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

                                  FORM 10-Q


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

      For the quarterly period ended            March 31, 1998
                                    --------------------------------------
                                     OR

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

      For the transition period from_________________to__________________

                        Commission file number 1-4618


                               SUNAMERICA INC.
           (Exact Name of Registrant as Specified in Its Charter)

                     Maryland                         86-0176061
      (State or Other Jurisdiction of     (IRS Employer Identification No.)
        Incorporation or Organization)

           1 SunAmerica Center, Los Angeles, California 90067-6022
           (Address of Principal Executive Offices)     (Zip Code)

      Registrant's telephone number, including area code:  (310) 772-6000


      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days   Yes  X   No   .
                                               ---    ---

      Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date:

      Common Stock, par value $1.00 per share, 179,117,646 shares outstanding

      Nontransferable Class B Stock, par value $1.00 per share, 16,272,702
shares outstanding




<PAGE>  2

                                      



                               SUNAMERICA INC.

                                    INDEX


                                                                      Page
                                                                    Number(s)
                                                                    ---------
Part I - Financial Information 

      Consolidated Balance Sheet (Unaudited) -
      March 31, 1998 and September 30, 1997                            3-4


      Consolidated Income Statement (Unaudited) -
      Three Months and Six Months Ended March 31, 1998 and 1997        5


      Consolidated Statement of Cash Flows (Unaudited) -
      Six Months Ended March 31, 1998 and 1997                         6-7


      Notes to Consolidated Financial Statements (Unaudited)           8-12


      Management's Discussion and Analysis of Financial
        Condition and Results of Operations                            13-32

      
Part II - Other Information                                            33-35



<PAGE>  3
                                SUNAMERICA INC.
                          CONSOLIDATED BALANCE SHEET
                          (In thousands - unaudited)




                                                    March 31,    September 30,
                                                        1998             1997 
                                                 ------------    -------------
ASSETS
Investments:
  Cash and short-term investments                $    982,521    $     993,349
  Bonds, notes and redeemable preferred stocks
    available for sale, at fair value 
    (amortized cost: March 31, 1998, $18,481,489;
    September 30, 1997, $18,124,837)               18,955,142       18,523,655
  Mortgage loans                                    2,994,918        3,139,309
  Common stocks available for sale, at fair 
    value (cost: March 31, 1998, $32,423;
    September 30, 1997, $32,821)                      108,532           96,541
  Partnerships                                      1,541,707        1,286,793
  Real estate                                          55,149           81,569
  Other invested assets                               340,482          286,962
                                                 ------------    -------------
  Total investments                                24,978,451       24,408,178

Variable annuity assets                            11,415,780        9,514,675
Accrued investment income                             286,682          296,637
Deferred acquisition costs                          1,126,772        1,118,582
Other assets                                          431,895          298,814
                                                 ------------    -------------
TOTAL ASSETS                                     $ 38,239,580    $  35,636,886
                                                 ============    =============



See accompanying notes

<PAGE>  4
                                SUNAMERICA INC.
                    CONSOLIDATED BALANCE SHEET (Continued)
                          (In thousands - unaudited)

                                                    March 31,    September 30,
                                                        1998             1997 
                                                 ------------    -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Reserves, payables and accrued liabilities:
  Reserves for fixed annuity contracts          $  13,657,475    $  14,445,126
  Reserves for guaranteed investment contracts      6,690,547        5,553,292
  Trust deposits                                      438,416          427,433
  Payable to brokers for purchases of securities       88,153          266,477
  Income taxes currently payable                        3,647            2,025
  Other liabilities                                   862,462          828,916
                                                 ------------    -------------
  Total reserves, payables
    and accrued liabilities                        21,740,700       21,523,269
                                                 ------------    -------------
Variable annuity liabilities                       11,415,780        9,514,675
                                                 ------------    -------------
Long-term notes and debentures                      1,236,290        1,136,072
                                                 ------------    -------------
Deferred income taxes                                 505,079          383,764
                                                 ------------    -------------
Company-obligated mandatorily redeemable
  preferred securities of subsidiary grantor
  trusts whose sole assets are junior
  subordinated debentures of the Company              495,000          495,000
                                                 ------------    -------------
Shareholders' equity:
  Preferred Stock                                     248,000          248,000
  Nontransferable Class B Stock                        16,273           16,273
  Common Stock                                        179,093          179,076
  Additional paid-in capital                          746,072          750,401
  Retained earnings                                 1,392,638        1,180,446
  Net unrealized gains on debt and
    equity securities available for sale              264,655          209,910
                                                 ------------    -------------
  Total shareholders' equity                        2,846,731        2,584,106
                                                 ------------    -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $ 38,239,580    $  35,636,886
                                                 ============    =============



See accompanying notes

<PAGE>  5
<TABLE>
                                        SUNAMERICA INC.
                                 CONSOLIDATED INCOME STATEMENT
               For the three months and six months ended March 31, 1998 and 1997
                     (In thousands, except per-share amounts - unaudited)

<CAPTION>
                                                 Three months              Six months     
                                            ---------------------            -----------------------
                                                 1998        1997         1998        1997
                                            ---------   ---------   ----------   ---------
<S>                                         <C>         <C>         <C>          <C>      
Investment income                           $ 524,492   $ 393,676   $1,044,802   $ 764,221
                                            ---------   ---------   ----------   ---------
Interest expense on:
  Fixed annuity contracts                    (181,758)   (128,104)    (371,286)   (256,999)
  Guaranteed investment contracts             (96,129)    (76,316)    (186,814)   (143,495)
  Trust deposits                               (2,295)     (2,538)      (4,631)     (4,960)
  Senior indebtedness                         (28,826)    (23,109)     (58,139)    (42,900)
                                            ---------   ---------   ----------   ---------
  Total interest expense                     (309,008)   (230,067)    (620,870)   (448,354)
                                            ---------   ---------   ----------   ---------
Dividends paid on preferred
  securities of grantor trusts                (10,294)    (11,605)     (20,589)    (20,194)
                                            ---------   ---------   ----------   ---------
NET INVESTMENT INCOME                         205,190     152,004      403,343     295,673
                                            ---------   ---------   ----------   ---------
NET REALIZED INVESTMENT GAINS (LOSSES)          2,258      (9,442)       5,452     (18,746)
                                            ---------   ---------   ----------   ---------
Fee income:
  Variable annuity fees                        48,119      32,702       93,182      63,600
  Net retained commissions                     26,684      15,792       51,280      29,114
  Surrender charges                            13,245       6,928       25,793      14,525
  Asset management fees                         7,143       6,305       14,046      12,723
  Loan servicing fees                           5,996       6,238       11,659      12,007
  Trust fees                                    4,457       4,432        9,031       8,887
  Other fees                                    3,327       1,113        4,802       2,721
                                            ---------   ---------   ----------   ---------
TOTAL FEE INCOME                              108,971      73,510      209,793     143,577
                                            ---------   ---------   ----------   ---------
GENERAL AND ADMINISTRATIVE EXPENSES           (77,398)    (62,035)    (154,760)   (121,289)
                                            ---------   ---------   ----------   ---------
AMORTIZATION OF DEFERRED ACQUISITION COSTS    (55,628)    (30,003)    (111,096)    (60,413)
                                            ---------   ---------   ----------   ---------
PRETAX INCOME                                 183,393     124,034      352,732     238,802

Income tax expense                            (49,500)    (37,200)     (95,200)    (71,600)
                                            ---------   ---------   ----------   ---------
NET INCOME                                  $ 133,893   $  86,834   $  257,532   $ 167,202
                                            =========   =========   ==========   =========
NET INCOME PER SHARE:

  Basic                                     $    0.68   $    0.46   $     1.30   $    0.89
                                            =========   =========   ==========   =========
  Diluted                                   $    0.60   $    0.42   $     1.16   $    0.81
                                            =========   =========   ==========   =========
</TABLE>

See accompanying notes


<PAGE>  6

                                SUNAMERICA INC.
                     CONSOLIDATED STATEMENT OF CASH FLOWS
               For the six months ended March 31, 1998 and 1997
                          (In thousands - unaudited)

                                                         1998             1997
                                                 ------------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                     $    257,532     $    167,202
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Interest credited to:
        Fixed annuity contracts                       371,286          256,999
        Guaranteed investment contracts               186,814          143,495
        Trust deposits                                  4,631            4,960
      Net realized investment losses (gains)           (5,452)          18,746
      Accretion of net discounts on investments       (27,223)         (15,272)
      Provision for deferred income taxes              95,864            2,900
  Change in:
    Accrued investment income                           9,833          (16,350)
    Deferred acquisition costs                        (11,190)         (51,555)
    Other assets                                       (3,097)         (17,736)
    Income taxes currently payable                    (70,653)         (30,076)
    Other liabilities                                   6,044           66,456
  Other, net                                            2,588           (5,257)
                                                 ------------     ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES             816,977          524,512
                                                 ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of:
    Bonds, notes and redeemable preferred
      stocks                                      (10,296,518)      (8,434,061)
    Mortgage loans                                   (237,527)        (324,774)
    Partnerships                                     (788,973)        (450,310)
    Other investments, excluding short-term
      investments                                    (232,106)        (124,631)
    Net assets of Financial Service Corporation       (41,295)              --
    The annuity business of John Alden Financial
      Corporation                                          --          178,803
  Sales of:
    Bonds, notes and redeemable preferred
      stocks                                        7,726,195        5,653,174
    Partnerships                                      391,106          273,109
    Other investments, excluding short-term
      investments                                      42,096          102,019
  Redemptions and maturities of:
    Bonds, notes and redeemable preferred
      stocks                                        2,109,127        1,529,071
    Mortgage loans                                    381,988          137,718
    Partnerships                                      126,049          312,063
    Other investments, excluding short-term
      investments                                     205,781            3,738
                                                 ------------     ------------
NET CASH USED BY INVESTING ACTIVITIES                (614,077)      (1,144,081)
                                                 ------------     ------------




<PAGE>  7

                                SUNAMERICA INC.
               CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
               For the six months ended March 31, 1998 and 1997
                          (In thousands - unaudited)

                                                         1998             1997
                                                 ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments of cash dividends to shareholders     $    (45,340)    $    (34,521)
  Premium receipts on:
    Fixed annuity contracts                           786,352          824,103
    Guaranteed investment contracts                 1,605,217        1,232,586
  Net exchanges from the fixed accounts
    of variable annuity contracts                    (597,371)        (247,286)
  Receipts of trust deposits                          382,524          392,526
  Withdrawal payments on:
    Fixed annuity contracts                        (1,121,273)        (510,413)
    Guaranteed investment contracts                  (656,230)        (393,218)
    Trust deposits                                   (376,174)        (376,198)
  Claims and annuity payments on fixed
    annuity contracts                                (231,872)        (150,081)
  Net proceeds from issuances of long-term
    notes                                              99,078          429,383
  Net repayments of other short-term financings       (58,639)         (14,197)
  Net proceeds from issuance of preferred
    securities of a subsidiary grantor trust               --          299,541
  Payment for redemption of Series C
    Preferred Stock                                        --          (48,680)
  Payment of issuance costs of 8-1/2% Premium
    Equity Redemption Cumulative Security Units            --          (45,362)
                                                 ------------     ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES     (213,728)       1,358,183
                                                 ------------     ------------
NET INCREASE (DECREASE) IN CASH AND 
  SHORT-TERM INVESTMENTS                              (10,828)         738,614

CASH AND SHORT-TERM                                          
  INVESTMENTS AT BEGINNING OF PERIOD                  993,349          529,363
                                                 ------------     ------------
CASH AND SHORT-TERM
  INVESTMENTS AT END OF PERIOD                   $    982,521     $  1,267,977
                                                 ============     ============
SUPPLEMENTAL CASH FLOW INFORMATION:

  Interest paid on indebtedness                  $     75,117     $     52,168
                                                 ============     ============
  Income taxes paid, net of refunds received     $     69,989     $     98,776
                                                 ============     ============
See accompanying notes



<PAGE>  8

                               SUNAMERICA INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)




1.    Basis of Presentation
      ---------------------
      In the opinion of the Company, the accompanying unaudited consolidated
      financial statements contain all adjustments (consisting of only normal
      recurring accruals) necessary to present fairly the Company's
      consolidated financial position as of March 31, 1998 and September 30,
      1997, the results of its consolidated operations for the three months and
      six months ended March 31, 1998 and 1997 and its consolidated cash flows
      for the six months ended March 31, 1998 and 1997. The results of
      operations for the three months and six months ended March 31, 1998 are
      not necessarily indicative of the results to be expected for the full
      year.  The accompanying unaudited consolidated financial statements
      should be read in conjunction with the audited consolidated financial
      statements for the fiscal year ended September 30, 1997, contained in the
      Company's 1997 Annual Report to Shareholders. 

2.    Acquisitions
      ------------                                           
      On March 31, 1997, the Company completed the acquisition of 1) a block
      of annuity contracts from John Alden Life Insurance Company, a subsidiary
      of John Alden Financial Corporation, and 2) all of the outstanding common
      stock of John Alden Life Insurance Company of New York.  This acquisition
      has been accounted for by using the purchase method of accounting. 
      Accordingly, the income statements for the three months and six months
      ended March 31, 1997 do not include the operating results of this
      acquisition.  On a pro forma basis, assuming the acquisition occurred on
      October 1, 1996, the beginning of the earliest period presented herein,
      revenues (investment income, net realized investment losses and fee
      income) would have been $549,947,000 and net income would have been
      $94,906,000 ($0.51 per basic share and $0.46 per diluted share) for the
      three months ended March 31, 1997.  For the six months ended March 31,
      1997, revenues would have been $1,073,861,000 and net income would have
      been $185,554,000 ($1.00 per basic share and $0.90 per diluted share).


<PAGE>  9
                               SUNAMERICA INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



3.    Company-Obligated Preferred Securities of Subsidiary Grantor Trusts
      -------------------------------------------------------------------

      Preferred securities of subsidiary grantor trusts comprise $185,000,000
      liquidation amount of 8.35% Trust Originated Preferred Securities issued
      by SunAmerica Capital Trust II in October 1995 and $310,000,000
      liquidation amount of 8.30% Trust Originated Preferred Securities issued
      by SunAmerica Capital Trust III in November 1996.

      In connection with the issuance of the 8.35% Trust Originated Preferred
      Securities and the related purchase by the Company of the grantor trust's
      common securities, the Company issued to the grantor trust $191,224,250
      principal amount of 8.35% junior subordinated debentures, due 2044, which
      are redeemable at the option of the Company on or after September 30,
      2000 at a redemption price of $25 per debenture plus accrued and unpaid
      interest.   

      In connection with the issuance of the 8.30% Trust Originated Preferred
      Securities and the related purchase by the Company of the grantor trust's
      common securities, the Company issued to the grantor trust $320,670,000
      principal amount of 8.30% junior subordinated debentures, due 2045, which
      are redeemable at the option of the Company on or after November 13, 2001
      at a redemption price of $25 per debenture plus accrued and unpaid
      interest.  

      On June 16, 1997, SunAmerica Capital Trust I redeemed $52,630,875
      liquidation amount of the 9.95% Trust Originated Preferred Securities for
      a cash payment equal to the liquidation amount of $52,630,875 plus
      accrued and unpaid dividends to the redemption date of $1,105,541. 
      Concurrently, the Company redeemed all of the related 9.95% junior
      subordinated debentures, due 2044, for a liquidation of $54,258,650 plus
      accrued and unpaid interest.

      The grantor trusts are wholly owned subsidiaries of the Company. The
      debentures issued to the grantor trusts and the common securities
      purchased by the Company from the grantor trusts are eliminated in the
      balance sheet.





<PAGE>  10
                                   SUNAMERICA INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)
                                     (Continued)
<TABLE>
4.    Earnings per Share
      ------------------

      The calculations of basic and diluted earnings per share for the three months and
      six months ended March 31, 1998 and 1997 are as follows (in thousands, except
      per-share amounts):

      BASIC EARNINGS PER SHARE:
                                            Three months             Six months     
                                        --------------------    --------------------
                                            1998        1997        1998        1997
                                        --------    --------    --------    --------
      <S>                               <C>         <C>         <C>         <C>     
      Net income                        $133,893    $ 86,834    $257,532    $167,202
                                        --------    --------    --------    --------
      Less preferred stock dividends:
        9-1/4% Preferred Stock, 
          Series B                            --      (2,031)         --      (4,062)
        Adjustable Rate Cumulative
          Preferred Stock, Series C           --          --          --         (28)
        Series E Mandatory Conversion
          Premium Dividend Preferred
          Stock                           (3,100)     (3,100)     (6,200)     (6,200)
                                        --------    --------    --------    --------
      Total preferred stock dividends     (3,100)     (5,131)     (6,200)    (10,290)
                                        --------    --------    --------    --------
      Income available to common
        shareholders                    $130,793    $ 81,703    $251,332    $156,912
                                        ========    ========    ========    ========

      Average common shares issued and
        outstanding                      195,221     179,514     195,224     179,453
      Less common shares issued and
        outstanding, but not vested
        to participants under various
        employee stock plans              (2,271)     (3,311)     (2,516)     (3,310)
                                        --------    --------    --------    --------
      Average shares outstanding         192,950     176,203     192,708     176,143
                                        ========    ========    ========    ========
      Basic earnings per share          $   0.68    $   0.46    $   1.30    $   0.89
                                        ========    ========    ========    ========

<PAGE>  11
                                   SUNAMERICA INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)
                                     (Continued)



4.    Earnings per Share  (continued)
      ------------------

      DILUTED EARNINGS PER SHARE:
                                            Three months             Six months     
                                        --------------------    --------------------
                                            1998        1997        1998        1997
                                        --------    --------    --------    --------
      <S>                               <C>         <C>         <C>         <C>     
      Net income                        $133,893    $ 86,834    $257,532    $167,202
                                        --------    --------    --------    --------
      Less preferred stock dividends:
        9-1/4% Preferred Stock,
          Series B                            --      (2,031)         --      (4,062)
        Adjustable Rate Cumulative
          Preferred Stock, Series C           --          --          --         (28)
                                        --------    --------    --------    --------
      Total preferred stock dividends         --      (2,031)         --      (4,090)
                                        --------    --------    --------    --------
      Income available to common
        shareholders                    $133,893    $ 84,803    $257,532    $163,112
                                        ========    ========    ========    ========

      Average common shares issued
        and outstanding                  195,221     179,514     195,224     179,453
      Plus incremental shares from
        potential common stock:
          Average number of shares
            arising from outstanding
            employee stock plans           9,855       5,480       9,226       5,147
          Average number of shares
            issuable upon conversion
            of Series E Mandatory
            Conversion Premium Dividend
            Preferred Stock               12,601      14,359      12,770      14,777
          Average number of shares
            issuable upon conversion of
            Premium Equity Redemption
            Cumulative Security Units      4,811       3,102       5,104       2,081
                                        --------    --------    --------    --------
      Average shares outstanding         222,488     202,455     222,324     201,458
                                        ========    ========    ========    ========
      Diluted earnings per share        $   0.60    $   0.42    $   1.16    $   0.81
                                        ========    ========    ========    ========

      </TABLE>

<PAGE>  12
                                   SUNAMERICA INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)
                                     (Continued)


<TABLE>
5.    Ratios of Earnings to Fixed Charges
      -----------------------------------

      The ratios of earnings to fixed charges for the three months and six months ended
      March 31, 1998 and 1997 are as follows:

                                                  Three months          Six months  
                                                 ---------------     ---------------
                                                  1998      1997      1998      1997
                                                 -----     -----     -----     ----- 
      <S>                                        <C>       <C>       <C>       <C>  
      Ratio of earnings to fixed charges 
      (which include dividends paid on
      preferred securities of grantor trusts
      and interest incurred on senior debt,
      but exclude interest incurred on fixed
      annuities, guaranteed investment
      contracts and trust deposits)                5.7x      4.6x      5.5x      4.8x
                                                 =====     =====     =====     =====
      Ratio of earnings to fixed charges
      (which include dividends paid on
      preferred securities of grantor
      trusts and interest incurred on
      senior debt, fixed annuities,
      guaranteed investment contracts
      and trust deposits)                          1.6x      1.5x      1.5x      1.5x
                                                 =====     =====     =====     =====
      Ratio of earnings to combined fixed
      charges and preferred stock dividends
      (which include dividends paid on
      preferred securities of grantor trusts
      and interest incurred on senior debt,
      but exclude interest incurred on fixed
      annuities, guaranteed investment
      contracts and trust deposits)                5.1x      3.8x      4.9x      3.9x
                                                  ====      ====      ====      ====
      Ratio of earnings to combined fixed
      charges and preferred stock dividends
      (which include dividends paid on
      preferred securities of grantor trusts
      and interest incurred on senior debt,
      fixed annuities, guaranteed investment
      contracts and trust deposits)                1.6x      1.5x      1.5x      1.5x
                                                  ====      ====      ====      ====
</TABLE>

<PAGE>  13
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS



      Management's discussion and analysis of financial condition and results
of operations of SunAmerica Inc. (the "Company") for the three months and six
months ended March 31, 1998 and March 31, 1997 follows.  In connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, the Company cautions readers regarding certain forward-looking statements
contained in this report and in any other statements made by, or on behalf of,
the Company, whether or not in future filings with the Securities and Exchange
Commission (the "SEC").  Forward-looking statements are statements not based
on historical information and which relate to future operations, strategies,
financial results, or other developments.  Statements using verbs such as
"expect," "anticipate," "believe" or words of similar import generally involve
forward-looking statements.  Without limiting the foregoing, forward-looking
statements include statements which represent the Company's beliefs concerning
future levels of sales and redemptions of the Company's products, investment
spreads and yields, or the earnings and profitability of the Company's
activities.

      Forward-looking statements are necessarily based on estimates and
assumptions that are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond the
Company's control and many of which are subject to change.  These uncertainties
and contingencies could cause actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company.  Whether or not actual results differ materially from forward-looking
statements may depend on numerous foreseeable and unforeseeable developments.
Some may be national in scope, such as general economic conditions, changes in
tax law and changes in interest rates.  Some may be related to the insurance
industry generally, such as pricing competition, regulatory developments and
industry consolidation.  Others may relate to the Company specifically, such
as credit, volatility and other risks associated with the Company's investment
portfolio.  Investors are also directed to consider other risks and
uncertainties discussed in documents filed by the Company with the SEC.  The
Company disclaims any obligation to update forward-looking information.

RESULTS OF OPERATIONS

      NET INCOME totaled $133.9 million ($0.68 per basic share and $0.60 per
diluted share) in the second quarter of 1998, compared with $86.8 million
($0.46 per basic share and $0.42 per diluted share) in the second quarter of
1997.  For the six months, net income amounted to $257.5 million ($1.30 per
basic share and $1.16 per diluted share) in 1998, compared with $167.2 million
($0.89 per basic share and $0.81 per diluted share) in 1997.  On March 31,
1997, the Company acquired certain annuity contracts from John Alden Life
Insurance Company and all of the outstanding common stock of John Alden Life
Insurance Company of New York (collectively, the "Acquisition").  The
Acquisition was accounted for under the purchase method of accounting, and,
therefore, results of operations include those of the Acquisition only from the

<PAGE>  14

date of acquisition.  Consequently, operating results for 1998 and 1997 are not
comparable.  On a pro forma basis, using the historical operating results of
the acquired businesses and assuming the Acquisition had been consummated on
October 1, 1996, the beginning of the prior-year periods discussed herein, net
income would have been $94.9 million ($0.51 per basic share and $0.46 per
diluted share) for the second quarter of 1997 and $185.6 million ($1.00 per
basic share and $0.90 per diluted share) for the six months of 1997.   

      PRETAX INCOME totaled $183.4 million in the second quarter of 1998 and
$124.0 million in the second quarter of 1997.  For the six months, pretax
income totaled $352.7 million in 1998, compared with $238.8 million in 1997. 
The significant improvements in the current periods over the prior periods
primarily resulted from increased net investment income, fee income and net
realized investment gains.  These favorable factors were partially offset by
increased amortization of deferred acquisition costs and higher general and
administrative expenses in the 1998 periods.

      NET INVESTMENT INCOME, which is the spread between the income earned on
invested assets and the interest paid on fixed annuities and other
interest-bearing liabilities, increased to $205.2 million in the second quarter
of 1998 from $152.0 million in the second quarter of 1997.  These amounts equal
3.37% on average invested assets (computed on a daily basis) of $24.38 billion
in the second quarter of 1998 and 3.33% on average invested assets of $18.26
billion in the second quarter of 1997.  For the six months, net investment
income increased to $403.3 million in 1998 from $295.7 million in 1997,
equalling 3.32% on average invested assets of $24.28 billion in 1998 and 3.35%
on average invested assets of $17.66 billion in 1997.  On a pro forma basis,
assuming the Acquisition had been consummated on October 1, 1996, net
investment income on related average invested assets would have been 3.08% and
3.09% for the second quarter and the six months of 1997, respectively. 

      Net investment spreads include the effect of income earned on the excess
of average invested assets over average interest-bearing liabilities.  This
excess amounted to $1.81 billion in the second quarter of 1998, $1.22 billion
in the second quarter of 1997, $1.74 billion in the six months of 1998 and
$1.19 billion in the six months of 1997.  The difference between the Company's
yield on average invested assets and the rate paid on average interest-bearing
liabilities (the "Spread Difference") was 2.94% in the second quarter of 1998,
2.95% in the second quarter of 1997, 2.91% in the six months of 1998 and 2.96%
in the six months of 1997.  On a pro forma basis, assuming the Acquisition had
been consummated on October 1, 1996, the Spread Difference would have been
2.88% and 2.90% in the second quarter and the six months of 1997, respectively. 
 
 
      Investment income (and the related yields on average invested assets)
totaled $524.5 million (8.60%) in the second quarter of 1998, compared with
$393.7 million (8.62%) in the second quarter of 1997.  For the six months,
investment income (and the related yields on average invested assets) totaled
$1.04 billion (8.60%) in 1998, compared with $764.2 million (8.65%) in 1997. 
Investment income and the related yields in the 1998 periods reflect the
effects of the Acquisition.  The invested assets associated with the
Acquisition included high-grade corporate, government and government/agency

<PAGE>  15

bonds and cash and short-term investments, which are generally lower yielding
than a significant portion of the invested assets that comprise the remainder
of the Company's portfolio.  As a result of the Acquisition, investment income
as a percent of average invested assets in the 1998 periods has declined. 
However, on a pro forma basis, assuming the Acquisition had been consummated
on October 1, 1996, the yield on related average invested assets would have
been 8.46% and 8.48% for the second quarter and six months of 1997,
respectively.  Thus, yields in the 1998 periods have increased when compared
to these pro forma yields and reflect a partial reallocation of lower-yielding
invested assets acquired as part of the Acquisition into generally higher-
yielding asset classes in which the Company has historically invested a portion
of its portfolio.  The greater investment income in the 1998 periods also
reflects increased income from the Company's investment in partnerships, as
well as the effects of increases in average invested assets (in excess of those
acquired through the Acquisition). 
 
      Partnership income increased to $74.3 million (a yield of 19.20% on
related average assets of $1.55 billion) in the second quarter of 1998,
compared with $68.8 million (a yield of 25.41% on related average assets of
$1.08 billion) in the second quarter of 1997.  For the six months, partnership
income amounted to $140.8 million (a yield of 19.03% on related average assets
of $1.48 billion) in 1998, compared with $126.6 million (a yield of 22.60% on
related average assets of $1.12 billion) in 1997.  Partnership income includes
income recognized by using the cost method of accounting, which amounted to
$18.8 million in the second quarter of 1998, $33.1 million in the second
quarter of 1997, $44.4 million in the six months of 1998 and $50.1 million in
the six months of 1997.  Such income is based upon cash distributions received
from limited partnerships, the operations of which the Company does not
influence.  Consequently, such income is not predictable and there can be no
assurance that the Company will realize comparable levels of such income in the
future.

      The Company has enhanced investment yield from time to time through total
return bond swap agreements (the "Total Return Agreements").  The Company
recorded losses of $2.7 million on Total Return Agreements in the second
quarter of 1998, compared with $0.5 million of losses recorded in the second
quarter of 1997.  For the six months, the Company recorded income of $14.1
million on Total Return Agreements in 1998, compared with $7.7 million in 1997. 
These results reflect the relative performances of the non-investment grade
bonds underlying the Total Return Agreements.  (See "Asset-Liability Matching"
for additional discussion of Total Return Agreements.) 

      Total interest and dividend expense equalled $319.3 million in the second
quarter of 1998 and $241.7 million in the second quarter of 1997.  For the six
months, interest and dividend expense aggregated $641.5 million in 1998,
compared with $468.5 million in 1997.  The average rate paid on all
interest-bearing liabilities was 5.66% in the second quarter of 1998, compared
with 5.67% in the second quarter of 1997.  For the six months, the average rate
paid on all interest-bearing liabilities was 5.69% for both 1998 and 1997. 
Interest-bearing liabilities averaged $22.58 billion during the second quarter
of 1998, $17.04 billion during the second quarter of 1997, $22.55 billion
during the six months of 1998 and $16.48 billion during the six months of 1997. 

<PAGE>  16

On a pro forma basis, assuming the Acquisition had been consummated on October
1, 1996, the average rate paid on all interest-bearing liabilities would have
been 5.58% for both the second quarter and six months of 1997.  The increases
in overall rates paid in the 1998 periods as compared with the pro forma
overall rates paid in the 1997 periods primarily reflect period-over-period
increases in the percentage of average interest-bearing liabilities composed
of guaranteed investment contracts ("GICs") and senior debt, which, on average,
bear higher interest rates, while generally bearing lower acquisition costs,
than the Company's other interest-bearing liabilities.
  
      GROWTH IN AVERAGE INVESTED ASSETS since the 1997 periods primarily
reflects the impact of the Acquisition.  The Company acquired $5.00 billion of
invested assets associated with the Acquisition on March 31, 1997.  The Company
intends to continue to pursue a strategy of enhancing its internal growth with
complementary acquisitions.

      Average invested assets also increased as a result of sales of the
Company's fixed-rate products, consisting of both fixed annuity premiums
(including those for the fixed accounts of variable annuity products) and GIC
premiums, and $806.3 million of aggregate net proceeds from the issuances of
Common Stock and long-term notes and debentures.  Since March 31, 1997, fixed
annuity premiums have totaled $1.45 billion and GIC premiums have aggregated
$2.45 billion.  Fixed annuity premiums totaled $447.6 million in the second
quarter of 1998, $396.7 million in the second quarter of 1997, $786.4 million
in the six months of 1998 and $824.1 million in the six months of 1997.  These
premiums include premiums for the fixed accounts of variable annuities totaling
$386.7 million, $346.1 million, $655.5 million and $734.5 million,
respectively.  The changes in premiums for the fixed accounts of variable
annuities in the 1998 periods principally reflect differing promotional
activities in each of those periods.

      GIC premiums increased to $1.02 billion in the second quarter of 1998
from $692.0 million in the second quarter of 1997 and to $1.61 billion in the
six months of 1998 from $1.23 billion in the six months of 1997.  The increases
in GIC premiums in the 1998 periods reflect an expansion of the GIC client base
due, in part, to a broadening of the Company's products and distribution
channels, including its AAA-rated company, SunAmerica National Life Insurance
Company and its AAA/Aaa-rated credit-enhanced GIC products, and an expansion
of its international client base.  
  
      The GICs issued by the Company generally guarantee the payment of
principal and interest at a fixed rate for a fixed term of three to five years. 
In the case of GICs sold to pension plans, certain withdrawals may be made at
book value in the event of circumstances specified in the plan document, such
as employee retirement, death, disability, hardship withdrawal or employee
termination.  The Company generally imposes surrender penalties in the event
of other withdrawals prior to maturity.  GICs purchased for their long-term
portfolios by banks, asset management firms, certain trusts and 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

<PAGE>  17

portfolios either prohibit withdrawals or permit withdrawals with notice
ranging from 90 to 270 days.  In pricing GICs, the Company analyzes cash flow
information and prices accordingly so that it is compensated for possible
withdrawals prior to maturity.

      NET REALIZED INVESTMENT GAINS totaled $2.3 million in the second quarter
of 1998, compared with net realized investment losses of $9.4 million in the
second quarter of 1997 and include impairment writedowns of $8.3 million and
$12.5 million, respectively.  Therefore, net gains from sales and redemptions
of investments totaled $10.6 million in the second quarter of 1998 and
$3.1 million in the second quarter of 1997.  For the six months, net realized
investment gains totaled $5.5 million in 1998, compared with $18.7 million of
net losses realized in 1997 and include impairment writedowns of $18.0 million
and $20.1 million, respectively.  Therefore, for the six months, net gains from
sales and redemptions of investments totaled $23.5 million in 1998 and $1.4
million in 1997.

      The Company sold or redeemed invested assets, principally bonds and
notes, aggregating $5.72 billion in the second quarter of 1998, $4.27 billion
in the second quarter of 1997, $10.98 billion in the six months of 1998 and
$7.76 billion in the six months of 1997, respectively.  Sales of investments
result from the active management of the Company's investment portfolio. 
Because redemptions of investments are generally involuntary and sales of
investments are made in both rising and falling interest rate environments, net
gains and losses from sales and redemptions of investments fluctuate from
period to period, and represent 0.17%, 0.07%, 0.19% and 0.02% of average
invested assets on an annualized basis for the second quarter of 1998, the
second quarter of 1997, the six months of 1998 and the six months of 1997,
respectively.  Active portfolio management involves the ongoing evaluation of
asset sectors, individual securities within the investment portfolio and the
reallocation of investments from sectors that are perceived to be relatively
overvalued to sectors that are perceived to be relatively undervalued.  The
intent of the Company's active portfolio management is to maximize total
returns on the investment portfolio, taking into account credit and interest-
rate risk.

      Impairment writedowns primarily have been applied to defaulted bonds and
mortgage loans.  Impairment writedowns, on an annualized basis, represent
0.14%, 0.28%, 0.15% and 0.23% of average invested assets for the second quarter
of 1998, the second quarter of 1997, the six months of 1998 and the six months
of 1997, respectively.  For the 18 fiscal quarters beginning October 1, 1993,
impairment writedowns as a percentage of average invested assets have ranged
from 0.14% to 1.54% and have averaged 0.33%.  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 $48.1
million in the second quarter of 1998 and $32.7 million in the second quarter
of 1997.  For the six months, variable annuity fees totaled $93.2 million in
1998, compared with $63.6 million in 1997.  These increased fees reflect growth

<PAGE>  18

in average variable annuity assets, principally due to increased market values,
the receipt of variable annuity premiums and net exchanges into the separate
accounts from the fixed accounts of variable annuity contracts, partially
offset by surrenders.  Variable annuity assets averaged $10.46 billion during
the second quarter of 1998 and $7.20 billion during the second quarter of 1997. 
For the six months, variable annuity assets averaged $10.02 billion in 1998,
compared with $6.94 billion in 1997.  Variable annuity premiums, which exclude
premiums allocated to the fixed accounts of variable annuity products, have
aggregated $1.62 billion since March 31, 1997.  Variable annuity premiums
increased to $428.0 million in the second quarter of 1998 from $314.0 million
in the second quarter of 1997.  For the six months, variable annuity premiums
increased to $862.2 million in 1998, compared with $545.7 million in 1997. 
Sales of variable annuity products (which include premiums allocated to the
fixed accounts) ("Variable Annuity Product Sales") amounted to $814.7 million,
$660.1 million, $1.52 billion and $1.28 billion in the second quarters of 1998
and 1997 and the six months of 1998 and 1997, respectively.  Increases in
Variable Annuity Product Sales in the 1998 periods are due, in part, to market
share gains through enhanced distribution efforts and growing consumer demand
for flexible retirement savings products that offer a variety of equity, fixed
income and guaranteed fixed account investment choices.  The Company has
encountered increased competition in the variable annuity marketplace during
recent years and anticipates that the market will remain highly competitive for
the foreseeable future.  Also, recent administration budget proposals include
the proposed taxation of exchanges involving variable annuity contracts and
reallocation within variable annuity contracts and certain other proposals
relating to annuities (see "Regulation").

      NET RETAINED COMMISSIONS are primarily derived from commissions on the
sales of nonproprietary investment products by the Company's broker-dealer
subsidiaries, after deducting the substantial portion of such commissions that
is passed on to registered representatives.  Net retained commissions totaled
$26.7 million in the second quarter of 1998 and $15.8 million in the second
quarter of 1997.  For the six months, net retained commissions totaled $51.3
million in 1998 and $29.1 million in 1997.  Broker-dealer sales (mainly sales
of general securities, mutual funds and annuities) totaled $7.15 billion in the
second quarter of 1998 and $4.32 billion in the second quarter of 1997.  For
the six months, such sales totaled $14.15 billion in 1998 and $7.60 billion in
1997.  The increases in sales and net retained commissions in the 1998 periods
reflect a greater number of registered representatives, higher average
production per representative and generally favorable market conditions.  The
greater number of registered representatives was primarily due to acquisitions,
including the October 1, 1997 acquisition of Financial Service Corporation and
the January 22, 1997 acquisition of The Financial Group, Inc.  At their
respective dates of acquisition, these acquired companies licensed through
their subsidiaries approximately 1,500 and 400 independent registered
representatives, respectively.  Increases in net retained commissions may not
be proportionate to increases in sales primarily due to differences in sales
mix. 

      SURRENDER CHARGES on fixed and variable annuities totaled $13.2 million
(including $4.9 million attributable to the Acquisition) in the second quarter
of 1998 and $6.9 million in the second quarter of 1997.  For the six months,
surrender charges on fixed and variable annuities totaled $25.8 million

<PAGE>  19

(including $9.4 million attributable to the Acquisition) in 1998, compared with
$14.5 million in 1997.  Surrender charges generally are assessed on annuity
withdrawals at declining rates during the first seven years of an annuity
contract.  Withdrawal payments, which include surrenders and lump-sum annuity
benefits, totaled $818.2 million (including $173.5 million attributable to the
Acquisition) in the second quarter of 1998, compared with $492.5 million in the
second quarter of 1997.  These payments, annualized, represent 14.0% (15.1% of
average fixed annuity reserves associated with the Acquisition) and 12.1%,
respectively, of average fixed and variable annuity reserves.  For the six
months, withdrawal payments totaled $1.59 billion (including $408.9 million
attributable to the Acquisition) in 1998 and $902.9 million in 1997 and,
annualized, represent 13.8% (17.5% of average fixed annuity reserves associated
with the Acquisition) and 11.3%, respectively, of average fixed and variable
annuity reserves.  Withdrawals include variable annuity withdrawals from the
separate accounts totaling $253.0 million (9.7% of average variable annuity
reserves), $216.5 million (12.0% of average variable annuity reserves), $474.2
million (9.5% of average variable annuity reserves) and $393.8 million (11.4%
of average variable annuity reserves) in the second quarters of 1998 and 1997
and the six months of 1998 and 1997, respectively.  Consistent with the
assumptions used in connection with the Acquisition and other acquisitions of
annuity businesses in fiscal 1996, management anticipates that the level of
withdrawal payments will continue to reflect higher relative withdrawal rates
in the near future because of higher surrenders on the acquired annuity
businesses.

      Excluding the effects of all recent acquisitions, withdrawal payments
represented 11.2% in the second quarter of 1998, 12.4% in the second quarter
of 1997, 10.1% in the six months of 1998 and 12.1% in the six months of 1997
of related average fixed and variable annuity reserves.   These lower surrender
rates in the current periods reflect the continued decreases in the percentage
of non-acquisition-related annuity contracts that are free of surrender
charges. 

      ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1
distribution fees, are based on the market value of assets managed in mutual
funds by SunAmerica Asset Management Corp.  Such fees totaled $7.1 million on
average assets managed of $2.79 billion in the second quarter of 1998 and
$6.3 million on average assets managed of $2.31 billion in the second quarter
of 1997.  For the six months, asset management fees totaled $14.0 million on
average assets managed of $2.74 billion in 1998, compared with $12.7 million
on average assets managed of $2.26 billion in 1997.  Asset management fees are
not proportionate to average assets managed, principally due to changes in
product mix.   Sales of mutual funds, excluding sales of money market accounts,
have aggregated $632.2 million since March 31, 1997.  Mutual fund sales totaled
$193.9 million in the second quarter of 1998, up 62% from $119.9 million in the
second quarter of 1997.  For the six months, such sales totaled $359.7 million
in 1998, up from $182.3 million in 1997.  The significant increases in sales
during the 1998 periods principally resulted from the introduction in November
1996 of the Company's "Style Select Series" product. Sales of this product
totaled $134.5 million, $70.6 million, $244.7 million and $85.0 million for the
second quarters of 1998 and 1997 and the six months of 1998 and 1997,
respectively, reflecting the addition of four new Style Select funds, which
doubled the number of Style Select funds to eight, and generally favorable

<PAGE> 20

market conditions.  Redemptions of mutual funds, excluding redemptions of money
market accounts, amounted to $108.9 million in the second quarter of 1998 and
$110.4 million in the second quarter of 1997.  For the six months, such
redemptions amounted to $200.9 million in 1998 and $214.1 million in 1997.

      LOAN SERVICING FEES are earned by Imperial Premium Finance, Inc.
("Imperial").  Imperial provides short-term installment loans for borrowers to
fund their property and casualty insurance premiums.  These loans are secured
by the unearned premium associated with the underlying insurance policies. 
Currently, Imperial sells most of the loans it originates and earns fee income
by servicing the sold loans.  Such fee income totaled $6.0 million on average
loans serviced of $466.7 million in the second quarter of 1998, compared with
$6.2 million on average loans serviced of $488.6 million in the second quarter
of 1997.  For the six months, loan servicing fees totaled $11.7 million on
average loans serviced of $480.4 million in 1998, compared with $12.0 million
on average loans serviced of $483.3 million in 1997.  

      TRUST FEES are earned by Resources Trust Company for providing
administrative and custodial services primarily for individual retirement
accounts, as well as for other qualified retirement plans.  Trust fees
increased to $4.5 million in the second quarter of 1998 (on an average of
207,000 trust accounts) from $4.4 million in the second quarter of 1997 (on an
average of 203,000 trust accounts).  For the six months, trust fees increased
to $9.0 million (on an average of 209,000 trust accounts) from $8.9 million (on
an average of 203,000 trust accounts). 

      GENERAL AND ADMINISTRATIVE EXPENSES totaled $77.4 million in the second
quarter of 1998, up 25% from $62.0 million in the second quarter of 1997.  For
the six months, general and administrative expenses totaled $154.8 million in
1998, up 28% from $121.3 million in 1997.  General and administrative expenses
in the 1998 periods reflect the impact of the Acquisition, as well as the
acquisitions of Financial Service Corporation and The Financial Group, Inc.,
which were consummated on October 1, 1997 and January 22, 1997, respectively. 
The number of employees has increased 33% to 2,350 since March 31, 1997.  As
a result, compensation (net of deferrals) has increased to $44.0 million in the
second quarter of 1998 from $34.8 million in the second quarter of 1997 and to
$89.0 million in the six months of 1998 from $69.2 million in the six months
of 1997.  General and administrative expenses remain closely controlled through
a company-wide cost containment program and continue to represent less than 1%
of average total assets. 

      AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $55.6 million in the
second quarter of 1998, compared with $30.0 million in the second quarter of
1997.  For the six months, such amortization totaled $111.1 million in 1998,
compared with $60.4 million in 1997.  The increases in amortization in the 1998
periods primarily reflect the amortization of the deferred acquisition costs
attributable to the Acquisition, which aggregated $16.7 million and $32.7
million for the second quarter and six months of 1998, respectively. 
Amortization has also increased due to additional fixed and variable annuity
and mutual fund sales and the subsequent amortization of related deferred
commissions and other direct selling costs. 

<PAGE>  21

      INCOME TAX EXPENSE totaled $49.5 million in the second quarter of 1998,
compared with $37.2 million in the second quarter of 1997 and $95.2 million in
the six months of 1998, compared with $71.6 million in the six months of 1997,
representing effective tax rates of 27% in the 1998 periods and 30% in the 1997
periods.  These tax rates reflect the favorable impact of tax credits
associated with tax-advantaged investments in affordable housing partnerships
owned by the Company.

FINANCIAL CONDITION AND LIQUIDITY

      SHAREHOLDERS' EQUITY increased 10.2% to $2.85 billion at March 31, 1998
from $2.58 billion at September 30, 1997, primarily due to $257.5 million of
net income recorded in the six months of 1998 and a $54.7 million improvement
in net unrealized gains on debt and equity securities available for sale
(credited directly to shareholders' equity).  These favorable factors were
partially offset by $45.3 million of dividends paid to shareholders.

      BOOK VALUE PER SHARE amounted to $13.71 at March 31, 1998, up from $12.40
at September 30, 1997.  Excluding net unrealized gains on debt and equity
securities available for sale, book value per share amounted to $12.44 at March
31, 1998 and $11.39 at September 30, 1997.  On a pro forma basis, assuming that
the 8-1/2% Premium Equity Redemption Cumulative Security Units were converted
to Common Stock, book value per share would have been $14.84 at March 31, 1998,
compared with $13.40 at September 30, 1997 and, excluding net unrealized gains
on debt and equity securities available for sale, would have been $13.64 at
March 31, 1998 and $12.47 at September 30, 1997.

      INVESTED ASSETS at March 31, 1998 totaled $24.98 billion, compared with
$24.41 billion at September 30, 1997.  The Company manages most of its invested
assets internally.  The Company's general investment philosophy is to hold
fixed-rate assets for long-term investment.  Thus, it does not have a trading
portfolio.  However, the Company has determined that all of its portfolio of
bonds, notes and redeemable preferred stocks (the "Bond Portfolio") is
available to be sold in response to changes in market interest rates, changes
in relative value of asset sectors and individual securities, changes in
prepayment risk, changes in the credit quality outlook for certain securities,
the Company's need for liquidity and other similar factors. 

      THE BOND PORTFOLIO, which constitutes 76% of the Company's total
investment portfolio (at amortized cost), had an aggregate fair value that
exceeded its amortized cost by $473.7 million at March 31, 1998, compared with
an excess of $398.8 million at September 30, 1997.  The net unrealized gains
on the Bond Portfolio since September 30, 1997 principally reflect the lower
prevailing interest rates at March 31, 1998 and the corresponding effect on the
fair value of the Bond Portfolio.

      At March 31, 1998, the Bond Portfolio (at amortized cost, excluding
$177.2 million of redeemable preferred stocks) included $17.48 billion of bonds
rated by Standard & Poor's Corporation ("S&P"), Moody's Investors Service
("Moody's"), Duff & Phelps Credit Rating Co. ("DCR"), Fitch Investors Service,
L.P. ("Fitch") or the National Association of Insurance Commissioners ("NAIC"), 
and $820.2 million of bonds rated by the Company pursuant to statutory ratings

<PAGE>  22

guidelines established by the NAIC.  At March 31, 1998, approximately
$16.33 billion of the Bond Portfolio was investment grade, including
$6.97 billion of U.S. government/agency securities and mortgage-backed
securities ("MBSs").

      At March 31, 1998, the Bond Portfolio included $1.97 billion (at
amortized cost with a fair value of $2.04 billion) of bonds that were not
investment grade.  Based on their March 31, 1998 amortized cost, these
non-investment-grade bonds accounted for 5.2% of the Company's total assets and
8.1% of its invested assets.  In addition to its direct investment in
non-investment-grade bonds, the Company has entered into Total Return
Agreements with an aggregate notional principal amount of $682.5 million at
March 31, 1998 (see "Asset-Liability Matching"). 
 
      Non-investment-grade securities generally provide higher yields and
involve greater risks than investment-grade securities because their issuers
typically are more highly leveraged and more vulnerable to adverse economic
conditions than investment-grade issuers.  In addition, the trading market for
these securities is usually more limited than for investment-grade securities. 
The Company had no material concentrations of non-investment-grade securities
at March 31, 1998.

      The table on the following page summarizes the Company's rated bonds by
rating classification as of March 31, 1998 (dollars in thousands):


<PAGE>  23

<TABLE>
                                          RATED BONDS BY RATING CLASSIFICATION
                                                 (Dollars in thousands)
<CAPTION>
                                                 Issues not rated by S&P/Moody's/
    Issues rated by S&P/Moody's/DCR/Fitch          DCR/Fitch, by NAIC category                      Total             
----------------------------------------------  -----------------------------------  ----------------------------------
 S&P/(Moody's)/                      Estimated    NAIC                   Estimated               Percent of  Estimated
 [DCR]/{Fitch}         Amortized        fair    category   Amortized        fair     Amortized    invested      fair
  category(1)             cost         value       (2)        cost         value        cost       assets(3)   value
---------------        ----------   ----------  --------   ----------   -----------  ----------   ---------  ----------  
<S>                    <C>          <C>         <C>        <C>          <C>          <C>          <C>        <C>          
   
AAA to A-
  (Aaa to A3)
  [AAA to A-]
  {AAA to A-}         $10,641,013  $10,825,983       1     $1,545,781   $1,665,108  $12,186,794     49.89%  $12,491,091
BBB+ to BBB-
  (Baa1 to Baa3)
  [BBB+ to BBB-]
  {BBB+ to BBB-}        3,599,512    3,640,323       2        548,102      573,882    4,147,614     16.98     4,214,205
BB+ to BB-
  (Ba1 to Ba3)
  [BB+ to BB-]
  {BB+ to BB-}            124,921      139,378       3         75,666       79,409      200,587      0.82       218,787
B+ to B- 
  (B1 to B3)
  [B+ to B-]
  {B+ to B-}            1,366,680    1,431,146       4        276,040      279,005    1,642,720      6.72     1,710,151
CCC+ to C
  (Caa to C)
  [CCC]
  {CCC+ to C-}             35,350       33,779       5         78,305       68,291      113,655      0.47       102,070
CI to D
  [DD]
  {D}                          --           --       6         12,938       10,423       12,938      0.05        10,423
                      -----------  -----------             ----------   ----------  -----------             -----------
TOTAL RATED ISSUES    $15,767,476  $16,070,609             $2,536,832   $2,676,118  $18,304,308             $18,746,727
                      ===========  ===========             ==========   ==========  ===========             ===========
</TABLE>
Footnotes appear on the following page.

<PAGE>  24

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

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

(2)   Bonds and short-term promissory instruments are divided into six quality
      categories for NAIC rating purposes, ranging from 1 (highest) to 5
      (lowest) for nondefaulted bonds plus one category, 6, for bonds in or near
      default.  These six categories correspond with the S&P/Moody's/DCR/Fitch
      rating groups listed above, with categories 1 and 2 considered investment
      grade.  The NAIC categories include $820.2 million (at amortized cost) of
      assets that were rated by the Company pursuant to applicable NAIC rating
      guidelines.

(3)   At amortized cost.


<PAGE> 25

     Senior secured loans ("Secured Loans") are included in the Bond Portfolio
and their amortized cost aggregated $2.39 billion at March 31, 1998.  Secured
Loans are senior to subordinated debt and equity, and are secured by assets of
the issuer.  At March 31, 1998, Secured Loans consisted of $1.40 billion of
publicly traded securities and $987.1 million of privately traded securities. 
These Secured Loans are composed of loans to 352 borrowers spanning 47
industries, with 23% of these assets (at amortized cost) concentrated in
financial institutions and 12% concentrated in utilities.  No other industry
concentration constituted more than 6% of these assets.

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

     MORTGAGE LOANS aggregated $2.99 billion at March 31, 1998 and consisted
of 1,180 commercial first mortgage loans with an average loan balance of
approximately $2.5 million, collateralized by properties located in 46 states. 
Approximately 30% of this portfolio was multifamily residential, 27% was
retail, 12% was office, 10% was manufactured housing, 8% was industrial and 13%
was other types.  At March 31, 1998, approximately 19% of this portfolio was
secured by properties located in California and no more than 9% of this
portfolio was secured by properties located in any other single state.  At
March 31, 1998, there were 46 mortgage loans with outstanding balances of
$10 million or more, which loans collectively aggregated approximately 27% of
this portfolio.  At March 31, 1998, approximately 23% of the mortgage loan
portfolio consisted of loans with balloon payments due before April 1, 2001.
During the second quarter and six months of 1998 and 1997, loans delinquent by
more than 90 days, foreclosed loans and restructured loans have not been
significant in relation to the total mortgage loan portfolio. 

     At March 31, 1998, approximately 38% of the mortgage loans were seasoned
loans underwritten to the Company's standards and purchased at or near par from
other financial institutions.  Such loans generally have higher average
interest rates than loans that could be originated today.  The balance of the
mortgage loan portfolio has been originated by the Company under strict
underwriting standards.  Commercial mortgage loans on properties such as
offices, hotels and shopping centers generally represent a higher level of risk
than do mortgage loans secured by multifamily residences.  This greater risk
is due to several factors, including the larger size of such loans and the more
immediate effects of general economic conditions on these commercial property
types.  However, due to the seasoned nature of the Company's mortgage loan
portfolio, its emphasis on multifamily loans and its strict underwriting
standards, the Company believes that it has prudently managed the risk
attributable to its mortgage loan portfolio while maintaining attractive
yields.

<PAGE>  26

     PARTNERSHIP investments totaled $1.54 billion at March 31, 1998,
constituting investments in approximately 620 separate partnerships with an
average size of approximately $2.5 million.  This portfolio includes:
(i) $822.1 million of partnerships managed by independent money managers that
invest in a broad selection of equity and fixed-income securities, currently
including approximately 3,800 separate issuers; (ii) $607.6 million of
partnerships that make tax-advantaged investments in affordable housing
properties, currently involving approximately 540 multifamily projects in 41
states; and (iii) $112.0 million of partnerships that invest in mortgage loans
and income-producing real estate.  At March 31, 1998, $875.6 million of the
Company's partnerships was accounted for by using the cost method and
$666.1 million by using the equity method.  The risks generally associated with
partnerships include those related to their underlying investments (i.e. equity
securities, debt securities and real estate), plus a level of illiquidity,
which is mitigated, to some extent, a) for the affordable housing partnerships
by the marketability of the tax credits they generate; and b) in the case of
many of the other partnerships, by the existence of contractual termination
provisions. 

     ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks
of interest rate fluctuations and disintermediation.  The Company believes that
its fixed-rate liabilities should be backed by a portfolio principally composed
of fixed-rate investments that generate predictable rates of return.  The
Company does not have a specific target rate of return.  Instead, its rates of
return vary over time depending on the current interest rate environment, the
slope of the yield curve, the spread at which fixed-rate investments are priced
over the yield curve, and general economic conditions.  Its portfolio strategy
is constructed with a view to achieve adequate risk-adjusted returns consistent
with its investment objectives of effective asset-liability matching, liquidity
and safety.  The Company's fixed-rate products incorporate surrender charges, 
two-tiered interest rate structures or other restrictions in order to encourage
persistency.  Approximately 85% of the Company's fixed annuity and GIC reserves
had surrender penalties or other restrictions at March 31, 1998. 

     As part of its asset-liability matching discipline, the Company conducts
detailed computer simulations that model its fixed-rate assets and liabilities
under commonly used stress-test interest rate scenarios.  With the results of
these computer simulations, the Company can measure the potential gain or loss
in fair value of its interest-rate sensitive instruments and seek to protect
its economic value and achieve a predictable spread between what it earns on
its invested assets and what it pays on its liabilities by designing its fixed-
rate products and conducting its investment operations to closely match the
duration of the fixed-rate assets to that of its fixed-rate liabilities.  The
Company's fixed-rate assets include:  cash and short-term investments; bonds,
notes and redeemable preferred stocks; mortgage loans; and investments in
limited partnerships that invest primarily in fixed-rate securities and are
accounted for by using the cost method.  At March 31, 1998, these assets had
an aggregate fair value of $23.29 billion with a duration of 3.6. The Company's
fixed-rate liabilities include:  fixed annuities; GICs; trust deposits; long-
term notes and debentures; and preferred securities of subsidiary grantor
trusts.  At March 31, 1998, these liabilities had an aggregate fair value
(determined by discounting future contractual cash flows by related market

<PAGE>  27

rates of interest) of $21.68 billion with a duration of 3.0. The Company's
potential exposure due to a 10% increase in prevailing interest rates from
their March 31, 1998 levels is a loss of $115.7 million in fair value of its
fixed-rate assets that is not offset by a decrease in the fair value of its
fixed-rate liabilities.  Because the Company actively manages its assets and
liabilities and has strategies in place to minimize its exposure to loss as
interest rate changes occur, it expects that actual losses would be less than
the estimated potential loss.

     Duration is a common option-adjusted measure for the price sensitivity of
a fixed-maturity portfolio to changes in interest rates.  It measures the
approximate percentage change in the market value of a portfolio if interest
rates change by 100 basis points, recognizing the changes in cash flows
resulting from embedded options such as policy surrenders, investment
prepayments and bond calls. It also incorporates the assumption that the
Company will continue to utilize its existing strategies of pricing its fixed
annuity and GIC products, allocating its available cash flow amongst its
various investment portfolio sectors and maintaining sufficient levels of
liquidity.  Because the calculation of duration involves estimation and
incorporates assumptions, potential changes in portfolio value indicated by the
portfolio's duration will likely be different from the actual changes
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 March 31, 1998, the Company had 38 outstanding Swap Agreements
with an aggregate notional principal amount of $2.13 billion.  These agreements
mature in various years through 2010 and have an average remaining maturity of
50 months.   

     The Company also seeks to provide liquidity from time to time by using
reverse repurchase agreements ("Reverse Repos") and by investing in MBSs.  It
also seeks to enhance its spread income by using Reverse Repos and Total Return
Agreements.  Reverse Repos involve a sale of securities and an agreement to
repurchase the same securities at a later date at an agreed upon price and are
generally over-collateralized.  Total Return Agreements effectively exchange
a fixed rate of interest on the notional amount for the coupon income plus or
minus the increase or decrease in the fair value of specified
non-investment-grade bonds.  MBSs are generally investment-grade securities
collateralized by large pools of mortgage loans.  MBSs generally pay principal
and interest monthly.  The amount of principal and interest payments may
fluctuate as a result of prepayments of the underlying mortgage loans.

<PAGE>  28

     There are risks associated with some of the techniques the Company uses
to provide liquidity, enhance its spread income and match its assets and
liabilities.  The primary risks associated with Total Return Agreements are the
credit risk on the underlying non-investment-grade bonds, the risk of potential
loss due to bond market fluctuations and the risk associated with counterparty
nonperformance.  The primary risk associated with the Company's Reverse Repos
and Swap Agreements is counterparty risk.  The Company believes, however, that
the counterparties to its Total Return Agreements, Reverse Repos and Swap
Agreements are financially responsible and that the counterparty risk
associated with those transactions is minimal.  In addition to counterparty
risk, Swap Agreements also have interest rate risk.  However, the Company's
Swap Agreements typically hedge variable-rate assets or liabilities, and
interest rate fluctuations that adversely affect the net cash received or paid
under the terms of a Swap Agreement would be offset by increased interest
income earned on the variable-rate assets or reduced interest expense paid on
the variable-rate liabilities.  The primary risk associated with MBSs is that
a changing interest rate environment might cause prepayment of the underlying
obligations at speeds slower or faster than anticipated at the time of their
purchase.  As part of its decision to purchase an MBS, the Company assesses the
risk of prepayment by analyzing the security's projected performance over an
array of interest-rate scenarios.  Once an MBS is purchased, the Company
monitors its actual prepayment experience monthly to reassess the relative
attractiveness of the security with the intent to maximize total return.

     INVESTED ASSETS EVALUATION routinely includes a review by the Company of
its portfolio of debt securities.  Management identifies monthly those
investments that require additional monitoring and carefully reviews the
carrying values of such investments at least quarterly to determine whether
specific investments should be placed on a nonaccrual basis and to determine
declines in value that may be other than temporary.  In making these reviews
for bonds, management principally considers the adequacy of any collateral,
compliance with contractual covenants, the borrower's recent financial
performance, news reports and other externally generated information concerning
the creditor's affairs.  In the case of publicly traded bonds, management also
considers market value quotations, if available.  For mortgage loans,
management generally considers information concerning the mortgaged property
and, among other things, factors impacting the current and expected payment
status of the loan and, if available, the current fair value of the underlying
collateral.

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

<PAGE>  29


     DEFAULTED INVESTMENTS, comprising all investments that are in default as
to the payment of principal or interest, totaled $51.2 million at March 31,
1998 (at amortized cost after impairment writedowns, with a fair value of $47.5
million), including $22.6 million of bonds and notes and $28.6 million of
mortgage loans.  At March 31, 1998, defaulted investments constituted 0.2% of
total invested assets.  At September 30, 1997, defaulted investments totaled
$38.5 million, including $15.6 million of bonds and notes and $22.9 million of
mortgage loans, and constituted 0.2% of total invested assets.

     SOURCES OF LIQUIDITY are readily available to the Company in the form of
the Company's existing portfolio of cash and short-term investments, Reverse
Repo capacity on invested assets and, if required, proceeds from invested asset
sales.  At March 31, 1998, approximately $15.33 billion of the Company's Bond
Portfolio had an aggregate unrealized gain of $585.4 million, while
approximately $3.15 billion of the Bond Portfolio had an aggregate unrealized
loss of $111.7 million.  In addition, the Company's investment portfolio
currently provides approximately $215.5 million of monthly cash flow from
scheduled principal and interest payments.  Further, $3.23 billion remains
available to the Company to issue securities under a shelf registration
statement filed in July 1997.  Historically, cash flows from operations and
from the sale of the Company's annuity and GIC products have been more than
sufficient in amount to satisfy the Company's liquidity needs.

     Management is aware that prevailing market interest rates may shift
significantly and has strategies in place to manage either an increase or
decrease in prevailing rates.  In a rising interest rate environment, the
Company's average cost of funds would increase over time as it prices its new
and renewing annuities and GICs to maintain a generally competitive market
rate.  Management would seek to place new funds in investments that were
matched in duration to, and higher yielding than, the liabilities assumed.  The
Company believes that liquidity to fund withdrawals would be available through
incoming cash flow, the sale of short-term or floating-rate instruments or
Reverse Repos on the Company's substantial MBS segment of the Bond Portfolio,
thereby avoiding the sale of fixed-rate assets in an unfavorable bond market.

     In a declining rate environment, the Company's cost of funds would
decrease over time, reflecting lower interest crediting rates on its fixed
annuities and GICs.  Should increased liquidity be required for withdrawals,
the Company believes that a significant portion of its investments could be
sold without adverse consequences in light of the general strengthening that
would be expected in the bond market.

     On a parent company stand-alone basis, SunAmerica Inc. (the "Parent"), at
March 31, 1998, had invested assets with a fair value of $2.83 billion and
outstanding senior indebtedness of $1.24 billion, comprising all of the
Company's outstanding senior indebtedness.  Additionally, as of March 31, 1998,
the Parent had three GICs purchased by local government entities, which
aggregated $213.7 million.


<PAGE>  30

     During November 1996 and October 1995, respectively, the Parent purchased
the common securities of SunAmerica Capital Trust III and SunAmerica Capital
Trust II (collectively, the "Grantor Trusts") and issued an aggregate of
$511.9 million of junior subordinated debentures (the "Debentures") to the
Grantor Trusts in connection with the public issuance of the preferred
securities of the Grantor Trusts (see Note 3 of Notes to Consolidated Financial
Statements).

     The Parent's annual debt service (principal and interest payments) with
respect to its senior indebtedness, GIC obligations and Debentures totals $98.7
million for the remainder of fiscal 1998, $292.0 million for fiscal 1999,
$574.6 million for fiscal 2000, $139.0 million for fiscal 2001, $297.4 million
for fiscal 2002 and $4.27 billion, in the aggregate, thereafter.  On or before
October 31, 1999, the Company is contractually scheduled to receive $431.3
million upon delivery of 17.3 million or fewer shares of the Company's Common
Stock in accordance with the terms of the Company's 8-1/2% Premium Equity
Redemption Cumulative Security Units.

     The Parent received dividends from its regulated life insurance
subsidiaries totaling $118.7 million in April 1997 and $94.3 million in
March 1996.  The Parent also received dividends of $1.2 million during fiscal
1998 and $17.5 million during fiscal 1997 from its other directly owned
subsidiaries.  The ability of the Company's life insurance subsidiaries to pay
dividends is limited by statute.  On March 31, 1998, there was approximately
$142.5 million of dividends available to the Parent from its regulated life
insurance subsidiaries.

     The Company has transferred to third-party investors certain of its
interests in various partnerships that make tax-advantaged affordable housing
investments.  As part of these transactions, the Parent has agreed to advance
monies to support the operations of the underlying housing projects, if
required, and has guaranteed that the transferred partnerships will provide,
as of the transfer date and under then current tax laws, a specified level of
associated tax credits and deductions to the third-party investors.  Based on
an evaluation of the underlying housing projects, management does not
anticipate any material cash payments with respect to the guarantees.

     In the ordinary course of business, the Company has agreed contingently
to make capital contributions, aggregating approximately $654.2 million, to
approximately 120 limited partnerships over the next 5 years in exchange for
ownership interests in such partnerships. 

     The Company relies significantly on computer systems and applications in
its daily operations.  Many of these systems and applications are not presently
year 2000 compliant.  The Company's business, financial condition and results
of operations could be materially and adversely affected by the failure of the
Company's systems and applications (and those operated by third parties
interfacing with the Company's systems and applications) to properly operate
or manage dates beyond the year 1999.  The Company has a coordinated plan to
repair or replace these noncompliant systems and to obtain similar assurances
from third parties interfacing with the Company's systems and applications and
expects to significantly complete its plan by the end of calendar year 1998. 

<PAGE>  31  

In fiscal year 1997, the Company recorded a $15.0 million provision for
estimated programming costs to make necessary repairs of certain specific
noncompliant systems.  Management believes that this provision is adequate and
does not anticipate any material future expenses associated with the repair
phase of this project.  Management also expects to make an additional $15.0
million expenditure to replace certain other specific noncompliant systems,
which expenditure will be capitalized as software costs and amortized over
future periods.

REGULATION

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

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






<PAGE>  32

     SunAmerica Asset Management is registered with the SEC as a registered
investment adviser under the Investment Advisers Act of 1940. The mutual funds
that it markets are subject to regulation under the Investment Company Act of
1940. SunAmerica Asset Management and the mutual funds are subject to
regulation and examination by the SEC. In addition, variable annuities and the
related separate accounts of the Company's life insurance subsidiaries are
subject to regulation by the SEC under the Securities Act of 1933 and the
Investment Company Act of 1940. 

     Resources Trust Company is subject to regulation by the Colorado State
Banking Board and the Federal Deposit Insurance Corporation.  It has applied
to the Office of Thrift Supervision to convert its charter to a federal savings
association. 

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

     The Company's premium finance business is subject to regulation and
supervision by substantially all of the states in which it is authorized to
transact business.  State premium finance laws establish supervisory agencies
with broad administrative and supervisory powers related to granting and
revoking licenses to transact business, approving finance agreement forms,
regulating certain finance charge rates, regulating marketing and other trade
practices (including the procedures to cancel financed insurance policies for
non-payment), prescribing the form and content of required financial statements
and reports, performing financial and other examinations and other related
matters.

     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 products.  Recent Administration budget
proposals include the proposed taxation of exchanges involving variable annuity
contracts and reallocations within variable annuity contracts and certain other
proposals relating to annuities.  The Company believes these proposals have a
small likelihood of being enacted, because they would discourage retirement
savings and there is strong popular and industry opposition to them. Other
proposals made in recent years to limit the tax deferral of annuities have not
been enacted.  The Company believes that certain of the proposals, if
implemented, would have an adverse effect on the Company's ability to sell
variable annuities, and, consequently, on its results of operations.  However,
the Company would not expect this to materially impact earnings in the near
term because the Company believes that adoption of the Administration
proposals, however unlikely, would reduce annuity surrenders on the existing
block of variable annuity contracts and the ongoing earnings potential arising
from that block would offset the near-term economic impact of the potential
decrease in sales. 

<PAGE>  33

                               SUNAMERICA INC.
                         PART II - OTHER INFORMATION



ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
-------------------------------------------------------------

On February 13, 1998, the Company  held its annual meeting of shareholders. 
The shareholders voted upon the following matters: (1) the election of eleven
directors, which comprise the entire Board of Directors;  (2) approval of the
SunAmerica 1997 Employee Stock Purchase Plan (the "ESPP"); and (3) approval of
the 1998 Long-Term Performance-Based Incentive Plan for the Chief Executive
Officer (the "1998 Incentive Plan").

Each matter was approved.  The votes cast for, against or withheld, as well as
the number of abstentions and broker non-votes as to each such matter were as
follows:

                                             Votes
                                Votes   Against or                    Broker
                                  For     Withheld   Abstentions   Non-Votes
                           ----------   ----------   -----------   ---------
ELECTION OF DIRECTORS:

Eli Broad                 322,704,897      547,688
William F. Aldinger, III  322,729,221      523,364
Philip G.  Heasley        322,403,000      849,585
David O. Maxwell          322,712,777      539,808
Barry Munitz              322,724,751      527,834
Lester Pollack            322,723,210      529,375
Carl E. Reichardt         321,158,690    2,093,895
Sanford C. Sigoloff       322,703,629      548,956
Harold M. Williams        322,675,181      577,404
Karen Hastie Williams     322,570,901      681,684
Jay S. Wintrob            322,733,662      518,923

ESPP                      275,353,448   28,359,434       702,042

1988 INCENTIVE PLAN       257,740,855   45,769,053       905,016  15,499,018



<PAGE>  34
                               SUNAMERICA INC.
                         PART II - OTHER INFORMATION



ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
EXHIBITS

10.1  SunAmerica 1997 Employee Stock Plan is incorporated herein by reference
      to Appendix A to the Company's Notice of 1998 Annual Meeting and Proxy
      Statement, filed January 2, 1998.

10.2  1998 Long-Term Performance-Based Incentive Plan for the Chief Executive
      Officer is incorporated herein by reference to Appendix B to the
      Company's Notice of 1998 Annual Meeting and Proxy Statement, filed
      January 2, 1998.

27    Financial Data Schedule for the period ended March 31, 1998. 

27.1  Restated Financial Data Schedule for the period ended September 30, 1995.

27.2  Restated Financial Data Schedule for the period ended December 31, 1995.

27.3  Restated Financial Data Schedule for the period ended March 31, 1996.

27.4  Restated Financial Data Schedule for the period ended June 30, 1996.

27.5  Restated Financial Data Schedule for the period ended September 30, 1996.

27.6  Restated Financial Data Schedule for the period ended December 31, 1996

27.7  Restated Financial Data Schedule for the period ended March 31, 1997.

27.8  Restated Financial Data Schedule for the period ended June 30, 1997.

27.9  Restated Financial Data Schedule for the period ended September 30, 1997.

REPORTS ON FORM 8-K

There were no Current Reports of Form 8-K filed during the three months ended
March 31, 1998.





<PAGE>  35
                               SUNAMERICA INC.
                         PART II - OTHER INFORMATION
                                 (Continued)




                                 SIGNATURES
                                 ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                          SUNAMERICA INC.
                                          -----------------------------------
                                          Registrant


Dated        May 14, 1998                 /s/ JAY S. WINTROB
     ----------------------------         -----------------------------------
                                          Jay S. Wintrob
                                          Vice Chairman


Dated        May 14, 1998                  /s/ SCOTT L. ROBINSON
     ----------------------------         -----------------------------------
                                          Scott L. Robinson
                                          Senior Vice President and Controller



<PAGE>  36
                               SUNAMERICA INC.
                                      


LISTS OF EXHIBITS FILED
-----------------------

27    Financial Data Schedule for the period ended March 31, 1998. 

27.1  Restated Financial Data Schedule for the period ended September 30, 1995.

27.2  Restated Financial Data Schedule for the period ended December 31, 1995.

27.3  Restated Financial Data Schedule for the period ended March 31, 1996.

27.4  Restated Financial Data Schedule for the period ended June 30, 1996.

27.5  Restated Financial Data Schedule for the period ended September 30, 1996.

27.6  Restated Financial Data Schedule for the period ended December 31, 1996

27.7  Restated Financial Data Schedule for the period ended March 31, 1997.

27.8  Restated Financial Data Schedule for the period ended June 30, 1997.

27.9  Restated Financial Data Schedule for the period ended September 30, 1997.