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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 1-2964
TRANSAMERICA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0932740
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 983-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock--$1 Par Value New York Stock Exchange
Pacific Stock Exchange
9-1/8% Cumulative Monthly Income New York Stock Exchange
Preferred Securities, Series A*
*Issued by Transamerica Delaware, LP, and
guaranteed by Transamerica Corporation
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( X )
Aggregate market value of Common Stock, $1 par value, held by nonaffil-
iates of the registrant as of the close of business on February 21, 1997:
$5,759,748,174.
Number of shares of Common Stock, $1 par value, outstanding as of the
close of business on February 21, 1997: 66,266,810.
Documents incorporated by reference:
Portions of the Transamerica Corporation 1996 Annual Report to
Stockholders are incorporated by reference into Parts I and II. With the
exception of those portions which are incorporated by reference, the Trans-
america Corporation 1996 Annual Report is not deemed filed as part of this
Report.
Portions of the Proxy Statement of Transamerica Corporation dated
March 18, 1997 are incorporated by reference into Part III. (A definitive
proxy statement has been filed with the Commission since the close of the
fiscal year.)
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TABLE OF CONTENTS
Page
____
Part I:
Item 1. Business ................................................. 3
Item 2. Properties ............................................... 21
Item 3. Legal Proceedings ........................................ 21
Item 4. Submission of Matters to a Vote of Securities Holders .... 22
Item 4A. Executive Officers of the Registrant ..................... 22
Part II:
Item 5. Market for Registrant's Common Equity and Related Stock-
holder Matters ........................................... 22
Item 6. Selected Financial Data .................................. 22
Item 7. Management's Discussion and Analysis of Financial Condi-
tion and Results of Operations ........................... 22
Item 8. Financial Statements and Supplementary Data .............. 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................... 23
Part III:
Item 10. Directors and Executive Officers of the Registrant ....... 23
Item 11. Executive Compensation ................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management ............................................... 26
Item 13. Certain Relationships and Related Transactions ........... 26
Part IV:
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ................................................. 27
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PART I
ITEM I. BUSINESS
Transamerica Corporation is a financial services organization which
engages primarily, through its subsidiaries, in life insurance, consumer
lending, commercial lending, leasing and real estate services. Transamerica
was incorporated in Delaware in 1928.
On March 13, 1997, Transamerica announced that it intends to sell
substantially all of its consumer lending operation as part of its strategy to
redeploy its capital while moving ahead with a plan to build a new,
centralized real estate secured lending operation. The assets to be offered
for sale include approximately $3.6 billion of gross receivables, principally
real estate secured loans, a network of approximately 420 branch offices and
other assets, including intangibles, of approximately $100 million. In
addition, another $550 million of real estate secured loans, non real estate
secured loans and foreclosed properties will be sold or liquidated
separately. This amount includes approximately $300 million remaining from
the $1.1 billion segregated in the plan announced in 1996 to accelerate
efforts to reduce the consumer lending operation's exposure to non real estate
consumer loans by further curtailing production of these loans, liquidating
most of the non real estate loan portfolio and intensifying collection
efforts. Net proceeds from the sale will be used to reduce debt, fund the new
centralized operations, purchase Transamerica common stock and for other
corporate purposes.
On October 14, 1996, Transamerica acquired all of the outstanding shares
of Trans Ocean Ltd., a closely held container leasing company, in exchange for
approximately 1.6 million shares ($112.7 million) of Transamerica common stock
of which 337,000 shares ($24.2 million) remain in escrow pending the
resolution of certain items.
On May 2, 1995, Transamerica sold substantially all of the assets of
Criterion Investment Management Company for gross proceeds of $60 million
which were used to reduce debt. The transaction resulted in an after tax gain
of $4.8 million.
On March 31, 1995, Transamerica purchased for $1,027.3 million in cash
substantially all the assets and assumed certain liabilities of the home
equity business of ITT Consumer Financial Corporation (ITT). Transamerica did
not assume any borrowings, tax liabilities or contingent liabilities of ITT.
The initial financing of the acquisition was provided through short-term bank
loans which have been repaid and refinanced with long-term debt.
On December 21, 1994, Transamerica sold its mutual fund subsidiary,
Transamerica Fund Management Company, for gross proceeds of $100 million which
were used to reduce debt. The transaction resulted in an after tax gain of
$4.9 million.
On April 13, 1994, Transamerica sold its remaining 21% ownership interest
in Sedgwick Group plc. Proceeds from the sale were $326.4 million, resulted
in no gain or loss and were used by Transamerica to purchase 4,500,000 shares
of its common stock and reduce debt.
On March 15, 1994, Transamerica acquired substantially all the operating
assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based
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transportation equipment rental company, including certain dry cargo
containers, tank containers, tank chassis, operating leases and other assets
(collectively the "Container Operations") for $1.1 billion in cash.
Transamerica assumed certain specified liabilities of the Container Operations
including trade accounts payable. Transamerica did not assume any borrowings,
tax liabilities or contingent liabilities of Tiphook. The initial financing
of the acquisition was provided through short-term bank loans which have been
repaid and refinanced with long-term debt.
Information concerning Transamerica's investment portfolio is
incorporated herein by reference to "Investment Portfolio" on pages 46 and 47,
and "Note C. Financial Instruments" on pages 56 through 62 of the
Transamerica Corporation 1996 Annual Report.
BUSINESS SEGMENT INFORMATION
"Note E. Business Segment Information" on page 64 of the Transamerica
Corporation 1996 Annual Report is incorporated herein by reference.
The business activities of Transamerica's principal subsidiaries are
more fully described below. Unless otherwise indicated, all dollar and other
amounts represent information as of December 31, 1996.
LIFE INSURANCE
Transamerica's life insurance business is generated through lines of
business which include individual life insurance, asset management, structured
settlements, annuities, reinsurance and Canada. These lines of business
conduct their operations through one or more of the following entities:
Transamerica Occidental Life Insurance Company, Transamerica Life Insurance
and Annuity Company, First Transamerica Life Insurance Company, Transamerica
Life Insurance Company of Canada and Transamerica Assurance Company
(hereinafter collectively referred to as "Transamerica Life Companies"). The
Transamerica Life Companies are engaged primarily in the business of
underwriting, distribution and reinsurance of investment based and traditional
life insurance products in all states of the United States, the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, Canada, Taiwan and Hong Kong.
The life insurance business is highly competitive. Competition arises
from numerous stock and mutual life insurance companies in the United States,
many of which offer products similar to those offered by the Transamerica Life
Companies. In the pension and annuity markets, competition also arises from
banks, mutual funds and other investment managers. Both product and price
competition are intense. The Transamerica Life Companies' key competitive
strengths are their financial position, broad product range, market position
and diversified distribution system.
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The following table sets forth certain statistical information relating
to the Transamerica Life Companies' operations.
Years Ended December 31,
______________________________________
1996 1995 1994
(Dollar amounts in millions)
Insurance in force at
end of period:(1)(2)
Whole life and endowment .... $157,825.6 $167,105.3 $153,162.5
Individual term life ........ 239,470.7 197,703.2 187,841.2
Group life(3) ............... 23,996.9 16,048.7 9,630.2
Credit life(4) .............. 430.1 59.0 132.6
__________ __________ __________
Total ..................... $421,723.3 $380,916.2 $350,766.5
========== ========== ==========
New insurance written:(2)
Whole life and endowment(5) . $ 16,579.1 $ 23,891.8 $ 23,056.7
Individual term life(6) ..... 70,389.1 50,502.9 37,823.2
Group life(3) ............... 11,372.2 7,856.4 2,369.1
Credit life(4) .............. 393.4
__________ __________ __________
Total ..................... $ 98,733.8 $ 82,251.1 $ 63,249.0
========== ========== ==========
Premium income:(7)
Individual life and annui-
ties(8) ................... $ 682.7 $ 663.4 $ 599.9
Group life and annuities(9) . 103.3 190.4 137.9
Accident and health (individ-
ual, group and credit)(10) 286.4 286.2 280.6
__________ __________ __________
Total ..................... $ 1,072.4 $ 1,140.0 $ 1,018.4
========== ========== ==========
Average individual life policy
in force at end of year
(actual dollar amounts) ..... $ 159,976 $ 155,274 $ 149,064
Average individual life policy
issued during year (actual
dollar amounts)(11) ......... $ 232,019 $ 236,401 $ 243,634
Number of individual life
policies in force at end of
year ........................ 1,228,454 1,227,603 1,221,765
Ratio of underwriting expenses
to premiums and other consid-
erations(12) ................ 8.2% 7.5% 8.7%
Lapse ratio--adjusted for de-
creases and expiries of
term insurance and rein-
surance assumed:(13)
Transamerica Life Companies . 8.7% 7.8% 8.0%
All U.S. stock life insur-
ance companies(14) ........ (15) 8.6% 8.3%
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_______
(1) The annual change in insurance in force results from additions for
new insurance written less reductions from terminations. Approximately 70% to
80% of terminations in all years were voluntary (from lapse or surrender) with
the remaining amount caused by deaths and other decreases by contract.
(2) Reinsurance assumed has been included, except for intercompany
amounts. Reinsurance ceded has not been deducted.
(3) The increases were due to growth in sales of insurance through
salary deduction plans offered by employers.
(4) The company discontinued underwriting in this line of business in
1988 and there have been significant decreases in insurance in force,
excluding reinsurance assumed, and new insurance written since that time.
Insurance in force represents business which is only cancelable at the
policyholder's request. New insurance written in 1996 represents in force
obtained through a reinsurance arrangement.
(5) The 1996 decrease was primarily due to the conversion of new
Trendsetter policies from whole life policies to term life policies. The 1995
increase was primarily attributable to increased marketing efforts.
(6) The increases were due primarily to the level of reinsurance
assumed. Additionally, in 1996 the new Trendsetter policies were sold as term
policies rather than whole life policies.
(7) Premiums on reinsurance assumed have been included; cancellations
and return premiums and premiums on reinsurance ceded have been deducted.
Considerations for supplementary contracts and deposit administration funds
received have not been included.
(8) The 1996 increase was primarily due to increased levels of
reinsurance assumed. The increase in 1995 was due primarily to increased
sales of individual annuity policies.
(9) The changes were due primarily to changing levels of sales of group
annuity policies, principally single premium pension contracts.
(10) The 1996 increase was primarily due to increased sales of employer
sponsored policies partially offset by decreased levels of reinsurance
assumed. The increase in 1995 was primarily due to an increased level of
reinsurance assumed.
(11) The declines were primarily due to lower face amounts of universal
life products.
(12) The ratio is the percentage of salaries and other operating expenses
to premiums and other considerations. The 1996 increase is due to higher
expenses related to sales of interest-sensitive products.
(13) The lapse ratio is calculated in accordance with the A.M. Best
Company, Inc. formula. It is the ratio of amounts of ordinary life insurance
terminated during the year to the aggregate of (1) ordinary life insurance in
force at the beginning of the year plus (2) new business issued during the
prior year. The 1996 increase resulted primarily from a trend toward lower
premium rates on term insurance products.
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(14) Industry median, as provided by A.M. Best Company, Inc.
(15) Information not yet available for 1996.
_____________________
Transamerica Life Companies' individual life insurance business is
generated through a system of 680 field sales offices primarily in the United
States and Canada, 36 of which are branch offices operated by employees and
the remainder are independent offices operated by independent general agents.
These offices house a sales force consisting of 62 employees of the
Transamerica Life Companies and approximately 2,000 independent agents
operating under contract on an exclusive or near exclusive basis, which
together generated approximately 33% of new premiums written in 1996. The
remaining 67% of the Transamerica Life Companies' individual life insurance
business was generated by more than 15,600 producing independent insurance
brokers operating under nonexclusive contracts.
In addition to its sales force, the Transamerica Life Companies have
approximately 2,700 employees in Los Angeles, California, Kansas City,
Missouri, Charlotte, North Carolina, Purchase, New York and Canada who service
outstanding policies and new business submitted by agency offices, and
approximately 300 field sales office employees serving its sales force.
Of life insurance in force at December 31, 1996, 20.6% was on residents
of California, followed by Texas (9.5%), Illinois (5.6%), Florida (3.8%) and
Pennsylvania (3.1%). No other state accounted for more than 3% of life
insurance in force. Canada accounted for 14% and all other foreign operations
accounted for 2.2% of life insurance in force.
Reinsurance. Portions of the Transamerica Life Companies' life insurance
risks are reinsured with other companies. The maximum amount of individual
insurance retained on any one life is $2 million at ages 16 to 65 inclusive.
This maximum is reduced for health impairments, for other ages and for certain
other special classes of risks. The Transamerica Life Companies also reinsure
a minor part of their liability under accident and health policies.
For many years the Transamerica Life Companies have solicited life
reinsurance from other companies. As of December 31, 1996, the Transamerica
Life Companies were accepting business from 375 companies under automatic
reinsurance agreements and from approximately 280 other companies on a case
by case basis.
Reserves. In accordance with the life insurance laws and regulations
under which they operate, the Transamerica Life Companies are required to
carry on their books as liabilities actuarial reserves to meet the obligations
on their various life insurance policies. Such life insurance reserves are
calculated pursuant to mortality and annuity tables in general use in the
United States and Canada and are the computed amounts which, with additions
from premiums to be received, and with interest on such reserves compounded
annually at certain assumed rates, will be sufficient to meet the Transamerica
Life Companies' policy obligations at their maturities if deaths occur in
accordance with mortality tables employed.
For a fee, the life insurance operation issues guaranteed investment
contracts which guarantee the payment by pension plans of certain qualified
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benefits if the plans' other sources of liquidity are exhausted. Unlike
traditional guaranteed investment contracts, these are synthetic contracts in
which the plan sponsor retains the assets and credit risk while the life
insurance operation assumes some limited degree of interest rate risk. To
minimize the risk of loss, the life insurance operation underwrites these
contracts based on the plan sponsor, at the beginning of the contract,
agreeing to the investment guidelines to be followed. These guidelines
include the overall portfolio credit and maturity requirements. The life
insurance operation regularly monitors adherence to these requirements. At
December 31, 1996 the life insurance operation had outstanding commitments to
maintain liquidity for benefit payments on notional amounts of $1.9 billion
compared to $600 million at December 31, 1995. At December 31, 1996 and
December 31, 1995 there were no advances outstanding to provide sponsor
liquidity under these contracts.
Investments. The Transamerica Life Companies' investments at
December 31, 1996 totaled $28.9 billion which was invested as follows: 93% in
fixed maturities; 2.8% in mortgage loans and real estate; 1.6% in common
stocks; 1.5% in policy loans; 0.5% in short-term investments; 0.3% in
redeemable preferred stocks; 0.2% in other long-term investments; and 0.1% in
nonredeemable preferred stocks. Fixed maturities are invested as follows:
59.1% in industrial and other non-government bonds; 22.4% in United States
government bonds; 17.1% in public utility bonds; 0.4% in foreign government
bonds; and 1% in municipal bonds.
The following table sets forth pretax mean investment yields, including
interest earned and dividends received, before (gross) and after (net)
deducting investment expenses for the Transamerica Life Companies' various
investments. The yields are computed based on the mean of beginning and end
of year assets, producing results which vary somewhat from the daily average
yield.
Years Ended December 31,
________________________
1996 1995 1994
Fixed maturities, at amortized cost--gross(1) 8.08% 8.30% 8.26%
Equity securities, at market value--gross(2) 1.59 1.66 2.87
Mortgages--gross(3) ......................... 9.08 8.74 10.70
Total invested assets:
Gross ..................................... 7.86 8.13 8.08
Net ....................................... 7.64% 7.93% 7.90%
_______
(1) The decrease in 1996 reflects the lower yields on new investments.
(2) The decrease in the 1996 and 1995 yield resulted primarily from an
increase in the market value of the portfolio.
(3) The decrease in the 1995 yield is primarily due to the funding of
new loans during 1995 at current market rates which were below the average of
the existing loans.
_____________________
FINANCE
The consumer lending operation and commercial lending operation have,
from time to time, entered into securitization arrangements whereby they have
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securitized portfolios of receivables. The term "owned and serviced" is used
herein to describe their receivables portfolio and the securitized
receivables.
Consumer Lending
Consumer lending services are provided by Transamerica Financial
Services, based in Los Angeles, California, which has approximately 500 branch
lending offices. Branch offices are located in the United States, Canada (19)
and the United Kingdom (13). In 1996, the consumer lending operation began a
restructuring to refocus on real estate secured first and second mortgage
lending and to convert from a branch based system using a new business model
to centralize back office support, reduce operating costs and implement
database marketing. The consumer lending operation also announced in 1996 a
plan to accelerate efforts to reduce its exposure to non real estate consumer
loans by further curtailing production of these loans, liquidating most of the
non real estate loan portfolio, and intensifying collection efforts. After
expansion to include certain real estate secured loans, the plan covered a
total of $1.1 billion in receivables. On March 13, 1997, Transamerica
announced that it intends to sell substantially all of its consumer lending
operation as part of its strategy to redeploy its capital while moving ahead
with a plan to build a new, centralized real estate secured lending operation.
During 1994 and 1995 the consumer lending operation continued to broaden
its receivables portfolio by expanding its revolving real estate secured lines
of credit, its personal loan business (which includes loans secured by
automobiles or other property as well as unsecured loans), its purchase from
dealers of retail finance contracts covering principally appliances, furniture
and services, credit insurance and retail used automobile financing. The
products offered by the consumer lending operation have traditionally been
fixed rate; in 1995 the company commenced offering variable rate products.
The consumer lending operation's primary business is making fixed rate
home equity loans that generally range up to $200,000. Of the company's net
finance receivables outstanding at December 31, 1996, 83% are secured by real
estate, principally one to four family residential properties. Of the
consumer lending operation's net finance receivables secured by real estate,
54% are secured by first mortgages. The consumer lending operation's policy
generally limits the amount of cash advanced on any one loan, plus any
existing mortgage, to between 70% and 80% (depending on location) of the
appraised value of the mortgaged property, as determined by qualified
independent appraisers at the time of loan origination.
The consumer lending operation's principal market involves the
origination and servicing of home equity loans for debt consolidation and
other purposes. Traditionally, the company has relied on an extensive loan-
by-mail program, currently involving approximately 50 million solicitation
pieces annually, to attract potential customers. However, competition has
been increasing in the U.S. home equity market, and competitors include
numerous other finance companies, banks, savings associations and mortgage
bankers as well as loan brokerage operations. In response, the consumer
lending operation's competitive strategies have included product
diversification and emphasis on superior service to better meet customer needs
as well as exploration of additional products and certain foreign markets.
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The following table sets forth certain statistical information relating
to the consumer lending operation's finance receivables for the years
indicated.
Years Ended December 31,
__________________________________
1996 1995 1994
(Dollar amounts in millions)
Volume of finance receivables
acquired:
Secured by residential
real estate(1) ................ $1,326.6 $2,067.9 $1,708.8
Other(2) ........................ 402.9 759.4 696.3
________ ________ ________
Total $1,729.5 $2,827.3 $2,405.1
======== ======== ========
Finance receivables outstanding
at end of year:
Principally secured by residen-
tial real estate(3) ........... $3,678.3 $5,150.8 $4,340.0
Less unearned finance charges ... 128.8 214.5 198.0
________ ________ ________
Net finance receivables - core
business ...................... 3,549.5 4,936.3 4,142.0
Other receivables - special
assets(3) ..................... 484.2
Less unearned finance charges -
special assets ................ 21.9
________
Net finance receivables -
special assets ................ 462.3
________ ________ ________
Net finance receivables before
foreclosures 4,011.8 4,936.3 4,142.0
Foreclosures in process(4) ...... 144.3 112.7 79.3
________ ________ ________
Net finance receivables ......... $4,156.1 $5,049.0 $4,221.3
======== ======== ========
Allowance for losses at end of
year(5):
Core business ................... $ 160.7 $ 164.1 $ 117.2
Special assets .................. 110.0
Ratio to outstandings less
unearned finance charges(5):
Core business ................... 4.53% 3.32% 2.83%
Special assets .................. 23.80%
Provision for credit losses
charged to income(6) ............ $ 272.9 $ 97.8 $ 82.2
Credit losses (net of recoveries):
Real estate secured finance
receivables(7) ................ $ 105.3 $ 64.8 $ 46.9
Non-real estate secured finance
receivables(8) ................ 53.0 39.0 28.3
Ratio to average net finance
receivables outstanding(9) .... 3.38% 2.15% 1.93%
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_______
(1) Volume for 1996 was lower than 1995 because volume for 1995 includes
$1 billion acquired from ITT on March 31, 1995. Excluding the effects of
that acquisition, volume in 1996 increased as a result of the consumer lending
operation's increased marketing effort. Loan originations in 1995, excluding
the effects of the ITT acquisition, were less than in 1994 principally due to
a decline in renewal volume (which was caused in part by a return to higher
rates in early 1995) and increased competition. The 1994 volume also included
$117 million of purchased receivables.
(2) The decrease in 1996 reflects a curtailment in consumer lending's
non real estate secured loan business.
(3) In the fall of 1996 a plan was announced to accelerate efforts to
reduce exposure to non real estate consumer loans and certain real estate
loans by further curtailing production of these loans, liquidating parts of
the loan portfolio and intensifying collection efforts. The plan covered a
total of $1.1 billion in receivables as of September 30, 1996. In the fourth
quarter $422.4 million of these receivables were sold and $106.3 million were
transferred back into the base business portfolio leaving $462.3 million
remaining at December 31, 1996 after collections and charge offs. Other
declines in 1996 were attributable to expected payoffs of accounts acquired
from ITT, which contributed to the increase in outstandings in 1995 over 1994,
as well as other payoffs exceeding loan originations.
(4) Foreclosures in process have continued to increase reflecting a
continued growth in California foreclosure activity to recover real estate
collateralized receivables. Foreclosures in process are carried at their
estimated net realizable value.
(5) The increase in 1996 reflects added provisions due to higher charge
offs and higher delinquency during the year. The increase in 1995 is due to
the acquisition of the ITT portfolio on March 31, 1995, parts of which were
purchased at a discount to reflect the delinquency in the portfolio.
(6) The provision for credit losses increased in 1996 and 1995 due to
increases in credit losses and higher delinquency (see notes 7 and 8 below).
In addition, in the third quarter of 1996, the consumer lending operation
established a $125 million allowance in conjunction with the plan discussed in
note 3 above.
(7) The increases were primarily due to continued sluggishness in the
California economy and a continued weak California real estate market. In the
fourth quarter of 1995, the company consolidated and accelerated California
branch foreclosure activity and also recognized credit losses that had been
anticipated in connection with the ITT acquisition, both of which contributed
to the increase over 1994. Credit losses exclude losses on the disposal of
repossessed assets, which amounted to $3.5 million in 1996, $15.4 million in
1995 and $7.3 million in 1994, and which are classified as operating expenses.
The 1995 increase in losses on the disposal of repossessed assets was mainly
due to the consolidation and acceleration of foreclosure activity in
California.
(8) The increases were caused by growth in the related outstanding
receivables which tend to have a higher loss ratio than the real estate
secured portfolio. Because new receivables generally do not go into default
for some period of time after origination, the increases also reflect the
"seasoning" of this portfolio.
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(9) The increased ratios were due to corresponding fluctuations in
credit losses (see notes 7 and 8 above).
_____________________
Following is certain information regarding delinquent receivables,
nonearning receivables, accounts in foreclosure and repossessed assets.
Because future improvements may be impacted by factors such as economic
conditions and the state of the real estate market, particularly in
California, the extent and timing of any change in the trend of delinquent
receivables, nonearning receivables and foreclosures and repossessed assets
remains uncertain.
Delinquent Receivables. The following table shows the ratio of consumer
finance receivables which are contractually past due 60 days or more and for
which the foreclosure process has not commenced to finance receivables
outstanding for each category and in total for the years indicated:
As of December 31,
______________________
1996 1995 1994
Finance receivables principally
secured by residential real
estate(1) .................. 3.17% 2.79% 2.08%
Other receivables - special
assets(2) .................. 21.34
______ _____ _____
Total ...................... 5.28% 2.79% 2.08%
====== ===== =====
_______
(1) The increases in 1996 and 1995 were due to worsening in the
condition of the non ITT portfolio and the ITT portfolio acquisition which
included the purchase of delinquent accounts at a discount.
(2) Represents delinquent accounts segregated for liquidation.
________________
Nonearning Receivables. Nonearning consumer finance receivables, which
are defined generally as those past due more than 29 days and for which the
foreclosure process has not commenced, amounted to $466.9 million, $308
million and $194.3 million at December 31, 1996, 1995 and 1994. Payments
received on nonearning receivables are applied to principal and interest
according to the terms of the loan; however, accrued interest receivable and
amortization of other finance charges are recognized in income only on
accounts past due less than 30 days.
Accounts in Foreclosure and Repossessed Assets. When foreclosure
proceedings begin on an account secured by real estate, the account is written
down to the fair value of the collateral, less estimated selling costs.
Accounts in process of foreclosure totaled $144.3 million, $112.7 million and
$79.3 million at December 31, 1996, 1995 and 1994. Repossessed assets held
for sale totaled $83.1 million, $94.6 million and $146.8 million at December
31, 1996, 1995 and 1994. The total increase in 1996 reflects continued high
foreclosure activity, especially in California.
Page 13
Commercial Lending
Commercial lending services are provided by three core business units:
distribution finance, business credit and insurance premium finance. The
commercial lending business operates from 30 branch lending offices located in
the United States (19), Canada (4) and Europe (7). The lending activities of
these core businesses are discussed below.
Distribution finance (formerly inventory finance) primarily provides
wholesale financing which consists principally of financing dealers' purchases
from distributors or manufacturers of goods for inventory. The products
financed include boats, recreational products, electronics and appliances,
manufactured housing, lawn and garden equipment and information technology
products. Loan terms typically provide for repayment within 30 days following
sale of the inventory by the borrower. After initial review of a borrower's
credit worthiness, the ongoing management of credit risk in this area may
include various monitoring techniques, such as periodic physical inventory
checks and review of the borrower's sales, as well as maintenance of
repurchase agreements with manufacturers which provides a degree of security
in the event of a repossession. Distribution finance also provides
complementary retail finance, leasing and asset recovery services.
Business credit consists of secured loans, primarily revolving, to
manufacturers, distributors and selected service businesses and collateralized
equipment lending. The asset based lending loans are collateralized and
consist of retained credit lines typically from $5 million to $40 million with
terms ranging from three to five years. Actual borrowings originated by
business credit's asset based lending group are limited to specified
percentages of the borrower's inventory, receivables and other eligible
collateral which are regularly monitored to ascertain that receivables
outstanding are within approved limits. Credit risk is managed by monitoring
the quality and performance of the borrower's collateral and compliance with
financial covenants. The equipment finance and lease division of business
credit provides collateralized equipment loans and leases secured by equipment
essential to the borrower's business. Credit risk is managed by rigorous
underwriting and transaction structuring which provides an acceptable
collateral coverage. Collateral coverage is enhanced by structuring loans
such that loan balances amortize at a faster rate than the underlying
equipment depreciates. In addition, most leases are structured with
guaranteed residuals and those residuals without guarantees are recorded using
conservative estimates of the projected fair market value of the collateral at
lease expiration. In addition to originating loans, business credit purchases
participations in loans originated by others.
Insurance premium finance involves the financing of insurance premiums
for businesses, generally at fixed rates for terms of less than one year. The
receivables are secured by the commercial lending operation's right to cause
the policies to be canceled and receive the unearned premiums. Credit risk is
managed generally by requiring down payments from borrowers to mitigate the
effects of possible delays in receiving unearned premiums in the event of
policy cancellation and by monitoring the concentrations of potential return
premiums among the insurance carriers as well as their financial condition.
The relatively short-term nature of the company's financings enables the
commercial lending operation to adjust its finance charges in response to
Page 14
competitive factors and changes in its costs. The interest rates at which the
commercial lending operation borrows funds generally move more quickly than
the rates at which it lends to customers. As a result, in rising interest
rate environments, margins are normally compressed until changes in the prime
lending rates are effected. Conversely, in declining interest rate
environments, margins are generally enhanced.
In 1995, the commercial lending operation sold for cash a portfolio of
consumer rediscount loans totaling $118 million of net outstanding
receivables which resulted in an after tax gain of $4.8 million. During 1995,
it also entered into a three-year arrangement in which it securitized a $475
million participation interest in a pool of its insurance premium finance
receivables. This agreement replaced a 1990 securitization of $375 million
which expired in 1995.
The commercial lending industry is highly competitive and has seen
increasing numbers of new market entrants. In addition to competition from
other finance companies, there is competition from captive finance
subsidiaries of manufacturing companies and commercial banks. The commercial
lending operation competes by offering a variety of financing products,
superior customer service including prompt credit review, and competitive
pricing.
The following table sets forth certain statistical information relating
to the commercial lending operation's finance receivables for the years
indicated.
Page 15
Years Ended December 31,
_____________________________________
1996 1995 1994
(Dollar amounts in millions)
Volume of finance receivables
acquired:
Distribution finance(1) ......... $ 8,315.6 $ 7,479.4 $ 7,347.4
Business credit(2) .............. 8,528.8 8,929.8 6,602.2
Insurance premium finance(3) .... 2,014.9 1,804.5 1,813.2
_________ _________ _________
Core businesses ............... 18,859.3 18,213.7 15,762.8
Other ........................... 0.1 18.8 74.9
_________ _________ _________
Total ......................... $18,859.4 $18,232.5 $15,837.7
========= ========= =========
Finance receivables outstanding
at end of year:
Distribution finance(4) ......... $ 2,530.9 $ 2,242.2 $ 2,078.5
Business credit(5) .............. 953.4 680.8 655.0
Insurance premium finance(6) .... 309.6 207.1 277.3
_________ _________ _________
Core businesses ............... 3,793.9 3,130.1 3,010.8
Other ........................... 3.2 6.9 75.3
_________ _________ _________
3,797.1 3,137.0 3,086.1
Less unearned finance charges ... 142.0 74.3 50.3
_________ _________ _________
Net finance receivables - owned . 3,655.1 3,062.7 3,035.8
Net finance receivables securi-
tized, sold and serviced(7) ... 474.3 474.2 374.5
_________ _________ _________
Net finance receivables owned
and serviced .................. $ 4,129.4 $ 3,536.9 $ 3,410.3
========= ========= =========
Allowance for losses at end of
year(8)(9) ...................... $ 82.5 $ 77.9 $ 90.7
Ratio to outstandings less
unearned finance charges:(10)
Owned ........................... 2.22% 2.51% 2.96%
Owned and serviced .............. 2.00% 2.20% 2.66%
Provision for credit losses
charged to income ............... $ 10.2 $ 16.1 $ 18.3
Credit losses (net of
recoveries) ..................... $ 5.2 $ 10.0 $ 8.8
Ratio to average net finance
receivables outstanding:(11)
Owned ......................... 0.16% 0.34% 0.29%
Owned and serviced ............ 0.14% 0.29% 0.26%
Page 16
_______
(1) The 1996 increase is due to aggressive sales and marketing in most
of the products financed.
(2) The decrease in 1996 is due to lower direct originations offset in
part by an increase in purchased participations relative to 1995. The
increase in 1995 reflects a shift in focus from purchasing participations from
other financial institutions to originating and selling participations in
loans.
(3) The 1996 increase primarily reflects increased origination activity
in Europe.
(4) The 1996 increase is due to aggressive sales and marketing in most
of the product lines financed. The 1995 increase was due mainly to increased
volume and a slower turnover in customer inventories.
(5) The 1996 increase is primarily due to an increase in net receivables
in the equipment finance and lease division. The 1995 increase is primarily
due to the addition of $123.9 million of net receivables in the equipment
finance and lease division offset by the sale of $118 million of rediscount
loans.
(6) The 1996 increase is due to the increased volume in Europe and
higher volume in the fourth quarter of 1996 versus 1995. The 1995 decrease
was due to the securitization of an additional net $100 million of receivables
(see note 8 below).
(7) The amounts are the balances of securitized receivables outstanding
at year end. In 1995, $475 million of insurance premium finance receivables
were securitized replacing a 1990 securitization agreement of $375 million
which expired in 1995.
(8) Includes allowance for losses on the securitized, sold and serviced
portfolio of $1.2 million in 1996 and 1995 and $938,000 in 1994 which is
reported in other liabilities in the consolidated balance sheet.
(9) The 1996 increase in the allowance for losses was attributable to
receivables growth in the core businesses. The 1995 decrease in the allowance
for losses was attributable to the sale of the Puerto Rico receivables
portfolio which had a larger reserve requirement and more than offset the
increase due to growth in the core businesses.
(10) The decline is due to the decreased allowance from portfolios sold
and liquidated which had a larger percentage reserve requirement and continued
improvement in the credit quality of accounts in the core business.
(11) The changes in ratios were due to corresponding fluctuations in
credit losses.
_____________________
Page 17
Delinquent Receivables. Delinquent receivables are defined as the
instalment balance for inventory finance and business credit asset based
lending receivables more than 60 days past due and the receivable balance for
all other receivables over 60 days past due.
The following table shows the ratio of delinquent commercial finance
receivables to finance receivables outstanding for each category and in total
for the years indicated.
As of December 31,
______________________
1996 1995 1994
Distribution finance ........... 0.30% 0.20% 0.11%
Insurance premium finance(1) ... 2.34 1.40 0.51
______ ______ ______
Core businesses .............. 0.39 0.24 0.12
Other(2) ....................... 79.23 53.47 20.63
______ ______ ______
Total - owned ................ 0.46% 0.35% 0.62%
====== ====== ======
Total owned and serviced ..... 0.41% 0.31% 0.55%
====== ====== ======
_______
(1) The increase in the 1996 ratio is primarily concentrated in the
European receivables portfolio. The increase in the 1995 ratio is primarily
due to lower receivables outstanding at December 31, 1995 as a result of a
$100 million increase in securitization during 1995 and a higher delinquency
level associated with one account.
(2) Represents finance receivables retained from businesses sold or
exited which are being liquidated. The increase in the 1996 and 1995 ratios
resulted from the reduction in receivables outstanding primarily due to the
sale of the Puerto Rico portfolio in 1995 which had a lower delinquency ratio
in relation to the other receivables included in this caption. The remaining
finance receivables balance in this category as of December 31, 1996 totals
$3.2 million.
_____________________
Nonearning Receivables. Nonearning receivables are defined as balances
from borrowers that are more than 90 days delinquent or sooner if it appears
doubtful they will be fully collectible. Accrual of finance charges is
suspended on nonearning receivables until past due amounts are collected.
Nonearning receivables were $21.4 million (0.56% of receivables outstanding),
$18 million (0.57% of receivables outstanding) and $23.3 million (0.75% of
receivables outstanding) at December 31, 1996, 1995 and 1994.
Leasing
Transamerica Leasing Inc. leases, services and manages containers,
chassis and trailers throughout the world. The leasing operation is based in
Purchase, New York and maintains approximately 400 offices, depots and other
Page 18
facilities in 48 countries. The company specializes in intermodal
transportation equipment, which allows goods to travel by road, rail or ship.
The company's customers include railroads, steamship lines, distribution
companies and motor carriers.
On October 14, 1996 the leasing operation acquired all of the outstanding
shares of Trans Ocean Ltd., a container leasing company, in exchange for
approximately 1.6 million shares ($112.7 million) of Transamerica common
stock. The Trans Ocean fleet comprised approximately 185,600 owned, leased
and managed units consisting of a variety of intermodal equipment types.
On March 15, 1994, the leasing operation purchased substantially all of
the assets of the container rental businesses of Tiphook plc for $1.1 billion.
The acquired fleet of standard containers and tank containers totaled 363,000
units.
The leasing operation is one of the largest lessors of intermodal
transportation equipment in the industry based on units of equipment available
for hire. The leasing operation competes by providing a high level of service
through an extensive worldwide network of offices and third party depots and
by offering a wide variety of equipment and lease types. The leasing
operation's management information system provides employees and other users,
including customers around the world, with on-line access to key billing and
operational information. The leasing operation's main competitors are other
transportation equipment leasing companies. The leasing operation experienced
increased competition in 1996 due to growth in the size of the worldwide
container fleet and a slower rate of growth in world trade.
At December 31, 1996, the leasing operation's fleet consisted of standard
twenty and forty foot dry containers and specialized containers such as
refrigerated containers, tank containers, high cube, open top and flatrack
equipment types, chassis and U.S. domestic containers totaling 896,300 units
which are owned or managed, and leased from approximately 370 depots
worldwide; 34,500 rail trailers leased to all major United States railroads
and to roll on/roll off steamship operators, shippers, shippers' agents and
regional truckers; and 10,300 over-the-road trailers in Europe.
The following table sets forth the leasing operation's fleet size, in
units, as of December 31, of the year indicated:
As of December 31,
_________________________
1996 1995 1994
Containers and chassis(1) 896,300 708,400 685,400
Rail trailers(2) ......... 34,500 36,900 39,300
European trailers(3) ..... 10,300 7,700 5,700
_______
(1) The 1996 increase was largely due to the acquisition of Trans Ocean.
(2) The 1996 and 1995 decreases resulted from the sale of older units as
intermodal loadings declined year to year.
(3) The 1996 and 1995 increases reflect expansion in the European
trailer market.
___________________
Page 19
The percent of the leasing operation's fleet on term lease or service
contract minimum lease was 53% in 1996, 51% in 1995 and 47% in 1994. The
increase in 1996 reflects the continuing trend toward increasing term and
service contract minimum leases which was partially reduced by a lower
percentage of term and service contract minimum leases from the acquired Trans
Ocean fleet. The increase in 1995 reflected the full integration of the
Tiphook container fleet into the leasing operation's fleet. At December 31,
1996 lease terms were one to 15 years.
The following table sets forth the leasing operation's fleet utilization
for the years indicated:
Years Ended December 31,
________________________
1996 1995 1994
Containers and chassis(1) ..... 81% 85% 81%
Rail trailers(2) .............. 82% 77% 92%
European trailers(3) .......... 92% 95% 96%
_______
(1) The 1996 decline is associated with lower equipment demand due to a
slower rate of growth in world trade compared to growth in the size of the
worldwide container fleet. The 1995 increase was due to higher demand
resulting from higher export levels from China and the Far East.
(2) The 1996 increase resulted from a continuing strong U.S. economy
and a decline in the supply of equipment. The 1995 decline was due to
decreased U.S. intermodal trailer loadings.
(3) The level of utilization for 1996 declined from 1995 and 1994 due to
a greater number of rental units in the fleet and flat demand in most of
continental Europe.
_____________________
REAL ESTATE SERVICES
Real estate services comprise Transamerica's real estate information
businesses as well as certain real estate and other investments.
The Transamerica Real Estate Information Companies, the principal
operating business of this segment, prepares tax payments and reports and
conducts tax searches with respect to real property taxes and assessments and
issues flood hazard determinations in all 50 states, and provides real
property information services in several states. It also provides customers
with information through an on-line computer system. As of December 31, 1996,
tax reports were generated for more than 3,000 institutional mortgage
servicers and their borrowers.
Page 20
The Transamerica Real Estate Information Companies includes the leading
tax service operation in the U.S. based on the number of customers and loans
serviced. Competition is increasing in the tax service market, driving down
fees at the same time that customers are demanding more services. In
response, the Transamerica Real Estate Information Companies have initiated a
number of strategies to maintain their industry leadership including
development of new technology and centralization of operations.
The following table sets forth the number of tax service contracts under
management at the end of the years indicated and new tax service contracts
written during those years:
1996 1995 1994
(Amounts in thousands)
Tax service contracts
under management ........ 17,529 17,664 16,694
New tax service contracts . 4,168 3,911 4,581
The real estate services segment includes investments in fixed income and
equity securities, collateralized bond obligations and certain real estate
properties. These investments totaled $1.2 billion at December 31, 1996
compared to $678.1 million at December 31, 1995.
REGULATION
Finance Activities
Transamerica's consumer lending and commercial lending operations are
subject to various state and federal laws. Depending upon the type of
lending, these laws may require licensing and certain disclosures and may
limit the amounts, terms and interest rates that may be offered.
Insurance Activities
The Corporation's life insurance business, in common with those of other
companies in this industry, are subject to regulation and supervision in the
states, territories and countries in which they operate. Although the extent
of such regulation varies, in general state laws establish supervisory
agencies with broad powers relating to licensing of insurance companies and
their agents to transact business therein, supervising premium rates and forms
of policies used, and regulating the form and content of required financial
statements and the types of investments that may be made. Insurance companies
are also required to file annual reports with the supervisory agencies in
states in which they do business and are subject to periodic examination by
such agencies.
Other Regulations
A number of jurisdictions in which the Corporation and its subsidiaries
operate, including California, have adopted laws and regulations imposing
environmental controls on the development of real estate and related business
activities.
Page 21
EMPLOYEES
The Corporation and its subsidiaries employed approximately 10,400
persons at December 31, 1996.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings from
continuing operations to fixed charges of Transamerica Corporation and its
subsidiaries for each of the five years ended December 31, 1996.
Years Ended December 31,
________________________________
1996 1995 1994 1993 1992
1.79 1.95 2.14 2.09 1.90
The ratios of earnings from continuing operations to fixed charges were
computed by dividing earnings from continuing operations before fixed charges
and income taxes by the fixed charges. Fixed charges consist of interest and
debt expense, minority interest charges related to certain securities of
affiliates and one-third of rent expense, which approximates the interest
factor.
ITEM 2. PROPERTIES
The executive offices of Transamerica Corporation are located in the
Transamerica Pyramid in San Francisco, California, a 48-story office building.
Approximately 15% of the 460,000 square feet of rentable space is occupied by
Transamerica and its subsidiaries.
The Transamerica Center in Los Angeles, California, consists of a
32-story building, an 11-story building and a 10-story building. Transamerica
Center is the home office of Transamerica Financial Services, certain
divisions of Transamerica Life Companies and certain other subsidiaries of
Transamerica. Approximately 66% of the 1,210,000 square feet of rentable
space is occupied by Transamerica subsidiaries.
ITEM 3. LEGAL PROCEEDINGS
Various pending or threatened legal proceedings by or against the
Corporation or one or more of its subsidiaries involve tax matters, alleged
breaches of contract, torts, employment discrimination, violations of
antitrust laws and miscellaneous other causes of action arising in the course
of their businesses. Some of these proceedings involve claims for punitive or
treble damages in addition to other specific relief. These include legal
actions, similar to those faced by many other major life insurers, which
allege damages related to sales practices of non-guaranteed premium policies
since the early 1980s.
Based upon information presently available, and in light of legal and
other defenses and insurance coverage available to the Corporation and its
subsidiaries, contingent liabilities arising from threatened and pending
litigation, income taxes and other matters are not expected to have a material
Page 22
effect on the consolidated financial position or results of operations of the
Corporation and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
See Item 10 in Part III of this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following information in the Transamerica Corporation 1996 Annual
Report is incorporated herein by reference:
Markets on which the Corporation's common stock is traded--"Common
Stock Listed and Traded," page 82.
High and low sale prices for the Corporation's common stock for each
quarter in 1996 and 1995--"Supplementary Financial Information," page 71.
Frequency and amount of cash dividends declared during 1996 and
1995--"Selected Eleven-Year Financial Data--Note E," page 73.
Number of common stockholders of record as of the close of business
on February 21, 1997--"Supplementary Financial Information--Note A," page
71.
ITEM 6. SELECTED FINANCIAL DATA
The following items for each of the five years in the period ended
December 31, 1996, included in "Selected Eleven-Year Financial Data" on
pages 72 and 73 of the Transamerica Corporation 1996 Annual Report, are
incorporated herein by reference:
Revenues
Income from continuing operations
Earnings per share of common stock--Income from
continuing operations
Total assets
Notes and loans payable: Long-term debt
Dividends declared per share of common stock
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information (other than graphic images and related commentary) set
forth under the caption "Financial Review" on pages 24 through 47, of the
Transamerica Corporation 1996 Annual Report, is incorporated herein by
reference.
Page 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and supplementary
financial information of the Corporation and its subsidiaries in the
Transamerica Corporation 1996 Annual Report are incorporated herein by
reference:
Consolidated Balance Sheet--December 31, 1996 and 1995--pages 48
and 49.
Consolidated Statement of Income--Years ended December 31, 1996,
1995 and 1994--page 50.
Consolidated Statement of Cash Flows--Years ended December 31,
1996, 1995 and 1994--page 51.
Consolidated Statement of Stockholders' Equity--Years ended
December 31, 1996, 1995 and 1994--page 52.
Notes to Financial Statements--December 31, 1996--pages 53
through 68.
Supplementary Financial Information--Years ended December 31, 1996
and 1995--page 71.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "(1) Election of Directors"
in the Proxy Statement of Transamerica Corporation dated March 18, 1997 is
incorporated herein by reference.
Page 24
The officers of the Corporation are listed below. Executive officers are
designated by an asterisk.
Name Position Age Name Position Age
____ ________ ___ ____ ________ ___
Frank C. Herringer* ..... Chairman of the Board, 54 Richard H. Fearon* ...... Senior Vice President-- 41
President and Chief Corporate Development
Executive Officer Nancy C. Bonner ......... Vice President-- 44
Thomas J. Cusack* ....... Executive Vice President, 41 Executive Development
Transamerica Corporation Maureen Breakiron-Evans . Vice President and 42
and President and Chief General Auditor
Executive Officer, Burton E. Broome* ....... Vice President and 61
Transamerica Life Controller
Companies James B. Dox ............ Vice President--Taxes 57
Richard H. Finn* ........ Executive Vice President, 62 David H. Hawkins ........ Vice President, Trans- 56
Transamerica Corpor- america Corporation
ation and President and Senior Vice Presi-
and Chief Executive dent and Treasurer,
Officer, Transamerica Transamerica Finance
Finance Corporation Corporation
Edgar H. Grubb* ......... Executive Vice President 57 James B. Lockhart ....... Vice President-- 60
and Chief Financial Public Affairs
Officer James F. McArdle ........ Vice President-- 33
Robert A. Watson* ....... Executive Vice President 51 Investor Relations
Shirley H. Buccieri* .... Senior Vice President, 45 William H. McClave ...... Vice President-- 53
General Counsel and Corporate
Secretary Communications
Richard N. Latzer* ...... Senior Vice President 60 Mark A. McEachen* ....... Vice President and 39
and Chief Investment Treasurer
Officer, Transamerica Richard J. Olsen ........ Vice President-- 58
Corporation, President Corporate Relations
and Chief Executive Rona Pehrson ............ Vice President-- 49
Officer, Transamerica Human Resources
Investment Services, George B. Sundby ........ Vice President--Financial 45
Inc. and President, Planning and Analysis,
Transamerica Realty and Assistant Controller
Services, Inc. Judith M. Tornese ....... Vice President--Risk 54
Management
Mr. Herringer was elected Chairman of the Board of the Corporation
effective January 1, 1996. He has been Chief Executive Officer of the
Corporation since 1991 and President since 1986.
Mr. Cusack was elected Executive Vice President of the Corporation in
1995. He was named President and Chief Executive Officer of the Transamerica
Life Companies in 1995. He was Senior Vice President of the Corporation from
1993 to 1995 and Vice President--Corporate Development from 1989 to 1993.
Page 25
Mr. Finn was elected Executive Vice President of the Corporation in 1993.
He was Group Vice President of the Corporation from 1990 to 1993. He has been
Chief Executive Officer since 1990, and President since 1988, of Transamerica
Finance Corporation.
Mr. Grubb was elected Executive Vice President and Chief Financial
Officer of the Corporation in 1993. He was Senior Vice President of the
Corporation from 1989 to 1993.
Mr. Watson was elected Executive Vice President of the Corporation in
1995. He was with Westinghouse Electric Corporation from 1992 to 1995 where
he served as an Executive Vice President and as Chairman and Chief Executive
Officer of Westinghouse's financial services division. He was President and
Chief Executive officer of Transamerica Commercial Finance Corporation from
1990 to 1992.
Ms. Buccieri was elected Senior Vice President, General Counsel and
Secretary of the Corporation in 1995. She was with Gibson, Dunn & Crutcher
from 1983 to 1995 and served as a Partner from 1990 to 1995.
Mr. Latzer was elected Senior Vice President and Chief Investment Officer
of the Corporation in 1988. Since 1988, he has been President and Chief
Executive Officer of Transamerica Investment Services, Inc. In 1995, he was
named President of Transamerica Realty Services, Inc.
Mr. Fearon was elected Senior Vice President--Corporate Development of
the Corporation in 1997. He was Vice President--Corporate Development in 1995
and 1996. He was General Manager of Corporate Development and Vice Chairman
of NatSteel Chemicals from 1990 to 1995.
Ms. Bonner was elected Vice President--Executive Development of the
Corporation in 1996. She was Vice President of Executive Development of Banc
One from 1991 to 1996.
Ms. Breakiron-Evans was elected Vice President and General Auditor of the
Corporation effective in 1994. She was with Arthur Andersen & Co. from 1980
to 1994 where she served as an Audit Partner in the San Francisco office from
1990 to 1994.
Mr. Broome was elected Vice President and Controller of the Corporation
in 1979.
Mr. Dox was elected Vice President--Taxes of the Corporation in 1993.
He was a Tax Partner with Ernst & Young LLP from 1977 to 1993, serving in the
Los Angeles office from 1983 to 1993.
Mr. Hawkins was elected Vice President of the Corporation in 1993. He
has been Senior Vice President and Treasurer of Transamerica Finance
Corporation since 1989.
Mr. Lockhart was elected Vice President--Public Affairs of the
Corporation in 1979.
Page 26
Mr. McArdle was elected Vice President--Investor Relations of the
Corporation in 1997. He held a number of positions within the commercial
lending operation between 1991 and 1997, most recently serving as group vice
president of the commercial lending operation's distribution finance unit.
Mr. McClave was elected Vice President--Corporate Communications of the
Corporation in 1981.
Mr. McEachen was elected Vice President and Treasurer of the Corporation
in 1996. He held a number of positions with Chrysler Corporation between 1982
and 1996, most recently serving as Treasurer of Chrysler Canada.
Mr. Olsen was elected Vice President--Corporate Relations of the
Corporation in 1981.
Ms. Pehrson was elected Vice President--Human Resources of the
Corporation in 1989.
Mr. Sundby was elected Vice President--Financial Planning and Analysis in
1995. He was Assistant Controller and Director of Accounting of the
Corporation from 1989 to 1995. He continues to serve as Assistant Controller.
Ms. Tornese was elected Vice President--Risk Management of the
Corporation in 1987.
There is no family relationship among any of the foregoing officers or
between any of the foregoing officers and any director of the Corporation.
The information set forth under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement of Transamerica
Corporation dated March 18, 1997 is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Director Compensation and
Benefits" and "Executive Compensation and Other Information" in the Proxy
Statement of Transamerica Corporation dated March 18, 1997 is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Principal Stockholders" and
"Stockholdings of Directors and Executive Officers" in the Proxy Statement of
Transamerica Corporation dated March 18, 1997 is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Director Compensation and
Benefits," "Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions" in the Proxy Statement of Transamerica Corporation
dated March 18, 1997 is incorporated herein by reference.
Page 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) List of Exhibits:
3.(i) Transamerica Corporation Certificate of Incorporation,
as amended (incorporated by reference to Exhibit 4.5 of
the Registrant's Registration Statement on Form S-3
(File No. 33-43921) as filed with the Commission on
November 13, 1991 and to Exhibits 3 and 4 contained in
Form 8-A filed January 21, 1992, as amended by Form 8
filed January 27, 1992).
3.(ii) Transamerica Corporation By-Laws, as amended
(incorporated by reference to Exhibit 3.(ii) of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1996).
4.1 Stock Purchase Rights Agreement dated as of July 17,
1986 together with Amendment dated January 24, 1991
(incorporated by reference to Exhibit 4.1 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1991).
4.2*
10.1 Form of Non-Qualified Stock Option Agreement under the
Registrant's 1971 and 1979 Non-Qualified Stock Option
Plan (incorporated by reference to Exhibit 10.4 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1988).
10.2 Executive Benefit Plan for Transamerica Corporation and
Affiliates, as amended (incorporated by reference to
Exhibit EX-10.2 of the Registrant's Annual Report on
Form 10-K (File No. 1-2964) for the year ended December
31, 1992).
10.3 1995 Bonus Plan (incorporated by reference to Exhibit
EX-10.8 of the Registrant's Annual Report on Form 10-K
(File No. 1-2964) for the year ended December 31, 1994).
_________
*Neither the Corporation nor its subsidiaries are
parties to any instrument with respect to long-term debt for
which securities authorized thereunder exceed 10% of the total
assets of the Corporation and its subsidiaries on a consolidated
basis. Copies of instruments with respect to long-term debt of
lesser amounts will be provided to the Commission upon request.
Page 28
10.4 1996 Bonus Plan (incorporated by reference to Exhibit
10.7 of the Registrant's Annual Report on Form 10-K
(File No. 1-2964 for the year ended December 31, 1995).
10.5 1997 Bonus Plan.
10.6 1985 Stock Option and Award Plan, as amended, (including
Amendments No. 1 through 7) (incorporated by reference to
Exhibit EX-10.5 of the Registrant's Quarterly Report on
Form 10-Q (File No. 1-2964) for the quarter ended March
31, 1994, to Exhibit 4.1 to Post-Effective Amendment
No. 3 of the Registrant's Registration Statement on
Form S-8 (File No. 33-26317) as filed with the Commission
on March 30, 1990, to Exhibit 10.11 of the Registrant's
Annual Report on Form 10-K (File No. 1-2964) for the year
ended December 31, 1990, and to Exhibit EX-10.1 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended June 30, 1995).
10.7 Form of Non-Qualified Stock Option Agreement under the
Registrant's 1985 Stock Option and Award Plan
(incorporated by reference to Exhibit EX-10.3 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended March 31, 1994).
10.8 Form of Incentive Stock Option Agreement under the
Registrant's 1985 Stock Option and Award Plan
(incorporated by reference to Exhibit 10.9 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1990).
10.9 Form of Restricted Stock Award Agreement under the 1985
Stock Option and Award Plan (incorporated by reference
to Exhibit EX-10.11 of the Registrant's Annual Report on
Form 10-K (File No. 1-2964) for the year ended December
31, 1993).
10.10 Form of Non-Qualified Stock Option Agreement for
Nonemployee Directors under the 1985 Stock Option and
Award Plan (incorporated by reference to Exhibit
EX-10.4 of the Registrant's Quarterly Report on Form 10-Q
(File No. 1-2964) for the quarter ended March 31, 1994).
10.11 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1987
(incorporated by reference to Exhibit 10.12 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1991).
10.12 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1988
(incorporated by reference to Exhibit EX-10.14 of the
Registrant's Annual Report on Form 10-K (File No. 1-2964)
for the year ended December 31, 1992).
Page 29
10.13 Deferred Compensation Policy for Transamerica Corporation
and Affiliates effective January 1, 1989 (incorporated by
reference to Exhibit 10.17 of the Registrant's Annual
Report on Form 10-K (File No. 1-2964) for the year ended
December 31, 1989).
10.14 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1990
(incorporated by reference to Exhibit 10.18 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1989).
10.15 Deferred Compensation Policy for Transamerica Corporation
and Affiliates effective July 1, 1992 (incorporated by
reference to Exhibit EX-10.17 of the Registrant's Annual
Report on Form 10-K (File No. 1-2964) for the year ended
December 31, 1992).
10.16 Deferred Compensation Policy for Transamerica
Corporation and Affiliates effective January 1, 1994
(incorporated by reference to Exhibit EX-10.18 of the
Registrant's Annual Report on Form 10-K (File No.
1-2964) for the year ended December 31, 1993).
10.17 Transamerica Corporation Deferred Compensation Plan, as
amended (including Amendment No. 1) (incorporated by
reference to Exhibit 10.19 of the Registrant's Annual
Report on Form 10-K (File No. 1-2964) for the year ended
December 31, 1996, and to Exhibit EX-10.20 of the
Registrant's Annual Report on Form 10-K (File No. 1-2964)
for the year ended December 31, 1994).
10.18 1971 Non-Qualified Stock Option Plan of Transamerica
Corporation, as amended (including Amendment Nos. 1 and
2) (incorporated by reference to Exhibit EX-10.20 of the
Registrant's Annual Report on Form 10-K (File No. 1-2964)
for the year ended December 31, 1992).
10.19 1979 Stock Option Plan of Transamerica Corporation, as
amended (including Amendment Nos. 1 and 2) (incorporated
by reference to Exhibit EX-10.21 of the Registrant's
Annual Report on Form 10-K (File No. 1-2964) for the year
ended December 31, 1992).
10.20 Form of Termination Agreement between Transamerica
Corporation and certain of its officers and of its
subsidiaries (incorporated by reference to Exhibit
EX-10.25 of the Registrant's Annual Report on Form 10-K
(File No. 1-2964) for the year ended December 31, 1994).
10.21 Reinsurance Agreement dated December 31, 1992 by and
between ARC Reinsurance Corporation and Transamerica
Insurance Company, as amended (incorporated by reference
to Exhibit EX-10.26 of the Registrant's Annual Report on
Form 10-K (File No. 1-2964) for the year ended December
31, 1992).
Page 30
10.22 Letter dated December 31, 1992 from the Registrant to
Transamerica Insurance Company regarding ARC Reinsurance
Corporation (incorporated by reference to Exhibit
EX-10.27 of the Registrant's Annual Report on Form 10-K
(File No. 1-2964) for the year ended December 31, 1992).
10.23 Transamerica Corporation 1995 Performance Stock Option
Plan (incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form S-8 (File
No. 33-64221) as filed with the Commission on November
14, 1995).
10.24 Transamerica Corporation Value Added Incentive Plan
(incorporated by reference to Exhibit EX-10.2 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-1964) for the quarter ended March 31, 1994).
10.25 Form of Nonqualified Stock Option Agreement under the
Registrant's 1995 Performance Stock Option Plan
(incorporated by reference to Exhibit EX-10.2 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended June 30, 1995).
10.26 Form of Nonqualified Stock Option Agreement granted with
Tandem Limited Stock Appreciation Right under the
Registrant's 1995 Performance Stock Option Plan
(incorporated by reference to Exhibit EX-10.3 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended June 30, 1995).
10.27 Form of Tandem Limited Stock Appreciation Right under
the Registrant's 1995 Performance Stock Option Plan
(incorporated by reference to Exhibit EX-10.4 of the
Registrant's Quarterly Report on Form 10-Q (File No.
1-2964) for the quarter ended June 30, 1995).
11 Statement Re: Computation of Per Share Earnings.
12 Ratio of Earnings to Fixed Charges Calculation.
13 Portions of the Transamerica Corporation 1996 Annual
Report (to the extent such portions are expressly
incorporated herein).
21 List of Subsidiaries of Transamerica Corporation.
23 Consent of Ernst & Young LLP to the incorporation by
reference of their report dated February 19, 1997 in the
Registrant's Registration Statements on Form S-8 (File
Nos. 2-80934, 2-83724, 33-3722, 33-12324, 33-13389,
33-18911, 33-26317, 33-38267, 33-43927, 33-55587 and
33-64221) and on Form S-3 (File Nos. 33-32419, 33-37889,
33-41008, 33-55047 and 33-63049).
Page 31
24 Power of Attorney executed by the directors of the
Registrant.
27 Financial Data Schedule.
Exhibits will be furnished to stockholders of the
Corporation upon written request and, with the exception of
Exhibit 13, upon payment of a fee of 30 cents per page, which
fee covers the Corporation's reasonable expenses in furnishing
such exhibits.
(b) Reports on Form 8-K filed in the fourth quarter of 1996: None
(c) Exhibits: Certain of the exhibits listed in Item (a)(3) above have
been submitted under separate filings, as indicated.
(d) Financial Statement Schedules: The response to this portion of
Item 14 is submitted as a separate section of this report.
Page 32
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
TRANSAMERICA CORPORATION
Registrant
Burton E. Broome
Vice President and Controller
Date: March 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 24, 1997 by the following persons on
behalf of the registrant and in the capacities indicated.
Signature Title
Principal Executive Officer:
FRANK C. HERRINGER* Chairman of the Board, President and
Chief Executive Officer
Principal Financial Officer:
Edgar H. Grubb Executive Vice President and Chief Financial
Officer
Principal Accounting Officer:
Burton E. Broome Vice President and Controller
Directors:
SAMUEL L. GINN* Director
FRANK C. HERRINGER* Chairman of the Board and Director
ROBERT W. MATSCHULLAT* Director
GORDON E. MOORE Director
TONI REMBE* Director
CONDOLEEZZA RICE* Director
CHARLES R. SCHWAB* Director
FORREST N. SHUMWAY* Director
PETER V. UEBERROTH* Director
*Shirley H. Buccieri
Attorney-in-Fact
A majority of the members of the Board of Directors.
Page 33
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2) and ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
and
FINANCIAL STATEMENT SCHEDULES
Year Ended December 31, 1996
TRANSAMERICA CORPORATION AND SUBSIDIARIES
SAN FRANCISCO, CALIFORNIA
Page 34
FORM 10-K--ITEM 14(a)(1) AND (2)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements:
The following consolidated financial statements of Transamerica Corpora-
tion and subsidiaries, included in the Transamerica Corporation 1996 Annual
Report, are incorporated by reference in Item 8:
Consolidated Balance Sheet--December 31, 1996 and 1995
Consolidated Statement of Income--Years ended December 31, 1996,
1995 and 1994
Consolidated Statement of Cash Flows--Years ended December 31, 1996,
1995 and 1994
Consolidated Statement of Stockholders' Equity--Years ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements--December 31, 1996
Financial Statement Schedules:
The following consolidated financial statement schedules of Transamerica
Corporation and subsidiaries are included in Item 14(d).
I--Summary of Investments Other Than Investments in Related
Parties--December 31, 1996
II--Condensed Financial Information of Registrant--December 31,
1996 and 1995, and years ended December 31, 1996, 1995 and
1994
III--Supplementary Insurance Information--Years ended December 31,
1996, 1995 and 1994
IV--Reinsurance--Years ended December 31, 1996, 1995 and 1994
V--Valuation and Qualifying Accounts--Years ended December 31,
1996, 1995 and 1994
All other schedules provided for in the applicable accounting regulation
of the Securities and Exchange Commission pertain to items which do not appear
in the financial statements of Transamerica Corporation and subsidiaries or to
items which are not significant or to items as to which the required disclos-
ures have been made elsewhere in the financial statements and supplementary
notes, and such schedules have therefore been omitted.
Page 35
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Transamerica Corporation
We have audited the consolidated financial statements of Transamerica
Corporation and subsidiaries listed in Item 14(a)(1) and (2) of the Annual
Report on Form 10-K of Transamerica Corporation for the year ended
December 31, 1996. Our audits also included the financial statement
schedules listed in the index at Item 14(a)(1) and (2). These financial
statements and schedules are the responsibility of Transamerica Corporation's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and related
schedules are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements and related schedules. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Transamerica Corporation and subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material
respects the information set forth therein.
As discussed in Note A to the consolidated financial statements,
Transamerica Corporation changed its method of accounting for certain debt
securities effective January 1, 1994.
Ernst & Young LLP
San Francisco, California
February 19, 1997
Page 36
SCHEDULE I
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE I--SUMMARY OF INVESTMENTS OTHER
THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1996
Column A Column B Column C Column D
_____________________________________________________________________________________________
Amount at
which shown in
Type of Investment Cost Value the balance sheet
_____________________________________________________________________________________________
(Amounts in millions)
Fixed maturities available for sale:
Bonds and notes:
U.S. Treasury securities and obligations of
U.S. government authorities and agencies . $ 294.6 $ 318.4 $ 318.4
Obligations of states and political
subdivisions ............................. 291.9 302.4 302.4
Foreign governments ........................ 149.9 155.5 155.5
Corporate securities ....................... 15,002.7 15,700.6 15,700.6
Mortgage-backed securities ................. 5,548.1 5,743.9 5,743.9
Public utilities ........................... 4,504.9 4,673.6 4,673.6
Redeemable preferred stocks .................. 84.6 91.5 91.5
_________ _________ _________
Total fixed maturities ............... 25,876.7 $26,985.9 26,985.9
=========
Equity securities:
Common stocks:
Banks, trust and insurance companies ....... 50.0 $ 91.8 91.8
Industrial, miscellaneous and all other .... 376.3 917.6 917.6
Nonredeemable preferred stocks ............... 20.5 36.6 36.6
_________ _________ _________
Total equity securities .............. 446.8 $ 1,046.0 1,046.0
=========
Mortgage loans on real estate .................. 704.1 681.5
Real estate .................................... 84.2 64.0
Loans to life insurance policyholders .......... 442.6 442.6
Short-term investments ......................... 165.2 165.2
_________ _________
Total investments .................... $27,719.6 $29,385.2
========= =========
<FN>
_______
The differences between Column B and Column D as to mortgage loans on real estate
and real estate represent write downs and allowances for possible permanent impairment
in value.
Page 37
SCHEDULE II
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
(Amounts in millions except share data)
BALANCE SHEET
December 31,
1996 1995
Assets:
Investments in subsidiaries ............................... $5,289.2 $5,368.8
Equity securities at fair value (cost: $236.9 in 1996
and $174.4 in 1995) ..................................... 550.9 360.0
Short-term investments .................................... 3.2 3.6
Notes and accounts receivable from subsidiaries ........... 301.0 73.7
Cash and cash equivalents ................................. 4.1 1.6
Deferred income tax benefit, including current tax
receivable of $14.0 in 1996 and net of current tax
liability of $41.0 in 1995 .............................. 106.3 57.6
Other assets .............................................. 207.3 298.5
________ ________
$6,462.0 $6,163.8
======== ========
Liabilities and Stockholders' Equity:
Notes and loans payable ................................... $ 607.9 $ 577.3
Income taxes due to subsidiaries .......................... 413.5 328.2
Notes and accounts payable to subsidiaries ................ 789.2 447.5
Accounts payable and other liabilities .................... 510.8 510.9
Stockholders' equity:
Preferred Stock ($100 par value):
Authorized--1,200,000 shares; issuable in series
Outstanding--Dutch Auction Rate Transferable
Securities, 2,250 shares, at liquidation preference
of $100,000 per share ............................... 225.0 225.0
Outstanding--Series D, 180,091 shares in 1996 and
180,091 shares in 1995 at liquidation preference of
$500 per share ...................................... 90.0 90.0
Common Stock ($1 par value):
Authorized--150,000,000 shares
Outstanding--65,968,708 shares in 1996 and 67,989,508
shares in 1995, after deducting 13,769,754 and
11,748,954 shares in treasury in 1996 and 1995 ...... 66.0 68.0
Additional paid-in capital .............................. 83.0
Retained earnings, including equity in undistributed net
income of subsidiaries of $1,826.6 in 1996 and
$1,688.0 in 1995 ...................................... 2,920.2 2,866.0
Net unrealized gain from investments marked to
fair value ............................................ 784.4 1,079.9
Foreign currency translation adjustments ................ (28.0) (29.0)
________ ________
4,140.6 4,299.9
________ ________
$6,462.0 $6,163.8
======== ========
Page 38
SCHEDULE II
(Continued)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
STATEMENT OF INCOME
Years Ended December 31,
1996 1995 1994
(Amounts in millions)
Revenues:
Dividends from subsidiaries ...................... $313.6 $329.8 $361.8
Tax service fees ................................. 206.5 152.6 190.3
Interest, principally from subsidiaries .......... 3.8 4.8 14.2
Investment income ................................ 10.4 15.1 9.0
Gain on investment transactions .................. 18.1 23.3 2.1
______ ______ ______
552.4 525.6 577.4
Expenses:
Interest ......................................... 89.5 82.0 98.7
General and administrative ....................... 233.6 250.7 181.8
______ ______ ______
323.1 332.7 280.5
______ ______ ______
229.3 192.9 296.9
Income tax benefit ................................. 88.4 78.3 26.3
______ ______ ______
Income before equity in undistributed income of
subsidiaries ..................................... 317.7 271.2 323.2
Equity in undistributed income of subsidiaries ..... 138.6 199.3 104.0
______ ______ ______
Net income ..................................... $456.3 $470.5 $427.2
====== ====== ======
Page 39
SCHEDULE II
(Continued)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
STATEMENT OF CASH FLOWS
Years Ended December 31,
1996 1995 1994
(Amounts in millions)
Operating activities:
Net income ........................................ $ 456.3 $ 470.5 $ 427.2
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 5.1 4.5 4.0
Accounts payable and other liabilities .......... (71.4) 47.6 48.3
Income taxes payable, including related accounts
with subsidiaries ............................. (0.6) (33.8) 207.1
Equity in undistributed income of subsidiaries .. (138.6) (199.3) (104.0)
Net (gains) on investment transactions .......... (18.1) (23.3) (2.0)
Other ........................................... (2.9) 4.8 26.1
_______ _______ _______
Net cash provided by operating activities ..... 229.8 271.0 606.7
Investing activities:
Capital contributions to subsidiaries ............. (36.3) (146.0) (90.0)
Sales of investments .............................. 219.4 99.4 46.5
Purchases of investments .......................... (158.4) (138.2) (115.4)
Decrease (increase) in short-term investments ..... 0.4 8.1 (11.2)
Decrease in accounts with subsidiaries ............ 170.8 108.7 426.2
Other ............................................. (20.0) (14.0) (6.3)
_______ _______ _______
Net cash provided (used) by investing
activities .................................. 175.9 (82.0) 249.8
Financing activities:
Proceeds from debt financing ...................... 198.4
Increase (decrease) in commercial paper obligations (157.8) 195.4 (61.2)
Payments of long-term notes ....................... (10.0) (125.0) (132.0)
Redemption of preferred stock ..................... (0.8) (115.9)
Treasury stock purchases .......................... (330.2) (155.4) (387.0)
Other common stock transactions ................... 45.6 51.0 8.0
Dividends ......................................... (149.2) (155.4) (167.7)
_______ _______ _______
Net cash used by financing activities ......... (403.2) (190.2) (855.8)
_______ _______ _______
Increase (decrease) in cash and cash equivalents .... 2.5 (1.2) 0.7
Cash and cash equivalents at beginning of year .... 1.6 2.8 2.1
_______ _______ _______
Cash and cash equivalents at end of year .......... $ 4.1 $ 1.6 $ 2.8
======= ======= =======
Page 40
SCHEDULE II
(Continued)
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TRANSAMERICA CORPORATION (PARENT COMPANY)
(Dollar amounts in millions)
NOTES TO BALANCE SHEET
Note A - Financial Instruments
December 31,
1996 1995
Notes and loans payable comprise the following amounts:
Short-term bank loans, commercial paper and current
portion of long-term debt ................................ $ 5.0 $155.5
Long-term debt due subsequent to one year:
Notes; interest at 6.75% to 9.875%; maturing through 2008 198.3 210.6
Commercial paper and other notes at various interest
rates and terms supported by credit agreements
expiring through 1998 .................................. 404.6 211.2
______ ______
$607.9 $577.3
====== ======
<FN>
The aggregate annual maturities for the five years subsequent to December 31,
1996 are: 1997--$5.0; 1998--$404.6; 1999--None; 2000--None and 2001--$5.0.
Transamerica manages a portion of its interest rate risk by entering into
interest rate swap agreements. At December 31, 1996 and 1995 interest rate swap
agreements comprise:
Weighted Weighted
Notional Average Fixed Average Floating
Amount Interest Rate Interest Rate
1996:
Interest rate swap agreements -
Transamerica pays:
Fixed rate interest expense, receives
floating rate interest income $ 50.0 5.14% 5.54%
Floating rate interest expense,
receives fixed rate interest income $275.0 7.18% 5.63%
1995:
Interest rate swap agreements -
Transamerica pays:
Fixed rate interest expense, receives
floating rate interest income $175.0 8.33% 5.87%
Floating rate interest expense,
receives fixed rate interest income $ 50.0 9.13% 6.47%
Note B - Minority Interest
In 1996, two affiliates of Transamerica issued $100.0 of 7.80% and $225.0 of
7.65% cumulative Capital Trust Pass-through Securities payable December 1, 2026.
Dividends on the outstanding Capital Trust Pass-through Securities are cumulative and
payable semi-annually in arrears. Transamerica has agreed to guarantee to pay in full
any accrued and unpaid dividends declared, or the redemption price including accrued
and unpaid dividends, if the securities are redeemed by the affiliates.
In 1994, an affiliate of Transamerica issued $200.0 of 9.125% cumulative Monthly
Income Preferred Securities. Dividends on the outstanding Monthly Income Preferrred
Securities is cumulative and payable monthly in arrears. Transamerica has agreed to
guarantee to pay in full any accrued and unpaid dividends declared, or the redemption
price including accrued and unpaid dividends, if the securities are called by the
affiliate.
Page 41
SCHEDULE III
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE III--SUPPLEMENTARY INSURANCE INFORMATION
Column A Column B Column C Column D Column E Column F
Future policy
Deferred benefits, Other policy
policy losses, claims and
acquisition claims and Unearned benefits Premium
Segment costs loss expenses premiums payable revenue
(Amounts in millions)
Life insurance:
Year ended December 31:
1996 ..................... $2,138.2 (A) $5,644.5 (B) $17.9 $22,898.4 $1,072.4
1995 ..................... $1,974.2 (A) $5,631.4 (B) $14.4 $22,262.0 $1,140.0
1994 ..................... $2,480.5 (A) $5,153.1 $ 7.3 $19,571.4 $1,018.4
Column G Column H Column I Column J Column K
Benefits, Amortization
claims, of deferred
Net losses and policy Other
investment settlement acquisition operating Premiums
income expenses costs expenses written
(Amounts in millions)
Life insurance:
Year ended December 31:
1996 ..................... $2,079.7 $2,805.8 $268.8 (C) $403.6 $286.1 (D)
1995 ..................... $1,974.7 $2,858.7 $191.3 (C) $367.3 $286.1 (D)
1994 ..................... $1,773.2 $2,356.4 $182.3 (C) $353.9 $280.0 (D)
<FN>
_______
(A) Includes a fair value adjustment of ($306.6 million) reduction in 1996, ($355.6 million)
reduction in 1995 and $351.3 million increase in 1994 required under Financial Accounting
Standards Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities.
(B) Includes a fair value adjustment of ($195 million) reduction in 1996 and ($339 million)
reduction in 1995 required under Financial Accounting Standards Statement No. 115.
(C) Includes accelerated amortization of deferred policy acquisition costs of $33.6 million in
1996, $9.2 million in 1995 and $6.3 million in 1994 associated with interest-sensitive
products due to realized investment gains.
(D) Health insurance premiums written.
Page 42
SCHEDULE IV
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE IV--REINSURANCE
Column A Column B Column C Column D Column E Column F
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
Segment amount companies companies amount to net
(Dollar amounts in millions)
Year ended December 31, 1996:
Life insurance in force ... $220,162.9 $195,158.2 $201,560.3 $226,565.0 89.0%
========== ========== ========== ==========
Premium revenue:
Life insurance .......... $ 816.6 $ 551.9 $ 521.3 $ 786.0 66.3%
Accident and health
insurance ............. 59.2 355.4 582.6 286.4 203.5%
__________ __________ __________ __________
$ 875.8 $ 907.3 $ 1,103.9 $ 1,072.4 102.9%
========== ========== ========== ==========
Year ended December 31, 1995:
Life insurance in force ... $206,722.6 $116,762.9 $174,193.6 $264,153.3 65.9%
========== ========== ========== ==========
Premium revenue:
Life insurance .......... $ 935.0 $ 619.0 $ 537.8 $ 853.8 63.0%
Accident and health
insurance ............. 165.6 439.6 560.2 286.2 195.8%
__________ __________ __________ __________
$ 1,100.6 $ 1,058.6 $ 1,098.0 $ 1,140.0 96.3%
========== ========== ========== ==========
Year ended December 31, 1994:
Life insurance in force ... $191,884.1 $115,037.5 $158,882.4 $235,728.9 67.4%
========== ========== ========== ==========
Premium revenue:
Life insurance .......... $ 620.5 $ 394.3 $ 511.7 $ 737.8 69.3%
Accident and health
insurance ............. 8.6 295.3 567.3 280.6 202.2%
__________ __________ __________ __________
$ 629.1 $ 689.6 $ 1,079.0 $ 1,018.4 105.9%
========== ========== ========== ==========
Page 43
SCHEDULE V
TRANSAMERICA CORPORATION AND SUBSIDIARIES
_____________________
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
----------Additions----------
Balance at Charged to Charged to Balance at
beginning costs and other accounts - Deductions - end of
Description of period expenses describe describe period
(Amounts in millions)
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 21.5 $ 2.1 (B) $ 1.0 (D) $ 22.6
Real estate .................... 27.2 2.5 (B) 9.5 (E) 20.2
Finance receivables ............ 246.1 $283.5 (8.4)(C) 163.5 (F) 357.7 (H)
Other assets ................... 6.1 (3.6)(A) 0.7 (G) 1.8
______ ______ _____ ______ ______
$300.9 $279.9 $(3.8) $174.7 $402.3
====== ====== ===== ====== ======
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 23.5 $ 2.0 (D) $ 21.5
Real estate .................... 26.3 $ 2.1 (B) 1.2 (E) 27.2
Finance receivables ............ 211.8 $114.2 33.9 (C) 113.8 (F) 246.1 (H)
Other assets ................... 67.4 (20.1)(A) 21.4 (I) 62.6 (G) 6.1
______ ______ _____ ______ ______
$329.0 $ 94.1 $57.4 $179.6 $300.9
====== ====== ===== ====== ======
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for losses -
Mortgage loans on real estate .. $ 30.3 $ 0.2 (B) $ 7.0 (D) $ 23.5
Real estate .................... 40.4 2.1 (B) 16.2 (E) 26.3
Finance receivables ............ 190.4 $101.9 3.6 (C) 84.1 (F) 211.8 (H)
Other assets ................... 159.6 2.1 (1.3)(I) 93.0 (G) 67.4
______ ______ _____ ______ ______
$420.7 $104.0 $ 4.6 $200.3 $329.0
====== ====== ===== ====== ======
Page 44
<FN>
_______
(A) Reversal of excess valuation allowance no longer required due to the favorable terms on disposition of assets
held for sale. 1995 reversal is due principally to operations in Puerto Rico.
(B) Included in gains on investment transactions.
(C) Changes in connection with receivables and other adjustments.
(D) Reduction in reserves associated with the settlement of mortgage loan transactions.
(E) Reduction in reserves associated with the settlement of real estate transactions.
(F) Charges for net credit losses.
(G) Charges for losses on disposal of assets held for sale, which in 1995 includes $41.2 million related to the
disposal of rent-to-own receivables and $17.8 million related to the disposal of Puerto Rico receivables and
in 1994 includes $78.7 million related to the disposal of the rent-to-own stores.
(H) Includes $1.2 million in 1996 and 1995 and $938,000 in 1994 related to securitized, sold and serviced
receivables reported in other liabilities in the consolidated balance sheet.
(I) The increase in 1995 was primarily associated with the transfer of Puerto Rico receivables from finance
receivables. The decrease in 1994 was associated with the settlement of litigation on previously charged off
accounts.