UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 8, 1998
(date of earliest event reported)
NATIONAL WESTERN LIFE INSURANCE COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Colorado
(State or Other Jurisdiction of Incorporation)
2-17039 84-0467208
(Commission File Number) (I.R.S. Employer Identification Number)
850 East Anderson Lane, Austin, Texas 78752-1602
(Address of Principal Executive Offices and Zip Code)
(512) 836-1010
(Registrant's Telephone Number, Including Area Code)
Item 5. Other Events
On September 8, 1998, National Western Life Insurance Company ("the
Registrant"), National Annuity Programs, Inc. ("NAP"), and the
policyholder plaintiffs, interveners and class-representatives in the
Diffie, et al. vs. National Western Life Insurance Company and National
Annuity Programs, Inc. class action litigation pending in the District
Court of Travis County, Texas, filed with the Court a joint motion for
preliminary approval of a Settlement Agreement among the parties, and
requested the Court to review the Settlement Agreement and make a
preliminary determination that it is fair, adequate and reasonable to
the members of the proposed classes, and that the proposed classes are
capable of being certified for settlement purposes, to approve the form
of the notices of the settlement to the classes, and to set a class
certification and fairness hearing on the settlement. As previously
reported, Registrant and NAP, its independent marketing general agency,
were sued for alleged violations of Texas statutes and regulations of
the Texas Department of Insurance, alleged negligent misrepresentations,
and other allegations relating to breach of contract, common law fraud,
good faith and fair dealing and conspiracy.
In exchange for a final order and judgment dismissing with prejudice the
claims asserted against the Registrant and NAP by all members of the
settlement classes, Registrant will contribute approximately $5 million
to the proposed settlement and NAP will pay $750,000 to the settlement.
Approximately $3,850,000 will be made available for the members of the
various classes that qualify for payments, and $1,900,000 will be paid
for attorneys' fees and expenses. There is a possibility that
Registrant's total payment to members of the classes could increase, but
it is believed that the amount would not be material. In the
settlement, Registrant guarantees that at least $900,000 will be paid
out to approved claims by members of the classes, and any unclaimed
amounts are to be returned to the Registrant. Additionally, Registrant
has agreed to pay the costs of notice to the class and administration of
the settlement claims process, estimated to be approximately $250,000.
Registrant has also agreed to guarantee minimum interest rates of 3% and
5% in the future on certain settlement options under specified annuity
policies which are the subject matter of the litigation, and to provide
additional incidental settlement benefits, all as detailed in the motion
and Settlement Agreement attached as Exhibit 10(l) hereto. The plaintiffs
estimate that the aggregate value of all of the settlement benefits,
including the $5,750,000 settlement payments and potential future
benefits to be derived by policyholders under certain policy settlement
elections, is approximately $10 million.
On September 9, 1998, the District Court entered an order temporarily
certifying a settlement class, preliminarily approved the Settlement
Agreement between the parties, determined that it is appropriate to send
notice to the proposed class members of the Settlement Agreement,
approved the form and content of the notices to the members of the
class, authorized the Registrant to retain an administrator to supervise
the Settlement Agreement offer to members of the class, set a "fairness
hearing" on the Settlement Agreement for January 20, 1999, and enjoined
other actions.
The Settlement Agreement is subject to Court review and initial approval
as to fairness, certification of appropriate classes, approval of form
of notice to class members, as well as notice to class members, claim
application by class members for payment, and final Court approval of
the settlement.
Although the Registrant and NAP consider this is a fair and equitable
settlement offer, significant uncertainty still exists whether the
Settlement Agreement will be approved by an acceptable number of class
members and by the Court. Additionally, the Registrant may void the
Settlement Agreement should a specified number of class members reject
the proposed settlement. As a result of this considerable uncertainty,
no amounts have been accrued in the Registrant's financial statements
for the potential settlement. Registrant will accrue the appropriate
amount of the settlement offer if and when it is probable that
acceptance of the Settlement Agreement will be achieved. The Registrant
will proceed with notification of class members and preliminary
administration of the claims process during the remainder of 1998. It
is this process which will determine whether ultimate settlement is
achieved. Accordingly, Registrant will accrue approximately $250,000
for the total estimated costs of the notification and administration
process in the quarter ended September 30, 1998.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 10(l) - Joint Motion For Preliminary Approval Of Settlement
Agreement, To Authorize Class Notice, To Enjoin Other Actions And To
Schedule Fairness Hearing
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 hereunto duly authorized.
National Western Life Insurance Company
(Registrant)
Date: September 28, 1998 By: /S/ Ross R. Moody
Ross R. Moody
President and Chief Operating Officer