1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] ANNUAL REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1995 Commission File No. 1-7255
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No fee required)
For the transition period from ________ to ________
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-1219710
- ------------------------------------------------------ -------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
American Heritage Life Building
1776 American Heritage Life Drive
Jacksonville, Florida 32224
- ------------------------------------------------------- -------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number - Area Code 904-992-1776
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange
- ------------------------------------------------------- ----------------------------------------------
Common Stock, Par Value $1.00 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
------------------
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 the 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 [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on February 29, 1996 was approximately $154,451,163.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 29, 1996
----- --------------------------------
Common Stock, Par value $1.00 per share 13,833,786 Shares
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference:
Document Where Incorporated
- ------------------------------------------------------- ----------------------------------------------
Annual report to shareholders
for the year ended December 31, 1995 Part II
Proxy statement dated March 22, 1996 Part III
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TABLE OF CONTENTS
ITEM DESCRIPTION PAGE
NO. NO.
1. BUSINESS 1
2. PROPERTIES 12
3. LEGAL PROCEEDINGS 12
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED 16
STOCKHOLDER MATTERS
6. SELECTED FINANCIAL DATA 16
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 16
CONDITION AND RESULTS OF OPERATIONS
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 16
ACCOUNTING AND FINANCIAL DISCLOSURE
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 27
11. EXECUTIVE COMPENSATION 27
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 27
AND MANAGEMENT
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 28
SIGNATURES 29
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PART I
ITEM 1. BUSINESS
American Heritage Life Investment Corporation, (the "Company"), a Florida
corporation founded on September 27, 1968, is a holding company whose principal
subsidiary is American Heritage Life Insurance Company ("AHL"), a Florida life
insurance company. AHL was organized on September 11, 1956 and is presently
authorized to do business as a life insurance company in all states, other than
New York, and in the District of Columbia, U.S. Virgin Islands and Puerto Rico.
The total number of employees of the Company at December 31, 1995 was 538. AHL
is engaged in the business of underwriting life and accident and health
insurance on an individual, credit and group basis. First Colonial Insurance
Company, ("FCIC"), a Florida credit property insurance company and a
wholly-owned subsidiary of AHL, was organized in 1987. Hereinafter, AHL and
FCIC are sometimes referred to as the "Insurance Companies."
The Company has reported increased operating earnings for 20 consecutive
years and has increased dividends to shareholders for 26 consecutive years. In
addition, the Company had more than $18.3 billion of gross life insurance
volume in force, and $1.318 billion of assets at December 31, 1995. Management
believes that these results were achieved by a combination of constantly
monitoring the operations and focusing on expense control. Expense control and
productivity are key ingredients in achieving the increased operating earnings.
The Company's ratio of expenses to total revenues, including premium
equivalents, (defined for this purpose as including premiums, premium
equivalents and investment income and excluding realized investment gains and
losses) has been recognized as being low based on industry averages. For the
years ended December 31, 1991 through 1995, general insurance expenses as a
percentage of total revenues, including premium equivalents, ranged from 6.2%
to 4.9%. For the years ended December 31, 1991 through 1995, operating
earnings per employee for each such year increased from $30,342 to $44,932.
There can be no assurance that the Company will continue to experience this
level of growth in the future.
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MARKETING AREAS
The Company has three primary marketing areas: ordinary, group and
credit. The following table sets forth the insurance revenues, insurance
revenues and premium equivalents and pre-tax operating earnings of the three
marketing areas for each of the years in the five year period ended December
31, 1995.
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
Insurance revenues (1):
Ordinary
Life $ 40,173 38,405 37,000 35,753 33,308
Accident and health 83,545 75,588 71,975 65,464 53,609
--------- ------- ------- ------- -------
Total ordinary 123,718 113,993 108,975 101,217 86,917
-------- ------- ------- ------- -------
Group
Life 8,604 7,719 10,350 10,832 13,865
Accident and health 31,321 35,503 42,473 48,325 59,120
-------- ------- ------- ------- -------
Total group 39,925 43,222 52,823 59,157 72,985
-------- ------- ------- ------- -------
Credit
Life 35,380 29,516 29,183 25,053 19,554
Accident and health 48,228 43,858 36,395 26,635 16,415
--------- ------- ------- ------- -------
Total credit 83,608 73,374 65,578 51,688 35,969
--------- ------- ------- ------- -------
Total $ 247,251 230,589 227,376 212,062 195,871
========= ======= ======= ======= =======
Insurance revenues and premium
equivalents (1):
Ordinary $ 167,328 161,612 149,106 138,241 148,414
Group 206,354 167,520 158,188 163,701 177,187
Credit 138,134 116,318 103,113 93,027 73,811
--------- ------- ------- ------- -------
Total $ 511,816 445,450 410,407 394,939 399,412
========= ======= ======= ======= =======
Pre-tax operating earnings:
Ordinary $ 28,935 26,049 21,798 17,322 15,826
Group 7,470 7,323 6,042 5,269 4,528
Credit 2,739 1,754 1,720 2,969 2,848
--------- ------- ------- ------- -------
Total $ 39,144 35,126 29,560 25,560 23,202
========= ======= ======= ======= =======
- ------------------------
(1) Insurance revenues include only the fees charged for interest-sensitive
and administrative services only business and do not include group and
credit premium equivalents and cash deposits from interest-sensitive
products. Thus it is necessary to evaluate insurance revenues including
premium equivalents.
Ordinary insurance revenues for reporting purposes pursuant to generally
accepted accounting principles include only the cost of insurance, expense
and surrender charges for interest-sensitive products. Revenues do not
include cash deposits from interest-sensitive products. Group and credit
insurance revenues do not include premium equivalents for the periods
presented. Group premium equivalents represent the claim costs paid for
minimum premium and self funded type plans which are paid with
policyholder funds as opposed to being paid by the Company. Under
indemnity type plans offered by the Company, claims are considered in
determining the premiums to be paid by the policyholder. For self funded
or split funded type plans, the Company pays the claim costs with
policyholder funds and such amounts are not included in the premiums paid
to the Company. Credit premium equivalents represent the claim costs paid
on administrative services only business.
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ORDINARY DEPARTMENT
GENERAL. Ordinary operations provide interest-sensitive products (universal
life, single and flexible premium deferred annuities and excess-interest whole
life), single premium immediate annuities, level and decreasing term products
and supplemental accident and health insurance products to individuals.
The largest portion (77.7% for the year ended December 31, 1995) of
new annualized sales was produced on a payroll allotment basis with the
remainder produced by a variety of direct billing methods through individual
agents. AHL's strategy in its ordinary operations is to offer a broader
product mix than its competitors in the payroll allotment area and to solicit
all of the employee base by targeting direct sales of insurance products to
higher income employees in addition to payroll allotment sales. Although the
Company knows of no independent study of the types of insurance products
offered in the industry, AHL believes it is one of the few life insurance
companies in the United States to offer a broad range of both life and accident
and health insurance products on a payroll allotment basis.
Distribution by payroll allotment requires a sophisticated data
processing capability which the Company has developed over the years. The
Company believes it has sufficient data processing capacity to accommodate
future growth for the foreseeable future without any significant additional
capital expenditures.
BACKGROUND. The Ordinary Department has been a key component of the strategy
and profit-making ability of AHL since its founding. For the year ended
December 31, 1995, the Ordinary Department accounted for approximately 74% of
the Company's pre-tax operating earnings, which excludes non-operating items
not allocated to the marketing areas.
Initially, ordinary operations consisted only of life insurance
products. In the mid-1970's, ordinary health insurance products were
introduced into the product portfolio in response to the Company's increasing
sales opportunities and successes in the payroll allotment market niche.
More recently, AHL has begun to target a complementary market to its
payroll allotment marketing efforts. This market was developed in response to
the personal life insurance needs of the owners, executives, officers, and
managers of its payroll allotment client companies. AHL has broadened its
strategic marketing mission to include this adjunct market niche in addition to
the more traditional "rank and file worker" market addressed by the other
payroll allotment marketing life insurance companies. As part of its focus,
AHL also redirected its upscale sales efforts from the more traditional
"kitchen table approach" to a strategy of making those upscale sales at the
workplace.
To describe its differentiation in the marketplace, AHL has coined a
descriptive phrase: "AHL--The Workplace Marketer(R) -- The Company that serves
the life and health insurance needs of the American Worker--from the lunchroom
to the board room."
MARKETS. Many ordinary life insurance companies focus on the upscale market
consisting of those individuals earning $80,000 or more. However, this target
market constitutes a small percentage of the buyer population. By targeting
the entire workplace, including the lower income worker earning under $40,000
per year and the middle income worker earning $40,000-$80,000 per year, AHL has
increased its market to a majority of the buyer population. Furthermore, AHL
offers a multiple product line of life and supplemental health products, rather
than the more narrow product mix offered by some other companies, thereby
increasing its marketing opportunities.
AHL believes that by targeting a much larger market and offering the
workplace market a full range of life and supplemental health products results
in a stronger marketing strategy.
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PRODUCTS. AHL's strategy is to price its products at levels competitive with
those of comparable products in the market, so long as they will provide an
acceptable profit margin. Set forth below are the primary products offered:
PAYROLL ALLOTMENT PRODUCTS: UPSCALE PRODUCTS:
Universal Life Universal Life
Interest-Sensitive Whole Life Excess Interest Whole Life
Term Life Term Life
Annuities Annuities
Cancer/Dread Disease
Accident
Disability Income
Hospital Indemnity including a
Supplemental Health Options Plan
It is the general policy of AHL to declare the interest rate to be
credited on funds received from interest-sensitive products monthly with such
rates being guaranteed for one year for both first year and renewal funds
during a particular month. All interest-sensitive products are subject to
surrender charge provisions which vary depending upon the particular type of
policy. For universal life-type policies, the surrender charges generally
range over a period of 10-20 years at varying rates, depending upon the plan of
insurance. For annuities, the surrender charges generally range over a period
of 7-10 years with charges varying from 1% to 10% of the accumulated fund value
over the surrender charge period.
All ordinary accident and health products are guaranteed renewable,
with periodic rate increases permitted due to adverse claims experience with
the approval of the respective state insurance department. Major health
products include specified disease (e.g., cancer, heart/stroke), accident,
disability income, long-term care and hospital income. Premiums on ordinary
policies are payable on a monthly, quarterly, semi-annual, annual, single or
flexible premium basis.
AHL's current practice dictates that unless the need for a medical
examination is indicated by the age and amount applied for or by an
investigation, the majority of ordinary life insurance is written without
requiring a medical examination in amounts up to $250,000 on applicants aged
0-35; up to $150,000 on applicants aged 36-40; up to $99,999 on applicants aged
41-50; up to $49,999 on applicants up to age 60. Somewhat higher limits are
permitted for certain agents with home office approval. A blood chemistry
profile is generally required for insurance amounts of $100,000 and greater.
DISTRIBUTION SYSTEM. AHL's products are marketed through the personal
producing general agent ("PPGA") system in 49 states. AHL has found the PPGA
system to be an efficient distribution system. These agents are not
exclusively AHL producers but may write business for several insurance
companies. Each PPGA's compensation is based only upon production. Although
the Company knows of no independent study of cost of sales in the ordinary
insurance industry, AHL believes that it has an efficient employee-based field
support network and that its cost of sales is relatively low by industry
standards.
AHL has 10 regional directors, 11 regional office coordinators and 17
regional sales managers located throughout the continental United States,
recruiting, training, licensing, serving, and motivating AHL's over 6,800
agents. The home office agency department is comprised of a staff of 23
people, including a senior vice president and four marketing vice presidents.
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GROUP DEPARTMENT
MARKETS. Although AHL's Group Department currently operates in 15 states, it
has clients of national scope. AHL's primary market for group life and health
insurance is corporate employers who have more than 100 employees located in
the southeast. Employer groups range in size from 100 to over 40,000
employees. The Company targets employers with 500 to 5,000 employees. AHL has
focused on an integrated approach to manage benefits. With health care being a
locally delivered product, it is important to establish close relations with
providers and client companies. AHL furnishes all components necessary to
effectively manage program costs including a provider network, managed care
program and benefits adjudication.
PRODUCTS. AHL's group products include group term life insurance, accidental
death and dismemberment, short-term disability, long-term disability, dental,
and major medical coverage. A wide range of funding vehicles, including fully
insured, split funding and self-funded products, are sold within these product
lines. For the years ended December 31, 1995 and 1994, approximately 81% and
74%, respectively, of group business (based on premiums and premiums
equivalents) was written on a self-funded or split funded basis.
DISTRIBUTION SYSTEM. AHL's group life and health products are distributed
through its regional group managers working with agents, consultants, brokers
and directly with policyholders. As health care has consumed a greater portion
of employers' operating costs, responsibility for managing the programs has
shifted from the personnel function to the financial function. Often this is
accomplished without the assistance of an agent on an ongoing basis.
Accordingly, AHL works with large corporations on a direct basis and with those
brokers who have clients in the marketplace.
AHL's strategy of focusing its marketing efforts on the brokerage and
consulting community resulted in a significant portion of sales coming from
this important business segment. AHL has been successful in demonstrating the
value of its products and services to leading brokerage firms.
ADMINISTRATIVE SERVICES ONLY VERSUS RETAINED BUSINESS. AHL's group business
has responded to the market by offering more products which allow employers to
share more of the risk for the financing of their health benefit programs.
There has been a shift in AHL's block of business from traditionally funded
products to split funded products and administrative services only products
which may be purchased with or without specific and aggregate stop-loss
coverage. The impact of this in the financial statement presentation has been
a reduction in traditional premium levels offset by an increase in premium
equivalents.
MARKET NICHE. AHL's target market will continue to be corporate employers with
100 or more lives. Particular emphasis will be placed on direct marketing to
those employers having a home office or regional presence within the
southeastern United States employing between 500 and 5,000 employees. The
products offered by AHL's Group Department complement the individual life and
health products sold on a payroll deduction basis and provide AHL agents and
brokers and AHL's client companies with a complete portfolio of products and
services.
MARKETING PLANS AHL will continue to develop products and services to meet
employer/employee needs. As managed care has gained growing acceptance within
AHL's market, AHL has decided to complement its product line with the
introduction of HMO products. Development is underway.
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CREDIT DEPARTMENT
MARKETS AND PRODUCTS. AHL is a full service credit insurance operation (credit
life and credit accident and health insurance) providing direct and reinsured
programs to a broad spectrum of the marketplace. In addition, credit related
property insurance coverage through its wholly-owned subsidiary, FCIC, is
offered. AHL has expanded its credit insurance marketing activities to include
34 of the 50 states.
Credit operations consist of life and accident and health insurance
coverages offered to consumer debtors, chiefly through banks, automobiles
dealers, finance companies and retailers. Typically, this insurance will pay
outstanding loan obligations in the event of an insured loss. This coverage is
issued on either the single-premium or outstanding loan balance basis. Credit
life is sold on a reducing or level-term basis and is available on a
single-life or, if permitted by state law, on a joint-life basis where the
related loan is co-signed. Credit accident and health insurance will normally
only be written in conjunction with credit life insurance. The maximum term is
generally 10 years for credit life insurance and five to six years for credit
accident and health insurance. The maximum issue age for credit life and
credit accident and health insurance is 71 and 66, respectively. All of the
foregoing terms and limits are subject to statutory requirements which may vary
in individual states from those specified above.
FCIC's products are designed to address the additional needs of the
clients of the Credit Department. Collateral protection coverage is marketed
to financial institutions and installment floater and vendor's single interest
coverage are marketed to consumer finance companies and retail dealers. In
addition, unemployment insurance is offered where permitted. FCIC is currently
licensed in 12 states.
The credit insurance industry is well established and is closely
controlled by state regulation. Competition is still very strong even though
there has been some retrenchment in the industry. Several companies have
restricted their marketing and several major providers have withdrawn
completely from the marketplace, which management believes has provided
significant opportunities for both new account sales and the administration of
runoff business for companies that have ceased writing credit insurance.
DISTRIBUTION SYSTEM. The distribution channels used by AHL and FCIC include
direct marketing by regional sales managers and the general agency system.
Additionally, FCIC has an assistant vice president for its credit property
insurance who works with and through the regional sales managers. AHL and FCIC
do not employ direct mail or other mass solicitation- type marketing.
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INVESTMENTS
The Company's investment objective is to earn a favorable return on
invested assets in excess of contractual obligations through a diversified
portfolio of high-quality, income-producing assets including primarily bonds,
preferred stocks, common stocks and to some extent mortgages (residential and
commercial). Our current investment strategy includes increasing our
investments in corporate bonds and mortgage loans while decreasing our
investments in GNMA's on a gradual basis. AHL carefully matches the investment
portfolio's assets with its policy liabilities. A positive investment spread
has been attained for all products. The maturity of the investment portfolio
is monitored so that the Company will be able to fund its future expected cash
obligations.
At December 31, 1995 and December 31, 1994, the Company had
consolidated invested assets of $979,602,947 and $845,729,426, respectively.
The following tabulation sets forth the categories, amounts and percentages of
these investments.
% OF % OF
DECEMBER 31, 1995 TOTAL DECEMBER 31, 1994 TOTAL
----------------- ------- ----------------- ------
Debt securities available-for-sale $515,428,786 52.6% $412,746,726 48.8%
Equity securities available-for-sale 34,734,980 3.6 52,476,038 6.2
Mortgage loans on real estate 29,506,184 3.0 20,625,877 2.5
Investment real estate 375,204 - 1,022,985 .1
Policy loans 376,672,196 38.5 351,160,060 41.5
Short-term investments 22,885,597 2.3 7,697,740 .9
------------ ----- ------------ -----
Total $979,602,947 100.0% $845,729,426 100.0%
============ ===== ============ =====
At December 31, 1995, the Company had consolidated debt securities
available-for-sale at an amortized cost of $493,813,866 and a fair value of
$515,428,786. The following tabulation sets forth these investments by
Standard and Poor's rating categories.
DECEMBER 31, 1995 DECEMBER 31, 1995
AMORTIZED FAIR
RATING COST VALUE
------------------------------- ---------------------- ----------------------
AAA $214,395,411 $215,707,562
AA 17,530,900 17,991,300
A,A- 76,580,054 82,353,400
BBB+, BBB, BBB- 117,680,946 126,089,188
BB+ and lower 29,139,831 32,817,380
Non-rated 1,884,944 1,832,600
Private placements 7,841,820 9,969,357
------------- ------------
Total bonds 465,053,906 486,760,787
Redeemable preferred stocks 28,759,960 28,667,999
------------- ------------
Total debt securities
available-for-sale $ 493,813,866 $515,428,786
============= ============
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The amortized cost and estimated fair value of debt securities at
December 31, 1995, by contractual maturity, were as follows. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or repay obligations with or without penalties.
DECEMBER 31, 1995
----------------------------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
Due in one year or less $ 5,616,792 $ 5,729,284
Due after one year through five years 7,610,743 8,433,999
Due after five years through ten years 135,888,071 146,812,594
Due after ten years 119,447,770 129,429,412
GNMA's 196,490,530 196,355,498
Redeemable preferred stocks 28,759,960 28,667,999
------------ ------------
Total $493,813,866 $515,428,786
============ ============
The following tabulation provides information with respect to the
investment results of the Company for the years ended December 31, 1995, 1994
and 1993:
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
---------- ---------- ----------
($ in thousands)
Average invested assets, weighted (1) $923,946 $848,012 $800,974
Net investment income 70,601 66,706 63,875
Realized investment gains 6,003 2,011 1,184
Change in unrealized investment
gains (losses) on equity
and debt securities (2) 27,664 (24,919) (11,263)
Ratio of net investment income
to weighted average invested
assets (3) 7.64% 7.87% 7.97%
- --------------------
(1) Average invested assets for 1995 and 1994 are calculated using fair values
for all securities as required by Financial Accounting Standard No. 115
(FAS 115), "Accounting for Certain Investments in Debt and Equity
Securities." In 1993 equity securities were carried at fair value and debt
securities were carried at cost.
(2) The change in unrealized investment gains (losses) includes gains and
losses on equity securities only in 1993. In 1995 and 1994, unrealized
gains and losses are calculated on both equity and debt securities as
prescribed by FAS 115.
(3) Since equity securities are carried at fair values for all years presented,
and debt securities are reported at fair value for 1995 and 1994, all
increases (decreases) in fair value result in a reduction (increase) of the
ratio calculated above.
At December 31, 1995, U.S. Treasury obligations and GNMA's, both of
which are secured by the full faith and credit of the United States Government,
aggregated at fair value $203,177,693 or 40.0% of the total bond portfolio of
$508,285,787 (including short-term bonds of $21,525,000). The amortized cost
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of non-investment grade bonds (rated below BBB- by Standard & Poor's
Corporation and excluding private placements and non-rated securities) at
December 31, 1995 was $30,152,831 with a fair value of $32,817,380. At fair
value, these investments represented 2.5% of total consolidated assets, or 3.4%
of invested assets. The Company's holdings of non- investment grade paper has
been limited and will continue to be minimal in the future.
The Company's mortgage loan portfolio aggregated $29,506,184 at
December 31, 1995. There were no non-performing mortgage loans at December
31, 1995. The Company holds no collateralized mortgage obligations or
derivative securities.
ADDITIONAL INFORMATION REGARDING INSURANCE OPERATIONS
The following table sets forth the cash premiums and deposits received
(in thousands) by geographic region in the United States for the Insurance
Companies for the three years ended December 31, 1995:
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993
-------- -------- --------
Southeast $258,408 $252,531 $225,220
Southwest 43,804 41,863 45,478
Midwest 14,185 13,007 17,704
Northeast 8,220 6,934 9,897
Northwest 12,523 8,586 5,300
-------- -------- --------
Total $337,140 $322,921 $303,599
======== ======== ========
The following tabulation sets forth the amount of gross life insurance
volume in force by industry segment at December 31, 1995, 1994, and 1993:
AT DECEMBER 31,
------------------------------------------------------
TYPE OF INSURANCE 1995 1994 1993
------------------------------ ---------- ---------- ----------
($ in millions)
Gross life insurance volume in force:
Ordinary $ 9,167 $ 8,282 $ 7,727
Credit 4,138 3,578 2,972
Group 5,079 4,956 4,902
------- ------- -------
Total $18,384 $16,816 $15,601
======= ======= =======
REINSURANCE
It is the general practice of the life insurance industry to reinsure
portions of life and accident and health insurance risks with other companies.
The maximum amount of ordinary insurance which AHL generally retains on any one
life currently insured under ordinary policies is $100,000 for policies issued
prior to July 1, 1994 and $200,000 for policies issued subsequent to July 1,
1994, with reductions for certain substandard, military and older age risks.
The major portion of reinsurance ceded on a GAAP basis is under agreements with
American United Life Insurance Company, Barnett Banks Insurance, Inc., General
Financial Life Insurance Company, Life Reassurance Corporation, Lincoln
National Life Insurance Company, Reassurance Company of Hanover, Reinsurance
Group of America, Inc., Southwestern Dealers Insurance Company and Transamerica
Occidental Life Insurance Company. At December 31, 1995, the
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aggregate amount of life insurance volume in force ceded under reinsurance
agreements totaled $3,836,741,000 (20.9% of the total in force at that date).
For the year ended December 31, 1995, $41,507,117, or 20.3% of the total
accident and health insurance premiums written, were reinsured.
Pursuant to GAAP and the terms and conditions of the reinsurance
agreements with the reinsurers which provide for an effective transfer of risk
to the reinsurer, the Company has taken credit in its consolidated financial
statements for the portion ceded to the respective reinsurer.
Management reviews the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar geographic regions,
activities or economic characteristics of the reinsurers to minimize its
exposure to significant losses from reinsurer insolvencies. All receivables
due from the reinsurers have been settled in a timely manner.
GOVERNMENT REGULATION
The Company and its insurance subsidiaries are subject to regulation
and supervision by the states in which the insurance subsidiaries transact
business. The laws of the various states establish regulatory agencies with
broad administrative powers to grant and revoke licenses to transact business,
regulate rates on certain business prior to use, establish reserve
requirements, determine the form and content of required statutory financial
statements, determine the reasonableness and adequacy of statutory capital and
surplus and prescribe the types of permitted investments and the maximum
concentrations of certain classes of investments. As part of their routine
regulatory oversight process, approximately once every three years state
insurance departments conduct periodic detailed examinations of the books,
records and accounts of insurance companies domiciled in their states.
Further, insurance companies are subject to market conduct examinations by
state insurance regulators. Such examinations are not conducted according to
any fixed schedule.
Insurance companies are required to file detailed annual and quarterly
statements with the state insurance regulators in each of the states in which
they do business, and their business and accounts are subject to examination by
such agencies at any time. State insurance receivership laws, rather than
federal bankruptcy laws, govern the liquidation or rehabilitation of insurance
companies.
This insurance regulation and supervision is designed primarily to
ensure the financial stability of insurance companies and to protect
policyholders rather than shareholders or general creditors.
FINANCIAL REGULATION
The Risk-Based Capital for Life and/or Health Insurers Model Act (the
"Model Act") was adopted by the National Association of Insurance Commissioners
("NAIC") in 1992. A similar model act was adopted for property and casualty
insurance companies in 1994. The main purpose of these model acts is to
provide a tool for insurance regulators to evaluate the capital of insurers
with respect to the risks assumed by them and determine whether there is a need
for possible corrective action.
These model acts provide for four different levels of regulatory
action, each of which may be triggered if an insurer's Total Adjusted Capital
is less than a corresponding "level" of Risk Based Capital ("RBC"). A modified
phase-in test is triggered if an insurer's Total Adjusted Capital is less than
200% of its "Authorized Control Level RBC" (as defined in the Model Act), or
less than 250% of its Authorized Control Level RBC and the insurer has a
negative trend ("the Company Action Level"). At the Company Action Level, the
insurer must submit a comprehensive plan to the regulatory authority which
discusses proposed corrective actions to improve its capital position. The
"Regulatory Action Level" is triggered if an insurer's Total Adjusted Capital
is less than 150% of its Authorized Control Level RBC. At the
10
13
Regulatory Action Level, the regulatory authority will perform a special
examination of the insurer and issue an order specifying corrective actions
that must be followed. The "Authorized Control Level" is triggered if an
insurer's Total Adjusted Capital is less than 100% of its Authorized Control
Level RBC, and at that level the regulatory authority is authorized (although
not mandated) to take regulatory control of the insurer. The "Mandatory
Control Level" is triggered if an insurer's Total Adjusted Capital is less than
70% of its Authorized Control Level RBC, and at that level the regulatory
authority must take regulatory control of the insurer. Regulatory control may
lead to rehabilitation or liquidation of an insurer.
Based on calculations using the NAIC formula as of December 31, 1995,
AHL and FCIC exceeded the required level for RBC at such time.
DIVIDEND REGULATION
The Company is a legal entity separate and distinct from its
subsidiaries. As a holding company with no other significant business
operations, its primary sources of cash to meet its obligations are borrowings,
dividends and other payments from its insurance subsidiaries.
The Company's insurance subsidiaries are subject to various regulatory
restrictions on the maximum amount of payments, including dividends and other
distributions, that they may make to the Company without obtaining prior
regulatory approval. As a Florida domiciled insurance company, AHL is subject
to Florida law, effective June 8, 1993, to the effect that life and health
insurance company dividends may be made without prior Florida Insurance
Commissioner's approval if the dividend is equal to or less than the greater
of: (a) 10% of AHL's surplus as to policyholders derived from realized net
operating profits on its business and net realized capital gains; or (b) AHL's
entire net operating profits and realized net capital gains derived during the
immediately preceding calendar year, if AHL will have surplus as to
policyholders equal to or exceeding 115% of the minimum required statutory
surplus as to policyholders after the dividend is paid.
If insurance regulators determine that payment of a dividend or any
other payment to an affiliate (such as a payment under a tax allocation
agreement or for employee or other services or pursuant to a surplus debenture)
would, because of the financial condition of the paying insurance company or
otherwise, be hazardous to such insurance company's policyholders or creditors
or to certain other parties, the regulators may block payment of such dividends
or such other payment to the affiliates that would otherwise be permitted
without prior approval.
CHANGE OF CONTROL REGULATION
The states in which the Company's insurance subsidiaries are domiciled
have enacted legislation or adopted administrative regulations affecting the
acquisition of control of insurance companies as well as transactions between
insurance companies and persons controlling them. Most states require
administrative approval of the acquisition of control of an insurance company
incorporated in the state or the acquisition of control of an insurance holding
company whose insurance subsidiary is incorporated in the state. In Florida,
the acquisition of 5% of such shares is generally deemed to be the acquisition
of "control" for the purpose of the holding company statutes and requires not
only filing of detailed information concerning the acquiring parties and the
plan of acquisition, but also administrative approval prior to the acquisition.
11
14
COMPETITION
The life insurance industry is highly competitive. The competitors of
the Company consist of both stock and mutual companies, and in many instances
they have been in business for longer periods of time and may have greater
financial resources than the Company. However, management of the Company
believes that its policies are generally competitive with similar types of
policies being offered by other insurers doing business in the jurisdictions in
which they operate.
In addition to the more than 1,800 life insurance companies which are
competitors of the Company, there are banks and other financial institutions
that could be permitted to sell life insurance products directly, thereby
increasing competition even more. However, there are a number of unresolved
regulatory issues related to the authority of banks located in the Company's
major marketing areas to compete directly with the Company in the sale of life
insurance products, including interest-sensitive products.
OTHER BUSINESS
The non-life insurance operations, excluding AHLIC, consisted
primarily of intercompany operations which are eliminated in consolidation and
accordingly did not contribute materially to consolidated operating earnings.
ITEM 2. PROPERTIES
AHL and its subsidiaries own 29.77 acres in a suburban area of
Jacksonville, Florida, upon which it completed construction in August, 1994 of
an eight story home office building containing approximately 140,000 square
feet and a two story annex building of approximately 20,000 square feet. AHL
and its affiliates relocated to this new home office building effective August
29, 1994.
AHL also owns a 92 space parking lot in downtown Jacksonville, Florida
and one parcel of vacant land located in suburban Jacksonville, consisting of
approximately 32 acres.
ITEM 3. LEGAL PROCEEDINGS
AHL, like other insurance companies, is currently a defendant in
lawsuits that involve claims for punitive, exemplary or other extra contractual
damages, which are for amounts substantially in excess of the actual damages
sought. Management considers such litigation regrettably to be of the type to
which insurance companies are usually and customarily subjected in the ordinary
course of business and to date the settlements of such claims of this nature
have not been material to the financial position of the Company. In the
opinion of management, based on the currently ascertained facts of the pending
litigation, which the Company intends to vigorously defend, the ultimate
resolution of such litigation should not be material to the financial position
of the Company.
12
15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1995.
EXECUTIVE OFFICERS OF REGISTRANT
The following tabulation is a list of the names and ages as well as
the position held for the past five years by each executive officer of the
Company and certain executive officers of AHL, none of whom is related to each
other either by blood or marriage.
NAME AGE POSITION
---- --- --------
T. O'Neal Douglas 60 Chairman of the Board, President and Chief Executive Officer (a)
Chairman and Chief Executive Officer (b)
Chris A. Verlander 48 Executive Vice President (a)
President (b)
C. Richard Morehead 49 Executive Vice-President, Treasurer and Chief Financial Officer (a) (b)
Chief Accounting Officer (a)
Charles C. Baggs 45 Senior Vice-President, Administration (b)
James H. Baum 44 Senior Vice-President Group Department (b)
David A. Bird 39 Senior Vice-President Agency Department (b)
W. Michael Heekin 43 Senior Vice-President, General Counsel and Corporate Secretary (a) (b)
Elizabeth A. Mahin 35 Senior Vice-President and Chief Accounting Officer (b)
William J Thomas 51 Senior Vice-President Credit Department (b)
Curtiss S. Sheldon 54 Senior Vice-President and Chief Actuary (b)
(a) AHLIC (b) AHL
Mr. Douglas' principal positions are those of: Chairman of the Board
of Directors of the Company, a position he has held since April, 1994;
President and Chief Executive Officer of the Company, a position he has held
since February, 1990; Director of the Company, a position he has held since
July, 1987; Director of AHL, a position he has held since January, 1984; Chief
Executive Officer of AHL, a position he has held since February, 1990; and
Chairman of AHL, a position he has held since April, 1994. From July, 1986 to
April, 1994 he was President of AHL. From July, 1986 to February, 1990, he was
Executive Vice President of the Company. From April, 1985 to July, 1986 he was
Executive Vice President of AHL. From December, 1983 to April, 1985, he was
Senior Vice President of AHL.
13
16
Mr. Chris A. Verlander's principal positions are those of: Executive
Vice President of the Company, which he has held since April, 1990; Director of
the Company, a position he has held since July, 1987; Director of AHL which he
has held since April, 1985 and President of AHL, which he has held since April,
1994. Prior to April, 1994 and since April, 1990 he was Executive Vice
President of AHL. Prior to April, 1994 and since September, 1985, he was
Corporate Secretary of the Company and AHL. Prior to April, 1990 and since
1984, he was Senior Vice President of the Company and AHL. Prior to 1984 and
since 1979, he was Vice President of AHL.
Mr. Morehead's principal positions are those of Executive Vice
President of the Company and AHL, which he has held since April, 1994,
Treasurer and Chief Financial Officer and Chief Accounting Officer of the
Company and Chief Financial Officer of AHL, which he has held since July, 1986
and Director of AHL, which he has held since July, 1990. Prior to April, 1994
and since July, 1986, he was Senior Vice President of the Company and AHL.
Prior to July, 1986 and since 1983, he was a partner in the accounting firm of
Peat, Marwick, Mitchell & Co. (now KPMG Peat Marwick LLP) and had been
affiliated with that firm since 1976.
Mr. Bagg's principal position is that of Senior Vice President of AHL,
a position he has held since December, 1990. Prior to December, 1990 and since
November, 1988 he was Vice President of AHL. Prior to November, 1988 and since
May, 1987 he was Assistant Vice President of AHL. From February, 1985 until
May, 1987 he was employed by AHL in a non-officer capacity.
Mr. Baum's principal position is that of Senior Vice President, Group
Department, of AHL, which position he has held since September, 1987. Prior to
September, 1987 and since December, 1986, he was Vice President and Group
Actuary of AHL.
Mr. Bird's principal position is that of Senior Vice President, Agency
Department of AHL, which he has held since May, 1994. Prior to May, 1994 and
since January, 1994 he was Vice-President of AHL. Prior to 1994 and since
1987, he was a Regional Director of AHL.
Mr. Heekin's principal positions are those of Senior Vice President,
Corporate Secretary and General Counsel of the Company, which he has held since
April, 1994; Senior Vice President and General Counsel of AHL, which he has
held since March, 1993; and Corporate Secretary of AHL, which he has held since
April, 1994. Prior to March, 1993 and since August, 1991, he was engaged by
the Florida State Insurance Department as the Deputy Receiver of Guarantee
Security Life Insurance Company in Receivership in Jacksonville, Florida.
Prior to August, 1991 and since July, 1991, he was engaged by the Florida State
Insurance Department as the Deputy Supervisor of Guarantee Security Life
Insurance Company. Prior to July, 1991 and since October, 1988, Mr. Heekin was
Associate Dean of Florida State University College of Law in Tallahassee,
Florida.
Ms. Mahin's principal position is that of Senior Vice President and
Chief Accounting Officer of AHL, which she has held since April, 1994. Prior
to April, 1994 and since August, 1990 she was Vice President and Controller of
AHL. Prior to August, 1990 and since April, 1989 she was Assistant Vice
President and Assistant Controller of AHL. From July, 1988 until April, 1989
she was employed by AHL in a non-officer capacity.
Mr. Thomas' principal position is that of Senior Vice President of
AHL, a position he has held since July, 1995. Prior to July, 1995 and since
April, 1990, he was Vice President of AHL. Prior to April, 1990 and since May,
1987, he was Assistant Vice President of AHL. From December, 1986 until May,
1987, he was employed by AHL in a non-officer capacity.
Mr. Sheldon's principal position is that of Senior Vice President and
Chief Actuary of AHL, which he has held since August, 1993. Prior to August,
1993 and since June, 1978 he was with Southern Farm Bureau Life Insurance
Company, serving as vice president and chief actuary since February, 1987.
14
17
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers to file with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of the Shares. Executive
officers and directors are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its executive officers and
directors were complied with, except for two Form 4 reports reflecting an
indirect interest in 4,030 shares acquired in April, 1995, by two trusts of
which Mr. A. Dano Davis is a trustee. Such transaction was reported on the
trust's Form 4s for June, 1995.
15
18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
See the Section entitled "Quarterly Stock Prices and Dividends" on
page 29 of the Registrant's 1995 Annual Report to Shareholders, which is
enclosed, which section is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
See "Selected Financial Data" on page 17 of this document.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See "Management's Discussion and Analysis" commencing on page 13 of
the Registrant's 1995 Annual Report to Shareholders which is enclosed, which
discussion and analysis is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Consolidated Statements of Earnings," "Consolidated Balance
Sheets," "Consolidated Statements of Stockholders' Equity," "Consolidated
Statements of Cash Flows," "Notes to Consolidated Financial Statements,"
"Independent Auditors' Report" and "Quarterly Financial Data," on pages 17
through 29 of the Registrant's 1995 Annual Report to Shareholders which is
enclosed, which statements and data are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
16
19
SELECTED FINANCIAL DATA
CONSOLIDATED SUMMARY OF EARNINGS
(In thousands except per share amounts and number of shares)
YEARS ENDED DECEMBER 31 1995 1994 1993 1992 1991
- ----------------------- ------------- ------------- ------------ ------------ -------------
Income:
Insurance revenues $ 247,251 230,589 227,376 212,062 195,871
Net investment income 70,601 66,706 63,875 59,721 54,535
Realized investment gains, net 6,003 2,011 1,184 237 89
------------- ------------ ------------ ------------ -----------
Total income 323,855 299,306 292,435 272,020 250,495
------------- ------------ ------------ ------------ -----------
Benefits, claims and expenses:
Benefits and claims 148,581 146,146 159,335 155,722 147,706
Underwriting, acquisitions and
insurance expenses:
Taxes, commissions and general expenses 106,399 95,326 82,298 71,012 64,953
Amortization of deferred acquisition costs 23,744 20,758 20,091 19,450 14,601
Other operating expenses 3,694 2,413 1,806 1,685 1,211
------------- ------------ ------------ ------------ -----------
Total benefits claims and expenses 282,418 264,643 263,530 247,869 228,471
------------- ------------ ------------ ------------ -----------
Earnings before income taxes 41,437 34,663 28,905 24,151 22,024
Income taxes 13,362 11,022 9,190 7,255 6,946
------------- ------------ ------------ ------------ -----------
Net earnings $ 28,075 23,641 19,715 16,896 15,978
------------- ------------ ------------ ------------ -----------
Net earnings per share of common stock $ 2.02 $ 1.71(2) 1.59(2) 1.42 1.27
------------- ------------ ------------ ------------ -----------
Weighted average number of shares outstanding 13,882,041 13,855,297 12,399,070 11,902,790 11,860,313
------------- ------------ ------------ ------------ -----------
Cash Dividends Declared Per Share(1) $ .65 $ .70 .59 .56 .53
------------- ------------ ------------ ------------ -----------
At December 31:
Total Assets $ 1,317,896 $ 1,179,257 1,138,578 1,016,984 892,595
------------- ------------ ------------ ------------ -----------
Notes Payable to Banks, Long-Term $ 20,000 20,000 - 50,000 -
------------- ------------ ------------ ------------ -----------
(1) 1994 includes $.055 dividend declared December 30, 1994, paid February 24,
1995 to shareholders of record February 13, 1995.
(2) As a result of the 1,872,045 additional shares outstanding from the public
stock offering completed in October, 1993, net earnings per share of
common stock were diluted for the years ended December 31, 1993 and
subsequent.
17
20
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
AND SUBSIDIARIES
Page
(1) Financial Statements Number
------
Independent Auditors' Report - Years ended December 31,
1995, 1994 and 1993 *
Consolidated Statements of Earnings, Years ended
December 31, 1995, 1994 and 1993 *
Consolidated Balance Sheets, December 31, 1995 and 1994 *
Consolidated Statements of Stockholders' Equity, Years
ended December 31, 1995, 1994 and 1993 *
Consolidated Statements of Cash Flows, Years ended
December 31, 1995, 1994 and 1993 *
Notes to Consolidated Financial Statements, Years ended
December 31, 1995, 1994 and 1993 *
(2) Financial Statement Schedules:
Independent Auditors' Report 19
I. - Summary of Investments - Other than Investments
in Related Parties, December 31, 1995 20
III. - Condensed Financial Information of Registrant 21
V. - Supplementary Insurance Information, Years ended
December 31, 1995, 1994 and 1993 25
VI. - Reinsurance, Years ended December 31, 1995, 1994
and 1993 26
All other schedules are omitted as the required information is inapplicable or
presented in the consolidated financial statements or related notes.
*Incorporated by reference.
18
21
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
American Heritage Life Investment Corporation:
Under date of January 29, 1996, we reported on the consolidated balance sheets
of American Heritage Life Investment Corporation and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995, as contained in the 1995 annual
report to stockholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for the
year 1995. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedules listed in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
As discussed in note 1 to the aforementioned consolidated financial statements,
during the year ended December 31, 1994, the Company adopted the provisions of
the Financial Standard Board's Statement of Financial Accounting Standard No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
KPMG PEAT MARWICK LLP
Jacksonville, Florida
January 29, 1996
19
22
SCHEDULE I
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1995
AMOUNT AT
WHICH SHOWN
FAIR IN THE
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- -------------------------------------- ------------- ------------ -------------
Debt securities available-for sale:
Bonds:
United States Government and
government agencies and
authorities $ 210,422,603 $211,617,564 $211,617,564
States, municipalities and
political subdivisions 345,000 372,600 372,600
Public utilities 33,173,518 34,033,555 34,033,555
Convertibles and bonds with
warrants attached 2,736,309 2,763,000 2,763,000
All other corporate 218,376,476 237,974,068 237,974,068
Redeemable preferred stock 28,759,960 28,667,999 28,667,999
------------- ------------ ------------
Total debt securities 493,813,866 $515,428,786 515,428,786
------------- ============ ------------
Equity securities available-for-sale:
Common stocks:
Public utilities 489,945 720,000 720,000
Banks, trust and insurance
companies 3,192,880 5,413,193 5,413,193
Industrial, miscellaneous and
all other 19,526,233 28,601,787 28,601,787
------------- ------------ ------------
Total equity securities 23,209,058 $ 34,734,980 34,734,980
------------- ============ ------------
Mortgage loans on real estate 29,506,184 29,506,184
Real estate 375,204 375,204
Policy loans 376,672,196 376,672,196
Short-term investments 22,885,597 22,885,597
------------- ------------
Total investments $ 946,462,105 $979,602,947
============= ============
See Footnote 1(c) to the Consolidated Financial Statements on page 22 of the
Annual Report to Shareholders which sets forth the accounting policies related
to investments.
20
23
SCHEDULE III
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
The following condensed balance sheets of American Heritage Life Investment
Corporation ("Registrant") as of December 31, 1995 and 1994 and its condensed
statements of earnings and cash flows for the years ended December 31, 1995,
1994 and 1993 should be read in conjunction with the notes to consolidated
financial statements included elsewhere in this report. Since the Registrant's
condensed statements of changes in stockholders' equity for the years ended
December 31, 1995, 1994 and 1993 are identical to the consolidated statements
of changes in stockholders' equity included elsewhere in this report, such
statements are not repeated in this schedule.
On December 27, 1995, a dividend of $13,245,264 related to American Heritage
Life Insurance Company's (AHL's) earnings in 1994, was paid from AHL to the
Registrant. In the years 1994 and 1993, no dividends were paid to the
Registrant by AHL.
21
24
SCHEDULE III, CONTINUED
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(REGISTRANT)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
- ------ ------------ ------------
Cash $ 46,174 $ 34,220
Certificate of deposit 100,000 100,000
Investment in life insurance
subsidiaries, at equity 249,370,749 204,265,884
Investment in non-life insurance
subsidiaries, at equity 4,454,226 4,433,485
Accounts receivable 11,449,111 460,999
Intercompany accounts 756,600 0
Other assets 9,485,563 10,732,903
------------ ------------
$275,662,423 $220,027,491
============ ============
Liabilities and Stockholders's Equity
- -------------------------------------
Liabilities:
Notes payable to banks $ 54,994,000 $ 44,200,000
Other liabilities 1,339,193 2,254,845
Intercompany accounts 0 213,031
------------ ------------
Total liabilities 56,333,193 46,667,876
------------ ------------
Stockholders' equity:
Common stock of $1.00 par value.
Authorized 20,000,000 shares in 1995 and 1994;
issued 13,933,206 in 1995 and 13,905,794 in 1994 13,933,206 13,905,794
Preferred stock:
Convertible of $10.00 par value.
Authorized 500,000 shares; none issued 0 0
Non-convertible of $10.00 par value.
Authorized 500,000 shares; none issued 0 0
Additional paid-in capital 42,214,787 41,866,379
Retained earnings 148,454,353 129,406,469
Unrealized investment gains (losses) 16,772,078 (10,892,295)
------------ ------------
221,374,424 174,286,347
Less cost of 97,277 in 1995 and 45,954
in 1994 common shares in treasury 2,045,194 926,732
------------ ------------
Total stockholders' equity 219,329,230 173,359,615
------------ ------------
$275,662,423 $220,027,491
============ ============
22
25
SCHEDULE III, CONTINUED
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(REGISTRANT)
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
-------------- -------------- --------------
Income:
Investment income $ 62,678 14,120 28,788
Other income 304,200 307,111 304,200
Realized loss - - (78,003)
------------ ----------- -----------
Total income 366,878 321,231 254,985
Operating expenses 3,719,580 2,429,137 1,857,680
------------ ----------- -----------
Loss before income tax benefits (3,352,702) (2,107,906) (1,602,695)
Income tax benefits (1,203,700) (780,500) (596,400)
------------ ----------- -----------
Loss before equity in earnings (loss)
of subsidiaries (2,149,002) (1,327,406) (1,006,295)
Equity in net earnings of life insurance
subsidiaries 30,565,760 25,320,502 21,003,611
Equity in net losses of non-life
insurance subsidiaries (341,372) (352,194) (282,687)
------------ ----------- -----------
Net earnings $ 28,075,386 23,640,902 19,714,629
============ =========== ===========
23
26
SCHEDULE III, CONTINUED
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(REGISTRANT)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
--------------- -------------- --------------
Operating activities:
Net earnings $ 28,075,386 23,640,902 19,714,629
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Change in accounts receivable (10,988,112) (138,117) (310,434)
Change in other assets 1,247,340 (1,270,691) (1,166,096)
Change in other liabilities (915,652) 1,082,606 (1,351,669)
Equity in net earnings of life
insurance subsidiaries (30,565,760) (25,320,502) (21,003,611)
Equity in net loss of non-life
insurance subsidiaries 341,372 352,194 282,687
Other 0 0 239,856
--------------- -------------- --------------
Net cash used from operating
activities (12,805,426) (1,653,608) (3,594,638)
--------------- -------------- --------------
Financing activities:
Dividends from subsidiaries 13,245,264 0 0
Capital contribution to subsidiary (120,000) (240,000) 0
Increase (decrease) in notes payable
to banks 10,794,000 11,720,000 10,379,000
Change in intercompany accounts (969,631) (170,635) (443,417)
Dividends to stockholders (9,389,613) (10,061,465) (7,770,638)
Purchase of treasury stock (1,118,462) (2,229) (317,596)
Excess over par value on shares issued 402,718 405,830 1,689,488
Other, net (26,896) 3,321 61,361
--------------- -------------- --------------
Net cash provided by
financing activities 12,817,380 1,654,822 3,598,198
--------------- -------------- --------------
Increase (decrease) in cash 11,954 1,214 3,560
Cash at beginning of year 34,220 33,006 29,446
--------------- -------------- --------------
Cash at end of year $ 46,174 34,220 33,006
=============== ============== ==============
24
27
SCHEDULE V
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
SUPPLEMENTARY INSURANCE INFORMATION
INDUSTRY SEGMENT DEFERRED FUTURE POLICYHOLDERS' POLICY AND
- ---------------------------- ACQUISITION POLICY ACCOUNT UNEARNED CONTRACT
Year ended December 31, 1995 COSTS BENEFITS BALANCES PREMIUMS CLAIMS
- ---------------------------- --------- ------------ ----------- ---------- ------------
Ordinary $158,250,346 195,859,984 629,589,633 3,360,538 9,537,431
Group 0 9,227,751 6,080,433 0 31,380,088
Credit 0 0 0 49,956,614 9,457,926
Other 0 0 0 0 (309,722)
------------ ----------- ------------ ---------- ----------
$158,250,346 205,087,735 635,670,066 53,317,152 50,375,445
============ =========== =========== ========== ==========
Year ended December 31, 1994
- ----------------------------
Ordinary $162,867,773 183,043,220 570,024,695 1,677,180 8,198,767
Group 0 9,468,534 6,511,065 0 36,376,975
Credit 0 0 0 49,927,086 8,733,157
Other 0 0 0 0 (215,082)
------------ ----------- ------------ ---------- ----------
$162,867,773 192,511,754 576,535,760 51,604,266 53,308,899
============ =========== =========== ========== ==========
Year ended December 31, 1993
- ----------------------------
Ordinary $146,332,710 175,251,348 525,186,003 1,698,586 8,800,490
Group 0 9,092,255 6,105,984 0 39,978,241
Credit 0 0 0 45,179,106 7,635,993
Other 0 0 0 0 (175,626)
------------ ----------- ------------ ---------- ----------
$146,332,710 184,343,603 531,291,987 46,877,692 56,414,724
============ =========== =========== ========== ==========
AMORTIZATION TAXES,
INDUSTRY SEGMENT NET BENEFITS OF DEFERRED COMMISSIONS
- ---------------------------- INSURANCE INVESTMENT AND ACQUISITION AND GENERAL
Year ended December 31, 1995 REVENUES INCOME(A) CLAIMS COSTS EXPENSES (B)
- ---------------------------- --------- ------------ ----------- -------------- -------------
Ordinary 123,718,289 61,559,101 103,183,528 23,744,359 29,414,331
Group 39,924,809 5,356,427 25,595,022 0 12,216,464
Credit 83,608,031 4,011,351 19,801,846 0 65,077,894
Other 0 (325,514) 0 0 (309,722)
----------- ---------- ----------- ---------- -----------
247,251,129 70,601,365 148,580,396 23,744,359 106,398,967
=========== ========== =========== ========== ===========
Year ended December 31, 1994
- ----------------------------
Ordinary 113,993,333 57,477,827 95,637,818 20,757,868 29,026,850
Group 43,221,583 5,657,542 29,093,520 0 12,462,165
Credit 73,373,760 3,846,885 21,414,613 0 54,052,460
Other 0 (275,761) 0 0 (215,082)
----------- ---------- ----------- ---------- -----------
230,588,676 66,706,493 146,145,951 20,757,868 95,326,393
=========== ========== =========== ========== ===========
Year ended December 31, 1993
- ----------------------------
Ordinary 108,974,989 55,724,809 94,240,229 20,090,573 28,571,495
Group 52,822,594 4,979,433 39,503,583 0 12,256,743
Credit 65,578,092 3,379,675 25,591,565 0 41,645,832
Other 0 (209,141) 0 0 (175,626)
----------- ---------- ----------- ---------- -----------
227,375,675 63,874,776 159,335,377 20,090,573 82,298,444
=========== ========== =========== ========== ===========
(a) Allocated to the industry segment based on required liabilities for future
policy benefits.
(b) Allocated on functional cost basis unless specifically identifiable with
industry segment.
(c) Includes only cost of insurance, expense and surrender charges for
interest-sensitive products. Insurance revenues do not include group and
credit premium equivalents and cash deposits from interest-sensitive
products.
25
28
SCHEDULE VI
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
REINSURANCE
(IN THOUSANDS OF DOLLARS)
CEDED TO ASSUMED PERCENTAGE
GROSS OTHER FROM OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNTS ASSUMED TO NET
------------ --------- --------- ----------- --------------
Year Ended December 31, 1995
- ----------------------------
Life insurance volume in force $ 15,016,456 3,836,741 3,367,550 14,547,265 23.1%
============ ========== ========== =========== =====
Insurance revenues(a):
Ordinary $ 119,182 5,756 10,292 123,718 8.3%
Group 44,602 6,989 2,312 39,925 5.8%
Credit 168,677 85,081 12 83,608 .1%
------------ ---------- ---------- ----------- -----
Total $ 332,461 97,826 12,616 247,251 5.1%
============ ========== ========== =========== =====
Year Ended December 31, 1994
- ----------------------------
Life insurance volume in force $13,818,345 3,284,122 2,997,321 13,531,544 22.2%
=========== ========== ========== =========== =====
Insurance revenues(a):
Ordinary $ 120,009 6,016 0 113,993 -
Group 51,534 8,502 190 43,222 .4%
Credit 129,880 59,475 2,969 73,374 4.0%
------------ ---------- ---------- ----------- -----
Total $ 301,423 73,993 3,159 230,589 1.4%
============ ========== ========== =========== =====
Year Ended December 31, 1993
- ----------------------------
Life insurance volume in force $12,543,890 2,898,107 3,057,223 12,703,006 24.1%
=========== ========== ========== =========== =====
Insurance revenues(a):
Ordinary $ 114,646 5,671 0 108,975 -
Group 57,766 8,033 3,090 52,823 5.8%
Credit 113,301 47,723 0 65,578 -
------------ ---------- ---------- ----------- -----
Total $ 285,713 61,427 3,090 227,376 1.4%
============ ========== ========== =========== =====
(a) Includes both life and accident and health premiums and commission and
expense allowances on reinsurance ceded.
26
29
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the section entitled "Election of Directors" on page 1 of the
Registrant's Proxy Statement dated March 22, 1996 which section is incorporated
herein by reference.
See the section entitled "Executive Officers of Registrant" on page
13, Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
See the section entitled "Executive Compensation and Other
Transactions with Management" beginning on page 6 of the Registrant's Proxy
Statement dated March 22, 1996, which section is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the sections entitled "Election of Directors" and "Principal
Shareholders" which commence on pages 1 and 22, respectively, of the
Registrant's Proxy Statement dated March 22, 1996, which sections are
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the section entitled "Executive Compensation and Other
Transactions with Management" beginning on page 6 of the Registrant's Proxy
Statement dated March 22, 1996, which section is incorporated herein by
reference.
27
30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed with this report
(1) Financial Statements
See "Index to Financial Statements and Schedules" on page 16,
Part II of this report.
(2) Schedules
See "Index to Financial Statements and Schedules" on page 16,
Part II of this report.
(3) Exhibits
Number Description
------ -----------
3(a) Amended and Restated Articles of Incorporation of
American Heritage Life Investment Corporation dated
February 9, 1995. Incorporated by reference to
Exhibit 3(a) of the Form 10-K filed by Registrant for
the period ended December 31, 1994 (File No. 1-7255).
(b) By-Laws of American Heritage Life Investment
Corporation as amended and restated, dated April 28,
1994. Incorporated by reference to Exhibit 3 of a
Form 8-K, dated April 29, 1994 (File No. 1-7255).
4 Common Stock Certificate of American Heritage Life
Investment Corporation. Incorporated by reference to
Exhibit 4 of the Form 10-K filed by the Registrant for
the period ended December 31, 1994 (File No. 1-7255).
10(a)(1) American Heritage Life Investment Corporation, 1988
Stock Option Plan, as Amended and Restated.
Incorporated by reference to Exhibit 3(a) of
the Form 10-K filed by Registrant for the
period ended December 31, 1994 (File No. 1-7255).
(a)(2) American Heritage Life Investment Corporation 1980
Stock Option Plan, as Amended and Restated.
Incorporated by reference to Exhibit 3(a) of
the Form 10-K filed by Registrant for the
period ended December 31, 1994 (File No. 1-7255).
(a)(3) American Heritage Life Investment Corporation 1996
Stock Option Plan. Incorporated by reference to
Exhibit II of Registrant's Proxy Statement dated March
22, 1996. (File No. 1-7255).
10(b)(1) American Heritage Life Investment Corporation Amended
and Restated Annual Incentive Plan.
(2) American Heritage Life Insurance Company Long-Term
Incentive Plan. Incorporated by reference to Exhibit
I of Registrant's Proxy Statement dated March 22, 1996
(File No. 1-7255).
10(c)(1) Senior Corporate Officers Management Security Plan of
American Heritage Life Investment Corporation and
Subsidiaries. Incorporated by reference to Exhibit
10(c)(1) of Form 10-K filed by Registrant for the
period ended December 31, 1993 (File No. 1-7255).
(2) Officers Management Security Plan of American Heritage
Life Investment Corporation and Subsidiaries.
Incorporated by reference to Exhibit 10(c)(2) of Form
10-K filed by Registrant for the period ended December
31, 1993 (File No. 1-7255).
13 Annual Report to Shareholders for the year ended
December 31, 1995.
21 Significant Subsidiary of the Registrant - American
Heritage Life Insurance Company (organized in the
State of Florida)
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended December 31,
1995.
28
31
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.
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
Date: March 29, 1996 By: /s/ T. O'Neal Douglas
------------------------------------------
T. O'Neal Douglas
Its Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ T. O'Neal Douglas Chairman, President and Director
- -------------------------------------- (Principal Executive Officer)
T. O'Neal Douglas
/s/ C. Richard Morehead Executive Vice President and
- -------------------------------------- Treasurer (Principal
C. Richard Morehead Financial and Accounting Officer)
/s/ Chris A. Verlander Executive Vice President
- -------------------------------------- Director
Chris A. Verlander
/s/ Edward L. Baker Director
- --------------------------------------
Edward L. Baker
/s/ A. Dano Davis Director March 29, 1996
- --------------------------------------
A. Dano Davis
/s/ Robert D. Davis Director
- --------------------------------------
Robert D. Davis
/s/ H. Corbin Day Director
- --------------------------------------
H. Corbin Day
/s/ Radford D. Lovett Director
- --------------------------------------
Radford D. Lovett
/s/ W. A. Verlander Director
- --------------------------------------
W. A. Verlander
29