|**SECURITIES AND EXCHANGE
      COMMISSION**
      **WASHINGTON, D.C.
      20549**
      **FORM 10-K**
      (Mark
One)
|------------------------------------------------------------------------------------------------------------------------





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











**For the fiscal year ended December
      31, 2000**
      **OR**







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

**For the
      transition period
      from               
      to**
      **Commission File No.
      33-47472**
      **ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**

|**Incorporated in
      Arizona** | **86-0198983**    
|--------------------------------- | ------------------
|                                  | IRS Employer      
|                                  | Identification
No.



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



|SECURITIES REGISTERED PURSUANT TO SECTION
      12(b) OF THE ACT:  None
      SECURITIES REGISTERED PURSUANT TO SECTION 12
      (g) OF THE ACT:  None
      INDICATE BY
      CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE
      FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
      THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
      WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
      FILING REQUIREMENTS FOR THE PAST 90 DAYS  Yes X  No ___
      INDICATE BY
      CHECK MARK IF DISCLOSURE OF DELINQUENT FILES PURSUANT TO ITEM 405 OF
      REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
      BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
      STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
      AMENDMENT TO THIS FORM 10-K.
      THE NUMBER OF
      SHARES OUTSTANDING OF THE REGISTRANTS COMMON STOCK ON MARCH 26, 2001 WAS
      AS FOLLOWS:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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








**PART I**
      **ITEM 1. 
      BUSINESS**
      **GENERAL
      DESCRIPTION**
      Anchor
      National Life Insurance Company, including its wholly owned subsidiaries,
      (the "Company") is an indirect wholly-owned subsidiary of American
      International Group, Inc. ("AIG"), an international insurance and
      financial services holding company.  At December 31, 1998, the
      Company was a wholly owned indirect subsidiary of SunAmerica Inc., a
      Maryland Corporation. On January 1, 1999, SunAmerica Inc. merged with and
      into AIG in a tax-free reorganization that has been treated as a pooling
      of interests for accounting purposes.  Thus, SunAmerica Inc. ceased
      to exist on that date. However, immediately prior to the date of the
      merger, substantially all of the net assets of SunAmerica Inc. were
      contributed to a newly formed subsidiary of AIG named SunAmerica Holdings,
      Inc., a Delaware Corporation. SunAmerica Holdings, Inc. subsequently
      changed its name to SunAmerica Inc. ("SunAmerica").
      The Company
      is incorporated in Arizona and maintains its principal executive offices
      at 1 SunAmerica Center, Los Angeles, California 90067-6022, telephone
      (310) 772-6000.  The Company has no employees; however, employees of
      SunAmerica and its other subsidiaries perform various services for the
      Company.  SunAmerica had approximately 2,400 employees at December
      31, 2000, approximately 1,700 of whom perform services for the Company as
      well as for certain of its affiliates.
      The Company
      is a life insurance company and conducts its business through three
      segments:  annuity operations, asset management operations, and
      broker-dealer operations.  Annuity operations focus primarily on the
      marketing, sale and administration of fixed and variable annuity products,
      the universal life business acquired from MBL Life in 1998 (See Note 4 of
      Notes to Consolidated Financial Statements) and guaranteed investment
      contracts ("GICs").  The Company's variable annuity products offer
      investors a broad spectrum of fund alternatives, with a choice of
      investment managers, as well as guaranteed fixed-rate account
      options.  The Company earns fee income on investments in the variable
      account options and net investment income on the fixed-rate account
      options.  Asset management operations, which include the sale and
      management of mutual funds, are conducted by SunAmerica Asset Management
      Corp. ("SunAmerica Asset Management"), the Company's registered investment
      advisor subsidiary and its related distributor, SunAmerica Capital
      Services, Inc. ("SACS").  SunAmerica Asset Management earns fee
      income by managing a diversified family of mutual funds and certain
      subaccounts within the Company's variable annuity products and by
      providing professional management of individual, corporate and pension
      plan portfolios.  SACS earns commissions and distribution fees by
      selling proprietary mutual funds and variable annuities. 
      Broker-dealer operations are conducted by the Company's broker-dealer
      subsidiary, Royal Alliance Associates, Inc. ("Royal"), which sells
      proprietary annuities and mutual funds, as well as a full range of
      non-proprietary investment products.  Net retained commissions are
      derived from the commissions on the sales of these products after
      deducting the substantial portion of such commissions that is passed on to
      registered representatives.



1






|The Company
      ranks among the largest U.S. issuers of variable annuities.  At
      December 31, 2000, the Company managed $33.81 billion of assets 
      through  its  fixed-rate  business and asset 
      management operations, consisting of $27.19 billion of assets on its
      balance sheet and $6.62 billion of  assets managed in mutual
      funds.  Its asset management operations provide a broad range of
      financial planning and investment services through more than 8,600
      independent registered representatives nationwide.  The Company also
      distributes its products and services through an extensive network of
      independent broker-dealers, full-service securities firms, independent
      general insurance agents, major financial institutions and, in the case of
      its GICs, by marketing directly to banks, municipalities, asset management
      firms and direct plan sponsors and through intermediaries, such as
      managers or consultants servicing these groups.
      The Company
      believes that demographic trends have produced strong consumer demand for
      long-term, investment-oriented products.  According to U.S. Census
      Bureau projections, the number of individuals between the ages of 45 to 64
      grew from 46 million to 60 million during the 1990s, making this age group
      the fastest-growing segment of the U.S. population.  Between 1989 and
      1999, annual industry premiums from fixed and variable annuities and fund
      deposits increased from $113.8 billion to $270.2 billion.  During the
      same period, annual industry sales of mutual funds, excluding money market
      accounts, rose from $125.34 billion to $1.27 trillion.
      Benefiting
      from continued strong growth of the retirement savings market, industry
      sales of tax-deferred savings products have represented, for a number of
      years, a significantly larger source of new premiums for the U.S. life
      insurance industry than have traditional life insurance products.
      Recognizing the growth potential of this market, the Company focuses its
      life insurance operations on the sale of annuities and GICs.
      In recent
      years, the Company has enhanced its marketing efforts and expanded its
      offerings of fee-based products such as variable annuities and mutual
      funds, resulting in significantly increased fee income.  Fee income
      has also expanded through the receipt of broker-dealer net retained
      commissions, resulting primarily from increased demand for long-term
      investment products.  The Company's fee-generating businesses entail
      no portfolio credit risk and require significantly less capital support
      than its fixed-rate business, which generates net investment
      income.
      The Company
      and its affiliates have made significant investments in technology over
      the past several years in order to lower operating costs and enhance their
      marketing efforts.  Its use of optical disk imaging and artificial
      intelligence has substantially reduced the more traditional
      paper-intensive life insurance processing procedures, reducing annuity
      processing and servicing costs and improving customer service.  This
      has also enabled the Company to more efficiently assimilate acquired
      business. The Company has also implemented technology to interface with
      its wholly owned or affiliated broker-dealers, which enables the Company
      to more effectively market its products and help the affiliated financial
      professionals to better serve their
clients.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2




|The following table shows the
      Company's net investment income (including net realized investment losses)
      and fee income for the year ended December 31, 2000 by business
      segment:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



**NET INVESTMENT AND FEE
      INCOME****Annuity
      Operations**
    ****
    **Asset
      Management Operations**
    ****
    **Broker- Dealer
      Operations**
    ****
    **Total**
    ****
    **Total by
      Percent**(In
    thousands)Net investment income(including net realizedinvestment losses)
    
    $
    112,482
    
    $
    6,016
    
    $
    827
    
    $
    119,325
    
    
    16.8
    %Fee income:Variable annuity fees
    
    $
    385,436
    
    $
    15,059
    
    $
    ---
    
    
    400,495
    
    
    56.4
    %Net retained commissions
    
    $
    ---
    
    $
    3,878
    
    $
    58,324
    
    
    62,202
    
    
    8.8
    %Asset management fees
    
    $
    ---
    
    $
    73,922
    
    $
    ---
    
    
    73,922
    
    
    10.4
    %Universal life insurancefees
    
    $
    20,258
    
    $
    ---
    
    $
    ---
    
    
    20,258
    
    
    2.9
    %Surrender charges
    
    $
    20,963
    
    $
    ---
    
    $
    ---
    
    
    20,963
    
    
    2.9
    %Other fees
    
    $
    3,832
    
    $
    6,708
    
    $
    2,419
    
    
    12,959
    
    
    1.8
    %Total fee income
    
    $
    430,489
    
    $
    99,567
    
    $
    60,743
    
    
    590,799
    
    
    83.2
    %Total
    
    $
    542,971
    
    $
    105,583
    
    $
    61,570
    
    $
    710,124
    
    
    100.0
    %






|For additional financial information on the Company's business segments,
      see "Notes to Consolidated Financial Statements - Note 13, Business
      Segments".
      **ANNUITY OPERATIONS**
      Founded in
      1965, the Company is an Arizona-chartered company licensed in 49 states
      and the District of Columbia which markets flexible-premium variable
      annuities and GICs.  It has a "AAA" (Extremely Strong) financial
      strength rating from Standard & Poor's ("S&P"), a "Aaa"
      (Exceptional) rating from Moody's Investors Service ("Moody's"), a "AAA"
      (Exceptionally Strong) rating from Fitch ("Fitch") and an "A++" (Superior)
      rating from industry analyst A.M. Best Company.
      In addition
      to distributing its variable annuity products through its six wholly-owned
      or affiliated broker-dealers, the Company distributes its products through
      over 900 independent broker-dealers, full-service securities firms and
      financial institutions as well as through independent general insurance
      agents.  In total, more than 52,000 independent sales representatives
      nationally are licensed to sell the Company's annuity products.
      On
      December 31, 1998, the Company acquired the individual life business and
      the individual and group annuity business of MBL Life Assurance
      Corporation ("MBL Life"), via a 100% coinsurance transaction.  The
      Company assumed reserves in this acquisition totaling $5,793,256,000,
      including $3,460,503,000 of fixed annuity  contracts, 
      $2,308,742,000  of  universal  life insurance contracts and
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3






|$24,011,000 of  guaranteed 
      investment  contracts.  Policyholders of MBL annuity products
      were required to transfer their funds into an existing product of the
      Company or  one  of its affiliates by December 31, 1999 in order
      to receive the policy enhancements due under the MBL Life rehabilitation
      agreement. Over 92% of the deferred annuity reserves had either been
      transferred or surrendered by December 31, 1999.
      Included in
      the block of business acquired from MBL Life were policies whose owners
      are residents of New York State (the "New York Business").  On July
      1, 1999, the New York Business was acquired by the Company's New York
      affiliate, First SunAmerica Life Insurance Company ("FSA"), via an
      assumption reinsurance agreement, and the remainder of the business
      converted to assumption reinsurance, which superseded the coinsurance
      agreement.  As part of this transfer, invested assets equal to
      $678,272,000, universal life reserves equal to $282,247,000, group pension
      reserves equal to $406,118,000, and other net assets of $10,093,000 were
      transferred to FSA.
      **VARIABLE ANNUITIES**
      The variable
      annuity products of the Company offer investors a broad spectrum of fund
      alternatives, with a choice of investment managers, as well as guaranteed
      fixed-rate account options.  The Company earns fee income through the
      sale, administration and management of the variable account options of its
      variable annuity products.  The Company also earns investment income
      on monies allocated to the fixed-rate account options of these
      products.  Variable annuities offer retirement planning features
      similar to those offered by fixed annuities, but differ in that the
      contractholder's rate of return is generally dependent upon the investment
      performance of the particular equity, fixed-income, money market or asset
      allocation fund selected by the contractholder.  Because the
      investment risk is borne by the customer in all but the fixed-rate account
      options, these products require significantly less capital support than
      fixed annuities.
      The Company's
      flagship Polaris variable annuity products are multimanager variable
      annuities that offer investors a choice of more than 30 variable funds and
      a number of guaranteed fixed-rate funds.  Polaris sales have
      increased significantly in recent years due to enhanced distribution
      efforts and growing consumer demand for flexible retirement savings
      products that offer a variety of equity, fixed-income and guaranteed fixed
      account investment choices.
      At December
      31, 2000, total variable product reserves were $22.43 billion, of which
      $20.39 billion were held in separate accounts and $2.04 billion were the
      liabilities of the fixed-rate account options which are held in the
      general accounts.  The Company's variable annuity products
      incorporate surrender charges to encourage persistency.  At December
      31, 2000, 81% of the Company's variable annuity reserves held in the
      separate accounts were subject to surrender penalties or other
      restrictions.  The Company's variable annuity products also generally
      limit the number of transfers made in a specified period between account
      options without the assessment of a fee.  The average size of a new
      variable annuity contract sold by the Company in 2000 was approximately
      $58,000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4






|**FIXED
      ANNUITIES AND GICs**
      The Company's
      general account obligations are fixed-rate products, including fixed
      annuities issued in prior years, universal life insurance contracts
      assumed in the Acquisition and fixed-rate options of its variable annuity
      contracts.  Such fixed-rate account options on its variable annuity
      contracts provide interest rate guarantees of one, two, three, five, seven
      or ten years.  Although the Company's annuity contracts remain in
      force an average of seven to ten years, a majority (approximately 81% at
      December 31, 2000) of the annuity contracts, as well as the universal life
      contracts, reprice  annually  at  discretionary 
      rates  determined  by the Company.  In repricing, the
      Company takes into account yield characteristics of its investment
      portfolio, surrender assumptions and competitive industry pricing, among
      other factors.
      The Company
      augments its retail annuity business with the sale of institutional
      products.  At December 31, 2000, the Company had $591.4 million of
      fixed-maturity, variable-rate GIC obligations that reprice periodically
      based upon certain defined indexes and $19.3 million of fixed-maturity,
      fixed-rate GICs acquired from MBL Life.  Of the total GIC portfolio
      at December 31, 2000, approximately 92% was sold to asset management
      firms, 5% was sold to state and local government entities and 3% was sold
      to corporations.
      The Company
      designs its fixed-rate products and conducts its investment operations in
      order to closely match the duration of the assets in its investment
      portfolio to its fixed annuity, universal life and GIC obligations. 
      The Company seeks to achieve a predictable spread between what it earns on
      its assets and what it pays on its liabilities by investing principally in
      fixed-rate securities.  The Company's fixed annuity and universal
      life products incorporate surrender charges and its GIC products
      incorporate other restrictions in order to encourage persistency.
      Approximately 82% of the Company's fixed annuity, universal life and GIC
      reserves had surrender penalties or other restrictions at December 31,
      2000.
      The Company
      believes that its fixed-rate liabilities should be backed by a portfolio
      principally composed of fixed-rate investments that generate predictable
      rates of return.  The Company does not have a specific target rate of
      return.  Instead, its rates of return vary over time depending on a
      variety of factors, including the current interest rate environment, the
      slope of the yield curve, the spread at which fixed-rate investments are
      priced over the yield curve, default rates and general economic
      conditions. The Company manages most of its invested assets
      internally.  Its portfolio strategy is constructed with a view to
      achieve adequate risk-adjusted returns consistent with its investment
      objectives of effective asset-liability matching, liquidity and safety.
      As 
      part  of  its  asset-liability  matching 
      discipline, the  Company conducts detailed computer simulations that
      model its fixed-rate assets and liabilities under commonly used 
      stress-test  interest  rate scenarios.  With the results of
      these computer simulations, the Company can measure the potential gain or
      loss in fair value of its interest-rate sensitive instruments and seek to
      protect its economic value and achieve a predictable spread between what
      it earns on its invested assets and what it pays on its liabilities by
      designing its fixed-rate products and conducting investment operations to
      closely match the duration of the fixed-rate assets to that of
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5




|its fixed-rate liabilities.  The
      Company's  fixed-rate  assets include: cash and short-term
      investments; bonds, notes and redeemable preferred stocks; mortgage loans;
      and investments in limited partnerships that invest primarily in
      fixed-rate securities.  At December 31, 2000, these assets  had
      an aggregate fair value of $5.20 billion with a duration of 2.9. See
      further discussion of duration under Financial Condition and Liquidity -
      Asset Liability Matching section.  The Company's fixed-rate
      liabilities include fixed annuity, GIC and universal life reserves and
      subordinated notes.  At December 31, 2000, these liabilities
      had  an  aggregate  fair value (determined by discounting
      future contractual cash flows by related market rates of interest) of
      $4.77 billion with a  duration of 3.2. For the years ended December
      31, 2000, December 31, 1999 and September 30, 1998, the Company's yields
      on average invested assets were 7.15%, 6.95% and 8.42%, respectively; its
      average rates paid on all interest-bearing liabilities were 4.96%, 4.98%
      and 5.45%, respectively; it realized net investment spreads of 2.35%,
      2.08% and 3.25%, respectively; on average invested assets. Net realized
      investment losses were 0.28% and 0.27% of average invested assets in 2000
      and 1999 respectively.  Net realized investment gains were 0.77% of
      average invested assets in 1998.
      The Company's
      general investment philosophy is to hold fixed-rate assets for long-term
      investment.  Thus, it does not have a trading portfolio. 
      However, the Company has determined that all of its portfolio of bonds,
      notes and redeemable preferred stocks (the "Bond Portfolio") is available
      to be sold in response to changes in market interest rates, changes in
      relative value of asset sectors and individual securities, changes in
      prepayment risk, changes in credit quality outlook for certain securities,
      and the Company's need for liquidity and other similar factors.
      The following
      table summarizes the Company's investment portfolio at December 31,
      2000:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



**SUMMARY OF
      INVESTMENTS****Carryingvalue**
    ****
    **Percent
      ofportfolio**(In
      thousands)Cash and short-term
      investments
    
    $
    169,701
    
    
    3.2
    %U.S. government
    securities
    
    
    18,868
    
    
    0.4Mortgage-backed
    securities
    
    
    1,636,304
    
    
    31.0Other bonds, notes and redeemable
      preferredstocks
    
    
    2,352,730
    
    
    44.7Mortgage loans
    
    
    684,174
    
    
    13.0Policy loans
    
    
    244,436
    
    
    4.6Separate account seed
    money
    
    
    104,678
    
    
    2.0Common stocks
    
    
    974
    
    
    0.0Partnerships
    
    
    8,216
    
    
    0.2Real estate
    
    
    24,139
    
    
    0.5Other invested assets
    
    
    18,514
    
    
    0.4Total investments
    
    $
    5,262,734
    
    
    100.0
    %




6




|At December
      31, 2000, the Bond Portfolio (excluding $1.4 million of redeemable
      preferred stocks) included $3.94 billion of bonds rated by S&P,
      Moody's, Fitch or the National Association of Insurance Commissioners
      ("NAIC"), and $65.7 million of bonds rated by the Company pursuant to
      statutory ratings guidelines established by the NAIC.  At December
      31, 2000, approximately $3.74 billion of the Bond Portfolio was investment
      grade, including $1.66 billion of the U.S. government/agency securities
      and mortgage-backed securities.
      At December
      31, 2000, the Bond Portfolio included $267.9 million of bonds that were
      not investment grade.  These non-investment-grade bonds accounted for
      approximately 1.0% of the Company's total assets and approximately 5.1% of
      its invested assets.
      
      Senior
      secured loans ("Secured Loans") are included in the Bond Portfolio and
      aggregated $255.8 million at December 31, 2000.  Secured Loans are
      senior to subordinated debt and equity, and are secured by assets of the
      issuer.  At December 31, 2000, Secured Loans consisted of loans to 48
      borrowers spanning 14 industries, with 19% of these assets concentrated in
      utilities, 9% concentrated in financial institutions and 9% concentrated
      in technology.  No other industry constituted more than 8% of these
      assets.
      
      Mortgage
      loans aggregated $684.2 million at December 31, 2000 and consisted of 130
      commercial first mortgage loans with an average loan balance of
      approximately $5.3 million, collateralized by properties located in 30
      states.  Approximately 31% of this portfolio was office, 18% was
      multifamily residential, 17% was manufactured housing, 10% was hotels, 9%
      was industrial, 5% was retail and 10% was other types.  At December
      31, 2000, approximately 33% and 10% of this portfolio were secured by
      properties located in California and New York, respectively, and no more
      than 8% of this portfolio was secured by properties located in any other
      single state.
      
      At December
      31, 2000, the carrying value (after impairment writedowns) of all
      investments in default as to the payment of principal or interest totaled
      $11.2 million, which constituted less than 1% of total invested
      assets.
      
      For more
      information concerning the Company's investments, including the risks
      inherent in such investments, see Item 7, "Management's Discussion and
      Analysis of Financial Condition and Results of Operations - Financial
      Condition and Liquidity."
      
      ASSET MANAGEMENT
      OPERATIONS
      
      Through its
      registered investment advisor subsidiary, SunAmerica Asset Management, and
      its related distributor, SACS, the Company earns fee income by
      distributing and managing a diversified family of mutual funds and by
      providing professional management of individual, corporate and pension
      plan portfolios.  The Company offers investors an array of equity,
      fixed-income, money market and tax-exempt mutual funds.  Founded in
      1983 and acquired by the Company in January 1990, SunAmerica Asset
      Management managed approximately $8.98 billion of assets at December 31,
      2000, including mutual fund assets, private accounts and  certain of
      the variable annuity assets of the Company and its affiliates.  SACS
      acts as a distributor for the Company's  proprietary 
      mutual   funds and variable  annuities  and does not
      sell to the public.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7




|Sales growth
      in recent years is primarily due to sales of the Company's "Style Select
      Series" product, which was introduced in November 1996.  The "Style
      Select Series" is a group of mutual funds that are each managed by three
      industry-recognized fund managers.  Several "Focus Portfolios in the
      "Style Select Series" were added in 1999 and 2000 bringing the total
      number of "style select series" portfolios to eleven.  The Focus
      Portfolios utilize three leading independent money managers, each of whom
      manages one-third of the portfolio by choosing ten favorite stocks. 
      In 2000, the Company introduced the Focused TechNet Portfolio.  This
      portfolio, along with the three existing Focus Portfolios,  climbed
      to over $2.30 billion in assets.
      
      The
      SunAmerica mutual funds are distributed nationally through a network of
      approximately 400 financial institutions and unaffiliated broker-dealers,
      as well as by the Company's broker-dealer subsidiary and affiliated
      broker-dealers.
      
      BROKER-DEALER
      OPERATIONS
      
      Broker-dealer
      operations are conducted by the Company's broker-dealer subsidiary, Royal,
      which sells proprietary annuities and mutual funds, as well as a full
      range of non-proprietry investment products. Net retained commissions are
      derived from the commissions on the sales of these products after
      deducting the substantial portion of such commissions that is passed on to
      registered representatives.  Royal currently has a network of
      approximately 2,900 representatives. Royal, along with the Company's five
      affiliated broker-dealers, comprise the largest network of independent
      registered representatives in the nation and the fifth-largest securities
      sales force, based on industry data.  Its wholly-owned or affiliated
      broker-dealers accounted for approximately one-third of the Company's
      total annuity sales in 2000.
      
      **REGULATION**
      
      The Company,
      in common with other insurers, is subject to regulation and supervision by
      the states and other jurisdictions in which it does business.  Within
      the United States, the method of such regulation varies but generally has
      its source in statutes that delegate regulatory and supervisory powers to
      an insurance official.  The regulation and supervision relate
      primarily to approval of policy forms and rates, the standards of solvency
      that must be met and maintained, including risk based capital
      measurements, the licensing of insurers and their agents, the nature of
      and limitations on investments, restrictions on the size of risks which
      may be insured under a single policy, deposits on securities for the
      benefit of policyholders, methods of accounting, periodic examinations of
      the affairs of insurance companies, the form and content of reports of
      financial condition required to be filed, and reserves for unearned
      premiums, losses and other purposes.  In general, such regulation is
      for the protection of policyholders rather than security
      holders.
      
      Risk-based
      capital ("RBC") standards are designed to measure the adequacy of an
      insurer's statutory capital and surplus in relation to the risks inherent
      in its business.  The RBC  standards consist of formulas
      that
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



8






|establish capital requirements relating to
      asset, insurance, interest rate risks and business.  The standards
      are intended to help identify companies which  are 
      under-capitalized and require specific regulatory actions in the event an
      insurer's RBC is deficient.   The  RBC  formula 
      develops  a  risk-adjusted target level of adjusted statutory
      capital and surplus by applying certain factors to various asset, premium
      and reserve items. Higher factors are applied to more risky items and
      lower factors are applied to less risky items.  Thus, the target
      level of statutory surplus varies not only as a result of the insurer's
      size, but also on the risk profile of the insurer's operations.  The
      statutory capital and surplus of the Company exceeded its RBC requirements
      by a considerable margin as of December 31, 2000.
      In 1998, the
      NAIC adopted the codification of statutory accounting principles
      ("Codification") which replaced the current Accounting Practices and
      Procedures Manual as the NAIC's primary guidance on statutory accounting,
      effective January 1, 2001.  Codification changes prescribed statutory
      accounting practices and will result in changes to the accounting
      practices that the Company uses to prepare its statutory basis financial
      statements.  Codification has been adopted by all fifty states as the
      prescribed basis of accounting, including Arizona.  The impact of any
      Codification on the Company's statutory surplus has not yet been
      determined.
      Federal
      legislation has been enacted allowing combinations between insurance
      companies, banks and other entities.  It is not yet known what effect
      this legislation will have on insurance companies.  In addition, from
      time to time, Federal initiatives are proposed that could affect the 
      Company's businesses.  Such initiatives include employee benefit plan
      regulations and tax law changes affecting the taxation of insurance
      companies and the tax treatment of insurance and other investment
      products. Proposals made in recent years to limit the tax deferral of
      annuities or otherwise modify the tax rules related to the treatment of
      annuities have not been enacted.  While certain of such proposals, if
      implemented, could have an adverse effect on the Company's sales of
      affected products, and, consequently, on its results of operations, the
      Company believes these proposals have a small likelihood of being enacted,
      because they would discourage retirement savings and there is strong
      public and industry opposition to them.
      SunAmerica
      Asset Management, a subsidiary of the Company, is registered with the
      Securities and Exchange Commission ("SEC") as an investment adviser under
      the Investment Advisers Act of 1940.  The mutual funds that it
      markets are subject to regulations under the Investment Company Act of
      1940.  SunAmerica Asset Management and the mutual funds are also
      subject to regulation and examination by the SEC.  In addition,
      variable annuities and the related separate accounts of the Company are
      subject to regulation by the SEC under the Securities Act of 1933 and the
      Investment Company Act of 1940.
      The Company's
      broker-dealer subsidiaries are subject to regulation and supervision by
      the states in which they transact business, as well as by the SEC and the
      National Association of Securities Dealers ("NASD").  The SEC and the
      NASD have broad administrative and supervisory powers relative to all
      aspects of business and may examine each subsidiary's business and
      accounts at any time.  The SEC also has broad jurisdiction to oversee
      various activities of the Company and its other
  subsidiaries.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9




|**COMPETITION**
      The 
      businesses  conducted  by  the  Company  are
      highly  competitive. The Company competes with other life insurers,
      and also compete for customers' funds with a variety  of investment
      products offered by  financial  services companies other than
      life insurance companies, such as banks, investment advisors, mutual fund
      companies and other financial institutions. In 1999, net annuity premiums
      written among the top 100 companies ranged from approximately $65 million
      to approximately $18 billion annually.  The Company together with its
      affiliates ranks in the top quartile of this group.  The Company
      believes the primary competitive factors among life insurance companies
      for investment-oriented insurance products, such as annuities and GICs,
      include product flexibility, net return after fees, innovation in product
      design, the claims-paying ability rating and the name recognition of the
      issuing company, the availability of distribution channels and service
      rendered to the customer before and after a contract is issued. 
      Other factors affecting the annuity business include the benefits
      (including before-tax and after-tax investment returns) and guarantees
      provided to the customer and the commissions paid.
      Competitors
      of SunAmerica Asset Management include a large number of mutual fund
      organizations, both independent and affiliated with other financial
      service companies, including banks and insurance companies.
      The Company's
      broker-dealer faces competition from regional firms and large, national
      full service and discount brokerage firms.
      **ITEM 2. 
      PROPERTIES**
      The Company's
      executive offices and its principal office are in leased premises at 1
      SunAmerica Center, Los Angeles, California 90067.  The Company,
      through an affiliate, also leases office space in Woodland Hills,
      California.  The Company's asset management and broker-dealer
      subsidiaries lease offices in New York, New York.
      The Company
      believes that such properties, including the equipment located therein,
      are suitable and adequate to meet the requirements of its
      businesses.
      **ITEM 3.  LEGAL
      PROCEEDINGS**
      The Company
      is involved in various kinds of litigation common to its businesses. 
      These cases are in various stages of development and, based on reports of
      counsel, management believes that provisions made for potential losses
      relating to such litigation are adequate and any further liabilities and
      costs will not have a material adverse impact upon the Company's financial
      position, results of operations or cash flows.
      **ITEM 4.  SUBMISSION OF MATTERS
      TO A VOTE OF SECURITY-HOLDERS**
      No matters
      were submitted during the quarter ending December 31, 2000 to a vote of
      security-holders, through the solicitation of proxies or
      otherwise.
      **PART II**
      **ITEM 5.  MARKET FOR THE
      REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
      MATTERS**
      Not
      applicable.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



10






|**ITEM 6.  SELECTED CONSOLIDATED
      FINANCIAL DATA**
      
      The
      following selected consolidated financial data of the Company and its
      subsidiaries should be read in conjunction with the consolidated financial
      statements and notes thereto and Management's Discussion and Analysis of
      Financial Condition and Results of Operations, both of which are included
      elsewhere herein.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                           | **Years Ended
      December 31,** | **Three Months
      Ended** | **Years Ended
      September 30,**
|-------------------------- | ---------------------------------- | ---------------------------- | -----------------------------------
|                           | **2000**                           |                              | **1999**                           
|                           |                                    |                              |                                    
|                           |                                    |                             
|                           |                                    | (In
    thousands)          
|                           |                                    |                             
|RESULTS OF OPERATIONS      |                                    |                              |                                    
|Net investment income      | $                                  | 134,502                      |                                    
|Net realized investment    |                                    |                              |                                    
|gains (losses)             |                                    | (15,177                      | )                                  
|Fee income                 |                                    | 590,799                      |                                    
|General and
administrative |                                    |                              |                                    
|                           | expenses                           |                              | (171,627                           
|Amortization of deferred   |                                    |                              |                                    
|                           | acquisition costs                  |                              | (158,007                           
|Annual commissions         |                                    | (56,473                      | )                                  
|                           |                                    |                              |                                    
|Pretax income              |                                    | 324,017                      |                                    
|Income tax expense         |                                    | (108,445                     | )                                  
|                           |                                    |                              |                                    
|NET INCOME                 | $                                  | 215,572                      |                                    
|                           |                                    |                              |                                    





|The results of operations of the Company for
      1999 are affected by the acquisition of business from MBL Life on December
      31, 1998 (See Note 4 of the accompanying consolidated financial
      statements).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11








|**ITEM 6.  SELECTED CONSOLIDATED
      FINANCIAL DATA (Continued)**
|-------------------------------------------------------------------





|                                  | **At December
31,**          | **At September
      30,**
|--------------------------------- | ---------------------------- | --------------------------
|                                  |                              | **2000**                  
|                                  |                              |                           
|                                  |                              |                           
|                                  |                              | (In
    thousands)        
|                                  |                              |                           
|FINANCIAL POSITION                |                              |                           
|Investments                       | $                            | 5,262,734                 
|Variable annuity assets
    held  |                              |                           
|                                  | in separate accounts         |                           
|Deferred acquisition
costs        |                              | 1,286,456                 
|Deferred income taxes             |                              | ---                       
|Other assets                      |                              | 246,468                   
|                                  |                              |                           
|TOTAL ASSETS                      | $                            | 27,189,478                
|                                  |                              |                           
|Reserves for fixed
annuity        |                              |                           
|                                  | contracts                    | $                         
|Reserves for universal
    life   |                              |                           
|                                  | insurance contracts          |                           
|Reserves for guaranteed           |                              |                           
|                                  | investment contracts         |                           
|Variable annuity
    liabilities  |                              |                           
|                                  | related to separate accounts |                           
|Other payables and
accrued        |                              |                           
|                                  | liabilities                  |                           
|Subordinated notes payable
    to |                              |                           
|                                  | affiliates                   |                           
|Deferred income taxes             |                              | 85,978                    
|Shareholder's equity              |                              | 1,128,669                 
|                                  |                              |                           
|TOTAL LIABILITIES AND             |                              |                           
|                                  | SHAREHOLDER'S EQUITY         | $                         
|                                  |                              |                           



|The financial position of the Company as of
      December 31, 1998 and thereafter is affected by the acquisition of
      business from MBL Life (See Note 4 of the accompanying consolidated
      financial statements).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12








|**ITEM 7.  MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**
      Management's
      discussion and analysis of financial condition and results of operations
      of Anchor National Life Insurance Company (the "Company") for the three
      years ended December 31, 2000 and 1999 and September 30, 1998
      follows.  Effective December 31, 1998, the Company changed its fiscal
      year end from September 30 to December 31.  Accordingly, the
      three-month period ended December 31, 1998 was a transition period. 
      Certain prior period amounts have been restated to conform to the current
      period's presentation.
      In connection
      with the "safe harbor" provisions of the Private Securities Litigation
      Reform Act of 1995, the Company cautions readers regarding certain
      forward-looking statements contained in this report and in any other
      statements made by, or on behalf of, the Company, whether or not in future
      filings with the Securities and Exchange Commission (the "SEC").
      Forward-looking statements are statements not based on historical
      information and which relate to future operations, strategies, financial
      results, or other developments.  Statements using verbs such as
      "expect," "anticipate," "believe" or words of similar import generally
      involve forward-looking statements.  Without limiting the foregoing,
      forward-looking statements include statements which represent the
      Company's beliefs concerning future levels of sales and redemptions of the
      Company's products, investment spreads and yields, or the earnings and
      profitability of the Company's activities.
      Forward-looking statements are necessarily based on estimates and
      assumptions that are inherently subject to significant business, economic
      and competitive uncertainties and contingencies, many of which are beyond
      the Company's control and many of which are subject to change.  These
      uncertainties and contingencies could cause actual results to differ
      materially from those expressed in any forward-looking statements made by,
      or on behalf of, the Company.  Whether or not actual results differ
      materially from forward-looking statements may depend on numerous
      foreseeable and unforeseeable developments.  Some may be national in
      scope, such as general economic conditions, changes in tax law and changes
      in interest rates.  Some may be related to the insurance industry
      generally, such as pricing competition, regulatory developments and
      industry consolidation.  Others may relate to the Company
      specifically, such as credit, volatility and other risks associates with
      the Company's investment portfolio.  Investors are also directed to
      consider other risks and uncertainties discussed in documents filed by the
      Company with the SEC.  The Company disclaims any obligation to update
      forward-looking information.
      **RESULTS OF OPERATIONS**
      The Company
      has three business segments, as descrubed in Note 13 of Notes to
      Consolidated Financial Statements: annuity operations, asset management
      operations and broker-dealer operations.  Annuity operations consist
      of the sale and administration of deposit-type insurance contracts, such
      as fixed and variable annuities, universal life insurance contracts and
      guaranteed investment contracts. The operations focus primarily on the
      marketing of variable annuity products and the administration of the
      universal  life  business  acquired  from 
      MBL  Life  Assurance  Corporation ("MBL Life") in 1998 (See
      Note 4 of Notes to Consolidated Financial Statements).
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13








|The  variable  annuity 
      products  offer  investors  a broad spectrum of fund
      alternatives,  with a choice of investment managers,  as 
      well as guaranteed fixed-rate account options.  The Company earns fee
      income on investments in the variable account options and net investment
      income on the fixed-rate account options.
      The asset
      management operations are conducted by the Company's registered investment
      advisor subsidiary, SunAmerica Asset Management Corp. ("SunAmerica Asset
      Management"), and its related distributor. These companies earn fee income
      by distributing and managing a diversified family of mutual funds,
      managing certain subaccounts within the Company's variable annuity
      products and providing professional management of individual, corporate
      and pension plan portfolios.
      The
      broker-dealer operations are conducted by the Company's broker-dealer
      subsidiary, Royal Alliance Associates, Inc. ("Royal"), which sells
      proprietary annuities and mutual funds, as well as a full range of
      non-proprietary investment products through approximately 2,900
      independent registered representatives.  Royal is a registered
      broker-dealer under the Securities Exchange Act of 1934 and a member of
      the National Association of Securities Dealers.
      NET INCOME
      totaled $215.6 million in 2000, compared with $184.7 million in 1999 and
      $138.6 million in 1998.  On December 31, 1998, the Company acquired
      the individual life business and the individual and group annuity business
      of MBL Life Assurance Corporation (the "Acquisition").  Since the
      Acquisition was accounted for under the purchase method of accounting,
      results of operations include those of the Acquisition only from its date
      of acquisition.  Consequently, the operating results for 2000 and
      1999 are not comparable with those of 1998.  On a pro forma basis,
      using the historical financial information of the acquired business and
      assuming that the Acquisition had been consummated on October 1, 1997, the
      beginning of the prior-year period discussed herein, net income would have
      been $162.6 million for the year ended September 30, 1998.
      PRETAX INCOME
      totaled $324.0 million in 2000, $287.7 million in 1999 and $209.7 million
      in 1998.  The 12.6% improvement in 2000 over 1999 primarily resulted
      from increased fee income from the Company's variable annuity and asset
      management operations, partially offset by increased operating expenses
      and amortization of related deferred acquisition costs. The 37.2%
      improvement in 1999 over 1998 primarily resulted from increased fee income
      from variable annuities and mutual funds and higher net investment income
      resulting from the Acquisition.  These were partially offset by
      increased general and administrative expenses, increased amortization of
      deferred acquisition costs and net realized investment losses.
      INCOME TAX
      EXPENSE totaled $108.4 million in 2000, $103.0 million in 1999 and $71.1
      million in 1998, representing effective tax rates of 33% in 2000, 36% in
      1999 and 34% in 1998.
      ANNUITY
      OPERATIONS
      PRETAX INCOME
      totaled $266.2 million in 2000, $252.0 million in 1999 and
       $183.2  million  in  1998.  The 
      increase  in  2000 over 1999 primarily resulted from increased
      variable annuity fee income, partially offset by increased amortization of
      deferred acquisition costs, lower net investment income, increased 
      general  & administative  expenses  and  increased
      annual commissions.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14








|The  37.6%  improvement  in
      1999 over 1998 primarily resulted from increased fee income and higher net
      investment income, partially offset by net realized investment losses
      sustained in 1999, increased general and administrative expenses and
      increased amortization of deferred acquisition costs.  As a result of
      the Acquisition, the results of operations for 2000 and 1999 are not
      comparable to those of 1998.  On a pro forma basis, using the
      historical financial information of the acquired business and
      assuming  that the Acquisition had been consummated on October 1,
      1997, the beginning of the prior year periods discussed herein, pretax
      income would have been $220.0 million for the year ended September 30,
      1998.
      NET
      INVESTMENT INCOME, which is the spread between the income earned on
      invested assets and the interest paid on fixed annuities and other
      interest-bearing liabilities, totaled $127.7 million in 2000, $151.7
      million in 1999 and $82.9 million in 1998.  These amounts equal 2.35%
      on average invested assets (computed on a daily basis) of $5.43 billion in
      2000, 2.08% on average invested assets of $7.28 billion in 1999, and 3.25%
      on average invested assets of $2.55 billion in 1998.  On a pro forma
      basis, assuming the Acquisition had been consummated on October 1, 1997,
      net investment income on related average invested assets would have been
      1.28% on average invested assets of $7.80 billion in 1998.  The
      improvement in the 1999 net investment yield over the 1998 pro forma
      amount reflects a redeployment of assets received in the Acquisition into
      higher yielding investment categories.
      Net
      investment spreads include the effect of income earned or interest paid on
      the difference between average invested assets and average
      interest-bearing liabilities.  Average invested assets exceeded
      average interest-bearing liabilities by $169.9 million in 2000, $159.2
      million in 1999 and 128.8 million in 1998.  The difference between
      the Company's yield on average invested assets and the rate paid on
      average interest-bearing liabilities (the "Spread Difference") was 2.19%
      in 2000, 1.97% in 1999 and 2.97% in 1998.  On a pro forma basis,
      assuming the Acquisition had been consummated on October 1, 1997, the
      Spread Difference would have been 1.15% for 1998, reflecting primarily the
      effect of the lower yielding assets received in the
Acquisition.
      Investment
      income (and the related yields on average invested assets) totaled $388.4
      million (7.15%) in 2000, compared with $506.0 million (6.95%) in 1999 and
      $214.9 million (8.42%) in 1998.  The decrease in investment income in
      2000 compared to 1999 resulted primarily from the surrender or rollover
      into a variable product of most of the fixed annuities received in the
      Acquisition.  The increase in the investment yield in 2000 compared
      to 1999 is due primarily to a generally increasing interest rate
      environment. Both the significant increase in investment income and the
      decrease in the related yield in 1999 as compared to 1998 principally
      resulted from the Acquisition.  The invested assets acquired in the
      Acquisition included high-grade corporate, government and
      government/agency bonds and cash and short-term investments, which are
      lower yielding than a significant portion of the invested assets that
      comprised the remainder of the Company's portfolio.  On a pro forma
      basis, assuming the Acquisition had been consummated on October 1, 1997,
      the yield on related average invested assets would have been 6.54% in
      1998.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15








|Expenses  incurred  to manage the  investment 
      portfolio  amounted  to  $7.1 million in 2000, $6.0 million
      in 1999 and $3.2 million in 1998.  These expenses are included as a
      reduction to investment income in the income statement.  Investment
      expenses were significantly higher in 2000 and 1999 due to the increase in
      the size of the portfolio as a result of the Acquisition.
      Total
      interest expense equaled $260.7 million in 2000, $354.3 million in 
      1999 and $132.0 million in 1998. The average rate paid on all
      interest-bearing liabilities was 4.96% in 2000, compared with 4.98% in
      1999 and 5.45% in 1998. Interest-bearing liabilities averaged $5.26
      billion during 2000, compared with $7.12 billion during 1999 and $2.42
      billion during 1998.  On a pro forma basis, assuming the Acquisition
      had been consummated on October 1, 1997, the average rate paid on all
      interest-bearing liabilities would have been 5.39% and interest-bearing
      liabilities would have averaged $7.62 billion in 1998.  The decreases
      in the overall rates paid in 1999 result primarily from a generally lower
      interest rate environment in 1999.
      DECLINE IN
      AVERAGE INVESTED ASSETS largely results from the surrenders and rollovers
      to variable products of the fixed annuity liabilities related to the
      Acquisition.  Changes in average invested assets also reflect sales
      of fixed annuities and the fixed account options of the Company's variable
      annuity products ("Fixed Annuity Premiums"), and renewal premiums on its
      universal life product ("UL Premiums") acquired in the Acquisition,
      partially offset by net exchanges from fixed accounts into the separate
      accounts of variable annuity contracts.  Fixed Annuity Premiums and
      UL Premiums totaled $1.82 billion in 2000, $2.10 billion in 1999 and $1.51
      billion in 1998, and are largely premiums for the fixed accounts of
      variable annuities.  These premiums represent 35%, 27% and 72%,
      respectively, of the related reserve balances at the beginning of the
      respective periods. The  lower levels of 2000 and 1999 premiums when
      expressed as a percentage of related reserve balances results from the
      impact of the Acquisition.  When premium and reserve balances
      resulting from the Acquisition are excluded, the resulting premiums
      represent 66% and 94% of the beginning fixed annuity reserve balances in
      2000 and 1999.
      Guaranteed
      investment contract ("GIC") premiums totaled $350.0 million in 2000 and
      $5.6 million in 1998.  There were no GIC premiums in 1999.  GIC
      surrenders and maturities totaled $78.3 million in 2000, $19.7 million in
      1999 and $36.3 million in 1998.  The GICs issued by the Company are
      generally variable rate contracts which guarantee the payment of principal
      and interest for a term of three to five years.  GICS that are
      purchased by banks for their long-term portfolios or by state and local
      governmental entities either prohibit withdrawals or permit scheduled book
      value withdrawals subject to the terms of the underlying indenture or
      agreement.  GICs purchased by asset management firms for their
      short-term portfolios either prohibit withdrawals or permit withdrawals
      with notice ranging from 90 to 270 days.  In pricing GICs, the
      Company analyzes cash flow information and prices accordingly so that it
      is compensated for possible withdrawals prior to maturity.
      NET REALIZED
      INVESTMENT LOSSES totaled $15.2 million in 2000 and $19.6 million in 1999,
      compared with net realized investment gains of $19.6 million in 1998 and
      include impairment writedowns of $20.6 million in 2000, $6.1 million in
      1999 and $13.1 million in 1998. Thus, net realized gains (losses) from
      sales and redemptions of investments included $5.4 million of gains in
      2000,  $13.5  million  of losses in 1999 and $32.7 million
      of gains in 1998.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16








|The
      Company  sold or redeemed  invested assets,  principally
      bonds and notes, aggregating $1.14 billion in 2000, $4.43 billion in 1999
      and $2.23 billion in 1998.  Sales of investments result from the
      active management of the Company's investment portfolio, including assets
      received as part of the Acquisition.  Because redemptions of
      investments are generally involuntary and sales of investments are made in
      both rising and falling interest rate environments, net gains and losses
      from sales and redemptions of investments fluctuate from period to period,
      and represent 0.10%, 0.19%, and 1.28% of average invested assets for 2000,
      1999 and 1998, respectively.  Active portfolio management involves
      the ongoing evaluation of asset sectors, individual securities within the
      investment portfolio and the reallocation of investments from sectors that
      are perceived to be relatively overvalued to sectors that are perceived to
      be relatively undervalued.  The intent of the Company's active
      portfolio management is to maximize total returns on the investment
      portfolio, taking into account credit, option, liquidity and interest-rate
      risk.
      Impairment
      writedowns include $20.6 million and $6.1 million of provisions applied to
      bonds in 2000 and 1999, respectively, and $9.4 million of provisions
      applied to partnerships and $3.7 million applied to bonds in 1998. 
      Impairment writedowns represent 0.38%, 0.08% and 0.51% of average invested
      assets for 2000, 1999 and 1998, respectively.  For the five years
      ended December 31, 2000, impairment writedowns as a percentage of average
      invested assets have ranged from 0.10% to 0.80% and have averaged
      0.42%.  Such writedowns are based upon estimates of the net
      realizable value of the applicable assets.  Actual realization will
      be dependent upon future events.
      VARIABLE
      ANNUITY FEES are based on the market value of assets in separate accounts
      supporting variable annuity contracts.  Such fees totaled $385.4
      million in 2000, $296.1 million in 1999 and $195.9 million in 1998. The
      increased fees reflect growth in average variable annuity assets,
      principally due to the receipt of variable annuity premiums and net
      exchanges into the separate accounts from the fixed accounts of variable
      annuity contracts, partially offset by surrenders and decreases in market
      values.  Variable annuity fees represent 1.8% of average variable
      annuity assets in all periods presented.  Variable annuity assets
      averaged $21.07 billion in 2000, $16.15 billion during 1999 and $10.70
      billion during 1998.  Variable annuity premiums, which exclude
      premiums allocated to the fixed accounts of variable annuity products,
      totaled $1.88 billion in 2000, $1.70 billion in 1999 and $1.82 billion in
      1998.  These amounts represent 9%, 12% and 19% of variable annuity
      reserves at the beginning of the respective periods.  Transfers from
      the fixed accounts of the Company's variable annuity products to the
      separate accounts (see "Decline in Average Invested Assets") are not
      classified as variable annuity premiums.  Accordingly, changes in
      variable annuity premiums are not necessarily indicative of the ultimate
      allocation by customers among fixed and variable account options of the
      Company's variable annuity products.
      Sales of
      variable annuity products (which include premiums allocated to the fixed
      accounts) ("Variable Annuity Product Sales") amounted to $3.64 billion,
      $3.66 billion and $3.33 billion in 2000, 1999 and 1998,
      respectively.  Variable Annuity Product Sales primarily reflect sales
      of the Company's flagship variable annuity line, Polaris. Polaris is a
      multi-manager variable annuity that offers investors a choice of more than
      30 variable funds and a number of guaranteed fixed-rate
    funds.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17








|The 
      Company  has  encountered  increased  competition in
      the variable annuity marketplace during recent years and anticipates that
      the market will remain highly competitive for the foreseeable
      future.  Also, from time to time, Federal initiatives are proposed
      that could affect the taxation of variable annuities and annuities
      generally (See "Regulation" in Item 1).
      UNIVERSAL
      LIFE INSURANCE FEES, NET result from the universal life insurance contract
      reserves acquired in the Acquisition and the ongoing receipt of renewal
      premiums on such contracts, and consist of mortality changes, up-front
      fees earned on premiums received and administrative fees, net of the
      excess mortality expense on these contracts.  The Company does not
      actively market universal life insurance contracts.  Universal life
      insurance fees amounted to $20.3 million and $28.9 million in 2000 and
      1999, respectively.  Such fees represent 1.08% and 1.34% of average
      reserves for universal life insurance contracts in the respective
      periods.  The decrease in fees in 2000 as compared to 1999 result
      principally from the ceding to an affiliate on July 1, 1999 of
      approximately 12.2% of the universal life reserves received in the
      Acquisition.  Since the Acquisition occurred on December 31, 1998,
      there were no such fees earned in 1998.
      SURRENDER
      CHARGES on fixed and variable annuity contracts and universal life
      contracts totaled $21.0 million in 2000, $17.1 million in 1999 (including
      $1.6 million attributable to the Acquisition) and $7.4 million in
      1998.  Surrender charges generally are assessed on withdrawals at
      declining rates during the first seven years of a contract. 
      Withdrawal payments, which exclude claims and lump-sum annuity benefits,
      totaled $2.22 billion in 2000, $3.12 billion in 1999 (including $1.58
      billion attributable to the Acquisition) and $1.14 billion in 1998. 
      These payments when expressed as a percentage of average fixed and
      variable annuity and universal life reserves represent 8.7%, 16.2% (7.9%
      attributable to the Acquisition) and 9.0% for 2000, 1999 and 1998,
      respectively.  The very high surrender rate in 1999 was due to the
      Acquisition, which occurred on July 1, 1999 and provided these
      policyholders the ability to surrender their policies without a moratorium
      fee for the first time since 1991.  Withdrawal rates in this block of
      business continued to be relatively high for the remainder of 1999. 
      Withdrawals include variable annuity payments from the separate accounts
      totaling $1.76 billion (8.4% of average variable annuity reserves), $1.34
      billion (8.3% of average variable annuity reserves) and $952.1 million
      (8.9% of average variable annuity reserves) in 2000, 1999 and 1998,
      respectively.  Management anticipates that withdrawal rates will
      gradually rise for the foreseeable future.
      GENERAL AND
      ADMINISTRATIVE EXPENSES totaled $95.3 million in 2000,  $93.4 million
      in 1999 and $49.7 million in 1998.  The increases in 2000 over 1999
      and 1998 principally reflect the expenses related to managing the
      Company's growing block of variable annuity policies.  General and
      administrative expenses remain closely controlled through a company-wide
      cost containment program and continue to represent less than 1% of average
      total assets.
      AMORTIZATION
      OF DEFERRED ACQUISITION COSTS totaled $125.0 million in 2000 (including
      $11.9 million attributable to the Acquisition), compared with $94.9
      million (including $8.9 million attributable to the Acquisition) in 1999
      and $58.8 million in 1998.  The increases in amortization were
      primarily due to additional fixed and variable annuity sales and the
      subsequent amortization of related deferred commissions and other direct
      selling costs.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18








|ANNUAL
      COMMISSIONS represent renewal commissions paid quarterly in arrears to
      maintain the persistency of certain of the Company's variable annuity
      contracts.  Substantially all of the Company's currently available
      variable annuity products allow for an annual commission payment option in
      return for a lower immediate commission.  Annual commissions totaled
      $56.5 million in 2000, $40.8 million in 1999 and $18.2 million in 1998.
      The increases in annual commissions since 1998 reflect increased sales of
      annuities that offer this commission option and gradual expiration of the
      initial fifteen-month periods before such payments begin.  The
      Company estimates that approximately 58% of the average balances of its
      variable annuity products is currently subject to such annual
      commissions.  Based on current sales, this percentage is expected to
      increase in future periods.
      **ASSET
      MANAGEMENT OPERATIONS**
      PRETAX INCOME
      totaled $28.3 million in 2000, $15.1 million in 1999 and $4.1 million in
      1998.  The 87.9% improvement in 2000 over 1999 primarily resulted
      from substantial increases in asset management and variable annuity 
      fee income, partially offset by corresponding increases in related and
      administrative expenses and amortization of deferred acquisition
      costs.  The significant improvement in 1999 over 1998 also resulted
      principally from increased asset management fee income, and higher net
      investment income, partially offset by increased amortization of deferred
      acquisition costs and increased general and administrative
      expenses.
      VARIABLE
      ANNUITY FEES totaled $15.1 million in 2000, $10.3 million in 1999 and $4.9
      million in 1998.  Premiums from variable annuities sold by the
      Company are held in trusts that are owned by the Company, with the assets
      directly supporting policyholder obligations.  SunAmerica Asset
      Management is the investment advisor for all of the trusts as well as
      trusts owned by an affiliate, First SunAmerica Life Insurance
      Company.  SunAmerica Asset Management also serves as the subadvisor
      for several of these trusts, for which it receives variable annuity fees
      which are direct expenses of the trusts.
      ASSET
      MANAGEMENT FEES,  which include investment advisory fees and 12b-1
      distribution fees,  are based on the market value of assets managed
      in mutual funds by SunAmerica Asset Management.  Such fees totaled
      $73.9 million on average assets managed of $6.62 billion in 2000, $43.5
      million on average assets managed of $4.19 billion in 1999 and $29.6
      million on average assets managed of $2.89 billion in 1998.  Asset
      management fees are not necessarily proportionate to average assets
      managed, principally due to changes in product mix.  Mutual fund
      sales, excluding sales of money market accounts, totaled $2.89 billion in
      2000, compared with $1.48 billion in 1999 and $853.6 million in
      1998.  The increase in sales in 2000 and 1999 principally resulted
      from increased sales of the Company's "Style Select Series" product. 
      The "Style Select Series" is a group of mutual funds that are each managed
      by three industry-recognized fund managers.  Additional "Focus
      Portfolios" in the Style Select Series were added in 1999 and
      2000.   The Focus Portfolios utilize three leading independent
      money managers, each of whom manages one-third of the portfolio by
      choosing ten favorite stocks.  Sales of the "Style Select Series"
      products totaled $2.05 billion in 2000, compared to $938.5 million in 1999
      and $550.6 million in 1998.  Redemptions of mutual funds, excluding
      redemptions of money market accounts, amounted to $819.9 million in 2000,
      $571.5 million in 1999 and $402.5 million in 1998, which represent 14.3%,
      16.8% and 17.5%, respectively, of average related mutual fund
      assets.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19








|GENERAL AND
      ADMINISTRATIVE EXPENSES totaled $44.3 million in 2000, compared  with
      $24.9 million in 1999 and $18.6 million in 1998.  The consecutive
      increases in expenses principally reflect the higher costs  related
      to servicing the Company's rapidly growing blocks of mutual funds, as well
      as certain costs of marketing such products.
      AMORTIZATION
      OF DEFERRED ACQUISITION COSTS totaled $33.0 million in 2000, compared with
      $21.9 million in 1999 and $13.9 million in 1998.  The increases in
      amortization were primarily due to additional mutual fund sales and the
      subsequent amortization of related deferred commissions and other direct
      selling costs.
      **BROKER DEALER OPERATIONS**
      PRETAX INCOME
      totaled $29.5 million in 2000, $20.6 million in 1999 and $22.4 million in
      1998.  The 43.2% improvement in 2000 over 1999 primarily resulted
      from increased net retained commissions, partially offset by increased
      general and administrative expenses.  The 8.0% decrease in 1999 as
      compared to 1998 resulted from increased general and administrative
      expenses and lower net investment income, offset by increased fee
      income.
      NET RETAINED
      COMMISSIONS are derived from commissions on the sales of proprietary and
      nonproprietary investment products, after deducting the substantial
      portion of such commissions that is passed on to registered
      representatives.  Approximately 90% of commission payments Royal
      receives is paid to its registered representatives.  Net retained
      commissions totaled $58.3 million in 2000, $49.0 million in 1999 and $46.9
      million in 1998.  Broker-dealer sales (mainly sales of general
      securities, mutual funds and annuities) totaled $13.25 billion in 2000,
      $13.40 billion in 1999 and $14.37 billion in 1998.  Fluctuations in
      net retained commissions may not be proportionate to fluctuations in sales
      primarily due to changes in sales mix.
      GENERAL AND
      ADMINISTRATIVE EXPENSES totaled $32.1 million in 2000, compared with $28.4
      million in 1999 and $24.6 million in 1998.  The  increases in
      2000 over 1999 and in 1999 over 1998 principally reflect  increases
      in marketing expenses and technology expenses.
      **FINANCIAL CONDITION AND LIQUIDITY**
      SHAREHOLDER'S
      EQUITY increased to $1.13 billion at December 31, 2000 from $935.1 million
      at December 31, 1999, due principally to $215.6 million of net income
      recorded in 2000 and a $47.0 million decrease in accumulated other
      comprehensive loss, offset by a $69.0 million dividend paid to the
      Parent.
      INVESTED  ASSETS at  December 31, 2000  totaled 
      $5.26  billion, compared with $5.55 billion at December 31,
      1999.  The Company manages most of its invested assets
      internally.  The Company's general investment philosophy is to hold
      fixed-rate assets for long-term investment.  Thus, it does not have a
      trading portfolio. However, the Company has determined that all of its
      portfolio of bonds, notes and redeemable preferred stocks (the "Bond
      Portfolio") is available to be sold in response to changes in market
      interest rates, changes in relative value of asset sectors and individual
      securities,  changes  in  prepayment  risk, 
      changes  in  the credit quality outlook for certain securities,
      the Company's need for liquidity and other similar
  factors.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20






THE BOND
      PORTFOLIO, which constituted 76% of the Company's total investment
      portfolio at December 31, 2000, had an amortized cost that was $122.7
      million greater than its aggregate fair value at December 31, 2000 and
      $202.6 million greater than its aggregate fair value at December 31,
      1999.  The decrease in net unrealized losses on the Bond Portfolio
      during 2000 principally reflects the decline in prevailing interest rates
      and the corresponding effect on the fair value of the Bond Portfolio at
      December 31, 2000.
      At December
      31, 2000, the Bond Portfolio (excluding $1.4 million of redeemable
      preferred stocks) included $3.94 billion of bonds rated by Standard &
      Poor's ("S&P"), Moody's Investors Service ("Moody's"), Fitch ("Fitch")
      or the National Association of Insurance Commissioners ("NAIC"), and $65.7
      million of bonds rated by the Company pursuant to statutory ratings
      guidelines established by the NAIC.  At December 31, 2000,
      approximately $3.74 billion of the Bond Portfolio was investment grade,
      including $1.66 billion of U.S. government/agency securities and
      mortgage-backed securities ("MBS").
      At December
      31, 2000, the Bond Portfolio included $267.9 million of bonds that were
      not investment grade.  These non-investment-grade bonds accounted for
      approximately 1.0% of the Company's total assets and approximately 5.1% of
      its invested assets.
      Non-investment-grade securities generally provide higher yields and
      involve greater risks than investment-grade securities because their
      issuers typically are more highly leveraged and more vulnerable to adverse
      economic conditions than investment-grade issuers. In addition, the
      trading market for these securities is usually more limited than for
      investment-grade securities.  The Company had no material
      concentrations of non-investment-grade securities at December 31,
      2000.
      The table on
      the next page summarizes the Company's rated bonds by rating
      classification as of December 31, 2000.
21

RATED BONDS BY RATING
      CLASSIFICATION(Dollars in thousands)**Issues Rated
      by S& P/Moody's/DCR/Fitch**
    ****
    **Issues not rated by
      S&P/Moody's DCR/Fitch, by NAIC Category**
    ****
    **Total******
    ****
    ****
    ****
    ******S&P/(Moody's) [DCR] {Fitch}category
      (1)**
    ****
    **Amortizedcost**
    ****
    **Estimatedfairvalue**
    ****
    **NAICcategory(2)**
    ****
    **Amortizedcost**
    ****
    **Estimatedfairvalue**
    ****
    **Amortizedcost**
    ****
    **Estimatedfairvalue**
    ****
    **Percent ofinvestedassets**AAA+ to
      A-(Aaa to A3)[AAA to A-]{AAA to A-}
    
    $2,947,732
    
    $2,920,444
    
    1
    
    $104,582
    
    $107,012
    
    $3,052,314
    
    $3,027,456
    
    57.53
    %BBB+ to
      BBB-(Baa1 to Baa3)[BBB+ to BBB-]{BBB+ to BBB-}
    
    610,893
    
    594,116
    
    2
    
    120,087
    
    117,064
    
    730,980
    
    711,180
    
    13.51
    %BB+ to
      BB-(Ba1 to Ba3)[BB+ to BB-]{BB+ to BB-}
    
    70,213
    
    59,893
    
    3
    
    11,839
    
    9,320
    
    82,052
    
    69,213
    
    1.32
    %B+ to
    B-(B1 to B3)[B+ to B-]{B+ to B-}
    
    209,959
    
    168,882
    
    4
    
    8,000
    
    7,524
    
    217,959
    
    176,406
    
    3.35
    %CCC+ to
      C(Caa to C)[CCC]{CCC+ to C-}
    
    39,850
    
    16,420
    
    5
    
    6,000
    
    5,807
    
    45,850
    
    22,227
    
    0.42
    %CI to
    D[DD]{D}
    
    40
    
    40
    
    6
    
    ---
    
    5
    
    40
    
    45
    
    0.00
    %TOTAL RATED
      ISSUES
    
    $3,878,687
    
    $3,759,795
    
    
    
    $250,508
    
    $246,732
    
    $4,129,195
    
    $4,006,527Footnotes appear on the following
      page.

22


**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. Issues are categorized based on the highest
      of the S&P, Moody's 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/Fitch rating groups listed above, with categories
      1 and 2 considered investment grade.  The NAIC categories include
      $65.7 million of assets that were rated by the Company pursuant to
      applicable NAIC rating guidelines.

23


Senior
      secured loans ("Secured Loans") are included in the Bond Portfolio and
      aggregated $255.8 million at December 31, 2000.  Secured Loans are
      senior to subordinated debt and equity and are secured by assets of the
      issuer.  At December 31, 2000, Secured Loans consisted of $74.9
      million of publicly traded securities and $180.9 million of privately
      traded securities.  These Secured Loans are composed of loans to 48
      borrowers spanning 14 industries, with 19% of these assets concentrated in
      utilities, 9% concentrated in financial institutions and 9% concentrated
      in technology.  No other industry constituted more than 8% of these
      assets.
      While the
      trading market for the Company's privately traded Secured Loans is more
      limited than for publicly traded issues, management believes that
      participation in these transactions has enabled the Company to improve its
      investment yield.  As a result of restrictive financial covenants,
      these Secured Loans involve greater risk of technical default than do
      publicly traded investment-grade securities.  However, management
      believes that the risk of loss upon default for these Secured Loans is
      mitigated by such financial covenants and the collateral values underlying
      the Secured Loans. The Company's Secured Loans are rated by S&P,
      Moody's, Fitch, the NAIC or by the Company, pursuant to comparable
      statutory ratings guidelines established by the NAIC.
      MORTGAGE
      LOANS aggregated $684.2 million at December 31, 2000 and consisted of 130
      commercial first mortgage loans with an average loan balance of
      approximately $5.3 million, collateralized by properties located in 30
      states.  Approximately 31% of this portfolio was office, 18% was
      multifamily residential, 17% was manufactured housing, 10% was hotels, 9%
      was industrial, 5% was retail, and 10% was other types.  At December
      31, 2000, approximately 33% and 10% of this portfolio were secured by
      properties located in California and New York, respectively, and no more
      than 8% of this portfolio was secured by properties located in any other
      single state. At December 31, 2000, there were 14 mortgage loans with
      outstanding balances of $10 million or more, which collectively aggregated
      approximately 41% of this portfolio.  At December 31, 2000,
      approximately 26% of the mortgage loan portfolio consisted of loans with
      balloon payments due before January 1, 2004.  During 2000, 1999 and
      1998, loans delinquent by more than 90 days, foreclosed loans and
      restructured loans have not been significant in relation to the total
      mortgage loan portfolio.
      At December
      31, 2000, approximately 10% of the mortgage loans were seasoned loans
      underwritten to the Company's standards and purchased at or near par from
      other financial institutions.  Such loans generally have higher
      average interest rates than loans that could be originated today. 
      The balance of the mortgage loan portfolio has been originated by the
      Company under strict underwriting standards.  Commercial mortgage
      loans on properties such as offices, hotels and shopping centers generally
      represent a higher level of risk than do mortgage loans secured by
      multifamily residences.  This greater risk is due to several factors,
      including the larger size of such loans and the more immediate effects of
      general economic conditions on these commercial property types. 
      However, due to the seasoned nature of the Company's mortgage loan
      portfolio and its strict underwriting standards, the Company believes that
      it has prudently managed the risk attributable to its mortgage loan
      portfolio while maintaining attractive
yields.

24








|SEPARATE
      ACCOUNT SEED MONEY totaled $104.7 million at December 31, 2000, compared
      to $144.2 million at December 31, 1999, and consists of seed money for
      mutual funds used as investment vehicles for the Company's variable
      annuity separate accounts and for SunAmerica Asset Management's mutual
      funds.
      OTHER
      INVESTED ASSETS aggregated $18.5 million at December 31, 2000, compared
      with $31.6 million at December 31, 1999, and consist of collateralized
      bond obligations and other investments.
      ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks
      of interest rate fluctuations and disintermediation.  The Company
      believes that its fixed-rate liabilities should be backed by a portfolio
      principally composed of fixed-rate investments that generate predictable
      rates of return.  The Company does not have a specific target rate of
      return.  Instead, its rates of return vary over time depending on the
      current interest rate environment, the slope of the yield curve, the
      spread at which fixed-rate investments are priced over the yield curve,
      default rates and general economic conditions.  Its portfolio
      strategy is constructed with a view to achieve adequate risk-adjusted
      returns consistent with its investment objectives of effective
      asset-liability matching, liquidity and safety.  The Company's
      fixed-rate products incorporate surrender charges or other restrictions in
      order to encourage persistency. Approximately 82% of the Company's fixed
      annuity, universal life and GIC reserves had surrender penalties or other
      restrictions at December 31, 2000.
      As part of
      its asset-liability matching discipline, the Company conducts detailed
      computer simulations that model its fixed-rate assets and liabilities
      under commonly used stress-test interest rate scenarios.  With the
      results of these computer simulations, the Company can measure the
      potential gain or loss in fair value of its interest-rate sensitive
      instruments and seek to protect its economic value and achieve a
      predictable spread between what it earns on its invested assets and what
      it pays on its liabilities by designing its fixed-rate products and
      conducting its investment operations to closely match the duration of the
      fixed-rate assets to that of its fixed-rate liabilities.  The
      Company's fixed-rate assets include: cash and short-term investments;
      bonds, notes and redeemable preferred stocks; mortgage loans; and
      investments in limited partnerships that invest primarily in fixed-rate
      securities.  At December 31, 2000, these assets had an aggregate fair
      value of $5.20 billion with a duration of 2.9.  The Company's
      fixed-rate liabilities include fixed annuity, GIC and universal life
      reserves and subordinated notes.  At December 31, 2000, these
      liabilities had an aggregate fair value (determined by discounting future
      contractual cash flows by related market rates of interest) of $4.77 
      billion  with a duration of 3.2.  The Company's potential 
      exposure due to a 10% decrease in prevailing interest rates from their
      December 31, 2000 levels is a loss of approximately $2.3 million,
      representing the increase in the fair value of its fixed-rate liabilities
      that is not offset by an increase in the fair value of its fixed-rate
      assets.  Because the Company actively manages its assets and
      liabilities and has strategies in place to minimize its exposure to loss
      as interest rate changes occur, it expects that  actual 
      losses  would  be  less  than  the 
      estimated  potential loss.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25








|Duration is a
      common option-adjusted measure for the price sensitivity of a
      fixed-maturity portfolio to changes in interest rates.  It measures
      theapproximate percentage change in the market value of a
      portfolio if interest rates change by 100 basis points, recognizing the
      changes in cash flows resulting from embedded options such as policy
      surrenders, investment prepayments and bond calls.  It also
      incorporates the assumption that the Company will continue to utilize its
      existing strategies of pricing its fixed annuity, universal life and GIC
      products, allocating its available cash flow amongst its various
      investment portfolio sectors and maintaining sufficient levels of
      liquidity.  Because the calculation of duration involves estimation
      and incorporates assumptions, potential changes in portfolio value
      indicated by the portfolio's duration will likely be different from the
      actual changes experienced under given interest rate scenarios, and the
      differences may be material.
      As a
      component of its asset and liability management strategy, the Company
      utilizes interest rate swap agreements ("Swap Agreements") to match assets
      more closely to liabilities.  Swap Agreements are agreements to
      exchange with a counterparty interest rate payments of differing character
      (for example, variable-rate payments exchanged for fixed-rate payments)
      based on an underlying principal balance (notional principal) to hedge
      against interest rate changes.  The Company typically utilizes Swap
      Agreements to create a hedge that effectively converts floating-rate
      assets and liabilities into fixed-rate instruments.  At December 31,
      2000, the Company had two outstanding Swap Agreements with a total
      notional principal of $125.7 million.  These agreements mature in
      June 2002 and December 2024.
      The
      Company also seeks to provide liquidity from time to time by using reverse
      repurchase agreements ("Reverse Repos") and by investing in MBSs. It also
      seeks to enhance its spread income by using Reverse Repos.  Reverse
      Repos involve a sale of securities and an agreement to repurchase the same
      securities at a later date at an agreed upon price and are generally
      over-collateralized.  MBSs are generally investment-grade securities
      collateralized by large pools of mortgage loans.  MBSs generally pay
      principal and interest monthly.  The amount of principal and interest
      payments may fluctuate as a result of repayments of the underlying
      mortgage loans.
      There
      are risks associated with some of the techniques the Company uses to
      provide liquidity, enhance its spread income and match its assets and
      liabilities.  The primary risk associated with the Company's Reverse
      Repos and Swap Agreements is counterparty risk.  The Company
      believes, however,  that  the  counterparties to its
      Reverse Repos and Swap Agreements are financially responsible and that the
      counterparty risk associated with those transactions is minimal.  It
      is the Company's policy that these agreements are entered into with
      counterparties who have a debt rating of A/A2 or better from both S&P
      and Moody's.  The Company  continually monitors its credit
      exposure with respect to these agreements.  In addition to
      counterparty risk, Swap Agreements also have interest rate risk. 
      However, the Company's Swap Agreements typically hedge variable-rate
      assets or liabilities, and interest rate fluctuations that adversely
      affect the net cash received or paid under the terms of a Swap Agreement
      would be offset by increased interest income earned on the variable-rate
      assets or reduced interest expense paid on the variable-rate
      liabilities.  The primary risk associated with MBSs is that a
      changing interest rate environment might cause prepayment of the
      underlying obligations at speeds slower or faster than anticipated at the
      time of their purchase.  As part of its decision 
      to purchase an MBS, the Company assesses the risk of prepayment by
      analyzing the security's projected performance over an array of
      interest-rate scenarios.  Once an MBS is purchased, the Company
      monitors its actual prepayment experience monthly to reassess the relative
      attractiveness of the security with the intent to maximize total
      return.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26




|INVESTED
      ASSETS EVALUATION is routinely conducted by the Company. Management
      identifies monthly those investments that require additional monitoring
      and carefully reviews the carrying values of such investments at least
      quarterly to determine whether specific investments should be placed on a
      nonaccrual basis and to determine declines in value that may be other than
      temporary.  In making these reviews for bonds, management principally
      considers the adequacy of any collateral, compliance with contractual
      covenants, the borrower's recent financial performance, new reports and
      other externally generated information concerning the creditor's affairs.
      In the case of publicly traded bonds, management also considers market
      value quotations, if available.  For mortgage loans, management
      generally considers information concerning the mortgaged property and,
      among other things, factors impacting the current and expected payment
      status of the loan and, if available, the current fair value of the
      underlying collateral. For investments in partnerships, management reviews
      the financial statements and other information provided by the general
      partners.
      The carrying
      values of investments that are determined to have declines in value that
      are other than temporary are reduced to net realizable value and, in the
      case of bonds, no further accruals of interest are made.  The
      provisions for impairment on mortgage loans are based on losses expected
      by management to be realized on transfers of mortgage loans to real
      estate, on the disposition and settlement of mortgage loans and on
      mortgage loans that management believes may not be collectible in full.
      Accrual of interest is suspended when principal and interest payments on
      mortgage loans are past due more than 90 days.
      DEFAULTED
      INVESTMENTS, comprising all investments that are in default as to the
      payment of principal or interest, totaled $3.6 million of bonds at
      December 31, 2000, and constituted less than 0.1% of total invested
      assets.  At December 31, 1999, defaulted investments totaled $0.9
      million ($0.2 million of bonds and $0.7 million of mortgage loans) and
      constituted less than 0.1% of total invested assets.
      SOURCES OF
      LIQUIDITY are readily available to the Company in the form of the
      Company's existing portfolio of cash and short-term investments, Reverse
      Repo capacity on invested assets and, if required, proceeds from invested
      asset sales.   At December 31, 2000, approximately $1.60 billion
      of the Company's Bond Portfolio  had an  aggregate 
      unrealized  gain  of  $34.4 million, while approximately
      $2.41 billion of the Bond Portfolio had an aggregate unrealized loss of
      $157.1 million.  In addition, the Company's investment portfolio
      currently provides approximately $50.6 million of monthly cash flow from
      scheduled principal and interest payments. Historically, cash flows from
      operations and from the sale of the Company's annuity and GIC products
      have been more than sufficient in amount to satisfy the Company's
      liquidity needs.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





27








|Management is
      aware that prevailing market interest rates may shift significantly 
      and  has  strategies in place to manage either an increase
      or decrease in prevailing rates.  In a rising interest
      rate environment, the Company's average cost of funds would increase over
      time as it prices its new and renewing annuities and GICs to maintain a
      generally competitive market rate.  Management would seek to place
      new funds in investments that were matched in duration to, and higher
      yielding than, the liabilities assumed.  The Company believes that
      liquidity to fund withdrawals would be available through incoming cash
      flow, the sale of short-term or floating-rate instruments or Reverse Repos
      on the Company's substantial MBS segment of the Bond Portfolio, thereby
      avoiding the sale of fixed-rate assets in an unfavorable bond
      market.
      In a
      declining rate environment, the Company's cost of funds would decrease
      over time, reflecting lower interest crediting rates on its fixed
      annuities and GICs.  Should increased liquidity be required for
      withdrawals, the Company believes that a significant portion of its
      investments could be sold without adverse consequences in light of the
      general strengthening that would be expected in the bond
market.
      CONTINGENT
      LIABILITIES are discussed in Note 9 of the accompanying consolidated
      financial statements.
      RECENTLY
      ISSUED ACCOUNTING STANDARDS are discussed in Note 2 of the accompanying
      consolidated financial statements.
      **ITEM 7A.  QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
      The
      quantitative and qualitative disclosures about market risk are contained
      in the Asset-Liability Matching section of Management's Disclosure and
      Analysis of Financial Condition and Results of Operations on pages 25 and
      26 herein.
      **ITEM 8.  FINANCIAL STATEMENTS
      AND SUPPLEMENTARY DATA**
      The Company's
      consolidated financial statements begin on page F-3. Reference is made to
      the Index to Financial Statements on page F-1 herein.
      **ITEM 9.  CHANGES IN
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND****FINANCIAL
      DISCLOSURE.**
      None.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



28








|**PART III**
      
      **ITEM 10.  DIRECTORS AND
      EXECUTIVE OFFICERS**
      The directors
      and principal officers of Anchor National Life Insurance Company (the
      "Company") as of March 26, 2001 are listed below, together with
      information as to their ages, dates of election and principal business
      occupation during the last five years (if other than their present
      business occupation).
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                  |         |                  |              | **Other Positions
      and** |            
|----------------- | ------- | ---------------- | ------------ | ----------------------------- | -----------
|                  |         |                  | **Year**     | **Other
Business**            |            
|                  |         | **Present**      | **Assumed**  | **Experience
    Within**     |            
|**Name**          | **Age** | **Position**     | **Position** | **Last Five
      Years****   | **From-To**
|                  |         |                  |              |                               |            
|Jay S. Wintrob*   | 43      | President and    | 2000         | Vice Chairman and             | 1998-2000  
|                  |         | Chief Executive  | 2001         | Chief Operating               |            
|                  |         | Officer of the   |              | Officer of SAI                |            
|                  |         | Company          |              | Executive Vice                | 1991       
|                  |         | President and    | 2000         | President of the              |            
|                  |         | Chief Executive  | 2001         | Company                       |            
|                  |         | Officer of       |              | (Joined SAI in 1987)          |            
|                  |         | SunAmerica Inc.  |              |                               |            
|                  |         | ("SAI")          |              |                               |            
|                  |         |                  |              |                               |            
|James R. Belardi* | 43      | Senior Vice      | 1992         | (Joined SAI in 1986)          |            
|                  |         | President of     |              |                               |            
|                  |         | the Company      |              |                               |            
|                  |         | Executive Vice   | 1995         |                               |            
|                  |         | President of     |              |                               |            
|                  |         | SAI              |              |                               |            
|                  |         |                  |              |                               |            
|Marc H. Gamsin*   | 45      | Senior Vice      | 1999         | Executive Vice President,     | 1998 to    
|                  |         | President of the |              | SunAmerica Investments,       | Present    
|                  |         | Company          |              | Inc. (GA)                     |            
|                  |         | Executive Vice   | 2001         | Executive Vice President,     | 1997-1998  
|                  |         | President of SAI |              | SunAmerica Investments,       |            
|                  |         |                  |              | Inc. (DE)                     |            
|                  |         |                  |              | Partner, O'Melveny &          | 1976-1996  
|                  |         |                  |              | Myers, LLP                    |            
|                  |         |                  |              |                               |            
|Jana W. Greer*    | 48      | Senior Vice      | 1994         | (Joined SAI in 1974)          |            
|                  |         | President of the |              |                               |            
|                  |         | Company          |              |                               |            
|                  |         | Senior Vice      | 1992         |                               |            
|                  |         | President of     |              |                               |            
|                  |         | SAI              |              |                               |            





|_______________________________
      * Also serves as a director
      **Unless otherwise indicated, officers and
      positions are with SunAmerica Inc.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------



29




|                     |         |                    |              | **Other Positions
      and** |            
|-------------------- | ------- | ------------------ | ------------ | ----------------------------- | -----------
|                     |         |                    | **Year**     | **Other
Business**            |            
|                     |         | **Present**        | **Assumed**  | **Experience
    Within**     |            
|**Name**             | **Age** | **Position**       | **Position** | **Last Five
      Years****   | **From-To**
|                     |         |                    |              |                               |            
|N. Scott Gillis*     | 47      | Senior Vice        | 1994         | Senior Vice President         | 1994-1999  
|                     |         | President          |              | and Controller,               |            
|                     |         | of the Company     |              | SunAmerica Life Insurance     |            
|                     |         | Vice President     | 1997         | Companies ("SLC")             |            
|                     |         | and Controller     | 2000         | (Joined SAI in 1985)          |            
|                     |         | of SAI             |              |                               |            
|                     |         |                    |              |                               |            
|Gregory M. Outcalt   | 38      | Senior Vice        | 2000         | Vice President, SLC           | 1993-1999  
|                     |         | President of the   |              | (Joined SAI in 1986)          |            
|                     |         | Company            |              |                               |            
|                     |         |                    |              |                               |            
|Edwin R. Raquel      | 43      | Senior Vice        | 1995         | Vice President,               | 1990-1995  
|                     |         | President and      |              | Actuary, SLC                  |            
|                     |         | Chief Actuary      |              |                               |            
|                     |         | of the Company     |              |                               |            
|                     |         |                    |              |                               |            
|Mark A. Zaeske       | 33      | Treasurer of       | 2001         | Assistant Treasurer,          | 1999-2000  
|                     |         | the Company        |              | Citigroup                     |            
|                     |         | Treasurer of       | 2000         | Associate Director,           | 1996-1999  
|                     |         | SAI                |              | Citigroup                     |            
|                     |         |                    |              | Treasury Financial            | 1994-1996  
|                     |         |                    |              | Analyst,                      |            
|                     |         |                    |              | Atlantic Richfield Company    |            
|                     |         |                    |              |                               |            
|P. Daniel Demko, Jr. | 51      | Vice President     | 1999         | Executive Vice President,     | 1998 to    
|                     |         | of the Company     |              | SunAmerica Retirement         | Present    
|                     |         |                    |              | Markets, Inc.                 |            
|                     |         |                    |              | President & Vice              | 1995-1998  
|                     |         |                    |              | Chairman, Global Health       |            
|                     |         |                    |              | Network, LLC                  |            
|                     |         |                    |              | Owner, P. Demko Company       | 1992-1995  
|                     |         |                    |              |                               |            
|Lawrence M. Goldman  | 39      | Vice President,    | 2000         | Associate General             | 1998-2000  
|                     |         | Co-General Counsel |              | Counsel of SAI                |            
|                     |         | and Assistant      |              | Senior Vice President,        | 1995-1998  
|                     |         | Secretary of       |              | Imperial Premium              |            
|                     |         | the Company        |              | Finance, Inc.                 |            
|                     |         | Vice President,    | 2000         |                               |            
|                     |         | Co-General Counsel |              |                               |            
|                     |         | and Assistant      |              |                               |            
|                     |         | Secretary of SAI   |              |                               |            
|                     |         |                    |              |                               |            
|J. Franklin Grey     | 48      | Vice President     | 1994         | Vice President of             | 1994 to    
|                     |         | of the Company     |              | Certain SLC                   | Present    





|_______________________________
      * Also serves as a director
      **Unless otherwise indicated, officers and
      positions are with SunAmerica Inc.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------



30




|                     |         |                  |              | **Other Positions
      and** |            
|-------------------- | ------- | ---------------- | ------------ | ----------------------------- | -----------
|                     |         |                  | **Year**     | **Other
Business**            |            
|                     |         | **Present**      | **Assumed**  | **Experience
    Within**     |            
|**Name**             | **Age** | **Position**     | **Position** | **Last Five
      Years****   | **From-To**
|                     |         |                  |              |                               |            
|Maurice S. Hebert    | 38      | Vice President   | 2000         | Vice President and            | 1998-2000  
|                     |         | and Controller   |              | Assistant Controller,         |            
|                     |         | of the Company   |              | SunAmerica Financial          |            
|                     |         |                  |              | Director, Investment          | 1997-1998  
|                     |         |                  |              | Accounting, SAI               |            
|                     |         |                  |              | Manager, Investment           | 1993-1997  
|                     |         |                  |              | Accounting, SAI               |            
|                     |         |                  |              |                               |            
|Christine A. Nixon   | 36      | Vice President,  | 2000         | Associate General             | 1997-2000  
|                     |         | Co-General       |              | Counsel of SAI                |            
|                     |         | Counsel and      |              | Associate Counsel             | 1993-1997  
|                     |         | Secretary of     |              | of SAI                        |            
|                     |         | the Company      |              |                               |            
|                     |         | Vice President,  | 2000         |                               |            
|                     |         | Co-General       |              |                               |            
|                     |         | Counsel and      |              |                               |            
|                     |         | Secretary        |              |                               |            
|                     |         | of SAI           |              |                               |            
|                     |         |                  |              |                               |            
|Edward P. Nolan, Jr. | 51      | Vice President   | 1993         | (Joined SAI in 1989)          |            
|                     |         | of the Company   |              |                               |            
|                     |         |                  |              |                               |            
|Stewart R. Polakov   | 41      | Vice President   | 2000         | Vice President,               | 1997-1999  
|                     |         | of the Company   |              | SunAmerica Financial,         |            
|                     |         |                  |              | Director, Investment          | 1994-1997  
|                     |         |                  |              | Accounting, SAI               |            
|                     |         |                  |              | (Joined SAI in 1991)          |            
|                     |         |                  |              |                               |            
|Scott H. Richland    | 38      | Vice President   | 1994         | Senior Vice President         | 1997-1998  
|                     |         | of the Company   |              | and Treasurer of SAI          |            
|                     |         | Senior Vice      | 1997         | Vice President and            | 1995-1997  
|                     |         | President of SAI |              | Treasurer of SAI              |            
|                     |         |                  |              | (Joined SAI in 1990)          |            
|                     |         |                  |              |                               |            
|Ron H. Tani          | 38      | Vice President   | 2000         | Vice President,               | 2000-      
|                     |         | of the Company   |              | SunAmerica Financial          | Present    
|                     |         |                  |              | Director of Product           | 1995-2000  
|                     |         |                  |              | Development, SLC              |            





|_______________________________
      * Also serves as a director
      **Unless otherwise indicated, officers and
      positions are with SunAmerica Inc.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------



31










|**ITEM 11.  EXECUTIVE
      COMPENSATION**
      All of the
      executive officers of the Company also serve as employees of SunAmerica
      Inc. or its affiliates and receive no compensation directly from the
      Company.
      The following
      table shows the cash compensation paid or earned, based on these
      allocations, to the chief executive officer and top four executive
      officers of the Company whose allocated compensation exceeds $100,000 for
      services rendered in all capacities to the Company during
    2000:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|**Name of Individual
      or** | **Capacities In**             | **Allocated
  Cash**
|------------------------------- | ----------------------------- | --------------------
|**Number in
      Group**       | **Which
      Served**        | **Compensation**    
|                                |                               |                     
|Jay S. Wintrob                  | President and Chief Executive | $  435,648          
|                                | Officer                       |                     
|Eli Broad                       | Chairman                      | $  340,938          
|Jana Waring Greer               | Senior Vice President         | $  571,211          
|Daniel P. Demko                 | Vice President                | $  496,724          
|James Belardi                   | Senior Vice President         | $ 
203,843          



|Directors of
      the Company who are also employees of SunAmerica Inc. or its affiliates
      receive no compensation in addition to their compensation as employees of
      SunAmerica Inc. or its affiliates.
      **ITEM 12.  SECURITY OWNERSHIP OR
      CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**
      The Company
      is an indirect wholly owned subsidiary of American International Group,
      Inc.
      **ITEM 13.  CERTAIN RELATIONSHIPS
      AND RELATED TRANSACTIONS**
      None.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32










|**PART IV**
      **ITEM 14.  EXHIBITS, FINANCIAL
      STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
      ON FORM 8-K**
      FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
      SCHEDULES
      Reference is made to the index set forth on page F-1 of this
      report.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|**EXHIBITSExhibitNo.** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2(a)                   | Purchase and Sale Agreement, dated as of July
      15, 1998, by and among the Company, SunAmerica Inc. ("SAI"), First
      SunAmerica Life Insurance Company and MBL Life Assurance Corporation, is
      incorporated herein by reference to Exhibit 2(e) to SAI's 1998 Annual
      Report on Form 10-K, filed December 21, 1998.                                                                                                                                             
|3(a)                   | Amended and Restated Articles of
      Incorporation and Articles of Redomestication, filed with the Arizona
      Department of Insurance on December 22, 1995, is incorporated herein by
      reference to Exhibit 3(a) to the Company's quarterly report on Form 10-Q
      for the quarter ended December 31, 1995, filed February 14,
  1996.                                                                                                                               
|3(b)                   | Amended and Restated Bylaws, as adopted
      January 1, 1996, is incorporated herein by reference to Exhibit 3(b) to
      the Company's quarterly report on Form 10-Q for the quarter ended December
      31, 1995, filed February 14, 1996.                                                                                                                                                                                                                                   
|3(c)                   | Amended and Restated Bylaws, as amended
      January 2, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                    
|4(a)                   | Amended and Restated Articles of
      Incorporation and Articles of Redomestication, filed with the Arizona
      Department of Insurance on December 12, 1996.  See Exhibit
      3(a).                                                                                                                                                                                                                                                                                         
|4(b)                   | Amended and Restated Bylaws, as adopted
      January 1, 1996.  See Exhibit 3(b).                                                                                                                                                                                                                                                                                                                                                                                                 
|4(c)                   | Amended and Restated Bylaws, as amended
      January 2, 2001.  See Exhibit 3(c).                                                                                                                                                                                                                                                                                                                                                                                                 
|10(a)                  | Subordinated Loan Agreement for Equity
      Capital, dated August 4, 1999, between the Company's subsidiary, Royal
      Alliance Associates, Inc., and SAI, defining SAI's rights with respect to
      the 8.0% notes due September 23, 2002.                                                                                                                                                                                                                                  
|10(b)                  | Second Amendment to Subordinated Loan
      Agreement for Equity Capital, dated as of September 13, 1999, between the
      Company's subsidiary, SunAmerica Asset Management Corp., and SAI,
      extending the maturity date to September 13, 2002 and adjusting the
      interest rate to 8% for the unpaid principal under the Amendment to
      Subordinated Loan Agreement for Equity Capital, dated September 3, 1996,
      with a maturity date of September 13, 1999.
|10(c)                  | Amendment to Subordinated Loan Agreement for
      Equity Capital, dated as of May 22, 2000, between the Company's
      subsidiary, SunAmerica Capital Services, Inc. ("SACS") and SAI, extending
      the maturity date to June 30, 2002 and changing the interest rate to 9.5%
      of a Subordinated Loan Agreement for Equity Capital, dated as of April 29,
      1998, defining SAI's rights with respect to the 8.5% notes due June 27,
      2001.                     



33




|**EXHIBITSExhibitNo.** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                
|---------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10(d)                  | Amendment to Subordinated Loan Agreement for
      Equity Capital, dated as of May 22, 2000, between the Company's
      subsidiary, SACS, and SAI, extending the maturity date to July 30, 2002
      and changing the interest rate to 9.5% of a Subordinated Loan Agreement
      for Equity Capital, dated as of June 3, 1998, defining SAI's rights with
      respect to the 8.5% notes due July 30, 2001.               
|10(e)                  | Amendment to Subordinated Loan Agreement for
      Equity Capital, dated as of September 30, 2000, between the Company's
      subsidiary, SACS, and SAI, extending the maturity date to October 31, 2004
      and changing the interest rate to 9.5% of a Subordinated Loan Agreement
      for Equity Capital, dated as of August 25, 1998, defining SAI's rights
      with respect to the 8.5% notes due October 30, 2001.
|10(f)                  | Subordinated Loan Agreement for Equity
      Capital, dated as of March 12, 1999, between the Company's subsidiary,
      SACS, and SAI, defining SAI's rights with respect to the 8.5% notes due
      April 30, 2002, is incorporated herein by reference to Exhibit 10(a) to
      the Company's quarterly report on Form 10-Q for the quarter ended March
      31, 1999, filed May 14, 1999.                              
|10(g)                  | Subordinated Loan Agreement for Equity
      Capital, dated as of August 9, 1999, between the Company's subsidiary,
      SACS, and SAI, defining SAI's rights with respect to the 8% notes due
      September 30, 2002, incorporated herein by reference to Exhibit 10(a) to
      the Company's quarterly report on Form 10-Q for the quarter ended
      September 30, 1999, filed November 15, 1999.                      
|10(h)                  | Subordinated Loan Agreement for Equity
      Capital, dated as of March 17, 2000, between the Company's subsidiary,
      SACS, and SAI, defining SAI's rights with respect to the 8.75% notes due
      April 30, 2003, is incorporated herein by reference to Exhibit 10(a) to
      the Company's quarterly report on Form 10-Q for the quarter ended March
      31, 2000, filed May 12, 2000.                             
|10(i)                  | Subordinated Loan Agreement for Equity
      Capital, dated February 21, 2000, between the Company's subsidiary, SACS,
      and SAI, defining SAI's rights with respect to the 8.5% notes due March
      31, 2003, is incorporated herein by reference to Exhibit 10(b) to the
      Company's quarterly report on Form 10-Q for the quarter ended March 31,
      2000, filed May 12, 2000.                                 
|10(j)                  | Asset Lease Agreement, dated June 26, 1998,
      between the Company and Aurora National Life Assurance Company ("Aurora"),
      relating to a lease from Aurora of certain information relating to single
      premium deferred annuities, is incorporated herein by reference by Exhibit
      10(h) to the Company's Form 10-K, filed December 23, 1998.                                                                 
|21                     | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                                                                    







|**REPORTS ON FORM
      8-K**
      No current report on Form 8-K was filed
      during the three months ended December 31,
2000.
|----------------------------------------------------------------------------------------------------------------------------------







34






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



| | **ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
| | ------------------------------------------------
| |                                                 
| |                                                 
| |                                                 
| | BY /S/ N. SCOTT
  GILLIS                        
| | N. Scott Gillis                                 
| | Senior Vice President and
    Director          







|**March 26, 2001**
      
      Pursuant to
      the requirements of the Securities and Exchange Act of 1934, this report
      has been signed below by the following persons on behalf of the registrant
      in the capacities and on the dates
indicated:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|**Signature**             | **Title**                   | **Date**      
|------------------------- | --------------------------- | --------------
|                          |                             |               
|/s/  N. SCOTT
    GILLIS  | Senior Vice President and   | March 26, 2001
|N. Scott
      Gillis     | Director (Principal         |               
|                          | Financial Officer)          |               
|                          |                             |               
|/s/  MAURICE S. HEBERT    | Vice President &
Controller | March 26, 2001
|Maurice S.
      Hebert   | (Principal Accounting       |               
|                          | Officer)                    |               
|                          |                             |               
|/s/  JAY S.
WINTROB       | President, Chief Executive  | March 26, 2001
|Jay S.
      Wintrob      | Officer and Director        |               
|                          |                             |               
|/s/  JAMES R.
    BELARDI | Senior Vice President       | March 26, 2001
|James R.
      Belardi    | and Director                |               
|                          |                             |               
|/s/  MARC H.
GAMSIN       | Senior Vice President       | March 26, 2001
|Marc H.
      Gamsin      | and Director                |               
|                          |                             |               
|/s/  JANA W. GREER        | Senior Vice President       | March 26, 2001
|Jana W.
      Greer       | and Director                |               
|                          |                             |               
|/s/  EDWIN R.
    RAQUEL  | Senior Vice President       | March 26, 2001
|Edwin R.
      Raquel     | and Chief Actuary           |               



35






|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **INDEX TO CONSOLIDATED FINANCIAL
      STATEMENTS**
|-----------------------------------------------------------------------------------------------------------



|                                                          | **Page**     
|--------------------------------------------------------- | -------------
|                                                          | **Number(s)**
|                                                          |              
|Report of Independent
    Accountants                     | F-2          
|                                                          |              
|Consolidated Balance Sheet - December 31,
      2000 and  |              
|December 31, 1999                                         | F-3 to F-4   
|                                                          |              
|Consolidated Statement of Income and
      Comprehensive  |              
|Income - Years Ended December 31, 2000 and
      1999,    |              
|Three Months Ended December 31, 1998 and
      Year       |              
|Ended September 30, 1998                                  | F-5 to F-6   
|                                                          |              
|Consolidated Statement of Cash Flows - Years
      Ended  |              
|December 31, 2000 and 1999, Three Months
      Ended      |              
|December 31, 1998 and Year Ended September
      30, 1998 | F-7 to F-8   
|                                                          |              
|Notes to Consolidated Financial
      Statements          | F-9 to
F-37  



F-1








|**Report of Independent
      Accountants**
      To the Board of Directors and Shareholder
      ofAnchor National Life Insurance Company:
      In our opinion, the accompanying
      consolidated balance sheet and the related consolidated statements of
      income and comprehensive income and of cash flows present fairly, in all
      material respects, the financial position of Anchor National Life
      Insurance Company and its subsidiaries at December 31, 2000 and 1999, and
      the results of their operations and their cash flows for the years ended
      December 31, 2000 and 1999, for the three months ended December 31, 1998
      and for the year ended September 30, 1998, in conformity with accounting
      principles generally accepted in the United States of America.  These
      financial statements are the responsibility of the Company's management;
      our responsibility is to express an opinion on these financial statements
      based on our audits.  We conducted our audits on these statements in
      accordance with auditing standards generally accepted in the United States
      of America, which require that we plan and perform the audit to obtain
      reasonable assurance about whether the financial statements are free of
      material misstatement. An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant
      estimates made by management, and evaluating the overall financial
      statement presentation.  We believe that our audits provide a
      reasonable basis for our opinion.
      
      PricewaterhouseCoopers LLPWoodland
      Hills, CaliforniaJanuary 31, 2001
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-2






ANCHOR NATIONAL LIFE INSURANCE
      COMPANY CONSOLIDATED BALANCE SHEET
      ****December
      31,2000
    
    December
      31,1999(In
    thousands)ASSETSInvestments:Cash and short-term
      investments
    
    $
    169,701
    
    $
    462,915Bonds, notes and
    redeemablepreferred stocks available for
sale,at fair value (amortized cost:December 2000, $4,130,570;December 1999, $4,155,728)
    
    
    4,007,902
    
    
    3,953,169Mortgage loans
    
    
    684,174
    
    
    674,679Policy loans
    
    
    244,436
    
    
    260,066Separate account seed
    money
    
    
    104,678
    
    
    144,231Common stocks available for
      sale,at fair value (cost: December 2000,$1,001; December 1999, $0)
    
    
    974
    
    
    ---Partnerships
    
    
    8,216
    
    
    4,009Real estate
    
    
    24,139
    
    
    24,000Other invested assets
    
    
    18,514
    
    
    31,632Total investments
    
    
    5,262,734
    
    
    5,554,701Variable annuity assets held in
      separateaccounts
    
    
    20,393,820
    
    
    19,949,145Accrued investment income
    
    
    57,555
    
    
    60,584Deferred acquisition
costs
    
    
    1,286,456
    
    
    1,089,979Receivable from brokers for sales
      ofsecurities
    
    
    15
    
    
    54,760Income taxes currently receivable
      from Parent
    
    
    60,992
    
    
    ---Deferred income taxes
    
    
    ---
    
    
    53,445Other assets
    
    
    127,906
    
    
    111,880TOTAL ASSETS
    
    $
    27,189,478
    
    $
    26,874,494




See accompanying notes to consolidated
      financial statementsF-3






ANCHOR NATIONAL LIFE INSURANCE
      COMPANYCONSOLIDATED BALANCE SHEET (Continued)
      ****December
      31,2000
    
    December
      31,1999(In
    thousands)LIABILITIES AND SHAREHOLDER'S
      EQUITYReserves, payables and accrued
      liabilities:Reserves for fixed annuity
      contracts
    
    $
    2,778,229
    
    $
    3,254,895Reserves for universal life
      insurancecontracts
    
    $
    1,832,667
    
    $
    1,978,332Reserves for guaranteed
      investmentcontracts
    
    
    610,672
    
    
    305,570Payable to brokers for purchases
      ofsecurities
    
    
    3,662
    
    
    139Income taxes currently
      payable
    
    
    ---
    
    
    23,490Modified coinsurance deposit
      liability
    
    
    97,647
    
    
    140,757Other liabilities
    
    
    203,015
    
    
    249,224Total reserves, payables and
      accruedliabilities
    
    
    5,525,892
    
    
    5,952,407Variable annuity liabilities
      related toseparate accounts
    
    
    20,393,820
    
    
    19,949,145Subordinated notes payable to
      affiliates
    
    
    55,119
    
    
    37,816Deferred income taxes
    
    
    85,978
    
    
    ---Shareholder's equity:Common Stock
    
    
    3,511
    
    
    3,511Additional paid-in
capital
    
    
    493,010
    
    
    493,010Retained earnings
    
    
    697,730
    
    
    551,158Accumulated other comprehensive
      loss
    
    
    (65,582
    )
    
    (112,553
    )Total shareholder's
equity
    
    
    1,128,669
    
    
    935,126TOTAL LIABILITIES AND SHAREHOLDER'S
      EQUITY
    
    $
    27,189,478
    
    $
    26,874,494




See accompanying notes to consolidated
      financial statementsF-4






ANCHOR NATIONAL LIFE INSURANCE
      COMPANYCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
      INCOMEYears Ended
      December 31,
    
    Three
      Months Ended December 31, 1998
    
    Year
      Ended September 30, 19982000
    
    1999(In
    thousands)Investment income
    
    $
    399,355
    
    $
    516,001
    
    $
    53,553
    
    $
    218,793Interest expense on:Fixed annuity contracts
    
    
    (140,322
    )
    
    (231,929
    )
    
    (22,828
    )
    
    (112,695
    )Universal life insurancecontracts
    
    
    (86,263
    )
    
    (102,486
    )
    
    ---
    
    
    ---Guaranteed investment
      contracts
    
    
    (34,124
    )
    
    (19,649
    )
    
    (3,980
    )
    
    (17,787
    )Senior indebtedness
    
    
    ---
    
    
    (199
    )
    
    (34
    )
    
    (1,498
    )Subordinated notes payable
    toaffiliates
    
    
    (4,144
    )
    
    (3,474
    )
    
    (853
    )
    
    (3,114
    )Total interest expense
    
    
    (264,853
    )
    
    (357,737
    )
    
    (27,695
    )
    
    (135,094
    )NET INVESTMENT INCOME
    
    
    134,502
    
    
    158,264
    
    
    25,858
    
    
    83,699NET REALIZED INVESTMENT
      GAINS (LOSSES)
    
    
    (15,177
    )
    
    (19,620
    )
    
    271
    
    
    19,482Fee income:Variable annuity fees
    
    
    400,495
    
    
    306,417
    
    
    58,806
    
    
    200,867Net retained commissions
    
    
    62,202
    
    
    51,039
    
    
    11,479
    
    
    48,561Asset management fees
    
    
    73,922
    
    
    43,510
    
    
    8,068
    
    
    29,592Universal life insurance fees,
      net
    
    
    20,258
    
    
    28,932
    
    
    ---
    
    
    ---Surrender charges
    
    
    20,963
    
    
    17,137
    
    
    3,239
    
    
    7,404Other fees
    
    
    12,959
    
    
    6,327
    
    
    1,738
    
    
    3,938TOTAL FEE INCOME
    
    
    590,799
    
    
    453,362
    
    
    83,330
    
    
    290,362GENERAL AND ADMINISTRATIVE
      EXPENSES
    
    
    (171,627
    )
    
    (146,683
    )
    
    (21,268
    )
    
    (92,929
    )AMORTIZATION OF DEFERREDACQUISITION COSTS
    
    
    (158,007
    )
    
    (116,840
    )
    
    (27,070
    )
    
    (72,713
    )ANNUAL COMMISSIONS
    
    
    (56,473)
    )
    
    (40,760
    )
    
    (6,624
    )
    
    (18,209
    )PRETAX INCOME
    
    
    324,017
    
    
    287,723
    
    
    54,497
    
    
    209,692Income tax expense
    
    
    (108,445
    )
    
    (103,025
    )
    
    (20,106
    )
    
    (71,051
    )NET INCOME
    
    $
    215,572
    
    $
    184,698
    
    $
    34,391
    
    $
    138,641




See accompanying notes to consolidated
      financial statementsF-5






ANCHOR NATIONAL LIFE INSURANCE
      COMPANYCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
      (Continued)Years Ended
      December 31,
    
    Three
      Months Ended December 31, 1998
    
    Year
      Ended September 30, 19982000
    
    1999(In
    thousands)OTHER COMPREHENSIVE INCOME
      (LOSS)NET OF TAX:Net unrealized gains
    (losses)on debt and equity securitiesavailable for sale identified in
      thecurrent period (net of incometax expense of $20,444 andincome tax benefit of $63,900,$5,517 and $2,168 for theyears ended December 31,2000 and 1999, the threemonths ended December 31,1998 and the year endedSeptember 30, 1998,respectively)
    
    $
    37,968
    
    $
    (118,669
    )
    $
    (10,249
    )
    $
    (4,027
    )Less reclassificationadjustment for net realizedlosses (gains) included in netincome (net of income taxexpense of $4,848, $4,165 and$116 and income tax benefitof $3,210 for the years endedDecember 31, 2000 and 1999,the three months endedDecember 31, 1998 and theyear ended September 30, 1998,respectively)
    
    
    9,003
    
    
    7,735
    
    
    215
    
    
    (5,963
    )OTHER COMPREHENSIVE INCOME
      (LOSS)
    
    
    46,971
    
    
    (110,934
    )
    
    (10,034
    )
    
    (9,990
    )COMPREHENSIVE INCOME
    
    $
    262,543
    
    $
    73,764
    
    $
    24,357
    
    $
    128,651




See accompanying notes to consolidated
      financial statementsF-6






**ANCHOR NATIONAL LIFE INSURANCE
      COMPANYCONSOLIDATED STATEMENT OF CASH FLOWS****Years Ended December 31,**
    
    Three Months Ended December 31, 1998
    
    Year Ended September 30, 1998******2000**
    
    **1999**(In
    thousands)CASH FLOWS FROM OPERATINGACTIVITIES:Net income
    
    $
    215,572
    
    $
    184,698
    
    $
    34,391
    
    $
    138,641Adjustments to reconcile
      netincome to net cash
      providedby operating
      activities:Interest credited
    to:Fixed annuity
    contracts
    
    
    140,322
    
    
    231,929
    
    
    22,828
    
    
    112,695Universal life
      insurancecontracts
    
    
    86,263
    
    
    102,486
    
    
    ---
    
    
    ---Guaranteed
    investmentcontracts
    
    
    34,124
    
    
    19,649
    
    
    3,980
    
    
    17,787Net realized
    investment(gains)losses
    
    
    15,177
    
    
    19,620
    
    
    (271
    )
    
    (19,482
    )Amortization (accretion)
      ofnet premiums (discounts)on investments
    
    
    (2,198
    )
    
    (18,343
    )
    
    (1,199
    )
    
    447Universal life insurance
    fees
    
    
    (20,258
    )
    
    (28,932
    )
    
    ---
    
    
    ---Amortization of
      goodwill
    
    
    1,455
    
    
    776
    
    
    356
    
    
    1,422Provision for
    deferredincome taxes
    
    
    114,127
    
    
    (100,013
    )
    
    15,945
    
    
    34,087Change in:Accrued investment
      income
    
    
    3,029
    
    
    9,155
    
    
    (1,512
    )
    
    (4,649
    )Deferred acquisition
      costs
    
    
    (204,077
    )
    
    (208,228
    )
    
    (34,328
    )
    
    (160,926
    )Other assets
    
    
    (16,628
    )
    
    (5,661
    )
    
    (21,070
    )
    
    (19,374
    )Income taxes currentlyreceivable/ payable
    
    
    (84,482
    )
    
    12,367
    
    
    16,992
    
    
    (38,134
    )Other liabilities
    
    
    (12,520
    )
    
    49,504
    
    
    5,617
    
    
    (2,248
    )Other, net
    
    
    43,376
    
    
    20,729
    
    
    5,510
    
    
    (5,599
    )NET CASH PROVIDED BY
      OPERATINGACTIVITIES
    
    
    313,282
    
    
    289,736
    
    
    47,239
    
    
    54,667CASH FLOWS FROM
      INVESTINGACTIVITIES:Purchases of:Bonds, notes and
      redeemablepreferred stocks
    
    
    (881,647
    )
    
    (4,130,682
    )
    
    (392,515
    )
    
    (1,970,502
    )Mortgage loans
    
    
    (144,303
    )
    
    (331,398
    )
    
    (4,962
    )
    
    (131,386
    )Other investments,
      excludingshort-term
    investments
    
    
    (66,722
    )
    
    (227,268
    )
    
    (1,992
    )
    
    ---Sales of:Bonds, notes and redeemable
      preferred stocks
    
    
    468,221
    
    
    2,660,931
    
    
    265,039
    
    
    1,602,079Other investments,
      excludingshort-term
    investments
    
    
    60,538
    
    
    65,395
    
    
    142
    
    
    42,458Redemptions and maturities
      of:Bonds, notes and redeemable
      preferred stocks
    
    
    429,347
    
    
    1,274,764
    
    
    37,290
    
    
    424,393Mortgage loans
    
    
    136,277
    
    
    46,760
    
    
    7,699
    
    
    80,515Other investments,
      excludingshort-term
    investments
    
    
    122,195
    
    
    21,256
    
    
    853
    
    
    67,213Cash and short-term
      investmentsacquired in coinsurancetransaction with MBL LifeAssurance Corporation
    
    
    ---
    
    
    ---
    
    
    3,083,211
    
    
    ---Net cash and short-term
      investmentstransferred from (to)
      affiliatesin assumption with MBL LifeAssurance Corporation
    
    
    (3,314
    )
    
    (371,634
    )
    
    ---
    
    
    ---NET CASH PROVIDED (USED IN)
      BYINVESTING
ACTIVITIES
    
    $
    120,592
    
    $
    (991,876
    )
    $
    2,994,765
    
    $
    114,770




See accompanying notes to consolidated
      financial statementsF-7






**ANCHOR NATIONAL LIFE INSURANCE
      COMPANYCONSOLIDATED STATEMENT OF CASH
      FLOWS (Continued)****Years Ended December 31,**
    
    Three Months Ended December 31, 1998
    
    Year Ended September 30, 1998******2000**
    
    **1999**(In
    thousands)CASH FLOWS FROM FINANCINGACTIVITIES:Premium receipts
on:Fixed annuity contracts
    
    $
    1,764,600
    
    $
    2,016,851
    
    $
    351,616
    
    $
    1,512,994Universal life insurancecontracts
    
    
    58,738
    
    
    78,864
    
    
    ---
    
    
    ---Guaranteed investmentcontracts
    
    
    350,000
    
    
    ---
    
    
    ---
    
    
    5,619Net exchanges from the
      fixedaccounts of variable
    annuitycontracts
    
    
    (1,994,710
    )
    
    (1,821,324
    )
    
    (448,762
    )
    
    (1,303,790
    )Withdrawal payments on:Fixed annuity contracts
    
    
    (320,778
    )
    
    (2,232,374
    )
    
    (41,554
    )
    
    (191,690
    )Universal life insurancecontracts
    
    
    (145,067
    )
    
    (81,634
    )
    
    ---
    
    
    ---Guaranteed investmentcontracts
    
    
    (78,312
    )
    
    (19,742
    )
    
    (3,797
    )
    
    (36,313
    )Claims and annuity payments
      on:Fixed annuity contracts
    
    
    (114,761
    )
    
    (46,578
    )
    
    (9,333
    )
    
    (40,589
    )Universal life insurancecontracts
    
    
    (118,302
    )
    
    (158,043
    )
    
    ---
    
    
    ---Net receipts from
    (repaymentsof) other short-termfinancings
    
    
    (33,689
    )
    
    (129,512
    )
    
    9,545
    
    
    (10,944
    )Net receipt (payment) relatedto a modified coinsurancetransaction
    
    
    (43,110
    )
    
    140,757
    
    
    (170,436
    )
    
    166,631Net receipts from issuances
      ofsubordinated notes
payableto affiliate
    
    
    17,303
    
    
    ---
    
    
    170,436
    
    
    ---Change in capital
    
    
    ---
    
    
    114,336
    
    
    70,000
    
    
    ---Dividends paid to Parent
    
    
    (69,000
    )
    
    ---
    
    
    ---
    
    
    (51,200
    )NET CASH PROVIDED (USED IN)
      BYFINANCING ACTIVITIES
    
    
    (727,088
    )
    
    (2,138,399
    )
    
    (72,285
    )
    
    50,718NET INCREASE (DECREASE) IN
      CASHAND SHORT-TERM
INVESTMENTS
    
    
    (293,214
    )
    
    (2,840,539
    )
    
    2,969,719
    
    
    220,155CASH AND SHORT-TERM
      INVESTMENTSAT BEGINNING OF PERIOD
    
    
    462,915
    
    
    3,303,454
    
    
    333,735
    
    
    113,580CASH AND SHORT-TERM
      INVESTMENTSAT END OF PERIOD
    
    $
    169,701
    
    $
    462,915
    
    $
    3,303,454
    
    $
    333,735SUPPLEMENTAL CASH FLOW INFORMATION:Interest paid on
    indebtedness
    
    $
    1,841
    
    $
    3,787
    
    $
    1,169
    
    $
    3,912Net income taxes paid
      (refunded)to Parent
    
    $
    78,796
    
    $
    190,126
    
    $
    (12,302
    )
    $
    74,932




See accompanying notes to consolidated
      financial statementsF-8










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS**
|-----------------------------------------------------------------------------------------------------------



|**1.** | **NATURE OF
      OPERATIONS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | Anchor National Life Insurance Company,
      including its wholly owned subsidiaries, (the "Company") is an
      Arizona-domiciled life insurance company which conducts its business
      through three segments:  annuity operations, asset management
      operations and broker-dealer operations. Annuity operations consist of the
      sale and administration of deposit-type insurance contracts, including
      fixed and variable annuities, universal life insurance contracts and
      guaranteed investment contracts ("GICs").  Asset management
      operations, which include the distribution and management of mutual funds,
      are conducted by SunAmerica Asset Management Corp. ("SunAmerica Asset
      Management"), the Company's registered investment advisor and wholly owned
      subsidiary and its related distributor, SunAmerica Capital Services, Inc.
      ("SACS").  Broker-dealer operations involve the sale of securities
      and financial services products, and are conducted by Royal Alliance
      Associates, Inc. ("Royal"), a wholly owned subsidiary of the
      Company.
      The Company is an indirect wholly owned
      subsidiary of American International Group, Inc. ("AIG"), an international
      insurance and financial services holding company.  At December 31,
      1998, the Company was a wholly owned indirect subsidiary of SunAmerica
      Inc., a Maryland Corporation.  On January 1, 1999, SunAmerica Inc.
      merged with and into AIG in a tax-free reorganization that has been
      treated as a pooling of interests for accounting purposes.  Thus,
      SunAmerica Inc. ceased to exist on that date.  However, immediately
      prior to the date of the merger, substantially all of the net assets of
      SunAmerica Inc. were contributed to a newly formed subsidiary of AIG named
      SunAmerica Holdings, Inc., a Delaware Corporation.  SunAmerica
      Holdings, Inc. subsequently changed its name to SunAmerica Inc.
      ("SunAmerica").
      The operations of the Company are influenced
      by many factors, including general economic conditions, monetary and
      fiscal policies of the federal government, and policies of state and other
      regulatory authorities.  The level of sales of the Company's
      financial products is influenced by many factors, including general market
      rates of interest, the strength, weakness and volatility of equity
      markets, and terms and conditions of competing financial products. 
      The Company is exposed to the typical risks normally associated with a
      portfolio of fixed-income securities, namely interest rate, option,
      liquidity and credit risk.  The Company controls its exposure to
      these risks by, among other things, closely monitoring and matching the
      duration of its assets and liabilities, monitoring and limiting prepayment
      and extension risk in its portfolio, maintaining a large percentage of its
      portfolio in highly liquid securities, and engaging in a disciplined
      process of underwriting, reviewing and monitoring credit risk.  The
      Company also is exposed to market risk, as market volatility may result in
      reduced fee income in the case of assets managed in mutual funds and held
      in separate accounts.



F-9










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**2.** | **SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 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 items have been
      reclassified to conform to the current period's
      presentation.Under generally accepted accounting
      principles, premiums collected on the non-traditional life and annuity
      insurance products, such as those sold by the Company, are not reflected
      as revenues in the Company's statement of earnings, as they are recorded
      directly to policyholders liabilities upon receipt.
      The preparation of financial statements in
      conformity with generally accepted accounting principles requires the use
      of estimates and assumptions that affect the amounts reports in the
      financial statements and the accompanying notes.  Actual results
      could differ from those estimates.
      INVESTMENTS:  Cash and short-term
      investments primarily include cash, commercial paper, money market
      investments, repurchase agreements and short-term bank
      participations.  All such investments are carried at cost plus
      accrued interest, which approximates fair value, have maturities of three
      months or less and are considered cash equivalents for purposes of
      reporting cash flows.
      Bonds, notes and redeemable preferred stocks
      available for sale and common stocks are carried at aggregate fair value
      and changes in unrealized gains or losses, net of tax, are credited or
      charged directly to shareholder's equity.  Bonds, notes and
      redeemable preferred stocks are reduced to estimated net realizable value
      when necessary for declines in value considered to be other than
      temporary. Estimates of net realizable value are subjective and actual
      realization will be dependent upon future events.
      Mortgage loans are carried at amortized
      unpaid balances, net of provisions for estimated losses.  Policy
      loans are carried at unpaid balances.  Separate account seed money
      consists of seed money for mutual funds used as investment vehicles for
      the Company's variable annuity separate accounts and is valued at
      market.  Limited partnerships are accounted for by the cost method of
      accounting.  Real estate is carried at cost, reduced by impairment
      provisions.  Common stock is carried at fair value.  Other
      invested assets include collateralized bond obligations and investments in
      mutual funds for the Company's asset management
      operations.Realized gains and losses on the sale
      of investments are recognized in operations at the date of sale and are
      determined by using the specific cost identification method. 
      Premiums and discounts on investments are amortized to investment income
      by using the interest method over the contractual lives of the
      investments.



F-10










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**2.** | **SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 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.  Upon adoption of Statement of Financial
      Accounting Standards No. 133, Accounting for Derivative Instruments and
      Hedging Activities ("SFAS 133") as amended by SFAS 138, Accounting for
      Certain Derivative Instruments and Certain Hedging Activities, and related
      implementation guidance, the Company will be required to mark all swap
      agreements to market as of January 1, 2001 (see "Recently Issued
      Accounting Standards").  Such adjustment is not anticipated to be
      material to the shareholder's equity of the Company.
      DEFERRED ACQUISITION COSTS:  Policy
      acquisition costs are deferred and amortized, with interest, in relation
      to the incidence of estimated gross profits to be realized over the
      estimated lives of the annuity contracts.  Estimated gross profits
      are composed of net interest income, net unrealized investment gains and
      losses, variable annuity fees, universal life insurance fees, surrender
      charges and direct administrative expenses.  Costs incurred to sell
      mutual funds are also deferred and amortized over the estimated lives of
      the funds obtained. Deferred acquisition costs ("DAC") consist of
      commissions and other costs that vary with, and are primarily related to,
      the production or acquisition of new business.  The Company
      capitalized DAC of $362,085,000 and $312,764,000 for the years ended
      December 31, 2000 and 1999, respectively.
      As debt and equity securities available for
      sale are carried at aggregate fair value, an adjustment is made to DAC
      equal to the change in amortization that would have been recorded if such
      securities had been sold at their stated aggregate fair value and the
      proceeds reinvested at current yields.  The change in this
      adjustment, net of tax, is included with the change in net unrealized
      gains or losses on debt and equity securities available for sale which is
      a component of accumulated other comprehensive income (loss) and is
      credited or charged directly to shareholder's equity.  DAC has been
      increased by  $21,800,000 and $29,400,000 at December 31, 2000 and
      1999, respectively, for this
adjustment.



F-11










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**2.** | **SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 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, amounted  to
      $21,604,000 (including accumulated amortization of $18,101,000) and
      $22,206,000 (including accumulated amortization of $16,350,000) at
      December 31, 2000 and 1999 respectively.  Goodwill is amortized by
      using the straight-line method over periods averaging 25 years and is
      included in Other Assets in the balance sheet.  Goodwill is evaluated
      for impairment when events or changes in economic conditions indicate that
      the carrying amount may not be recoverable.
      CONTRACTHOLDER RESERVES: 
      Contractholder reserves for fixed annuity contracts and guaranteed
      investment contracts are accounted for as investment-type contracts in
      accordance with Statement of Financial Accounting Standards No. 97,
      "Accounting and Reporting by Insurance Enterprises for Certain
      Long-Duration Contracts and for Realized Gains and Losses from the Sale of
      Investments," and are recorded at accumulated value (premiums received,
      plus accrued interest, less withdrawals and assessed fees). 
      Contractholder reserves for universal life insurance contracts are equal
      to the policyholder account values before surrender charges.
      MODIFIED COINSURANCE DEPOSIT
      LIABILITY:  Cash received as part of the modified coinsurance
      transaction described in Note 8 is recorded as a deposit liability. 
      Premiums from the reinsured business is allocated to pay down the
      liability pursuant to a repayment schedule.
      FEE INCOME:  Variable annuity fees,
      asset management fees, universal life insurance fees and surrender charges
      are recorded in income as earned.  Net retained commissions are
      recognized as income on a trade date basis.
      INCOME TAXES:  The Company files as a
      "life insurance company" under the provisions of the Internal Revenue Code
      of 1986.  Its federal income tax return is consolidated with those of
      its direct parent, SunAmerica Life Insurance Company (the "Parent"), and
      its affiliate, First SunAmerica Life Insurance Company ("FSA"). 
      Income taxes have been calculated as if the Company filed a separate
      return.  Deferred income tax assets and liabilities are recognized
      based on the difference between financial statement carrying amounts and
      income tax bases of assets and liabilities using enacted income tax rates
      and laws.



F-12










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**2.** | **SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | RECENTLY ISSUED ACCOUNTING
      STANDARDS:  In June 1998, the Financial Accounting Standards Board
      ("FASB") issued Statement of Financial Accounting Standards No. 133,
      Accounting for Derivative Instruments and Hedging Activities ("SFAS
      133").  The Company has reviewed and continues to review the effect
      of the implementation of SFAS 133, as amended by SFAS 138 and related
      implementation guidance.  This statement requires the Company to
      recognize all derivatives in the consolidated balance sheet measuring
      these derivatives at fair value.  The recognition of the change in
      the fair value of a derivative depends  on  a  number 
      of  factors, including the intended use of the derivative and, to the
      extent it is effective as part of a hedge transaction.  SFAS
      133  was  postponed  by  SFAS  137, Accounting
      for Derivative Instruments and Hedging Activities - Deferral of the
      Effective Date of FASB No. 133, and now will be effective  for 
      the  Company  as  of  January 1, 2001.  Because
      of the Company's minimal use of derivatives, management does not
      anticipate that the new statement will have a significant effect on either
      the earnings or the financial position of the
    Company.
|**3.** | **FISCAL YEAR
      CHANGE**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | Effective December 31, 1998, the Company
      changed its fiscal year end from September 30 to December 31. 
      Accordingly, the consolidated financial statements include the results of
      operations and cash flows for the three-month transition period ended
      December 31, 1998.  Such results are not necessarily indicative of
      operations for a full year. The consolidated financial statements as of
      and for the three months ended December 31, 1998 were originally filed as
      the Company's unaudited Transition Report on Form 10-Q.
      Results for the comparable prior year period
      are summarized below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



**Three Months
      EndedDecember 31, 1997**(In thousands)Investment income
    
    $
    59,062Net investment income
    
    
    25,689Net realized investment
      gains
    
    
    20,935Total fee income
    
    
    63,984Pretax income
    
    
    67,654Net income
    
    $
    44,348






|**4.** | **ACQUISITION**                                                                                                                                                                                                                                                                                       
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | On December 31, 1998, the Company
      acquired the individual life business  and  the 
      individual  and group annuity business of MBL Life Assurance
      Corporation ("MBL Life") (the "Acquisition"), via a 100% coinsurance
      transaction, for a cash purchase price of
  $128,420,000.



F-13










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**4.** | **ACQUISITION
      (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | As part of this transaction, the Company
      acquired assets having an aggregate fair value of $5,718,227,000, composed
      primarily of invested assets totaling $5,715,010,000.  Liabilities
      assumed in this acquisition totaled $5,831,266,000, including
      $3,460,503,000 of fixed annuity reserves, $2,308,742,000 of universal life
      reserves and $24,011,000 of guaranteed investment contract reserves. 
      The excess of the purchase price over the fair value of net assets
      received amounted to $92,687,000 at December 31, 2000, after adjustment
      for the transfer of the New York business to FSA (see below), and is
      included in Deferred Acquisition Costs in the accompanying consolidated
      balance sheet.  The income statements for the years ended December
      31, 2000 and 1999 include the impact of the Acquisition.  On a pro
      forma basis, assuming the Acquisition had been consummated on October 1,
      1997, the  beginning of the prior-year periods discussed herein,
      investment income would have been $514,433,000 and net income would have
      been $162,555,000 for the year ended September 30, 1998.
      Included in the block of business acquired
      from MBL Life were policies whose owners are residents of New York State
      ("the New York Business").  On July 1, 1999, the New York Business
      was acquired by the Company's New York affiliate, FSA, via an assumption
      reinsurance agreement, and the remainder of the business converted to
      assumption reinsurance in the Company, which superseded the coinsurance
      agreement.  As part of this transfer, invested assets equal to
      $678,272,000, life reserves equal to $282,247,000, group pension reserves
      equal to $406,118,000, and other net assets of $10,093,000 were
      transferred to FSA.
      The $128,420,000 purchase price was
      allocated between the Company and FSA based on the estimated future gross
      profits of the two blocks of business.  The portion allocated to FSA
      was $10,000,000.As part of the Acquisition, the
      Company received $242,473,000 from MBL Life to pay policy enhancements
      guaranteed by the MBL Life rehabilitation agreement to policyholders
      meeting certain requirements.  Of this amount, the Company was
      required to transfer $20,055,000 to the Parent for enhancements on
      policies which customers elected to convert to fixed annuity policies of
      the Parent.  Included in the Company's reserves transferred to FSA in
      1999 were $34,657,000 of such policy enhancement reserves.  Based
      upon final actuarial calculations performed in the first quarter of 2000,
      $16,741,000 of such reserves were returned to the Company by FSA.  A
      primary requirement was that annuity policyholders must have converted
      their MBL Life policy to a policy type currently offered by the Company or
      one of its affiliates by December 31, 1999.  Pursuant to the
      agreement, the enhancements were scheduled to be credited in four
      installments on January 1, 2000, June 30, 2001, June 30, 2002 and June 30,
      2003, to eligible policies still active on each of those dates.



F-14










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**4.** | **ACQUISITION
      (Continued)**                                                                                                                                                                                                                                                                                                                   
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | The Company's portion of the payment due
      on January 1, 2000 amounted to $58,329,000 and was either credited to the
      accounts of the policyholders or paid as benefits through withdrawals or
      accelerated death benefits during 2000.  On December 31, 2000, the
      enhancement reserve for such payments totaled
  $162,653,000.



F-15










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**5.** | **INVESTMENTS**                                                                                                                                     
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------
|       | The amortized cost and estimated fair
      value of bonds, notes and redeemable preferred stocks available for sale
      by major category follow:



**Amortized
      Cost**
    
    **Estimated Fair
      Value**(In thousands)AT DECEMBER 31, 2000:Securities of the United
      StatesGovernment
    
    $
    19,164
    
    $
    18,868Mortgage-backed
securities
    
    
    1,651,581
    
    
    1,636,304Securities of public
      utilities
    
    
    154,076
    
    
    151,209Corporate bonds and notes
    
    
    1,426,845
    
    
    1,329,001Redeemable preferred
    stocks
    
    
    1,375
    
    
    1,375Other debt securities
    
    
    877,529
    
    
    871,145Total
    
    $
    4,130,570
    
    $
    4,007,902AT DECEMBER 31, 1999:Securities of the United
      StatesGovernment
    
    $
    24,688
    
    $
    22,884Mortgage-backed
securities
    
    
    1,505,729
    
    
    1,412,134Securities of public
      utilities
    
    
    114,933
    
    
    107,596Corporate bonds and notes
    
    
    1,676,006
    
    
    1,596,469Redeemable preferred
    stocks
    
    
    4,375
    
    
    4,547Other debt securities
    
    
    829,997
    
    
    809,539Total
    
    $
    4,155,728
    
    $
    3,953,169






| | The amortized cost and estimated fair value
      of bonds, notes and redeemable preferred stocks available for sale by
      contractual maturity, as of December 31, 2000,
  follow:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



**Amortized
      Cost**
    
    **Estimated Fair
      Value**(In thousands)Due in one year or less
    
    $
    66,156
    
    $
    64,269Due after one year
throughfive years
    
    
    805,277
    
    
    795,040Due after five years
    throughten years
    
    
    1,023,591
    
    
    938,495Due after ten years
    
    
    583,965
    
    
    573,794Mortgage-backed
securities
    
    
    1,651,581
    
    
    1,636,304Total
    
    $
    4,130,570
    
    $
    4,007,902






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



F-16










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**5.** | **INVESTMENTS
      (Continued)**                                                                                                         
|------ | ------------------------------------------------------------------------------------------------------------------------------------------
|       | Gross unrealized gains and losses on
      bonds, notes and redeemable preferred stocks available for sale by major
      category follow:



**GrossUnrealizedGains**
    
    **GrossUnrealizedLosses**(In thousands)AT DECEMBER 31, 2000:Securities of the United
      StatesGovernment
    
    $
    17
    
    $
    (313
    )Mortgage-backed
securities
    
    
    10,000
    
    
    (25,277
    )Securities of public
      utilities
    
    
    267
    
    
    (3,134
    )Corporate bonds and notes
    
    
    12,682
    
    
    (110,526
    )Other debt securities
    
    
    11,482
    
    
    (17,866
    )Total
    
    $
    34,448
    
    $
    (157,116
    )AT DECEMBER 31, 1999:Securities of the United
      StatesGovernment
    
    $
    47
    
    $
    (1,852
    )Mortgage-backed
securities
    
    
    3,238
    
    
    (96,832
    )Securities of public
      utilities
    
    
    13
    
    
    (7,350
    )Corporate bonds and notes
    
    
    10,222
    
    
    (89,758
    )Redeemable preferred
    stocks
    
    
    172
    
    
    ---Other debt securities
    
    
    4,275
    
    
    (24,734
    )Total
    
    $
    17,967
    
    $
    (220,526
    )






| | Gross unrealized gains on equity securities
      available for sale aggregated $18,000 at December 31, 2000.  Gross
      unrealized losses on equity securities available for sale aggregated
      $45,000 at December 31, 2000.  There were no unrealized gains or
      losses on equity securities available for sale at December 31,
      1999.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-17






|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**5.** | **INVESTMENTS
      (Continued)**                                                       
|------ | ----------------------------------------------------------------------------------------
|       | Gross realized investment gains and
      losses on sales of investments are as
follows:



****
    ****
    ****
    ****
    ****
    ****
    ****
    **Years
      Ended December 31,**
    ****
    **Three Months
      Ended**
    ****
    **Year
      Ended**
    ********
    ****
    ****
    ****
    ****
    ****
    ****
    ****
    **2000**
    ****
    **1999**
    ****
    **December 31,
      1998**
    ****
    **September 30,
      1998**(In
    thousands)BONDS, NOTES ANDREDEEMABLE PREFERREDSTOCKS:Realized gains
    
    $
    9,608
    
    $
    8,333
    
    $
    6,669
    
    $
    28,086Realized losses
    
    
    (5,573
    )
    
    (26,113
    )
    
    (5,324
    )
    
    (4,627
    )MORTGAGE LOANS:Realized losses
    
    
    (276
    )
    
    ---
    
    
    ---
    
    
    ---COMMON STOCKS:Realized gains
    
    
    610
    
    
    4,239
    
    
    12
    
    
    337Realized losses
    
    
    ---
    
    
    (11
    )
    
    (9
    )
    
    ---OTHER INVESTMENTS:Realized gains
    
    
    1,091
    
    
    ---
    
    
    573
    
    
    8,824IMPAIRMENT WRITEDOWNS
    
    
    (20,637
    )
    
    (6,068
    )
    
    (1,650
    )
    
    (13,138
    )Total net realizedinvestment gains(losses)
    
    $
    (15,177
    )
    $
    (19,620
    )
    $
    271
    
    $
    19,482






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

****
    ****
    ****
    ****
    ****
    ****
    ****
    **Years
      Ended December 31,**
    ****
    **Three Months
      Ended**
    ****
    **Year
      Ended**
    ********
    ****
    ****
    ****
    ****
    ****
    ****
    ****
    **2000**
    ****
    **1999**
    ****
    **December 31,
      1998**
    ****
    **September 30,
      1998**(In
    thousands)Short-term investments
    
    $
    21,683
    
    $
    61,764
    
    $
    4,649
    
    $
    12,524Bonds, notes andredeemable preferredstocks
    
    
    290,157
    
    
    348,373
    
    
    39,660
    
    
    156,140Mortgage loans
    
    
    60,608
    
    
    47,480
    
    
    7,904
    
    
    29,996Common stocks
    
    
    ---
    
    
    7
    
    
    ---
    
    
    34Real estate
    
    
    121
    
    
    (525
    )
    
    13
    
    
    (467
    )Partnerships
    
    
    7,031
    
    
    6,631
    
    
    352
    
    
    24,311Other invested assets
    
    
    26,868
    
    
    58,223
    
    
    1,700
    
    
    (572
    )Less: investment expenses
    
    
    (7,113
    )
    
    (5,952
    )
    
    (725
    )
    
    (3,173
    )Total investmentincome
    
    $
    399,355
    
    $
    516,001
    
    $
    53,553
    
    $
    218,793




F-18










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**5.** | **INVESTMENTS
      (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | At December 31, 2000, no investments
      exceeded 10% of the Company's consolidated shareholder's
equity.
      At December 31, 2000, mortgage loans were
      collateralized by properties located in 30 states, with loans totaling
      approximately 33% of the aggregate carrying value of the portfolio secured
      by properties located in California and approximately 10% by properties
      located in New York.  No more than 8% of the portfolio was secured by
      properties in any other single state.
      At December 31, 2000, bonds, notes and
      redeemable preferred stocks included $267,891,000 of bonds and notes not
      rated investment grade.  The Company had no material concentrations
      of non-investment-grade assets at December 31, 2000.
      At December 31, 2000, the carrying value of
      investments in default as to the payment of principal or interest was
      $3,563,000 of bonds which approximates   its estimated fair
      value.
      As a component of its asset and liability
      management strategy, the Company utilizes Swap Agreements to match assets
      more closely to liabilities.  Swap Agreements are agreements to
      exchange with a counterparty interest rate payments of differing character
      (for example, variable-rate payments exchanged for fixed-rate payments)
      based on an underlying principal balance (notional principal) to hedge
      against interest rate changes.  The Company typically utilizes Swap
      Agreements to create a hedge that effectively converts floating-rate
      assets and liabilities to fixed-rate instruments.  At December 31,
      2000, the Company had one outstanding asset Swap Agreement with a notional
      principal amount of $97,000,000 and one outstanding liability Swap
      Agreement with a notional principal amount of $28,688,000.  The asset
      Swap Agreement was entered into in May 2000 and matures in June
      2002.  The liability Swap Agreement was entered into in December 1996
      and matures in December 2024.  The interest income on the asset Swap
      Agreement is included in Investment Income in the income statement, while
      the interest paid on the liability Swap Agreement is included in Interest
      Expense on Guaranteed Investment Contracts in the income statement. 
      The net interest income (paid) amounted to $43,000 for the year ended
      December 31, 2000, $(215,000) for the year ended December 31, 1999,
      $(54,000) for the three months ended December 31, 1998 and $(278,000) for
      the year ended September 30, 1998.
      At December 31, 2000, $8,955,000 of bonds,
      at amortized cost, were on deposit with regulatory authorities in
      accordance with statutory requirements.



F-19










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**6.** | **FAIR VALUE OF FINANCIAL
      STATEMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | The 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 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.The following methods
      and assumptions were used to estimate the fair value of each class of
      financial instruments for which it is practicable to estimate that value:
      CASH AND SHORT-TERM INSTRUMENTS: 
      Carrying value is considered to be a reasonable estimate of fair
      value.
      BONDS, NOTES AND REDEEMABLE PREFERRED
      STOCKS:  Fair value is based principally on independent pricing
      services, broker quotes and other independent information.
      MORTGAGE LOANS:  Fair values are
      primarily determined by discounting future cash flows to the present at
      current market rates, using expected prepayment rates.SEPARATE ACCOUNT SEED MONEY:  Fair value is considered to be
      the market value of the underlying securities.
      COMMON STOCKS:  Fair
      value is based principally on independent pricing services, broker quotes
      and other independent information.POLICY LOANS:  Carrying value is
      considered to be a reasonable estimate of fair value.PARTNERSHIPS:  Fair value of partnerships accounted for by
      using the cost method is based upon the fair value of the net assets of
      the partnerships as determined by the general
  partners.



F-20










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**6.** | **FAIR VALUE OF FINANCIAL STATEMENTS
      (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | VARIABLE ANNUITY ASSETS HELD IN SEPARATE
      ACCOUNTS:  Variable annuity assets are carried at the market value of
      the underlying securities.RECEIVABLE FROM/PAYABLE
      TO BROKERS FOR SALES/PURCHASES OF SECURITIES:  Such amounts represent
      transactions of a short-term nature for which the carrying value is
      considered a reasonable estimate of fair value.
      RESERVES FOR FIXED ANNUITY CONTRACTS: 
      Deferred annuity contracts are assigned a fair value equal to current net
      surrender value.  Annuitized contracts are valued based on the
      present value of future cash flows at current pricing rates.
      RESERVES FOR GUARANTEED INVESTMENT
      CONTRACTS:  Fair value is based on the present value of future cash
      flows at current pricing rates and is net of the estimated fair value of a
      hedging Swap Agreement, determined from independent broker
      quotes.
      VARIABLE ANNUITY LIABILITIES RELATED TO
      SEPARATE ACCOUNTS: Variable annuity liabilities are carried at the market
      value of the underlying securities of the variable annuity assets held in
      separate accounts.
      SUBORDINATED NOTES PAYABLE TO
      AFFILIATES:  Fair value is estimated based on the quoted market
      prices for similar issues.



F-21










|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------



|**6.** | **FAIR VALUE OF FINANCIAL STATEMENTS
      (Continued)**                                                                                                                    
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | The estimated fair values of the
      Company's financial instruments at December 31, 2000 and 1999 compared
      with their respective carrying values, are as
  follows:



**CarryingValue**
    ****
    **FairValue**(In
    thousands)DECEMBER 31, 2000:ASSETS:Cash and short-term
      investments
    
    $
    169,701
    
    $
    169,701Bonds, notes and
    redeemablepreferred stocks
    
    
    4,007,902
    
    
    4,007,902Mortgage loans
    
    
    684,174
    
    
    711,543Policy loans
    
    
    244,436
    
    
    244,436Separate account seed
    money
    
    
    104,678
    
    
    104,678Common stocks
    
    
    974
    
    
    974Partnerships
    
    
    8,216
    
    
    9,915Variable annuity assets held
      inseparate accounts
    
    
    20,393,820
    
    
    20,393,820Receivable from brokers for
      salesof securities
    
    
    15
    
    
    15LIABILITIES:Reserves for fixed annuity
      contracts
    
    
    2,778,229
    
    
    2,618,719Reserves for guaranteed
      investmentcontracts
    
    
    610,672
    
    
    610,672Payable to brokers for purchases
      ofsecurities
    
    
    3,662
    
    
    3,662Variable annuity liabilities
      relatedto separate accounts
    
    
    20,393,820
    
    
    20,393,820Subordinated notes payable
    toaffiliates
    
    
    55,119
    
    
    57,774




|F-22
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------



|**6.** | **FAIR VALUE OF FINANCIAL STATEMENTS
      (Continued)**
|------ | --------------------------------------------------------



| |                    |                                            |                      |   |           |            | **CarryingValue**  | ****      | **FairValue** | 
| | ------------------ | ------------------------------------------ | -------------------- | - | --------- | ---------- | ------------------ | --------- | ------------- | 
| |                    |                                            |                      |   |           |            |                   
| |                    |                                            |                      |   |           |            | (In
    thousands)
| |                    |                                            |                      |   |           |            |                   
| | DECEMBER 31, 1999: |                                            |                      |   |           |            |                    |          
| |                    |                                            |                      |   |           |            |                    |           |               | 
| | ASSETS:            |                                            |                      |   |           |            |                    |          
| |                    | Cash and short-term
      investments      |                      | $ | 462,915   |            | $                  | 462,915   |              
| |                    | Bonds, notes and
    redeemable            |                      |   |           |            |                    |           |              
| |                    |                                            | preferred stocks     |   |           | 3,953,169  |                    |           | 3,953,169     | 
| |                    | Mortgage loans                             |                      |   | 674,679   |            |                    | 673,781   |              
| |                    | Policy loans                               |                      |   | 260,066   |            |                    | 260,066   |              
| |                    | Separate account seed
    money            |                      |   | 144,231   |            |                    | 144,231   |              
| |                    | Common stocks                              |                      |   | ---       |            |                    | ---       |              
| |                    | Partnerships                               |                      |   | 4,009     |            |                    | 9,114     |              
| |                    | Variable annuity assets held
      in      |                      |   |           |            |                    |           |              
| |                    |                                            | separate accounts    |   |           | 19,949,145 |                    |           | 19,949,145    | 
| |                    | Receivable from brokers for
      sales    |                      |   |           |            |                    |           |              
| |                    |                                            | of securities        |   |           | 54,760     |                    |           | 54,760        | 
| |                    |                                            |                      |   |           |            |                    |           |               | 
| | LIABILITIES:       |                                            |                      |   |           |            |                    |          
| |                    | Reserves for fixed annuity
      contracts |                      |   | 3,254,895 |            |                    | 3,053,660 |              
| |                    | Reserves for guaranteed
      investment   |                      |   |           |            |                    |           |              
| |                    |                                            | contracts            |   |           | 305,570    |                    |           | 305,570       | 
| |                    | Payable to brokers for purchases
      of  |                      |   |           |            |                    |           |              
| |                    |                                            | securities           |   |           | 139        |                    |           | 139           | 
| |                    | Variable annuity liabilities
      related |                      |   |           |            |                    |           |              
| |                    |                                            | to separate accounts |   |           | 19,949,145 |                    |           | 19,949,145    | 
| |                    | Subordinated notes payable
    to          |                      |   |           |            |                    |           |              
| |                    |                                            | affiliates           |   |           | 37,816     |                    |           | 38,643        | 



|**7.** | **SUBORDINATED NOTES PAYABLE TO
      AFFILIATES**                                                                                                                                                                                                                                                
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | Subordinated notes (including accrued
      interest of $2,659,000) payable to affiliates totaled $55,119,000 at
      interest rates ranging from 8% to 9.5% at December 31, 2000, and require
      principal payments of $3,000,000 in 2001, $29,060,000 in 2002 and
      $20,400,000 in 2003.



|F-23
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------



|**8.** | **REINSURANCE**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | The Company guarantees a minimum level
      of death benefits for the majority of the Company's separate account
      contracts.  If assets in these separate accounts are insufficient to
      fund minimum policy benefits, the Company is obligated to pay the
      difference.  This exposure was reinsured on approximately 26% of the
      reserves as of December 31, 2000.  The Company does not expect its
      obligations under these guarantees to have a material impact on the
      Company's financial condition or results of operations.
      Certain of the Company's variable annuities
      provide for a Guaranteed Minimum Income Benefit in the form of guaranteed
      benefit payout upon annuitization.  All of the annuitization benefit
      at risk has been reinsured as of December 31, 2000.The business which was assumed from MBL Life as part of the
      Acquisition is subject to existing reinsurance ceded agreements.  At
      December 31, 1998, the maximum retention on any single life was
      $2,000,000, and a total credit of $5,057,000 was taken against the life
      insurance reserves, representing predominantly yearly renewable term
      reinsurance.  In order to limit even further the exposure to loss on
      any single insured and to recover an additional portion of the benefits
      paid over such limits, the Company entered into a reinsurance treaty
      effective January 1, 1999 under which the Company retains no more than
      $100,000 of risk on any one insured life.  At December 31, 2000, a
      total reserve credit of $4,160,000 was taken against the life insurance
      reserves.  With respect to these coinsurance agreements, the Company
      could become liable for all obligations of the reinsured policies if the
      reinsurers were to become unable to meet the obligations assumed under the
      respective reinsurance agreements.  The Company monitors its credit
      exposure with respect to these agreements.  However, due to the high
      credit ratings of the reinsurers, such risks are considered to be minimal.
      On August 1, 1999, the Company entered into
      a modified coinsurance transaction, approved by the Arizona Department of
      Insurance, which involved the ceding of approximately $6,000,000,000 of
      variable annuities to ANLIC Insurance Company (Hawaii), a non-affiliated
      stock life insurer.  The transaction is accounted for as reinsurance
      for statutory reporting purposes.  As part of the transaction, the
      Company received cash in the amount of $150,000,000 and recorded a
      corresponding deposit liability.  As payments are made to the
      reinsurer, the deposit liability is relieved.  The cost of this
      program, which amounted to $12,026,000 for the year ended December 31,
      2000 and $3,621,000 for the year ended December 31, 1999, is classified as
      General and Administrative Expenses in the Consolidated Statement of
      Income.
      On August 11, 1998, the Company entered into
      a similar modified coinsurance transaction, approved by the Arizona
      Department of Insurance, which involved the ceding of approximately
      $6,000,000,000 of variable annuities to ANLIC Insurance Company (Cayman),
      a Cayman Islands Stock life insurance company, effective December 31,
      1997.



F-24






|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------



|**8.** | **REINSURANCE
      (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 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 were made to the reinsurer, the reduction of
      DAC was relieved.  Certain expenses related  to this transaction
      were charged directly to DAC amortization in the income statement. 
      The net effect of this transaction in the income statement was not
      material.
      On December 31, 1998, the Company recaptured
      this business.  As part of this recapture, the Company paid cash of
      $170,436,000 and recorded an increase in DAC of $167,202,000 with the
      balance of $3,234,000 being recorded as DAC amortization in the income
      statement.





|**9.** | **COMMITMENTS AND CONTINGENT
      LIABILITIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | The Company has entered into six
      agreements in which it has provided liquidity support for certain
      short-term securities of municipalities and non-profit organizations 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 at December 31,
      2000 is $925,000,000.  Related to each of these agreements are
      participation agreements with the Company's  Parent, under which the
      Parent will share in $460,100,000 of these liabilities in exchange for a
      proportionate percentage of the fees received under these agreements.
      Management does not anticipate any material future losses with respect to
      these commitments.
      In the ordinary course of business, the
      Company is obligated to purchase approximately $86,000,000 of asset backed
      securities as of December 31, 2000.
      The Company is involved in various kinds of
      litigation common to its businesses.  These cases are in various
      stages of development and, based on reports of counsel, management
      believes that provisions made for potential losses relating to such
      litigation are adequate and any further liabilities and costs will not
      have a material adverse impact upon the Company's financial position,
      results of operations or cash flows.
      The Company's current financial strength and
      counterparty credit ratings from Standard & Poor's are based in part
      on a guarantee (the "Guarantee") of the Company's insurance policy
      obligations by American Home Assurance Company ("American Home"), a
      subsidiary of AIG, and a member of an AIG intercompany pool, and the
      belief that the Company is viewed as a strategically important member of
      AIG.  The Guarantee is unconditional and irrevocable, and
      policyholders have the right to enforce the Guarantee directly against
      American Home.



|F-25
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------



|**9.** | **COMMITMENTS AND CONTINGENT
      LIABILITIES (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | The Company's current  financial
      strength rating from Moody's is basedin part on a support
      agreement between the Company and AIG (the "Support Agreement"), pursuant
      to which AIG has agreed that AIG will cause the Company to maintain a
      policyholder's surplus of not less than $1 million or such greater amount
      as shall be sufficient to enable the Company to perform its obligations
      under any policy  issued by it.  The Support Agreement also
      provides that if the Company needs funds not otherwise available to it to
      make timely payment of its obligations under policies issued by it, AIG
      will provide such funds at the request of the Company.  The Support
      Agreement is not a direct or indirect guarantee by AIG to any person of
      any obligations of the Company. AIG may terminate the Support Agreement
      with respect to outstanding obligations of the Company only under
      circumstances where the Company attains, without the benefit of the
      Support Agreement, a financial strength rating equivalent to that held by
      the Company with the  benefit  of the support agreement. 
      Policyholders have the right to cause the Company to enforce its rights
      against AIG and, if the Company fails or refuses to take timely action to
      enforce the Support Agreement or if the Company defaults in any claim or
      payment owed to such policyholder when due, have the right to enforce the
      Support Agreement directly against AIG.
      American Home does not publish financial
      statements, although it files statutory annual and quarterly reports with
      the New York State Insurance Department, where such reports are available
      to the public. AIG is a reporting company under the Securities Exchange
      Act of 1934, and publishes annual reports on Form 10-K and quarterly
      reports on Form 10-Q, which are available from the Securities and Exchange
      Commission.



|F-26
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------



|**10.** | **SHAREHOLDER'S
      EQUITY**                                                                                                                                                                                       
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | The Company is authorized to issue 4,000
      shares of its $1,000 par value Common Stock.  At December 31, 2000
      and 1999, 3,511 shares were outstanding.Changes in
      shareholder's equity are as follows:



****
    ****
    ****
    ****
    ****
    ****
    ****
    **Years
      Ended December 31,**
    ****
    **Three Months
      Ended**
    ****
    **Year
      Ended**
    ********
    ****
    ****
    ****
    ****
    ****
    ****
    ****
    **2000**
    ****
    **1999**
    ****
    **December 31,
      1998**
    ****
    **September 30,
      1998**(In
    thousands)ADDITIONAL PAID-INCAPITAL:Beginning balances
    
    $
    493,010
    
    $
    378,674
    
    $
    308,674
    
    $
    308,674Reclassification ofNote by the Parent
    
    
    ---
    
    
    170,436
    
    
    ---
    
    
    ---Return of capital
    
    
    ---
    
    
    (170,500
    )
    
    ---
    
    
    ---Capital contributionsreceived
    
    
    ---
    
    
    114,250
    
    
    70,000
    
    
    ---Contribution ofpartnershipinvestment
    
    
    ---
    
    
    150
    
    
    ---
    
    
    ---Ending balances
    
    $
    493,010
    
    $
    493,010
    
    $
    378,674
    
    $
    308,674RETAINED EARNINGS:Beginning balances
    
    $
    551,158
    
    $
    366,460
    
    $
    332,069
    
    $
    244,628Net income
    
    
    215,572
    
    
    184,698
    
    
    34,391
    
    
    138,641Dividends paid
    
    
    (69,000
    )
    
    ---
    
    
    ---
    
    
    (51,200
    )Ending balances
    
    $
    697,730
    
    $
    551,158
    
    $
    366,460
    
    $
    332,069ACCUMULATED OTHERCOMPREHENSIVE INCOME(LOSS):Beginning balances
    
    $
    (112,553
    )
    $
    (1,619
    )
    $
    8,415
    
    $
    18,405Change in netunrealized gains(losses) on debtsecuritiesavailable for sale
    
    
    79,891
    
    
    (198,659
    )
    
    (23,791
    )
    
    (23,818
    )Change in netunrealized gains(losses) on equitysecuritiesavailable for sale
    
    
    (27
    )
    
    (10
    )
    
    (44
    )
    
    (950
    )Change in adjustmentto deferredacquisition costs
    
    
    (7,600
    )
    
    28,000
    
    
    8,400
    
    
    9,400Tax effects of netchanges
    
    
    (25,293
    )
    
    59,735
    
    
    5,401
    
    
    5,378Ending balances
    
    $
    (65,582
    )
    $
    (112,553
    )
    $
    (1,619
    )
    $
    8,415




|F-27
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**10.** | **SHAREHOLDER'S EQUITY
      (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 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 less equity in undistributed income or loss of
      subsidiaries included in net investment income if, after paying the
      dividend, the Company's capital and surplus would be adequate in the
      opinion of the Arizona Department of Insurance. Dividends of $69,000,000
      and $51,200,000 were paid on March 1, 2000 and June 4, 1998,
      respectively.  No dividends were paid in the year ended December 31,
      1999 or the three months ended December 31, 1998.
      Under statutory accounting principles
      utilized in filings with insurance regulatory authorities, the Company's
      net income for the years ended December 31, 2000 and 1999 was
      approximately $168,367,000 and $261,539,000, respectively.  The
      statutory net loss for the year ended December 31, 1998 was
      $98,766,000.  The Company's statutory capital and surplus totaled
      approximately $719,946,000 at December 31, 2000 and $694,621,000 at
      December 31, 1999.
      In 1998, the NAIC adopted the codification
      of statutory accounting principles ("Codification") which replaced the
      current Accounting Practices and Procedures Manual as the NAIC's primary
      guidance on statutory accounting, effective January 1, 2001. 
      Codification changes prescribed statutory accounting practices and will
      result in changes to the accounting practices that the company uses to
      prepare its statutory basis financial statements. Codification has been
      adopted  by all fifty states as the prescribed basis of accounting,
      including Arizona.  The impact of Codification on the Company's
      statutory surplus has not yet been determined.On
      June 30, 1999, the Parent cancelled the Company's surplus note payable of
      $170,436,000 and funds received were reclassified to Additional Paid-in
      Capital in the accompanying consolidated balance sheet.  On September
      9, 1999, the Company paid $170,500,000 to its Parent as a return of
      capital.  On September 14, 1999 and October 25, 1999, the Parent
      contributed additional capital to the Company in the amounts of
      $54,250,000 and $60,000,000, respectively.  Also on December 31,
      1999, the Parent made a $150,000 contribution of partnership investments
      to the Company.



|F-28
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**11.** | **INCOME
  TAXES**                                                                                            
|------- | --------------------------------------------------------------------------------------------------------------
|        | The components of the provisions for
      federal income taxes on pretax income consist of the
    following:



**Net
      RealizedInvestmentGains (Losses)**
    ****
    **Operations**
    ****
    **Total**(In
    thousands)YEAR ENDED DECEMBER 31,
    2000:Currently payable
    
    $
    2,791
    
    $
    (8,473
    )
    $
    (5,682
    )Deferred
    
    
    (8,103
    )
    
    122,230
    
    
    114,127Total income tax expense
    
    $
    (5,312
    )
    $
    113,757
    
    $
    108,445YEAR ENDED DECEMBER 31,
    1999:Currently payable
    
    $
    6,846
    
    $
    196,192
    
    $
    203,038Deferred
    
    
    (13,713
    )
    
    (86,300
    )
    
    (100,013
    )Total income tax expense(benefit)
    
    $
    (6,867
    )
    $
    109,892
    
    $
    103,025THREE MONTHS ENDED DECEMBER 31,
      1998:Currently payable
    
    $
    740
    
    $
    3,421
    
    $
    4,161Deferred
    
    
    (620
    )
    
    16,565
    
    
    15,945Total income tax expense
    
    $
    120
    
    $
    19,986
    
    $
    20,106YEAR ENDED SEPTEMBER 30,
      1998:Currently payable
    
    $
    4,221
    
    $
    32,743
    
    $
    36,964Deferred
    
    
    (550
    )
    
    34,637
    
    
    34,087Total income tax expense
    
    $
    3,671
    
    $
    67,380
    
    $
    71,051






|F-29
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**11.** | **INCOME TAXES
      (Continued)**                                                                                                
|------- | ----------------------------------------------------------------------------------------------------------------------------------
|        | Income taxes computed at the United
      States federal income tax rate of 35% and income taxes provided differ as
      follows:



**Years
      Ended December 31,**
    ****
    **Three Months
      Ended**
    ****
    **Year
      Ended**
    ********
    ****
    ****
    ****
    ****
    ****
    ****
    ****
    **2000**
    ****
    **1999**
    ****
    **December 31,
      1998**
    ****
    **September 30,
      1998**(In
    thousands)Amount computed atstatutory rate
    
    $
    113,406
    
    $
    100,703
    
    $
    19,074
    
    $
    73,392Increases (decreases)resulting from:Amortization ofdifferences betweenbook and tax basesof net assetsacquired
    
    
    597
    
    
    609
    
    
    146
    
    
    460State income taxes,net of federal taxbenefit
    
    
    9,718
    
    
    7,231
    
    
    1,183
    
    
    5,530Dividends-receiveddeduction
    
    
    (10,900
    )
    
    (3,618
    )
    
    (345
    )
    
    (7,254
    )Tax credits
    
    
    (2,382
    )
    
    (1,346
    )
    
    
    
    
    (1,296
    )Other, net
    
    
    (1,994
    )
    
    (554
    )
    
    48
    
    
    219Total income taxexpense
    
    $
    108,445
    
    $
    103,025
    
    $
    20,106
    
    $
    71,051






| | For United States federal income tax
      purposes, certain amounts from life insurance operations are accumulated
      in a memorandum policyholders' surplus account and are taxed only when
      distributed to shareholders or when such account exceeds prescribed
      limits. The accumulated policyholders' surplus was $14,300,000 at December
      31, 2000.  The Company does not anticipate any transactions which
      would cause any part of this surplus to be taxable.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              





|F-30
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**11.** | **INCOME TAXES
      (Continued)**                                                                                                                                                                                                                                                                                                         
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 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:



**December
      31,2000**
    ****
    **December
      31,1999**(In
    thousands)DEFERRED TAX LIABILITIES:Investments
    
    $
    18,738
    
    $
    23,208Deferred acquisition
costs
    
    
    317,995
    
    
    272,697State income taxes
    
    
    9,640
    
    
    5,203Other liabilities
    
    
    55,101
    
    
    18,658Total deferred tax
      liabilities
    
    
    401,474
    
    
    319,766DEFERRED TAX ASSETS:Contractholder reserves
    
    
    (247,591
    )
    
    (261,781
    )Guaranty fund assessments
    
    
    (3,610
    )
    
    (2,454
    )Deferred income
    
    
    (28,982
    )
    
    (48,371
    )Net unrealized losses on debt and
      equitysecurities available for
    sale
    
    
    (35,313
    )
    
    (60,605
    )Total deferred tax assets
    
    
    (315,496
    )
    
    (373,211
    )Deferred income taxes
    
    $
    85,978
    
    $
    (53,445
    )






|**12.** | **RELATED-PARTY
      MATTERS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | The Company 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
      $44,584,000 in the year ended December 31, 2000, $37,435,000 in the year
      ended December 31, 1999, $6,977,000 in the three months ended December 31,
      1998 and $32,946,000 in the year ended September 30, 1998.  These
      broker-dealers, when combined with the Company's wholly owned
      broker-dealer, distribute a significant portion of the Company's products,
      amounting to approximately 33.8%, 35.6%, 35.6% and 33.6% of premiums for
      each of the respective periods.
      The Company purchases administrative,
      investment management, accounting, marketing and data processing services
      from its Parent and SunAmerica, an indirect parent.  Amounts paid for
      such services totaled $132,034,000 for the year ended December 31, 2000,
      $105,059,000 for the year ended December 31, 1999, $21,593,000 for the
      three months ended December 31, 1998 and $84,975,000 for the year ended
      September 30, 1998.  The marketing component of such costs during
      these periods amounted to $61,954,000, $53,385,000,  $9,906,000 and
      $39,482,000, respectively, and are deferred and amortized as part of
      Deferred Acquisition Costs.  The other components of such costs are
      included in General and Administrative Expenses in the income
      statement.





|F-31
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**12.** | **RELATED-PARTY MATTERS
      (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | At December 31, 2000, the Company held
      no investments issued by any of its affiliates.  At December 31,
      1999, the Company held bonds with a fair value of $50,000 which were
      issued by its affiliate, International Lease Finance Corp.  The
      amortized cost of these bonds is equal to the fair value.
      During the year ended December 31, 2000, FSA
      transferred $16,741,000 of cash to the Company related to policy
      enhancements of the New York Business from the Acquisition (see Note
      4).
      During the year ended December 31, 2000, the
      Company transferred $20,055,000 of cash to the Parent as a result of
      policy enhancements granted to annuity policyholders who converted their
      MBL Life policies to policies of the Parent (see Note 4).
      During the year ended December 31, 2000, the
      Company sold various invested assets from the Parent for cash equal to
      their current market value of $6,362,000.
      During the year ended December 31, 1999, the
      Company transferred short-term investments and bonds to FSA with an
      aggregate fair value of $634,596,000 as part of the transfer of the New
      York Business from the Acquisition (See Note 4).  The Company
      recorded a net realized loss of $5,144,000 on the transfer of these
      assets.
      During the year ended December 31, 1999, the
      Company purchased certain invested assets from SunAmerica for cash equal
      to their current market value of $161,159,000.
      During the year ended September 30, 1998,
      the Company sold various invested assets to SunAmerica for cash equal to
      their current market value of $64,431,000.  The Company recorded a
      net gain aggregating $16,388,000 on such transactions.
      During the year ended September 30, 1998,
      the Company purchased certain invested assets from SunAmerica, the Parent
      and CalAmerica Life Insurance Company, a wholly-owned subsidiary of the
      Parent that has since merged into the Parent, for cash equal to their
      current market value which aggregated $20,666,000, $10,468,000 and
      $61,000, respectively.





|F-32
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**13.** | **BUSINESS
  SEGMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | The Company has three business
      segments:  annuity operations, asset management operations and
      broker-dealer operations.  The accounting policies of the segments
      are the same as those described in Note 2 - Summary of Significant
      Accounting Policies.  The Company evaluates performance and allocates
      reserves based on profit or loss from operations before income
      taxes.  There were no intersegment revenues during all periods
      presented.  Substantially all of the Company's revenues are derived
      from the United States.  The Parent makes expenditures for long-lived
      assets for the annuity operations segment and allocates depreciation of
      such assets to the annuity operations segment.
      Products for the annuity operations and
      asset management operations are marketed through affiliated and
      independent broker-dealers, full-service securities firms and financial
      institutions.  One independent selling organization in the annuity
      operations represented 16.9% of sales in the year ended December 31, 2000,
      12.0% of sales in the year ended December 31, 1999, 14.7% in the three
      months ended December 31, 1998 and 16.8% in the year ended September 30,
      1998.  No other independent selling organization was responsible for
      10% of sales for any such period.  There was no single independent
      selling organization that accounted for 10% of sales in the asset
      management operations.  Registered representatives sell products
      offered by the broker-dealer operations.  Revenue from any single
      registered representative or group of registered representatives do not
      compose a material percentage of total revenues in the broker-dealer
      operations.





|F-33
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**13.** | **BUSINESS
    SEGMENTS (Continued)**                      
|------- | -----------------------------------------------------------
|        | Summarized data for the Company's
business segments follow:



**AnnuityOperations**
    ****
    **AssetManagementOperations**
    ****
    **Broker-DealerOperations**
    ****
    **Total**(In
    thousands)YEAR ENDEDDECEMBER 31, 2000:Investment income
    
    $
    388,368
    
    $
    9,800
    
    $
    1,187
    
    $
    399,355Interest expense
    
    
    (260,709
    )
    
    (3,784
    )
    
    (360
    )
    
    (264,853
    )Net investment income
    
    
    127,659
    
    
    6,016
    
    
    827
    
    
    134,502Net realized investmentlosses
    
    
    (15,177
    )
    
    ---
    
    
    ---
    
    
    (15,177
    )Total fee income
    
    
    430,489
    
    
    99,567
    
    
    60,743
    
    
    590,799General andadministrative expenses
    
    
    (95,303
    )
    
    (44,266
    )
    
    (32,058
    )
    
    (171,627
    )Amortization of deferredacquisition costs
    
    
    (125,035
    )
    
    (32,972
    )
    
    ---
    
    
    (158,007
    )Annual commissions
    
    
    (56,473
    )
    
    ---
    
    
    ---
    
    
    (56,473
    )Pretax income
    
    $
    266,160
    
    $
    28,345
    
    $
    29,512
    
    $
    324,017Total assets
    
    $
    26,908,888
    
    $
    199,075
    
    $
    81,515
    
    $
    27,189,478Expenditures for long-lived assets
    
    $
    ---
    
    $
    454
    
    $
    1,600
    
    $
    2,054






|F-34
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**13.** | **BUSINESS
    SEGMENTS (Continued)**
|------- | -------------------------------------



**AnnuityOperations**
    ****
    **AssetManagementOperations**
    ****
    **Broker-DealerOperations**
    ****
    **Total**(In
    thousands)YEAR ENDEDDECEMBER 31, 1999:Investment income
    
    $
    505,962
    
    $
    9,072
    
    $
    967
    
    $
    516,001Interest expense
    
    
    (354,263
    )
    
    (3,085
    )
    
    (389
    )
    
    (357,737
    )Net investment income
    
    
    151,699
    
    
    5,987
    
    
    578
    
    
    158,264Net realized investmentlosses
    
    
    (19,620
    )
    
    ---
    
    
    ---
    
    
    (19,620
    )Total fee income
    
    
    349,066
    
    
    55,885
    
    
    48,411
    
    
    453,362General andadministrative expenses
    
    
    (93,449
    )
    
    (24,856
    )
    
    (28,378
    )
    
    (146,683
    )Amortization of deferredacquisition costs
    
    
    (94,910
    )
    
    (21,930
    )
    
    ---
    
    
    (116,840
    )Annual commissions
    
    
    (40,760
    )
    
    ---
    
    
    ---
    
    
    (40,760
    )Pretax income
    
    $
    252,026
    
    $
    15,086
    
    $
    20,611
    
    $
    287,723Total assets
    
    $
    26,649,310
    
    $
    150,966
    
    $
    74,218
    
    $
    26,874,494Expenditures for long-lived assets
    
    $
    ---
    
    $
    2,271
    
    $
    2,728
    
    $
    4,999






|F-35
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**13.** | **BUSINESS
    SEGMENTS**
|------- | -------------------------



**AnnuityOperations**
    ****
    **AssetManagementOperations**
    ****
    **Broker-DealerOperations**
    ****
    **Total**(In
    thousands)THREE MONTHS ENDEDDECEMBER 31, 1998:Investment income
    
    $
    52,424
    
    $
    971
    
    $
    158
    
    $
    53,553Interest expense
    
    
    (26,842
    )
    
    (752
    )
    
    (101
    )
    
    (27,695
    )Net investment income
    
    
    25,582
    
    
    219
    
    
    57
    
    
    25,858Net realized investmentgains (losses)
    
    
    (238
    )
    
    509
    
    
    ---
    
    
    271Total fee income
    
    
    60,876
    
    
    11,333
    
    
    11,121
    
    
    83,330General andadministrative expenses
    
    
    (9,363
    )
    
    (5,171
    )
    
    (6,734
    )
    
    (21,268
    )Amortization of deferredacquisition costs
    
    
    (23,111
    )
    
    (3,959
    )
    
    ---
    
    
    (27,070
    )Annual commissions
    
    
    (6,624
    )
    
    ---
    
    
    ---
    
    
    (6,624
    )Pretax income
    
    $
    47,122
    
    $
    2,931
    
    $
    4,444
    
    $
    54,497Total assets
    
    $
    22,982,323
    
    $
    104,473
    
    $
    59,537
    
    $
    23,146,333Expenditures for long-lived assets
    
    $
    ---
    
    $
    308
    
    $
    1,005
    
    $
    1,313






|F-36
|----









|**ANCHOR NATIONAL LIFE INSURANCE
      COMPANY**
      **NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS (Continued)**
|-----------------------------------------------------------------------------------------------------------------------





|**13.** | **BUSINESS
    SEGMENTS**
|------- | -------------------------



**AnnuityOperations**
    ****
    **AssetManagementOperations**
    ****
    **Broker-DealerOperations**
    ****
    **Total**(In
    thousands)YEAR ENDEDSEPTEMBER 30, 1998:Investment income
    
    $
    214,871
    
    $
    2,839
    
    $
    1,083
    
    $
    218,793Interest expense
    
    
    (131,980
    )
    
    (2,709
    )
    
    (405
    )
    
    (135,094
    )Net investment income
    
    
    82,891
    
    
    130
    
    
    678
    
    
    83,699Net realized investmentgains (losses)
    
    
    19,615
    
    
    (133
    )
    
    ---
    
    
    19,482Total fee income
    
    
    207,450
    
    
    36,632
    
    
    46,280
    
    
    290,362General andadministrative expenses
    
    
    (49,732
    )
    
    (18,640
    )
    
    (24,557
    )
    
    (92,929
    )Amortization of deferredacquisition costs
    
    
    (58,833
    
    
    (13,880
    
    
    ---
    
    
    (72,713Annual commissions
    
    
    (18,209
    )
    
    ---
    
    
    ---
    
    
    (18,209Pretax income
    
    $
    183,182
    
    $
    4,109
    
    $
    22,401
    
    $
    209,692Total assets
    
    $
    14,389,922
    
    $
    104,476
    
    $
    55,870
    
    $
    14,550,268Expenditures for long-lived assets
    
    $
    ---
    
    $
    205
    
    $
    5,289
    
    $
    5,494






|F-37
|----