The amount of capital distributions which can be paid by GALIC is subject to restrictions relating to capital and surplus and statutory net income. In addition, any dividend or distribution paid from other than earned surplus is considered an extraordinary dividend and may be paid only after prior regulatory approval. (See Note K to the financial statements.) The maximum amount of dividends payable by GALIC in 1995 without prior regulatory approval is approximately $49.7 million. In January 1995, GALIC paid a capital distribution of $16.8 million to AAG.
AAG invests primarily in fixed income investments which, including loans and short-term investments, comprised over 98% of its investment portfolio at December 31, 1994. AAG generally invests in securities with intermediate- term maturities with an objective of optimizing interest yields while maintaining an appropriate relationship of maturities between AAG's assets and expected liabilities. AAG's fixed maturity portfolio is classified into two categories: "held to maturity" and "available for sale". (See Note A to the financial statements.) At December 31, 1994, AAG had approximately $279 million in net unrealized losses on its fixed maturity portfolio compared to net unrealized gains of $206 million at December 31, 1993. This decrease, representing approximately 11% of the carrying value of AAG's bond portfolio, resulted from an increase in the general level of interest rates.
Investments When available, fair values for investments are based on prices quoted in the most active market for each security. If quoted prices are not available, fair value is estimated based on present values, fair values of comparable securities, or similar methods.
AAG implemented Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities", beginning December 31, 1993. This standard requires that (i) debt securities be classified as "held to maturity" and reported at amortized cost if AAG has the positive intent and ability to hold them to maturity, (ii) debt and equity securities be classified as "trading" and reported at fair value, with unrealized gains and losses included in earnings, if they are bought and held principally for selling in the near term and (iii) debt and equity securities not classified as held to maturity or trading be classified as "available for sale" and reported at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity. Only in certain limited circumstances, such as significant issuer credit deterioration or if required by insurance or other regulators, may a company change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future.
Investment in Affiliate AAG's investments in equity securities of companies that are 20% to 50% owned by AFC and its subsidiaries are carried at cost, adjusted for a proportionate share of their undistributed earnings or losses.
Held to Available Maturity for Sale Total Purchases ($713.6) ($475.6) ($1,189.2) Maturities and paydowns 54.8 183.4 238.2 Sales 5.6 616.3 621.9 Gross Gains 0.8 7.9 8.7 Gross Losses (1.0) (9.8) (10.8)
The results of discontinued operations included in the Consolidated Statement of Operations were as follows (in millions):
4.1 Indenture dated as of February 2, 1993, between the Registrant and Star Bank, National Association, as Trustee, relating to the Registrant's 11-1/8% Senior Subordinated Notes due 2003, incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, dated February 5, 1993.