The headquarters building is located at 11222 Quail Roost Drive, Miami, Florida 33157, and is approximately 480,000 square feet in size. The building is used exclusively for general office use, except for a portion which functions as the Company's warehouse. Certain other properties are infrequently acquired through foreclosures of mortgage loans in which ABLAC has invested. ABLAC holds and operates such properties until sale can be effected.
At December 31 (in thousands except book value per common share):
The per common share data for years prior to 1997 has been restated to reflect the 2 for 1 stock split effective September 12, 1997.
The Company has become aware that some financial institutions have, in connection with a loan, begun to issue debt cancellation agreements, which are similar to the Company's credit life and credit disability products. Various state insurance and financial institution regulators are examining these agreements to determine whether they should be regulated as insurance. It is premature to project the ultimate legal resolution and resulting market effects this development might have.
In 1997, net income increased 22% to $114.9 million from $94.5 million in 1996. Operating results benefited from continued strong growth in net investment income and in the Company's credit-related products. 1997 was impacted by the favorable results in the Company's property lines and a reduction of the operating losses in the United Kingdom insurance subsidiary. After-tax operating
Total revenues increased 6.0% in 1997 over the prior year, primarily due to increases in net premiums earned of $75.3 million and investment income of $12.9 million. Gross collected premiums increased more than $248 million or approximately 10%, from $2.5 billion in 1996 to $2.7 billion in 1997. In 1997, property and casualty segment revenues increased by $69.0 million while the life segment revenues increased $27.2 million. A significant portion of the revenue growth resulted from the increase in net earned premiums in extended service contract and homeowners products for the property and casualty segment and Credit Life and Credit A&H for the life segment.
Gross collected premiums increased 9% in 1996 and 30% in 1995 (26% in 1995 excluding the $66 million block of business acquired). Net earned premiums increased 11% in 1996 and 13% in 1995.
Investment income increased by 11% to $134.1 million in 1997 from $121.2 million in 1996. The increase is mainly due to the overall increase in invested assets of $194.7 million. The investment income increase in 1996 from 1995 was 22%. The Company's average fixed income investment yield was 6.9% in 1997, 6.8% in 1996 and 7.0% in 1995.
In 1997, the Company did not experience significant catastrophic losses. In 1996, the Company incurred approximately $9.2 million in pre-tax losses related to Hurricanes Bertha, Fran and Hortense.
Credit bond pre-tax losses and expenses amounted to $11.5 million in 1995, including reserves and partial litigation settlements of $5.8 million. In 1997 and 1996, the Company did not incur any significant expenses or losses associated with the remaining credit bond policies in force.
The Company's 1997 reserve development, both foreign and domestic, was not significantly different from previously established reserves. The Company's loss reserve development includes losses assumed from excess casualty reinsurance pools in which the Company discontinued participation effective on or prior to 1981. The business is long-tail in nature and losses continue to exceed both Company and industry expectations. Most of these losses result from asbestos-related and environmental pollution claims. The Company's exposure is primarily through participation in excess casualty pools. These pools typically involve high-layer coverages that are applicable only after primary insurance coverage and, in many cases, reinsurance coverages have been exhausted. The Company's experience can differ significantly from that of other insurers which wrote the primary coverages directly. The Company establishes loss reserves on known claims as recommended by the various pool managers, plus additional reserves to compensate for those claims that have not yet been reported.
At the current time, it is not possible to determine the future development of asbestos and environmental claims due to a general absence of reliable predictive data and of a generally accepted actuarial methodology for these exposures, significant unresolved legal issues including coverage issues, policy definitions and evolving theories and arguments. Additionally, the determination of ultimate damages and the final allocation of such damages to financially responsible parties is complex and uncertain. Our historical experience suggests, however, that although reinsurance pool losses will continue, they should not have a materially adverse effect on the Company's financial condition or cash flows. Losses from the Company's discontinued reinsurance pools were $6.6, $8.3 and $7.3 million in 1997, 1996 and 1995, respectively. Reserve additions in 1997 have increased the survival ratio to 22 years from 14 in 1996.
Interest expense was $16.2 million, $17.5 million and $15.6 million in 1997, 1996 and 1995, respectively. The decrease in interest expense in 1997 is primarily due to lower debt levels during the year. The increase in interest expense from 1995 to 1996 was due primarily to elevated debt levels.
Liabilities were $3.0, $2.8 and $2.5 billion at December 31, 1997, 1996 and 1995, respectively. Liabilities associated with policies represent a major portion of total liabilities including $2.3 billion or 77.6% in 1997, $2.1 billion or 75.0% in 1996, and $1.9 billion or 75.1% in 1995.
During 1995 and 1994, the Company issued $50.0 million and $75.0 million of medium term notes respectively. The debt issuance proceeds were used to refinance outstanding debt and to support the Company's continued growth and expansion into new markets. In 1995, the Company replaced its short-term financing facility and borrowed $87 million, mainly used to pay off its former facility.
Stockholders' equity increased by $408.0 million to $813.9 million at December 31, 1997, from $405.9 million at January 1, 1995. In August 1997, the Company declared a two-for-one split, effected in the form of a stock dividend, on the Company's common stock. The result of the stock split was that all common shareholders received one additional share for each share they held. In July 1996, the Company issued 2.3 million shares of preferred stock with a stated value of $50 per share that contributed net proceeds of $111.8 million to equity. The other primary sources of growth in stockholders' equity from January 1, 1995, to December 31, 1997, are accumulated earnings of $281.6 million reduced by $57.4 million in dividends paid on the Company's common and preferred shares. Under FASB Statement 115 - Accounting for Certain Investments in Debt and Equity Securities - certain investments in debt and equity securities are carried in the balance sheet at fair value. The difference between amortized cost and fair value of securities available-for-sale (unrealized gain or loss, net of tax) is included as a component of equity. Unrealized gains, net of taxes on the Company's fixed maturity portfolio were $15.2 million at December 31, 1997.
At December 31, 1997, $2.2 billion or 57% of the Company's total assets were comprised of securities, short-term investments and cash. Securities are principally readily marketable and none are part of highly leveraged transactions. In the bond portfolio, 77% of bonds have maturities of
under five years and 80% have a rating of "A" or better (80% and 83% respectively at December 31, 1996 and 1995). Unrealized gains on fixed maturity investments increased to $42.6 million at December 31, 1997, from $25.1 million at December 31, 1996.
The Company's investment portfolio has been structured to match cash requirements. Liabilities representing current cash requirements including claim liabilities, accrued commissions and other liabilities totaled $922.3, $906.3 and $748.0 million, at December 31, 1997, 1996 and 1995 respectively. Other significant cash commitments in 1998 include shareholder dividends of approximately $26.6 million under the current capital structure.
In connection with the execution of the Cendant Merger Agreement, the Company paid AIG a fee of $100 million for the termination of the AIG Merger Agreement and certain other related agreements. See Note 15 to the Consolidated Financial Statement on page 79 in Part II
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of American Bankers Insurance Group, Inc. and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
American Bankers Insurance Group, Inc. provides credit-related insurance programs in the United States, Canada and the Caribbean. The Company also conducts business in Latin America and the United Kingdom. ABIG, as an international wholesaler and marketer of insurance products, services and programs, concentrates on marketing through financial institutions, retailers and other entities which provide consumer financing as a regular part of their business.
All significant intercompany transactions and accounts have been eliminated in consolidation.
Under FASB Statement 115, investments in debt and equity securities are classified as either held-to-maturity, available-for-sale or trading. Investments in debt securities are classified as held-to-maturity and measured at amortized cost if the Company has the positive intent and ability to hold these securities to maturity. Investments in debt securities not classified as held-to-maturity and equity securities with readily determinable fair values are classified as either available-for-sale or trading securities and measured at fair value. Securities that are purchased and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value with subsequent changes in value reflected as unrealized investment gains and losses in the Consolidated Statements of Income. Investments not classified as either trading securities or held-to-maturity securities are classified as available-for-sale securities and reported at fair value with subsequent changes in value reflected as unrealized investment gains and losses in the Consolidated Statements of Common Stock and Other Stockholders' Equity.
Equity securities are carried at market value. Mortgage loans and policy loans are stated at the unpaid principal balance of such loans net of unamortized discount. Investments with impairment in value, which is other than temporary, are written down to estimated realizable value. The writedowns are included in realized investment gains in the Consolidated Statements of Income. Premiums and discounts on mortgage-backed securities are amortized using the simple interest method over the expected life of each security - generally 2 to 7 years. In addition, a pro rata portion of premiums and discounts is recognized when principal payments are received and is included in net investment income in the Consolidated Statements of Income. Unrealized gains and losses on equity securities are reflected in Stockholders' Equity. The cost of securities sold is based on the specific identification method.
Policy liabilities on life and annuity business are computed principally by the net level premium method based upon assumptions as to future investment yield, mortality, morbidity, and withdrawals consistent with those used to develop the gross premiums on the policies in force. Universal life and annuity policyholders' liabilities are based on full account values. Unearned premiums for credit insurance and property business represent the unexpired portion of the premiums.
Depreciation of property and equipment is provided primarily on the accelerated method. Buildings are depreciated on the straight line method.
In February 1997, the Financial Accounting Standards Board issued FASB Statement 128 Earnings per Share, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS). It replaces the presentation of primary and fully diluted EPS with basic and diluted EPS. Basic EPS excludes all dilution. It is based on income available to common shareholders and the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The Company adopted FASB Statement 128 as of the fourth quarter of 1997 and has restated all previously reported per share amounts to conform to the new presentation.
For those foreign affiliates where the foreign currency is the functional currency, unrealized foreign exchange gains (losses) net of taxes have been reflected in Common Stock and Other Stockholders' Equity under the caption "Net unrealized investment and foreign exchange gains (losses)."
Certain items in the 1996 and prior financial statements have been reclassified to conform with the 1997 presentation.
At December 31, 1997 and 1996, fixed maturities with an amortized cost of $187,493,000 and $140,090,000 respectively were on deposit with insurance regulatory authorities to meet statutory requirements. In addition, fixed maturities with an amortized cost of $24,098,000 and $37,467,000 were being held in trust under reinsurance agreements at December 31, 1997 and 1996, respectively. The approximate market value and amortized cost of fixed maturity investments at December 31, 1997, are shown below by contractual or expected maturity periods. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
At the current time, it is not possible to determine the future development of asbestos and environmental claims due to a general absence of reliable predictive data and of a generally accepted actuarial methodology for these exposures, significant unresolved legal issues including coverage issues, policy definitions and evolving theories and arguments. Additionally, the determination of ultimate damages and the final allocation of such damages to financially responsible parties is complex and uncertain. Our historical experience suggests, however, that although reinsurance pool losses will continue, they should not have a materially adverse effect on the Company's financial condition or cash flows. Losses from the Company's discontinued reinsurance pools were $6.6, $8.3 and $7.3 million in 1997, 1996 and 1995 respectively.
Overall claims experience is principally dependent on the frequency and severity of claims as well as trends in litigation and loss cost inflation. With the exception of discontinued lines, the Company writes primarily property coverages which are characterized by relatively short settlement periods and quick development of ultimate losses. Reinsurance pool reserves represent approximately 10.2% of the gross liability for property and casualty losses and LAE at December 31, 1997. The Company's estimating and reserving practices are reviewed continually. Subsequent adjustments to the original estimates are made when determinable and are reflected in current year operations.
The accompanying tables present an analysis of losses and LAE for the Company's domestic property and casualty subsidiaries. The following table provides a reconciliation of beginning and ending liability balances for 1997, 1996 and 1995.
Accident and health net claim liabilities reported in the Company's life subsidiaries were $80,564,000, $80,026,000 and $57,049,000 at December 31, 1997, 1996 and 1995, respectively. There was no significant adverse development during the past three years.
Prior to 1984, ABLAC was taxed at regular corporate rates in accordance with the Life Insurance Company Income Tax Act of 1959, whereby a portion of its statutory income was not subject to current income taxation, but was accumulated in an account designated "policyholders' surplus." The aggregate balance in this account ($17,000,000 at December 31, 1997) would be taxed at applicable current rates only if distributed to stockholders or if the account exceeded a prescribed maximum. The Deficit Reduction Act of 1984 eliminated additions to the account for 1984 and thereafter. ABLAC does not anticipate any transactions that would cause any part of this amount to become taxable. Deferred taxes in the amount of $5,950,000 have not been provided since the Company does not anticipate any transactions that would cause any part of the account balance to become taxable. As of December 31, 1997, ABLAC has a shareholders' surplus account balance (on a tax basis) of approximately $158,100,000 from which it could pay dividends to stockholders without incurring any federal income tax liability, subject to regulatory requirements and the availability of funds. The other life insurance subsidiaries do not have policyholders' surplus account balances.
Pre-tax income from foreign sources excludes the results of Canadian branches of domestic companies.
At December 31, 1997, the Company's U.K. subsidiary had approximately $12,645,000 in net operating loss (NOL) carryforwards. A valuation allowance for the full amount of the related tax benefit has been established due to uncertainties associated with utilization of the NOL carryforwards.
On December 1, 1995, the Company replaced its short-term credit agreement with a $250,000,000 five-year competitive advance and revolving credit agreement with a group of banks. The credit facility features a revolving line of credit, commercial paper and/or bid loan facilities. Interest rates vary according to the credit instrument exercised and the market rates then prevailing. Quarterly fees payable under this credit facility are: (a) fees payable to each lender, based upon the Company's Moody's and Standard & Poor's ratings at every quarter end; (b) utilization fees; and (c) administrative fee. The fees incurred in 1997 and 1996 were $237,000 and $316,000, respectively for these facilities. Fees for 1995 were $1,482,000 for the old credit agreement and credit facility. The credit agreement contains various covenants pertaining to minimum stockholders' equity, maximum funded debt ratio and insurance statutory surplus and other ratios. No dividend payments are permitted if there is a default under the credit facility. Consummation of the merger as contemplated by the Cendant Merger Agreement will, unless consents or waivers are obtained from the group of banks under the credit facility, constitute an event of default and result in the termination of the credit facility. This event may impact the Company's liquidity if it is required to repay all outstanding loans and advances pursuant to the credit facility and the unavailability of further loans and advances under the credit facility.
In 1994, the Company filed with the Securities and Exchange Commission a shelf registration statement for $200,000,000 medium-term notes which provides for maturities ranging from nine months to thirty years. Under this shelf registration, the Company issued a $75,000,000 fixed rate note in May 1994 at 7.6% that is due May 1999 and interest is payable semi-annually. In addition, the Company issued a five-year $50,000,000 floating rate note in April 1995. Interest is payable and the rate is established on a quarterly basis. At December 31, 1997, the interest rate was 6.4%.
In August 1997, the Company declared a two-for-one split, effected in the form of a stock dividend, on the Company's common stock.
The Company's insurance subsidiaries prepare their statutory financial statements in accordance with accounting principles and practices prescribed or permitted by the insurance department of their state of domicile. Prescribed statutory accounting practices include state laws, regulations and general administrative rules as well as a variety of publications of the National Association of Insurance Commissioners (NAIC). Permitted statutory accounting practices encompass all accounting practices that are not prescribed; such practices differ from state to state and may change in the future. The NAIC has a project to codify statutory accounting practices, the result of which is expected to constitute the only source of "prescribed" statutory accounting practices.
Under the Incentive Stock Option award, 187,200 (post-split) options on shares of common stock were granted of which 122,800 (post-split) shares were issued upon exercise with an option price of $14.22. Certain key employees were granted options at fifty percent of the fair market value of the common stock on the grant date. Shares obtained by exercise are subject to restrictions. Non-vested shares are subject to forfeiture if employment is terminated except by death, disability or retirement. Vesting occurs ratably over a five-year period from the date exercised. The weighted-average fair value of options granted during the year was $14.31.
Under the Non-Qualified Stock Option award, 175,200 (post-split) options on shares of common stock were granted of which 162,600 (post-split) shares can be exercised starting May 1998 at a price of $28.44. Certain key employees were granted options at prices equivalent to the fair market value of the common stock on the grant date. Each option further entitles the employee to be awarded, for no additional consideration, two additional shares of restricted common stock. Restricted shares vest three years from date of exercise. Options are not exercisable before the first year anniversary nor after the third annual anniversary from the date of the grant. The weighted-average fair value of options granted during the year was $5.64.
Under the Non-Employee Directors Stock Option award, 26,000 (post-split) options on shares of common stock were granted all of which can be exercised starting May 1998 at a price of $28.44. Each non-employee director received 2,000 (post-split) options at prices equivalent to the fair market value of the common stock on the grant date. The weighted-average fair value of options granted during the year was $8.08.
Under the Senior Management Stock Option Plan (SMSOP), key management employees were granted a total of 460,200 (post-split) options on shares of the common stock during the years 1994 through 1996. Option prices were equivalent to the fair market value of common stock on the grant date with prices ranging from $11.07 to $23.75. The grantee received for no additional consideration two shares of common stock subject to certain transfer restrictions for every one primary share purchased upon the exercise of the option. During 1997, 144,400 (post-split) shares of common stock were issued upon exercise of options subject to the plan, with option prices ranging from $11.07 to $23.75. As the result of the adoption of the EIP, no new grants will be made under the SMSOP.
Under the Stock Option/Restricted Stock Award Plan (SORSAP), key management employees were granted a total of 1,167,600 (post-split) options on shares of common stock during the years 1990 through 1994. Option prices were equivalent to the fair market value of common stock on the grant date with prices ranging from $4.13 to $13.25. The grantee received for no additional consideration three shares of common stock subject to certain transfer restrictions for every one primary share purchased upon the exercise of the option. As the result of the adoption in 1994 of the SMSOP, no new grants were made under the SORSAP.
A summary of the status and activity for options and shares granted and exercised under the Plans at December 31, 1997, is as follows:
Shares issued under the plans are recorded at fair market value at the effective date of the grant. The unamortized difference ($6,252,000 as of December 31, 1997, and $4,382,000 as of December 31, 1996) between the fair market value and option price on shares which are restricted is reported as part of stockholders' equity. Amortization of the restricted stock is recorded as compensation expense ratably over the vesting period ($2,280,000 in 1997, $1,544,000 in 1996, and $1,407,000 in 1995). Furthermore, any difference between the fair market value at the grant date and the option price on the unrestricted shares in the SORSAP Plan and SMSOP Plan is recorded as compensation expense. Forfeitures are included as credits in the income statement during the period in which the forfeiting event occurs.
Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for awards under those plans, consistent with FASB Statement No. 123, the reduction in the Company's 1997, 1996, and 1995 net income and net income per share would have been insignificant. The effect of applying the fair value method of accounting for stock options on reported net income and net income per share for 1997, 1996 and 1995 may not be representative of the effects for future years because outstanding options vest over a period of several years and additional awards are generally made each year.
The fair value of options granted was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 1997, 1996 and 1995:
At their Annual Meeting in 1987, the stockholders approved the 1987 Executive Stock Option/Dividend Accrual Plan (ESODAP). As of December 31, 1997, options representing 1,420,828 shares (post-split) had been granted under the plan, of which 1,109,404 (post-split) had been exercised and 131,876 (post-split) had been terminated. A key feature of the plan is the Dividend Accrual Account which allows for the crediting of dividends in order to assist the executive in the exercise of the options. As the result of the adoption of the SORSAP and SICP, no new grants were made under the ESODAP.
* Dividends paid on all shares held by the LESOP are used to service the existing debt of the LESOP.
* Compensation expense for the years ended December 31, 1997, 1996 and 1995 was $976,000, $1,186,000 and $1,430,000 respectively. The compensation expense represents the Company's contributions to the LESOP necessary to meet its periodic debt service, after applying dividend payments received on the shares held by the LESOP. All dividends paid on such shares retain their character as distributions made from the Company's retained earnings.
* Shares held by the LESOP as of December 31, 1997 include the following:
The pension plan expense included the following components for the years ended December 31:
The Board of Directors previously approved a non-qualified supplemental benefit plan. This unfunded deferred compensation plan is intended to provide pension benefits which would otherwise be provided under the benefit accrual formula applicable to all employees in the Company's qualified Plan, but which are in excess of an annual amount permitted under current tax regulations. Expense ($.5 million in 1997, $.1 million in 1996 and $.1 million in 1995) is being recognized over the remaining service period for the officers presently covered.
Total rental expense for the years ended December 31, 1997, 1996 and 1995 was $10,962,000, $9,258,000 and $7,661,000 respectively.
During 1995, the Company completed a settlement with the Federal Deposit Insurance Corporation (FDIC) of the only remaining lawsuit against the Company relating to its relationship with a former credit bond client. This settlement included the entry of orders by the Court dismissing all claims between the Company and the FDIC with prejudice. The settlement, net of previously established reserves, resulted in a charge of $5.8 million. Effective with this settlement, the Company concluded all litigation ever initiated against it in connection with its discontinued credit bond insurance business.
any liabilities that could result are not expected to have a material adverse effect on the Company's financial position.
As described more fully in Note 15 - "Change of Control of the Company" on page 79 of this report, on December 22, 1997, the Company announced that it had entered into a merger agreement with AIG and on January 27, 1998, Cendant Corporation ("Cendant") and Season Acquisition Corp. ("Season") commenced an unsolicited tender offer for 51% of the Company's shares. Six legal actions have been brought against the Company and members of its board of directors growing out of the proposed merger with AIG and Cendant's tender offer.
- -------------------------------------------------------------------------------- Summarized data for the Company's foreign operations (principally in Canada and the United Kingdom) and domestic operations are as follows:
The Company distributes its products through eight markets or distribution channels involving over one thousand clients. Its business is generally not concentrated, and no single customer accounted for 10% or more of the Company's consolidated gross collected premiums in 1997.
Quarterly financial information for the years ended December 31, 1997 and 1996, is presented below:
The Company adopted FASB Statement 128 "Earnings per Share" for the period ending December 31, 1997. This Statement replaces the presentation of primary and fully diluted EPS with a presentation of basic and diluted EPS. All prior year data has been restated to conform with the provisions of this Statement and to reflect the two-for-one stock split effective September 1997. The following is the required reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation
The Company entered into an Agreement and Plan of Merger, dated as of March 23, 1998, by and among Cendant Corporation ("Cendant"), Season Acquisition Corporation ("Season") and the Company (the "Cendant Merger Agreement") pursuant to which (i) the previously announced tender offer by Season is being conducted (the "Offer") and (ii) upon consummation of the Offer, the merger of the Company with and into Season will be consummated (the "Merger"). The execution of the Cendant Merger Agreement followed the public announcement by Cendant on January 27, 1998 of its proposal to acquire the Company for $58 per share of Common Stock, to be paid in cash and common stock of Cendant and the subsequent announcement by Cendant on March 16, 1998, increasing the per share price for its proposal from $58 to $67.
Under the terms of the Cendant Merger Agreement, Season is offering to purchase 23,501,260 outstanding shares of Common Stock at a price of $67.00 per Common Share, net to the seller in cash, without interest thereon. Following the consummation of the Offer, the Company will be merged with and into Season with Season continuing as the surviving corporation. Season will succeed to the business of the Company and will assume the name American Bankers Insurance Group, Inc. As a result of the Merger, each Common Share then outstanding (other than Common Shares owned by Cendant, Season or any direct or indirect subsidiary of the company and in each case not held on behalf of third parties) will be converted into, and become exchangeable for, that number of shares of Cendant Common Stock having a value equal to the amount derived by dividing $67.00 by the average closing prices of the Cendant Common Stock as reported on the NYSE composite transactions reporting system (as reported by the New York City edition of the Wall Street Journal) for the ten trading days ending on the third trading day prior to the date the Merger is consummated). In addition, pursuant to the Merger, each of the then outstanding $3.125 Series B Cumulative Convertible Preferred Shares ("Preferred Shares") will be converted into one share of Cendant Preferred Stock having substantially similar terms to the Preferred Shares, except that such shares shall be convertible into shares of Cendant Common Stock in accordance with the terms of the Preferred Shares.
adoption of the AIG Merger Agreement and approval of the AIG Merger and to grant to AIG an irrevocable proxy with respect to such shares of Common Stock, subject to certain conditions.
Certain officers of the Company have severance agreements which entitle them to receive specified payments under certain circumstances following a change in control. The maximum amount that the Company could incur pursuant to such severance agreements is approximately $12.7 million, net of tax.
Information of Summary of Investments - Other Than Investments in Related Parties is included on page 11 in Part I Item 1 c. of this report, and in Note 3 on page 55 in Part II Item 8 of this report, with the exception of the Information on Equity Securities which is included below.
The accompanying condensed financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto of American Bankers Insurance Group, Inc. and subsidiaries.
The Company is scheduled to repay the LESOP note at a yearly amount of $2,125,000 plus interest. For a description of short-term and long-term debt payable to others and related information see Note 7 to the Consolidated Financial Statements on page 64 in Part II Item 8 of this report. For a description of the Company's commitments and contingencies, see Note 11 to the Consolidated Financial Statements on page 75 in Part II Item 8 of this report.
AMERICAN BANKERS INSURANCE GROUP, INC. SUPPLEMENTARY INSURANCE INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS)
* Excluding net realized investment gains of $10,394, $7,812, and $721 for 1997, 1996 and 1995, respectively. **Excluding Life and Annuity premiums.
AMERICAN BANKERS INSURANCE GROUP, INC. REINSURANCE FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS)