<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K

(Mark One)
[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]

                  For the fiscal year ended September 30, 1998

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [No Fee Required]

        For the transition period from __________ to __________


                          Commission File No. 33-47472


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY


Incorporated in Arizona                                          86-0198983
                                                                IRS Employer
                                                              Identification No.

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS Yes [X] No [ ]

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT 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.   [X]

THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANTS COMMON STOCK ON DECEMBER 22,
1998 WAS AS FOLLOWS:

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


<PAGE>   2


                                     PART I

ITEM 1.  BUSINESS

GENERAL DESCRIPTION

        Anchor National Life Insurance Company (the "Company") is an indirect
wholly owned subsidiary of SunAmerica Inc. (the "Parent"), a financial services
company specializing in retirement savings and investment products and services.
The Company ranks among the largest U.S. issuers of variable annuities.
Complementing these annuity operations are the Company's guaranteed investment
contract ("GIC") operations, its asset management operations and its wholly
owned and affiliated broker-dealer operations, which provide a broad range of
financial planning and investment services through more than 9,700 independent
registered representatives nationwide. At September 30, 1998, the Company held
$17.53 billion of assets, consisting of $14.53 billion of assets on its balance
sheet and $3.00 billion of assets managed in mutual funds.

        On August 20, 1998, the Parent announced that it has entered into a
definitive agreement to merge with and into American International Group, Inc.
("AIG"). The transaction was approved by both the Parent's and AIG's
shareholders on November 18, 1998, and, subject to various regulatory approvals,
will be completed in late 1998 or early 1999.

        The Company is incorporated in Arizona and maintains its principal
executive offices at 1 SunAmerica Center, Los Angeles, California 90067-6022,
telephone (310) 772-6000. The Company has no employees; however, employees of
the Parent and its other subsidiaries perform various services for the Company.
The Parent had approximately 2,500 employees at September 30, 1998,
approximately 1,000 of whom perform services for the Company as well as for
certain of its affiliates.

        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 1987 and 1997,
annual industry premiums from fixed and variable annuities and fund deposits
increased from $86.32 billion to $207.64 billion. During the same period, annual
industry sales of mutual funds, excluding money market accounts, rose from
$190.63 billion to $874.26 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 six wholly-owned or affiliated broker-dealers comprise the
largest network of independent registered representatives in the nation and the
fifth-largest securities sales force, based on industry data. Its wholly owned
or affiliated broker-dealers accounted for approximately one-third of the
Company's total annuity sales in fiscal 1998. 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

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<PAGE>   3



directly to banks, municipalities, asset management firms and direct plan
sponsors and through intermediaries, such as managers or consultants servicing
these groups.

        The Company and its affiliates have 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 reduced the more traditional paper-intensive life
insurance processing procedures, reducing annuity processing and servicing costs
and improving customer service. The Company has also implemented technology to
interface with its wholly-owned or affiliated broker-dealers, which enables the
Company to more effectively market its products and help the affiliated
financial professionals to better service their clients.

        In recent years, the Company has enhanced its marketing efforts and
expanded its offerings of fee-based products such as variable annuities and
mutual funds, resulting in significantly increased fee income. Fee income has
also expanded through the receipt of broker-dealer net retained commissions,
resulting primarily from increased demand for long-term investment products. The
Company's fee generating businesses entail no portfolio credit risk and require
significantly less capital support than its fixed-rate business, which generates
net investment income.

        For the year ended September 30, 1998, the Company's net investment
income (including net realized investment gains) and fee income by primary
product line or service are as follows:

                          NET INVESTMENT AND FEE INCOME

<TABLE>
<CAPTION>
                                                                       Primary product or
                                        Amount       Percent                       service
                                      --------     ---------     -------------------------
                                  (In thousands)
<S>                               <C>              <C>           <C>

Net investment income
  (including net realized
  investment gains)                   $106,354          26.8%    Fixed-rate products
                                      --------         -----
Fee income:
  Variable annuity fees                200,867          50.6     Variable annuities
  Net retained commissions              48,561          12.2     Broker-dealer sales
  Surrender charges                      7,404           1.9     Fixed- and variable-rate
                                                                   products
  Asset management fees                 29,592           7.5     Mutual funds
  Other fees                             3,938           1.0
                                      --------         -----
  Total fee income                     290,362          73.2
                                      --------         -----
Total                                 $396,716         100.0%
                                      ========         =====
</TABLE>

        For financial information on the Company's business segments, see Part
IV - "Notes to Consolidated Financial Statements - Note 11 - Business
Segments."


                                        2


<PAGE>   4



LIFE INSURANCE OPERATIONS

        Founded in 1965, the Company is an Arizona-chartered company licensed in
49 states and the District of Columbia which markets flexible-premium variable
annuities and GICs. It has an "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.

        In addition to distributing its variable annuity products through its
six wholly owned or affiliated broker-dealers, the Company distributes its
products through over 800 other independent broker-dealers, full-service
securities firms and financial institutions as well as through independent
general insurance agents. In total, more than 49,000 independent sales
representatives nationally are licensed to sell the Company's annuity products.

FIXED ANNUITIES AND GICs

        The Company's general account obligations include fixed-rate products,
including fixed annuities issued in prior years, and fixed-rate account options
of its variable annuity contracts. Although the Company's contracts remain in
force an average of seven to ten years, a majority (approximately 85% at
September 30, 1998) 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.

        The Company augments its retail annuity business with the sale of
institutional products. At September 30, 1998, the Company had $282.3 million of
fixed-maturity, variable-rate GIC obligations that reprice periodically based
upon certain defined indexes. Of the total GIC portfolio at September 30, 1998,
approximately 74% was sold to asset management firms, 18% was sold to banks and
8% was sold to state and local government entities.

        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 or other
restrictions in order to encourage persistency. Approximately 77% of the
Company's fixed annuity and GIC reserves had surrender penalties or other
restrictions at September 30, 1998.

VARIABLE ANNUITIES

        The variable annuity products of the Company offer investors a broad
spectrum of fund alternatives, with a choice of investment managers, as well as
guaranteed fixed-rate account options. The Company earns fee income through the
sale, administration and management of the variable account options of its
variable annuity products. The Company also earns investment income on monies
allocated to the fixed-rate account options of these products. Variable
annuities offer retirement planning features similar to those offered by fixed
annuities, but differ in that the contractholder's rate of return is generally
dependent upon the investment performance of the particular equity, fixed-


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<PAGE>   5



income, money market or asset allocation fund selected by the contractholder.
Because the investment risk is borne by the customer in all but the fixed-rate
account options, these products require significantly less capital support than
fixed annuities. The Company's flagship variable annuity product, Polaris, is a
multimanager variable annuity that offers investors a choice of 26 variable
funds and 7 guaranteed fixed-rate funds. Polaris sales have increased
significantly in recent years due to enhanced distribution efforts and growing
consumer demand for flexible retirement savings products that offer a variety of
equity, fixed-income and guaranteed fixed account investment choices. At
September 30, 1998, total variable product reserves were $12.93 billion, of
which $11.13 billion were held in separate accounts. The Company's variable
annuity products incorporate surrender charges to encourage persistency. At
September 30, 1998, 77% of the Company's variable annuity reserves held in the
separate accounts 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 1998 was
approximately $50,000.

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 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, 1998, these assets had an
aggregate fair value of $2.69 billion with a duration of 3.6. The Company's
fixed-rate liabilities include fixed annuities, subordinated notes and GICs. At
September 30, 1998, these liabilities had an aggregate fair value (determined by
discounting future contractual cash flows by related market rates of interest)
of $2.41 billion with a duration of 1.4. For the years ended September 30, 1998,
1997 and 1996, the Company's yields on average invested assets were 8.53%, 7.97%
and 7.50%, respectively; its average rates paid on all interest-bearing
liabilities were 5.49%, 5.46% and 5.25%, respectively; it realized net
investment spreads of 3.34%, 2.77% and 2.59%, respectively, on average invested
assets; and net realized investment gains and losses were 0.75%, 0.66% and 0.61%
of average invested assets, respectively.



                                        4


<PAGE>   6



        The Company's general investment philosophy is to hold fixed-rate assets
for long-term investment. Thus, it does not have a trading portfolio. However,
the Company has determined that all of its portfolio of bonds, notes and
redeemable preferred stocks (the "Bond Portfolio") is available to be sold in
response to changes in market interest rates, changes in relative value of asset
sectors and individual securities, changes in prepayment risk, changes in credit
quality outlook for certain securities, and the Company's need for liquidity and
other similar factors.

        The following table summarizes the Company's investment portfolio at
September 30, 1998:

                             SUMMARY OF INVESTMENTS

<TABLE>
<CAPTION>
                                                                Carrying          Percent of
                                                                   value           portfolio
                                                           -------------          ----------
                                                           (In thousands)
<S>                                                        <C>                    <C>  
Cash and short-term investments                            $     333,735                12.2%
U.S. government securities                                        88,239                 3.2
Mortgage-backed securities                                       584,007                21.4
Other bonds, notes and redeemable
   preferred stocks                                            1,282,508                46.9
Mortgage loans                                                   391,448                14.3
Real estate                                                       24,000                 0.9
Common stocks                                                        169                   -
Other invested assets                                             30,636                 1.1
                                                           -------------              ------
Total investments                                          $   2,734,742               100.0%
                                                           =============              ======
</TABLE>

        At September 30, 1998, the Bond Portfolio (excluding $6.9 million of
redeemable preferred stocks) included $1.90 billion of bonds rated by S&P,
Moody's, DCR, Fitch Investors Service, L.P. ("Fitch") or the National
Association of Insurance Commissioners ("NAIC"), and $53.6 million of bonds
rated by the Company pursuant to statutory ratings guidelines established by the
NAIC. At September 30, 1998, approximately $1.78 billion of the Bond Portfolio
was investment grade, including $672.1 million of U.S. government/agency
securities and mortgage-backed securities.

        At September 30, 1998, the Bond Portfolio included $167.6 million of
bonds that were not investment grade. These non-investment-grade bonds accounted
for 1.2% of the Company's total assets and 6.1% of its invested assets.

        Senior secured loans ("Secured Loans") are included in the Bond
Portfolio and aggregated $186.6 million at September 30, 1998. Secured Loans are
senior to subordinated debt and equity, and are secured by assets of the issuer.
At September 30, 1998, Secured Loans consisted of loans to 62 borrowers spanning
21 industries, with 32% of these assets concentrated in financial institutions.
No other industry concentration constituted more than 9% of these assets.

        Mortgage loans aggregated $391.4 million at September 30, 1998 and
consisted of 133 commercial first mortgage loans with an average loan balance of
approximately $2.9 million, collateralized by properties located in 29

                                        5


<PAGE>   7



states. Approximately 21% of the portfolio was multifamily residential, 17% was
office, 14% was manufactured housing, 13% was industrial, 11% was hotels and 24%
was other types.

        At September 30, 1998, the carrying value (after impairment writedowns)
of all investments in default as to the payment of principal or interest totaled
$0.9 million, which constituted less than 0.1% of total invested assets.

        For more information concerning the Company's investments, including the
risks inherent in such investments, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Financial Condition
and Liquidity."


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. The Company offers investors an array of equity,
fixed-income, money market and tax-exempt mutual funds. Sales growth in recent
years is primarily due to sales of the Company's "Style Select Series" product
(which was introduced in November 1996) and the introduction in June 1998 of the
"Dogs" of Wall Street. The "Style Select Series" is a group of mutual funds
which are each managed by three industry-recognized fund managers. The "Dogs" of
Wall Street fund contains 30 large capitalization value stocks which are
selected by strict criteria. Founded in 1983 and acquired by the Company in
January 1990, SunAmerica Asset Management managed approximately $3.78 billion of
assets at September 30, 1998, including mutual fund assets, private accounts and
certain of the variable annuity assets of the Company and its affiliates.

        The SunAmerica mutual funds are distributed nationally through a network
of approximately 400 financial institutions and unaffiliated broker-dealers, as
well as by the Company's broker-dealer subsidiary and its affiliated
broker-dealers.


BROKER-DEALER

        The Company owns a broker-dealer, Royal Alliance Associates, Inc.,
acquired in January 1990. The Company has maintained its network of
representatives at approximately 3,500 during the year.


REGULATION

        The Company is subject to regulation and supervision by the insurance
regulatory agencies of the states in which it is authorized to transact
business. State insurance laws establish supervisory agencies with broad
administrative and supervisory powers. Principal among these powers are granting
and revoking licenses to transact business, regulating marketing and other trade
practices, operating guaranty associations, licensing agents, approving policy
forms, regulating certain premium rates, regulating insurance holding company
systems, establishing reserve and valuation requirements,



                                        6


<PAGE>   8



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 combinations between insurance companies, banks
and other entities. In recent years, the NAIC has developed several model laws
and regulations designed to reduce the risk of insurance company insolvencies
and market conduct violations. These initiatives include investment reserve
requirements, risk-based capital ("RBC") standards, codification of insurance
accounting principles, new investment standards and restrictions on an insurance
company's ability to pay dividends to its stockholders. The NAIC is also
currently developing model laws or regulations relating to product design,
product reserving standards and illustrations of annuity products. Current
proposals are still being debated and the Company is monitoring developments in
this area and the effects any changes would have on the Company.

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

        SunAmerica Asset Management is registered with the Securities and
Exchange Commission (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
and the mutual funds are subject to regulation and examination by the SEC. In
addition, variable annuities and the related separate accounts of the Company
are subject to regulation by the SEC under the Securities Act of 1933 and the
Investment Company Act of 1940.

        The Company's broker-dealer subsidiary is subject to regulation and
supervision by the states in which it transacts business, as well as by the SEC
and the National Association of Securities Dealers ("NASD"). The SEC and the
NASD have broad administrative and supervisory powers relative to all aspects of
business and may examine the broker-dealer subsidiary's business and accounts at
any time. The SEC also has broad jurisdiction to oversee various activities of
the Company and its other subsidiaries.

        From time to time, Federal initiatives are proposed that could affect
the Company's businesses. Such initiatives include employee benefit plan
regulations and tax law changes affecting the taxation of insurance companies


                                        7

<PAGE>   9



and the tax treatment of insurance and other investment products. Proposals made
in recent years to limit the tax deferral of annuities or otherwise modify the
tax rules related to the treatment of annuities have not been enacted. While
certain of such proposals, if implemented, could have an adverse effect on the
Company's sales of affected products, and consequently on its results of
operations, the Company believes such proposals have a small likelihood of being
enacted, because they would discourage retirement savings and there is a strong
public and industry opposition to them.


COMPETITION

        The businesses conducted by the Company are highly competitive. The
Company's life insurance operations 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 96% of total net annuity premiums
written. Net annuity premiums written among the top 100 companies range from
less than $100 million to approximately $10 billion annually. The Company
together with its affiliates 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.

        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.

        The Company's broker-dealer faces competition from regional firms and
large, national full service and discount brokerage firms.

ITEM 2.   PROPERTIES

        The Company's executive offices and its principal office are in leased
premises at 1 SunAmerica Center, Los Angeles, California. The Company, through
an affiliate, also leases office space in Woodland Hills, California. The
Company's broker-dealer and asset management subsidiaries lease offices in New
York, New York.

        The Company believes that such properties, including the equipment
located therein, are suitable and adequate to meet the requirements of its
businesses.



                                        8


<PAGE>   10



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 1998 to a vote of
security-holders, through the solicitation of proxies or otherwise.

                                     PART II

Item 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS

        Not applicable.


                                        9


<PAGE>   11



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. 



<TABLE>
<CAPTION>

                                                                          Years ended September 30,
                                                           ------------------------------------------------------
                                                             1998       1997       1996        1995       1994
                                                           --------   --------   --------    --------   --------
<S>                                                       <C>        <C>        <C>         <C>        <C>
                                                                              (In thousands)

RESULTS OF OPERATIONS

Net investment income                                      $ 86,872   $ 73,201   $ 56,843    $ 50,083   $ 58,996
Net realized investment gains (losses)                       19,482    (17,394)   (13,355)     (4,363)   (33,713)
Fee income                                                  290,362    213,146    169,505     145,105    141,753
General and administrative expenses                         (96,102)   (98,802)   (81,552)    (64,457)   (54,363)
Amortization of deferred acquisition costs                  (72,713)   (66,879)   (57,520)    (58,713)   (44,195)
Annual commissions                                          (18,209)    (8,977)    (4,613)     (2,658)    (1,158)
                                                           --------   --------   --------    --------   --------

Pretax income                                               209,692     94,295     69,308      64,997     67,320
Income tax expense                                          (71,051)   (31,169)   (24,252)    (25,739)    (22,705)
                                                           --------   --------   --------    --------   --------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
   ACCOUNTING FOR INCOME TAXES                              138,641     63,126     45,056      39,258     44,615

Cumulative effect of change in accounting
   for income taxes                                             ---        ---        ---         ---    (20,463)
                                                           --------   --------   --------    --------   --------
NET INCOME                                                 $138,641   $ 63,126   $ 45,056    $ 39,258   $ 24,152
                                                           ========   ========   ========    ========   ========
</TABLE>


                                       10

<PAGE>   12



ITEM. 6   SELECTED CONSOLIDATED FINANCIAL DATA (continued)


<TABLE>
<CAPTION>
                                                                    At  September 30,
                                        -------------------------------------------------------------------------
                                           1998           1997            1996            1995           1994
                                        -----------    -----------      ----------      ----------     ----------
                                                                     (In thousands)
<S>                                    <C>            <C>            <C>               <C>            <C>
FINANCIAL POSITION

Investments                             $ 2,734,742    $ 2,608,301      $2,329,232      $2,114,908     $1,632,072
Variable annuity assets
  held in separate accounts              11,133,569      9,343,200       6,311,557       5,230,246      4,486,703
Deferred acquisition costs                  539,850        536,155         443,610         383,069        416,289
Other assets                                118,203         83,283          120,136         55,474          67,062
                                        -----------    -----------      ----------      ----------     ----------

TOTAL ASSETS                            $14,526,364    $12,570,939      $9,204,535      $7,783,697     $6,602,126
                                        ===========    ===========      ==========      ==========     ==========

Reserves for fixed annuity
   contracts                            $ 2,189,272     $2,098,803      $1,789,962      $1,497,052     $1,437,488
Reserves for guaranteed
   investment contracts                     282,267        295,175         415,544         277,095            ---
Variable annuity liabilities
   related to separate
   accounts                              11,133,569      9,343,200       6,311,557       5,230,246      4,486,703
Other payables and accrued
   liabilities                              133,647        155,256          96,196         227,953        195,134
Subordinated notes payable
   to Parent                                 39,182         36,240          35,832          35,832         34,712
Deferred income taxes                        95,758         67,047          70,189          73,459         64,567
Shareholder's equity                        652,669        575,218         485,255         442,060        383,522

                                        -----------    -----------      ----------      ----------      ----------
TOTAL LIABILITIES AND
   SHAREHOLDER'S EQUITY                 $14,526,364    $12,570,939      $9,204,535      $7,783,697     $6,602,126
                                        ===========    ===========      ==========      ==========     ==========
</TABLE>



                                       11


<PAGE>   13




ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

        Management's discussion and analysis of financial condition and results
of operations of Anchor National Life Insurance Company (the "Company") for the
three years in the period ended September 30, 1998 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 $138.6 million in 1998, compared with $63.1 million
in 1997 and $45.1 million in 1996.

        PRETAX INCOME totaled $209.7 million in 1998, $94.3 million in 1997 and
$69.3 million in 1996. The 122.4% improvement in 1998 over 1997 primarily
resulted from increased fee income and higher net realized investment gains,
partially offset by increased annual commissions and increased amortization of
deferred acquisition costs. The 36.1% improvement in 1997 over 1996 primarily
resulted from increased fee income and net investment income, partially offset
by higher general and administrative expenses and increased amortization of
deferred acquisition costs.

        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 $86.9 million in 1998 from $73.2
million in 1997 and $56.8 million in 1996. These amounts represent 3.34% on
average invested assets (computed on a daily basis) of $2.60 billion in 1998,
2.77% on average invested assets of $2.65 billion in 1997 and 2.59% on average
invested assets of $2.19 billion in 1996.

 
                                     12


<PAGE>   14



        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 $140.4 million in 1998, $126.5 million in 1997 and $142.9
million in 1996. The difference between the Company's yield on average invested
assets and the rate paid on average interest-bearing liabilities (the "Spread
Difference") was 3.04% in 1998, 2.51% in 1997 and 2.25% in 1996.

        Investment income (and the related yields on average invested assets)
totaled $222.0 million (8.53%) in 1998, compared with $210.8 million (7.97%) in
1997 and $164.6 million (7.50%) in 1996. These increased yields in 1998 and 1997
include the effects of an increasing proportion of mortgage loans in the
Company's portfolio. On average, mortgage loans have higher yields than that of
the Company's overall portfolio. In addition, the Company experienced higher
returns on its investments in partnerships, particularly in 1998. The increase
in investment income in 1997 also reflects an increase in average invested
assets.

        Partnership income increased to $24.3 million (a yield of 174.85% on
related average assets of $13.9 million) in 1998, compared with $6.7 million (a
yield of 15.28% on related average assets of $44.0 million) in 1997 and $4.1
million (a yield of 10.12% on related average assets of $40.2 million) in 1996.
Partnership income is based primarily upon cash distributions received from
limited partnerships, the operations of which the Company does not influence.
Consequently, such income is not predictable and there can be no assurance that
the Company will realize comparable levels of such income in the future.

        Total interest expense equalled $135.1 million in 1998, $137.6 million
in 1997 and $107.8 million in 1996. The average rate paid on all
interest-bearing liabilities was 5.49% in 1998, compared with 5.46% in 1997 and
5.25% in 1996. Interest-bearing liabilities averaged $2.46 billion during 1998,
compared with $2.52 billion during 1997 and $2.05 billion during 1996. The
increases in the overall rates paid on interest-bearing liabilities primarily
resulted from the impact of certain promotional one-year interest rates offered
on the fixed account portion of the Company's Polaris and Seasons variable
annuity products.

        The modest decline in average invested assets in 1998 reflects a similar
modest decline in average interest-bearing liabilities, which results from the
net effect of increased sales of the Company's fixed rate products and net
exchanges from fixed accounts into the separate accounts of variable annuity
contracts. Fixed annuity premiums totaled $1.51 billion in 1998, compared with
$1.10 billion in 1997 and $741.8 million in 1996, and are largely premiums for
the fixed accounts of variable annuities. These amounts represent 72%, 61% and
50% of the fixed annuity reserve balances at the beginning of the respective
periods. The premiums for the fixed accounts of variable annuities have
increased primarily because of increased sales of the Company's variable annuity
products and greater inflows into the one-year fixed account and the new
six-month fixed account of these products, which are used for dollar cost
averaging into the variable accounts. Accordingly, the Company anticipates that
it will see a large portion of these premiums transferred into the variable
funds.

        Guaranteed investment contract ("GIC") premiums totaled $5.6 million in
1998, $55.0 million in 1997 and $135.0 million in 1996. GIC surrenders and
maturities totaled $36.3 million in 1998, $198.1 million in 1997 and $16.5
million in 1996. The Company does not actively market GICs; consequently,
premiums and surrenders may vary substantially from period to period. The GICs
issued by the Company generally guarantee the payment of principal and interest
at fixed or variable rates for a term of three to five years. GICs that

                                       13


<PAGE>   15



are purchased by banks for their long-term portfolios or by state and local
governmental entities either prohibit withdrawals or permit scheduled book value
withdrawals subject to the terms of the underlying indenture or agreement. GICs
purchased by asset management firms for their short-term portfolios either
prohibit withdrawals or permit withdrawals with notice ranging from 90 to 270
days. In pricing GICs, the Company analyzes cash flow information and prices
accordingly so that it is compensated for possible withdrawals prior to
maturity.

        NET REALIZED INVESTMENT GAINS totaled $19.5 million in 1998, compared
with net realized investment losses of $17.4 million in 1997 and $13.4 million
in 1996. Net realized investment gains (losses) include impairment writedowns of
$13.1 million in 1998, $20.4 million in 1997 and $16.0 million in 1996. Thus,
net gains from sales and redemptions of investments totaled $32.6 million in
1998, $3.0 million in 1997 and $2.6 million in 1996.

        The Company sold or redeemed invested assets, principally bonds and
notes, aggregating $2.23 billion in 1998, $2.62 billion in 1997 and $1.60
billion in 1996, respectively. Sales of investments result from the active
management of the Company's investment portfolio. Because redemptions of
investments are generally involuntary and sales of investments are made in both
rising and falling interest rate environments, net gains from sales and
redemptions of investments fluctuate from period to period, and represent 1.25%,
0.11% and 0.12% of average invested assets for 1998, 1997 and 1996,
respectively. Active portfolio management involves the ongoing evaluation of
asset sectors, individual securities within the investment portfolio and the
reallocation of investments from sectors that are perceived to be relatively
overvalued to sectors that are perceived to be relatively undervalued. The
intent of the Company's active portfolio management is to maximize total returns
on the investment portfolio, taking into account credit, option, liquidity and
interest-rate risk.

        Impairment writedowns include $9.4 million of provisions applied to
partnerships during 1998 and $15.7 million and $15.2 million of provisions
applied to non-income producing land owned in Arizona during 1997 and 1996,
respectively. The statutory carrying value of this land had been guaranteed by
the Company's ultimate Parent, SunAmerica Inc. ("SunAmerica"). SunAmerica made a
capital contribution of $28.4 million on December 31, 1996 to the Company
through the Company's direct parent in exchange for the termination of its
guaranty with respect to this land. Accordingly, the Company reduced the
carrying value of this land to estimated fair value to reflect the full
termination of the guaranty. Impairment writedowns represent 0.50%, 0.77% and
0.73% of average invested assets for 1998, 1997 and 1996, respectively. For the
five years ended September 30, 1998, impairment writedowns as a percentage of
average invested assets have ranged from 0.28% to 0.91% and have averaged 0.64%.
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
$200.9 million in 1998, $139.5 million in 1997 and $104.0 million in 1996. These
increased fees reflect growth in average variable annuity assets, due to
increased market values, the receipt of variable annuity premiums and net
exchanges into the separate accounts from the fixed accounts of variable annuity
contracts, partially offset by surrenders. Variable annuity fees represent 1.9%,
1.8% and 1.8% of average variable annuity assets for 1998, 1997 and 1996,
respectively. Variable annuity assets averaged $10.70 billion during 1998, $7.55
billion during 1997 and $5.70 billion during 1996. Variable

                                       14


<PAGE>   16



annuity premiums, which exclude premiums allocated to the fixed accounts of
variable annuity products, have aggregated $1.82 billion in 1998, $1.27 billion
in 1997 and $919.8 million in 1996. These amounts represent 19%, 20% and 18% of
variable annuity reserves at the beginning of the respective periods.

        Sales of variable annuity products (which include premiums allocated to
the fixed accounts) ("Variable Annuity Product Sales") amounted to $3.33
billion, $2.37 billion and $1.66 billion in 1998, 1997 and 1996, respectively,
and primarily reflect sales of the Company's flagship variable annuity, Polaris.
Polaris is a multimanager variable annuity that offers investors a choice of 26
variable funds and 7 guaranteed fixed-rate funds. 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. In recent weeks, subsequent to the Company's fiscal
year end, sales of variable annuities have slowed as investors paused to
reevaluate their investment decisions in light of volatile markets. The Company
believes that fluctuating market conditions increase the value of financial
planning services and make the flexibility and security of variable annuities
even more attractive.

        The Company has encountered increased competition in the variable
annuity marketplace during recent years and anticipates that the market will
remain highly competitive for the foreseeable future. Also, from time to time,
Federal initiatives are proposed which could affect the taxation of variable
annuities and annuities generally.

        NET RETAINED COMMISSIONS are primarily derived from commissions on the
sales of nonproprietary investment products by the Company's broker-dealer
subsidiary, after deducting the substantial portion of such commissions that is
passed on to registered representatives. Net retained commissions totaled $48.6
million in 1998, $39.1 million in 1997 and $31.5 million in 1996. Broker-dealer
sales (mainly sales of general securities, mutual funds and annuities) totaled
$14.37 billion in 1998, $11.56 billion in 1997 and $8.75 billion in 1996. The
increases in sales and net retained commissions reflect higher average
production per representative and generally favorable market conditions and, in
1997, a greater number of registered representatives due primarily to the
transfer of representatives from an affiliated broker-dealer. Increases in net
retained commissions may not be proportionate to increases in sales primarily
due to differences in sales mix.

        SURRENDER CHARGES on fixed and variable annuities totaled $7.4 million
in 1998, $5.5 million in 1997 and $5.2 million in 1996. 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 $1.14 billion in 1998, $1.06
billion in 1997 and $898.0 million in 1996. These payments represent 9.0%, 11.2%
and 12.4%, respectively, of average fixed and variable annuity reserves.
Withdrawals include variable annuity withdrawals from the separate accounts
totaling $952.1 million (8.9% of average variable annuity reserves), $822.0
million (10.9% of average variable annuity reserves) and $634.1 million (11.2%
of average variable reserves) in 1998, 1997 and 1996, respectively. Management
anticipates that withdrawal rates will remain relatively stable for the
foreseeable future.

        ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1
distribution fees, are based on the market value of assets managed in mutual
funds by SunAmerica Asset Management Corp. Such fees totaled $29.6 million on


                                       15

<PAGE>   17



average assets managed of $2.89 billion in 1998, $25.8 million on average assets
managed of $2.34 billion in 1997 and $25.4 million on average assets managed of
$2.14 billion in 1996. 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, aggregated $853.6 million in
1998, compared with $454.8 million in 1997 and $223.4 million in 1996. The
significant increases in sales principally resulted from sales of the Company's
"Style Select Series" product (which was introduced in November 1996) and the
introduction in June 1998 of the "Dogs" of Wall Street. The "Style Select
Series" is a group of mutual funds which are each managed by three
industry-recognized fund managers. The "Dogs" of Wall Street fund contains 30
large capitalization value stocks which are selected by strict criteria. Sales
of these products totaled $611.1 million in 1998, compared with $267.8 million
in 1997, reflecting the addition of five new Style Select funds, which more than
doubled the number of Style Select funds to nine, and generally favorable market
conditions. Redemptions of mutual funds, excluding redemptions of money market
accounts, amounted to $402.5 million in 1998, $412.8 million in 1997 and $379.9
million in 1996, which represent 17.5%, 22.0% and 21.4%, respectively, of
average mutual fund assets.

        GENERAL AND ADMINISTRATIVE EXPENSES totaled $96.1 million in 1998,
compared with $98.8 million in 1997 and $81.6 million in 1996. 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 $72.7 million in
1998, compared with $66.9 million in 1997 and $57.5 million in 1996. The
increases in amortization were primarily due to additional fixed and variable
annuity and mutual fund sales and the subsequent amortization of related
deferred commissions and other direct selling costs.

        ANNUAL COMMISSIONS represent renewal commissions paid quarterly in
arrears to maintain the persistency of certain of the Company's variable annuity
contracts. Substantially all of the Company's currently available variable
annuity products allow for an annual commission payment option in return for a
lower immediate commission. Annual commissions totaled $18.2 million in 1998,
$9.0 million in 1997 and $4.6 million in 1996. The increases in annual
commissions since 1996 reflect increased sales of annuities that offer this
commission option and gradual expiration of the initial fifteen-month periods
before such payments begin. The Company estimates that approximately 50% of the
average balances of its variable annuity products is currently subject to such
annual commissions. Based on current sales, this percentage is expected to
increase in future periods.

        INCOME TAX EXPENSE totaled $71.1 million in 1998, compared with $31.2
million in 1997 and $24.3 million in 1996, representing effective tax rates of
34% in 1998, 33% in 1997 and 35% in 1996.

FINANCIAL CONDITION AND LIQUIDITY

        SHAREHOLDER'S EQUITY increased 13.5% to $652.7 million at September 30,
1998 from $575.2 million at September 30, 1997, primarily due to $138.6 million
of net income recorded in 1998, which was partially offset by $51.2 million of
dividends paid in April 1998 and a $10.0 million decrease in net unrealized
gains on debt and equity securities available for sale.

        INVESTED ASSETS at September 30, 1998 totaled $2.73 billion, compared
with $2.61 billion at September 30, 1997. The Company manages most of its


                                       16

<PAGE>   18



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, and the
Company's need for liquidity and other similar factors.

        THE BOND PORTFOLIO, which constitutes 71% of the Company's total
investment portfolio, had an aggregate fair value that exceeded its amortized
cost by $19.9 million at September 30, 1998, compared with an excess of $43.7
million at September 30, 1997. The decline in the unrealized gain of the Bond
Portfolio in 1998 was due to changes in market value of portions of the
non-investment-grade portfolio.

        At September 30, 1998, the Bond Portfolio (excluding $6.9 million of
redeemable preferred stocks) included $1.90 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 $53.6 million of
bonds rated by the Company pursuant to statutory ratings guidelines established
by the NAIC. At September 30, 1998, approximately $1.78 billion of the Bond
Portfolio was investment grade, including $672.1 million of U.S.
government/agency securities and mortgage-backed securities ("MBSs").

        At September 30, 1998, the Bond Portfolio included $167.6 million of
bonds that were not investment grade. These non-investment-grade bonds accounted
for 1.2% of the Company's total assets and 6.1% of its invested assets.

        Non-investment-grade securities generally provide higher yields and
involve greater risks than investment-grade securities because their issuers
typically are more highly leveraged and more vulnerable to adverse economic
conditions than investment-grade issuers. In addition, the trading market for
these securities is usually more limited than for investment-grade securities.
The Company had no material concentrations of non-investment-grade securities at
September 30, 1998.

        The table on the next page summarizes the Company's rated bonds by
rating classification as of September 30, 1998.


                                       17


<PAGE>   19


                      RATED BONDS BY RATING CLASSIFICATION
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                 Issues not rated by S&P/Moody's/
         Issues Rated by S&P/Moody's/DCR/Fitch       DCR/Fitch, by NAIC Category                            Total
----------------------------------------------  ----------------------------------------     ---------------------------------------
 S&P/(Moody's)/                      Estimated     NAIC                       Estimated                     Estimated     Percent of
  [DCR]/{Fitch}       Amortized         fair     category      Amortized        fair         Amortized         fair       invested
   category (1)            cost        value       (2)            cost          value           cost          value        assets
------------------   ----------     ----------  ----------     ----------     ----------     ----------     ----------    ----------
<S>                  <C>            <C>         <C>            <C>            <C>            <C>            <C>           <C>

AAA+ to A-
  (Aaa to A3)
  [AAA to A-]
  {AAA to A-}        $  999,052     $1,025,861           1     $  180,548     $  192,187     $1,179,600     $1,218,048     44.54%
BBB+ to BBB-
  (Baal to Baa3)
  [BBB+ to BBB-]
  {BBB+ to BBB-}        420,087        418,723           2        145,025        143,532        565,112        562,255     20.56
BB+ to BB-
  (Ba1 to Ba3)
  [BB+ to BB-]
  {BB+ to BB-}           43,156         39,179           3         10,181          9,917         53,337         49,096      1.80
B+ to B-
  (B1 to B3)
  [B+ to B-]
  {B+ to B-}            113,376        102,375           4         12,954         12,065        126,330        114,440      4.18
CCC+ to C
  (Caa to C)
  [CCC]
  {CCC+ to C-}              760            655           5          3,500          3,274          4,260          3,929      0.14
CI to D
  [DD]
  {D}                         0              0           6             99             99             99             99        --
                     ----------     ----------                 ----------     ----------     ----------     ----------       
TOTAL RATED ISSUES   $1,576,431     $1,586,793                 $  352,307     $  361,074     $1,928,738     $1,947,867
                     ==========     ==========                 ==========     ==========     ==========     ==========       
</TABLE>

Footnotes appear on the following page.


                                       18


<PAGE>   20


        Footnotes to the table of Rated Bonds by Rating Classification
        --------------------------------------------------------------

(1)     S&P and Fitch rate debt securities in rating categories ranging from AAA
        (the highest) to D (in payment default).  A plus (+) or minus (-)
        indicates the debt's relative standing within the rating category.  A
        security rated BBB- or higher is considered investment grade.  Moody's
        rates debt securities in rating categories ranging from Aaa (the 
        highest) to C (extremely poor prospects of ever attaining any real
        investment standing). The number 1, 2 or 3 (with 1 the highest and 3 the
        lowest) indicates the debt's relative standing within the rating
        category. A security rated Baa3 or higher is considered investment
        grade. DCR rates debt securities in rating categories ranging from AAA
        (the highest) to DD (in payment default). A plus (+) or minus (-)
        indicates the debt's relative standing within the rating category. A
        security rated BBB- or higher is considered investment grade. Issues are
        categorized based on the highest of the S&P, Moody's, DCR 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 $53.6 million
        of assets that were rated by the Company pursuant to applicable NAIC
        rating guidelines.



                                       19


<PAGE>   21


        Senior secured loans ("Secured Loans") are included in the Bond
Portfolio and aggregated $186.6 million at September 30, 1998. Secured Loans are
senior to subordinated debt and equity, and are secured by assets of the issuer.
At September 30, 1998, Secured Loans consisted of $71.6 million of publicly
traded securities and $115.0 million of privately traded securities. These
Secured Loans are composed of loans to 62 borrowers spanning 21 industries, with
32% of these assets concentrated in financial institutions. No other industry
concentration constituted more than 9% of these assets.

        While the trading market for the Company's privately traded Secured
Loans is more limited than for publicly traded issues, management believes that
participation in these transactions has enabled the Company to improve its
investment yield. As a result of restrictive financial covenants, these Secured
Loans involve greater risk of technical default than do publicly traded
investment-grade securities. However, management believes that the risk of loss
upon default for these Secured Loans is mitigated by such financial covenants
and the collateral values underlying the Secured Loans. The Company's Secured
Loans are rated by S&P, Moody's, DCR, Fitch, the NAIC or by the Company,
pursuant to comparable statutory ratings guidelines established by the NAIC.

        MORTGAGE LOANS aggregated $391.4 million at September 30, 1998 and
consisted of 133 commercial first mortgage loans with an average loan balance of
approximately $2.9 million, collateralized by properties located in 29 states.
Approximately 21% of this portfolio was multifamily residential, 17% was office,
14% was manufactured housing, 13% was industrial, 11% was hotels and 24% was
other types. At September 30, 1998, approximately 21% and 14% of this portfolio
were secured by properties located in California and New York, respectively, and
no more than 8% of this portfolio was secured by properties located in any other
single state. At September 30, 1998, there were three mortgage loans with
outstanding balances of $10 million or more, which loans collectively aggregated
approximately 11% of this portfolio. At September 30, 1998, approximately 30% of
the mortgage loan portfolio consisted of loans with balloon payments due before
October 1, 2001. During 1998, 1997 and 1996, 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, 1998, approximately 11% of the mortgage loans were
seasoned loans underwritten to the Company's standards and purchased at or near
par from other financial institutions. Such loans generally have higher average
interest rates than loans that could be originated today. The balance of the
mortgage loan portfolio has been originated by the Company under strict
underwriting standards. Commercial mortgage loans on properties such as offices,
hotels and shopping centers generally represent a higher level of risk than do
mortgage loans secured by multifamily residences. This greater risk is due to
several factors, including the larger size of such loans and the more immediate
effects of general economic conditions on these commercial property types.
However, due to 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.

        OTHER INVESTED ASSETS aggregated $30.6 million at September 30, 1998,
including $15.0 million of collateralized bond obligations and collateralized
mortgage obligation residuals, $11.2 million of policy loans and $4.4 million of
investments in limited partnerships. The Company's limited partnership



                                       20

<PAGE>   22



interests, accounted for by using the cost method of accounting, are invested
primarily in a combination of debt and equity securities.

        ASSET-LIABILITY MATCHING is utilized by the Company to minimize the
risks of interest rate fluctuations and disintermediation. The Company believes
that its fixed-rate liabilities should be backed by a portfolio principally
composed of fixed-rate investments that generate predictable rates of return.
The Company does not have a specific target rate of return. Instead, its rates
of return vary over time depending on the current interest rate environment, the
slope of the yield curve, the spread at which fixed-rate investments are priced
over the yield curve, and general economic conditions. Its portfolio strategy is
constructed with a view to achieve adequate risk-adjusted returns consistent
with its investment objectives of effective asset-liability matching, liquidity
and safety. The Company's fixed-rate products incorporate surrender charges or
other restrictions in order to encourage persistency. Approximately 77% of the
Company's fixed annuity and GIC reserves had surrender penalties or other
restrictions at September 30, 1998.

        As part of its asset-liability matching discipline, the Company conducts
detailed computer simulations that model its fixed-rate assets and liabilities
under commonly used stress-test interest rate scenarios. With the results of
these computer simulations, the Company can measure the potential gain or loss
in fair value of its interest-rate sensitive instruments and seek to protect its
economic value and achieve a predictable spread between what it earns on its
invested assets and what it pays on its liabilities by designing its fixed-rate
products and conducting its investment operations to closely match the duration
of the fixed-rate assets to that of its fixed-rate liabilities. The Company's
fixed-rate assets include: cash and short-term investments; bonds, notes and
redeemable preferred stocks; mortgage loans; and investments in limited
partnerships that invest primarily in fixed-rate securities and are accounted
for by using the cost method. At September 30, 1998, these assets had an
aggregate fair value of $2.69 billion with a duration of 3.6. The Company's
fixed-rate liabilities include fixed annuities, subordinated notes and GICs. At
September 30, 1998, these liabilities had an aggregate fair value (determined by
discounting future contractual cash flows by related market rates of interest)
of $2.41 billion with a duration of 1.4. The Company's potential exposure due to
a 10% increase in prevailing interest rates from their September 30, 1998 levels
is a loss of $26.7 million in fair value of its fixed-rate assets that is not
offset by a decrease in the fair value of its fixed-rate liabilities. Because
the Company actively manages its assets and liabilities and has strategies in
place to minimize its exposure to loss as interest rate changes occur, it
expects that actual losses would be less than the estimated potential loss.

        Duration is a common option-adjusted measure for the price sensitivity
of a fixed-maturity portfolio to changes in interest rates. It measures the
approximate percentage change in the market value of a portfolio if interest
rates change by 100 basis points, recognizing the changes in cash flows
resulting from embedded options such as policy surrenders, investment
prepayments and bond calls. It also incorporates the assumption that the Company
will continue to utilize its existing strategies of pricing its fixed annuity
and GIC products, allocating its available cash flow amongst its various
investment portfolio sectors and maintaining sufficient levels of liquidity.
Because the calculation of duration involves estimation and incorporates
assumptions, potential changes in portfolio value indicated by the portfolio's
duration will likely be different from the actual changes


                                       21

<PAGE>   23



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, 1998, the Company had one outstanding Swap
Agreement with a notional principal amount of $21.5 million. This agreement
matures in December 2024.

        The Company also seeks to provide liquidity from time to time by using
reverse repurchase agreements ("Reverse Repos") and by investing in MBSs. It
also seeks to enhance its spread income by using Reverse Repos. Reverse Repos
involve a sale of securities and an agreement to repurchase the same securities
at a later date at an agreed upon price and are generally over-collateralized.
MBSs are generally investment-grade securities collateralized by large pools of
mortgage loans. MBSs generally pay principal and interest monthly. The amount of
principal and interest payments may fluctuate as a result of prepayments of the
underlying mortgage loans.

        There are risks associated with some of the techniques the Company uses
to provide liquidity, enhance its spread income and match its assets and
liabilities. The primary risk associated with the Company's Reverse Repos and
Swap Agreements is counterparty risk. The Company believes, however, that the
counterparties to its Reverse Repos and Swap Agreements are financially
responsible and that the counterparty risk associated with those transactions is
minimal. It is the Company's policy that these agreements are entered into with
counterparties who have a debt rating of A/A2 or better from both S&P and
Moody's. The Company continually monitors its credit exposure with respect to
these agreements. In addition to counterparty risk, Swap Agreements also have
interest rate risk. However, the Company's Swap Agreements typically hedge
variable-rate assets or liabilities, and interest rate fluctuations that
adversely affect the net cash received or paid under the terms of a Swap
Agreement would be offset by increased interest income earned on the
variable-rate assets or reduced interest expense paid on the variable-rate
liabilities. The primary risk associated with MBSs is that a changing interest
rate environment might cause prepayment of the underlying obligations at speeds
slower or faster than anticipated at the time of their purchase. As part of its
decision to purchase an MBS, the Company assesses the risk of prepayment by
analyzing the security's projected performance over an array of interest-rate
scenarios. Once an MBS is purchased, the Company monitors its actual prepayment
experience monthly to reassess the relative attractiveness of the security with
the intent to maximize total return.

        INVESTED ASSETS EVALUATION is routinely conducted by the Company.
Management identifies monthly those investments that require additional
monitoring and carefully reviews the carrying values of such investments at
least quarterly to determine whether specific investments should be placed on a
nonaccrual basis and to determine declines in value that may be other than
temporary. In making these reviews for bonds, management principally considers
the adequacy of any collateral, compliance with contractual



                                       22

<PAGE>   24



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. For investments in partnerships,
management reviews the financial statements and other information provided by
the general partners.

        The carrying values of investments that are determined to have declines
in value that are other than temporary are reduced to net realizable value and,
in the case of bonds, no further accruals of interest are made. The provisions
for impairment on mortgage loans are based on losses expected by management to
be realized on transfers of mortgage loans to real estate, on the disposition
and settlement of mortgage loans and on mortgage loans that management believes
may not be collectible in full. Accrual of interest is suspended when principal
and interest payments on mortgage loans are past due more than 90 days.

        DEFAULTED INVESTMENTS, comprising all investments that are in default as
to the payment of principal or interest, totaled $0.9 million of mortgage loans
at September 30, 1998, and constituted less than 0.1% of total invested assets.
At September 30, 1997, defaulted investments totaled $1.4 million, including
$0.5 million of bonds and notes and $0.9 million of mortgage loans, and
constituted less than 0.1% of total invested assets.

        SOURCES OF LIQUIDITY are readily available to the Company in the form of
the Company's existing portfolio of cash and short-term investments, Reverse
Repo capacity on invested assets and, if required, proceeds from invested asset
sales. At September 30, 1998, approximately $1.50 billion of the Company's Bond
Portfolio had an aggregate unrealized gain of $59.2 million, while approximately
$456.3 million of the Bond Portfolio had an aggregate unrealized loss of $39.3
million. In addition, the Company's investment portfolio currently provides
approximately $23.6 million of monthly cash flow from scheduled principal and
interest payments. Historically, cash flows from operations and from the sale of
the Company's annuity and GIC products have been more than sufficient in amount
to satisfy the Company's liquidity needs.

        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.


                                       23


<PAGE>   25




YEAR 2000

        The Company relies significantly on computer systems and applications in
its daily operations. Many of these systems are not presently year 2000
compliant, which means that because they have historically used only two digits
to identify the year in a date, they will fail to distinguish dates in the
"2000s" from dates in the "1900s." The Company's business, financial condition
and results of operations could be materially and adversely affected by the
failure of the Company's systems and applications (and those operated by third
parties interfacing with the Company's systems and applications) to properly
operate or manage these dates.

        The Company has a coordinated plan to repair or replace these
noncompliant systems and to obtain similar assurances from third parties
interfacing with the Company's systems and applications. In fiscal 1997, the
Company recorded a $6.2 million provision for estimated programming costs to
make necessary repairs of certain specific noncompliant systems. Management is
making expenditures which it expects to ultimately total $5.0 million to replace
certain other specific noncompliant systems, which expenditures will be
capitalized as software costs and amortized over future periods. Both phases of
the project are currently proceeding in accordance with the plan and management
expects them to be substantially completed by the end of calendar 1998. Testing
of both the repaired and replacement systems will be conducted during calendar
1999.

        In addition, the Company has distributed a year 2000 questionnaire to
certain of its significant suppliers, distributors, financial institutions,
lessors and others with which it does business to evaluate their year 2000
compliance plans and state of readiness and to determine the extent to which the
Company's systems and applications may be affected by the failure of others to
remediate their own year 2000 issues. To date, however, the Company has received
only preliminary feedback from such parties and has not independently confirmed
any information received from other parties with respect to the year 2000
issues. Therefore, there can be no assurance that such other parties will
complete their year 2000 conversions in a timely fashion or will not suffer a
year 2000 business disruption that may adversely affect the Company's financial
condition and results of operations.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The quantitative and qualitative disclosures about market risk are
contained in the Asset-Liability Matching section of Management's Disclosure and
Analysis of Financial Condition and Results of Operations on pages 21 and 22
herein.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The Company's consolidated financial statements begin on page F-3.
Reference is made to the Index to Financial Statements on page F-1 herein.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

        None.


                                       24


<PAGE>   26


                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS

        The directors and principal officers of Anchor National Life Insurance
Company (the "Company") as of December 22, 1998 are listed below, together with
information as to their ages, dates of election and principal business
occupation during the last five years (if other than their present business
occupation). 


<TABLE>
<CAPTION>
                                                                             Other Positions and
                                                           Year              Other Business
                                   Present                 Assumed           Experience Within
    Name                   Age     Position(s)             Position(s)       Last Five Years**             From-To
-------------              ---     -----------             -----------       ------------------            -------
<S>                        <C>     <C>                     <C>               <C>                           <C>
Eli Broad*                 65      Chairman,               1994              Cofounded SAI                
                                   Chief Executive                           in 1957                      
                                   Officer and                                                            
                                   President of                                                           
                                   the Company                                                            
                                   Chairman, Chief         1986                                           
                                   Executive Officer                                                      
                                   and President of                                                       
                                   SunAmerica Inc.                                                        
                                   ("SAI")                                                                
                                                                                                          
Jay S. Wintrob*            41      Executive Vice          1991              (Joined SAI in 1987)   
                                   President of the                                                       
                                   Company                                                                
                                   Vice Chairman and       1998                                      
                                   Chief Operating                                                        
                                   Officer of SAI                                                         
                                                                                                          
James R. Belardi*          41      Senior Vice             1992              (Joined SAI in 1986)   
                                   President of the                                                       
                                   Company                                                                
                                   Executive Vice          1995                                           
                                   President of SAI                                                       
                                                                                                          
Jana Waring Greer*         46      Senior Vice             1991              (Joined SAI in 1974)   
                                   President of the                                                       
                                   Company and SAI                                                        
                                                                                                          
Peter McMillan, III        41      Director                                  Executive Vice                1994-
                                                                             President and Chief           1998
                                                                             Investment Officer           
                                                                             SunAmerica Investments,      
                                                                             Inc. (DE)                    
                                                                             Senior Vice President,        1989-
                                                                             SunAmerica                    1994
                                                                             Investments, Inc. (DE)       
</TABLE>


----------------------------------
*   Also serves as a director

**  Unless otherwise indicated, officers and positions are with SunAmerica Inc.


                                       25

<PAGE>   27



<TABLE>
<CAPTION>
                                                                             Other Positions and
                                                           Year              Other Business
                                   Present                 Assumed           Experience Within
    Name                   Age     Position(s)             Position(s)       Last Five Years**             From-To
-------------              ---     -----------             -----------       ------------------            -------
<S>                        <C>     <C>                     <C>               <C>                           <C>
Scott L. Robinson*         52       Senior Vice               1991          (Joined SAI in 1978)
                                    President of the         
                                    Company                  
                                    Senior Vice               1991
                                    President and            
                                    Controller of SAI        
                                                             
Susan L. Harris*           41       Senior Vice               1994          Vice President,              1994-1995
                                    President and                           General Counsel-
                                    Secretary of the                        Corporate Affairs and
                                    Company                                 Secretary of SAI
                                    Senior Vice               1995          Vice President,              1989-1994
                                    President,                              Associate General
                                    General Counsel                         Counsel and Secretary
                                    and Secretary of                        of SAI
                                    SAI                                     (Joined SAI in 1985)
                                                             
                                                             
James Rowan*               36       Senior Vice               1996          Vice President of SAI        1993-1995
                                    President of the                        (Joined SAI in 1992)
                                    Company                  
                                    Senior Vice               1995
                                    President of SAI         
                                                             
N. Scott Gillis            45       Senior Vice               1994          Vice President and           1989-1994
                                    President and                           Controller, SunAmerica
                                    Controller of the                       Life Companies ("SLC")
                                    Company                                 (Joined SAI in 1985)
                                    Vice President of         1997
                                    SAI                      
                                                             
Edwin R. Reoliquio         41       Senior Vice               1995          Vice President and           1990-1995
                                    President and                           Actuary, SLC
                                    Chief Actuary            
                                    of the Company           
                                                             
Victor E. Akin             34       Senior Vice               1996          Vice President,              1995-1996
                                    President of                            SLC
                                    the Company                             Director, Product            1994-1995
                                                                            Development, SLC
                                                                            Manager, Business            1993-1994
                                                                            Development, SLC

</TABLE>



------------------------------

*   Also serves as a director

**  Unless otherwise indicated, officers and positions are with SunAmerica Inc.

                                       26


<PAGE>   28


<TABLE>
<CAPTION>
                                                                             Other Positions and
                                                           Year              Other Business
                                   Present                 Assumed           Experience Within
    Name                   Age     Position(s)             Position(s)       Last Five Years**             From-To
-------------              ---     -----------             -----------       ------------------            -------
<S>                        <C>     <C>                     <C>               <C>                           <C>
Scott H. Richland          36       Vice President         1994                Senior Vice President          1997-1998
                                    of the Company                             and Treasurer of SAI
                                    Senior Vice            1997                Vice President and             1995-1997
                                    President of SAI                           Treasurer of SAI
                                                                               Vice President and             1994-1995
                                                                               Assistant Treasurer
                                                                               of SAI
                                                                               Assistant Treasurer            1993-1994
                                                                               of SAI
                                                                               (Joined SAI in 1990)
                                                                        
David R. Bechtel           31       Vice President         1998                Vice President,                1996-1998
                                    and Treasurer of                           Deutsche Morgan
                                    the Company                                Grenfell, Inc.
                                    Vice President         1998                Associate,                     1995-1996
                                    and Treasurer of                           UBS Securities LLC
                                    SAI                                        Associate,                     1994
                                                                               Wachtell Lipton Rosen
                                                                               & Katz          
                                                                               Associate,                     1993-1994
                                                                               Wells Fargo Nikko
                                                                               Investment Advisers
                                                                        
J. Franklin Grey           46       Vice President         1994                Director,                      1991-1994
                                    of the Company                             Institutional Marketing
                                                                               Capital Holding Corp.
                                                                               (Providian)
                                                                        
Keith B. Jones             47       Vice President         1992                (Joined SAI in 1986)
                                    of the Company                      
                                                                        
Michael L. Lindquist       45       Vice President         1993                 (Joined SAI in 1983)
                                    of the Company                      
                                                                        
Edward P. Nolan, Jr.       49       Vice President         1993                 (Joined SAI in 1989)
                                    of the Company                      
                                                                        
Gregory M. Outcalt         36       Vice President         1993                 (Joined SAI in 1986)
                                    of the Company

</TABLE>

---------------------------------

*   Also serves as a director

**  Unless otherwise indicated, officers and positions are with SunAmerica Inc.

                                       27


<PAGE>   29



ITEM 11.  EXECUTIVE COMPENSATION

        All of the executive officers of the Company also serve as employees of
SunAmerica Inc. or its affiliates and receive no compensation directly from the
Company. Some of the officers also serve as officers of other companies
affiliated with the Company. Allocations have been made as to each individual's
time devoted to his or her duties as an executive officer of the Company.

        The following table shows the cash compensation paid or earned, based on
these allocations, to the chief executive officer and top four executive
officers of the Company whose allocated compensation exceeds $100,000 for
services rendered in all capacities to the Company during 1998:

<TABLE>
<CAPTION>
Name of Individual or                Capacities In                     Allocated Cash
Number in Group                       Which Served                     Compensation
---------------------           -------------------------               --------------
<S>                                   <C>                                    <C>
Eli Broad                       Chairman, Chief Executive                   $1,482,778
                                  Officer and President
Jay S. Wintrob                  Executive Vice President                       857,524
Jana Waring Greer               Senior Vice President                          775,001
Peter McMillan                  Director                                       421,457
James R. Belardi                Senior Vice President                          408,949
                                                                           ===========
</TABLE>

      Directors of the Company who are also employees of SunAmerica Inc. or its
affiliates receive no compensation in addition to their compensation as
employees of SunAmerica Inc. or its affiliates.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        No shares of the Company are owned by any executive officer or director.
The Company is an indirect wholly owned subsidiary of SunAmerica Inc. Except for
Mr. Broad, the percentage of shares of SunAmerica Inc. beneficially owned by any
director does not exceed one percent of the class outstanding. At November 30,
1998, Mr. Broad was the beneficial owner of 13,015,360 shares of Common Stock of
SunAmerica Inc. (approximately 6.4% of the class outstanding) and 13,340,591
shares of Nontransferable Class B Common Stock of SunAmerica Inc. (approximately
82% of the class outstanding). Of the Common Stock, 1,053,738 shares represent
restricted shares granted under the Company's employee stock plans as to which
Mr. Broad has no investment power; and 9,283,050 shares represent employee stock
options held by Mr. Broad which are or will become exercisable on or before
January 30, 1999 and as to which he has no voting or investment power. Of the
Nontransferable Class B Stock, 12,284,360 shares are held directly by Mr. Broad;
and 1,056,231 shares are registered in the name of a corporation as to which Mr.
Broad exercises sole voting and dispositive powers. At November 30, 1998, all
directors and officers as a group beneficially owned 16,027,507 shares of Common
Stock (approximately 8% of the class outstanding) and 13,340,591 shares of
Nontransferable Class B Common Stock (approximately 82% of the class
outstanding).

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        None.


                                       28

<PAGE>   30


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
          REPORTS ON FORM 8-K

FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

        Reference is made to the index set forth on page F-1 of this report.

EXHIBITS

<TABLE>
<CAPTION>
    Exhibit
      No.                                 Description
    -------                               -----------
<S>            <C>

      2(a)     Purchase and Sale Agreement, dated as of July 15, 1998, by and
               among the Company, SunAmerica Inc. ("SAI"), First SunAmerica Life
               Insurance Company and MBL Life Assurance Corporation, is
               incorporated herein by reference to Exhibit 2(e) to SAI's 1998
               Annual Report on Form 10-K, filed December 21, 1998.

      3(a)     Amended and Restated Articles of Incorporation and Articles of
               Redomestication, filed with the Arizona Department of Insurance
               on December 22, 1995, is incorporated herein by reference to
               Exhibit 3(a) to the Company's quarterly report on Form 10-Q for
               the quarter ended December 31, 1995, filed February 14, 1996.

      3(b)     Amended and Restated Bylaws, as adopted January 1, 1996, is
               incorporated herein by reference to Exhibit 3(b) to the Company's
               quarterly report on Form 10-Q for the quarter ended December 31,
               1995, filed February 14, 1996.

      4(a)     Amended and Restated Articles of Incorporation and Articles of
               Redomestication, filed with the Arizona Department of Insurance
               on December 12, 1996. See Exhibit 3(a).

      4(b)     Amended and Restated Bylaws, as adopted January 1, 1996.  See
               Exhibit 3(b).

     10(a)     Amendment to the Subordinated Loan Agreement for Equity Capital,
               dated as of August 22, 1996, between the Company's subsidiary,
               SunAmerica Capital Services, Inc. ("SACS") and SAI, extending the
               maturity date to September 30, 1999 of a Subordinated Loan
               Agreement for Equity Capital, dated as of September 30, 1992,
               defining SAI's rights with respect to the 9% notes due September
               29, 1996, is incorporated herein by reference to Exhibit 10(f) to
               the Company's Form 10-K, filed December 19, 1996.

     10(b)     Subordinated Loan Agreement for Equity Capital, dated as of July
               24, 1996, between the Company's subsidiary, Royal Alliance
               Associates, Inc. and SAI, defining SAI's rights with respect to
               the 9% notes due August 23, 1999 is incorporated herein by
               reference to Exhibit 10(k) to the Company's Form 10-K, filed
               December 19, 1996.

     10(c)     Amendment to the Subordinated Loan Agreement for Equity Capital,
               dated as of September 3, 1996, between the Company's subsidiary,
               SunAmerica Asset Management Corp., and SAI, extending the maturity
               date to September 13, 1999 of a Subordinated Loan Agreement for
               Equity Capital, dated as of September 3, 1993, defining SAI's
               rights with respect to the 7% notes due September 13, 1996, is
               incorporated herein by reference to Exhibit 10(l) to the Company's
               Form 10-K, filed December 19, 1996.
</TABLE>



                                       29

<PAGE>   31



<TABLE>
<CAPTION>
    Exhibit
      No.                                 Description
    -------                               -----------
<S>            <C>

     10(d)     Subordinated Loan Agreement for Equity Capital, dated as of
               February 19, 1997, between the Company's subsidiary, SACS, and
               SAI, defining SAI's rights with respect to the 9% notes due March
               14, 2000, is incorporated herein by reference to Exhibit 10(a) to
               Company's quarterly report on Form 10-Q for the quarter ended
               March 31, 1997, filed May 15, 1997.

     10(e)     Subordinated Loan Agreement for Equity Capital, dated as of April
               29, 1998, between the Company's subsidiary, SACS, and SAI,
               defining SAI's rights with respect to the 8.5% notes due June 27,
               2001, 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, 1998, filed August 14, 1998.

     10(f)     Subordinated Loan Agreement for Equity Capital, dated as of June
               3, 1998, between the Company's subsidiary, SACS, and SAI,
               defining SAI's rights with respect to the 8.5% notes due July 30,
               2001, 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, 1998, filed August 14, 1998.

     10(g)     Subordinated Loan Agreement for Equity Capital, dated as of
               August 25, 1998, between the Company's subsidiary, SACS, and SAI,
               defining SAI's rights with respect to the 8.5% notes due October
               30, 2001.

     10(h)     Asset Lease Agreement, dated June 26, 1998, between the Company
               and Aurora National Life Assurance Company ("Aurora"), relating
               to a lease from Aurora of certain information relating to single
               premium deferred annuities.

       21      Subsidiaries of the Company.

       27      Financial Data Schedule

</TABLE>


REPORTS ON FORM 8-K

On July 17, 1998, the Company filed a Current Report on Form 8-K to file a press
release issued by SAI. in connection with the Company's acquisition of a block
of individual life and individual group annuity business of MBL Life Assurance
Corporation.


                                       30

<PAGE>   32


                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                    ANCHOR NATIONAL LIFE INSURANCE COMPANY

                                    By/s/  SCOTT L. ROBINSON
                                    --------------------------------------
                                    Scott L. Robinson
December 23, 1998                   Senior Vice President and Director

        Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated: 


<TABLE>
<CAPTION>
               Signature                    Title                                    Date
               ---------                    -----                                    ----
<S>                                         <C>                                      <C>
/s/   ELI BROAD                             Chairman, Chief Executive                December 23, 1998
------------------------------              Officer and President                    -----------------
        Eli Broad                           (Principal Executive Officer)

/s/   SCOTT L. ROBINSON                     Senior Vice President and                December 23, 1998
-----------------------------               Director (Principal                      -----------------
        Scott L. Robinson                   Financial Officer)

/s/   N. SCOTT GILLIS                       Senior Vice President and                December 23, 1998
------------------------------              Controller (Principal                    -----------------
        N. Scott Gillis                     Accounting Officer)

/s/   JAY S. WINTROB                        Executive Vice President                 December 23, 1998
------------------------------              and Director                             -----------------
        Jay S. Wintrob

/s/   JAMES R. BELARDI                      Senior Vice President,                   December 23, 1998
------------------------------              Treasurer and Director                   -----------------
        James R. Belardi

/s/   JANA W. GREER                         Senior Vice President                    December 23, 1998
------------------------------              and Director                             -----------------
        Jana W. Greer

/s/   SUSAN L. HARRIS                       Senior Vice President,                   December 23, 1998
------------------------------              Secretary and Director                   -----------------
        Susan L. Harris

/s/   JAMES W. ROWAN                        Senior Vice President                    December 23, 1998
------------------------------              and Director                             -----------------
        James W. Rowan

/s/   EDWIN R. REOLIQUIO                    Senior Vice President                    December 23, 1998
------------------------------              and Chief Actuary                        -----------------
        Edwin R. Reoliquio

/s/   PETER McMILLAN                        Director                                 December 23, 1998
------------------------------                                                       -----------------
        Peter McMillan
</TABLE>

                                       31

<PAGE>   33


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                          Page(s)
                                                                          -------
<S>                                                                       <C>

Report of Independent Accountants                                         F-2

Consolidated Balance Sheet as of September 30, 1998 and 1997              F-3 through
                                                                          F-4

Consolidated Income Statement for the years ended
        September 30, 1998, 1997 and 1996                                 F-5

Consolidated Statement of Cash Flows for the years ended
        September 30, 1998, 1997 and 1996                                 F-6 through
                                                                          F-7

Notes to Consolidated Financial Statements                                F-8 through
                                                                          F-25

</TABLE>


                                       F-1


<PAGE>   34


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareholder of
Anchor National Life Insurance Company


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 Anchor National Life Insurance
Company and its subsidiaries (the "Company") at September 30, 1998 and 1997, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1998, 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.



PricewaterhouseCoopers LLP
Los Angeles, California
November 9, 1998


                                       F-2


<PAGE>   35

                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                                                           At September 30,
                                                                 -----------------------------------
                                                                       1998                1997
                                                                 ---------------     ---------------
<S>                                                              <C>                  <C>
ASSETS

Investments:
  Cash and short-term investments                                $   333,735,000      $   113,580,000
  Bonds, notes and redeemable
     preferred stocks available for
     sale, at fair value (amortized
     cost: 1998, $1,934,863,000;
     1997, $1,942,485,000)                                         1,954,754,000        1,986,194,000
  Mortgage loans                                                     391,448,000          339,530,000
  Common stocks available for sale,
     at fair value (cost: 1998,
     $115,000; 1997, $271,000)                                           169,000            1,275,000
  Real estate                                                         24,000,000           24,000,000
  Other invested assets                                               30,636,000          143,722,000
                                                                 ---------------      ---------------
  Total investments                                                2,734,742,000        2,608,301,000

Variable annuity assets held in
   separate accounts                                              11,133,569,000        9,343,200,000
Accrued investment income                                             26,408,000           21,759,000
Deferred acquisition costs                                           539,850,000          536,155,000
Income taxes currently receivable                                      5,869,000                  ---
Other assets                                                          85,926,000           61,524,000
                                                                 ---------------      ---------------

TOTAL ASSETS                                                     $14,526,364,000      $12,570,939,000
                                                                 ===============      ===============

</TABLE>


                             See accompanying notes

                                       F-3

<PAGE>   36

                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

                     CONSOLIDATED BALANCE SHEET (Continued)

<TABLE>
<CAPTION>
                                                                        At September 30,
                                                               -------------------------------------
                                                                     1998                  1997
                                                               ---------------       ---------------

<S>                                                            <C>                   <C>
LIABILITIES AND SHAREHOLDER'S EQUITY

Reserves, payables and accrued liabilities:
  Reserves for fixed annuity contracts                          $ 2,189,272,000       $ 2,098,803,000
  Reserves for guaranteed investment
    contracts                                                       282,267,000           295,175,000
  Payable to brokers for purchases of
    securities                                                       27,053,000               263,000
  Income taxes currently payable                                            ---            32,265,000
  Other liabilities                                                 106,594,000           122,728,000
                                                                ---------------       ---------------
  Total reserves, payables
    and accrued liabilities                                       2,605,186,000         2,549,234,000
                                                                ---------------       ---------------
Variable annuity liabilities related to
   separate accounts                                             11,133,569,000         9,343,200,000
                                                                ---------------       ---------------
Subordinated notes payable to Parent                                 39,182,000            36,240,000
                                                                ---------------       ---------------
Deferred income taxes                                                95,758,000            67,047,000
                                                                ---------------       ---------------
Shareholder's equity:
  Common Stock                                                        3,511,000             3,511,000
  Additional paid-in capital                                        308,674,000           308,674,000
  Retained earnings                                                 332,069,000           244,628,000
  Net unrealized gains on debt and equity
    securities available for sale                                     8,415,000            18,405,000
                                                                ---------------       ---------------
  Total shareholder's equity                                        652,669,000           575,218,000
                                                                ---------------       ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                      $14,526,364,000       $12,570,939,000
                                                                ===============       ===============
</TABLE>



                             See accompanying notes

                                       F-4



<PAGE>   37


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

                          CONSOLIDATED INCOME STATEMENT

<TABLE>
<CAPTION>

                                                            Years ended September 30,
                                          -----------------------------------------------------------
                                              1998                    1997                  1996
                                          -------------          -------------          -------------
<S>                                       <C>                    <C>                    <C>
Investment income                         $ 221,966,000          $ 210,759,000          $ 164,631,000
                                          -------------          -------------          -------------
Interest expense on:
  Fixed annuity contracts                  (112,695,000)          (109,217,000)           (82,690,000)
  Guaranteed investment contracts           (17,787,000)           (22,650,000)           (19,974,000)
  Senior indebtedness                        (1,498,000)            (2,549,000)            (2,568,000)
  Subordinated notes payable
    to Parent                                (3,114,000)            (3,142,000)            (2,556,000)
                                          -------------          -------------          -------------
  Total interest expense                   (135,094,000)          (137,558,000)          (107,788,000)
                                          -------------          -------------          -------------
NET INVESTMENT INCOME                        86,872,000             73,201,000             56,843,000
                                          -------------          -------------          -------------
NET REALIZED INVESTMENT GAINS
  (LOSSES)                                   19,482,000            (17,394,000)           (13,355,000)
                                          -------------          -------------          -------------
Fee income:
  Variable annuity fees                     200,867,000            139,492,000            103,970,000
  Net retained commissions                   48,561,000             39,143,000             31,548,000
  Asset management fees                      29,592,000             25,764,000             25,413,000
  Surrender charges                           7,404,000              5,529,000              5,184,000
  Other fees                                  3,938,000              3,218,000              3,390,000
                                          -------------          -------------          -------------
TOTAL FEE INCOME                            290,362,000            213,146,000            169,505,000
                                          -------------          -------------          -------------

GENERAL AND ADMINISTRATIVE
  EXPENSES                                  (96,102,000)           (98,802,000)           (81,552,000)
                                          -------------          -------------          -------------
AMORTIZATION OF DEFERRED
  ACQUISITION COSTS                         (72,713,000)           (66,879,000)           (57,520,000)
                                          -------------          -------------          -------------
ANNUAL COMMISSIONS                          (18,209,000)            (8,977,000)            (4,613,000)
                                          -------------          -------------          -------------

PRETAX INCOME                               209,692,000             94,295,000             69,308,000

Income tax expense                          (71,051,000)           (31,169,000)           (24,252,000)
                                          -------------          -------------          -------------

NET INCOME                                $ 138,641,000          $  63,126,000          $  45,056,000
                                          =============          =============          =============

</TABLE>


                             See accompanying notes


                                       F-5

<PAGE>   38


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

                      CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                               Years ended September 30,
                                              -----------------------------------------------------------------
                                                    1998                    1997                     1996
                                              ---------------          ---------------          ---------------
<S>                                           <C>                      <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                  $   138,641,000          $    63,126,000          $    45,056,000
  Adjustments to reconcile net
    income to net cash provided
    by operating activities:
      Interest credited to:
        Fixed annuity contracts                   112,695,000              109,217,000               82,690,000
        Guaranteed investment
            contracts                              17,787,000               22,650,000               19,974,000
      Net realized investment
          (gains)losses                           (19,482,000)              17,394,000               13,355,000
      Amortization (accretion) of
          net premiums (discounts)
          on investments                              447,000              (18,576,000)              (8,976,000)
      Amortization of goodwill                      1,422,000                1,187,000                1,169,000
      Provision for deferred
        income taxes                               34,087,000              (16,024,000)              (3,351,000)
  Change in:
    Accrued investment income                      (4,649,000)              (2,084,000)              (5,483,000)
    Deferred acquisition costs                   (160,926,000)            (113,145,000)             (60,941,000)
    Other assets                                  (19,374,000)             (14,598,000)              (8,000,000)
    Income taxes currently payable                (38,134,000)              10,779,000                5,766,000
    Other liabilities                              (2,248,000)              14,187,000                5,474,000
  Other, net                                       (5,599,000)                 418,000                 (129,000)
                                              ---------------          ---------------          ---------------
NET CASH PROVIDED BY OPERATING
  ACTIVITIES                                       54,667,000               74,531,000               86,604,000
                                              ---------------          ---------------          ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Premium receipts on:
    Fixed annuity contracts                     1,512,994,000            1,097,937,000              741,774,000
    Guaranteed investment contracts                 5,619,000               55,000,000              134,967,000
  Net exchanges from the fixed
    accounts of variable annuity
    contracts                                  (1,303,790,000)            (620,367,000)            (236,705,000)
  Withdrawal payments on:
    Fixed annuity contracts                      (191,690,000)            (242,589,000)            (263,614,000)
    Guaranteed investment contracts               (36,313,000)            (198,062,000)             (16,492,000)
  Claims and annuity payments on
    fixed annuity contracts                       (40,589,000)             (35,731,000)             (31,107,000)
  Net receipts from (repayments of)
    other short-term financings                   (10,944,000)              34,239,000             (119,712,000)
  Net receipts from a modified
    coinsurance transaction                       166,631,000                       --                       --
  Capital contributions received                           --               28,411,000               27,387,000
  Dividends paid                                  (51,200,000)             (25,500,000)             (29,400,000)
                                              ---------------          ---------------          ---------------
NET CASH PROVIDED BY
  FINANCING ACTIVITIES                             50,718,000               93,338,000              207,098,000
                                              ---------------          ---------------          ---------------
</TABLE>

                                                     F-6

<PAGE>   39



                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

                CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)


<TABLE>
<CAPTION>
                                                                 Years ended September 30,
                                            -----------------------------------------------------------------
                                                  1998                     1997                     1996
                                            ---------------          ---------------          ---------------
<S>                                         <C>                      <C>                      <C>
CASH FLOWS FROM INVESTING
  ACTIVITIES:
    Purchases of:
      Bonds, notes and redeemable
          preferred stocks                  $(1,970,502,000)         $(2,566,211,000)         $(1,937,890,000)
      Mortgage loans                           (131,386,000)            (266,771,000)             (15,000,000)
      Other investments, excluding
          short-term investments                         --              (75,556,000)             (36,770,000)
    Sales of:
      Bonds, notes and redeemable
          preferred stocks                    1,602,079,000            2,299,063,000            1,241,928,000
    Real estate                                          --                       --                  900,000
    Other investments, excluding
        short-term investments                   42,458,000                6,421,000                4,937,000
    Redemptions and maturities of:
      Bonds, notes and redeemable
          preferred stocks                      424,393,000              376,847,000              288,969,000
      Mortgage loans                             80,515,000               25,920,000               11,324,000
      Other investments, excluding
          short-term investments                 67,213,000               23,940,000               20,749,000
                                            ---------------          ---------------          ---------------
NET CASH PROVIDED (USED) BY
  INVESTING ACTIVITIES                          114,770,000             (176,347,000)            (420,853,000)
                                            ---------------          ---------------          ---------------
NET INCREASE (DECREASE) IN CASH
  AND SHORT-TERM INVESTMENTS                    220,155,000               (8,478,000)            (127,151,000)

CASH AND SHORT-TERM INVESTMENTS
  AT BEGINNING OF PERIOD                        113,580,000              122,058,000              249,209,000
                                            ---------------          ---------------          ---------------
CASH AND SHORT-TERM INVESTMENTS
  AT END OF PERIOD                          $   333,735,000          $   113,580,000          $   122,058,000
                                            ===============          ===============          ===============

SUPPLEMENTAL CASH FLOW INFORMATION:

  Interest paid on indebtedness             $     3,912,000          $     7,032,000          $     5,982,000
                                            ===============          ===============          ===============
  Net income taxes paid                     $    74,932,000          $    36,420,000          $    22,031,000
                                            ===============          ===============          ===============
</TABLE>


                             See accompanying notes

                                       F-7

<PAGE>   40


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      NATURE OF OPERATIONS

        Anchor National Life Insurance Company (the "Company") is a wholly owned
        indirect subsidiary of SunAmerica Inc. (the "Parent"). The Company is an
        Arizona-domiciled life insurance company and conducts its business
        through three segments: annuity operations, asset management operations
        and broker-dealer operations. Annuity operations include the sale and
        administration of fixed and variable annuities and guaranteed investment
        contracts. Asset management operations, which includes the sale and
        management of mutual funds, is conducted by SunAmerica Asset Management
        Corp. Broker-dealer operations include the sale of securities and
        financial services products, and are conducted by Royal Alliance
        Associates, Inc.

        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.

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 1998 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.

        INVESTMENTS: Cash and short-term investments primarily include cash,
        commercial paper, money market investments, repurchase agreements and
        short-term bank participations. All such investments are carried at cost
        plus accrued interest, which approximates fair value, have maturities of
        three months or less and are considered cash equivalents for purposes of
        reporting cash flows.

        Bonds, notes and redeemable preferred stocks available for sale and
        common stocks are carried at aggregate fair value and changes in
        unrealized gains

                                       F-8


<PAGE>   41

                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

        or losses, net of tax, are credited or charged directly to shareholder's
        equity. Bonds, notes and redeemable preferred stocks are reduced to
        estimated net realizable value when necessary for declines in value
        considered to be other than temporary. Estimates of net realizable value
        are subjective and actual realization will be dependent upon future
        events.

        Mortgage loans are carried at amortized unpaid balances, net of
        provisions for estimated losses. Real estate is carried at the lower of
        cost or fair value. Other invested assets include investments in limited
        partnerships, which are accounted for by using the cost method of
        accounting; separate account investments; leveraged leases; policy
        loans, which are carried at unpaid balances; and collateralized mortgage
        obligation residuals.

        Realized gains and losses on the sale of investments are recognized in
        operations at the date of sale and are determined by using the specific
        cost identification method. Premiums and discounts on investments are
        amortized to investment income by using the interest method over the
        contractual lives of the investments.

        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.
        Initially, Swap Agreements are designated as hedges and, therefore, are
        not marked to market. However, when a hedged asset/liability is sold or
        repaid before the related Swap Agreement matures, the Swap Agreement is
        marked to market and any gain/loss is classified with any gain/loss
        realized on the disposition of the hedged asset/liability. Subsequently,
        the Swap Agreement is marked to market and the resulting change in fair
        value is included in Investment Income in the income statement. When a
        Swap Agreement that is designated as a hedge is terminated before its
        contractual maturity, any resulting gain/loss is credited/charged to the
        carrying value of the asset/liability that it hedged and is treated as a
        premium/discount for the remaining life of the asset/liability.

        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 expenses. Costs incurred to
        sell mutual funds are also deferred and amortized over the estimated
        lives of the funds obtained. Deferred acquisition costs ("DAC") consist
        of commissions and other costs that vary with, and are primarily related
        to, the production or acquisition of new business.

        As debt and equity securities available for sale are carried at
        aggregate fair value, an adjustment is made to DAC equal to the change
        in amortization that would have been recorded if such securities had
        been sold at their stated aggregate fair value and the proceeds
        reinvested at current yields. The change in this adjustment, net of tax,
        is included with the change in net unrealized gains/losses on debt and
        equity



                                       F-9

<PAGE>   42


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

        securities available for sale that is credited or charged directly to
        shareholder's equity. DAC has been decreased by $7,000,000 at September
        30, 1998 and $16,400,000 at September 30, 1997 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 $23,339,000 at September 30, 1998, is
        amortized by using the straight-line method over periods averaging 25
        years and is included in Other Assets in the balance sheet. Goodwill is
        evaluated for impairment when events or changes in economic conditions
        indicate that the carrying amount may not be recoverable.

        CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity
        contracts and guaranteed investment contracts are accounted for as
        investment-type contracts in accordance with Statement of Financial
        Accounting Standards No. 97, "Accounting and Reporting by Insurance
        Enterprises for Certain Long-Duration Contracts and for Realized Gains
        and Losses from the Sale of Investments," and are recorded at
        accumulated value (premiums received, plus accrued interest, less
        withdrawals and assessed fees).

        FEE INCOME:  Variable annuity fees, asset management fees and surrender
        charges are recorded in income as earned.  Net retained commissions are
        recognized as income on a trade date basis.

        INCOME TAXES: The Company is included in the consolidated federal income
        tax return of the Parent and files as a "life insurance company" under
        the provisions of the Internal Revenue Code of 1986. Income taxes have
        been calculated as if the Company filed a separate return. Deferred
        income tax assets and liabilities are recognized based on the difference
        between financial statement carrying amounts and income tax bases of
        assets and liabilities using enacted income tax rates and laws.

        RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1997, the Financial
        Accounting Standards Board (the "FASB") issued Statement of Financial
        Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
        130") and Statement of Financial Accounting Standards No. 131,
        "Disclosure about Segments of an Enterprise and Related Information"
        ("SFAS 131").

        SFAS 130 establishes standards for reporting comprehensive income and
        its components in a full set of general purpose financial statements.
        SFAS 130 is effective for the Company as of October 1, 1998 and is not
        included in these financial statements.

        SFAS 131 establishes standards for the disclosure of information about
        the Company's operating segments. SFAS 131 is effective for the year
        ending September 30, 1999 and is not included in these financial
        statements.



                                      F-10


<PAGE>   43

                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

        Implementation of SFAS 130 and SFAS 131 will not have an impact on the
        Company's results of operations, financial condition or liquidity.

        In June 1998, the FASB issued Statement of Financial Accounting
        Standards No. 133, "Accounting for Derivative Instruments and Hedging
        Activities" ("SFAS 133"). SFAS 133 addresses the accounting for
        derivative instruments, including certain derivative instruments
        embedded in other contracts, and hedging activities. SFAS 133 is
        effective for the Company as of October 1, 1999 and is not included in
        these financial statements. The Company has not completed its analysis
        of the effect of SFAS 133, but management believes that it will not have
        a material impact on the Company's results of operations, financial
        condition or liquidity.

3.      INVESTMENTS

        The amortized cost and estimated fair value of bonds, notes and
        redeemable preferred stocks available for sale by major category follow:

<TABLE>
<CAPTION>
                                                                           Estimated
                                                    Amortized                fair
                                                      cost                   value
                                                  --------------         --------------
<S>                                               <C>                    <C>
        AT SEPTEMBER 30, 1998:

          Securities of the United States
            Government                            $   84,377,000         $   88,239,000
          Mortgage-backed securities                 569,613,000            584,007,000
          Securities of public utilities             108,431,000            106,065,000
          Corporate bonds and notes                  883,890,000            884,209,000
          Redeemable preferred stocks                  6,125,000              6,888,000
          Other debt securities                      282,427,000            285,346,000
                                                  --------------         --------------
            Total                                 $1,934,863,000         $1,954,754,000
                                                  ==============         ==============
        AT SEPTEMBER 30, 1997:

          Securities of the United States
            Government                            $   18,496,000         $   18,962,000
          Mortgage-backed securities                 636,018,000            649,196,000
          Securities of public utilities              22,792,000             22,893,000
          Corporate bonds and notes                  984,573,000          1,012,559,000
          Redeemable preferred stocks                  6,125,000              6,681,000
          Other debt securities                      274,481,000            275,903,000
                                                  --------------         --------------
            Total                                 $1,942,485,000         $1,986,194,000
                                                  ==============         ==============

</TABLE>


                                      F-11


<PAGE>   44


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.      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, 1998, follow:

<TABLE>
<CAPTION>
                                                                        Estimated
                                                Amortized                fair
                                                  cost                   value
                                              --------------         --------------
<S>                                           <C>                    <C>
         Due in one year or less              $   19,124,000         $   19,319,000
         Due after one year through
           five years                            313,396,000            318,943,000
         Due after five years through
           ten years                             744,740,000            750,286,000
         Due after ten years                     287,990,000            282,199,000
         Mortgage-backed securities              569,613,000            584,007,000
                                              --------------         --------------
           Total                              $1,934,863,000         $1,954,754,000
                                              ==============         ==============
</TABLE>


        Actual maturities of bonds, notes and redeemable preferred stocks will
        differ from those shown above due to prepayments and redemptions.


                                      F-12

<PAGE>   45


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.      INVESTMENTS (continued)

        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
                                                  ------------         ------------
<S>                                               <C>                  <C>
        AT SEPTEMBER 30, 1998:

          Securities of the United States
            Government                            $  3,862,000         $         --
          Mortgage-backed securities                15,103,000             (709,000)
          Securities of public utilities             2,420,000           (4,786,000)
          Corporate bonds and notes                 31,795,000          (31,476,000)
          Redeemable preferred stocks                  763,000                   --
          Other debt securities                      5,235,000           (2,316,000)
                                                  ------------         ------------
            Total                                 $ 59,178,000         $(39,287,000)
                                                  ============         ============


        AT SEPTEMBER 30, 1997:

          Securities of the United States
            Government                            $    498,000         $    (32,000)
          Mortgage-backed securities                14,998,000           (1,820,000)
          Securities of public utilities               141,000              (40,000)
          Corporate bonds and notes                 28,691,000             (705,000)
          Redeemable preferred stocks                  556,000                   --
          Other debt securities                      1,569,000             (147,000)
                                                  ------------         ------------
            Total                                 $ 46,453,000         $ (2,744,000)
                                                  ============         ============
</TABLE>


        Gross unrealized gains on equity securities available for sale
        aggregated $54,000 and $1,004,000 at September 30, 1998 and 1997,
        respectively. There were no unrealized losses at September 30, 1998 and
        1997.


                                      F-13

<PAGE>   46


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.      INVESTMENTS (continued)

        Gross realized investment gains and losses on sales of investments are
        as follows:


<TABLE>
<CAPTION>
                                                                Years ended September 30,
                                                --------------------------------------------------------
                                                    1998                  1997                  1996
                                                ------------          ------------          ------------
<S>                                             <C>                   <C>                   <C>
        BONDS, NOTES AND REDEEMABLE
          PREFERRED STOCKS:
          Realized gains                        $ 28,086,000          $ 22,179,000          $ 14,532,000
          Realized losses                         (4,627,000)          (25,310,000)          (10,432,000)

        COMMON STOCKS:
          Realized gains                             337,000             4,002,000               511,000
          Realized losses                                 --              (312,000)           (3,151,000)

        OTHER INVESTMENTS:
          Realized gains                           8,824,000             2,450,000             1,135,000

        IMPAIRMENT WRITEDOWNS                    (13,138,000)          (20,403,000)          (15,950,000)
                                                ------------          ------------          ------------
          Total net realized
            investment gains and losses         $ 19,482,000          $(17,394,000)         $(13,355,000)
                                                ============          ============          ============
</TABLE>

        The sources and related amounts of investment income are as follows:

<TABLE>
<CAPTION>
                                                              Years ended September 30,
                                              -----------------------------------------------------------
                                                  1998                   1997                   1996
                                              -------------          -------------          -------------
<S>                                                     <C>                    <C>                    <C>
        Short-term investments                $  12,524,000          $  11,780,000          $  10,647,000
        Bonds, notes and
          redeemable preferred stocks           156,140,000            163,038,000            140,387,000
        Mortgage loans                           29,996,000             17,632,000              8,701,000
        Common stocks                                34,000                 16,000                  8,000
        Real estate                                (467,000)              (296,000)              (196,000)
        Cost-method partnerships                 24,311,000              6,725,000              4,073,000
        Other invested assets                      (572,000)            11,864,000              1,011,000
                                              -------------          -------------          -------------
          Total investment income             $ 221,966,000          $ 210,759,000          $ 164,631,000
                                              =============          =============          =============
</TABLE>


        Expenses incurred to manage the investment portfolio amounted to
        $1,910,000 for the year ended September 30, 1998, $2,050,000 for the
        year ended September 30, 1997, and $1,737,000 for the year ended
        September 30, 1996, and are included in General and Administrative
        Expenses in the income statement.

        At September 30, 1998, no investment exceeded 10% of the Company's
        consolidated shareholder's equity.


                                      F-14

<PAGE>   47


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.      INVESTMENTS (continued)

        At September 30, 1998, mortgage loans were collateralized by properties
        located in 29 states, with loans totaling approximately 21% of the
        aggregate carrying value of the portfolio secured by properties located
        in California and approximately 14% by properties located in New York.
        No more than 8% of the portfolio was secured by properties in any other
        single state.

        At September 30, 1998, bonds, notes and redeemable preferred stocks
        included $167,564,000 of bonds and notes not rated investment grade. The
        Company had no material concentrations of non-investment-grade assets at
        September 30, 1998.

        At September 30, 1998, the carrying value of investments in default as
        to the payment of principal or interest was $917,000, all of which were
        mortgage loans. Such nonperforming investments had an estimated fair
        value equal to their carrying value.

        As a component of its asset and liability management strategy, the
        Company utilizes Swap Agreements to match assets more closely to
        liabilities. Swap Agreements are agreements to exchange with a
        counterparty interest rate payments of differing character (for example,
        variable-rate payments exchanged for fixed-rate payments) based on an
        underlying principal balance (notional principal) to hedge against
        interest rate changes. The Company typically utilizes Swap Agreements to
        create a hedge that effectively converts floating-rate assets and
        liabilities to fixed-rate instruments. At September 30, 1998, the
        Company had one outstanding Swap Agreement with a notional principal
        amount of $21,538,000, which matures in December 2024. The net interest
        paid amounted to $278,000 and $125,000 for the years ended September 30,
        1998 and 1997, respectively, and is included in Interest Expense on
        Guaranteed Investment Contracts in the income statement.

        At September 30, 1998, $5,154,000 of bonds, at amortized cost, were on
        deposit with regulatory authorities in accordance with statutory
        requirements.

4.      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 real estate investments
        and other invested assets except for cost-method partnerships) 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.


                                      F-15

<PAGE>   48


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

4.      FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

        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.

        MORTGAGE LOANS: Fair values are primarily determined by discounting
        future cash flows to the present at current market rates, using expected
        prepayment rates.

        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 HELD IN SEPARATE ACCOUNTS: 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. Annuitized contracts are valued based on the
        present value of future cash flows at current pricing rates.

        RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the
        present value of future cash flows at current pricing rates and is net
        of the estimated fair value of a hedging Swap Agreement, determined from
        independent broker quotes.

        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 RELATED TO SEPARATE ACCOUNTS: 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.

        SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on
        the quoted market prices for similar issues.


                                      F-16

<PAGE>   49


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

4.      FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

        The estimated fair values of the Company's financial instruments at
        September 30, 1998 and 1997, compared with their respective carrying
        values, are as follows:


<TABLE>
<CAPTION>
                                                             Carrying                 Fair
                                                              value                   value
                                                          ---------------         ---------------
<S>                                                       <C>                     <C>
        1998:

        ASSETS:
          Cash and short-term investments                 $   333,735,000         $   333,735,000
          Bonds, notes and redeemable
            preferred stocks                                1,954,754,000           1,954,754,000
          Mortgage loans                                      391,448,000             415,981,000
          Common stocks                                           169,000                 169,000
          Cost-method partnerships                              4,403,000              12,744,000
          Variable annuity assets held in
            separate accounts                              11,133,569,000          11,133,569,000

        LIABILITIES:
          Reserves for fixed annuity contracts              2,189,272,000           2,116,874,000
          Reserves for guaranteed investment
            contracts                                         282,267,000             282,267,000
          Payable to brokers for purchases
            of securities                                      27,053,000              27,053,000
          Variable annuity liabilities related
            to separate accounts                           11,133,569,000          10,696,607,000
          Subordinated notes payable to Parent                 39,182,000              40,550,000
                                                          ===============         ===============

        1997:

        ASSETS:
          Cash and short-term investments                 $   113,580,000         $   113,580,000
          Bonds, notes and redeemable
            preferred stocks                                1,986,194,000           1,986,194,000
          Mortgage loans                                      339,530,000             354,495,000
          Common stocks                                         1,275,000               1,275,000
          Cost-method partnerships                             46,880,000              84,186,000
          Variable annuity assets held in
            separate accounts                               9,343,200,000           9,343,200,000

        LIABILITIES:
          Reserves for fixed annuity contracts              2,098,803,000           2,026,258,000
          Reserves for guaranteed investment
            contracts                                         295,175,000             295,175,000
          Payable to brokers for purchases
            of securities                                         263,000                 263,000
          Variable annuity liabilities related to
            separate accounts                               9,343,200,000           9,077,200,000
          Subordinated notes payable to Parent                 36,240,000              37,393,000
                                                          ===============         ===============
</TABLE>


                                      F-17

<PAGE>   50


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5.      SUBORDINATED NOTES PAYABLE TO PARENT

        Subordinated notes and accrued interest payable to Parent totaled
        $39,182,000 at interest rates ranging from 8.5% to 9% at September 30,
        1998, and require principal payments of $23,060,000 in 1999, $5,400,000
        in 2000 and $10,000,000 in 2001.

6.      REINSURANCE

        On August 11, 1998, the Company entered into a modified coinsurance
        transaction, approved by the Arizona Department of Insurance, which
        involves the ceding of approximately $5,000,000,000 of variable
        annuities to ANLIC Insurance Company (Cayman), a Cayman Islands stock
        life insurance company, effective December 31, 1997. As a part of this
        transaction, the Company received cash amounting to approximately
        $188,700,000, and recorded a corresponding reduction of DAC related to
        the coinsured annuities.

        As payments are made to the reinsurer, the reduction of DAC is relieved.
        The net reduction in DAC at September 30, 1998 was $166,631,000. Certain
        expenses related to this transaction are being charged directly to DAC
        amortization in the income statement. The net effect of this transaction
        in the income statement is not material.

7.      CONTINGENT LIABILITIES

        The Company has entered into three agreements in which it has provided
        liquidity support for certain short-term securities of two
        municipalities by agreeing to purchase such securities in the event
        there is no other buyer in the short-term marketplace. In return the
        Company receives a fee. The maximum liability under these guarantees is
        $242,600,000. Management does not anticipate any material future losses
        with respect to these liquidity support facilities. An additional
        $51,000,000 has been committed to investments in the process of being
        funded or to be available in the case of certain natural disasters, for
        which the Company receives a fee.

        The Company is involved in various kinds of litigation common to its
        businesses. These cases are in various stages of development and, based
        on reports of counsel, management believes that provisions made for
        potential losses relating to such litigation are adequate and any
        further liabilities and costs will not have a material adverse impact
        upon the Company's financial position or results of operations.


                                      F-18


<PAGE>   51


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

8.      SHAREHOLDER'S EQUITY

        The Company is authorized to issue 4,000 shares of its $1,000 par value
        Common Stock. At September 30, 1998 and 1997, 3,511 shares were
        outstanding.

        Changes in shareholder's equity are as follows:


<TABLE>
<CAPTION>
                                                                Years ended September 30,
                                               -----------------------------------------------------------
                                                   1998                   1997                   1996
                                               -------------          -------------          -------------
<S>                                            <C>                    <C>                    <C>
        ADDITIONAL PAID-IN CAPITAL:
          Beginning balances                   $ 308,674,000          $ 280,263,000          $ 252,876,000
          Capital contributions received                  --             28,411,000             27,387,000
                                               -------------          -------------          -------------
            Ending balances                    $ 308,674,000          $ 308,674,000          $ 280,263,000
                                               =============          =============          =============
        RETAINED EARNINGS:
          Beginning balances                   $ 244,628,000          $ 207,002,000          $ 191,346,000
          Net income                             138,641,000             63,126,000             45,056,000

          Dividend paid                          (51,200,000)           (25,500,000)           (29,400,000)
                                               -------------          -------------          -------------
            Ending balances                    $ 332,069,000          $ 244,628,000          $ 207,002,000
                                               =============          =============          =============
</TABLE>


<TABLE>
<CAPTION>
                                                               Years ended September 30,
                                               -----------------------------------------------------------
                                                     1998                  1997                  1996
                                               -------------          -------------          -------------
<S>                                                       <C>                   <C>                   <C>
        NET UNREALIZED GAINS (LOSSES) ON
         DEBT AND EQUITY SECURITIES
         AVAILABLE FOR SALE:
           Beginning balances                  $  18,405,000          $ (5,521,000)         $ (5,673,000)
           Change in net unrealized
             gains (losses) on debt
             securities available
             for sale                            (23,818,000)           57,463,000            (2,904,000)
           Change in net unrealized
             gains (losses) on equity
             securities available for sale          (950,000)              (55,000)            3,538,000
           Change in adjustment to
             deferred acquisition costs            9,400,000           (20,600,000)             (400,000)
           Tax effects of net changes              5,378,000           (12,882,000)              (82,000)
                                               -------------          ------------          ------------
             Ending balances                   $   8,415,000          $ 18,405,000          $ (5,521,000)
                                               =============          ============          ============
</TABLE>



                                      F-19

<PAGE>   52


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

8.   SHAREHOLDER'S EQUITY (continued)

     Dividends that the Company may pay to its shareholder in any year without
     prior approval of the Arizona Department of Insurance are limited by
     statute. The maximum amount of dividends which can be paid to shareholders
     of insurance companies domiciled in the state of Arizona without obtaining
     the prior approval of the Insurance Commissioner is limited to the lesser
     of either 10% of the preceding year's statutory surplus or the preceding
     year's statutory net gain from operations. Dividends in the amounts of
     $51,200,000, $25,500,000 and $29,400,000 were paid on June 4, 1998, April
     1, 1997 and March 18, 1996, respectively.

     Under statutory accounting principles utilized in filings with insurance
     regulatory authorities, the Company's net income for the nine months ended
     September 30, 1998 was $64,125,000. The statutory net income for the year
     ended December 31, 1997 was $74,407,000, and the statutory net income for
     the year ended December 31, 1996 was $27,928,000. The Company's statutory
     capital and surplus was $537,542,000 at September 30, 1998, $567,979,000 at
     December 31, 1997 and $311,176,000 at December 31, 1996.

9.   INCOME TAXES

     The components of the provisions for federal income taxes on pretax income
     consist of the following:


<TABLE>
<CAPTION>
                                                      Net realized
                                                      investment
                                                     gains (losses)       Operations         Total
                                                     -------------       ------------     ------------
<S>                                                  <C>                 <C>              <C>
     1998:

     Currently payable                               $   4,221,000       $ 32,743,000     $ 36,964,000
     Deferred                                             (550,000)        34,637,000       34,087,000
                                                     -------------       ------------     ------------

       Total income tax expense                      $   3,671,000       $ 67,380,000     $ 71,051,000
                                                     =============       ============     ============
     1997:

     Currently payable                               $  (3,635,000)      $ 50,828,000     $ 47,193,000
     Deferred                                           (2,258,000)       (13,766,000)     (16,024,000)
                                                     -------------       ------------     ------------

       Total income tax expense                      $  (5,893,000)      $ 37,062,000     $ 31,169,000
                                                     =============       ============     ============
     1996:

     Currently payable                               $   5,754,000       $ 21,849,000     $ 27,603,000
     Deferred                                          (10,347,000)         6,996,000       (3,351,000)
                                                     -------------       ------------     ------------

       Total income tax expense                      $  (4,593,000)      $ 28,845,000     $ 24,252,000
                                                     =============       ============     ============
</TABLE>


                                      F-20


<PAGE>   53

                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9.   INCOME TAXES (continued)

     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,
                                              --------------------------------------------------------
                                                  1998                  1997                  1996
                                              ------------          ------------          ------------
<S>                                           <C>                   <C>                   <C>
     Amount computed at
         statutory rate                       $ 73,392,000          $ 33,003,000          $ 24,258,000
       Increases (decreases)
         resulting from:
           Amortization of differences
             between book and tax
             bases of net assets
             acquired                              460,000               666,000               464,000
           State income taxes, net of
             federal tax benefit                 5,530,000             1,950,000             2,070,000
           Dividends-received deduction         (7,254,000)           (4,270,000)           (2,357,000)
           Tax credits                          (1,296,000)             (318,000)             (257,000)
           Other, net                              219,000               138,000                74,000
                                              ------------          ------------          ------------
              Total income tax expense        $ 71,051,000          $ 31,169,000          $ 24,252,000
                                              ============          ============          ============
</TABLE>

     For United States federal income tax purposes, certain amounts from life
     insurance operations are accumulated in a memorandum policyholders' surplus
     account and are taxed only when distributed to shareholders or when such
     account exceeds prescribed limits. The accumulated policyholders' surplus
     was $14,300,000 at September 30, 1998. The Company does not anticipate any
     transactions which would cause any part of this surplus to be taxable.


                                      F-21


<PAGE>   54


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9.   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,
                                              ------------------------------------
                                                   1998                   1997
                                              -------------          -------------
<S>                                           <C>                    <C>
     DEFERRED TAX LIABILITIES:
     Investments                              $  17,643,000          $  13,160,000
     Deferred acquisition costs                 223,392,000            154,949,000
     State income taxes                           2,873,000              1,777,000
     Other liabilities                              144,000                     --
     Net unrealized gains on debt
       and equity securities
       available for sale                         4,531,000              9,910,000
                                              -------------          -------------
       Total deferred tax liabilities           248,583,000            179,796,000
                                              -------------          -------------

     DEFERRED TAX ASSETS:
     Contractholder reserves                   (149,915,000)          (108,090,000)
     Guaranty fund assessments                   (2,910,000)            (2,707,000)
     Other assets                                        --             (1,952,000)
                                              -------------          -------------
       Total deferred tax assets               (152,825,000)          (112,749,000)
                                              -------------          -------------

       Deferred income taxes                  $  95,758,000          $  67,047,000
                                              =============          =============
</TABLE>


                                      F-22


<PAGE>   55


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. RELATED-PARTY MATTERS

     The Company pays commissions to five affiliated companies, SunAmerica
     Securities, Inc., Advantage Capital Corp., Financial Services Corp., Sentra
     Securities Corp. and Spelman & Co. Inc. Commissions paid to these
     broker-dealers totaled $32,946,000 in 1998, $25,492,000 in 1997, and
     $16,906,000 in 1996. These broker-dealers, when combined with the Company's
     wholly owned broker-dealer, represent a significant portion of the
     Company's business, amounting to approximately 33.6%, 36.1%, and 38.3% of
     premiums in 1998, 1997, and 1996, respectively. The Company also sells its
     products through unaffiliated broker-dealers, the largest two of which
     represented approximately 17.3% and 8.4% of premiums in 1998, 19.2% and
     10.1% in 1997, and 19.7% and 10.2% in 1996, respectively.

     The Company purchases administrative, investment management, accounting,
     marketing and data processing services from SunAmerica Financial, whose
     purpose is to provide services to the Company and its affiliates. Amounts
     paid for such services totaled $84,975,000 for the year ended September 30,
     1998, $86,116,000 for the year ended September 30, 1997 and $65,351,000 for
     the year ended September 30, 1996. The marketing component of such costs
     during these periods amounted to $39,482,000, $31,968,000 and $17,442,000,
     respectively, and are deferred and amortized as part of Deferred
     Acquisition Costs. The other components of such costs are included in
     General and Administrative Expenses in the income statement.

     The Parent made a capital contribution of $28,411,000 in December 1996 to
     the Company, through the Company's direct parent, in exchange for the
     termination of its guaranty with respect to certain real estate owned in
     Arizona. Accordingly, the Company reduced the carrying value of this real
     estate to estimated fair value to reflect the termination of the guaranty.

     During the year ended September 30, 1998, the Company sold various invested
     assets to the Parent for cash equal to their current market value of
     $64,431,000. The Company recorded a net gain aggregating $16,388,000 on
     such transactions.

     During the year ended September 30, 1998, the Company purchased certain
     invested assets from the Parent, SunAmerica Life Insurance Company and
     CalAmerica Life Insurance Company for cash equal to their current market
     value, which aggregated $20,666,000, $10,468,000 and $61,000, respectively.

     During the year ended September 30, 1997, the Company sold various invested
     assets to SunAmerica Life Insurance Company and to CalAmerica Life
     Insurance Company for cash equal to their current market value of
     $15,776,000 and $15,000, respectively. The Company recorded a net gain
     aggregating $276,000 on such transactions.

     During the year ended September 30, 1997, the Company purchased certain
     invested assets from SunAmerica Life Insurance Company and CalAmerica Life
     Insurance Company for cash equal to their current market value of
     $8,717,000 and $284,000, respectively.

     During the year ended September 30, 1996, the Company sold various invested
     assets to the Parent and to SunAmerica Life Insurance Company for cash
     equal to their current market value of $274,000 and $47,321,000,
     respectively. The Company recorded a net loss aggregating $3,000 on such
     transactions.



                                      F-23


<PAGE>   56


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. RELATED-PARTY MATTERS (continued)

     During the year ended September 30, 1996, the Company purchased certain
     invested assets from SunAmerica Life Insurance Company for cash equal to
     their current market value, which aggregated $28,379,000.

11. BUSINESS SEGMENTS

     Summarized data for the Company's business segments follow:


<TABLE>
<CAPTION>
                                                                  Total
                                                               depreciation
                                                                   and
                                          Total                amortization               Pretax                  Total
                                         revenues                 expense                 income                  assets
                                      ---------------         ---------------         ---------------         ---------------
<S>                                   <C>                     <C>                     <C>                     <C>
     1998:
     Annuity operations               $   443,407,000         $    60,731,000         $   178,120,000         $14,366,018,000
     Broker-dealer operations              47,363,000               1,770,000              22,401,000              55,870,000
     Asset management
       operations                          41,040,000              14,780,000               9,171,000             104,476,000
                                      ---------------         ---------------         ---------------         ---------------
     Total                            $   531,810,000         $    77,281,000         $   209,692,000         $14,526,364,000
                                      ===============         ===============         ===============         ===============


     1997:
     Annuity operations               $   332,845,000         $    55,675,000         $    74,792,000         $12,438,021,000
     Broker-dealer operations              38,005,000                 689,000              16,705,000              51,400,000
     Asset management
       operations                          35,661,000              16,357,000               2,798,000              81,518,000
                                      ---------------         ---------------         ---------------         ---------------
     Total                            $   406,511,000         $    72,721,000         $    94,295,000         $12,570,939,000
                                      ===============         ===============         ===============         ===============


     1996:
     Annuity operations               $   256,681,000         $    43,974,000         $    53,827,000         $ 9,092,770,000
     Broker-dealer operations              31,053,000                 449,000              13,033,000              37,355,000
     Asset management
       operations                          33,047,000              18,295,000               2,448,000              74,410,000
                                      ---------------         ---------------         ---------------         ---------------
     Total                            $   320,781,000         $    62,718,000         $    69,308,000         $ 9,204,535,000
                                      ===============         ===============         ===============         ===============
</TABLE>


12. SUBSEQUENT EVENTS

     On July 15, 1998, the Company entered into a definitive agreement to
     acquire the individual life business and the individual and group annuity
     business of MBL Life Assurance Corporation ("MBL Life") via a 100%
     coinsurance transaction for approximately $130,000,000 in cash. The
     transaction will include approximately $2,000,000,000 of universal life
     reserves and $3,000,000,000 of fixed annuity reserves. The Company plans to
     reinsure a large portion of the mortality risk



                                                 F-24


<PAGE>   57


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. SUBSEQUENT EVENTS (Continued)

     associated with the acquired block of universal life business. Completion
     of this acquisition is expected by the end of calendar year 1998 and is
     subject to customary conditions and required approvals. Included in this
     block of business is approximately $250,000,000 of individual life business
     and $500,000,000 of group annuity business whose contract owners are
     residents of New York State ("the New York Business"). Approximately six
     months subsequent to completion of the transaction, the New York Business
     will be acquired by the Company's New York affiliate, First SunAmerica Life
     Insurance Company, and the remainder of the business will be acquired by
     the Company via assumption reinsurance agreements between MBL Life and the
     respective companies, which will supersede the coinsurance agreement. The
     $130,000,000 purchase price will be allocated between the Company and its
     affiliate based on their respective assumed life insurance reserves.

     On August 20, 1998, the Parent announced that it has entered into a
     definite agreement to merge with and into American International Group,
     Inc. ("AIG"). Under the terms of the agreement, each share of the Parent's
     common stock (including Nontransferable Class B) will be exchanged for
     0.855 shares of AIG's common stock. The transaction will be treated as a
     pooling of interests for accounting purposes and will be a tax-free
     reorganization. The transaction was approved by both the Parent's and AIG's
     shareholders on November 18, 1998, and, subject to various regulatory
     approvals, will be completed in late 1998 or early 1999.




                                      F-25


<PAGE>   58


                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
                             LIST OF EXHIBITS FILED




<TABLE>
<CAPTION>
Exhibit
  No.                                   Description
-------                                 -----------
<S>            <C>

 10(g)         Subordinated Loan Agreement for Equity Capital, dated as of
               August 25, 1998, between the Company's subsidiary, SACS, and SAI,
               defining SAI's rights with respect to the 8.5% notes due October
               30, 2001.

 10(h)         Asset Lease Agreement, dated June 26, 1998, between the Company
               and Aurora National Life Assurance Company ("Aurora") relating to
               a lease from Aurora of certain information relating to single
               premium deferred annuities.

 21            Subsidiaries of the Company.

 27            Financial Data Schedule.

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