SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1 to
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report: December 31, 1996
(Date of earliest event reported)
Commission File No. 1-7361
AMERICAN FINANCIAL CORPORATION
Incorporated under the laws of Ohio
IRS Employer Identification No. 31-0624874
One East Fourth Street
Cincinnati, Ohio 45202
Phone: (513) 579-2121
Former name or former address, if changed since last report:
Not Applicable.
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This Amendment No. 1 to Form 8-K is being filed to provide
the Pro Forma Financial information required by Item 7(b) of
this Form.
Item 7(b) Pro Forma Financial Information
Effective as of the close of business on December 31, 1996,
American Financial Group, Inc. ("AFG"), the owner of 100% of
the outstanding common stock of American Financial
Corporation ("AFC"), contributed to the capital of AFC, 38
million of the 47 million outstanding shares of common stock
of American Premier Underwriters, Inc. ("American Premier"),
previously a direct, wholly-owned subsidiary of AFG. No
consideration was paid by AFC.
AFG was formed in December 1994 for the purpose of acquiring
AFC and American Premier. In mergers completed on April 3,
1995, AFG issued 71.4 million shares of its common stock in
exchange for all of the outstanding common stock of AFC and
American Premier (the "Mergers"). AFC received 18.7 million
shares of AFG for its investment in a like number of
American Premier shares. The AFG shares held by AFC have
been treated as retired in AFG's financial statements.
The accompanying Unaudited Pro Forma Condensed Balance Sheet
as of September 30, 1996, and Unaudited Pro Forma Statements
of Earnings for the nine months ended September 30, 1996 and
1995 and year ended December 31, 1995, assume the
contribution of American Premier to AFC occurred on April 3,
1995, the date AFC and American Premier became subsidiaries
of AFG. AFC's acquisition of American Premier is accounted
for in a manner similar to a pooling of interests whereby
the assets and liabilities of American Premier (at AFG's
historical cost basis) are combined with those of AFC. The
Unaudited Pro Forma Financial Statements should be read in
conjunction with the historical financial statements and
related notes of AFC and American Premier which are included
in their respective Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q for the periods corresponding
to those presented below.
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AMERICAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(In Millions)
Historical
American Pro Forma AFC
AFC Premier Adjustments Pro Forma
Assets
Cash and short-term investments $ 297.8 $ 104.6 $ - $ 402.4
Investments 9,912.3 1,866.7 (575.8) (a) 11,203.2
Recoverables from reinsurers and prepaid
reinsurance premiums 966.8 77.9 (97.1) (b) 947.6
Agents' balances and premiums receivable 369.4 288.0 (14.7) (b) 642.7
Deferred acquisition costs 364.5 79.7 - 444.2
Prepaid expenses, deferred charges and other assets 646.7 381.0 (3.2) (b) 1,024.5
Receivable from affiliates - 587.1 (587.1) (b) -
Cost in excess of net assets acquired 176.4 381.1 (272.5) (c) 285.0
$ 12,733.9 $ 3,766.1 $ (1,550.4) $ 14,949.6
Liabilities and Shareholders' Equity
Unpaid losses and loss adjustment expenses $ 3,139.8 $ 1,097.9 $ (57.1) (b) $ 4,180.6
Unearned insurance premiums 894.2 392.8 (37.2) (b) 1,249.8
Annuity benefits accumulated 5,279.2 - - 5,279.2
Life, accident and health reserves 561.2 - - 561.2
Payable to affiliates 725.4 - (587.1) (b) 138.3
Long-term debt 388.4 264.5 10.9 (d) 663.8
Accounts payable, accrued expenses and other
liabilities 840.7 383.6 (61.7) (b) 1,162.6
Minority interest 147.4 - 194.0 (e) 341.4
Total liabilities 11,976.3 2,138.8 (538.2) 13,576.9
Preferred stock 168.5 - - 168.5
Common stock 9.6 47.0 (47.0) (f) 9.6
Capital surplus - 579.1 (100.7) (f) 478.4
Retained earnings 464.9 1,003.9 (885.8) (f) 583.0
Net unrealized gains (losses) on marketable securities,
net of deferred income tax 114.6 (2.7) 21.3 (f) 133.2
Total shareholders' equity 757.6 1,627.3 (1,012.2) 1,372.7
$ 12,733.9 $ 3,766.1 $ (1,550.4) $ 14,949.6
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AMERICAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(In Millions)
Historical
American Pro Forma AFC
AFC Premier Adjustments Pro Forma
Income:
Property and casualty insurance premiums $ 1,164.4 $ 998.2 $ - $ 2,162.6
Life, accident and health premiums 80.3 - - 80.3
Investment income 517.4 164.6 (54.9) (g) 627.1
Realized gains on sales of securities 16.8 6.6 1.2 (h) 24.6
Equity in net earnings of investee corporations 50.7 1.6 (29.8) (i) 22.5
Gains on sales of investee corporations 169.4 - - 169.4
Gains on sales of subsidiaries 2.9 53.1 (19.2) (k) 36.8
Other income 93.9 11.8 (2.6) (l) 103.1
2,095.8 1,235.9 (105.3) 3,226.4
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses 921.9 733.7 - 1,655.6
Commissions and other underwriting expenses 365.0 231.5 - 596.5
Annuity benefits 206.3 - - 206.3
Life, accident and health benefits 70.2 - - 70.2
Interest charges on borrowed money 102.4 29.6 (63.5) (m) 68.5
Other operating and general expenses 228.3 35.4 17.1 (n) 280.8
1,894.1 1,030.2 (46.4) 2,877.9
Earnings before income taxes and extraordinary items 201.7 205.7 (58.9) 348.5
Provision for income taxes 35.4 79.0 (21.5) (o) 93.0
Earnings before extraordinary items $ 166.3 $ 126.7 $ (37.4) $ 255.5
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AMERICAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(In Millions)
Pro Forma Adjustments
Deduct 1st
Historical Quarter
American American Other AFC
AFC Premier Premier Adjustments Pro Forma
Income:
Property and casualty insurance premiums $ 1,107.1 $ 1,131.5 $ (381.9) $ - $ 1,856.7
Life, accident and health premiums 1.6 - - - 1.6
Investment income 472.3 153.5 (49.3) (24.4) (g) 552.1
Realized gains on sales of securities 22.2 8.5 0.2 4.1 (h) 35.0
Equity in net earnings of investee corporations 44.0 0.7 - (11.2) (i) 33.5
Gains (losses) on sales of investee corporations (0.3) - - 0.4 (j) 0.1
Gains (losses) on sales of subsidiaries - (0.2) - 0.2 (k) -
Other income 77.2 9.3 (3.0) (1.1) (l) 82.4
1,724.1 1,303.3 (434.0) (32.0) 2,561.4
Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses 775.6 899.1 (287.0) - 1,387.7
Commissions and other underwriting expenses 359.1 253.9 (93.0) - 520.0
Annuity benefits 194.2 - - - 194.2
Life, accident and health benefits 1.3 - - - 1.3
Interest charges on borrowed money 103.0 36.1 (13.1) (30.5) (m) 95.5
Other operating and general expenses 176.9 36.5 (14.7) 6.7 (n) 205.4
1,610.1 1,225.6 (407.8) (23.8) 2,404.1
Earnings before income taxes and extraordinary items 114.0 77.7 (26.2) (8.2) 157.3
Provision for income taxes 31.1 29.6 (9.9) (10.8) (o) 40.0
Earnings before extraordinary items $ 82.9 $ 48.1 $ (16.3) $ 2.6 $ 117.3
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AMERICAN FINANCIAL CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT 0F EARNINGS
YEAR ENDED DECEMBER 31, 1995
(In Millions)
Pro Forma Adjustments
Deduct 1st
Historical Quarter
American American Other AFC
AFC Premier Premier Adjustments Pro Forma
Income:
Property and casualty insurance premiums $ 1,535.2 $ 1,495.4 $ (381.9) $ - $ 2,648.7
Life, accident and health premiums 15.7 - - - 15.7
Investment income 632.6 205.4 (49.3) (39.2) (g) 749.5
Realized gains on sales of securities 56.6 23.8 0.2 3.4 (h) 84.0
Equity in net earnings (losses) of investee corporations 36.9 (2.2) - (19.5) (i) 15.2
Gains (losses) on sales of investee corporations (0.1) - - 0.4 (j) 0.3
Gains (losses) on sales of subsidiaries - (0.3) - 0.3 (k) -
Other income 106.6 13.4 (3.0) (2.3) (l) 114.7
2,383.5 1,735.5 (434.0) (56.9) 3,628.1
Expenses:
Properly and casualty insurance:
Losses and loss adjustment expenses 1,065.9 1,198.5 (287.0) 1,977.4
Commissions and other underwriting expenses 474.2 326.1 (93.0) - 707.3
Annuity benefits 254.7 - - - 254.7
Life, accident and health benefits 13.2 - - - 13.2
Interest charges on borrowed money 138.2 44.9 (13.1) (47.4) (m) 122.6
Other operating and general expenses 254.0 53.0 (14.7) 8.7 (n) 301.0
2,200.2 1,622.5 (407.8) (38.7) 3,376.2
Earnings before income taxes and extraordinary items 183.3 113.0 (26.2) (18.2) 251.9
Provision for income taxes 40.1 45.9 (9.9) (19.7) (o) 56.4
Earnings before extraordinary items $ 143.2 $ 67.1 $ (16.3) $ 1.5 $ 195.5
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American Financial Corporation
Notes to Unaudited Pro Forma Financial Statements
(in millions)
(a) Represents (i) the elimination of AFC's $574.3 million
investment in AFG whose assets consist principally of
its investments in AFC and American Premier and (ii)
a $1.5 million adjustment to reduce American
Premier's investments to AFG's basis.
(b) To eliminate intercompany balances between AFC and
American Premier including deferred income tax
benefits recorded in consolidation.
(c) To adjust American Premier's goodwill to AFG's basis.
(d) To adjust American Premier's long-term debt to AFG's
basis.
(e) Represents common stock of American Premier owned by AFG.
(f) Reflects (i) AFG's contribution of American Premier
common stock to AFC as if contributed at the date of
the Mergers, (ii) the elimination of AFC's
investment in AFG and American Premier, and (iii)
AFC's share of American Premier's earnings and net
unrealized gains on marketable securities from the date of the
Mergers to September 30, 1996.
(g) Adjustments to investment income consist of the
following:
Nine Months Ended Year Ended
September 30, December 31,
1996 1995 1995
Eliminate intercompany interest ($61.8) ($28.6) ($44.8)
Reclassify investment expenses 4.7 2.6 3.0
Adjust to AFG's basis 2.2 1.6 2.6
($54.9) ($24.4) ($39.2)
(h) To adjust American Premier's realized gains to AFG's basis.
(i) To eliminate AFC's equity in earnings of AFG.
(j) To eliminate AFC's $0.4 million loss on sale of an investee to
American Premier.
(k) To adjust American Premier's gain on sale of subsidiary in 1996 to
AFG's basis and eliminate American Premier's loss on the sale of a
subsidiary to AFC in 1995.
(l) To eliminate intercompany charges.
(m) To eliminate intercompany interest on credit line between AFC and American
Premier as detailed in note (g) above and adjust interest on
American Premier's debt to AFG's basis.
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(n) Adjustments to other operating and general expenses consist of the
following:
Nine Months Ended Year Ended
September 30, December 31,
1996 1995 1995
Minority interest in American
Premier's earnings $20.7 $9.4 $13.3
Adjust goodwill amortization
to AFG's basis (5.7) (4.4) (5.9)
Investment expenses from note (g) 4.7 2.6 3.0
Eliminate intercompany charges (2.6) (.9) (1.7)
$17.1 $6.7 $ 8.7
(o) Represents primarily the tax benefit on interest expense of AFC on
its credit line with American Premier for which AFC did not record
a tax benefit.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMERICAN FINANCIAL CORPORATION
March 17, 1997 By: James C. Kennedy
James C. Kennedy
Deputy General Counsel & Secretary
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