994, Imperial owned or serviced approximately
86,000 loans with an average loan balance of approximately $6,600 at September
30, 1997.
 
     Imperial generally makes loans to borrowers through a network of
approximately 4,500 qualified independent property and casualty insurance agents
who arrange the loan or refer the client to Imperial.
 
REGULATION
 
     The Company's insurance subsidiaries are subject to regulation and
supervision by the insurance regulatory agencies of the states in which they are
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 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 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
 
                                        7
<PAGE>   9
 
combinations between insurance companies, banks and other entities. In recent
years, the NAIC has approved and recommended to the states for adoption and
implementation several regulatory initiatives designed to reduce the risk of
insurance company insolvencies and market conduct violations. These initiatives
include investment reserve requirements, risk-based capital 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 relating to
product design and illustrations for 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.
 
     SunAmerica Asset Management Corp. is registered with the SEC as a
registered investment advisor under the Investment Advisors 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's life insurance
subsidiaries are subject to regulation by the SEC under the Securities Act of
1933 and the Investment Company Act of 1940.
 
     Resources Trust Company is subject to regulation by the Colorado State
Banking Board and the Federal Deposit Insurance Corporation.
 
     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 the subsidiaries' business and accounts at any time.
 
     The Company's premium finance business is subject to regulation and
supervision by substantially all of the states in which it is authorized to
transact business. State premium finance laws establish supervisory agencies
with broad administrative and supervisory powers related to granting and
revoking licenses to transact business, approving finance agreement forms,
regulating certain finance charge rates, regulating marketing and other trade
practices (including the procedures to cancel financed insurance policies for
non-payment), prescribing the form and content of required financial statements
and reports, performing financial and other examinations and other related
matters.
 
COMPETITION
 
     The businesses conducted by the Company's subsidiaries are highly
competitive. The Company's life insurance subsidiaries compete 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. Within the U.S. life insurance industry, the 100 largest
writers of individual and group annuities account for approximately 95% of total
net annuity premiums written. Net annuity premiums written among the top 100
companies range from less than $100 million to more than $9 billion annually.
SunAmerica ranks in the top quartile of this group. Certain of these companies
and other life insurers with which the Company competes are significantly larger
and have available to them much greater financial and other resources. 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.
 
                                        8
<PAGE>   10
 
     Competitors of SunAmerica Asset Management include a large number of mutual
fund organizations, both independent and affiliated with other financial
services companies, including banks and insurance companies.
 
     Resources Trust competes for retirement plan assets against other trust
companies, brokerage firms, mutual funds, banks and insurance companies.
 
     The Company's broker-dealers face competition from regional firms and
large, national full service and discount brokerage firms.
 
     Imperial faces competition from other premium finance companies and many
large insurance companies who directly finance their own premiums.
 
ITEM 2. PROPERTIES
 
     The Company's executive offices and the principal offices of its life
insurance subsidiaries are in leased premises at 1 SunAmerica Center, Los
Angeles, California. The Company's life insurance subsidiaries also lease office
space in Torrance and Woodland Hills, California; Houston, Texas; and New York,
New York. The Company's broker-dealers lease space in Phoenix, Arizona; Atlanta,
Georgia; Houston, Texas; and New York, New York. The Company's asset management
subsidiary leases offices in New York, New York, and the retirement trust
services subsidiary occupies leased premises in Englewood, Colorado. The
Company's premium finance subsidiary is headquartered in Sherman Oaks,
California.
 
     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 are adequate and any further liabilities and costs will not have a
material adverse impact upon the Company's financial position or results of
operations.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
 
     No matters were submitted during the fourth quarter 1997 to a vote of
security-holders, through the solicitation of proxies or otherwise.
 
                                        9
<PAGE>   11
 
EXECUTIVE OFFICERS OF THE COMPANY
 
     The following sets forth certain information regarding the current
executive officers of SunAmerica Inc. as of December 10, 1997:
 
<TABLE>
<CAPTION>
                                                           Year
                                                          assumed    Other positions and other business
                                   Present position at    present      experience within the last five
          Name              Age     December 10, 1997     position                  years                    From-to
-------------------------   ----   --------------------   -------    -----------------------------------  -------------
<S>                         <C>    <C>                    <C>        <C>                                  <C>
Eli Broad                    64    Chairman and Chief       1976     (Cofounded Company in 1957)
                                   Executive Officer
                                   President                1986
Jay S. Wintrob               40    Vice Chairman            1995     Executive Vice President                 1991-1995
                                                                     (Joined Company in 1987)
James R. Belardi             40    Executive Vice           1995     Senior Vice President and                1992-1995
                                   President                         Treasurer
                                                                     (Joined Company in 1986)
Lorin M. Fife                44    Senior Vice              1995     Vice President and General               1994-1995
                                   President, General                Counsel -- Regulatory Affairs
                                   Counsel --                        Vice President and Associate             1989-1994
                                   Regulatory Affairs                General Counsel
                                                                     (Joined Company in 1989)
Marc H. Gamsin               42    Senior Vice              1996     Partner, O'Melveny & Myers LLP           1989-1996
                                   President
Jana Waring Greer            45    Senior Vice              1991     (Joined Company in 1974)
                                   President
Susan L. Harris              40    Senior Vice              1995     Vice President, General Counsel --       1994-1995
                                   President, General                Corporate Affairs, and Secretary
                                   Counsel -- Corporate              Vice President, Associate General        1989-1994
                                   Affairs and                       Counsel and Secretary (Joined
                                   Secretary                         Company in 1985)
Gary W. Krat                 50    Senior Vice              1992     (Joined Company in 1990)
                                   President
Scott H. Richland            35    Senior Vice              1997     Vice President and Treasurer             1995-1997
                                   President and                     Vice President and Assistant             1994-1995
                                   Treasurer                         Treasurer
                                                                     Assistant Treasurer                      1993-1994
                                                                     Director, SunAmerica Investments,        1990-1993
                                                                     Inc.
                                                                     (Joined Company in 1990)
Scott L. Robinson            51    Senior Vice              1991     (Joined Company in 1978)
                                   President
                                   and Controller
James W. Rowan               35    Senior Vice              1995     Vice President                           1993-1995
                                   President                         (Joined Company in 1992)
Karel Carnohan               41    Vice President           1995     Vice President, Equity                   1994-1995
                                                                     Analyst, C.J. Lawrence/
                                                                     Deutsche Bank Securities
                                                                     Corporation
                                                                     First Vice President,                    1990-1994
                                                                     Corporate Finance and
                                                                     Investor Relations,
                                                                     Countrywide Credit
                                                                     Industries, Inc.
                                                                     Countrywide Mortgage
                                                                     Investments, Inc.
</TABLE>
 
                                       10
<PAGE>   12
 
EXECUTIVE OFFICERS OF THE COMPANY (CONTINUED)
 
<TABLE>
<CAPTION>
                                                           Year
                                                          assumed    Other positions and other business
                                   Present position at    present      experience within the last five
          Name              Age     December 10, 1997     position                  years                    From-to
-------------------------   ----   --------------------   -------    -----------------------------------  -------------
<S>                         <C>    <C>                    <C>        <C>                                  <C>
Michael L. Fowler            43    Vice President           1988     (Joined Company in 1988)
N. Scott Gillis              45    Vice President           1997     Senior Vice President                 1994-Present
                                                                     and Controller, SunAmerica
                                                                     Life Companies
                                                                     Vice President and Controller            1990-1994
                                                                     SunAmerica Life Companies
                                                                     (Joined Company in 1985)
George L. Holdridge, Jr.     40    Vice President           1995     Senior Vice President,                   1994-1995
                                                                     SunAmerica Financial, Inc.
                                                                     Vice President and Director              1989-1994
                                                                     of Technology, SunAmerica
                                                                     Financial, Inc.
                                                                     (Joined Company in 1983)
Donald E. Spetner            38    Vice President           1997     Vice President,                          1989-1997
                                                                     Corporate Communications,
                                                                     Nissan North America, Inc.
</TABLE>
 
                                       11
<PAGE>   13
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
 
MARKET INFORMATION
 
     The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange. The Company's Common Stock is also traded on the Boston,
Midwest and Philadelphia Stock Exchanges. There is no trading or other market
for the Nontransferable Class B Stock.
 
     High and low sales prices, based on the New York Stock Exchange Composite
Price Tape, for the Company's Common Stock for each quarter during the fiscal
years ended September 30, 1997 and 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                               1997                                    1996
                                                ----------------------------------      ----------------------------------
                                                     High                Low                 High                Low
                                                --------------      --------------      --------------      --------------
<S>                                               <C>                 <C>                 <C>                 <C>
First quarter.................................    $30 53/64           $23 27/64           $16 37/64           $13 39/64
Second quarter................................     34                  24 43/64            19 11/64            14 45/64
Third quarter.................................     34 5/64             24 43/64            19 43/64            15 13/64
Fourth quarter................................     40 53/64            32 29/64            24 37/64            17 27/64
                                                  =========           =========           =========           =========
</TABLE>
 
     The sales prices listed above have been restated to reflect a three-for-two
stock split, paid in the form of a stock dividend on August 29, 1997.
 
HOLDERS
 
     As of November 30, 1997, the number of holders of record of each class of
common equity of the Company was as follows:
 
<TABLE>
<CAPTION>
                                                                                       Number
                                                                                     of holders
                                  Title of Class                                     of record
-----------------------------------------------------------------------------------  ----------
<S>                                                                                  <C>
Common Stock (par value $1.00 per share)...........................................       2,264
Nontransferable Class B Stock (par value $1.00 per share)..........................           7
                                                                                          =====
</TABLE>
 
DIVIDENDS
 
     Dividends paid per share on the Company's Common Stock and Nontransferable
Class B Stock for each quarter during the fiscal years ended September 30, 1997
and 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                          1997                        1996
                                                -------------------------   -------------------------
                                                Common    Nontransferable   Common    Nontransferable
                                                 Stock     Class B Stock     Stock     Class B Stock
                                                -------   ---------------   -------   ---------------
<S>                                             <C>       <C>               <C>       <C>
First quarter.................................  $0.0667           $0.0600   $0.0500           $0.0450
Second quarter................................   0.0667            0.0600    0.0500            0.0450
Third quarter.................................   0.0667            0.0600    0.0500            0.0450
Fourth quarter................................   0.0667            0.0600    0.0500            0.0450
                                                -------           -------   -------           -------
Total.........................................  $0.2668           $0.2400   $0.2000           $0.1800
                                                =======           =======   =======           =======
</TABLE>
 
     The dividends listed above have been restated to reflect a three-for-two
stock split, paid in the form of a stock dividend on August 29, 1997.
 
                                       12
<PAGE>   14
 
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. Per-share amounts have been restated to reflect to reflect a
three-for-two stock split, paid in the form of a stock dividend on August 29,
1997. In addition, certain items have been reclassified to conform to the
current year's presentation.
 
<TABLE>
<CAPTION>
                                                        Years ended September 30,
                                      -------------------------------------------------------------
                                        1997         1996         1995         1994         1993
                                      ---------    ---------    ---------    ---------    ---------
                                                (In thousands, except per-share amounts)
<S>                                   <C>          <C>          <C>          <C>          <C>
RESULTS OF OPERATIONS
Net investment income..............   $ 679,377    $ 492,756    $ 365,555    $ 294,454    $ 263,791
Net realized investment losses.....     (29,203)     (30,314)     (33,012)     (21,124)     (21,287)
Fee income.........................     317,703      248,411      198,604      171,085      148,646
General and administrative
  expenses.........................    (265,738)    (210,650)    (165,434)    (135,161)    (153,923)
Amortization of deferred
  acquisition costs................    (165,089)    (108,176)     (86,107)     (69,253)     (53,216)
                                      ---------    ---------    ---------    ---------    ---------
Pretax income......................     537,050      392,027      279,606      240,001      184,011
Income tax expense.................    (158,000)    (117,600)     (85,400)     (74,700)     (57,000)
                                      ---------    ---------    ---------    ---------    ---------
INCOME BEFORE CUMULATIVE EFFECT OF
  CHANGE IN ACCOUNTING FOR INCOME
  TAXES............................     379,050      274,427      194,206      165,301      127,011
Cumulative effect of change in
  accounting for income taxes......          --           --           --      (33,500)          --
                                      ---------    ---------    ---------    ---------    ---------
NET INCOME.........................   $ 379,050    $ 274,427    $ 194,206    $ 131,801    $ 127,011
                                      =========    =========    =========    =========    =========
EARNINGS PER SHARE:
  INCOME BEFORE CUMULATIVE EFFECT
     OF CHANGE IN ACCOUNTING FOR
     INCOME TAXES..................   $    1.80    $    1.30    $    0.95    $    0.80    $    0.61
  Cumulative effect of change in
     accounting for income taxes...          --           --           --        (0.18)          --
                                      ---------    ---------    ---------    ---------    ---------
  NET INCOME.......................   $    1.80    $    1.30    $    0.95    $    0.62    $    0.61
                                      =========    =========    =========    =========    =========
CASH DIVIDENDS PER SHARE PAID TO
  COMMON SHAREHOLDERS:
  Nontransferable Class B Stock....   $  0.2400    $  0.1800    $  0.1200    $  0.0800    $  0.0560
                                      =========    =========    =========    =========    =========
  Common Stock.....................   $  0.2668    $  0.2000    $  0.1333    $  0.0889    $  0.0623
                                      =========    =========    =========    =========    =========
</TABLE>
 
                                       13
<PAGE>   15
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
 
<TABLE>
<CAPTION>
                                                               Years ended September 30,
                                                      --------------------------------------------
                                                      1997      1996      1995      1994      1993
                                                      ----      ----      ----      ----      ----
<S>                                                   <C>       <C>       <C>       <C>       <C>
RATIO OF EARNINGS TO FIXED CHARGES
Ratio of earnings to fixed charges (which include
  dividends paid on preferred securities of grantor
  trusts and interest incurred on senior debt, but
  exclude interest incurred on fixed annuities,
  guaranteed investment contracts and trust
  deposits)........................................    4.6x      5.4x      5.8x      5.8x      6.1x
                                                       ===       ===       ===       ===       ===
Ratio of earnings to fixed charges (which include
  dividends paid on preferred securities of grantor
  trusts and interest incurred on senior debt,
  fixed annuities, guaranteed investment contracts
  and trust deposits)..............................    1.5x      1.5x      1.5x      1.5x      1.4x
                                                       ===       ===       ===       ===       ===
Ratio of earnings to combined fixed charges and
  preferred stock dividends (which include
  dividends paid on preferred securities of grantor
  trusts and interest incurred on senior debt, but
  exclude interest incurred on fixed annuities,
  guaranteed investment contracts and trust
  deposits)........................................    3.9x      3.8x      3.4x      2.8x      2.8x
                                                       ===       ===       ===       ===       ===
Ratio of earnings to combined fixed charges and
  preferred stock dividends (which include
  dividends paid on preferred securities of grantor
  trusts and interest incurred on senior debt,
  fixed annuities, guaranteed investment contracts
  and trust deposits)..............................    1.4x      1.4x      1.4x      1.4x      1.3x
                                                       ===       ===       ===       ===       ===
</TABLE>
 
<TABLE>
<CAPTION>
                                                         At September 30,
                              -----------------------------------------------------------------------
                                 1997           1996           1995           1994           1993
                              -----------    -----------    -----------    -----------    -----------
                                                          (In thousands)
<S>                           <C>            <C>            <C>            <C>            <C>
FINANCIAL POSITION
Investments................   $24,408,178    $16,199,784    $10,808,959    $ 9,280,390    $10,364,952
Variable annuity assets....     9,514,675      6,380,458      5,263,006      4,513,093      4,194,970
Deferred acquisition
  costs....................     1,118,582        782,300        526,415        581,874        475,917
Other assets...............       595,451        364,279        245,787        280,868        231,582
                              -----------    -----------    -----------    -----------    -----------
TOTAL ASSETS...............   $35,636,886    $23,726,821    $16,844,167    $14,656,225    $15,267,421
                              ===========    ===========    ===========    ===========    ===========
Reserves for fixed annuity
  contracts................   $14,445,126    $ 9,654,674    $ 4,862,250    $ 4,519,623    $ 4,934,871
Reserves for guaranteed
  investment contracts.....     5,553,292      4,169,028      3,607,192      2,783,522      2,216,104
Variable annuity
  liabilities..............     9,514,675      6,380,458      5,263,006      4,513,093      4,194,970
Trust deposits.............       427,433        436,048        426,595        442,320        378,986
Other payables and accrued
  liabilities..............     1,097,418        489,672        747,733        860,763      1,828,153
Long-term notes and
  debentures...............     1,136,072        573,335        524,835        472,835        380,560
Other senior
  indebtedness.............            --             --             --         28,662        127,151
Deferred income taxes......       383,764        125,417        146,847         74,319         96,599
Preferred securities of
  grantor trusts...........       495,000        237,631         52,631             --             --
Shareholders' equity.......     2,584,106      1,660,558      1,213,078        961,088      1,110,027
                              -----------    -----------    -----------    -----------    -----------
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY.....   $35,636,886    $23,726,821    $16,844,167    $14,656,225    $15,267,421
                              ===========    ===========    ===========    ===========    ===========
</TABLE>
 
                                       14
<PAGE>   16
 
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 SunAmerica Inc. (the "Company") for the three years in the period
ended September 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 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 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 $379.1 million or $1.80 per share in 1997, compared with
$274.4 million or $1.30 per share in 1996 and $194.2 million or $0.95 per share
in 1995. On March 31, 1997, the Company acquired certain annuity contracts from
John Alden Life Insurance Company and all of the outstanding common stock of
John Alden Life Insurance Company of New York (collectively, the "John Alden
Acquisition"). During fiscal 1996, the Company acquired CalAmerica Life
Insurance Company (formerly known as CalFarm Life Insurance Company)
("CalAmerica") on December 29, 1995; Ford Life Insurance Company ("Ford Life")
on February 29, 1996; and certain annuity contracts from The Central National
Life Insurance Company of Omaha (the "Central National Annuity Contracts") on
April 1, 1996 (collectively, the "1996 Acquisitions"). The John Alden
Acquisition and the 1996 Acquisitions (collectively, the "Acquisitions") were
accounted for under the purchase method of accounting, and, therefore, results
of operations include those of the Acquisitions only from their respective dates
of acquisition. Consequently, operating results for the fiscal years 1997, 1996
and 1995 are not comparable. On a pro forma basis, using the historical
operating results of the acquired businesses and assuming the Acquisitions had
been consummated on October 1, 1994, the beginning of the earliest period
discussed herein, net income would have been $397.4 million ($1.88 per share) in
1997, $323.2 million ($1.54 per share) in 1996 and $232.3 million ($1.15 per
share) in 1995.
 
     PRETAX INCOME totaled $537.1 million in 1997, $392.0 million in 1996 and
$279.6 million in 1995. The 37.0% improvement in 1997 over 1996 and the 40.2%
improvement in 1996 over 1995 primarily resulted from increased net investment
income and fee income, which were partially offset by higher general and
administrative expenses and increased amortization of deferred acquisition
costs.
 
                                       15
<PAGE>   17
 
     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, increased to $679.4 million in 1997 from $492.8
million in 1996 and $365.6 million in 1995. These amounts equal 3.26% on average
invested assets (computed on a daily basis) of $20.86 billion in 1997, 3.43% on
average invested assets of $14.36 billion in 1996 and 3.69% on average invested
assets of $9.90 billion in 1995. The invested assets associated with the
Acquisitions were primarily high-grade corporate, government and
government/agency bonds and cash and short-term investments, which are generally
lower yielding than a significant portion of the invested assets that comprise
the remainder of the Company's portfolio. As a result of the Acquisitions, net
investment income as a percent of average invested assets in 1997 and 1996 has
declined. However, on a pro forma basis, assuming the Acquisitions had been
consummated on October 1, 1994, net investment income on related average
invested assets would have been 3.14% in 1997, 2.97% in 1996 and 2.75% in 1995.
 
     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 $1.15 billion in 1997, $1.06 billion in 1996 and $741.2 million in
1995. The difference between the Company's yield on average invested assets and
the rate paid on average interest-bearing liabilities (the "Spread Difference")
was 2.95% in 1997, 3.01% in 1996 and 3.25% in 1995. On a pro forma basis,
assuming the Acquisitions had been consummated on October 1, 1994, the Spread
Difference would have been 2.91% in 1997, 2.82% in 1996 and 2.71% in 1995.
 
     Investment income (and the related yields on average invested assets)
totaled $1.80 billion (8.61%) in 1997, compared with $1.25 billion (8.74%) in
1996 and $905.8 million (9.15%) in 1995. Investment income and the related
yields reflect the effects of the Acquisitions from their respective dates of
acquisition. On a pro forma basis, assuming the Acquisitions had been
consummated on October 1, 1994, the yields on related average invested assets
would have been 8.53% in 1997, 8.37% in 1996 and 8.16% in 1995. This increased
yield (on a pro forma basis) in 1997 reflects a partial reallocation of lower
yielding invested assets acquired as part of the Acquisitions into generally
higher yielding asset classes in which the Company has historically invested a
portion of its portfolio. In addition, the John Alden Acquisition increased the
proportion of mortgage loans in the Company's portfolio. On average, mortgage
loans have higher yields than that of the Company's overall portfolio. Increased
investment income in 1997 and 1996 also reflects higher returns from the
Company's investments in partnerships and total return bond swap agreements (the
"Total Return Agreements"), as well as increases in average invested assets (in
excess of those acquired through the Acquisitions).
 
     Partnership income increased to $241.5 million (a yield of 21.00% on
related average assets of $1.15 billion) in 1997, compared with $178.6 million
(a yield of 19.04% on related average assets of $937.8 million) in 1996 and
$134.1 million (a yield of 18.17% on related average assets of $738.0 million)
in 1995. Partnership income includes income recognized by using the cost method
of accounting, which amounted to $71.7 million, $59.1 million and $106.9 million
in 1997, 1996 and 1995, respectively. Such income is based 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.
 
     The Company has enhanced investment yield from time to time through Total
Return Agreements. The Company recorded income of $35.4 million on Total Return
Agreements in 1997, compared with $32.5 million recorded in 1996 and $13.0
million recorded in 1995. The improved results in 1997 and 1996 reflect improved
overall performance of the non-investment-grade bonds underlying the Total
Return Agreements and increases in the average notional principal amount of the
Total Return Agreements. (See "Asset-Liability Matching" for additional
discussion of Total Return Agreements.)
 
                                       16
<PAGE>   18
 
     Total interest and dividend expense equalled $1.12 billion in 1997, $761.5
million in 1996 and $540.2 million in 1995. The average rate paid on all
interest-bearing liabilities was 5.66% in 1997, compared with 5.73% in 1996 and
5.90% in 1995. Interest-bearing liabilities averaged $19.71 billion during 1997,
compared with $13.29 billion during 1996 and $9.16 billion during 1995. On a pro
forma basis, assuming the Acquisitions had been consummated on October 1, 1994,
the average rate paid on all interest-bearing liabilities would have been 5.62%
in 1997, 5.55% in 1996 and 5.45% in 1995. These increases in overall rates paid
reflect year-over-year increases in the percentage of average interest-bearing
liabilities composed of senior debt, guaranteed investment contracts ("GICs")
and preferred securities of subsidiary grantor trusts, which, though the average
rates have declined on these liabilities since 1995, generally bear higher
interest rates than that of the Company's interest-bearing liabilities on
average.
 
     GROWTH IN AVERAGE INVESTED ASSETS since 1995 primarily reflects the impact
of the Acquisitions. As part of the Acquisitions, the Company acquired $722.5
million of invested assets of CalAmerica on December 29, 1995, $3.10 billion of
invested assets of Ford Life on February 29, 1996, $908.8 million of invested
assets associated with the Central National Annuity Contracts on April 1, 1996
and $5.00 billion of invested assets associated with the John Alden Acquisition
on March 31, 1997. The Company intends to continue to pursue a strategy of
enhancing its internal growth with complementary acquisitions.
 
     Average invested assets also increased as a result of sales of the
Company's fixed-rate products, consisting of both fixed annuity premiums
(including those for the fixed accounts of variable annuity products) and GIC
premiums, and $1.44 billion of aggregate net proceeds from the issuances of
Common Stock, preferred securities of subsidiary grantor trusts and long-term
notes. Fixed annuity premiums totaled $1.49 billion in 1997, compared with
$993.4 million in 1996 and $944.7 million in 1995. These premiums include
premiums for the fixed accounts of variable annuities totaling $1.17 billion,
$782.6 million and $286.7 million, respectively, which have increased primarily
because of increased sales of the Company's Polaris product and greater inflows
into the one-year fixed account of that product.
 
     GIC premiums increased to $2.08 billion in 1997 from $1.02 billion in 1996
and $1.77 billion in 1995. The increase in GIC premiums in 1997 reflects an
expansion of the GIC client base due, in part, to a broadening of the Company's
products and distribution channels, including its AAA-rated and its
AAA/Aaa-rated credit-enhanced GIC products. This increase also reflects
increased sales of longer-maturity products to banks, asset management firms for
their long-term portfolios and certain trusts. The decline in GIC premiums in
1996 primarily resulted from planned reductions of sales of short-term maturity
products to asset management firms and from reductions of sales to banks. While
GIC premiums declined, GIC surrenders and maturities also declined during 1996
to $708.7 million, compared with $1.16 billion in 1995. GIC surrenders and
maturities were $1.01 billion in 1997. The size of the Company's GIC reserves
increased over the three-year period to $5.55 billion at September 30, 1997 from
$2.78 billion at September 30, 1994.
 
     The GICs issued by the Company generally guarantee the payment of principal
and interest at a fixed rate for a fixed term of three to five years. In the
case of GICs sold to pension plans, certain withdrawals may be made at book
value in the event of circumstances specified in the plan document, such as
employee retirement, death, disability, hardship withdrawal or employee
termination. The Company generally imposes surrender penalties in the event of
other withdrawals prior to maturity. GICs purchased by banks and asset
management firms for their long-term portfolios, certain trusts or 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.
 
                                       17
<PAGE>   19
 
     NET REALIZED INVESTMENT LOSSES totaled $29.2 million in 1997, $30.3 million
in 1996 and $33.0 million in 1995. Net realized investment losses include
impairment writedowns of $65.3 million in 1997, $34.9 million in 1996 and $42.7
million in 1995. Therefore, net gains from sales of investments totaled $36.1
million in 1997, $4.6 million in 1996 and $9.7 million in 1995.
 
     The Company sold invested assets, principally bonds and notes, aggregating
$13.90 billion, $7.88 billion and $4.85 billion in 1997, 1996 and 1995,
respectively. Sales of investments result from the active management of the
Company's investment portfolio. Because sales of investments are made in both
rising and falling interest rate environments, net gains from sales of
investments fluctuate from period to period, and represent 0.17%, 0.03% and
0.10% of average invested assets for 1997, 1996 and 1995, 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 primarily have been applied to defaulted bonds and
mortgage loans. Impairment writedowns, on an annualized basis, represent 0.31%,
0.24% and 0.43% of average invested assets for 1997, 1996 and 1995,
respectively. For the five years ended September 30, 1997, impairment writedowns
as a percentage of average invested assets have ranged from 0.24% to 1.36% and
have averaged 0.60%. 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 $141.2 million
in 1997, $104.7 million in 1996 and $84.6 million in 1995. These increased fees
reflect growth in average variable annuity assets, principally due to the
receipt of variable annuity premiums, increased market values and net exchanges
into the separate accounts from the fixed accounts of variable annuity
contracts, partially offset by surrenders. Variable annuity assets averaged
$7.66 billion during 1997, $5.75 billion during 1996 and $4.67 billion during
1995. Variable annuity premiums, which exclude premiums allocated to the fixed
accounts of variable annuity products, totaled $1.31 billion in 1997, $929.2
million in 1996 and $571.4 million in 1995. Sales of variable annuity products
(which include premiums allocated to the fixed accounts) ("Variable Annuity
Product Sales") amounted to $2.47 billion, $1.71 billion and $858.1 million in
1997, 1996 and 1995, respectively. Increases in Variable Annuity Product Sales
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.
 
     NET RETAINED COMMISSIONS are primarily derived from commissions on the
sales of nonproprietary investment products by the Company's broker-dealer
subsidiaries, after deducting the substantial portion of such commissions that
is passed on to registered representatives. Net retained commissions totaled
$64.9 million in 1997, $49.8 million in 1996 and $33.7 million in 1995.
Broker-dealer sales (mainly sales of general securities, mutual funds and
annuities) totaled $17.52 billion in 1997, $12.78 billion in 1996 and $7.41
billion in 1995. The increases in sales and net retained commissions reflect a
greater number of registered representatives, higher average production per
representative and generally favorable market conditions. The greater number of
registered representatives was primarily due to acquisitions, including the
January 22, 1997 acquisition of The Financial Group, Inc., which, through its
subsidiary, Keogler Morgan & Company, licensed more than 400 independent
registered representatives at date of acquisition; and the January 3, 1996
acquisition of Advantage Capital Corporation, a Houston-based broker-dealer,
which licensed approximately 1,000 independent registered representatives at
date of acquisition. Increases in net retained commissions may not be
proportionate to increases in sales primarily due to differences in sales mix.
 
                                       18
<PAGE>   20
 
     SURRENDER CHARGES on fixed and variable annuities totaled $35.2 million
(including $24.5 million attributable to the Acquisitions) in 1997, compared
with $22.1 million in 1996 (including $11.1 million attributable to the
Acquisitions) and $11.9 million in 1995. 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 $2.28 billion (including $1.00 billion
attributable to the Acquisitions) in 1997, compared with $1.42 billion
(including $245.8 million attributable to the Acquisitions) in 1996 and $1.31
billion in 1995. These payments represent 12.0% (15.0% of average fixed annuity
reserves associated with the Acquisitions), 11.1% (9.3% of average fixed annuity
reserves associated with the 1996 Acquisitions) and 14.8%, respectively, of
average fixed and variable annuity reserves. Withdrawals include variable
annuity withdrawals from the separate accounts totaling $827.3 million in 1997,
$637.0 million in 1996 and $650.0 million in 1995. Consistent with the
assumptions used in connection with the John Alden Acquisition, management
anticipates that the level of withdrawal payments will continue to reflect
higher relative withdrawal rates in the near future because of higher surrenders
on the annuity business acquired in the John Alden Acquisition.
 
     Excluding the effects of the Acquisitions, withdrawal payments represented
10.4% of related average fixed and variable annuity reserves in 1997 and 11.6%
in 1996. These lower surrender rates reflect the continued decrease in the
percentage of non-acquisition-related annuity contracts that are free of
surrender charges.
 
     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 $25.8 million on
average assets managed of $2.34 billion in 1997, $25.4 million on average assets
managed of $2.14 billion in 1996 and $26.9 million on average assets managed of
$2.07 billion in 1995. 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, amounted to $454.8 million in
1997, compared with $223.4 million in 1996 and $140.2 million in 1995.
Redemptions of mutual funds, excluding redemptions of money market accounts,
amounted to $412.8 million in 1997, $379.9 million in 1996 and $426.5 million in
1995. The significant increases in sales during 1997 principally resulted from
the introduction in November 1996 of the Company's Style Select Series product.
Higher mutual fund sales and lower redemptions in 1996 both reflect enhanced
marketing efforts and the favorable performance records of certain of the
Company's mutual funds, and heightened consumer demand for equity investments
generally.
 
     LOAN SERVICING FEES are earned by Imperial Premium Finance, Inc.
("Imperial"). Imperial provides short-term installment loans for borrowers to
fund their property and casualty insurance premiums. These loans are secured by
the unearned premium associated with the underlying insurance policies.
Currently, Imperial sells most of the loans it originates and earns fee income
by servicing the sold loans. Such fee income totaled $24.3 million on average
loans serviced of $490.5 million in 1997, compared with $23.8 million on average
loans serviced of $457.8 million in 1996, and $19.8 million on average loans
serviced of $438.3 million in 1995. Although average loans serviced have
increased during 1997, loan servicing fees have not increased proportionately,
largely due to increased competition in the premium finance marketplace.
 
     TRUST FEES are earned by Resources Trust Company for providing
administrative and custodial services primarily for individual retirement
accounts, as well as for other qualified retirement plans. Trust fees increased
to $17.9 million in 1997 (on an average of 204,400 trust accounts) from $16.7
million in 1996 (on an average of 201,800 trust accounts) and $15.4 million in
1995 (on an average of 196,000 trust accounts).
 
     GENERAL AND ADMINISTRATIVE EXPENSES totaled $265.7 million in 1997,
compared with $210.7 million in 1996 and $165.4 million in 1995. General and
administrative expenses in 1997 and 1996 reflect the impact of acquisitions from
their respective dates of occurrence. General and administrative expenses in
1997 include a $15.0 million provision for estimated programming costs
associated with the year 2000. Management believes that this provision is
adequate and does not anticipate any
 
                                       19
<PAGE>   21
 
material future expenses associated with this project. 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 $165.1 million in 1997,
compared with $108.2 million in 1996 and $86.1 million in 1995. The increases in
amortization primarily reflect the amortization of the deferred acquisition
costs attributable to the Acquisitions, which aggregated $65.2 million in 1997
and $16.8 million in 1996. Amortization has also increased during the three-year
period due to additional fixed and variable annuity and mutual fund sales and
the subsequent amortization of related deferred commissions and other direct
selling costs.
 
     INCOME TAX EXPENSE totaled $158.0 million in 1997, compared with $117.6
million in 1996 and $85.4 million in 1995, representing effective tax rates of
29% in 1997, 30% in 1996 and 31% in 1995. These tax rates reflect the favorable
impact of tax credits associated with tax-advantaged investments in affordable
housing partnerships owned by the Company.
 
FINANCIAL CONDITION AND LIQUIDITY
 
     SHAREHOLDERS' EQUITY increased 55.6% to $2.58 billion at September 30, 1997
from $1.66 billion at September 30, 1996, primarily due to $577.3 million of net
proceeds realized from the issuance of additional Common Stock, $379.1 million
of net income recorded in 1997 and $209.9 million of net unrealized gains on
debt and equity securities available for sale (credited directly to
shareholders' equity), versus $17.0 million of net unrealized losses on such
securities recorded at September 30, 1996. These favorable factors were
partially offset by a $136.5 million aggregate reduction in outstanding
preferred stock resulting from the redemption of Series B Preferred Stock and
Adjustable Rate Cumulative Preferred Stock, Series C (see Note 9 of Notes to
Consolidated Financial Statements) and $67.8 million of dividends paid to
shareholders.
 
     INVESTED ASSETS at year end totaled $24.41 billion in 1997, compared with
$16.20 billion at year-end 1996. This 50.7% increase primarily resulted from the
John Alden Acquisition (with related invested assets aggregating $5.00 billion
at the date of acquisition). Other factors contributing to this increase include
sales of GICs; net proceeds from the issuance of Common Stock; $559.3 million of
net proceeds from the issuance of long-term notes and debentures; the $462.5
million net unrealized gain recorded on debt and equity securities available for
sale at September 30, 1997, versus the $39.1 million net unrealized loss
recorded on such securities at September 30, 1996; and a $257.4 million net
increase in preferred securities of subsidiary grantor trusts.
 
     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.
 
     THE BOND PORTFOLIO, which comprises 76% of the Company's total investment
portfolio (at amortized cost), had an aggregate fair value that exceeded its
amortized cost by $398.8 million at September 30, 1997. At September 30, 1996,
the amortized cost exceeded the fair value of the Bond Portfolio by $75.6
million. The net unrealized gains on the Bond Portfolio since September 30, 1996
principally reflect the lower prevailing interest rates at September 30, 1997
and the corresponding effect on the fair value of the Bond Portfolio.
 
     At September 30, 1997, the Bond Portfolio (at amortized cost, excluding
$136.4 million of redeemable preferred stocks) included $17.28 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 $707.2 million of bonds rated by the Company pursuant to statutory ratings
guidelines established by the NAIC. At September 30, 1997, approximately $16.10
billion of the Bond
 
                                       20
<PAGE>   22
 
Portfolio was investment grade, including $7.27 billion of U.S.
government/agency securities and mortgage-backed securities ("MBSs").
 
     At September 30, 1997, the Bond Portfolio included $1.89 billion (at
amortized cost with a fair value of $1.97 billion) of bonds that were not
investment grade. Based on their September 30, 1997 amortized cost, these
non-investment-grade bonds accounted for 5.3% of the Company's total assets and
7.9% of its invested assets. In addition to its direct investment in
non-investment-grade bonds, the Company has entered into Total Return Agreements
with an aggregate notional principal amount of $439.1 million at September 30,
1997 (see "Asset-Liability Matching").
 
     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
September 30, 1997.
 
     The following table summarizes the Company's rated bonds by rating
classification as of September 30, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
    Issues rated by S&P/Moody's/DCR/Fitch              Issues not rated by S&P/Moody's/                    Total
----------------------------------------------            DCR/Fitch, by NAIC category            --------------------------
S&P/(Moody's)/                                     -----------------------------------------                     Percent of
  [DCR]/<Fitch>     Amortized       Estimated         NAIC         Amortized      Estimated       Amortized       invested
   category(1)        cost         fair value      category(2)        cost        fair value        cost         assets(3)
---------------    -----------     -----------     -----------     ----------     ----------     -----------     ----------
<S>                <C>             <C>             <C>             <C>            <C>            <C>             <C>
AAA+ to A-
  (Aaa to A3)
  [AAA to A-]
  <AAA to A->      $10,656,174     $10,835,942          1          $1,468,979     $1,487,022     $12,125,153        50.64%
BBB+ to BBB-
 (Baa1 to Baa3)
 [BBB+ to BBB-]
 <BBB+ to BBB->      3,415,438       3,490,194          2             558,826        579,575       3,974,264        16.60
BB+ to BB-
 (Ba1 to Ba3)
 [BB+ to BB-]
 <BB+ to BB->          137,818         151,979          3              85,731         88,911         223,549         0.93
B+ to B-
 (B1 to B3)
 [B+ to B-]
 <B+ to B->          1,325,950       1,387,326          4             227,437        228,298       1,553,387         6.49
CCC+ to C
 (Caa to C)
 [CCC]
 <CCC+ to C->           33,960          28,806          5              66,110         71,147         100,070         0.42
CI to D
 [DD]
 <D>                        --              --          6              11,965         11,500          11,965         0.05
                   -----------     -----------                     ----------     ----------     -----------
Total rated
 issues            $15,569,340     $15,894,247                     $2,419,048     $2,466,453     $17,988,388
                   ===========     ===========                     ==========     ==========     ===========
 
<CAPTION>
Issues rated
by S&P/Moody's/
DCR/Fitch
---------------
S&P/(Moody's)/
  [DCR]/<Fitch>   Estimated
   category(1)   fair value
---------------  -----------
<S>                <C>
AAA+ to A-
  (Aaa to A3)
  [AAA to A-]
  <AAA to A->    $12,322,964
BBB+ to BBB-
 (Baa1 to Baa3)
 [BBB+ to BBB-]
 <BBB+ to BBB->    4,069,769
BB+ to BB-
 (Ba1 to Ba3)
 [BB+ to BB-]
 <BB+ to BB->        240,890
B+ to B-
 (B1 to B3)
 [B+ to B-]
 <B+ to B->        1,615,624
CCC+ to C
 (Caa to C)
 [CCC]
 <CCC+ to C->         99,953
CI to D
 [DD]
 <D>                  11,500
                  ----------
Total rated
 issues          $18,360,700
                 ===========
</TABLE>
 
(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 and 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 $707.2 million (at amortized cost) of assets that were
    rated by the Company pursuant to applicable NAIC rating guidelines.
 
(3) At amortized cost.
 
                                       21
<PAGE>   23
 
     Senior Secured Loans ("Secured Loans") are included in the Bond Portfolio
and their amortized cost aggregated $2.46 billion at September 30, 1997. Secured
Loans are senior to subordinated debt and equity, and are secured by assets of
the issuer. At September 30, 1997, Secured Loans consisted of loans to 338
borrowers spanning 45 industries, with 21% of these assets (at amortized cost)
concentrated in financial institutions and 14% concentrated in utilities. No
other industry concentration constituted more than 5% of these assets.
 
     While the trading market for Secured Loans is more limited than for
publicly traded corporate debt issues, management believes that participation in
these transactions has enabled the Company to improve its investment yield. As a
result of restrictive financial covenants, 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 its 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 $3.14 billion at September 30, 1997 and consisted
of 1,267 commercial first mortgage loans with an average loan balance of
approximately $2.5 million, collateralized by properties located in 45 states.
Approximately 29% of this portfolio was multifamily residential, 27% was retail,
15% was office, 9% was manufactured housing, 7% was industrial and 13% was other
types. At September 30, 1997, approximately 18%, 11%, 9% and 8% of this
portfolio was secured by properties located in California, New York, Florida and
Texas, respectively, and no more than 5% of this portfolio was secured by
properties located in any other single state. At September 30, 1997, there were
51 mortgage loans with outstanding balances of $10 million or more, which loans
collectively aggregated approximately 30% of this portfolio. At the time of
their origination or purchase by the Company, virtually all mortgage loans had
loan-to-value ratios of 75% or less. At September 30, 1997, approximately 34% of
the mortgage loan portfolio consisted of loans with balloon payments due before
October 1, 2000. During 1997, 1996 and 1995, 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 September 30, 1997, the
mortgage loan portfolio included $808.6 million of commercial mortgage loans
obtained as part of the John Alden Acquisition. During 1997, the Company sold
$333.8 million of single-family residential mortgage loans obtained as part of
the John Alden Acquisition.
 
     At September 30, 1997, approximately 45% 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,
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.
 
     PARTNERSHIP investments totaled $1.29 billion at September 30, 1997,
constituting investments in approximately 550 separate partnerships with an
average size of approximately $2.3 million. This portfolio includes: (i) $664.6
million of partnerships managed by independent money managers that invest in a
broad selection of equity and fixed-income securities, currently including
approximately 3,500 separate issuers; (ii) $516.2 million of partnerships that
make tax-advantaged investments in affordable housing properties, currently
involving approximately 525 multifamily projects in 43 states; and (iii) $106.0
million of partnerships that invest in mortgage loans and income-producing real
estate. At September 30, 1997, $725.5 million of the Company's partnerships was
accounted for by using the cost method and $561.3 million by using the equity
method. The risks generally associated with partnerships include those related
to their underlying investments (i.e. equity securities, debt
 
                                       22
<PAGE>   24
 
securities and real estate), plus a level of illiquidity, which is mitigated, to
some extent, a) for the affordable housing partnerships by the marketability of
the tax credits they generate; and b) in the case of many of the other
partnerships, by the existence of contractual termination provisions.
 
     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,
two-tiered interest rate structures or other restrictions in order to encourage
persistency. Approximately 87% of the Company's fixed annuity and GIC reserves
had surrender penalties or other restrictions at September 30, 1997.
 
     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 September 30, 1997, these assets had an
aggregate fair value of $23.06 billion with a duration of 3.5. The Company's
fixed-rate liabilities include: fixed annuities; GICs; trust deposits; long-term
notes and debentures; and preferred securities of subsidiary grantor trusts. At
September 30, 1997, these liabilities had an aggregate fair value (determined by
discounting future contractual cash flows by related market rates of interest)
of $21.43 billion with a duration of 3.0. The Company's potential exposure due
to a relative 10% increase in interest rates prevalent at September 30, 1997 is
a loss of approximately $98.3 million in fair value of its fixed-rate assets
that is not offset by an increase 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.
 
     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 September 30, 1997, the Company had 39 outstanding Swap
Agreements
 
                                       23
<PAGE>   25
 
with an aggregate notional principal amount of $1.62 billion. These agreements
mature in various years through 2003 and have an average remaining maturity of
38 months.
 
     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 and Total Return
Agreements. 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. Total Return Agreements effectively exchange a
fixed rate of interest on the notional amount for the coupon income plus or
minus the increase or decrease in the fair value of specified
non-investment-grade bonds. 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 risks associated with Total Return Agreements are the
credit risk on the underlying non-investment-grade bonds, the risk of potential
loss due to bond market fluctuations and the risk associated with counterparty
nonperformance. 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 Total Return Agreements, Reverse Repos and Swap Agreements
are financially responsible and that the counterparty risk associated with those
transactions is minimal. 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 routinely includes a review by the Company of
its portfolio of debt securities. 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 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.
 
     The carrying values of bonds that are determined to have declines in value
that are other than temporary are reduced to net realizable value and no further
accruals of interest are made. The valuation allowances 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 $38.5 million at September 30,
1997 (at amortized cost after impairment writedowns, with a fair value of $38.0
million), including $15.6 million of bonds and notes and
 
                                       24
<PAGE>   26
 
$22.9 million of mortgage loans. At September 30, 1997, defaulted investments
constituted 0.2% of total invested assets. At September 30, 1996, defaulted
investments totaled $28.7 million, including $16.7 million of bonds and notes
and $12.0 million of mortgage loans, and constituted 0.2% 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 September 30, 1997, approximately $15.87 billion of the Company's Bond
Portfolio had an aggregate unrealized gain of $458.8 million, while
approximately $2.25 billion of the Bond Portfolio had an aggregate unrealized
loss of $60.0 million. In addition, the Company's investment portfolio currently
provides approximately $184.7 million of monthly cash flow from scheduled
principal and interest payments. Further, $3.23 billion remains available to the
Company to issue securities under a shelf registration statement filed in July
1997 (see Note 6 of Notes to Consolidated Financial Statements). 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.
 
     On a parent company stand-alone basis, SunAmerica Inc. (the "Parent"), at
September 30, 1997, had invested assets with a fair value of $2.51 billion and
outstanding senior indebtedness of $1.14 billion, comprising all of the
Company's outstanding senior indebtedness. In October 1997, subsequent to its
fiscal year-end, the Company issued $100 million of 6.75% notes due October 1,
2007 (the "6.75% Notes"). (See Note 6 of Notes to Consolidated Financial
Statements.) Additionally, as of September 30, 1997, the Parent had three GICs
purchased by local government entities which aggregated $227.0 million.
 
     During November 1996 and October 1995, respectively, the Parent purchased
the common securities of SunAmerica Capital Trust III and SunAmerica Capital
Trust II (collectively, the "Grantor Trusts") and issued an aggregate of $511.9
million of junior subordinated debentures (the "Debentures") to the Grantor
Trusts in connection with the public issuance of the preferred securities of the
Grantor Trusts (see Note 8 of Notes to Consolidated Financial Statements).
 
     The Parent's annual debt service (principal and interest payments) with
respect to its senior indebtedness (including the 6.75% Notes), GIC obligations
and Debentures totals $183.6 million for fiscal 1998, $292.0 million for fiscal
1999, $574.6 million for fiscal 2000, $139.0 million for fiscal 2001, $297.4
million for fiscal 2002 and $4.27 billion, in the aggregate, thereafter. On or
before October 31, 1999, the Company is contractually scheduled to receive
$431.3 million upon delivery of 17.3 million or fewer shares of the Company's
Common Stock in accordance with the terms of the Company's 8 1/2% Premium Equity
Redemption Cumulative Security Units.
 
                                       25
<PAGE>   27
 
     The Parent received dividends from its regulated life insurance
subsidiaries totaling $118.7 million in April 1997, $94.3 million in March 1996
and $69.2 million in March 1995. The Parent also received dividends of $17.5
million in fiscal 1997 and $16.0 million in fiscal 1996 from its other directly
owned subsidiaries. The ability of the Company's life insurance subsidiaries to
pay dividends is limited by statute. There are no dividends available to the
Parent from its regulated life insurance subsidiaries for the remainder of
calendar year 1997.
 
     The Company has transferred to third-party investors certain of its
interests in various partnerships that make tax-advantaged affordable housing
investments. As part of these transactions, the Parent has agreed to advance
monies to support the operations of the underlying housing projects, if
required, and has guaranteed that the transferred partnerships will provide, as
of the transfer date and under then current tax laws, a specified level of
associated tax credits and deductions to the third-party investors. Based on an
evaluation of the underlying housing projects, management does not anticipate
any material cash payments with respect to the guarantees.
 
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.
 
     Additional financial statement schedules are included on pages S-3 through
S-7 herein. Reference is made to the Index to Financial Statement Schedules on
page S-1 herein.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None.
 
                                    PART III
 
     The Notice of 1998 Annual Meeting of Shareholders and Proxy Statement,
which, when filed pursuant to Regulation 14A under the Securities Exchange Act
of 1934, will be incorporated by reference in this Annual Report on Form 10-K
pursuant to General Instruction G(3) of Form 10-K, provides the information
required under Part III (Items 10, 11, 12 and 13), except for the information
regarding the executive officers of the Company, which is included in Part I on
pages 10-11.
 
                                       26
<PAGE>   28
 
                                    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 indexes set forth on pages F-1 and S-1 of this
report.
 
EXHIBITS
 
<TABLE>
<CAPTION>
Exhibit
 No.                                         Description
------   -----------------------------------------------------------------------------------
<S>      <C>
 2(a)    Stock Purchase Agreement between the Company and The American Road Insurance
          Company, dated as of November 10, 1995, whereby the Company acquired all of the
          outstanding stock of Ford Life Insurance Company from The American Road Insurance
          Company, a subsidiary of Ford Motor Company, is incorporated herein by reference
          to Exhibit 10.1 of the Company's Form 8-K, filed on December 12, 1995.
 2(b)    Share Exchange Agreement, dated January 12, 1996, among the Company, Stanford
          Ranch, Inc., and the Stockholders of Stanford Ranch, Inc. named therein, whereby
          the Company issued shares of its Common Stock in exchange for all of the
          outstanding shares of common stock of Stanford Ranch, Inc., is incorporated herein
          by reference to the Company's Notice of 1996 Annual Meeting and Proxy Statement,
          filed January 15, 1996.
 2(c)    Asset Purchase and Sale Agreement between SunAmerica Life Insurance Company and
          John Alden Life Insurance Company, dated as of November 29, 1996 is incorporated
          herein by reference to Exhibit 2(c) to the Company's 1996 Annual Report on Form
          10-K, filed December 10, 1996.
 2(d)    Stock Purchase Agreement between SunAmerica Life Insurance Company and John Alden
          Financial Corporation, dated as of November 29, 1996, regarding all of the
          outstanding stock of John Alden Life Insurance Company of New York, is
          incorporated herein by reference to Exhibit 2(d) to the Company's 1996 Annual
          Report on Form 10-K, filed December 10, 1996.
 3(a)    Restated Charter, dated October 3, 1991, is incorporated herein by reference to
          Exhibit 3(a) to the Company's Form 8 dated and filed October 4, 1991, amending the
          Company's Annual Report on Form 10-K for the year ended September 30, 1990, filed
          December 20, 1990.
 3(b)    Articles Supplementary, dated June 24, 1992, which define the rights of the holders
          of the Company's 9 1/4% Preferred Stock, Series B, are incorporated herein by
          reference to Exhibit 3(c) to the Company's 1992 Annual Report on Form 10-K, filed
          November 30, 1992.
 3(c)    Amendment to the Company's Restated Articles of Incorporation, dated February 1,
          1993, is incorporated herein by reference to Exhibit 1 to the Company's Form 8-K,
          filed February 3, 1993.
 3(d)    Articles Supplementary, dated March 9, 1993, which define the rights of the holders
          of the Company's Series D Mandatory Conversion Premium Dividend Preferred Stock,
          are incorporated herein by reference to Exhibit 3(e) to the Company's Registration
          Statement No. 33-66048 on Form S-4, filed July 22, 1993.
 3(e)    Articles Supplementary, dated August 31, 1993, which define the rights of the
          holders of the Company's Adjustable Rate Cumulative Preferred Stock, Series C, are
          incorporated herein by reference to Exhibit 3(f) to the Company's 1993 Annual
          Report on Form 10-K, filed December 16, 1993.
</TABLE>
 
                                       27
<PAGE>   29
 
<TABLE>
<CAPTION>
Exhibit
 No.                                         Description
------   -----------------------------------------------------------------------------------
<S>      <C>
 3(f)    Articles Supplementary, dated January 27, 1995, which define the reacquisition of
          the Company's Series A Mandatory Conversion Premium Dividend Preferred Stock, are
          incorporated herein by reference to Exhibit 3(g) to the Company's 1995 Annual
          Report on Form 10-K, filed November 29, 1995.
 3(g)    Articles Supplementary, dated October 30, 1995, which define the rights of the
          holders of the Company's Series E Mandatory Conversion Premium Dividend Preferred
          Stock, are incorporated herein by reference to Exhibit 3(h) to the Company's
          Annual Report on Form 10-K, filed November 29, 1995.
 3(h)    Articles of Amendment, dated October 30, 1995, are incorporated herein by reference
          to Exhibit 3(i) to the Company's Annual Report on Form 10-K, filed November 29,
          1995.
 3(i)    Articles of Amendment, dated June 7, 1996, are incorporated herein by reference to
          Exhibit 3(j) to the Company's Annual Report on Form 10-K, filed December 10, 1996.
 3(j)    Articles of Amendment, dated February 14, 1997.
 3(k)    Bylaws, as amended and restated on November 8, 1996, are incorporated herein by
          reference to Exhibit 3(k) to the Company's Annual Report on Form 10-K, filed
          December 10, 1996.
 4(a)    Restated Charter, dated October 3, 1991. See Exhibit 3(a).
 4(b)    Bylaws, as amended and restated on November 8, 1996. See Exhibit 3(l).
 4(c)    Articles Supplementary, dated June 24, 1992. See Exhibit 3(b).
 4(d)    Articles Supplementary, dated March 9, 1993. See Exhibit 3(d).
 4(e)    Articles Supplementary, dated August 31, 1993. See Exhibit 3(e).
 4(f)    Form of Subordinated Indenture, dated as of October 28, 1996, between the Company
          and The First National Bank of Chicago, as Trustee, is incorporated herein by
          reference to Exhibit 4.3 to the Company's Registration Statement No. 333-14201 on
          Form S-3, filed October 16, 1996.
 4(g)    Senior Indenture, dated as of April 15, 1993, between the Company and The First
          National Bank of Chicago, as Trustee, defining the rights of the holders of the
          Company's 8 1/8% Debentures due April 28, 2023 and certain other debt securities
          of the Company, is incorporated herein by reference to Exhibit 4(h) to the
          Company's 1993 Annual Report on Form 10-K, filed December 16, 1993.
 4(h)    Supplemental Indenture, dated as of June 28, 1993, supplementing the Senior
          Indenture, dated as of April 15, 1993, is incorporated herein by reference to
          Exhibit 4.2 to the Company's Registration Statement No. 333-14201 on Form S-3,
          filed October 16, 1996.
 4(i)    Supplemental Indenture, dated October 28, 1996, supplementing the Senior Indenture,
          dated as of April 15, 1993, as amended by the Supplemental Indenture, dated as of
          June 28, 1993, between the Company and The First National Bank of Chicago, as
          Trustee, is incorporated herein by reference to Exhibit 4.7 to the Company's
          Current Report on Form 8-K, filed November 6, 1996.
 4(j)    Junior Subordinated Indenture, dated as of March 15, 1995, as supplemented by the
          First Supplemental Indenture, dated as of March 15, 1995, defining the rights of
          the holders of the Company's 9.95% Junior Subordinated Debentures, Series A, due
          2044, between the Company and The First National Bank of Chicago, is incorporated
          herein by reference to Exhibit 4.3 to the Company's Registration Statement No.
          33-62405 on Form S-3, filed September 6, 1995.
</TABLE>
 
                                       28
<PAGE>   30
 
<TABLE>
<CAPTION>
Exhibit
 No.                                         Description
------   -----------------------------------------------------------------------------------
<S>      <C>
 4(k)    Form of Second Supplemental Indenture, dated October 11, 1995, to the Junior
          Subordinated Indenture dated as of March 15, 1995, defining the rights of the
          holders of the Company's 8.35% Junior Subordinated Debentures due 2044, between
          the Company and The First National Bank of Chicago, as Trustee, is incorporated
          herein by reference to Exhibit 4.12 to the Company's Registration Statement No.
          33-64205 on Form S-3, filed September 6, 1995.
 4(l)    Supplemental Indenture, dated October 28, 1996, supplementing the Junior
          Subordinated Indenture, dated as of March 15, 1995, between the Company and The
          First National Bank of Chicago, as Trustee, is incorporated herein by reference to
          Exhibit 4.8 to the Company's Current Report on Form 8-K, filed November 6, 1996.
 4(m)    Fourth Supplemental Indenture, dated November 13, 1996, to the Junior Subordinated
          Indenture, dated as of March 15, 1995, defining the rights of the holders of the
          Company's 8.30% Junior Subordinated Debentures due 2045, between the Company and
          The First National Bank of Chicago, as Trustee, is incorporated herein by
          reference to Exhibit 4.16 to the Company's Current Report on Form 8-K, filed
          November 12, 1996.
 4(n)    Purchase Contract Agreement, dated November 6, 1996, between the Company and The
          Bank of New York, as Purchase Contract Agent (including Form of Security
          Certificate), is incorporated hereby by reference to Exhibit 4.3 to the Company's
          Current Report on Form 8-K, filed November 6, 1996.
 4(o)    Pledge Agreement, dated November 6, 1996, among the Company, The First National
          Bank of Chicago, as Collateral Agent, and The Bank of New York, as Purchase
          Contract Agent, is incorporated herein by reference to Exhibit 4.4 to the
          Company's Current Report on Form 8-K, filed November 6, 1996.
 4(p)    Prepaid Securities Indenture, dated November 1, 1996, between the Company and The
          Bank of New York, as Trustee, is incorporated herein by reference to Exhibit 4.5
          to the Company's Current Report on Form 8-K, filed November 6, 1996.
 4(q)    Supplemental Indenture, dated November 6, 1996, to the Prepaid Securities Indenture
          (including Form of Certificate for the Prepaid Securities), is incorporated herein
          by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K, filed
          November 6, 1996.
 4(r)    Tri-Party Agreement, dated as of July 1, 1993, among The First National Bank of
          Chicago, Bank of America, NT & SA and the Company, appointing The First National
          Bank of Chicago as Successor Trustee to Bank of America NT & SA for the Company's
          9% Notes due January 15, 1995 and 9.95% Debentures due February 1, 2012, is
          incorporated herein by reference to Exhibit 4(i) to the Company's 1993 Annual
          Report on Form 10-K, filed December 16, 1993.
 4(s)    Form of Amended and Restated Declaration of Trust of SunAmerica Capital Trust I,
          dated as of June 6, 1995, among the Company and the Trustees of the Trust, is
          incorporated herein by reference to Exhibit 4.5 to the Company's Registration
          Statement Nos. 33-56961 and 33-56961-01 on Form S-4, filed April 12, 1995.
 4(t)    Form of Amended and Restated Declaration of Trust of SunAmerica Capital Trust II,
          dated as of October 11, 1995, among the Company and the Trustees of the Trust, is
          incorporated herein by reference to Exhibit 4.10 to the Company's Registration
          Statement Nos. 33-62405 and 33-62405-01 on Form S-3, filed September 6, 1995.
 4(u)    Amended and Restated Declaration of Trust of SunAmerica Capital Trust III, dated as
          of November 13, 1996, among the Company and Trustees of the Trust, is incorporated
          herein by reference to Exhibit 4.13 to the Company's Current Report on Form 8-K,
          filed November 12, 1996.
</TABLE>
 
                                       29
<PAGE>   31
 
<TABLE>
<CAPTION>
Exhibit
 No.                                         Description
------   -----------------------------------------------------------------------------------
<S>      <C>
 4(v)    Form of Guarantee Agreement, dated October 11, 1995, between the Company and The
          Bank of New York, as Trustee, relating to the Preferred Securities of SunAmerica
          Capital Trust II, is incorporated herein by reference to Exhibit 4.14 to the
          Company's Registration Statement Nos. 33-62405 and 33-62405-01 on Form S-3, filed
          September 6, 1995.
 4(w)    Form of Guarantee Agreement, dated November 13, 1996, between the Company and The
          Bank of New York, as Trustee, relating to the Preferred Securities of SunAmerica
          Capital Trust III, is incorporated herein by reference to Exhibit 4.19 of the
          Company's Registration Statement Nos. 333-14201 and 333-14201-01 on Form S-3,
          filed October 16, 1996.
10(a)    Employment Agreement, dated July 14, 1992, between the Company and Michael L.
          Fowler, is incorporated herein by reference to Exhibit 10(f) to the Company's 1992
          Annual Report on Form 10-K, filed November 30, 1992.
10(b)    Employment Agreement, dated April 17, 1995, between the Company and Joseph M.
          Tumbler, is incorporated herein by reference to Exhibit 10(a) to the Company's
          Quarterly Report on Form 10-Q, for the quarter ended June 30, 1995, filed August
          14, 1995.
10(c)    Employment Agreement, dated April 27, 1995, between the Company and Jay S. Wintrob,
          is incorporated herein by reference to Exhibit 10(b) to the Company's Quarterly
          Report on Form 10-Q, for the quarter ended June 30, 1995, filed August 14, 1995.
10(d)    Employment Agreement, dated August 15, 1997, between the Company and Gary W. Krat.
10(e)    1988 Employee Stock Plan is incorporated herein by reference to Exhibit B to the
          Company's and Kaufman and Broad Home Corporation's Notice of and Joint Proxy
          Statement for Special Meeting of Shareholders held on February 21, 1989, filed
          January 24, 1989.
10(f)    Amended and Restated 1978 Employee Stock Option Program, is incorporated herein by
          reference to Appendix A to the Company's Notice of 1987 Annual Meeting of
          Shareholder's and Proxy Statement, filed March 24, 1987.
10(g)    Executive Deferred Compensation Plan is incorporated herein by reference to Exhibit
          10(1) to the Company's 1985 Annual Report on Form 10-K, filed February 27, 1986.
10(h)    1987 Restricted Stock Plan is incorporated herein by reference to Appendix A to the
          Company's Notice of 1988 Annual Meeting of Shareholders and Proxy Statement, filed
          March 22, 1988.
10(i)    Executive Deferred Compensation Plan, dated as of October 1, 1989, is incorporated
          herein by reference to Exhibit 10(h) to the Company's 1994 Annual Report on Form
          10-K, filed December 1, 1994.
10(j)    SunAmerica Supplemental Deferral Plan is incorporated herein by reference to
          Exhibit 10(m) to the Company's 1989 Annual Report on Form 10-K, filed December 20,
          1989.
10(k)    Long-Term Performance-Based Incentive Plan, Amended and Restated 1997, is
          incorporated herein by reference to Appendix C to the Company's Notice of 1997
          Annual Meeting of Shareholders and Proxy Statement, filed December 30, 1996.
10(l)    Performance Incentive Compensation Plan is incorporated herein by reference to the
          Company's Notice of 1995 Annual Meeting of Shareholders and Proxy Statement, filed
          December 1, 1994.
10(m)    1995 Performance Stock Plan as amended and restated is incorporated herein by
          reference to Exhibit 10(e) to the Company's Quarterly Report on Form 10-Q for the
          quarter ended March 31, 1997, filed May 15, 1997.
</TABLE>
 
                                       30
<PAGE>   32
 
<TABLE>
<CAPTION>
Exhibit
 No.                                         Description
------   -----------------------------------------------------------------------------------
<S>      <C>
10(n)    Registered Representatives' Deferred Compensation Plan is incorporated herein by
          reference to Exhibit 4.1 to the Company's Registration Statement No. 333-10523 on
          Form S-3, filed August 20, 1996.
10(o)    Deferred Compensation Agreement is incorporated herein by reference to Exhibit 4.2
          of the Company's Registration No. 333-10523 on Form S-3, filed August 20, 1996.
10(p)    Amendment to Performance Incentive Compensation Plan is incorporated herein by
          reference to the Company's Notice of 1996 Annual Meeting of Shareholders and Proxy
          Statement, filed January 15, 1996.
10(q)    Amendment and Restatement, dated December 31, 1996, to the $250,000,000 Credit
          Agreement, dated as of October 27, 1996, among the Company and SunAmerica
          Financial, Inc. as Borrowers and Citibank, N.A. as Agent for the banks named
          therein, is incorporated herein by reference to Exhibit 10.1 to the Company's
          Quarterly Report on Form 10-Q for the quarter ended December 31, 1996, filed
          February 13, 1997.
10(r)    Executive Savings Plan, effective January 1, 1997, is incorporated herein by
          reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
          quarter ended December 31, 1996, filed February 13, 1997.
10(s)    SunAmerica 1997 Employee Incentive Stock Plan is incorporated herein by reference
          to Appendix A to the Company's Notice of 1997 Annual Meeting and Proxy Statement,
          filed December 30, 1996.
10(t)    SunAmerica Long-Term Incentive Plan is incorporated herein by reference to Appendix
          B to the Company's Notice of 1997 Annual Meeting and Proxy Statement, filed
          December 30, 1996.
10(u)    Non-Employee Directors' Stock Option Plan is incorporated herein by reference to
          Appendix D to the Company's Notice of 1997 Annual Meeting and Proxy Statement,
          filed December 30, 1996.
10(v)    List of Executive Compensation Plans and Arrangements.
11       Statement re Computation of per-share earnings.
12(a)    Statement re Computation of ratio of earnings to fixed charges.
12(b)    Statement re Computation of ratio of earnings to combined fixed charges and
          preferred stock dividends.
21       Subsidiaries of the Company.
23       Consent of Independent Accountants.
27       Financial Data Schedule.
</TABLE>
 
REPORTS ON FORM 8-K
 
     On July 16, 1997, the Company filed a Current Report on Form 8-K to file
exhibits in connection with the issuance of 10,669,745 shares of its Common
Stock pursuant to the Company's Registration Statement on Form S-3 (File No.
333-14201).
 
     On July 31, 1997, the Company filed a Current Report on Form 8-K to file
exhibits in connection with the issuance of its 5.60% Debentures due July 31,
2097 pursuant to the Company's Registration Statement on Form S-3 (File No.
333-31619).
 
     On October 7, 1997, the Company filed a Current Report on Form 8-K to file
exhibits in connection with the issuance of its 6.75% Notes due October 1, 2007
pursuant to the Company's Registration Statement on Form S-3 (File No.
333-31619).
 
     On December 1, 1997, the Company filed a Current Report on Form 8-K to file
exhibits in connection with its Medium Term Note Program.
 
                                       31
<PAGE>   33
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                            SUNAMERICA INC.
 
Date: December 10, 1997                     By:       SCOTT L. ROBINSON
                                               -------------------------------- 
                                                      Scott L. Robinson
                                                  Senior Vice President and
                                                           Controller
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
 
<TABLE>
<CAPTION>
               Signature                                Title                      Date
----------------------------------------   -------------------------------  ------------------
<C>                                        <S>                              <C>
               ELI BROAD                   Chairman, President              December 10, 1997
----------------------------------------    and Chief Executive Officer
               Eli Broad                    (Principal Executive Officer)
 
             JAY S. WINTROB                Vice Chairman and Director       December 10, 1997
----------------------------------------
             Jay S. Wintrob
 
            JAMES R. BELARDI               Executive Vice President         December 10, 1997
----------------------------------------    (Principal Financial Officer)
            James R. Belardi
 
           SCOTT L. ROBINSON               Senior Vice President and        December 10, 1997
----------------------------------------    Controller (Principal
           Scott L. Robinson                Accounting Officer)
 
          WILLIAM F. ALDINGER              Director                         December 10, 1997
----------------------------------------
          William F. Aldinger
 
         KAREN HASTIE-WILLIAMS             Director                         December 10, 1997
----------------------------------------
         Karen Hastie-Williams
 
            DAVID O. MAXWELL               Director                         December 10, 1997
----------------------------------------
            David O. Maxwell
 
              BARRY MUNITZ                 Director                         December 10, 1997
----------------------------------------
              Barry Munitz
 
             LESTER POLLACK                Director                         December 10, 1997
----------------------------------------
             Lester Pollack
 
           CARL E. REICHARDT               Director                         December 10, 1997
----------------------------------------
           Carl E. Reichardt
 
          SANFORD C. SIGOLOFF              Director                         December 10, 1997
----------------------------------------
          Sanford C. Sigoloff
 
           HAROLD M. WILLIAMS              Director                         December 10, 1997
----------------------------------------
           Harold M. Williams
</TABLE>
 
                                       32
<PAGE>   34
 
                 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                 Page(s)
                                                                            -----------------
<S>                                                                         <C>
Report of Independent Accountants..........................................        F-2
Consolidated Balance Sheet as of September 30, 1997 and 1996...............        F-3
Consolidated Income Statement for the years ended September 30, 1997, 1996
  and 1995.................................................................        F-4
Consolidated Statement of Cash Flows for the years ended September 30,
  1997, 1996 and 1995......................................................  F-5 through F-6
Notes to Consolidated Financial Statements................................. F-7 through F-28
</TABLE>
 
     Separate financial statements of subsidiaries not consolidated and 50% or
less owned persons accounted for by the equity method have been omitted because
they do not individually constitute a significant subsidiary.
 
                                       F-1
<PAGE>   35
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Shareholders of SunAmerica Inc.
 
     In our opinion, the accompanying consolidated balance sheet and the related
consolidated income statement and statement of cash flows present fairly, in all
material respects, the financial position of SunAmerica Inc. and its
subsidiaries at September 30, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1997, in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards 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 the opinion expressed
above.
 
Price Waterhouse LLP
Los Angeles, California
November 7, 1997
 
                                       F-2
<PAGE>   36
 
                                SUNAMERICA INC.
 
                           CONSOLIDATED BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                                                   September 30,
                                                                            ---------------------------
                                                                               1997            1996
                                                                            -----------     -----------
                                                                                  (In thousands)
<S>                                                                         <C>             <C>
ASSETS
Investments:
  Cash and short-term investments.........................................  $   993,349     $   529,363
  Bonds, notes and redeemable preferred stocks available for sale, at fair
     value (amortized cost: 1997, $18,124,837,000; 1996,
     $12,657,620,000).....................................................   18,523,655      12,582,024
  Mortgage loans..........................................................    3,139,309       1,652,257
  Common stocks available for sale, at fair value (cost: 1997,
     $32,821,000; 1996, $44,871,000)......................................       96,541          81,385
  Partnerships............................................................    1,286,793       1,071,857
  Real estate.............................................................       81,569         105,321
  Other invested assets...................................................      286,962         177,577
                                                                            -----------     -----------
  Total investments.......................................................   24,408,178      16,199,784
Variable annuity assets...................................................    9,514,675       6,380,458
Accrued investment income.................................................      296,637         186,803
Deferred acquisition costs................................................    1,118,582         782,300
Other assets..............................................................      298,814         177,476
                                                                            -----------     -----------
TOTAL ASSETS..............................................................  $35,636,886     $23,726,821
                                                                            ===========     ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Reserves, payables and accrued liabilities:
  Reserves for fixed annuity contracts....................................  $14,445,126     $ 9,654,674
  Reserves for guaranteed investment contracts............................    5,553,292       4,169,028
  Trust deposits..........................................................      427,433         436,048
  Payable to brokers for purchases of securities..........................      266,477          42,518
  Income taxes currently payable..........................................        2,025          18,436
  Other liabilities.......................................................      828,916         428,718
                                                                            -----------     -----------
  Total reserves, payables and accrued liabilities........................   21,523,269      14,749,422
                                                                            -----------     -----------
Variable annuity liabilities..............................................    9,514,675       6,380,458
                                                                            -----------     -----------
Long-term notes and debentures............................................    1,136,072         573,335
                                                                            -----------     -----------
Deferred income taxes.....................................................      383,764         125,417
                                                                            -----------     -----------
Company-obligated mandatorily redeemable preferred securities of
  subsidiary grantor trusts whose sole assets are junior subordinated
  debentures of the Company...............................................      495,000         237,631
                                                                            -----------     -----------
Shareholders' equity:
  Preferred Stock.........................................................      248,000         384,549
  Nontransferable Class B Stock...........................................       16,273          10,848
  Common Stock............................................................      179,076         108,604
  Additional paid-in capital..............................................      750,401         304,295
  Retained earnings.......................................................    1,180,446         869,215
  Net unrealized gains (losses) on debt and equity securities available
     for sale.............................................................      209,910         (16,953)
                                                                            -----------     -----------
  Total shareholders' equity..............................................    2,584,106       1,660,558
                                                                            -----------     -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................  $35,636,886     $23,726,821
                                                                            ===========     ===========
</TABLE>
 
See accompanying notes
 
                                       F-3
<PAGE>   37
 
                                SUNAMERICA INC.
 
                         CONSOLIDATED INCOME STATEMENT
 
<TABLE>
<CAPTION>
                                                                               Years ended September 30,
                                                                    ------------------------------------
                                                                           1997         1996        1995
                                                                    -----------   ----------   ---------
                                                                               (In thousands,
                                                                         except per-share amounts)
<S>                                                                 <C>           <C>          <C>
Investment income.................................................  $ 1,795,826   $1,254,288   $ 905,802
                                                                    -----------   ----------   ---------
Interest expense on:
  Fixed annuity contracts.........................................     (644,426)    (410,269)   (258,730)
  Guaranteed investment contracts.................................     (314,144)    (252,027)   (213,340)
  Trust deposits..................................................       (9,726)      (9,968)    (10,519)
  Senior indebtedness.............................................     (106,279)     (69,033)    (55,985)
                                                                    -----------   ----------   ---------
  Total interest expense..........................................   (1,074,575)    (741,297)   (538,574)
                                                                    -----------   ----------   ---------
Dividends paid on preferred securities of grantor trusts..........      (41,874)     (20,235)     (1,673)
                                                                    -----------   ----------   ---------
NET INVESTMENT INCOME.............................................      679,377      492,756     365,555
                                                                    -----------   ----------   ---------
NET REALIZED INVESTMENT LOSSES....................................      (29,203)     (30,314)    (33,012)
                                                                    -----------   ----------   ---------
Fee income:
  Variable annuity fees...........................................      141,204      104,661      84,583
  Net retained commissions........................................       64,911       49,824      33,715
  Surrender charges...............................................       35,241       22,086      11,885
  Asset management fees...........................................       25,764       25,413      26,935
  Loan servicing fees.............................................       24,264       23,846      19,792
  Trust fees......................................................       17,912       16,684      15,394
  Other fees......................................................        8,407        5,897       6,300
                                                                    -----------   ----------   ---------
TOTAL FEE INCOME..................................................      317,703      248,411     198,604
                                                                    -----------   ----------   ---------
GENERAL AND ADMINISTRATIVE EXPENSES...............................     (265,738)    (210,650)   (165,434)
                                                                    -----------   ----------   ---------
AMORTIZATION OF DEFERRED ACQUISITION COSTS........................     (165,089)    (108,176)    (86,107)
                                                                    -----------   ----------   ---------
PRETAX INCOME.....................................................      537,050      392,027     279,606
Income tax expense................................................     (158,000)    (117,600)    (85,400)
                                                                    -----------   ----------   ---------
NET INCOME........................................................  $   379,050   $  274,427   $ 194,206
                                                                    ===========   ==========   =========
EARNINGS PER SHARE................................................  $      1.80   $     1.30   $    0.95
                                                                    ===========   ==========   =========
NET EARNINGS APPLICABLE TO COMMON STOCK (used in the computation
  of earnings per share)..........................................  $   373,268   $  262,895   $ 179,223
                                                                    ===========   ==========   =========
AVERAGE SHARES OUTSTANDING........................................      207,758      201,881     189,342
                                                                    ===========   ==========   =========
</TABLE>
 
See accompanying notes
 
                                       F-4
<PAGE>   38
 
                                SUNAMERICA INC.
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                               Years ended September 30,
                                                               -----------------------------------------
                                                                       1997           1996          1995
                                                               ------------   ------------   -----------
                                                                            (In thousands)
<S>                                                            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................  $    379,050   $    274,427   $   194,206
Adjustments to reconcile net income to net cash provided by
 operating activities:
  Interest credited to:
     Fixed annuity contracts.................................       644,426        410,269       258,730
     Guaranteed investment contracts.........................       314,144        252,027       213,340
     Trust deposits..........................................         9,726          9,968        10,519
  Net realized investment losses.............................        29,203         30,314        33,012
  Accretion of net discounts on investments..................       (38,684)       (28,610)      (33,756)
  Provision for deferred income taxes........................       128,001         (3,457)       (5,834)
Change in:
  Accrued investment income..................................       (59,214)       (10,347)       10,648
  Deferred acquisition costs.................................       (78,564)       (50,495)      (24,741)
  Other assets...............................................       (32,846)       (18,958)       (4,731)
  Income taxes currently payable.............................       (84,424)        19,052        52,433
  Other liabilities..........................................       157,598         38,275        25,523
Other, net...................................................        (1,652)        15,721        12,674
                                                               ------------   ------------   -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................     1,366,764        938,186       742,023
                                                               ------------   ------------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
  Bonds, notes and redeemable preferred stocks...............   (19,506,303)   (11,476,827)   (6,852,129)
  Mortgage loans.............................................      (990,408)      (320,748)     (250,547)
  Partnerships...............................................    (1,062,133)      (712,749)     (410,299)
  Other investments, excluding short-term investments........      (269,538)      (132,711)      (92,516)
  Net assets of acquired businesses..........................       173,239         62,790      (442,804)
Sales of:
  Bonds, notes and redeemable preferred stocks...............    13,108,441      7,490,441     4,498,853
  Mortgage loans.............................................       333,763             --            --
  Partnerships...............................................       679,169        318,303       165,710
  Other investments, excluding short-term investments........        92,626         63,556        71,442
Redemptions and maturities of:
  Bonds, notes and redeemable preferred stocks...............     4,425,246      2,891,448     2,134,509
  Mortgage loans.............................................       428,636        199,564       107,102
  Partnerships...............................................       321,901        183,014       104,734
  Other investments, excluding short-term investments........       180,868         50,819        53,928
                                                               ------------   ------------   -----------
NET CASH USED BY INVESTING ACTIVITIES........................    (2,084,493)    (1,383,100)     (912,017)
                                                               ------------   ------------   -----------
</TABLE>
 
                                       F-5
<PAGE>   39
 
                                SUNAMERICA INC.
 
                CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                               Years ended September 30,
                                                               -----------------------------------------
                                                                       1997           1996          1995
                                                               ------------   ------------   -----------
                                                                            (In thousands)
<S>                                                            <C>            <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of cash dividends to shareholders...................  $    (67,819)  $    (61,721)  $   (50,268)
Premium receipts on:
  Fixed annuity contracts....................................     1,490,556        993,376       944,742
  Guaranteed investment contracts............................     2,076,941      1,019,275     1,766,629
Net exchanges to (from) the fixed accounts of variable
  annuity contracts..........................................      (660,332)      (260,635)       10,388
Receipts of trust deposits...................................       787,599        454,237       447,398
Withdrawal payments on:
  Fixed annuity contracts....................................    (1,454,718)      (786,724)     (690,292)
  Guaranteed investment contracts............................    (1,010,127)      (708,743)   (1,156,299)
  Trust deposits.............................................      (805,937)      (454,718)     (473,611)
Claims and annuity payments on fixed annuity contracts.......      (387,181)      (232,361)     (178,487)
Net proceeds from issuances of long-term notes and
  debentures.................................................       559,332         47,478        51,675
Net proceeds from issuances of preferred securities of
  subsidiary grantor trusts..................................       299,586        179,476            --
Payment for redemption of preferred securities of a
  subsidiary grantor trust...................................       (52,631)            --            --
Net proceeds from issuance of Preferred Stock................            --        240,547            --
Payments for redemptions of Preferred Stock..................      (136,549)            --            --
Net proceeds from issuance of Common Stock...................       577,268             --            --
Other, net...................................................       (34,273)      (310,560)     (215,913)
                                                                -----------     ----------   -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES....................     1,181,715        118,927       455,962
                                                                -----------     ----------   -----------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS...       463,986       (325,987)      285,968
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD.......       529,363        855,350       569,382
                                                                -----------     ----------   -----------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.............  $    993,349   $    529,363   $   855,350
                                                                ===========     ==========   ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid on indebtedness................................  $    130,461   $     66,037   $    54,899
                                                                ===========     ==========   ===========
Income taxes paid, net of refunds received...................  $    114,423   $    102,005   $    38,801
                                                                ===========     ==========   ===========
NON-CASH FINANCING ACTIVITY:
Exchange of 2,105,235 shares of 9 1/4% Series B Preferred
  Stock for preferred securities of a subsidiary grantor
  trust......................................................  $         --   $         --   $    52,631
                                                                ===========     ==========   ===========
</TABLE>
 
See accompanying notes
 
                                       F-6
<PAGE>   40
 
                                SUNAMERICA INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 -- NATURE OF OPERATIONS
 
     SunAmerica Inc. (the "Company") conducts its business through five
segments: annuity operations, asset management, retirement trust services,
broker-dealer operations and premium financing. Annuity operations, which
include the sale and administration of fixed and variable annuities and
guaranteed investment contracts, are conducted through the Company's five life
insurance subsidiaries: SunAmerica Life Insurance Company; Anchor National Life
Insurance Company; CalAmerica Life Insurance Company (formerly known as CalFarm
Life Insurance Company) ("CalAmerica"); First SunAmerica Life Insurance Company;
and SunAmerica National Life Insurance Company. Asset management, which includes
the sale and management of mutual funds, is conducted by SunAmerica Asset
Management Corp. Retirement trust services are provided by Resources Trust
Company and include custodial and administrative services for self-directed
retirement plans. Broker-dealer operations include the sale of securities and
financial services products, and are conducted by the Company's three
broker-dealer subsidiaries: Royal Alliance Associates, Inc.; SunAmerica
Securities, Inc.; and Advantage Capital Corporation. Premium financing is
provided by Imperial Premium Finance, Inc. and involves the origination and
servicing of short-term premium finance loans.
 
     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, 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.
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     BASIS OF PRESENTATION. The accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
and include the accounts of the Company and all of its wholly owned
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation. Certain prior period amounts have been reclassified
to conform with the 1997 presentation.
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
 
     On August 29, 1997, the Company paid a three-for-two stock split; on August
30, 1996, the Company paid a two-for-one stock split; and on November 10, 1995,
the Company paid a three-for-two stock split (collectively, the "Stock Splits").
The Stock Splits were effected in the form of stock dividends on the Company's
Common Stock and Nontransferable Class B Stock. The par value of the shares paid
in connection with the Stock Splits was charged to Additional Paid-In Capital in
the balance sheet. Per-share amounts, average shares outstanding, stock option
plan data and related prices have been restated, for all periods presented, to
reflect the Stock Splits.
 
     INVESTMENTS.  Cash and short-term investments primarily include cash,
commercial paper, money market investments, repurchase agreements and short-term
bank participations. All such
 
                                       F-7
<PAGE>   41
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 shareholders' 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. Real estate is carried at the lower of cost or fair value.
 
     Partnerships are accounted for by using the equity method if the Company
exercises significant influence over their operating affairs; otherwise, the
cost method is used. For partnerships that invest in tax-advantaged affordable
housing units, interest is capitalized during construction. The Company invests
in such partnerships principally with the intent to syndicate them to
third-party investors once construction of the underlying projects is completed.
Investments in such partnerships are accounted for by using the equity method
and sales of such partnerships are accounted for as sales of real estate.
Because the Company provides certain operating and yield guarantees to the
buyers, the gain realized upon sale is deferred, after recognition of
syndication compensation, and amortized over a 15-year period. Syndication
compensation, imputed interest and amortization of deferred gains are included
in Investment Income in the income statement.
 
     Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income using the interest method over the contractual lives of the
investments.
 
     INTEREST RATE SWAP AGREEMENTS.  The net differential to be paid or received
on interest rate swap agreements ("Swap Agreements") entered into to reduce the
impact of changes in interest rates is recognized over the lives of the
agreements, and such differential is classified as Investment Income or Interest
Expense in the income statement. All outstanding Swap Agreements are designated
as hedges and, therefore, are not marked to market. However, in the event that a
hedged asset/liability were to be sold or repaid before the related Swap
Agreement matures, the Swap Agreement would be marked to market and any
gain/loss classified with any gain/loss realized on the disposition of the
hedged asset/liability. Subsequently, the Swap Agreement would be marked to
market and the resulting change in fair value would be included in Investment
Income in the income statement. In the event that a Swap Agreement that is
designated as a hedge were to be terminated before its contractual maturity, any
resulting gain/loss would be credited/charged to the carrying value of the
asset/liability that it hedged.
 
     TOTAL RETURN CORPORATE BOND SWAP AGREEMENTS.  Total return corporate bond
swap agreements ("Total Return Agreements") have been entered into for
investment purposes, and, accordingly, are marked to market with the related
gain/loss classified as Investment Income in the income statement.
 
     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 realized
investment gains and losses, variable annuity fees, surrender charges and direct
administrative
 
                                       F-8
<PAGE>   42
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
expenses. Costs incurred to sell mutual funds are also deferred and amortized
over the estimated lives of the funds obtained. Deferred acquisition costs
consist of commissions and other costs that vary with, and are primarily related
to, the production or acquisition of new business.
 
     As debt and equity securities available for sale are carried at aggregate
fair value, an adjustment is made to deferred acquisition costs 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/losses on debt and equity securities available for sale
that is credited or charged directly to shareholders' equity. Deferred
Acquisition Costs have been decreased by $139,600,000 at September 30, 1997 and
increased by $13,000,000 at September 30, 1996 for this adjustment.
 
     VARIABLE ANNUITY ASSETS AND LIABILITIES.  The assets and liabilities
resulting from the receipt of variable annuity premiums are segregated in
separate accounts. The Company receives administrative fees for managing the
funds and other fees for assuming mortality and certain expense risks. Such fees
are included in Variable Annuity Fees in the income statement.
 
     GOODWILL.  Goodwill, amounting to $55,704,000 at September 30, 1997, is
amortized by using the straight-line method over periods ranging from 25 to 40
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).
 
     FEE INCOME.  Variable annuity fees, asset management fees, trust fees and
surrender charges are recorded in income as earned. Net retained commissions are
recognized as income on a trade date basis. Loan servicing fees are recognized
as income ratably over the life of the serviced loans and include the difference
between the loan yield and the rate earned by the purchasers of the loans.
 
     EARNINGS PER SHARE.  The calculation of earnings per share is made by
dividing applicable earnings by the weighted average number of shares of Common
Stock and Nontransferable Class B Stock (collectively referred to as "Common
Stock") outstanding during each period, adjusted for the incremental shares
attributed to common stock equivalents. Common stock equivalents include
outstanding employee stock options; Premium Equity Redemption Cumulative
Security Units issued in November 1996; and convertible preferred stock, which
includes the Series D and E Depositary Shares issued in March 1993 and November
1995, respectively. Common stock equivalents are included in the computation
only if their effect is dilutive. Net Earnings Applicable to Common Stock are
reduced by preferred stock dividend requirements, which amounted to $5,782,000
in 1997, $11,532,000 in 1996 and $14,983,000 in 1995. These preferred stock
dividend requirements do not include dividends paid on the convertible issues,
which amounted to $12,400,000 in 1997, $15,528,000 in 1996 and $13,907,000 in
1995.
 
                                       F-9
<PAGE>   43
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 3 -- ACQUISITIONS
 
     On March 31, 1997, the Company completed the acquisition of 1) a block of
annuity contracts from John Alden Life Insurance Company, a subsidiary of John
Alden Financial Corporation, and 2) all of the outstanding common stock of John
Alden Life Insurance Company of New York, for a total cash purchase price of
approximately $238,282,000 (collectively, the "John Alden Acquisition"). As part
of this transaction, the Company acquired assets having an aggregate fair value
of $5,056,098,000, composed primarily of invested assets totaling
$5,000,822,000. Liabilities assumed in this transaction totaled $5,218,828,000,
including $5,161,538,000 of fixed annuity reserves. An amount equal to the sum
of the purchase price and the fair value of the net liabilities assumed,
amounting to $369,372,000 at September 30, 1997, is included in Deferred
Acquisition Costs in the balance sheet. On October 31, 1997, John Alden Life
Insurance Company of New York was merged with and into the Company's other New
York-chartered life insurance subsidiary, First SunAmerica Life Insurance
Company.
 
     On April 1, 1996, the Company completed the acquisition of a $958,672,000
block of annuity contracts (the "Central National Annuity Contracts") from The
Central National Life Insurance Company of Omaha, a subsidiary of Beneficial
Corp. As part of this acquisition, the Company acquired assets having an
aggregate fair value of $918,200,000, composed primarily of invested assets
totaling $908,755,000. An amount equal to the excess of the fair value of the
annuity reserves assumed over the fair value of the assets acquired, amounting
to $28,642,000 at September 30, 1997, is included in Deferred Acquisition Costs
in the balance sheet.
 
     On February 29, 1996, the Company completed the acquisition of all of the
outstanding stock of Ford Life Insurance Company ("Ford Life") for a cash
purchase price of $172,500,000. The Company acquired assets having an aggregate
fair value of $3,146,072,000, composed primarily of invested assets totaling
$3,097,151,000. Liabilities assumed in this acquisition totaled $3,090,123,000,
including $3,050,575,000 of fixed annuity reserves. An amount equal to the
excess of the purchase price over the fair value of the net assets acquired,
amounting to $92,805,000 at September 30, 1997, is included in Deferred
Acquisition Costs in the balance sheet. On December 31, 1996, Ford Life was
merged with and into SunAmerica Life Insurance Company.
 
     On December 29, 1995, the Company completed the acquisition of all of the
outstanding stock of CalAmerica for a cash purchase price of $120,000,000. The
Company acquired assets having an aggregate fair value of $739,852,000, composed
primarily of invested assets totaling $722,461,000. Liabilities assumed in this
acquisition totaled $662,316,000, including $645,379,000 of fixed annuity
reserves. An amount equal to the excess of the purchase price over the fair
value of the net assets acquired, amounting to $35,127,000 at September 30,
1997, is included in Deferred Acquisition Costs in the balance sheet.
 
     These acquisitions have been accounted for by using the purchase method of
accounting. Accordingly, the income statement includes the operating results of
the John Alden Acquisition for only the period from April 1, 1997 through
September 30, 1997; the operating results of the Central National Annuity
Contracts for only the period from April 1, 1996 through September 30, 1997;
Ford Life's operating results for only the period from March 1, 1996 through
September 30, 1997; and CalAmerica's operating results for only the period from
January 1, 1996 through September 30, 1997. On a pro forma (unaudited) basis,
assuming these acquisitions occurred on October 1, 1994, the beginning of the
earliest period presented, revenues (investment income, net realized investment
losses and fee income) would have been $2,269,135,000, $1,972,178,000 and
$1,704,979,000, and net income would have been $397,402,000 ($1.88 per share),
$323,200,000 ($1.54 per share) and $232,321,000 ($1.15 per share) for the years
ended September 30, 1997, 1996 and 1995, respectively.
 
                                      F-10
<PAGE>   44
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 3 -- ACQUISITIONS (CONTINUED)
     At September 30, 1997, the deferred acquisition costs arising from these
transactions aggregated $525,946,000, and are being amortized, with interest, in
relation to the incidence of estimated gross profits to be realized over the
estimated lives of the assumed annuity contracts. Future annual amortization is
projected to be as follows: 1998, $94,868,000; 1999, $82,251,000; 2000,
$68,523,000; 2001, $56,047,000; 2002, $44,563,000; and thereafter, in the
aggregate, $179,694,000. The deferred acquisition costs are substantially less
than computations of the present values of estimated future profits discounted
at the related weighted average crediting rates.
 
NOTE 4 -- INVESTMENTS
 
     The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale and held for investment by major category
follow:
 
<TABLE>
<CAPTION>
                                                                                   Estimated
                                                                     Amortized       fair
                                                                       cost          value
                                                                    -----------   -----------
                                                                         (In thousands)
<S>                                                                 <C>           <C>
AT SEPTEMBER 30, 1997:
Securities of the United States Government........................  $ 1,111,064   $ 1,126,468
Mortgage-backed securities........................................    6,208,610     6,344,036
Securities of public utilities....................................      532,577       542,583
Corporate bonds and notes.........................................    8,086,802     8,288,921
Asset-backed securities...........................................    1,566,605     1,586,242
Redeemable preferred stocks.......................................      152,449       162,955
Other debt securities.............................................      466,730       472,450
                                                                    -----------   -----------
Total available for sale..........................................  $18,124,837   $18,523,655
                                                                    ===========   ===========
AT SEPTEMBER 30, 1996:
Securities of the United States Government........................  $ 1,067,498   $ 1,046,134
Mortgage-backed securities........................................    4,519,643     4,458,171
Securities of public utilities....................................      216,619       211,578
Corporate bonds and notes.........................................    5,193,079     5,186,864
Asset-backed securities...........................................    1,322,468     1,317,524
Redeemable preferred stocks.......................................      108,438       128,228
Other debt securities.............................................      229,875       233,525
                                                                    -----------   -----------
Total available for sale..........................................  $12,657,620   $12,582,024
                                                                    ===========   ===========
</TABLE>
 
                                      F-11
<PAGE>   45
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 4 -- INVESTMENTS (CONTINUED)
     The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale by contractual maturity, as of September 30,
1997, follow:
 
<TABLE>
<CAPTION>
                                                                                   Estimated
                                                                     Amortized       fair
                                                                       cost          value
                                                                    -----------   -----------
                                                                         (In thousands)
<S>                                                                 <C>           <C>
Due in one year or less...........................................  $   453,552   $   461,266
Due after one year through five years.............................    3,891,514     3,950,395
Due after five years through ten years............................    5,219,820     5,356,891
Due after ten years...............................................    2,351,341     2,411,067
Mortgage-backed securities........................................    6,208,610     6,344,036
                                                                    -----------   -----------
Total available for sale..........................................  $18,124,837   $18,523,655
                                                                    ===========   ===========
</TABLE>
 
     Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above due to prepayments and redemptions.
 
     Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale by major category follow:
 
<TABLE>
<CAPTION>
                                                                         Gross       Gross
                                                                        unrealized unrealized
                                                                         gains      losses
                                                                        --------   ---------
                                                                           (In thousands)
<S>                                                                     <C>        <C>
AT SEPTEMBER 30, 1997:
Securities of the United States Government............................  $ 16,393   $    (989)
Mortgage-backed securities............................................   158,988     (23,562)
Securities of public utilities........................................    10,581        (575)
Corporate bonds and notes.............................................   236,038     (33,919)
Asset-backed securities...............................................    20,261        (624)
Redeemable preferred stocks...........................................    10,564         (58)
Other debt securities.................................................     6,018        (298)
                                                                        --------   ---------
Total available for sale..............................................  $458,843   $ (60,025)
                                                                        ========   =========
AT SEPTEMBER 30, 1996:
Securities of the United States Government............................  $    542   $ (21,906)
Mortgage-backed securities............................................    46,677    (108,149)
Securities of public utilities........................................       176      (5,217)
Corporate bonds and notes.............................................    91,751     (97,966)
Asset-backed securities...............................................     6,963     (11,907)
Redeemable preferred stocks...........................................    27,455      (7,665)
Other debt securities.................................................     4,054        (404)
                                                                        --------   ---------
Total available for sale..............................................  $177,618   $(253,214)
                                                                        ========   =========
</TABLE>
 
     At September 30, 1997, gross unrealized gains on equity securities
available for sale aggregated $64,635,000 and gross unrealized losses aggregated
$915,000. At September 30, 1996, gross unrealized gains on equity securities
available for sale aggregated $39,194,000 and gross unrealized losses aggregated
$2,680,000.
 
                                      F-12
<PAGE>   46
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 4 -- INVESTMENTS (CONTINUED)
     Gross realized investment gains and losses on sales of investments are as
follows:
 
<TABLE>
<CAPTION>
                                                                   Years ended September 30,
                                                               ---------------------------------
                                                                 1997         1996        1995
                                                               ---------    --------    --------
                                                                        (In thousands)
<S>                                                            <C>          <C>         <C>
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS:
Available for sale:
  Realized gains............................................   $ 155,610    $ 81,323    $ 61,104
  Realized losses...........................................    (141,513)    (93,261)    (83,308)
Held for investment:
  Realized gains............................................          --          --       9,262
  Realized losses...........................................          --          --      (2,626)
EQUITIES:
Realized gains..............................................      22,755       8,765      25,863
Realized losses.............................................        (760)     (5,365)     (4,985)
OTHER INVESTMENTS:
Realized gains..............................................       2,286      13,234       6,453
Realized losses.............................................      (2,268)        (72)     (2,028)
IMPAIRMENT WRITEDOWNS.......................................     (65,313)    (34,938)    (42,747)
                                                               ---------    --------    --------
Total net realized investment losses........................   $ (29,203)   $(30,314)   $(33,012)
                                                               =========    ========    ========
</TABLE>
 
     The sources and related amounts of investment income are as follows:
 
<TABLE>
<CAPTION>
                                                                  Years ended September 30,
                                                             ------------------------------------
                                                                1997          1996         1995
                                                             ----------    ----------    --------
                                                                        (In thousands)
<S>                                                          <C>           <C>           <C>
Short-term investments....................................   $   83,021    $   66,378    $ 43,485
Bonds, notes and redeemable preferred stocks..............    1,169,631       819,812     555,260
Mortgage loans............................................      222,403       149,476     146,311
Equity-method partnerships................................      169,805       119,474      27,148
Cost-method partnerships..................................       71,727        59,094     106,927
Other invested assets.....................................       79,239        40,054      26,671
                                                             ----------    ----------    --------
Total investment income...................................   $1,795,826    $1,254,288    $905,802
                                                             ==========    ==========    ========
</TABLE>
 
     Expenses incurred to manage the investment portfolio amounted to
$26,801,000 for the year ended September 30, 1997, $21,475,000 for the year
ended September 30, 1996 and $19,077,000 for the year ended September 30, 1995
and are included in General and Administrative Expenses in the income statement.
 
     Investments in unconsolidated partnerships accounted for by using the
equity method of accounting totaled $561,336,000 at September 30, 1997. At that
date, total combined assets of these partnerships were $2,220,060,000 (including
$2,211,405,000 of investments) and total combined liabilities were
$1,593,596,000 (including $1,543,148,000 of nonrecourse notes payable to banks).
For the year then ended, total combined revenues and expenses of such
partnerships were $425,342,000 and $168,885,000, respectively, resulting in
$256,457,000 of total combined pretax income.
 
     Investments in unconsolidated partnerships accounted for by using the
equity method of accounting totaled $644,862,000 at September 30, 1996. At that
date, total combined assets of these partnerships were $1,008,617,000
(consisting entirely of investments) and total combined liabilities were
$458,485,000 (including $415,007,000 of nonrecourse notes payable to banks). For
the year then
 
                                      F-13
<PAGE>   47
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 4 -- INVESTMENTS (CONTINUED)
ended, total combined revenues and expenses of such partnerships were
$222,831,000 and $108,207,000, respectively, resulting in $114,624,000 of total
combined pretax income.
 
     At September 30, 1997, no investment exceeded 10% of the Company's
consolidated shareholders' equity.
 
     At September 30, 1997, mortgage loans were collateralized by properties
located in 45 states, with loans totaling approximately 18%, 11%, 9% and 8% of
the aggregate carrying value of the portfolio secured by properties located in
California, New York, Florida and Texas, respectively.
 
     At September 30, 1997, bonds, notes and redeemable preferred stocks
included $1,888,971,000 (fair value of $1,967,967,000) of bonds and notes not
rated investment grade. The Company had no material concentrations of
non-investment-grade assets at September 30, 1997.
 
     At September 30, 1997, the amortized cost of investments in default as to
the payment of principal or interest was $38,481,000, consisting of $15,557,000
of non-investment-grade bonds and $22,924,000 of mortgage loans. Such
nonperforming investments had an estimated fair value of $38,016,000.
 
     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 September 30,
1997, the Company had 39 outstanding Swap Agreements with an aggregate notional
principal amount of $1,620,578,000. These agreements mature in various years
through 2003 and have an average remaining maturity of 38 months. With respect
to swaps that hedge assets, net interest received (paid) amounted to
($1,091,000), $5,214,000 and $8,017,000 for the years ended September 30, 1997,
1996 and 1995, respectively, and is included in Investment Income in the income
statement. With respect to swaps that hedge liabilities, net interest paid
amounted to $1,706,000, $168,000 and $718,000 for the years ended September 30,
1997, 1996 and 1995, respectively, and is included in Interest Expense on
Guaranteed Investment Contracts in the income statement.
 
     For investment purposes, the Company also has entered into various Total
Return Agreements with an aggregate notional principal amount of $439,113,000
(the "Notional Amount") at September 30, 1997. The Total Return Agreements
effectively exchange a fixed rate of interest (the "Payment Amount") on the
Notional Amount for the coupon income plus or minus the increase or decrease in
the fair value (the "Total Return") of specified non-investment-grade bonds (the
"Bonds"). The Total Return Agreements mature in November 1997; however, the
Company intends to enter into other similar agreements. The Company is exposed
to potential loss, due to credit risk on the underlying non-investment-grade
bonds and bond market fluctuations, equal to the Payment Amount plus any
reduction in the aggregate fair value of the Bonds below the Notional Amount.
The Company is also exposed to potential credit loss in the event of
nonperformance by the investment-grade-rated counterparty with respect to any
increase in the aggregate market value of the Bonds above the Notional Amount.
However, nonperformance is not anticipated and, therefore, no collateral is held
or pledged. Net amounts received are included in Investment Income in the income
statement and totaled $35,368,000, $32,490,000 and $13,044,000 for the years
ended September 30, 1997, 1996 and 1995, respectively.
 
                                      F-14
<PAGE>   48
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The following estimated fair value disclosures are limited to reasonable
estimates of the fair value of only the Company's financial instruments. The
disclosures do not address the value of the Company's recognized and
unrecognized nonfinancial assets (including its partnerships accounted for by
using the equity method, real estate investments and other invested assets) and
liabilities or the value of anticipated future business. The Company does not
plan to sell most of its assets or settle most of its liabilities at these
estimated fair values.
 
     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 INVESTMENTS:  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. Fair values include the market value, determined from independent
broker quotes, of Swap Agreements that hedge certain bonds and notes.
 
     MORTGAGE LOANS:  Fair values are primarily determined by discounting future
cash flows to the present at current market rates, using expected prepayment
rates. Fair values include the market value, determined from independent broker
quotes, of Swap Agreements that hedge certain mortgage loans.
 
     COMMON STOCKS:  Fair value is based principally on independent pricing
services, broker quotes and other independent information.
 
     COST-METHOD PARTNERSHIPS:  Fair value of limited 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.
 
     VARIABLE ANNUITY ASSETS:  Variable annuity assets are carried at the market
value of the underlying securities.
 
     RESERVES FOR FIXED ANNUITY CONTRACTS:  Deferred annuity contracts and
single premium life contracts are assigned a fair value equal to current net
surrender value, which includes the estimated fair value of hedging Swap
Agreements, determined from independent broker quotes. 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 hedging Swap Agreements, determined from independent
broker quotes.
 
     TRUST DEPOSITS:  Trust deposits are carried at the fair value of deposits
payable upon demand.
 
                                      F-15
<PAGE>   49
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
 
     PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES:  Such obligations represent
net transactions of a short-term nature for which the carrying value is
considered a reasonable estimate of fair value.
 
     VARIABLE ANNUITY LIABILITIES:  Fair values of contracts in the accumulation
phase are based on net surrender values. Fair values of contracts in the payout
phase are based on the present value of future cash flows at assumed investment
rates.
 
     LONG-TERM NOTES AND DEBENTURES:  Fair value is estimated based on the
quoted market prices for the same or similar issues and is net of the estimated
fair value of a hedging Swap Agreement, determined from independent broker
quotes.
 
     PREFERRED SECURITIES OF SUBSIDIARY GRANTOR TRUSTS:  Fair value is based
upon independent pricing services.
 
     The estimated fair values of the Company's financial instruments at
September 30, 1997 and 1996, compared with their respective carrying values, are
as follows:
 
<TABLE>
<CAPTION>
                                                                     Carrying        Fair
                                                                       value         value
                                                                    -----------   -----------
                                                                         (In thousands)
<S>                                                                 <C>           <C>
1997:
  ASSETS:
  Cash and short-term investments.................................  $   993,349   $   993,349
  Bonds, notes and redeemable preferred stocks....................   18,523,655    18,523,655
  Mortgage loans..................................................    3,139,309     3,269,079
  Common stocks...................................................       96,541        96,541
  Cost-method partnerships........................................      725,458       935,948
  Variable annuity assets.........................................    9,514,675     9,514,675
  LIABILITIES:
  Reserves for fixed annuity contracts............................   14,445,126    13,806,124
  Reserves for guaranteed investment contracts....................    5,553,292     5,515,335
  Trust deposits..................................................      427,433       427,433
  Payable to brokers for purchases of securities..................      266,477       266,477
  Variable annuity liabilities....................................    9,514,675     9,240,245
  Long-term notes and debentures..................................    1,136,072     1,172,392
  Preferred securities of subsidiary grantor trusts...............      495,000       507,375
                                                                    ===========   ===========
</TABLE>
 
                                      F-16
<PAGE>   50
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                     Carrying        Fair
                                                                       value         value
                                                                    -----------   -----------
                                                                         (In thousands)
<S>                                                                 <C>           <C>
1996:
  ASSETS:
  Cash and short-term investments.................................  $   529,363   $   529,363
  Bonds, notes and redeemable preferred stocks....................   12,582,024    12,582,024
  Mortgage loans..................................................    1,652,257     1,696,080
  Common stocks...................................................       81,385        81,385
  Cost-method partnerships........................................      426,996       549,652
  Variable annuity assets.........................................    6,380,458     6,380,458
  LIABILITIES:
  Reserves for fixed annuity contracts............................    9,654,674     9,233,359
  Reserves for guaranteed investment contracts....................    4,169,028     4,119,407
  Trust deposits..................................................      436,048       436,048
  Payable to brokers for purchases of securities..................       42,518        42,518
  Variable annuity liabilities....................................    6,380,458     6,183,055
  Long-term notes and debentures..................................      573,335       588,705
  Preferred securities of subsidiary grantor trusts...............      237,631       240,398
                                                                    ===========   ===========
</TABLE>
 
NOTE 6 -- INDEBTEDNESS
 
     Indebtedness consists of the following long-term notes and debentures
(interest rates are as of September 30):
 
<TABLE>
<CAPTION>
                                                                             September 30,
                                                                         ----------------------
                                                                            1997         1996
                                                                         ----------    --------
                                                                             (In thousands)
<S>                                                                      <C>           <C>
5.6% debentures due July 31, 2097 (net of unamortized discount of
  $43,513,000)........................................................   $  131,487    $     --
Medium-term notes due 1998 through 2026 (5 3/8% to 7 3/8%)............      248,335     248,335
8 1/8% debentures due April 28, 2023..................................      100,000     100,000
9.95% debentures due February 1, 2012.................................      100,000     100,000
6.2% notes due October 31, 1999.......................................      431,250          --
9% notes due January 15, 1999.........................................      125,000     125,000
                                                                         ----------    --------
Total indebtedness....................................................   $1,136,072    $573,335
                                                                         ==========    ========
</TABLE>
 
     In July 1997, the Company filed a shelf registration statement under which
it may issue up to $3,500,000,000 of securities in the form of debt; preferred
stock; common stock; warrants to purchase debt, preferred stock or common stock;
stock purchase contracts or stock purchase units; or preferred securities of the
Company's subsidiary grantor trusts. Subsequently, the Company issued
$175,000,000 of its 5.6% debentures, due July 31, 2097, and received discounted
proceeds of approximately $130,000,000.
 
                                      F-17
<PAGE>   51
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 6 -- INDEBTEDNESS (CONTINUED)
     On October 7, 1997, subsequent to the Company's fiscal year end, the
Company issued $100,000,000 of 6.75% notes due October 1, 2007. Subsequent to
this offering, $3,225,000,000 remains available to the Company to issue
securities under the July 1997 shelf registration statement.
 
     Short-term borrowings, which include short-term bank notes, reverse
repurchase agreements and borrowings under a commercial paper program, averaged
$611,719,000 at a weighted average interest rate of 6 1/4% during 1997 and
$475,619,000 at a weighted average interest rate of 4 1/2% during 1996. The
highest level of short-term borrowings at any month-end was $1,019,754,000 at
5 3/8% during 1997 and $747,961,000 at 4 3/4% during 1996. There were no
short-term borrowings outstanding at September 30, 1997.
 
     Principal payments on long-term borrowings, including the 6.75% notes, are
due as follows: 1998, $20,000,000; 1999, $142,775,000; 2000, $445,250,000; 2001,
$24,000,000; 2002, $24,000,000; and thereafter, $623,560,000. On or before
October 31, 1999, the Company is contractually scheduled to receive $431,250,000
upon delivery of 17,250,000 or fewer shares of the Company's Common Stock in
accordance with the terms of the Company's 8 1/2% Premium Equity Redemption
Cumulative Security Units.
 
NOTE 7 -- CONTINGENT LIABILITIES
 
     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 are adequate and any further liabilities and costs will not have a
material adverse impact upon the Company's financial position or results of
operations.
 
     In 1989 and 1996, the Company sold, through three separate 100% coinsurance
transactions, the general agency division of SunAmerica Life Insurance Company,
the credit life business of Ford Life and the mortality-based business of
CalAmerica. With respect to these coinsurance transactions, SunAmerica Life
Insurance Company and CalAmerica could become liable for in-force amounts ceded
of $3,052,583,000 and $2,248,683,000, respectively, at September 30, 1997, if
the coinsurers were to become unable to meet the obligations assumed under the
respective coinsurance agreements. At September 30, 1997, related policyholder
reserves carried by the coinsurers were $93,062,000 and $99,117,000,
respectively. As part of the 1989 SunAmerica Life Insurance Company coinsurance
transaction, assets substantially equal to the policyholder reserves assumed by
the coinsurer are held in trust to secure the obligations of the coinsurer.
 
     The Company has transferred to third-party investors certain of its
interests in various partnerships that make tax-advantaged affordable housing
investments. As part of these transactions, the Company has agreed to advance
monies to support the operations of the underlying housing projects, if
required, and has guaranteed that the transferred partnerships will provide, as
of the transfer date and under then current tax laws, a specified level of
associated tax credits and deductions to the third-party investors. Based on an
evaluation of the underlying housing projects, management does not anticipate
any material cash payments with respect to the guarantees.
 
     In the ordinary course of business, the Company has agreed contingently to
make capital contributions, aggregating approximately $637,100,000, to 167
limited partnerships over the next 12 years (four years on a weighted average
basis) in exchange for ownership interests in such partnerships.
 
                                      F-18
<PAGE>   52
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 8 -- COMPANY-OBLIGATED PREFERRED SECURITIES OF GRANTOR TRUSTS
 
     Preferred securities of subsidiary grantor trusts comprise $185,000,000
liquidation amount of 8.35% Trust Originated Preferred Securities issued by
SunAmerica Capital Trust II in October 1995 and $310,000,000 liquidation amount
of 8.30% Trust Originated Preferred Securities issued by SunAmerica Capital
Trust III in November 1996.
 
     In connection with the issuance of the 8.35% Trust Originated Preferred
Securities and the related purchase by the Company of the grantor trust's common
securities, the Company issued to the grantor trust $191,224,250 principal
amount of 8.35% junior subordinated debentures, due 2044, which are redeemable
at the option of the Company on or after September 30, 2000 at a redemption
price of $25 per debenture plus accrued and unpaid interest.
 
     In connection with the issuance of the 8.30% Trust Originated Preferred
Securities and the related purchase by the Company of the grantor trust's common
securities, the Company issued to the grantor trust $320,670,000 principal
amount of 8.30% junior subordinated debentures, due 2045, which are redeemable
at the option of the Company on or after November 13, 2001 at a redemption price
of $25 per debenture plus accrued and unpaid interest.
 
     On June 16, 1997, SunAmerica Capital Trust I redeemed the 9.95% Trust
Originated Preferred Securities for a cash payment equal to the liquidation
amount of $52,630,875 plus accrued and unpaid dividends to the redemption date.
Concurrently, the Company redeemed all of the related 9.95% junior subordinated
debentures, due 2044, for a liquidation amount of $54,258,650 plus accrued
interest.
 
     The interest and other payment dates on the debentures correspond to the
distribution and other payment dates on the preferred and common securities. The
preferred and common securities will be redeemed on a pro rata basis, to the
same extent as the debentures are repaid. Under certain circumstances involving
a change in law or legal interpretation, the debentures may be distributed to
holders of the preferred and common securities in liquidation of the grantor
trust(s). The Company's obligations under the debentures and related agreements,
taken together, provide a full and unconditional guarantee of payments due on
the preferred securities.
 
     The grantor trusts are wholly owned subsidiaries of the Company. The
debentures issued to the grantor trusts and the common securities purchased by
the Company from the grantor trusts are eliminated in the balance sheet.
 
NOTE 9 -- SHAREHOLDERS' EQUITY
 
     The Company is authorized to issue 20,000,000 shares of preferred stock
("Preferred Stock"). All preferred shares of the Company rank on a parity with
each other and rank senior to Common Stock and Nontransferable Class B Stock of
the Company as to payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of the Company.
 
     On November 1, 1995, the Company issued 4,000,000 $3.10 Depositary Shares
(the "Series E Depositary Shares"), each representing one-fiftieth of a share of
Series E Mandatory Conversion Premium Dividend Preferred Stock, with a
liquidation preference of $62 per share. On November 1, 1998, each of the
outstanding Series E Depositary Shares will convert into four and one-half
shares of Common Stock. The Company may redeem the Series E Depositary Shares
prior to such date, in whole or in part, at a price per share initially equal to
$81, declining by $0.006111 on each day following the date of issue to $74.767
on September 1, 1998, and equal to $74.40 thereafter. The call price is payable
in shares of Common Stock having an aggregate current market price, as defined,
equal to such call price, plus an amount paid in cash or in Common Stock
representing all accrued and unpaid dividends. In addition, should the Company
call the Series E Depositary Shares prior to November 1, 1998, holders will
receive 50% of the excess, if any, of four and one-half times the current
 
                                      F-19
<PAGE>   53
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9 -- SHAREHOLDERS' EQUITY (CONTINUED)
market price, as defined, of the Common Stock over $74.40, payable in shares of
Common Stock.
 
     On March 10, 1993, the Company issued 5,002,500 $2.78 Depositary Shares
(the "Series D Depositary Shares"), each representing one-fiftieth of a share of
Series D Mandatory Conversion Premium Dividend Preferred Stock, with a
liquidation preference of $37 per share. On January 2, 1996, the Company
redeemed all of the Series D Depositary Shares for a call price equal to $49.95
per share plus accrued and unpaid dividends to the redemption date. The call
price was paid with 5,112,529 shares of the Company's Common Stock.
 
     At September 30, 1996, the Company had outstanding 486,800 shares of
Adjustable Rate Cumulative Preferred Stock, Series C (the "Series C Preferred
Shares"), with a liquidation preference of $100 per share. On October 4, 1996,
the Company redeemed all of the Series C Preferred Shares for a cash payment
equal to the total liquidation amount of $48,680,000 plus accrued and unpaid
dividends to the redemption date.
 
     In 1992, the Company issued 5,620,000 shares of 9 1/4% Preferred Stock,
Series B (the "Series B Preferred Shares"), with a liquidation preference of $25
per share. On June 13, 1995, the Company exchanged 2,105,235 Series B Preferred
Shares with a liquidation preference of $52,630,875 for $52,630,875 liquidation
amount of 9.95% Trust Originated Preferred Securities of SunAmerica Capital
Trust I (see Note 8). On June 16, 1997, the Company redeemed all of the
remaining Series B Preferred Shares for a cash payment equal to the total
liquidation amount of approximately $87,869,000 plus accrued and unpaid
dividends to the redemption date.
 
     The Company is authorized to issue 350,000,000 shares of its $1.00 par
value Common Stock and is authorized to repurchase 15,000,000 shares of such
stock. At September 30, 1997, 179,076,000 shares were outstanding and at
September 30, 1996, 108,604,000 shares were outstanding.
 
     On November 6, 1996, the Company issued 11,500,000 8 1/2% Premium Equity
Redemption Cumulative Security Units (the "Units") with a stated amount of
$37.50 per Unit. Each Unit consists of a stock purchase contract (the
"Contract") and a United States Treasury Note (the "Treasury Note") having a
principal amount equal to the stated amount and maturing on October 31, 1999.
The holders of the Units will receive interest on the Treasury Notes payable by
the United States Government at a rate of 7 1/2% per annum and Contract fees
payable by the Company at a rate of 1% per annum (both, the "Unit Payments")
based upon the stated amount. The Contract obligates the Company to deliver on
October 31, 1999 to the holder of each Unit one and one-half shares of Common
Stock of the Company, subject to adjustment under certain defined circumstances,
and obligates the holder of the Unit to pay to the Company $37.50 per Unit. The
Treasury Notes will be held by a collateral agent to secure payment to the
Company as required under the Contract, but may be redeemed by the holders of
the Units under certain defined circumstances. The Company may call the Units
(and close the Contract) prior to October 31, 1999, in whole or in part, at a
price per Unit initially equal to $59.829, declining by $0.008060 on each day
following the date of issue to $51.108 on August 31, 1999, and equal to $50.625
thereafter. The call price is payable in shares of Common Stock having an
aggregate current market price, as defined, equal to such call price, plus an
amount paid in cash equal to all accrued and unpaid Unit Payments. The Company
receives no proceeds from this offering until the Contracts are consummated.
 
     The Company is authorized to issue 25,000,000 shares of its $1.00 par value
Nontransferable Class B Stock. Holders of this stock have rights identical to
those of the Company's common stockholders except that they have ten votes per
share and are entitled to only 90% of any cash dividend paid on the Common
Stock. This stock is convertible at any time into shares of Common Stock. At
September 30, 1997, 16,273,000 shares were outstanding and at September 30,
1996, 10,848,000 shares were outstanding.
 
                                      F-20
<PAGE>   54
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9 -- SHAREHOLDERS' EQUITY (CONTINUED)
     Changes in shareholders' equity are as follows:
 
<TABLE>
<CAPTION>
                                                                 Years ended September 30,
                                                               ------------------------------
                                                                 1997       1996       1995
                                                               --------   --------   --------
                                                               (In thousands)
<S>                                                            <C>        <C>        <C>
PREFERRED STOCK:
Beginning balance............................................  $384,549   $321,642   $374,273
Issuance of 4,000,000 Series E Preferred Shares..............        --    248,000         --
Redemption of 5,002,500 Series D Depositary Shares...........        --   (185,093)        --
Redemption of 3,514,765 Series B Preferred Shares............   (87,869)        --         --
Redemption of 486,800 Series C Preferred Shares..............   (48,680)        --         --
Exchange of 2,105,235 Series B Preferred Shares for 2,105,235
  shares of Trust Originated Preferred Securities of
  SunAmerica Capital Trust I.................................        --         --    (52,631)
                                                               --------   --------   --------
Ending balance...............................................  $248,000   $384,549   $321,642
                                                               ========   ========   ========
NONTRANSFERABLE CLASS B STOCK:
Beginning balance............................................  $ 10,848   $ 10,240   $  6,826
Conversion of 4,816,000 shares to Common Stock...............        --     (4,816)        --
Stock Splits.................................................     5,425      5,424      3,414
                                                               --------   --------   --------
Ending balance...............................................  $ 16,273   $ 10,848   $ 10,240
                                                               ========   ========   ========
COMMON STOCK:
Beginning balance............................................  $108,604   $ 44,175   $ 28,977
Issuance of 10,669,745 shares of Common Stock at $54 1/8 per
  share......................................................    10,670         --         --
Issuance of 5,112,529 shares to redeem the Series D
  Depositary Shares..........................................        --      5,113         --
Conversion of Nontransferable Class B Stock to 4,776,000
  shares.....................................................        --      4,776         --
Stock options and other employee benefit plans...............       115        252        473
Stock Splits.................................................    59,687     54,288     14,725
                                                               --------   --------   --------
Ending balance...............................................  $179,076   $108,604   $ 44,175
                                                               ========   ========   ========
</TABLE>
 
                                      F-21
<PAGE>   55
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9 -- SHAREHOLDERS' EQUITY (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                 Years ended September 30,
                                                             ---------------------------------
                                                                1997        1996       1995
                                                             ----------   --------   ---------
                                                             (In thousands)
<S>                                                          <C>          <C>        <C>
ADDITIONAL PAID-IN CAPITAL:
Beginning balance..........................................  $  304,295   $185,211   $ 188,667
Issuance of Common Stock...................................     566,598         --          --
Cost of issuance of Series E Preferred Shares..............          --     (7,453)         --
Excess of redemption value of Series D Preferred Shares
  over par value of shares of Common Stock issued, net of
  transaction costs........................................          --    179,972          --
Cost of issuance of 7,400,000 shares of Trust Originated
  Preferred Securities of SunAmerica Capital Trust II......          --     (5,524)         --
Cost of issuance of 12,400,000 shares of Trust Originated
  Preferred Securities of SunAmerica Capital Trust III.....     (10,414)        --          --
Cost of issuance of 11,500,000 Premium Equity Redemption
  Cumulative Security Units................................     (44,605)        --          --
Cost of exchange of Series B Shares for shares of
  Trust Originated Preferred Securities of SunAmerica
  Capital Trust I..........................................          --         --      (2,500)
Stock options and other employee benefit plans.............        (361)    11,801      17,183
Stock Splits...............................................     (65,112)   (59,712)    (18,139)
                                                             ----------   --------   ---------
Ending balance.............................................  $  750,401   $304,295   $ 185,211
                                                             ==========   ========   =========
RETAINED EARNINGS:
Beginning balance..........................................  $  869,215   $656,509   $ 512,571
Net income.................................................     379,050    274,427     194,206
Dividends on:
  Preferred Stock..........................................     (18,808)   (27,063)    (29,112)
  Nontransferable Class B Stock............................      (3,906)    (4,878)     (3,686)
  Common Stock.............................................     (45,105)   (29,780)    (17,470)
                                                             ----------   --------   ---------
Ending balance.............................................  $1,180,446   $869,215   $ 656,509
                                                             ==========   ========   =========
NET UNREALIZED GAINS/LOSSES ON DEBT AND EQUITY SECURITIES
  AVAILABLE FOR SALE:
Beginning balance..........................................  $  (16,953)  $ (4,699)  $(150,226)
Change in net unrealized gains/losses on debt securities
  available for sale.......................................     474,414    (44,464)    297,910
Change in net unrealized gains on equity securities
  available for sale.......................................      27,206     18,011       6,179
Change in adjustment to deferred acquisition costs.........    (152,600)     7,600     (80,200)
Tax effects of net changes.................................    (122,157)     6,599     (78,362)
                                                             ----------   --------   ---------
Ending balance.............................................  $  209,910   $(16,953)  $  (4,699)
                                                             ==========   ========   =========
</TABLE>
 
     Dividends that the Company may receive from its life insurance subsidiaries
in any year without prior approval of the Arizona, California or New York
insurance commissioners are limited by statute. At September 30, 1997,
restricted net assets of these consolidated life insurance subsidiaries totaled
approximately $1,555,215,000, none of which is available for the payment of
dividends until calendar year 1998.
 
     The combined statutory equity of the Company's five life insurance
subsidiaries totaled $1,055,225,000 at September 30, 1997, $1,187,013,000 at
December 31, 1996, and $943,755,000 at December 31, 1995. The combined statutory
net income of these subsidiaries totaled $30,348,000 for the nine months ended
September 30, 1997, $210,791,000 for the year ended December 31, 1996, and
$67,144,000 for the year ended December 31, 1995.
 
                                      F-22
<PAGE>   56
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 10 -- STOCK COMPENSATION PLANS
 
     At September 30, 1997, the Company had five stock-based compensation plans,
which are described below. The Company applies APB Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for
such plans, and, accordingly, no compensation cost has been recognized for stock
options granted pursuant to these plans. If compensation cost for such stock
options had been recognized, based on the fair value at the grant dates and
computed in a manner consistent with a method described by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," then the Company's net income would have been $366,825,000 ($1.74
per share) and $269,878,000 ($1.28 per share) for the years ended September 30,
1997 and 1996, respectively. The weighted average per share fair value used to
compute compensation cost for the year ended September 30, 1997 was $11.92 and
reflects weighted average assumptions including a dividend yield of 0.9%, a
volatility of 39.3%, a risk-free interest rate of 6.2% and an option life of 7.0
years. The weighted average per share fair value used to compute compensation
cost for the year ended September 30, 1996 was $6.32 and reflects weighted
average assumptions including a dividend yield of 1.3%, a volatility of 40.3%, a
risk-free interest rate of 6.0% and an option life of 6.6 years.
 
     The Company's five stock plans are the 1997 Employee Incentive Stock Plan
(the "1997 Plan"), the 1995 Performance Stock Plan (the "1995 Plan"), the 1988
Employee Stock Plan (the "1988 Plan"), the Long-Term Performance-Based Incentive
Plan (the "CEO Plan") and the Non-Employee Directors' Stock Option Plan. The
1988 Plan has been replaced by the 1997 Plan. Under these stock plans, the
Company may grant an aggregate of 43,668,525 shares to its employees in the form
of either stock options, restricted stock or stock units. At September 30, 1997,
12,696,300 shares remain available for future grant. Options granted under the
plans have an exercise price equal to the market price at the date of grant,
have a maximum term of 10 years and generally become exercisable ratably over a
five-year period.
 
     Under its CEO Plan, the Company may grant shares of its Common Stock to the
Company's Chief Executive Officer ("CEO") in the form of stock options. Prior to
amendment of the CEO Plan, which was approved by shareholders in fiscal 1997,
awards under this plan were also made in the form of restricted stock or
deferred shares. The actual number of options granted is predicated upon defined
performance of the Company's Common Stock relative to defined performance of the
S&P 500 Index. Restricted shares are held in escrow until the earlier of the
CEO's death, disability or retirement. Deferred shares are held in escrow until
the earlier of the CEO's death, disability or eighteen months following
retirement. Stock options granted under this plan have an exercise price equal
to the market price at the date of grant, have a maximum term of 10 years and
are immediately exercisable.
 
                                      F-23
<PAGE>   57
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 10 -- STOCK COMPENSATION PLANS (CONTINUED)
     A summary of the status of the Company's stock option plans as of September
30, 1997, 1996 and 1995, and changes during the years then ended follows:
 
<TABLE>
<CAPTION>
                                              1997                   1996                   1995
                                       ------------------     ------------------     ------------------
                                                 Weighted               Weighted               Weighted
                                                 average                average                average
                                       Shares    exercise     Shares    exercise     Shares    exercise
                                       (000's)    price       (000's)    price       (000's)    price
                                       ------    --------     ------    --------     ------    --------
<S>                                    <C>       <C>          <C>       <C>          <C>       <C>
Options outstanding at beginning of
  year..............................   12,452    $  9.23      10,320    $  6.82      7,482     $  4.97
Options granted.....................   3,438       30.51      2,593       18.32      3,950       10.29
Options exercised...................    (762)       4.63       (306)       5.00       (419)       4.05
Options forfeited...................    (133)      16.82       (155)       8.83       (693)       8.33
                                       ------                ------                 ------
Options outstanding at end of
  year..............................   14,995      14.27     12,452        9.23     10,320        6.82
                                       ======    =======     ======     =======     ======     =======
Options exercisable at end of
  year..............................    9,710    $  9.65      8,022     $  6.69      5,994     $  5.27
                                       ======    =======     ======     =======     ======     =======
</TABLE>
 
     The following table summarizes information about stock options outstanding
at September 30, 1997.
 
<TABLE>
<CAPTION>
                                                    Options Outstanding
                                             ---------------------------------     Options Exercisable
                                                        Weighted                   -------------------
                                                         average     Weighted                Weighted
                                                        remaining     average                 average
                                             Shares    contractual   exercise      Shares    exercise
         Range of exercise prices            (000's)      life         price       (000's)     price
-------------------------------------------  -------   -----------   ---------     -------   ---------
<S>                                          <C>       <C>           <C>           <C>       <C>
$0.86 to $2.57.............................   2,412    3.9 years      $  1.98       2,412     $  1.98
$4.50 to $7.15.............................   1,922    5.9               5.72       1,731        5.56
$8.11 to $12.31............................   4,699    7.4              10.13       3,224        9.64
$14.97 to $20.46...........................   2,538    8.5              18.27       1,230       16.30
$25.33 to $39.35...........................   3,424    9.3              30.47       1,113       25.35
                                             ------                                ------
Total......................................  14,995    7.3              14.27       9,710        9.65
                                             ======    ==========      ======      ======     =======
</TABLE>
 
     At September 30, 1997, 3,126,804 shares of unvested restricted stock are
outstanding and deferred shares and stock units representing 2,712,000 shares of
stock are outstanding. The Company granted restricted stock and stock units
aggregating 370,116 shares in the year ended September 30, 1997, 527,634 shares
in the year ended September 30, 1996 and 3,121,875 shares in the year ended
September 30, 1995. The weighted average per share fair value of such stock at
the date of grant was $23.08 in 1997, $15.83 in 1996 and $9.25 in 1995.
Restrictions generally lapse either on an accelerated basis, upon achievement of
defined performance goals, or over a defined length of service. Compensation
cost charged to operations for all outstanding restricted stock, deferred shares
and stock units amounted to $23,940,000 for the year ended September 30, 1997,
$21,124,000 for the year ended September 30, 1996 and $6,519,000 for the year
ended September 30, 1995.
 
                                      F-24
<PAGE>   58
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 11 -- INCOME TAXES
 
     The components of the provisions for income taxes on pretax income consist
of the following:
 
<TABLE>
<CAPTION>
                                                            Federal       State       Total
                                                            --------     -------     --------
                                                                     (In thousands)
<S>                                                         <C>          <C>         <C>
1997:
Currently payable.........................................  $ 28,281     $ 1,718     $ 29,999
Deferred..................................................   127,347         654      128,001
                                                            --------     -------     --------
Total income tax expense..................................  $155,628     $ 2,372     $158,000
                                                            ========     =======     ========
1996:
Currently payable.........................................  $110,531     $10,526     $121,057
Deferred..................................................      (991)     (2,466)      (3,457)
                                                            --------     -------     --------
Total income tax expense..................................  $109,540     $ 8,060     $117,600
                                                            ========     =======     ========
1995:
Currently payable.........................................  $ 85,688     $ 5,546     $ 91,234
Deferred..................................................    (5,370)       (464)      (5,834)
                                                            --------     -------     --------
Total income tax expense..................................  $ 80,318     $ 5,082     $ 85,400
                                                            ========     =======     ========
</TABLE>
 
     Income taxes computed at the United States federal income tax rate of 35%
and income taxes provided differ as follows:
 
<TABLE>
<CAPTION>
                                                               Years ended September 30,
                                                           ----------------------------------
                                                             1997         1996         1995
                                                           --------     --------     --------
                                                                     (In thousands)
<S>                                                        <C>          <C>          <C>
Amount computed at statutory rate......................... $187,968     $137,209     $ 97,862
Increases (decreases) resulting from:
  Affordable housing tax credits..........................  (24,436)     (21,742)     (17,579)
  State income taxes, net of federal tax benefit..........    1,542        5,238        3,686
  Dividends-received deduction............................  (12,634)      (8,277)      (3,271)
  Other, net..............................................    5,560        5,172        4,702
                                                           --------     --------     --------
Total income tax expense.................................. $158,000     $117,600     $ 85,400
                                                           ========     ========     ========
</TABLE>
 
                                      F-25
<PAGE>   59
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 11 -- INCOME TAXES (CONTINUED)
     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The significant
components of the liability for Deferred Income Taxes are as follows:
 
<TABLE>
<CAPTION>
                                                                          September 30,
                                                                     -----------------------
                                                                       1997          1996
                                                                     ---------     ---------
                                                                         (In thousands)
<S>                                                                  <C>           <C>
DEFERRED TAX LIABILITIES:
Investments......................................................... $ 125,852     $ 135,647
Deferred acquisition costs..........................................   341,131       231,978
State income taxes..................................................     3,428         1,048
Other liabilities...................................................   125,928         8,442
Net unrealized gains on certain debt and equity securities..........   113,028            --
                                                                     ---------     ---------
Total deferred tax liabilities......................................   709,367       377,115
                                                                     ---------     ---------
DEFERRED TAX ASSETS:
Contractholder reserves.............................................  (299,905)     (231,296)
Other assets........................................................   (25,698)      (11,273)
Net unrealized losses on certain debt and equity securities.........        --        (9,129)
                                                                     ---------     ---------
Total deferred tax assets...........................................  (325,603)     (251,698)
                                                                     ---------     ---------
Deferred income taxes............................................... $ 383,764     $ 125,417
                                                                     =========     =========
</TABLE>
 
                                      F-26
<PAGE>   60
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 12 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
 
     Quarterly financial data for the years ended September 30, 1997 and 1996
follow:
 
<TABLE>
<CAPTION>
                                                      First      Second     Third      Fourth
                                                     --------   --------   --------   --------
                                                     (In thousands, except per-share amounts)
<S>                                                  <C>        <C>        <C>        <C>
1997:
Net investment income..............................  $143,669   $152,004   $185,760   $197,944
Net realized investment gains (losses).............    (9,304)    (9,442)   (12,136)     1,679
Fee income.........................................    70,067     73,510     81,796     92,330
General and administrative expenses................   (59,254)   (62,035)   (70,419)   (74,030)
Amortization of deferred acquisition costs.........   (30,410)   (30,003)   (52,080)   (52,596)
                                                     --------   --------   --------   --------
Pretax income......................................   114,768    124,034    132,921    165,327
Income tax expense.................................   (34,400)   (37,200)   (38,600)   (47,800)
                                                     --------   --------   --------   --------
Net income.........................................  $ 80,368   $ 86,834   $ 94,321   $117,527
                                                     ========   ========   ========   ========
Per share..........................................  $   0.39   $   0.42   $   0.45   $   0.53
                                                     ========   ========   ========   ========
1996:
Net investment income..............................  $102,126   $112,294   $128,533   $149,803
Net realized investment gains (losses).............     1,404     (3,589)   (12,629)   (15,500)
Fee income.........................................    53,485     62,104     66,405     66,417
General and administrative expenses................   (43,358)   (49,152)   (52,977)   (65,163)
Amortization of deferred acquisition costs.........   (21,071)   (24,216)   (29,875)   (33,014)
                                                     --------   --------   --------   --------
Pretax income......................................    92,586     97,441     99,457    102,543
Income tax expense.................................   (27,800)   (29,200)   (29,800)   (30,800)
                                                     --------   --------   --------   --------
Net income.........................................  $ 64,786   $ 68,241   $ 69,657   $ 71,743
                                                     ========   ========   ========   ========
Per share..........................................  $   0.31   $   0.32   $   0.33   $   0.34
                                                     ========   ========   ========   ========
</TABLE>
 
                                      F-27
<PAGE>   61
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 13 -- BUSINESS SEGMENTS
 
     Summarized data for the Company's business segments follow:
 
<TABLE>
<CAPTION>
                                                                Total
                                                             depreciation
                                                                 and
                                                  Total      amortization   Pretax       Total
                                                 revenues      expense      income      assets
                                                ----------   -----------   --------   -----------
                                                                 (In thousands)
<S>                                             <C>          <C>           <C>        <C>
1997:
Annuity operations............................  $1,905,412    $ 155,714    $490,349   $34,909,441
Broker-dealer operations......................      67,052        2,401      22,622       101,049
Retirement trust services.....................      49,279        1,497      13,001       487,598
Asset management..............................      35,661       16,357       2,798        81,518
Premium financing.............................      26,922        1,039       8,280        57,280
                                                ----------    ---------    --------   -----------
Total.........................................  $2,084,326    $ 177,008    $537,050   $35,636,886
                                                ==========    =========    ========   ===========
1996:
Annuity operations............................  $1,315,553    $  97,806    $350,183   $23,032,076
Broker-dealer operations......................      51,906        1,228      17,253        74,140
Retirement trust services.....................      45,216        1,166      13,570       481,974
Asset management..............................      33,047       18,295       2,448        74,410
Premium financing.............................      26,663          962       8,573        64,221
                                                ----------    ---------    --------   -----------
Total.........................................  $1,472,385    $ 119,457    $392,027   $23,726,821
                                                ==========    =========    ========   ===========
1995:
Annuity operations............................  $  934,243    $  69,554    $246,037   $16,172,140
Broker-dealer operations......................      35,276          868      12,017        42,441
Retirement trust services.....................      46,676        1,461      15,268       484,456
Asset management..............................      34,427       24,069         510        86,510
Premium financing.............................      20,772          713       5,774        58,620
                                                ----------    ---------    --------   -----------
Total.........................................  $1,071,394    $  96,665    $279,606   $16,844,167
                                                ==========    =========    ========   ===========
</TABLE>
 
                                      F-28
<PAGE>   62
 
                                SUNAMERICA INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 13 -- BUSINESS SEGMENTS (CONTINUED)
                 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
 
                     INDEX TO FINANCIAL STATEMENT SCHEDULES
 
<TABLE>
<CAPTION>
                                                                              Page number in
                                                                               this Annual
                                                                                Report on
                                                                                Form 10-K
                                                                             ----------------
<S>                                                                          <C>
Report of Independent Accountants on Financial Statement Schedules.........        S-2
Schedule II -- Condensed Financial Information of Registrant...............  S-3 through S-6
Schedule IV -- Reinsurance.................................................        S-7
</TABLE>
 
     All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
 
                                       S-1
<PAGE>   63
 
                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                         FINANCIAL STATEMENT SCHEDULES
 
To the Board of Directors of SunAmerica Inc.
 
     Our audits of the consolidated financial statements referred to in our
report dated November 7, 1997, appearing on page F-2 of this Annual Report on
Form 10-K of SunAmerica Inc. also included an audit of the Financial Statement
Schedules listed on page S-1 of this Form 10-K. In our opinion, these Financial
Statement Schedules present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
 
Price Waterhouse LLP
Los Angeles, California
November 7, 1997
 
                                       S-2
<PAGE>   64
 
                 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
 
          SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                            CONDENSED BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                                        September 30,
                                                              ---------------------------------
                                                                   1997               1996
                                                              --------------     --------------
<S>                                                           <C>                <C>
ASSETS
Investment in and advances to subsidiaries.................   $2,086,981,000     $1,770,212,000
Other investments..........................................    2,506,556,000      1,045,629,000
Other assets...............................................      219,956,000        104,940,000
                                                              --------------     --------------
Total assets...............................................   $4,813,493,000     $2,920,781,000
                                                              ==============     ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Senior notes and debentures..............................   $1,136,072,000     $  573,335,000
  Junior subordinated debentures...........................      511,894,000        245,483,000
  Reserves for guaranteed investment contracts.............      226,959,000        239,050,000
  Payable to brokers for purchases of securities...........       92,990,000         46,684,000
  Other liabilities........................................      261,472,000        155,671,000
                                                              --------------     --------------
  Total liabilities........................................    2,229,387,000      1,260,223,000
Shareholders' equity.......................................    2,584,106,000      1,660,558,000
                                                              --------------     --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................   $4,813,493,000     $2,920,781,000
                                                              ==============     ==============
</TABLE>
 
                           CONDENSED INCOME STATEMENT
 
<TABLE>
<CAPTION>
                                                             Years ended September 30,
                                                     ------------------------------------------
                                                         1997           1996           1995
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
Dividends received from subsidiaries..............   $136,205,000   $110,256,000   $ 69,287,000
Investment income.................................    280,277,000    189,911,000    158,228,000
Net realized investment gains (losses)............     16,835,000      4,598,000    (25,459,000)
Other income......................................      1,804,000      3,625,000      3,636,000
                                                     -------------  ------------   ------------
TOTAL INCOME......................................    435,121,000    308,390,000    205,692,000
                                                     -------------  ------------   ------------
Interest expense on senior notes and debentures...    (78,575,000)   (51,062,000)   (44,729,000)
Interest expense on junior subordinated
  debentures......................................    (43,290,000)   (20,902,000)    (2,854,000)
Interest expense on guaranteed investment
  contracts.......................................    (19,435,000)   (20,411,000)   (21,482,000)
General and administrative expenses, net of
  reimbursement from subsidiaries of $38,315,000
  in 1997, $33,930,000 in 1996 and $19,095,000 in
  1995............................................        338,000       (146,000)    (2,354,000)
                                                     -------------  ------------   ------------
TOTAL EXPENSES....................................   (140,962,000)   (92,521,000)   (71,419,000)
                                                     -------------  ------------   ------------
PRETAX INCOME.....................................    294,159,000    215,869,000    134,273,000
Income tax expense................................    (45,614,000)   (35,404,000)   (21,116,000)
                                                     -------------  ------------   ------------
INCOME BEFORE EQUITY IN UNDISTRIBUTED NET INCOME
  OF SUBSIDIARIES.................................    248,545,000    180,465,000    113,157,000
Equity in undistributed net income of
  subsidiaries....................................    130,505,000     93,962,000     81,049,000
                                                     -------------  ------------   ------------
NET INCOME........................................   $379,050,000   $274,427,000   $194,206,000
                                                     =============  ============   ============
</TABLE>
 
                                       S-3
<PAGE>   65
 
                 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
 
          SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  (CONTINUED)
 
                        CONDENSED STATEMENT OF CASH FLOW
 
<TABLE>
<CAPTION>
                                                        Years ended September 30,
                                           ---------------------------------------------------
                                                1997               1996              1995
                                           ---------------     -------------     -------------
<S>                                        <C>                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...............................  $   379,050,000     $ 274,427,000     $ 194,206,000
Adjustments to reconcile net income to
  net
 cash provided by operating activities:
  Equity in net income of subsidiaries...     (266,710,000)     (204,218,000)     (150,336,000)
  Net realized investment (gains)
     losses..............................      (16,835,000)       (4,598,000)       25,459,000
Other, net...............................       74,750,000        22,644,000        46,736,000
                                           ---------------     -------------     -------------
NET CASH PROVIDED BY OPERATING
 ACTIVITIES..............................      170,255,000        88,255,000       116,065,000
                                           ---------------     -------------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales (purchases) of investments.....   (1,055,976,000)     (153,640,000)       24,505,000
Dividends received from subsidiaries.....      136,205,000       110,256,000        69,287,000
Contributions of capital paid to
  subsidiaries...........................     (115,861,000)     (435,928,000)     (203,476,000)
                                           ---------------     -------------     -------------
NET CASH USED BY INVESTING ACTIVITIES....   (1,035,632,000)     (479,312,000)     (109,684,000)
                                           ---------------     -------------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of cash dividends...............      (67,819,000)      (61,721,000)      (50,268,000)
Withdrawal payments on guaranteed
 investment contracts....................      (31,525,000)      (31,725,000)      (36,472,000)
Net proceeds from issuances of long-term
 notes and debentures....................      559,332,000        47,478,000        51,675,000
Net proceeds from issuances of junior
 subordinated debentures.................      310,256,000       185,700,000                --
Payment for redemption of 9.95% junior
 subordinated debentures.................      (54,259,000)               --                --
Payments for redemptions of Preferred
 Stock...................................     (136,549,000)               --                --
Net proceeds from issuance of Series E
 Preferred Stock.........................               --       240,547,000                --
Net proceeds for issuance of Common
  Stock..................................      577,268,000                --                --
Net issuance cost of 8 1/2% Premium
  Equity
 Redemption Cumulative Security Units....      (44,605,000)               --                --
                                           ---------------     -------------     -------------
NET CASH PROVIDED (USED) BY FINANCING
 ACTIVITIES..............................    1,112,099,000       380,279,000       (35,065,000)
                                           ---------------     -------------     -------------
NET INCREASE (DECREASE) IN CASH AND
 SHORT-TERM INVESTMENTS..................      246,722,000       (10,778,000)      (28,684,000)
CASH AND SHORT-TERM INVESTMENTS AT
 BEGINNING OF PERIOD.....................      110,181,000       120,959,000       149,643,000
                                           ---------------     -------------     -------------
CASH AND SHORT-TERM INVESTMENTS AT
 END OF PERIOD...........................  $   356,903,000     $ 110,181,000     $ 120,959,000
                                           ===============     =============     =============
NON-CASH FINANCING ACTIVITY:
 Exchange of junior subordinated
  debentures, Series A, due 2044 for
  2,105,235 shares of 9 1/4% Series B
  Preferred Stock and for the common
  securities of a subsidiary
  grantor trust..........................  $            --     $          --     $  54,259,000
                                           ===============     =============     =============
</TABLE>
 
                                       S-4
<PAGE>   66
 
                 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
 
          SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  (CONTINUED)
 
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
 
NOTE 1 -- INDEBTEDNESS
 
     Indebtedness consist of the following long-term notes and debentures
(interest rates are as of September 30):
 
<TABLE>
<CAPTION>
                                                                       September 30,
                                                              -------------------------------
                                                                   1997              1996
                                                              --------------     ------------
<S>                                                           <C>                <C>
SENIOR NOTES AND DEBENTURES:
5.6% debentures due July 31, 2097 (net of unamortized
  discount of $43,513,000)..................................  $  131,487,000     $         --
Medium-term notes due 1998 through 2026 (5 3/8% to
  7 3/8%)...................................................     248,335,000      248,335,000
8 1/8% debentures due April 28, 2023........................     100,000,000      100,000,000
9.95% debentures due February 1, 2012.......................     100,000,000      100,000,000
6.20% notes due October 31, 1999............................     431,250,000               --
9% notes due January 15, 1999...............................     125,000,000      125,000,000
                                                              --------------     ------------
Total senior notes and debentures...........................   1,136,072,000      573,335,000
                                                              --------------     ------------
 
JUNIOR SUBORDINATED DEBENTURES:
9.95% junior subordinated debentures, Series A, due 2044....              --       54,259,000
8.35% junior subordinated debentures, due 2044..............     191,224,000      191,224,000
8.30% junior subordinated debentures, due 2045..............     320,670,000               --
                                                              --------------     ------------
Total junior subordinated debentures........................     511,894,000      245,483,000
                                                              --------------     ------------
Total indebtedness..........................................  $1,647,966,000     $818,818,000
                                                              ==============     ============
</TABLE>
 
     On October 7, 1997, subsequent to the Company's fiscal year end, the
Company issued $100,000,000 of 6.75% notes due October 1, 2007.
 
     In addition, the Company is the issuer of the following guaranteed
investment contracts ("GICs") (interest rates are as of September 30):
 
<TABLE>
<CAPTION>
                                                                        September 30,
                                                                -----------------------------
                                                                    1997             1996
                                                                ------------     ------------
<S>                                                             <C>              <C>
8 1/2% GIC due serially through 2002 (including interest
  credited of $1,275,000 in 1997 and $1,252,000 in 1996)......  $187,414,000     $190,627,000
8 3/8% GIC due serially through 2003 (including interest
  credited of $203,000 in 1997 and $254,000 in 1996)..........    30,308,000       39,294,000
7 3/8% GIC due in 2018 (including interest credited of
  $303,000 in 1997 and $272,000 in 1996)......................     9,237,000        9,129,000
                                                                ------------     ------------
Total guaranteed investment contracts.........................  $226,959,000     $239,050,000
                                                                ============     ============
</TABLE>
 
     Aggregate debt service payments (i.e., principal and interest payments),
including GICs, indebtedness and the 6.75% notes, are due as follows: 1998,
$183,560,000; 1999, $291,960,000; 2000, $574,641,000; 2001, $138,995,000; 2002,
$297,373,000; and $4,274,693,000, in the aggregate, thereafter.
 
                                       S-5
<PAGE>   67
 
                 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
 
    SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 2 -- GUARANTEES
 
     The Company has transferred to third-party investors certain of its
interests in various partnerships that make tax-advantaged affordable housing
investments. As part of these transactions, the Parent has agreed to advance
monies to support the operations of the underlying housing projects, if
required, and has guaranteed that the transferred partnerships will provide, as
of the transfer date and under then current tax laws, a specified level of
associated tax credits and deductions to the third-party investors. Based on an
evaluation of the underlying housing projects, management does not anticipate
any material cash payments with respect to the guarantees.
 
NOTE 3 -- CONTINGENCIES
 
     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 are adequate and any further liabilities and costs will not have a
material adverse impact upon the Company's financial position or results of
operations.
 
     In the ordinary course of business, the Parent has agreed contingently to
make capital contributions, aggregating approximately $332,959,000 to 153
limited partnerships over the next 6 years (four years on a weighted average
basis) in exchange for ownership interests in such partnerships.
 
                                       S-6
<PAGE>   68
 
                 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
 
                           SCHEDULE IV -- REINSURANCE
 
        AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                          Percentage
                                               Ceded        Assumption                    of amount
                                Gross         to other      from other        Net          assumed
                                amount       companies      companies        amount         to net
                              ----------     ----------     ----------     ----------     ----------
<S>                           <C>            <C>            <C>            <C>            <C>
1997:
Life insurance in force.....  $6,749,549     $5,757,164      $     --      $  992,385           --%
                              ==========     ==========       =======      ==========       ======
Premiums:
  Annuities and other single
     premiums...............  $1,427,699     $       --      $ 62,857      $1,490,556         4.22%
  Annual life insurance
     premiums...............      30,321         26,232         7,632          11,721        65.11
  Accident and health
     insurance premiums.....      (1,338)        (1,557)           --             219           --
                              ----------     ----------       -------      ----------       ------
          Total premiums....  $1,456,682     $   24,675      $ 70,489      $1,502,496         4.69%
                              ==========     ==========       =======      ==========       ======
1996:
Life insurance in force.....  $8,009,173     $7,701,296      $     --      $  307,877           --%
                              ==========     ==========       =======      ==========       ======
Premiums:
  Annuities and other single
     premiums...............  $  984,334     $       --      $  9,042      $  993,376         0.91%
  Annual life insurance
     premiums...............      42,364         42,364            --              --           --
  Accident and health
     insurance premiums.....      16,613         16,613            --              --           --
                              ----------     ----------       -------      ----------       ------
          Total premiums....  $1,043,311     $   58,977      $  9,042      $  993,376         0.91%
                              ==========     ==========       =======      ==========       ======
1995:
Life insurance in force.....  $1,907,878     $1,592,650      $     --      $  315,228           --%
                              ==========     ==========       =======      ==========       ======
Premiums:
  Annuities and other single
     premiums...............  $  944,742     $       --      $     --      $  944,742           --%
  Annual life insurance
     premiums...............      16,225         16,225            --              --           --
                              ----------     ----------       -------      ----------       ------
          Total premiums....  $  960,967     $   16,225      $     --      $  944,742           --%
                              ==========     ==========       =======      ==========       ======
</TABLE>
 
                                       S-7