GACC owns all of its television station studios and buildings and all but one of its transmission sites. GACC owns three of its radio studios and buildings, four of its FM transmission sites and all but one of its AM transmission sites.
Actual cash outlays will be less than indicated in the above table to the extent that AFC can satisfy scheduled retirements and sinking fund requirements by acquiring its debt at discounts from redemption values.
Based on the results of this offer and cash availability, AFC will redeem some or all of the unexchanged debentures. In March 1994, AFC called for redemption its 13-1/2% Debentures and its 13-1/2% Series A Debentures. Holders of either issue may accept the exchange offer.
Interest and dividend payments on parent company debt and preferred stock (all issues) for the subsequent five years, assuming all sinking fund and other principal payments are made as scheduled and before effects of the 1994 exchange offers and redemptions, would be approximately (in millions):
may be attractive to persons seeking to control or influence the policies of a company. While management believes this investment philosophy will produce higher overall returns, such concentrations subject the portfolio to greater risk in the event one of the companies invested in becomes financially distressed.
Investee Corporations Equity in net earnings of investee corporations (companies in which AFC owns a significant portion of the voting stock) represents AFC's proportionate share of the investees' earnings and losses.
Consolidated Statement of Changes in Capital Accounts: Years ended December 31, 1993, 1992 and 1991
Consolidated Statement of Cash Flows: Years ended December 31, 1993, 1992 and 1991
The directors and executive officers of AFC at March 1, 1994, are:
Ronald F. Walker has served as President and Chief Operating Officer of AFC for more than five years. He is also Vice Chairman of the Board of Directors of GAI and holds executive positions in most of AFC's other subsidiaries. He is also a director of AAG, AFEI, Chiquita, General Cable and Tejas Gas Company.
Carl H. Lindner, Robert D. Lindner and Richard E. Lindner are brothers. Carl H. Lindner III and S. Craig Lindner are sons of Carl H. Lindner.
Inc., formerly Sprague Technologies, Inc., and subsidiaries as of December 31, 1991 and the related consolidated statements of operations, common stockholders' equity and cash flows for the year then ended (before adjustments and reclassifications to conform with the presentation for 1992). Our audit also included the 1991 financial statement schedule listed in the Index at Item 14(a) of American Annuity Group, Inc's. Form 10-K for the year ended December 31, 1993 (not presented separately herein). These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and the financial statement schedule based on our audit.
Assets Cash and short-term investments $ 167,950 $ 837,429 Investments: Bonds and redeemable preferred stocks: Held to maturity - at amortized cost (market - $3,959,400 and $4,705,600) 3,788,732 4,597,544 Available for sale - at market (amortized cost - $2,216,328 and $1,905,814) 2,349,528 1,976,514 Other stocks - principally at market (cost - $207,056 and $182,476) 339,156 230,876 Investment in investee corporations 899,800 568,207 Bonds and receivables from investees 6,783 305,701 Loans receivable 624,149 812,436 Real estate and other investments 139,319 179,152 8,147,467 8,670,430 Recoverables from reinsurers and prepaid reinsurance premiums 756,060 599,204 Trade receivables 298,240 594,834 Other receivables 213,507 318,799 Property, plant and equipment, net 44,950 215,851 Deferred tax asset - 258,300 Prepaid expenses, deferred charges and other assets 275,349 394,319 Cost in excess of net assets acquired 173,965 499,639
At December 31, 1992, gross unrealized gains on other stocks were $63.7 million and gross unrealized losses were $15.1 million.
Due to GACC's financial difficulties, AFC transferred all GACC securities and loans to the investee account and reduced the carrying value of that investment to estimated net realizable value ($35 million) at the end of 1992. AFC resumed equity accounting for its investment in GACC following GACC's reorganization at the end of 1993.
Summarized financial information for AFC's major investees at December 31, 1993, is shown below (in millions). See "Investee Corporations" in Management's Discussion and Analysis.
Series E, $10.50 par value - authorized 2,725,000 shares; annual dividends per share $1; to be retired at par in 1994 and 1995; 504,711 shares (stated value - $5.3 million) outstanding at December 31, 1993 and 1992.
The gross deferred tax asset was reduced by a valuation allowance based on an analysis of the likelihood of realization. Factors considered in assessing the need for a valuation allowance include: (i) recent tax returns, which show neither a history of large amounts of taxable income nor cumulative losses in recent years, (ii) opportunities to generate taxable income from sales of appreciated assets, and (iii) the likelihood of generating larger amounts of taxable income in the future. The likelihood of realizing this asset will be reviewed periodically; any adjustments required to the valuation allowance will be made in the period in which the developments on which they are based become known.
Cash payments for income taxes, net of refunds, were $49.6 million, $9.6 million and $41.2 million for 1993, 1992 and 1991, respectively.
O. Benefit Plans AFC expensed ESORP contributions of $8.9 million in 1993, $7.4 million in 1992 and $7.5 million in 1991. Other operating and general expenses include a charge of $1 million in 1993, a credit of $1 million in 1992 and a charge of $38 million in 1991 for units outstanding under AFC's Book Value Incentive Plan.
New insurance regulations requiring rate rollbacks are being implemented in California as a result of the 1988 ballot initiative, Proposition 103. GAI has not received a rollback assessment and management believes an ultimate liability, if any, cannot be estimated. Since it is not probable that GAI will pay a material premium refund, no provision has been made in the financial statements for a potential liability.
The fair value of the liability for annuities in the payout phase is assumed to be the present value of the anticipated cash flows, discounted at current interest rates. Fair value of annuities in the accumulation phase is assumed to be the policyholders' cash surrender amount. The aggregate fair value of all annuity liabilities, net of deferred policy acquisition costs, at December 31, 1993, approximates the amounts recorded in the financial statements.
T. Subsequent Event (Unaudited) In February 1994, American Premier announced that it was considering a proposal from AFC to purchase GAI's personal lines business (primarily insurance of private passenger automobiles and residential property) for $380 million. These operations had earned premiums of $342 million in 1993 and represented approximately 25% of the premiums earned by all of GAI's insurance operations. The purchase would include the transfer of a portfolio of principally investment grade securities with a market value of approximately $450 million. The estimated net book value (GAAP basis) of the business to be transferred would be approximately $200 million.
March 17, 1994 1. Amended Exchange Offer terms 2. Call for redemption of 13-1/2% Debentures
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES THREE YEARS ENDED DECEMBER 31, 1993 (In Thousands)
Percentage of State of Common Equity Name of Company Incorporation Ownership
American Financial Enterprises, Inc. Connecticut 83% Great American Holding Corporation Ohio 100 Great American Insurance Company Ohio 100 American Annuity Group, Inc. Delaware 80 Great American Life Insurance Company Ohio 100 American Empire Surplus Lines Insurance Company Delaware 100 American National Fire Insurance Company New York 100 Great American Management Services, Inc. Ohio 100 Mid-Continent Casualty Company Oklahoma 100 Stonewall Insurance Company Alabama 100 Transport Insurance Company Ohio 100