AAG, GALIC and Loyal rent office space in Cincinnati, Ohio totaling approximately 230,000 square feet under leases expiring primarily in 2006 through 2008. Several of the Company's non-insurance subsidiaries lease marketing and administrative offices in locations throughout the United States.
Diluted earnings per common share: Continuing operations $2.23 $1.61 $1.39 $1.45 $1.05 Discontinued operations - - - (0.08) (0.07) Extraordinary items (0.02) (0.03) (0.14) - (0.05) Change in accounting principle - - - - (0.01) Net income $2.21 $1.58 $1.25 $1.37 $0.92 Cash dividends per common share $0.10 $0.10 $0.08 $0.07 $0.06
Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 encourages corporations to provide investors with information about the Company's anticipated performance and provides protection from liability if future results are not the same as management's expectations. This document contains certain forward-looking statements that are based on assumptions which management believes are reasonable, but by their nature, inherently uncertain. Future results could differ materially from those projected. Factors that could cause such differences include, but are not limited to: changes in economic conditions, regulatory actions, the Year 2000 issue and competitive pressures. AAG undertakes no obligation to update any forward- looking statements.
For purposes of the calculations of consolidated debt to capital, consolidated debt includes the Company's notes payable and its Remarketed Par Securities ("ROPES") which were issued in May 1997. Capital represents the sum of consolidated debt, redeemable preferred securities of subsidiary trusts and stockholders' equity (excluding unrealized gains on fixed maturity investments). Proforma amounts assume unrestricted cash and marketable investments on hand at AAG (parent) have been used to reduce consolidated debt.
Sources and Uses of Funds To pay interest and principal on borrowings, obligations related to discontinued manufacturing operations and other holding company costs, AAG (parent) and AAG Holding use cash and investments on hand as well as capital distributions from their principal subsidiary, Great American Life Insurance Company ("GALIC"). At December 31, 1998, AAG (parent) had nearly $100 million of cash and investments on hand. The amount of capital distributions which can be paid by GALIC is subject to restrictions relating to statutory surplus and earnings. In 1998, GALIC made $72 million in such payments; the maximum amount of dividends payable by GALIC in 1999 without prior regulatory approval is $35.6 million.
In 1998, AAG and AAG Holding retired $128 million of debt (including $24 million held by affiliates) and $15 million of Common Stock using proceeds from a public debt offering and cash on hand.
At December 31, 1998 and 1997, respectively, AAG had approximately $240 million and $242 million in net unrealized gains on its fixed maturity portfolio. At December 31, 1998, all of AAG's fixed maturity investments were classified as "available for sale" (See Note B).
Contingency plans provide a documented order of actions necessary to keep the Company's business functions operating and mitigate the extent of any potential disruptions. The Company expects to complete its contingency planning process for all mission critical software applications and operational processes in the second quarter of 1999, and for less significant software applications and operational processes in the third quarter of 1999. These plans will be tested through the balance of the year.
The following table provides information about AAG's fixed maturity investments at December 31, 1998. The table shows (dollars in millions) principal cash flows and related weighted-average interest rates by expected maturity dates. Callable bonds and notes are included based on call date or maturity date depending upon which date produces the most conservative yield. Mortgage-backed securities and sinking fund issues are included based on maturity year adjusted for expected payment patterns. Actual cash flows may differ from those expected.
1999 2000 2001 2002 2003 Remain Principal Cash Flows $480 $550 $660 $700 $780 $2,680 Wtd.-Avg. Interest Rate 8.2% 7.8% 8.3% 7.8% 7.5% 7.6%
1999 2000 2001 2002 2003 Remain Annuity Payments $660 $620 $560 $500 $450 $2,610
General The operations of Great American Life Assurance Company of Puerto Rico, Inc. ("GAPR") and Arkansas National Life Insurance Company are included in AAG's consolidated financial statements from their dates of acquisition in December 1997 and March 1998, respectively. On September 30, 1998, the Company sold its Funeral Services Division, which included American Memorial Life Insurance Company and Arkansas National. The results contained herein include the results of this division for the first nine months of 1998 and for 1997 and 1996. Accordingly, the 1998 income statement components are not comparable to 1997 and 1996.
Management believes the concept of net operating earnings (or "core" earnings) is helpful in comparing the operating performance of AAG with that of similar companies. Diluted net operating earnings per share for 1998 and 1997 were up 10% and 13%, respectively, over the prior years. However, net operating earnings should not be considered a substitute for net income as an indication of AAG's overall performance. The following table (in millions, except per share amounts) compares the Company's net operating earnings over the past three years.
Expenses per income statement (581.0) (530.0) (498.8) Less provision for relocation expenses - 4.0 - Operating expenses (581.0) (526.0) (498.8)
Net operating earnings per common share (diluted) $ 1.74 $ 1.58 $ 1.40
The following table summarizes AAG's life, accident and health premiums as shown in the Consolidated Income Statement (in millions).
Increases in life, accident and health premiums and benefits in 1998 reflect primarily the acquisition of GAPR. Life, accident and health premiums and benefits increased in 1997 due primarily to an increase in pre-need life insurance sales by AAG's Funeral Services Division which was sold in September 1998.
Net Investment Income Net investment income increased 3% in 1998 and 6% in 1997, reflecting an increase in the Company's average fixed maturity investment base. This increase was partially offset by decreasing market interest rates and the sale of AAG's Funeral Services Division. Investment income is shown net of investment expenses of $4.7 million in 1998 and 1997 and $6.5 million in 1996. Lower investment expenses in 1998 and 1997 reflect a decrease in fees charged by an affiliate. (See Notes E and P.)
Annuity Benefits Annuity benefits reflect amounts accrued on annuity policyholders' funds accumulated. The majority of AAG's fixed rate annuity products permit AAG to change the crediting rate at any time (subject to minimum interest rate guarantees of 3% to 4% per annum). As a result, management has been able to react to changes in market interest rates and maintain a desired interest rate spread. While management believes the interest rate and stock market environment over the last several years has contributed to an increase in annuitizations and surrenders, the Company's persistency rate remains approximately 88%. However, a continuation of the current interest rate environment could adversely affect this rate.
On immediate annuities (annuities in the pay-out phase), interest is credited based on discount rates used at the time the policies are annuitized. Discount rates are generally based on interest rates in effect at annuitization.
Insurance Acquisition Expenses Insurance acquisition expenses include amortization of deferred acquisition costs ("DAC") as well as certain marketing expenses and commissions on sales of life insurance products. The increase in 1998 reflects the acquisition of GAPR, commissions and amortization related to increased sales of pre-need life insurance products and increased amortization of DAC on fixed annuities due to actual experience and changes in actuarial assumptions. Insurance acquisition expenses also include amortization of the present value of future profits of businesses acquired amounting to $10.6 million in 1998, $8.1 million in 1997 and $8.7 million in 1996.
Preferred Distributions and Interest Expenses Trust preferred distribution requirements and interest and other debt expenses increased 22% in 1998 and 59% in 1997 due to higher average amounts outstanding. Issuances of debt and preferred securities have been used to fund acquisitions and to maintain a portfolio of investments at AAG (parent) (See "Sources and Uses of Funds").
Provision for Relocation Expenses In 1997, AAG began relocating most of the operations of Loyal from Mobile, Alabama to Cincinnati, Ohio to more closely coordinate its efforts with those of other AAG operations. The estimated cost of the relocation ($4.0 million) was expensed in the third quarter of 1997.
Consolidated Statement of Cash Flows: Years Ended December 31, 1998, 1997 and 1996
December 31, 1998 1997 Assets Investments: Fixed maturities: Available for sale - at market (amortized cost - $5,782.8 and $3,922.0) $6,023.1 $4,099.4 Held to maturity - at amortized cost (market $0 and $2,340.6) - 2,276.4 Equity securities - at market (cost - $46.7 and $30.9) 85.2 83.0 Investment in affiliate 15.9 16.8 Mortgage loans on real estate 40.1 52.1 Real estate 55.1 42.0 Policy loans 220.5 241.0 Short-term investments 73.6 13.9 Total investments 6,513.5 6,824.6 Cash 59.4 36.8 Accrued investment income 97.6 101.6 Unamortized insurance acquisition costs, net 247.4 261.6 Other assets 152.5 185.2 Assets held in separate accounts 120.0 300.5
Liabilities and Capital Annuity benefits accumulated $5,449.6 $5,528.1 Life, accident and health reserves 341.6 709.9 Notes payable 131.0 135.8 Payable to affiliates, net 54.1 35.8 Deferred taxes on unrealized gains 84.3 71.8 Accounts payable, accrued expenses and other liabilities 96.1 119.5 Liabilities related to separate accounts 120.0 300.5 Total liabilities 6,276.7 6,901.4 Mandatorily redeemable preferred securities of subsidiary trusts 225.0 225.0 Stockholders' Equity: Common Stock, $1 par value -100,000,000 shares authorized - 42,576,933 and 43,199,147 shares outstanding 42.6 43.2 Capital surplus 354.1 368.0 Accumulated deficit at December 31, 1992 (212.6) (212.6) Retained earnings since January 1, 1993 344.5 252.1 Unrealized gains on marketable securities, net 160.1 133.2 Total stockholders' equity 688.7 583.9
Diluted earnings (loss) per common share: Continuing operations $2.23 $1.61 $1.39 Extraordinary items (0.02) (0.03) (0.14) Net income $2.21 $1.58 $1.25 Cash dividends per common share $0.10 $0.10 $0.08
Common Stock: Balance at beginning of year $ 43.2 $ 43.3 $ 43.1 Common Stock issued - - 0.2 Common Stock retired (0.6) (0.1) - Balance at end of year $ 42.6 $ 43.2 $ 43.3
Capital Surplus: Balance at beginning of year $368.0 $358.5 $361.1 Capital contribution - 9.3 - Common Stock issued 0.4 0.2 2.2 Common Stock retired (14.3) (1.0) - Common dividends declared - - (3.4) Preferred Stock retired - 2.0 - Preferred dividends declared - (1.0) (1.4) Balance at end of year $354.1 $368.0 $358.5
Retained Earnings Since January 1, 1993: Balance at beginning of year $252.1 $186.5 $131.4 Net income 96.7 69.9 55.1 Common dividends declared (4.3) (4.3) - Balance at end of year $344.5 $252.1 $186.5
Comprehensive Income: Net Income $ 96.7 $ 69.9 $ 55.1 Other comprehensive income - change in net unrealized gains on marketable securities 26.9 71.4 (27.5) Comprehensive income $123.6 $141.3 $ 27.6
Net increase (decrease) in cash and short-term investments 82.3 (33.4) (85.3) Cash and short-term investments at beginning of year 50.7 84.1 169.4 Cash and short-term investments at end of year $ 133.0 $ 50.7 $ 84.1
American Financial Group, Inc. ("AFG") and its subsidiaries owned 82% of AAG's Common Stock at December 31, 1998.
Basis of Presentation The accompanying Consolidated Financial Statements include the accounts of AAG and its subsidiaries. Certain reclassifications have been made to prior years to conform to the current year's presentation. Acquisitions and sales of subsidiaries have resulted in certain differences in the financial statements and have affected comparability between years. All significant intercompany balances and transactions have been eliminated. All acquisitions have been treated as purchases. The results of operations of companies since their formation or acquisition are included in the Consolidated Financial Statements.
Short-term investments are carried at cost; mortgage loans on real estate are generally carried at amortized cost; policy loans are stated at the aggregate unpaid balance. Premiums and discounts on mortgage-backed securities are amortized over their expected average lives using the interest method.
Life, Accident and Health Reserves Liabilities for future policy benefits under traditional life, accident and health policies are computed using the net level premium method. Computations are based on anticipated investment yields, mortality, morbidity and surrenders and include provisions for unfavorable deviations. Reserves are modified as necessary to reflect actual experience and developing trends.
Assets Held in and Liabilities Related to Separate Accounts Separate account assets and related liabilities represent variable annuity deposits and, in 1997, include deposits maintained by several banks under a tax- deferred annuity program previously offered by the Funeral Services Division, which was sold in 1998. (See Note C.)
If the AFC tax group utilizes any of AAG's net operating losses or deductions that originated prior to AAG's entering AFC's consolidated tax group, AFC will pay to AAG an amount equal to the benefit received.
Benefit Plans AAG sponsors an Employee Stock Ownership Retirement Plan ("ESORP") covering all employees who are qualified as to age and length of service. The ESORP, which invests primarily in securities of AAG, is a trusteed, noncontributory plan for the benefit of the employees of AAG and its subsidiaries. Contributions are discretionary by the directors of AAG and are charged against earnings in the year for which they are declared. Qualified employees having vested rights in the plan are entitled to benefit payments at age 60.
AAG operates in three major segments: (i) retirement products, (ii) life, accident and health insurance and (iii) corporate and other. AAG's retirement product companies sell tax-deferred annuities to employees of primary and secondary educational institutions, hospitals and in the non- qualified markets. More than one-fourth of AAG's retirement annuity premiums came from California in 1996 to 1998. No other state accounted for more than 10% of premiums. Sales from AAG's top two Managing General Agencies accounted for 14% and 5% of retirement annuity premiums in 1998.
Effective January 1, 1998, AAG implemented SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 requires segment information to be reported based on how management internally evaluates the operating performance of its business units. Implementation of this standard had no impact on AAG's financial position or results of operations.
Realized gains (b) 32.3 5.2 1.2 Equity in net earnings (loss) of affiliate (0.4) 0.8 (2.2) Total revenues per income statement $724.5 $634.2 $577.3
Operating profit (loss) - pretax Retirement annuities $111.6 $101.5 $ 91.7 Life, accident & health 12.6 8.0 9.5 Corporate and other (12.6) (7.3) (21.7) Total pretax operating income 111.6 102.2 79.5
Realized gains (b) 32.3 5.2 1.2 Equity in net earnings (loss) of affiliate (0.4) 0.8 (2.2)
(a) Decrease in "Corporate and other" assets reflects sale of Funeral Services Division in 1998. (b) Includes gain on sale of subsidiaries in 1998.
Fixed maturity investments at December 31, consisted of the following (in millions):
Held to Maturity Amortized Market Gross Unrealized Cost Value Gains Losses Fixed maturities: U. S. Government and government agencies and authorities $ - $ - $ - $ - States, municipalities and political subdivisions - - - - Foreign governments - - - - Public utilities - - - - Mortgage-backed securities - - - - All other corporate - - - - Redeemable preferred stocks - - - - $ - $ - $ - $ -
Available Held to for Sale Maturity Total Purchases ($893.8) ($116.3) ($1,010.1) Maturities and paydowns 148.6 106.6 255.2 Sales 251.7 9.3 261.0 Gross gains 8.3 1.1 9.4 Gross losses (8.3) (0.3) (8.6)
Securities classified as "held to maturity" were sold for gains of $0.5 million in 1998 due to significant deterioration in the issuers' creditworthiness. In 1997 and 1996, gains (losses) on such sales were insignificant.
Maturity 1998 One year or less 5% After one year through five years 25 After five years through ten years 25 After ten years 14 Mortgage-backed securities 31 100%
1998 1997 1996 Fixed maturities* $502.1 $492.6 $463.4 Other 9.5 6.4 10.8 Total investment income 511.6 499.0 474.2 Investment expenses (4.7) (4.7) (6.5) Net investment income $506.9 $494.3 $467.7
AAG's investment portfolio is managed by a subsidiary of AFG. Investment expenses included investment management charges from this subsidiary amounting to $3.3 million in 1998, $2.9 million in 1997 and $4.7 million in 1996. (See Note P - "Related Party Transactions".)
In 1996 AAG recorded a pretax extraordinary charge of $1.1 million representing its proportionate share of Chiquita's loss on the retirement of debt.
Unamortized insurance acquisition costs consisted of the following at December 31, (in millions): 1998 1997 Deferred policy acquisition costs $320.1 $300.6 Present value of future profits acquired 59.9 102.0 Unearned revenues (132.6) (141.0) $247.4 $261.6
1998 1997 1996 Beginning balance $102.0 $ 72.5 $73.4 Addition due to acquisition 3.6 37.5 - Reduction due to sale (32.0) - - Interest accrued 6.4 5.3 5.4 Amortization (17.0) (13.3)(14.1) Other (3.1) - 7.8 $ 59.9 $102.0 $72.5
The interest accrual rates used range primarily from 5% to 7%. During each of the next five years, the PVFP is expected to decrease at a rate of approximately 9% of the balance at the beginning of each respective year.
1998 1997 Direct obligations of AAG $ 1.2 $ 1.3 Obligations of AAG Holding (guaranteed by AAG): 6-7/8% Senior Notes due 2008 100.0 - Bank Credit Line 27.0 107.0 11-1/8% Senior Subordinated Notes due 2003 - 24.1 Other subsidiary debt 2.8 3.4 Total $131.0 $135.8
In January 1998, AAG Holding replaced its existing bank lines with a $200 million unsecured credit agreement. Loans under the credit agreement mature from 2000 to 2003 and bear interest at floating rates based on prime or Eurodollar. In February 1998, AAG Holding borrowed under the new credit line and retired its 11-1/8% Notes realizing a pretax extraordinary loss of $1.2 million. In June 1998, AAG Holding sold $100 million principal amount of 6-7/8% Senior Notes and used the net proceeds to repay outstanding indebtedness under the unsecured bank credit line.
In August 1997, AAG Holding retired its 9-1/2% Senior Notes, realizing a pretax extraordinary loss of $2.4 million. During 1996, a pretax extraordinary loss of $8.2 million was realized on the repurchase of $78.0 million principal amount of Notes.
At December 31, 1998, AAG and its subsidiaries had no material amounts of scheduled principal payments due until final maturity of the bank credit line in 2003.
Cash interest payments were $10.9 million in 1998, $9.4 million in 1997 and $17.4 million in 1996.
Wholly-owned subsidiary trusts of AAG Holding have issued $225 million of preferred securities and, in turn, purchased $225 million of AAG Holding subordinated debt which provide interest and principal payments to fund the Trusts' obligations. The preferred securities are mandatorily redeemable upon maturity or redemption of the subordinated debt. The three preferred securities issues are summarized as follows:
In December 1996, AAG sold 320,000 shares of newly issued Preferred Stock for $32 million (see Note P - "Related Party Transactions"). In March 1997, AAG repurchased all 490,000 shares of its Preferred Stock for approximately $47 million.
Pretax Taxes Net Unrealized holding gains on securities arising during the period ($42.1) $14.6 ($27.5) Unrealized gain on securities transferred from held to maturity - - - Reclassification adjustment for investment losses (gains) realized in net income and unrealized gains of subsidiaries sold - - - Changes in net unrealized gains on marketable securities ($42.1) $14.6 ($27.5)
The average remaining life of AAG's options was 8.5 years at December 31, 1998. The exercise prices of options issued during the year ranged from $22.13 to $24.38 in 1998; $14.00 to $21.75 in 1997 and $13.25 to $13.75 in 1996.
At December 31, 1998, AAG had net operating loss carryforwards for federal income tax purposes of approximately $84 million which are scheduled to expire from 2003 through 2005.
Future minimum lease payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year at December 31, 1998 are payable as follows: 1999 - $5.3 million; 2000 - $5.0 million; 2001 - $4.9 million; 2002 - $4.1 million; 2003 - $4.0 million; 2004 and beyond - $13.5 million.
The number of common shares outstanding used in calculating diluted earnings per share in 1998 and 1997 include 0.7 million shares and 0.5 million shares, respectively, for the effect of the assumed exercise of AAG's stock options.
Capital and surplus $350.4 $317.0 $285.0 Asset valuation reserve 62.6 64.7 91.4 Interest maintenance reserve 20.6 23.9 24.7
The amount of dividends which can be paid by GALIC without prior approval of regulatory authorities is subject to restrictions relating to capital and surplus and statutory net income. Based on net income at December 31, 1998, GALIC may pay $35.6 million in dividends in 1999 without prior approval.
Revenues $ 665 $ 617 $91 Pretax income 130 92 8 Net income 84 60 5
Investments $6,291 $6,634 Unamortized insurance acquisition costs 208 225 Assets held in separate accounts 120 300 Other assets 281 284
Related Party Transactions In connection with AAG's purchase of GALIC from Great American Insurance Company ("GAI"), a subsidiary of AFG, in 1992, GAI agreed to neutralize the financial effects on GALIC of the adoption of an actuarial guideline with respect to non-traditional life insurance and annuity products. In satisfaction of this obligation, (i) GAI had agreed to purchase, at AAG's option, up to $57 million of AAG Preferred Stock and (ii) terms of GALIC's investment management services contract with AFG were modified to reduce the fees owed under certain circumstances. In December 1996 and 1995, AAG sold $21.7 million and $17.0 million, respectively, of its Series B Preferred Stock to GAI; the proceeds were contributed to GALIC. Also in December 1996, AAG sold $10.3 million of its Series B Preferred Stock to AFC. In March 1997, AAG repurchased all the Series B Preferred Stock for approximately $47 million. In 1997, AAG and GAI agreed that no additional shares of AAG Preferred Stock would be issued pursuant to this arrangement and that the financial impact of the actuarial guideline would be offset solely by reduction of investment management fees.
In a 1997 transaction, AAG purchased a minority ownership position in a company engaged in the production of ethanol. AAG's Chairman purchased the remaining ownership. During 1998, this company borrowed $4.0 million from AAG under a subordinated note bearing interest at 14% and used the proceeds to pay a portion of a $6.3 million capital distribution, including $3.1 million to AAG. AAG's equity investment in this company at December 31, 1998 was $1.8 million. In addition, AAG has extended a $5 million line of credit to this company; no amounts have been borrowed under the credit line.
GALIC has a line of credit with a company owned in part by AFG and a brother of AAG's Chairman. Under the agreement, this company may borrow up to $8 million at 13% with interest deferred and added to principal. At December 31, 1998, $6.1 million was due GALIC under the line.
Fair Value of Financial Instruments The following table shows (in millions) the carrying value and estimated fair value of AAG's financial instruments at December 31:
Liabilities Annuity benefits accumulated $5,449.6 $5,307.2 $5,528.1 $5,319.1 Notes payable 131.0 130.4 135.8 136.6
Unadjusted Asset Effect of Reported (Liability ) SFAS 115 Amount Fixed maturities - available for sale $5,782.8 $240.3 $6,023.1 Equity securities 46.7 38.5 85.2 Unamortized insurance acquisition costs, net 256.3 (8.9) 247.4 Annuity benefits accumulated (5,424.1) (25.5) (5,449.6) Deferred taxes on unrealized gains - (84.3) (84.3) Unrealized gains on marketable securities, net $160.1
Quarterly results necessarily rely heavily on estimates. These estimates and certain other factors, such as the seasonal nature of the Company's affiliate and certain other operations and the discretionary sales of assets, cause the quarterly results not to be necessarily indicative of results for longer periods of time. The following table represents quarterly results of operations for the years ended December 31, 1998 and 1997 (in millions, except per share data).
Earnings (loss) per common share: Basic: Continuing operations $0.60 $0.50 $0.87 $0.30 $2.27 Extraordinary items (0.02) - - - (0.02) Net income $0.58 $0.50 $0.87 $0.30 $2.25
Average common shares outstanding Basic 43.1 43.1 43.0 42.7 43.0 Diluted 43.8 43.9 43.7 43.4 43.7
Realized gains (losses) on sales of investments $ 0.3 ($ 0.1) $ 1.5 $ 3.5 $ 5.2 Total revenues 149.7 154.5 161.7 168.3 634.2
Average common shares outstanding Basic 43.2 43.2 43.2 43.2 43.2 Diluted 43.4 43.6 43.8 43.8 43.7
December 31, Assets: 1998 1997 Investments: Fixed maturities: Available for sale - at market (amortized cost - $68.7 and $61.3) $ 67.6 $ 62.5 Equity securities - at market (cost - $1.9 and $11.5) 1.9 11.5 Investment in affiliate 24.8 - Cash and short-term investments 3.6 3.6 Investment in subsidiaries (a) 512.0 396.0 Note receivable from AAG Holding 115.0 115.7 Other assets 16.5 53.9 $741.4 $643.2 Liabilities and Capital: Accounts payable, accrued expenses and other liabilities $ 22.3 $ 24.3 Payables to affiliates 29.2 33.7 Notes payable 1.2 1.3 Stockholders' equity (b) 688.7 583.9 $741.4 $643.2
Year ended December 31, 1998 1997 1996 Revenues: Net investment income and other income $ 37.5 $ 34.1 $ 10.6 Realized gains (losses) on sales of investments (1.5) 0.1 - Gain on sale of subsidiaries 4.6 - - Equity in net loss of affiliate (4.4) - - Equity in undistributed earnings of subsidiaries 72.7 (92.9) 47.6 Capital distributions from subsidiaries 50.6 181.1 61.2 159.5 122.4 119.4 Costs and Expenses: Interest and other financing expenses 0.1 0.2 15.2 Provision for relocation expenses - 4.0 - Other expenses 15.9 14.0 25.7 16.0 18.2 40.9 Income from continuing operations before income taxes 143.5 104.2 78.5 Provision for income taxes 46.0 32.8 17.4 Income from continuing operations 97.5 71.4 61.1
(a) Includes unrealized gains of $160.8 million and $132.4 million in 1998 and 1997, respectively.
(b) Includes unrealized gains of $160.1 million and $133.2 million in 1998 and 1997, respectively.
Investing Activities: Purchase of investments (59.9) (104.8) - Decrease (increase) in intercompany notes 13.3 0.7 (46.9) Purchase of subsidiaries - (51.7) - Maturities and redemptions of fixed maturity investments 51.4 0.5 - Sales of investments 38.2 22.0 - Sale of subsidiaries 10.6 - - Sales of real estate and other assets - - 0.2 53.6 (133.3) (46.7)
4 Registrant has no outstanding debt issues exceeding 10% of the assets of Registrant and consolidated subsidiaries.
s/CARL H. LINDNER Chairman of the Board March 30, 1999 Carl H. Lindner of Directors
s/WILLIAM J. MANEY Senior Vice President, March 30, 1999 William J. Maney Treasurer and Chief Financial Officer (Principal Accounting Officer)