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.
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 notes payable, redeemable preferred securities of subsidiary trusts (including ROPES), preferred stock and common equity.
The National Association of Insurance Commissioners' ("NAIC") risk-based capital ("RBC") formulas determine the amount of capital that an insurance company needs to ensure that it has an acceptable expectation of not becoming financially impaired. At December 31, 1997, the capital ratios of each of AAG's insurance subsidiaries was at least 4.3 times its authorized control level RBC.
Sources and Uses of Funds The ability of AAG and AAG Holding to pay interest and principal on debt, dividends on preferred securities, obligations related to the Company's discontinued manufacturing operations and other holding company costs is largely dependent upon payments from its principal subsidiary, Great American Life Insurance Company ("GALIC"), in the form of capital distributions. The amount of capital distributions which can be paid by GALIC is subject to restrictions relating to statutory surplus and earnings. The maximum amount of dividends payable by GALIC in 1998 without prior regulatory approval is $73.6 million. In 1997, GALIC made $45 million in such payments, net of capital contributions received from AAG Holding.
Since year end 1993 (through February 1998), AAG has retired $225 million principal amount of its public debentures and $79 million of preferred stock. In addition, AAG acquired General Accident Life Assurance Company of Puerto Rico, Inc. for approximately $50 million in December 1997 and acquired Laurentian Capital Corporation for approximately $150 million in November 1995. AAG funded these outlays with issuances of common and preferred securities, bank borrowings, dividends from GALIC and cash on hand.
At December 31, 1997 and 1996, respectively, AAG had approximately $242 million and $100 million in net unrealized gains on its fixed maturity portfolio. This increase, representing approximately 2% of the carrying value of AAG's fixed maturity portfolio, resulted from price increases related to a decrease in the general level of interest rates.
At December 31, 1997, AAG had less than 2% of total assets invested in mortgage loans and real estate, the majority of which had been purchased within the last five years.
Uncertainties Contingencies A managing general agency which produced approximately one-fifth of GALIC's premiums in 1996 and less than six percent of its premiums in 1997 was named a defendant in a lawsuit filed in July 1996 by two regulatory agencies in California. The managing general agency has settled the allegations brought against it by agreeing, among other things, to modify certain sales practices. The regulatory agencies have taken a position that GALIC may be responsible for certain acts of its insurance agents in connection with the sale of GALIC's annuities. GALIC is engaged in discussions with the regulatory agencies to resolve this matter. The ultimate outcome is not expected to have a material adverse impact on the financial condition of the Company.
AAG (Consolidated): 1997 1996 1995 Revenues per income statement $634.2 $577.3 $439.6 Less realized gains (5.2) (1.2) (15.7) Less equity in net (earnings) loss of affiliate (0.8) 2.2 (0.1) Operating revenues 628.2 578.3 423.8
Net operating earnings per common share (basic) $ 1.60 $ 1.40 $ 1.20
1997 1996 1995 Retirement Annuities: SPDAs $254 $319 $219 FPDAs - renewal 160 182 196 FPDAs - first year 32 35 42 Variable annuities 43* 4 - Pre-need annuities 38 40 - Pre-need life insurance 73 57 - Other life insurance 22 22 2 Accident and health insurance 20 21 - Total premiums $642 $680 $459
The decrease in fixed annuity sales in 1997 reflects primarily the decrease of SPDA business written by GALIC's largest premium producing agency in 1996 (from $99 million to $23 million). GALIC is no longer writing business through this agency (see "Management's Discussion and Analysis - Contingencies"). Management believes that the success of the stock market and the recent interest rate environment have also resulted in decreased sales and increased surrenders and annuitizations of GALIC's fixed annuities. This trend has continued into January and February of 1998. Annuity Investors Life Insurance Company's increased sales of variable annuities helped offset the decrease in GALIC's production.
Net Investment Income Net investment income increased 6% in 1997 and 15% in 1996 due primarily to an increase in the Company's average fixed maturity investment base. This increase was partially offset by decreasing market interest rates. Investment growth resulted from internal cash flow generated by AAG's insurance operations and the investment of a portion of the proceeds from the issuance of trust preferred securities. Investment income is shown net of investment expenses of $4.7 million in 1997, $6.5 million in 1996 and $5.4 million in 1995. Lower investment expenses in 1997 reflect a decrease in fees charged by an affiliate. (See Notes D and P.)
Annuity Benefits Annuity benefits reflect interest credited to annuity policyholders' funds accumulated. The majority of GALIC's fixed rate annuity products permit GALIC 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 without a substantial effect on persistency. Annuity benefits increased 3% in 1997 and 7% in 1996 due primarily to an increase in average annuity benefits accumulated, partially offset by decreases in crediting rates on GALIC's annuities.
Trust Preferred Distribution Requirement Trust preferred distribution requirement represents amounts accrued on $225 million of preferred securities issued by subsidiaries of AAG Holding in 1997 and 1996. A portion of the proceeds from these issuances was used to retire debt.
Provision for Relocation Expenses In the third quarter of 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. The relocation was substantially complete in the first quarter of 1998.
Discontinued Operations The Company has sold all of its former manufacturing operations. Certain properties utilized in those former operations continue to be held for sale and are currently leased to non- affiliated companies.
New Accounting Standards to be Implemented During 1997, the Financial Accounting Standards Board issued the following Statements of Financial Accounting Standards ("SFAS").
SFAS No. 130 establishes standards for the reporting of a company's change in equity during the period from non-owner sources. For AAG, comprehensive income will consist principally of net income and the change in net unrealized gains on marketable securities. SFAS No. 131 establishes standards for the way companies report information about operating segments, products and services, geographic areas and major customers. Implementation of these standards will not have a significant effect on AAG's financial position, net income or reported segments.
$7,710.3 $7,024.1 Liabilities and Capital Annuity benefits accumulated $5,528.1 $5,365.6 Life, accident and health reserves 709.9 575.4 Notes payable 135.8 114.9 Payable to affiliates, net 35.8 14.5 Deferred taxes on unrealized gains 71.8 33.3 Accounts payable, accrued expenses and other liabilities 119.5 111.3 Liabilities related to separate accounts 300.5 247.6 Total liabilities 6,901.4 6,462.6 Mandatorily redeemable preferred securities of subsidiary trusts 225.0 75.0 Stockholders' Equity: Preferred Stock (at redemption value) - 49.0 Common Stock, $1 par value -100,000,000 shares authorized - 43,199,147 and 43,255,705 shares outstanding 43.2 43.3 Capital surplus 368.0 358.5 Accumulated deficit at December 31, 1992 (212.6) (212.6) Retained earnings since January 1, 1993 252.1 186.5 Unrealized gains on marketable securities, net 133.2 61.8 Total stockholders' equity 583.9 486.5
Common Stock: Balance at beginning of year $ 43.3 $ 43.1 $ 39.1 Common Stock issued - 0.2 4.0 Common Stock retired (0.1) - - Balance at end of year $ 43.2 $ 43.3 $ 43.1
Capital Surplus: Balance at beginning of year $358.5 $361.1 $330.8 Capital contribution 9.3 - - Common Stock issued 0.2 2.2 33.3 Common Stock retired (1.0) - - Common dividends declared - (3.4) (3.0) Preferred Stock retired 2.0 - - Preferred dividends declared (1.0) (1.4) - Balance at end of year $368.0 $358.5 $361.1
Basis of Presentation The accompanying Consolidated Financial Statements include the accounts of AAG and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior periods to conform to the current year's presentation.
The liability for future policy benefits for interest sensitive life policies is equal to the sum of the accumulated fund balances under such policies.
Assets Held in and Liabilities Related to Separate Accounts Separate account assets and related liabilities represent deposits maintained by several banks under a previously offered tax-deferred annuity program and, to a lesser extent, variable annuity deposits. The Company receives an annual fee from each bank for sponsoring the program; if depositors elect to purchase an annuity from the Company, funds are transferred to the Company.
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 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.
In December 1997, AAG acquired General Accident for approximately $50 million in cash. AAG funded the purchase with borrowings under its bank lines of credit.
In November 1995, AAG acquired all of the outstanding shares of LCC. Its principal insurance subsidiaries were American Memorial Life Insurance Company and Loyal American Life Insurance Company. AAG paid approximately $106 million for the outstanding common stock of LCC and repaid $45 million of LCC indebtedness concurrently with the acquisition. GALIC provided approximately $90 million of the purchase price in exchange for American Memorial and Loyal. AAG funded the balance of the cost of acquiring LCC with the proceeds from a Common Stock rights offering completed in August 1995, bank borrowings and cash on hand.
Held to Maturity Amortized Market Gross Unrealized Cost Value Gains Losses U. S. Government and government agencies and authorities $ - $ - $ - $ - States, municipalities and political subdivisions 39.8 40.2 0.4 - Foreign government 8.3 8.9 0.6 - Public utilities 360.8 366.2 6.7 (1.3) Mortgage-backed securities 659.2 684.6 25.6 (0.2) All other corporate 1,208.3 1,240.7 33.2 (0.8) $2,276.4 $2,340.6 $66.5 ($2.3)
Held to Maturity Amortized Market Gross Unrealized Cost Value Gains Losses U. S. Government and government agencies and authorities $ - $ - $ - $ - States, municipalities and political subdivisions 40.6 39.8 - (0.8) Foreign government 8.3 8.8 0.5 - Public utilities 383.9 383.5 5.2 (5.6) Mortgage-backed securities 679.6 688.9 14.8 (5.5) All other corporate 1,383.3 1,403.6 27.1 (6.8) $2,495.7 $2,524.6 $47.6 ($18.7)
Held to Maturity Amortized Market Gross Unrealized Cost Value Gains Losses U. S. Government and government agencies and authorities $184.6 $186.1 $3.4 ($1.9) States, municipalities and political subdivisions 12.1 12.2 0.2 (0.1) Foreign government 17.5 17.3 - (0.2) Public utilities 175.2 180.5 5.9 (1.1) Mortgage-backed securities 1,222.0 1,234.7 24.1 (11.4) All other corporate 1,643.5 1,695.3 62.5 (10.7) $3,254.9 $3,325.6 $96.1 ($25.4)
Held to Available Maturity For Sale Total Purchases ($ 1.4) ($1,448.5) ($1,449.9) Maturities and paydowns 212.7 195.5 408.2 Sales 5.2 742.4 747.6 Gross gains 0.2 19.8 20.0 Gross losses - (13.9) (13.9)
Securities classified as "held to maturity" were sold due to significant deterioration in the issuers' creditworthiness; gains/(losses) on such sales were insignificant.
1997 1996 1995 Fixed maturities* $492.6 $463.4 $405.2 Other 6.4 10.8 5.7 Total investment income 499.0 474.2 410.9 Investment expenses (4.7) (6.5) (5.4) Net investment income $494.3 $467.7 $405.5
*Includes income on fixed maturities, mortgage loans, policy loans and short-term investments.
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 1997 and $4.7 million in 1996 and 1995. (See Note P.)
Included in equity in Chiquita's earnings in 1997 is a $1.3 million gain attributable to Chiquita's issuance of common stock.
1997 1996 Deferred policy acquisition costs $300.6 $272.2 Present value of future profits acquired 102.0 72.5 Unearned revenues (141.0) (150.0) $261.6 $194.7
1997 1996 1995 Beginning balance $ 72.5 $73.4 $ - Additions due to acquisitions 37.5 - 74.2 Interest accrued 5.3 5.4 - Amortization (13.3) (14.1) (0.8) Other - 7.8 - $102.0 $72.5 $73.4
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 (including $21.3 million purchased by GALIC). During 1995, AAG repurchased $4.9 million principal amount of its Notes realizing a pretax extraordinary loss of $231,000.
Wholly-owned subsidiary trusts of AAG Holding have issued $225 million of preferred securities and, in turn, purchased $225 million of newly-issued 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:
Date of Optional Issue Issue(Maturity Date) Amount Redemption Dates November 1996 9-1/4% TOPrS* (2026) $75,000,000 On or after 11/7/2001 March 1997 8-7/8% Preferred Securities (2027) 75,000,000 On or after 3/1/2007 May 1997 7-1/4% ROPES** (2041) 75,000,000 Prior to 9/28/2000 and after 9/28/2001
In December 1996 and 1995, AAG sold 320,000 shares and 170,000 shares, respectively, of newly issued Preferred Stock for $32 million and $17 million, respectively (see Note P). In March 1997, AAG repurchased all of its Preferred Stock for approximately $47 million.
In August 1995, AAG sold 3.92 million shares of common stock at $9.50 per share under a rights offering to existing shareholders.
The average remaining life of AAG's options was 9.2 years at December 31, 1997. The exercise prices of options issued during the year ranged from $14.00 to $21.75 in 1997 and $13.25 to $13.75 in 1996.
No compensation cost has been recognized for stock option grants. Had compensation cost been determined for stock option awards based on the fair values at grant dates consistent with the method prescribed by SFAS No. 123, AAG's net income and earnings per share would have been approximately $4 million ($0.09 per share) lower. For SFAS No. 123 purposes, calculations were determined using the Black-Scholes option pricing model and the following assumptions: dividend yield of less than 1%; expected volatility of 20%; risk-free interest rates of 5.7% - 6.5% for 1997 and 6.0% for 1996 and expected life of 7.5 years.
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. 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 $6 million to $10 million. The reserve for environmental work was $8.5 million at December 31, 1997.
Insurance reserves $6,142 $5,942 Notes payable: Due parent 159 166 Due others 135 114 Liabilities related to separate accounts 300 247 Other liabilities 165 92
Revenues $ 617 $ 91 Pretax income 92 8 Net income 60 5
Mandatorily redeemable preferred securities of subsidiary trusts $ 225.0 $ 230.3 $ 75.0 $ 76.5
Fixed maturities - available for sale $3,254.9 $ 70.7 $3,325.6 Equity securities 16.1 34.9 51.0 Unamortized insurance acquisition costs, net 197.5 (2.8) 194.7 Annuity benefits accumulated (5,357.9) (7.7) (5,365.6) Deferred taxes on unrealized gains - (33.3) (33.3) Unrealized gains on marketable securities, net $ 61.8
First Second Third Fourth Total 1997 Quarter Quarter Quarter Quarter Year Realized gains (losses) $ 0.3($ 0.1) $ 1.5 $ 3.5 $ 5.2 Total revenues 149.7 154.5 161.7 168.3 634.2
Basic and diluted earnings (loss) per common share: Continuing operations $0.33 $0.37 $0.39 $0.30 $1.39 Extraordinary items (0.04) (0.06) (0.04) - (0.14) Net income $0.29 $0.31 $0.35 $0.30 $1.25
Discontinued operations, net of tax - - (3.2) Income before extraordinary items 71.4 61.1 55.5
(a) Includes unrealized gains of $132.4 million and $61.8 million in 1997 and 1996, respectively.
Cash and short-term investments at beginning of period 1.9 1.4 1.9
27.1 Financial Data Schedule for 1997 - included in Report filed electronically with the Securities and Exchange Commission.
The information required by the following Items will be included in AAG's definitive Proxy Statement for the 1998 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 sheets of American Annuity Group, Inc. and subsidiaries as of December 31, 1997 and 1996, 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, 1997. 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.
December 31, 1997 1996 Assets Investments: Fixed maturities: Held to maturity - at amortized cost (market - $2,340.6 and $2,524.6) $2,276.4 $2,495.7 Available for sale - at market (amortized cost - $3,922.0 and $3,254.9) 4,099.4 3,325.6 Equity securities - at market (cost - $30.9 and $16.1) 83.0 51.0 Investment in affiliate 16.8 16.5 Mortgage loans on real estate 52.1 68.1 Real estate 42.0 37.6 Policy loans 241.0 236.0 Short-term investments 13.9 41.4 Total investments 6,824.6 6,271.9 Cash 36.8 42.7 Accrued investment income 101.6 94.8 Unamortized insurance acquisition costs, net 261.6 194.7 Other assets 185.2 172.4 Assets held in separate accounts 300.5 247.6
Year ended December 31, 1997 1996 1995 Revenues: Net investment income $494.3 $467.7 $405.5 Realized gains on sales of investments 5.2 1.2 15.7 Life, accident and health premiums 121.5 103.6 15.7 Equity in net earnings (loss) of affiliate 0.8 (2.2) 0.1 Other income 12.4 7.0 2.6 634.2 577.3 439.6 Costs and Expenses: Annuity benefits 278.8 271.8 254.7 Life, accident and health benefits 110.1 92.3 13.2 Amortization of insurance acquisition costs 36.3 34.1 12.7 Trust preferred distribution requirement 15.5 1.0 - Interest and other debt expenses 8.9 14.3 17.6 Provision for relocation expenses 4.0 - - Other expenses 76.4 85.3 50.7 530.0 498.8 348.9 Income from continuing operations before income taxes 104.2 78.5 90.7 Provision for income taxes 32.8 17.4 32.0
Average number of common shares: Basic 43.2 43.1 40.5 Diluted 43.7 43.1 40.5
Investments Debt securities are classified as "held to maturity" and reported at amortized cost if AAG has the positive intent and ability to hold them to maturity. Debt and equity securities are classified as "available for sale" and reported at fair value with unrealized gains and losses reported as a separate component of stockholders' equity if the securities are not classified as held to maturity or bought and held principally for selling in the near term. Only in certain limited circumstances, such as significant issuer credit deterioration or if required by insurance or other regulators, may a company change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future.
For interest-sensitive life and universal life products, premiums are recorded in a policyholder account which is reflected as a liability. Revenue is recognized as amounts are assessed against the policyholder account for mortality coverage and contract expenses. Surrender benefits reduce the account value. Death benefits are expensed when incurred, net of the account value.
Stock-Based Compensation As permitted under Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," AAG accounts for stock options and other stock-based compensation plans using the intrinsic value based method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Benefit Plans AAG sponsors an Employee Stock Ownership 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.
Held to Available Maturity for Sale Total Purchases ($280.7) ($826.8) ($1,107.5) Maturities and paydowns 50.5 96.6 147.1 Sales 1.4 767.1 768.5 Gross gains 0.8 23.2 24.0 Gross losses (0.6) (8.3) (8.9)
The carrying values of investments in any issue in excess of 10% of stockholders' equity at December 31, 1997, other than investments issued or guaranteed by the U.S. Government or government agencies, consisted of the following investments (in millions):
Fixed Equity Tax Maturities Securities Other Effects Total Realized $ 6.1 $ 1.7 ($2.6) ($ 1.8) $ 3.4 Change in unrealized 142.0 17.2 - (55.7) 103.5
Realized $ 0.8 $ - $0.4 ($ 0.4)$ 0.8 Change in unrealized (142.2) 16.4 - 44.0 (81.8)
On January 28, 1998, AAG Holding replaced its existing bank lines with a new $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 rates. On February 2, 1998, AAG Holding borrowed $50 million under the new credit line and retired its 11-1/8% Notes realizing a pretax extraordinary loss of $1.2 million; included in the Notes retired by AAG Holding was approximately $24.3 million principal amount of 11-1/8% notes previously acquired by AAG and GALIC.
"Retained earnings since January 1, 1993," reflects accumulated changes in AAG's retained earnings since its acquisition of GALIC.
AAG's charge for discontinued operations in 1995 represented primarily additional reserves related to possible deficiencies by AAG's predecessor in reporting quality assurance information in connection with certain military related sales prior to 1991. In September 1997, the United States Government resolved these claims in exchange for a payment of $3.5 million.
Rental expense for operating leases was $2.9 million in 1997, $2.6 million in 1996 and $1.6 million in 1995.
Net investment income includes approximately $900,000 in 1997, and $1 million in 1996 and 1995 of payments from a subsidiary of AFG for the rental of an office building owned by GALIC.
Unrealized Gains on Marketable Securities, Net The components of the Consolidated Balance Sheet caption "Unrealized gains on marketable securities, net" in stockholders' equity are summarized as follows (in millions):
Unadjusted Asset Effect of Reported (Liability) SFAS 115 Amount Fixed maturities - available for sale $3,922.0 $177.4 $4,099.4 Equity securities 30.9 52.1 83.0 Unamortized insurance acquisition costs, net 268.0 (6.4) 261.6 Annuity benefits accumulated (5,510.0) (18.1) (5,528.1) Deferred taxes on unrealized gains - (71.8) (71.8) Unrealized gains on marketable securities, net $133.2
Pension Plan The Company has a defined benefit pension plan (the "Plan") covering former U.S. employees of its discontinued manufacturing operations. Pension benefits are based upon past service with the Company and compensation levels. Contributions are made by the Company in amounts necessary to satisfy requirements of ERISA. Effective December 31, 1997, the Plan was merged with two other defined benefit plans which had been sponsored by affiliates of the Company. The Plan is the surviving plan of the merger and is no longer underfunded as a result of the merger.
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, 1997 and 1996 (in millions, except per share data).
Diluted: Continuing operations $0.39 $0.41 $0.37* $0.44 $1.61 Extraordinary items - - (0.03) - (0.03) Net income $0.39 $0.41 $0.34* $0.44 $1.58
December 31, Assets: 1997 1996 Investments: Fixed maturities: Available for sale - at market (amortized cost - $61.3) $ 62.5 $ - Equity securities - at market (cost - $11.5) 11.5 - Cash and short-term investments 3.6 1.9 Investment in subsidiaries (a) 396.0 384.8 Note receivable from AAG Holding 115.7 122.0 Other assets 53.9 47.8 $643.2 $556.5 Liabilities and Capital: Accounts payable, accrued expenses and other liabilities $ 24.3 $ 44.6 Payables to affiliates 33.7 24.2 Notes payable 1.3 1.2 Stockholders' equity (b) 583.9 486.5 $643.2 $556.5
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, American Annuity Group, Inc. has duly caused this Report to be signed on its behalf by the undersigned, duly authorized.