AAG, GALIC and Loyal rent office space in Cincinnati, Ohio totaling approximately 230,000 square feet under leases expiring primarily in 2006 through 2008. In connection with AAG's realignment, the Company intends to sublease up to 60,000 square feet of its excess office space to others. Several of the Company's subsidiaries lease marketing and administrative offices in locations throughout the United States.
American Data Source India Private Limited, a software development and administrative services subsidiary of AAG, rents space in Bangalore, India totaling approximately 30,000 square feet under leases expiring primarily in 2001.
Management believes that its corporate offices are generally well maintained and adequate for the Company's present needs.
AAG owns facilities related to its former manufacturing operations totaling approximately 200,000 square feet in North Adams, Massachusetts and 60,000 square feet in Longwood, Florida. These facilities are currently being leased to companies using them for manufacturing and other operations.
The following financial data has been summarized from, and should be read in conjunction with, the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The data reflects the acquisitions of American Memorial and Loyal in November 1995, GAPR in December 1997 and United Teacher Associates in October 1999 and the sale of the Funeral Services Division in September 1998 (in millions, except per share amounts).
Operating earnings before income taxes $ 92.0 $143.9 $103.4 $ 80.7 $ 90.6
Income from continuing operations $ 63.5 $ 97.5 $ 71.4 $ 61.1 $ 58.7 Loss from discontinued operations - - - - (3.2) Extraordinary items - (0.8) (1.5) (6.0) (0.2) Change in accounting principle (4.7) - - - - Net income $ 58.8 $ 96.7 $ 69.9 $ 55.1 $ 55.3
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 and competitive pressures. AAG undertakes no obligation to update any forward-looking statements.
Ratios The following ratios may be considered relevant indicators of AAG's liquidity and are typically presented by AAG in its prospectuses and similar documents. 1999 1998 1997 Earnings to fixed charges 3.9 5.6 5.1
During 1999, AAG and its subsidiaries used bank borrowings and cash on hand to make acquisitions totalling approximately $130 million and to repurchase $5 million of its preferred securities and $5 million of Common Stock.
The September 1998 sale of its Funeral Services Division netted approximately $165 million in cash ($145 million after-tax). The majority of the proceeds were received by AAG's insurance subsidiaries.
The NAIC assigns quality ratings to publicly traded as well as privately placed securities. At December 31, 1999, 91% of AAG's fixed maturity portfolio was comprised of investment grade bonds (NAIC rating of "1" or "2"). Management believes that the high credit quality of AAG's investment portfolio should generate a stable and predictable investment return.
AAG invests primarily in fixed income investments which, including loans and short-term investments, comprised 98% of its investment portfolio at December 31, 1999. 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.
Approximately 90% of AAG's MBSs are rated "AAA" with substantially all being investment grade quality. The market in which these securities trade is highly liquid. Aside from interest rate risk, AAG does not believe a material risk (relative to earnings or liquidity) is inherent in holding such investments.
Litigation In March 2000, a jury in Dallas, Texas, awarded a verdict against GALIC in the amount of $11.2 million in a lawsuit brought by two former agents of GALIC. The Company believes that the verdict was contrary to both the facts and the law and expects to prevail on appeal. The ultimate outcome of this case will not have a material adverse impact on the financial condition of the Company.
Fixed Maturity Portfolio The fair value of AAG's fixed maturity portfolio is directly impacted by changes in market interest rates. AAG's fixed maturity portfolio is comprised of substantially all fixed rate investments with primarily short-term and intermediate-term maturities. This practice allows flexibility in reacting to fluctuations of interest rates. AAG's portfolio is managed with an attempt to achieve an adequate risk-adjusted return while maintaining sufficient liquidity to meet policyholder obligations. AAG uses various actuarial models in an attempt to align the duration of invested assets to the projected cash flows of policyholder liabilities.
The following table provides information about AAG's fixed maturity investments at December 31, 1999 and 1998, that are sensitive to interest rate risk. These tables show (dollars in millions) principal cash flows and related weighted-average interest rates by expected maturity date for each of the five subsequent years and for all years thereafter. Callable bonds and notes are included based on call date or maturity date depending upon which date produces the most conservative yield. MBSs and sinking fund issues are included based on maturity year adjusted for expected payment patterns. Actual cash flows may differ from those expected.
December 31, 1999 December 31, 1998 Principal Principal Cash Flows Rate Cash Flows Rate 2000 $ 350 7.9% 1999 $480 8.2% 2001 390 8.3 2000 550 7.8 2002 560 8.0 2001 660 8.3 2003 690 7.6 2002 700 7.8 2004 670 7.8 2003 780 7.5 Thereafter 3,490 7.7 Thereafter 2,680 7.6
Fair First Second Third Fourth Fifth Thereafter Total Value 1999 $690 $620 $550 $490 $440 $2,730 $5,520 $5,371 1998 660 620 560 500 450 2,660 5,450 5,307
Debt and Preferred Securities The following table shows scheduled principal payments on fixed-rate long-term debt of AAG and related weighted average interest rates for the next five years and for all years thereafter (in millions):
AAG (Consolidated): 1999 1998 1997 Revenues per income statement $635.9 $727.9 $636.3 Less realized losses (gains) on sales of investments and subsidiaries 7.1 (32.3) (5.2) Core operating revenues 643.0 695.6 631.1 Expenses per income statement 543.9 584.0 532.9 Less provision for realignment expenses (10.0) - - Less provision for relocation expenses - - (4.0) Core operating expenses 533.9 584.0 528.9
Net Investment Income Net investment income decreased 2% in 1999 resulting primarily from less invested assets due to the sale of the Funeral Services Division. Net investment income increased 3% in 1998, 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.
Individual securities are sold from time to time as market opportunities appear to present optimal situations under AAG's investment strategies.
Other Income Other income increased in 1999 and 1998 due primarily to increased revenues from AAG's agency and brokerage subsidiaries, additional variable annuity fees and increased life insurance policy fees.
On its deferred annuities (annuities in the accumulation phase), AAG generally credits interest to policyholders' accounts at their current stated "surrender" interest rates. Furthermore, for "two-tier" deferred annuities (annuities under which a higher interest amount can be earned if a policy is annuitized rather than surrendered), AAG accrues an additional liability to provide for expected deaths and annuitizations. Changes in crediting rates, actual surrender and annuitization experience or modifications in actuarial assumptions can affect this accrual. The decrease in annuity benefits from 1997 to 1998 reflects both decreases in crediting rates and changes in actuarial assumptions.
Insurance Acquisition Expenses Insurance acquisition expenses include amortization of deferred policy acquisition costs ("DPAC") as well as commissions on sales of life insurance products. The decrease in 1999 reflects the sale of the Funeral Services Division. Insurance acquisition expenses also include amortization of the present value of future profits of businesses acquired amounting to $7.7 million in 1999, $10.6 million in 1998 and $8.1 million in 1997.
Interest and Other Debt Expenses Interest and other debt expenses increased 10% in 1999 and 21% in 1998 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).
Other Expenses Other expenses increased 14% in 1999, reflecting: (i) higher personnel costs and consulting expenses (related primarily to expanded Year 2000 testing and other systems costs); (ii) increased costs associated with new business initiatives and acquisitions and (iii) operating expenses of subsidiaries acquired. These increases were partially offset by the absence of expenses resulting from the sale of the Funeral Services Division. Other expenses increased 21% in 1998, reflecting primarily: (i) operating expenses of GAPR, which was acquired in December 1997; (ii) higher depreciation and amortization costs and (iii) increases in personnel costs.
Extraordinary Items Extraordinary items reflect AAG's losses, net of tax, on retirements of its debt.
Recent Accounting Standards The following accounting standards have been implemented by AAG in 1998 and 1999 or will be implemented in 2001. The implementation of these standards is discussed under various subheadings of Note B to the Financial Statements (segment information is discussed in Note D); effects of each are shown in the relevant Notes. Implementation of Statement of Financial Accounting Standards ("SFAS") No. 133 in the first quarter of 2001 is not expected to have a significant effect on AAG.
Other standards issued in recent years did not apply to AAG or had only negligible effects on AAG.
Consolidated Income Statement: Years Ended December 31, 1999, 1998 and 1997
Consolidated Statement of Changes in Stockholders' Equity: Years Ended December 31, 1999, 1998 and 1997
Consolidated Statement of Cash Flows: Years Ended December 31, 1999, 1998 and 1997
The information required by the following Items will be included in AAG's definitive Proxy Statement for the 2000 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission within 120 days of the Company's fiscal year end and is herein incorporated by reference:
We have audited the accompanying consolidated balance sheet of American Annuity Group, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Annuity Group, Inc. and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
December 31, 1999 1998 Assets Investments: Fixed maturities - at market (amortized cost - $6,073.2 and $5,782.8) $5,946.7 $6,023.1 Equity securities - at market (cost - $43.6 and $46.7) 72.3 85.2 Investment in affiliate 12.3 15.9 Mortgage loans on real estate 16.0 40.1 Real estate 73.6 55.1 Policy loans 217.2 220.5 Short-term investments 80.2 73.6 Total investments 6,418.3 6,513.5 Cash 39.4 59.4 Accrued investment income 98.0 97.6 Unamortized insurance acquisition costs, net 406.2 247.4 Other assets 214.4 152.5 Variable annuity assets (separate accounts) 354.4 120.0 $7,530.7 $7,190.4 Liabilities and Capital Annuity benefits accumulated $5,519.5 $5,449.6 Life, accident and health reserves 520.6 341.6 Notes payable 201.3 131.0 Payable to affiliates, net 69.8 54.1 Deferred taxes on unrealized gains (losses) (27.2) 84.3 Accounts payable, accrued expenses and other liabilities 147.0 96.1 Variable annuity liabilities (separate accounts) 354.4 120.0 Total liabilities 6,785.4 6,276.7 Mandatorily redeemable preferred securities of subsidiary trusts 219.6 225.0 Stockholders' Equity: Common Stock, $1 par value -100,000,000 shares authorized - 42,374,086 and 42,576,933 shares outstanding 42.4 42.6 Capital surplus 349.7 354.1 Retained earnings 186.5 131.9 Unrealized gains (losses) on marketable securities, net (52.9) 160.1 Total stockholders' equity 525.7 688.7
Year ended December 31, 1999 1998 1997 Revenues: Life, accident and health premiums $123.9 $170.4 $121.5 Net investment income 496.3 506.9 494.3 Realized gains (losses) on sales of: Investments (7.1) 10.7 5.2 Subsidiaries - 21.6 - Other income 22.8 18.3 15.3 635.9 727.9 636.3 Costs and Expenses: Annuity benefits 262.6 261.7 278.8 Life, accident and health benefits 86.4 131.7 110.1 Insurance acquisition expenses 45.0 65.0 36.3 Trust preferred distribution requirement 18.6 19.0 15.5 Interest and other debt expenses 11.9 10.8 8.9 Provision for realignment expenses 10.0 - - Provision for relocation expenses - - 4.0 Other expenses 109.4 95.8 79.3 543.9 584.0 532.9 Operating earnings before income taxes 92.0 143.9 103.4 Provision for income taxes 26.5 46.1 32.5
Net income applicable to Common Stock $ 58.8 $ 96.7 $ 68.9
Basic earnings (loss) per common share: Income before extraordinary items and accounting change $1.50 $2.27 $1.63 Extraordinary items - (0.02) (0.03) Accounting change (0.11) - - Net income $1.39 $2.25 $1.60
Common Stock: Balance at beginning of year $ 42.6 $ 43.2 $ 43.3 Common Stock retired (0.2) (0.6) (0.1) Balance at end of year $ 42.4 $ 42.6 $ 43.2
Unrealized Gains (Losses), Net: Balance at beginning of year $160.1 $133.2 $ 61.8 Change during year (213.0) 26.9 71.4 Balance at end of year ($ 52.9) $160.1 $133.2
Comprehensive Income (Loss): Net Income $ 58.8 $ 96.7 $ 69.9 Other comprehensive income (loss) - change in net unrealized gains (losses) on marketable securities (213.0) 26.9 71.4 Comprehensive income (loss) ($154.2) $123.6 $141.3
Cash Flows from Investing Activities: Purchases of and additional investments in: Fixed maturity investments (1,435.7) (1,121.9) (1,449.9) Equity securities (7.9) (23.5) (12.5) Real estate, mortgage loans and other assets (42.8) (25.7) (16.1) Purchase of subsidiaries (128.7) (31.8) (51.3) Sale of subsidiaries - 164.6 - Cash and short-term investments of subsidiaries acquired (sold) 66.1 (18.2) 2.6 Maturities and redemptions of fixed maturity investments 617.6 673.0 408.2 Sales of: Fixed maturity investments 750.4 369.5 747.6 Equity securities 11.3 6.3 5.8 Real estate, mortgage loans and other assets 42.3 20.4 20.9 Decrease (increase) in policy loans 3.8 1.5 (1.3) (123.6) 14.2 (346.0)
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 established for accident and health claims are modified as necessary to reflect actual experience and developing trends.
Income Taxes AAG and its principal subsidiary, Great American Life Insurance Company ("GALIC"), have separate tax allocation agreements with American Financial Corporation ("AFC"), a subsidiary of AFG, which designate how tax payments are shared by members of the tax group. In general, both companies compute taxes on a separate return basis. GALIC is obligated to make payments to (or receive benefits from) AFC based on taxable income without regard to temporary differences. If GALIC's taxable income (computed on a statutory accounting basis) exceeds a current period net operating loss of AAG, the taxes payable by GALIC associated with the excess are payable to AFC. If the AFC taxgroup 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.
Start-Up Costs Prior to 1999, certain costs associated with introducing new products and distribution channels were deferred and amortized on a straight-line basis over five years. In 1999, AAG implemented Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." The SOP required that (i) costs of start-up activities be expensed as incurred and (ii) unamortized balances of previously deferred costs be expensed and reported as the cumulative effect of a change in accounting principle. Accordingly, AAG expensed previously capitalized start-up costs of $4.7 million (net of tax) or $0.11 per diluted share, effective January 1, 1999.
In October 1999, AAG acquired United Teacher Associates Insurance Company ("UTA") for $81 million in cash, pending post-closing adjustments under which AAG may receive as much as several million dollars. UTA provides retired and active teachers with supplemental health products and retirement annuities, and purchases blocks of insurance policies from other insurance companies. UTA produced over $64 million of statutory premiums in 1999. At year end 1999, it had assets of nearly $300 million.
In February 1999, AAG acquired Great American Life Insurance Company of New York (formerly known as Old Republic Life Insurance Company of New York) for approximately $27 million in cash.
In the first quarter of 1999, 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 (losses) (b) (7.1) 32.3 5.2 Total revenues per income statement $635.9 $727.9 $636.3
Operating profit (loss) - pretax Retirement products $124.1 $115.2 $106.4 Life, accident & health: U.S. 4.7 9.1 12.1 Puerto Rico 9.0 8.2 0.4 Corporate and other (a) (28.7) (20.9) (16.7) Pretax earnings from operations 109.1 111.6 102.2
"Investing activities" related to fixed maturity investments included in AAG's Consolidated Statement of Cash Flows consisted of the following (in millions):
1999* 1998 1997 Purchases ($1,435.7)($1,121.9)($1,449.9) Maturities and paydowns 617.6 673.0 408.2 Sales 750.4 369.5 747.6 Gross gains 21.0 12.3 20.0 Gross losses (29.8) (9.7) (13.9)
The table below sets forth the scheduled maturities of AAG's fixed maturity investments based on market value as of December 31:
Fixed Equity Tax Maturities Securities Other Effects Total Realized ($ 8.8) $ 0.2 $1.5 $ 2.5 $ 4.6) Change in unrealized (366.8) (9.8) - 131.8 (244.8)
1999 1998 1997 Fixed maturities* $492.3 $502.1 $492.6 Other 9.1 9.5 6.4 Total investment income 501.4 511.6 499.0 Investment expenses (5.1) (4.7) (4.7) Net investment income $496.3 $506.9 $494.3
AAG's investment portfolio is managed by a subsidiary of AFG. Investment expenses included investment management charges from this subsidiary amounting to $2.9 million in 1999, $3.3 million in 1998 and $2.9 million in 1997.
Investment in affiliate reflects AAG's 4% ownership (2.7 million shares; carrying value of $12.3 million at December 31, 1999) of the common stock of Chiquita Brands International which is accounted for under the equity method. AFG and its other subsidiaries own an additional 32% interest in the common stock of Chiquita. Chiquita is a leading international marketer, producer and distributor of bananas and other quality fresh and processed food products.
The market value of AAG's investment in Chiquita was approximately $13 million and $26 million at December 31, 1999 and 1998, respectively.
Included in AAG's retained earnings at December 31, 1998, was $8.7 million applicable to equity in undistributed net losses of Chiquita.
A progression of AAG's present value of future profits acquired ("PVFP") is as follows (in millions): 1999 1998 1997 Beginning balance $ 59.9 $102.0 $ 72.5 Addition due to acquisition 62.9 3.6 37.5 Reduction due to sale - (32.0) - Interest accrued 5.4 6.4 5.3 Amortization (13.1) (17.0) (13.3) Other - (3.1) - $115.1 $ 59.9 $102.0
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 11% of the balance at the beginning of each respective year.
In February 1998, AAG Holding borrowed $50 million under the 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 due 2008 and used the net proceeds to repay outstanding indebtedness under the bank credit line.
At December 31, 1999 scheduled principal payments on debt for the subsequent five years were as follows (in millions):
November 1996 9-1/4% TOPrS* (2026) $74,600,000 $75,000,000 On or after 11/7/2001 March 1997 8-7/8% Preferred Securities (2027) 70,000,000 75,000,000 On or after 3/1/2007
May 1997 7-1/4% ROPES** (2041) 75,000,000 75,000,000 Prior to 9/28/2000 and after 9/28/2001
Pretax Taxes Net Unrealized holding gains (losses) on securities arising during the period ($321.8) $110.5 ($211.3) 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 (2.7) 1.0 (1.7) Change in net unrealized gains (losses) on marketable securities ($324.5) $111.5 ($213.0)
Pretax Taxes Net Unrealized holding gains (losses) on securities arising during the period $ 6.6 ($1.0) 5.6 Unrealized gain on securities transferred from held to maturity 60.6 (21.2) 39.4 Reclassification adjustment for investment losses (gains) realized in net income and unrealized gains of subsidiaries sold (27.8) 9.7 (18.1) Change in net unrealized gains (losses) on marketable securities $ 39.4 ($12.5) $26.9
Pretax Taxes Net Unrealized holding gains (losses) on securities arising during the period $ 117.6 ($41.2) 76.4 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 (7.7) 2.7 (5.0) Change in net unrealized gains (losses) on marketable securities $ 109.9 ($38.5) $71.4
1999 1998 1997 Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding at beginning of year 2,464,080 $16.42 2,178,190 $15.21 1,548,969 $13.38 Granted 247,474 $22.81 417,000 $22.51 633,070 $19.70 Forfeited (159,045) $16.24 (90,332) $16.57 (3,849) $13.51 Exercised (31,394) $13.25 (40,778) $13.80 -
1999 1998 1997 Earnings before income taxes: Operating $92.0 $143.9 $103.4 Equity in earnings of affiliate (3.0) (0.4) 0.8 Extraordinary items - (1.2) (2.3) Cumulative effect of accounting change (7.2) - - Earnings before income taxes $81.8 $142.3 $101.9
December 31, 1999 1998 Deferred tax assets: Net operating loss carryforwards $30.0 $29.4 Accrued expenses 10.0 5.1 Investment securities, including affiliate 43.4 36.3 Valuation allowance for deferred tax assets (21.2) (26.4)
At December 31, 1999, AAG had net operating loss carryforwards for federal income tax purposes of approximately $86 million which are scheduled to expire from 2003 through 2005.
Future minimum lease payments, net of sublease revenues, under operating leases having initial or remaining non-cancelable lease terms in excess of one year at December 31, 1999 are payable as follows: 2000 - $6.1 million; 2001 - $5.5 million; 2002 - $4.6 million; 2003 - $4.5 million; 2004 - $4.4 million; 2005 and beyond - $9.3 million.
The number of common shares outstanding used in calculating diluted earnings per share in 1999 and 1998 include 0.6 million shares and 0.7 million shares, respectively, for the effect of the assumed exercise of AAG's stock options.
In March 2000, a jury in Dallas, Texas, awarded a verdict against GALIC in the amount of $11.2 million in a lawsuit brought by two former agents of GALIC. The Company believes that the verdict was contrary to both the facts and the law and expects to prevail on appeal. The ultimate outcome of this case will not have a material adverse impact on the financial condition of the Company.
The Company is continuing its clean-up activities at certain of its former manufacturing operations and third-party sites, in some cases in accordance with consent agreements with federal and state environmental agencies. Changes in regulatory standards and further investigations could affect estimated costs in the future. Management believes that reserves recorded are sufficient to satisfy the known liabilities and that the ultimate cost will not, individually, or in the aggregate, have a material adverse effect on the financial condition or results of operations of AAG. At December 31, 1999, based on prior costs and discussions with independent environmental consultants, the Company believes the remaining aggregate cost of environmental work at all sites for which it has responsibility will range from $4.8 million to $12.7 million. The majority of these costs are expected to be paid out over the next three years. AAG is actively pursuing recovery of a portion of the costs from the companies which provided insurance coverage for the former manufacturing operations. The Company's reserve for environmental costs was $5.3 million at December 31, 1999, and $4.7 million at December 31, 1998.
Capital and surplus $403.8 $350.4 $317.0 Asset valuation reserve 66.5 62.6 64.7 Interest maintenance reserve 9.8 20.6 23.9
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, 1999, GALIC may pay $40.4 million in dividends in 2000 without prior approval.
Revenues $ 552 $ 665 $ 617 Pretax income 59 130 92 Net income 36 84 60
Cash and investments $6,258 $6,291 Unamortized insurance acquisition costs 363 208 Variable annuity assets (separate accounts) 354 120 Other assets 307 281
1999 1998 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Assets Fixed maturity investments $5,946.7 $5,946.7 $6,023.1 $6,023.1 Equity securities 72.3 72.3 85.2 85.2 Investment in affiliate 12.3 12.7 15.9 25.6
First Second Third Fourth Total 1999 Quarter Quarter Quarter Quarter Year Realized gains (losses) $ 4.0 ($ 2.3) ($ 5.9 )($ 2.9) ($ 7.1) Total revenues 153.5 149.7 155.9 176.8 635.9 Income before accounting change 22.4 18.4 15.4 7.3* 63.5 Accounting change (4.7) - - - (4.7) Net Income 17.7 18.4 15.4 7.3* 58.8
Basic earnings (loss) per common share: Income before accounting change $0.53 $0.43 $0.36 $0.17* $1.50 Accounting change (0.11) - - - (0.11) Net income $0.42 $0.43 $0.36 $0.17* $1.39
Realized gains (losses) $ 10.2 $ 1.5 $ 25.6 ($ 5.0)$ 32.3 Total revenues 187.8 185.9 211.0 143.2 727.9
Extraordinary items, net of tax - (0.8) (1.5) Cumulative effect of accounting change, net of tax (4.7) - - Net Income $ 58.8 $ 96.7 $ 69.9
Operating Activities: Net income $58.8 $96.7 $ 69.9 Adjustments: Extraordinary items - 0.8 1.5 Cumulative effect of accounting change 4.7 - - Equity in net earnings of subsidiaries (44.2) (76.6) (58.8) Realized losses (gains) (1.7) 1.5 (0.1) Gain on sale of subsidiaries - (4.6) - Depreciation and amortization 1.0 1.4 2.2 Decrease (increase) in other assets (9.6) 1.1 (1.9) Increase (decrease) in balances with affiliates 3.4 (5.1) 9.5 Increase (decrease) in other liabilities 5.0 (3.4) (11.2) Capital distributions from subsidiaries 44.1 8.9 181.2 Contributions to subsidiaries (51.3) (61.6) (3.1) Other, net (0.1) 6.2 (0.7) 10.1 (34.7) 188.5
Investing Activities: Purchase of investments (47.6) (59.9) (104.8) Decrease in intercompany notes receivable 11.3 13.3 0.7 Purchase of subsidiaries (22.2) - (51.7) Maturities and redemptions of fixed maturity investments 3.9 51.4 0.5 Sales of investments 55.3 38.2 22.0 Sale of subsidiaries - 10.6 - 0.7 53.6 (133.3)
Net Increase (Decrease) in Cash and Short-term Investments (2.5) - 1.7
Cash and short-term investments at end of period $ 1.1 $ 3.6 $ 3.6
27.2 Restated Financial Data Schedule for nine months ended September 30, 1997 - included in Report filed electronically with the Securities and Exchange Commission.