Document/Exhibit Description Pages Size
1: 10-K Annual Report 37± 164K
2: EX-10.1 Claims Administration Agreement 4± 20K
3: EX-10.2 Administration and Marketing Agreement 8± 39K
4: EX-10.3 Employment Agreement 12± 62K
5: EX-10.4 Employment Agreement 12± 61K
6: EX-11 Statement of Computation of Per Share Earnings 2± 9K
7: EX-13 Annual Report 61± 256K
8: EX-21 Subsidiaries of the Registrant 1 5K
9: EX-23 Consent of Independent Auditors 1 7K
10: EX-24 Power of Attorney 2± 11K
11: EX-27 Financial Data Schedule 2± 8K
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, l996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to ___________________.
Commission file number 0-18485.
Life USA HOLDING, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1578384
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 95, Interchange North Building
300 South Highway 169
Minneapolis, Minnesota 55426
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612)-546-7386
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of class)
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 l934 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 (ss.229.405 of this chapter) 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. [ ]
The aggregate market value of the voting stock (21,262,095 shares) held by
non-affiliates of the registrant as of February 14, 1997 was $207,305,426.
The number of shares outstanding of the issuer's classes of common stock as of
February 14, l997:
Common stock, $.01 Par Value - 21,262,095 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December
31, 1996 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual shareholders meeting to
be held April 15, 1997 are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
GENERAL
Life USA Holding, Inc. (the Company) is a national financial services holding
and marketing company with $4.39 billion in consolidated assets. LifeUSA
Insurance Company (LifeUSA), its largest and most significant wholly-owned
subsidiary, is licensed to write and sell life insurance and several forms of
annuities through independent field marketing organizations and agents in the
District of Columbia and all states except New York. Universal Benefits Life,
which markets and administers employee payroll deduction plans, is a division of
LifeUSA.
During 1996, the Company formed two additional wholly-owned subsidiaries,
LifeUSA Securities, Inc. (LifeUSA Securities) and LifeUSA Marketing, Inc.
(LifeUSA Marketing). LifeUSA Securities has received approval from the National
Association of Securities Dealers, Inc. as a wholesale broker-dealer, will
initially market a family of LifeUSA mutual funds established through a
joint-venture agreement with a $16 billion asset management firm and is
exploring distribution of variable life insurance and annuity contracts. LifeUSA
Marketing conducts a variety of marketing activities for the Company, including
the acquisition of and investment in national field marketing organizations.
During 1996, LifeUSA Marketing acquired Tax Planning Seminars and a minority
equity interest in Creative Marketing International Corporation, both national
field marketing organizations.
The Company's consolidated assets have grown from $1.01 billion at December 31,
1991 to $4.39 billion at December 31, 1996. This growth is founded upon:
* Innovative products which offer long-term retirement benefits
to consumers who seek protection against outliving their
financial resources;
* A national marketing and distribution system comprised of
independent agents and home office staff;
* A conservative investment portfolio with long-term investments
comprised of U.S. Treasury securities, U.S. Government agency
securities, foreign government obligations denominated in U.S.
dollars and issued and traded in the United States,
mortgage-backed securities issued or guaranteed by U.S.
government corporations or agencies and investment grade
corporate obligations;
* Arrangements with reinsurers who are highly-rated by A. M.
Best Company, Inc. (A. M. Best) which enables LifeUSA to write
volumes of business that it would not otherwise have been able
to write due to regulatory restrictions based on the amount of
its statutory capital and surplus; and
* Agreements with Allianz Life Insurance Company of North
America (Allianz Life), a highly-rated insurance company,
which allow LifeUSA agents to produce life insurance and
annuity business on Allianz Life policies which are similar to
LifeUSA policies.
PRODUCTS
LifeUSA has designed its products to emphasize long-term value and benefits.
This is what management believes the "baby-boom" generation needs most and the
insurance industry is best suited to provide -- long-term benefits in the form
of income guaranteed for a lifetime. The economic concern today is not dying too
soon, but living too long. By de-emphasizing short-term gain and lump sum cash
benefits to those who surrender their policies, LifeUSA's products are less
exposed to the disintermediation risk faced by companies selling commodity-type
products.
A disintermediation risk occurs when current interest rates are higher than the
interest rates being earned by a company's existing investment portfolio. The
risk is that policyholders will move their funds away from the company to get
higher, short-term rates. If the assets supporting the policies are invested
long-term to support long-term rates of return and the liabilities offer
short-term liquidity, those who surrender their policies for cash take more than
their fair share from the company and from persisting policyholders.
Management believes that consumer demand for products that meet retirement needs
is increasing and will continue to increase in the future due primarily to the
aging of the United States population. Management also believes that LifeUSA's
products are well-situated to take advantage of this increasing demand.
The United States Census Bureau (Census Bureau) reports that persons in the
45-64 age group, as a percentage of the total United States population, will
grow from 18.8% in 1990 to 28.0% in 2010. Persons over 65 years old are
projected by the Census Bureau to be approximately 59 million, or 20.0% of the
total United States population, by the year 2020. Despite this increase, the
percentage of employed persons covered by employer-sponsored retirement plans
has declined. According to the Census Bureau, only 40% of employed persons are
currently covered by an employer-sponsored retirement plan. Moreover, management
believes that there is increasing consumer concern as to whether
government-sponsored retirement programs, such as Social Security, will continue
to provide meaningful retirement benefits. There is, therefore, a growing need
for individually-funded financial products to provide a stream of adequate
retirement income.
LifeUSA offers a portfolio of universal life insurance, annuities and benefit
riders. LifeUSA's major products emphasize rewarding long-term policyholders
with higher retirement stream-of-income benefits that protect against the cost
of living too long. LifeUSA products are designed to appeal to the rapidly
expanding retirement market of individuals and affinity groups such as
employer/employee associations, unions and state, county and local government
organizations (see "Marketing and Distribution" section which follows for
further discussion).
LifeUSA products compete against the products of other insurance companies on
the basis of long-term benefits, not on the basis of short-term interest
credited rates or high cash surrender values and liquidity. Policyholder
persistency is encouraged by LifeUSA's increased retirement income benefit for
long-term policyholders and lower benefits in case of early surrender or lapse.
LifeUSA products are designed to permit long-term investment of assets by
LifeUSA during the time premiums are being paid, the time benefits are
accumulated and the time benefits are being paid out. This product design not
only makes the products attractive to certain consumers, but also permits
LifeUSA to invest exclusively in high quality, long-term securities which tend
to provide higher yields than short-term securities. The target market for the
Company's products are consumers with average annual incomes of $25,000 to
$60,000. Management believes that this market is not adequately serviced by the
insurance industry and that the features of the Company's products will be
attractive to these consumers.
LIFE INSURANCE PRODUCTS. At December 31, 1996, life insurance account values in
force (including business produced by LifeUSA's agents for Allianz Life)
aggregated $260.1 million ($174.6 million of which was ceded to reinsurers). The
majority of in force life insurance business is paid in annual or more frequent
installments. The following describes LifeUSA's most significant life insurance
products:
Universal Annuity Life(R) I and Universal Annuity Life(R) III
The Universal Annuity Life (UAL) products are policies specifically
designed to pay the insured as much for living as for dying. At younger
ages, when the protection against premature death is needed most, the
UAL products provide tax-free benefits for the policyholder's family or
business. At retirement, there are a variety of annuitization options
available, including the IDEA(R) (see "IDEA" section which follows for
further discussion) option which allows payments to increase by as much
as 60% if the insured becomes fully disabled. The UAL I and UAL III
products are marketed by LifeUSA agents in all states except that
product approval by regulatory authorities is pending review in New
Jersey for UAL I and New Jersey and Pennsylvania for UAL III. In 1996,
the UAL I and UAL III products accounted for 88% of total life
insurance premiums. The UAL I and UAL III were introduced in 1990 and
1991, respectively.
DUALife(SM) I and DUALife(SM) III
The DUALife products are UAL policies specifically designed for
dual-income families. DUALife provides simultaneous retirement income,
disability and life insurance benefits for two individuals within one
policy. It is specifically for families in which both individuals work
and provides a death benefit, of equal amount, on both individuals.
When one individual dies, a benefit is paid, but the plan continues in
effect for the survivor, including cash values, retirement values and
post-retirement disability benefits. The DUALife I and DUALife III
products are marketed by LifeUSA agents in all states except
California, Maryland, Maine, New Hampshire, New Jersey, Pennsylvania,
South Carolina and Texas. In 1996, the DUALife I and DUALife III
products accounted for less than 1% of total life insurance premiums.
DUALife I and DUALife III were both introduced in 1995.
ANNUITY PRODUCTS. LifeUSA annuities are designed to offer flexible premium
payments and a variety of annuitization options to the annuitant. The product
design also protects LifeUSA against the negative effects of disintermediation
and other lump sum withdrawals by providing cash surrender values at amounts
less than the annuitization values. To encourage persistency, LifeUSA annuities
pay enhanced benefits to policyholders who allow the annuity funds to accumulate
over the long term and then elect some form of income payout option rather than
a lump sum cash payment. At December 31, 1996, annuity account values in force
(including business produced by LifeUSA's agents for Allianz Life) totaled $4.88
billion ($3.22 billion of which was ceded to reinsurers). Over 88% of the in
force annuities are single premium annuities. The following describes LifeUSA's
most significant annuity products and annuity products introduced during 1996
and the first quarter of 1997:
Accumulator(SM) Classic
The Accumulator Classic (formerly the Accumulator 8) is ideal for the
policyholder seeking an excellent return and relatively high liquidity.
The policyholder receives an 8% bonus, and after just one year, can
elect to receive the entire policy value over as few as five years. The
Accumulator Classic accounted for approximately 46% of total annuity
premiums in 1996. Approximately 5.9% of such policies annuitize by the
first anniversary of the policy. The average premium paid during 1996
on Accumulator Classic annuities issued in 1996 was $25,000. The
Accumulator Classic is marketed by LifeUSA agents in all states except
Oregon and Washington. The average age of the insured at the issuance
of the Accumulator Classic annuity is 58. The Accumulator Classic was
introduced in 1988.
Accumulator(SM) (Buffet) Series
The Accumulator (Buffet) Series offers both high return and flexible
liquidity options. Rather than just a single bonus amount and more
limited choices for annuitization payouts, the Series offers the
flexibility to select from a range of bonuses (5% to 10%) and
corresponding payout periods (5 to 10 years). The Accumulator (Buffet)
Series accounted for approximately 34% of total annuity premiums in
1996 and is marketed by LifeUSA agents in all states except California,
New Jersey, Oregon and Washington. The Accumulator (Buffet) Series was
introduced in 1993.
IDEA(R)
The IDEA -- Individual Disability Escalating Annuity -- is a
revolutionary concept in single premium deferred annuity product
design. With the IDEA, a policyholder will receive 60% more monthly
retirement income in the event of total disability due to illness,
accident or old age; the income increase is 30% in the event of partial
disability. The increased income benefit is paid as long as the
disability lasts, even for life. The IDEA accounted for less than 1% of
total annuity premiums in 1996 and is marketed by LifeUSA agents in all
states except Kansas, New Jersey, Oregon, Pennsylvania and Washington.
In late 1992, the IDEA feature was added to all new UAL I and UAL III
policies, with the exception of policies sold in Kansas, New Jersey,
Pennsylvania and Washington. The IDEA was introduced in 1992.
ANNU-A-DEX(SM)
The ANNU-A-DEX is a single premium fixed annuity offering an initial 7%
premium bonus, with an additional benefit tied to the performance of
the S&P 500(R) Index. The appeal of the product is that one can buy a
competitive fixed annuity, with principal and interest guaranteed, and
should the S&P 500(R) Index outperform the annuity over a seven-year
period, one-half of the incremental growth is added to the value of the
annuity. While not an investment product, the ANNU-A-DEX is positioned
as an alternative "safe haven" for investment funds. An investor can
"lock-in" current gains and still participate, should the stock market
continue to rise, all with no down-side exposure. The ANNU-A-DEX
accounted for less than 1% of total annuity premiums in 1996 and is
marketed by LifeUSA agents and issued by Allianz Life in all states
except Florida, Indiana, New Jersey, North Dakota, Oklahoma, Oregon and
Washington. The ANNU-A-DEX was introduced in 1996.
IDEAL(SM) Annuity
The IDEAL annuity is unique in that it provides up to 10 years of
protection against interest rate changes (increases and decreases).
When issued, the IDEAL annuity offers a base credited rate, plus a 1.5%
annual interest bonus, both guaranteed for five years. Thus, the
policyholder is protected against a decline in interest rates for the
next five years. At the end of the first five-year term, the
policyholder has the option to "re-enter" the policy at the interest
rate being credited on new issues. The new credited rate, plus another
1.5% annual interest bonus, is then guaranteed for a new five-year
term. Thus, the policyholder is also protected against a rise in
interest rates. The IDEAL annuity is marketed by LifeUSA agents in all
states except Connecticut, Florida, Illinois, Indiana, Maryland,
Montana, New Jersey, North Carolina, North Dakota, Oklahoma, Oregon,
Pennsylvania, South Carolina, Texas, Utah, Washington, West Virginia
and Wisconsin. The IDEAL annuity was introduced in the first quarter of
1997.
MARKETING AND DISTRIBUTION
As of March 25, 1997, 146 independent field marketing organizations (FMOs) and
51,000 agents were licensed to market LifeUSA's policies and produce business
for Allianz Life. All FMOs and agents are independent contractors and are
responsible for their operating and marketing expenses.
The FMOs coordinate and pay for the marketing of LifeUSA's products and provide
recruiting, training and management of the agents contracted through them.
Depending on the system it uses and the market in which it operates, an FMO may
have a few agents or as many as several thousand agents. LifeUSA provides
marketing support to FMOs through marketing training seminars, product
demonstrations, product literature and home office support. The FMO receives a
gross cash commission from LifeUSA on business produced and, within specified
LifeUSA guidelines, allocates such commissions among its agents.
Cash commissions as a percentage of first year premiums are higher for life
insurance sales than annuity sales. Commissions are based on a percentage of the
targeted annual premiums and consist of both a higher first year commission and
a lower renewal commission on premiums paid on a policy after the first year.
FMOs and agents are subject to a chargeback of all or a portion of the
commissions paid in the event a life insurance policy is canceled or
surrendered, including cancellations for the non-payment of premiums, within the
first 13 months of issuance. As is customary in the industry, LifeUSA advances
agents up to an aggregate of 50% of first year commissions when life insurance
policies are sold even though most of the premiums have not yet been received.
LifeUSA contracts include a financial guaranty by the FMOs for chargebacks and
advances to the agents within the FMO's organization.
Since its inception, the Company has issued its common stock or granted options
to purchase its common stock to FMOs and agents as production bonuses.
Management believes that these forms of equity participation provided agents in
the early years with additional incentives to place profitable business with
LifeUSA, to encourage policyholder persistency and to seek good underwriting
risks for LifeUSA. From 1992 through March 31, 1997, stock options were granted
to FMOs and agents at an exercise price which was equal to the greater of $10.00
per share or 150% of the average closing bid price for the Company's common
stock for the twenty trading days immediately preceding the end of the calendar
quarter for which the stock option was granted (see "Agent and Employee
Ownership" section which follows for further discussion). The Company will
discontinue the granting of stock options as production bonuses after stock
options earned by FMOs and agents during the calendar quarter ended March 31,
1997 have been granted. Today, management believes that the Company's entire
agent compensation package, which includes LifeUSA's standard cash commissions,
annual cash production bonuses for major producers and Producer Perks
Certificates which are redeemable for merchandise and earned by achieving
certain levels of production, will, along with its proven service and product
offerings, continue to encourage strong agent participation.
Although LifeUSA's larger and more successful FMOs and agents tend to produce a
majority of their business with LifeUSA, there is no requirement that they do
so. FMOs and agents may also be contracted with other life insurance companies.
Each FMO essentially serves as a "wholesaler" for LifeUSA. A typical FMO
consists of one or more highly experienced individuals who have demonstrated the
ability to build, manage and supervise a marketing organization that is
producing, or has the potential to produce, a minimum of $500,000 in annual life
and annuity commissions. During 1996, one FMO accounted for 11% of LifeUSA's
total production. Although no other single FMO accounted for more than 10% of
LifeUSA's total production, the top FMOs (including their respective agents)
produced the following portions of LifeUSA's total business during 1996:
Percent of CPCs (1)
-------------------
Top 5 FMOs 32%
Top 10 FMOs 49%
Top 25 FMOs 81%
----------------------------------
(1) CPCs (Combined Production Credits) are a measurement of the life insurance
and annuity business produced.
During 1996, the Company developed a strategy to generate additional premium
production from LifeUSA's existing agents and from new production sources by
making loans to or investing in FMOs and by recruiting new FMOs to sell its
products. The amount of any loan or investment relates to the revenue currently
generated by the FMO and the projected increase in business produced for LifeUSA
by the FMO. To date, the Company has made loans to FMOs that account for 31% of
the Company's 1996 life insurance and annuity production. The loans include
incentives for achieving increased production. In addition, in August 1996,
LifeUSA Marketing acquired Tax Planning Seminars, a national FMO that had been
contracted with LifeUSA for seven years and in November 1996, acquired an equity
interest in Creative Marketing International Corporation, another national FMO
that had not been contracted previously with LifeUSA. The Company has made and
expects to continue to make future investments by issuing shares of its common
stock and paying cash from its available resources ($5.6 million of fixed
maturity investments - available for sale and cash and cash equivalents as of
December 31, 1996 on an unconsolidated basis), cash generated from operations,
cash dividends from LifeUSA and borrowings under its $30 million line of credit
(no amounts outstanding at December 31, 1996). In addition, during 1996, the
Company signed marketing agreements with 31 national FMOs to market LifeUSA life
insurance and annuity products for the first time. There can be no assurances
that the Company's premium volume or income will be enhanced by the loans to or
investments in FMOs or by the contracting of new national FMOs.
Management believes that the overall reduction in employer-funded employee
benefit plans, coupled with certain tax incentives for individual retirement
planning, has created a large and rapidly growing market for insurance and
annuity products for affinity groups such as employer/employee associations,
unions, state, county and city governments and teachers. These insurance and
annuity products are normally provided to such employee benefit plans through
payroll deduction. The payroll deduction market offers the opportunity for
multiple sales at one location. Management believes that LifeUSA's products are
especially attractive in the payroll deduction market because of their emphasis
on long-term value and benefits.
Universal Benefits Life, a division of LifeUSA organized in 1992 to provide
supplemental employee retirement plans through payroll deduction, continued to
benefit from the employer-sponsored market during 1996. By the end of 1996,
38,000 employees were participating in 5,000 plans issued and administered by
Universal Benefits Life.
REINSURANCE
In the insurance industry, one company (the ceding company) may share the
rewards and risks associated with business it produces with another insurance
company (the assuming company) through reinsurance. Reinsurance gives the
assuming company a share of the policy premiums and future profits associated
with the portion of the business that it has assumed, in exchange for
commissions and expense allowances paid to the ceding company that are based on
a percentage of the policy premiums. At the same time, reinsurance also requires
the assuming company to pay a share of the future policy benefits associated
with the portion of the business it has assumed from the ceding company.
Upon the issuance of a policy, statutory accounting requires commissions and
other policy issuance costs to be expensed and statutory reserves for policy
benefits which in the aggregate exceed first year premiums to be established,
thereby creating a statutory loss during the first year in which a life
insurance policy or annuity contract is in force. As a result, the retention or
assumption of new business places a strain on the insurer's statutory capital
and surplus. When a company reinsures business it writes, it is generally not
required to use its statutory capital and surplus to establish reserves for the
portion of the business ceded to the assuming company. Rather, the assuming
company generally maintains the required reserves for the portion of the
business assumed from the ceding company, thereby reducing the strain on the
ceding company's statutory capital and surplus. In addition, the commissions and
expense allowances paid to the ceding company by the assuming company provide an
additional source of working capital to be used to support the production of
additional new business by the ceding company.
Since its inception in 1987, LifeUSA has entered into various agreements to
reinsure a substantial portion of the new life insurance and annuity business
written each year. Entering into these reinsurance agreements has allowed
LifeUSA to write a larger volume of business than it would otherwise have been
able to write due to regulatory restrictions based on the amount of its
statutory capital and surplus. In addition, under the terms of agreements
between the Company and Allianz Life, LifeUSA agents have produced life
insurance and annuity business on Allianz Life policies which are similar to
LifeUSA's policies. LifeUSA has assumed a portion of this business under
reinsurance agreements.
The Company receives commissions and expense allowances on the portions of the
LifeUSA life insurance and annuity products reinsured and service fees on
business produced by LifeUSA's agents and written by Allianz Life. The
commissions and expense allowances and service fees received on life insurance
policies are approximately 150% of the first-year planned target premium and
range from 12 1/2% to 18% of renewal and first-year excess premiums. The Company
also receives commissions and expense allowances and service fees ranging from 6
1/2% to 22% on annuity deposits. An additional allowance equal to .20% of the
account value of all annuities issued after April 1, 1991 is received as of the
beginning of policy years two through ten.
Since its inception, LifeUSA has modified its net retention (the percentage of
new life insurance and annuity business retained by LifeUSA and assumed by
LifeUSA from Allianz Life) to the extent that its statutory capital and surplus
has been able to support such changes. During 1996, net retention was maintained
at a constant 25% and LifeUSA produced a statutory net income of $13.2 million.
As a result, the Company did not make significant capital contributions to
LifeUSA during 1996. Based on currently anticipated life insurance and annuity
sales, projected statutory profits from LifeUSA's mature block of in force
business and the continuation of acceptable reinsurance arrangements, the
Company does not expect to contribute capital to LifeUSA through 1997 in order
to maintain adequate levels of statutory capital and surplus. The Company may
further alter the level of its retention and assumption of new business
depending upon future levels of production, capital needs and availability of
alternative financing.
From inception through December 31, 1996, the Company has contributed $122.5
million to LifeUSA in order to maintain LifeUSA's desired levels of statutory
capital and surplus. Although the Company does not expect to contribute capital
to LifeUSA through 1997 in order to maintain adequate levels of statutory
capital and surplus, management believes that the combination of (i) the
anticipated increase in cash flow during 1997 and the anticipated reduction in
capital requirements for new business retained or assumed by LifeUSA associated
with maintaining net retention at 25%, (ii) the statutory profits generated by
LifeUSA on the mature business which it has retained or assumed, (iii) the $5
million in proceeds that remained at December 31, 1996 from the $30 million
convertible subordinated debenture issued to Allianz Life in February 1995 and
(iv) the availability of the $30 million line of credit from two of its
reinsurers, will provide sufficient capital resources to support the capital
needs of LifeUSA through 1997, based on currently anticipated life insurance and
annuity sales and on the continuation of acceptable reinsurance arrangements.
Reinsurance Ceded
LifeUSA ceded from 95% to 100% of its new life insurance and annuity business to
Transamerica Occidental Life Insurance Company (TOLIC) from 1987 through March
31, 1991, and from April 1, 1991 through December 31, 1992 ceded 100% of its new
business equally to the following three reinsurers (the Reinsurers):
* Employers Reassurance Corporation, a subsidiary of Employers
Reinsurance Corporation, a member of the General Electric Company
group;
* Munich American Reassurance Company, a subsidiary of Munich Reinsurance
Company, one of the largest German insurance companies; and
* Republic-Vanguard Life Insurance Company, a member of the Winterthur
Swiss Insurance Group, one of the largest Swiss insurance companies.
From 1990 through 1992, TOLIC and the Reinsurers retroceded 25% to 30% of this
business back to LifeUSA. Effective December 31, 1992, the retrocession
agreement with the Reinsurers was terminated with respect to new business
written by LifeUSA after that date. From 1993 through 1995, LifeUSA retained a
portion of its new business and ceded the remainder equally to the Reinsurers.
Effective January 1, 1996, Munich American Reassurance Company reduced its share
of the new business ceded by LifeUSA to the Reinsurers to 20%, while both
Employers Reassurance Corporation and Republic-Vanguard Life Insurance Company
increased their share of this business to 40%.
During 1994, an agreement was reached with TOLIC and the Reinsurers to unwind
the retrocession agreements in effect from 1990 through 1992 and record all
business written under the terms of those agreements as direct reinsurance. As a
result, LifeUSA has accounted for all business previously retroceded to LifeUSA
from TOLIC and the Reinsurers as being retained by LifeUSA and all business
ultimately assumed by TOLIC and the Reinsurers as being ceded to TOLIC and the
Reinsurers by LifeUSA at issuance. This change had no impact on the Company's
financial position or operating results for any period presented. All
disclosures in this document reflect the unwinding of the retrocession
agreements as discussed in this paragraph.
The following table shows the percentages of new life insurance and annuity
business written by LifeUSA that have been ceded to TOLIC and the Reinsurers
since inception:
Life Insurance Annuity
-------------- -------
September 1987 - December 1988 100% 100%
January 1989 - December 1989 95 100
January 1990 - December 1990 75 75
January 1991 - December 1992 70 75
January 1993 - June 1993 65 65
July 1993 - September 1995 50 50
October 1995 - Present 75 75
Because of the initial and regular review of LifeUSA's products and operations
by the reinsurers, the reinsurance arrangements have had the additional benefit
of providing the Company access to the expertise of the reinsurers which has
assisted in the development of underwriting standards, the analysis of product
pricing and the development of actuarial assumptions. LifeUSA does not have any
risk of loss with respect to the reinsured portions of the policies unless a
reinsurer fails to pay its share of policy claims. LifeUSA is ultimately liable
for payment to policyholders of all claims which the reinsurers fail to pay.
Management does not believe, however, that LifeUSA has more than a remote
exposure on the reinsured business. LifeUSA has also entered into agreements
with the reinsurers whereby LifeUSA limits its mortality risk exposure to
$50,000 per life. Management believes that its relations with the reinsurers are
good.
Reinsurance Assumed
All new life insurance and annuity business produced by LifeUSA's agents and
written by Allianz Life from 1987 through 1994 was ceded to TOLIC. Effective
January 1, 1990, LifeUSA entered into a retrocession agreement with TOLIC to
assume a portion of this business. During 1994, LifeUSA terminated the
retrocession agreement with TOLIC and entered into an agreement with Allianz
Life to assume a portion of this business directly from Allianz Life effective
January 1, 1995.
The following table shows the percentages of new life insurance and annuity
business produced by LifeUSA's agents and written by Allianz Life that have been
assumed by LifeUSA since inception:
Life Insurance Annuity
-------------- -------
September 1987 - December 1989 --% --%
January 1990 - December 1990 25 25
January 1991 - December 1991 30 25
January 1992 - June 1993 50 30
July 1993 - September 1995 50 50
October 1995 - Present 25 25
AGREEMENTS WITH ALLIANZ LIFE
Since 1987, under the terms of agreements between the Company and Allianz Life,
LifeUSA agents have produced life insurance and annuity business on Allianz Life
policies which are similar to LifeUSA policies. These agreements require the
Company to provide all administrative and other home office services and to pay
for all commissions due LifeUSA agents and premium taxes on the business
produced for Allianz Life. For these services, Allianz Life pays service fees to
the Company. LifeUSA has assumed a portion of this business under reinsurance
agreements (see the preceding "Reinsurance Assumed" section for further
discussion). For the years 1992 through 1996, the Company derived the following
amounts of service fees from Allianz Life under the terms of these agreements:
Year Ended Percent of
December 31, Service Fees Revenues
----------- -------------- -----------
(In thousands)
1992 $ 49,795 34 %
1993 69,593 35
1994 58,062 28
1995 60,031 22
1996 63,222 20
UNDERWRITING
All life insurance business is subject to standard underwriting procedures as
agreed to by the Reinsurers, using Munich American's underwriting manual.
Republic-Vanguard is the reinsurer currently charged with the responsibility of
reviewing the underwriting practices of LifeUSA and performing periodic audits
(once per year) of LifeUSA's compliance with underwriting procedures and
results. There are minimal underwriting requirements with regard to annuity
business.
LifeUSA can underwrite all life policies with a face amount up to $500,000
without approval of Republic-Vanguard. Amounts above this level require
individual evaluation by Republic-Vanguard. As appropriate, varying
requirements, including tests, medical exams and personal financial statements,
may be required at higher ages and/or larger face amounts of insurance.
INVESTMENTS
The Company's long-term investment portfolio is comprised of U.S. Treasury
securities, U.S. Government agency securities, foreign government obligations
denominated in U.S. dollars and issued and traded in the United States,
mortgage-backed securities issued or guaranteed by U.S. government corporations
or agencies and investment grade corporate obligations. The Company has never
invested in real estate, private direct mortgages or below investment-grade
securities. The Company engages Investment Advisers, Inc. (IAI), a
Minneapolis-based investment advisory firm, and Allianz Investment Corporation
(AIC), an affiliate of Allianz Life, to serve as the Company's investment
advisers. At December 31, 1996, assets managed for customers by IAI and AIC
exceed $16 billion and $19 billion, respectively.
IAI and AIC effect purchases of investment securities for the Company based on
the Company's guidelines. The investment philosophy of LifeUSA is reflected by
investment guidelines adopted by the Board of Directors of the Company in 1990
and reaffirmed annually, as follows:
SIZE: no more than 2% of the Company's invested assets in any issuer
other than direct or guaranteed United States obligations, no more than
25% of invested assets in any industry, and no more than 2% of any
issue other than direct or guaranteed United States obligations;
QUALITY: minimum quality of "BBB-" or better, average quality "A" or
better;
DURATION: match to liabilities, allow for sufficient liquidity and cash
flow matching; and
INCOME: manage to maintain or increase income, excluding capital gains.
As of December 31, 1996, the Company had cash, cash equivalents and fixed
maturity investments on a consolidated basis totaling $1.90 billion, including
$7.6 million in restricted deposits with state insurance authorities regulating
LifeUSA. The following table summarizes the book, carrying and market values of
each investment category held at December 31 (dollars in thousands):
[Enlarge/Download Table]
Book % of Carrying % of Market % of
1996: Value Total Value Total Value Total
----- ----- ----- ----- ----- ----- -----
Cash and cash equivalents $ 20,989 1.11% $ 20,989 1.10% $ 20,989 1.10%
Government Treasury and Agency
notes and bonds 98,982 5.24 100,909 5.30 104,537 5.46
Mortgage pass-throughs 46,085 2.44 46,804 2.46 46,836 2.45
Agency Collateralized Mortgage Obligations:
CMO - Sequential pay 6,260 .33 6,260 .33 6,284 .33
CMO - Planned amortization class 615,995 32.63 615,556 32.36 616,286 32.22
CMO - Accretion directed class 23,484 1.24 23,484 1.23 23,672 1.24
CMO - Targeted amortization class 11,970 .63 11,970 .63 12,675 .66
Investment grade corporate securities:
AAA+ to AAA- 36,749 1.95 36,900 1.94 37,930 1.98
AA+ to AA- 153,408 8.12 153,276 8.06 154,056 8.05
A+ to A- 485,766 25.72 491,040 25.81 493,102 25.78
BBB+ to BBB- 388,898 20.59 395,277 20.78 396,662 20.73
Non-investment grade corporate securities -- -- -- -- -- --
----------- ------ ----------- ------ ----------- ------
Total $1,888,586 100.00% $ 1,902,465 100.00% $ 1,913,029 100.00%
========== ====== =========== ====== =========== ======
Book % of Carrying % of Market % of
1995: Value Total Value Total Value Total
----- ----- ----- ----- ----- ----- -----
Cash and cash equivalents $ 33,222 1.95% $ 33,222 1.89% $ 33,222 1.85%
Government Treasury and Agency
notes and bonds 96,435 5.66 101,895 5.81 107,660 5.99
Mortgage pass-throughs 32,104 1.88 33,347 1.90 33,667 1.87
Agency Collateralized Mortgage Obligations:
CMO - Sequential pay 5,445 .32 5,445 .31 5,507 .31
CMO - Planned amortization class 616,271 36.17 620,785 35.39 638,969 35.53
CMO - Accretion directed class 23,426 1.38 23,426 1.34 24,524 1.36
CMO - Targeted amortization class 11,862 .70 11,862 .68 13,228 .74
Investment grade corporate securities:
AAA+ to AAA- 43,650 2.56 44,015 2.51 46,694 2.60
AA+ to AA- 123,941 7.28 129,105 7.36 132,157 7.35
A+ to A- 325,710 19.12 339,005 19.33 346,502 19.26
BBB+ to BBB- 391,379 22.98 411,980 23.48 416,454 23.14
Non-investment grade corporate securities -- -- -- -- -- --
----------- ------ ----------- ------ ----------- ------
Total $1,703,445 100.00% $ 1,754,087 100.00% $ 1,798,584 100.00%
========== ====== =========== ====== =========== ======
The following table sets forth the investment results of the Company:
[Enlarge/Download Table]
Year ended December 31,
---------------------------------------------
1996 1995 1994
---- ---- ----
(Dollars in thousands)
Weighted average investments (1) $ 1,793,926 $ 1,521,355 $ 1,072,650
Investment income (2) $ 130,032 $ 109,656 $ 75,002
Yield on weighted average investments (3) 7.25% 7.21% 6.99%
Net realized gains on investments $ 1,791 $ 7,634 $ 1,183
---------------------------------------------
(1) The average book value of investments held during the year calculated
on a monthly basis.
(2) Before related investment expenses and excluding net realized gains on
investments.
(3) Excluding net realized and unrealized gains and losses on investments.
As part of its asset and liability management practices, LifeUSA manages
investments and credited interest rates to produce a net investment spread
consistent with priced-for expectations. The investment portfolio is managed
primarily by allocating new cash flows into investments which have yield,
maturity and other characteristics suitable for LifeUSA's liabilities.
Consistent with LifeUSA's asset and liability management practices, as of
December 31, 1996, the modified duration of LifeUSA's fixed income securities
was 6.01 years, compared to 6.26 years as of December 31, 1995.
The percentage of the total market value of the Company's portfolio that was
comprised of investment grade corporate obligations was 57% at December 31,
1996. With each corporate security acquisition, LifeUSA's external managers
perform a comprehensive analysis of the credit implications and outlook of the
issuing corporation and industry. Ongoing procedures are also in place for
monitoring and assessing any potential deterioration or downgrade in credit
quality. The Company's guidelines for investing in corporate securities does not
allow the purchase of securities that are rated below investment grade by
Moody's Investors Service and/or Standard & Poor's Corporation.
The remainder of the Company's portfolio is comprised of government and
government agency obligations. Government and government agency obligations are
predominantly held in the form of Planned Amortization Class (PAC) CMOs, the
most conservative type of CMO issued. These CMOs are specifically structured to
provide the highest degree of protection against swings in repayments caused
primarily by changes in interest rates and have virtually no risk of default.
These securities are well-suited to fund the payment of the liabilities they
support.
Currently, the decision as to the asset type in which to invest is dictated by
market conditions and relative values within the respective markets at the time
of purchase. Management believes that these asset types will allow the Company
to maintain high quality, consistent yields and proper maturities for the
overall portfolio.
As of December 31, 1996, the Company held 46%, or $878 million, of the total
market value of its long term securities as available for sale. The Company
believes that this percentage is a prudent level that will allow enough
liquidity to meet any adverse cash flow experience. The Company continues to
classify a significant portion of its investment securities as held to maturity
based on its intent to hold such securities to maturity. A key feature of
LifeUSA's products is the provision of bonuses to encourage policyholders to
withdraw their funds over settlement periods lasting at least five years.
Policyholders taking cash settlements do not receive the bonuses. This feature
allows the Company to hold a significant amount of assets to maturity. Insurance
regulations require LifeUSA to perform an asset adequacy analysis each year to
determine if the assets are sufficient to fund future obligations. The Company's
asset adequacy analysis indicates that the assets are sufficient to fund future
obligations. The Company continually monitors and modifies the allocation of new
assets between held to maturity and available for sale as deemed prudent based
on the continuing analysis of cash flow projections and liquidity needs.
Agent and Employee Ownership
Historically, the Company has issued a variety of equity-based financial
instruments (common stock, convertible subordinated debentures and stock
options) to LifeUSA's agents and the Company's home office employees in order to
provide these individuals with an ownership interest in the Company and create
an important incentive to produce premiums and maintain profitable operations.
From 1992 through March 31, 1997, the Company granted stock options as
commission bonuses to LifeUSA's agents based on net earned commissions on
business written. The Company will discontinue the granting of stock options as
production bonuses after stock options earned by FMOs and agents during the
calendar quarter ended March 31, 1997 have been granted. The Company also has a
stock option plan for employees under which employees on the anniversary date of
their employment receive options on a number of shares of common stock equal to
1% of their annual salary at an exercise price per share of not less than 150%
of the market value of a share of Common Stock on the date the option is issued.
The Company will continue to grant stock options to employees.
Home Office Support
Management believes that quality service, responsiveness and support to agents
and to policyholders have been and continue to be critical to agent retention,
policyholder satisfaction and cost-effective operations. As a result of their
ownership interests in the Company, home office employees have a special
commitment to their jobs and are therefore called "home office owners." An
example of home office responsiveness created by this commitment is the "48-hour
challenge." If an insurance application conforming to normal standards is not
completed within 48 hours, the agent receives $100. For 1996, over 60,000
applications were submitted and only 57 challenges were paid.
At December 31, 1996, the Company employed 412 full-time and 22 part-time
persons, and the number of persons performing home office functions were as
follows:
Number of
Home Office Function Employees
-------------------- ---------
Executive 17
Operations 174
Support 92
Marketing 57
Information Services 40
Universal Benefits Life (payroll deduction) 54
The Company's employees are not represented by a collective bargaining unit. The
Company considers its general relations with its employees to be excellent.
Regulation
LifeUSA is subject to regulation in the 49 states in which it is authorized to
do business. The laws of these states establish supervisory agencies with
administrative powers related to granting and revoking licenses to transact
business, approving the form and content of policies, reviewing the advertising
and illustration of policies, licensing agents, establishing reserve
requirements and regulating the type and amount of investments. Such regulations
are primarily intended to protect policyholders. The Company is also regulated
in several states as an insurance holding company.
The insurance regulatory framework continues to be reviewed by various states
and by the National Association of Insurance Commissioners (NAIC). Regulatory
initiatives such as risk-based capital standards have been undertaken to
identify inadequately capitalized companies and to reduce the risk of company
insolvencies. The NAIC has established risk-based capital standards to determine
the capital requirements of a life insurance company based upon the risks
inherent in its operations. LifeUSA's percentage of actual total adjusted
capital to authorized control level risk-based capital is well in excess of
regulatory requirements. As a result of the production of statutory net income
of $13.2 million during 1996, the Company did not make significant capital
contributions to LifeUSA during 1996 and, based on currently anticipated life
insurance and annuity sales and the continuation of reinsurance arrangements,
the Company does not expect to contribute capital to LifeUSA through 1997 in
order to maintain an acceptable risk-based capital ratio.
The NAIC has also considered changes in the model laws for nonforfeiture values
of life insurance and deferred annuity products. Since 1994, LifeUSA has made
presentations to and had discussions with the Life/Health Actuarial Task Force
of the NAIC, which is responsible for developing new model laws for
nonforfeiture values. LifeUSA demonstrated that its two-tier products use
longer-term, higher-yielding investments to provide higher retirement values to
policyholders, while decreasing disintermediation and solvency risks to LifeUSA.
Although it is possible that the NAIC may adopt new model laws addressing
nonforfeiture values in the future, such adoption is not currently anticipated
to have a significant impact on LifeUSA.
NAIC committees are also considering a new annuity illustration model
regulation, a new approach to statutory valuation of liabilities (reserves) and
regulations for equity-indexed products. The Company is monitoring these
developments and no significant impact is anticipated at this time.
In December 1995, the NAIC passed a model regulation for disclosure in life
insurance policy illustrations. A number of states either have adopted the model
regulation by its January 1, 1997 effective date or are in the process of
adopting the model regulation. LifeUSA has already completed the certification
process required by the model regulation. This regulation has not had and is not
anticipated to have a significant impact on LifeUSA.
Insurance laws also require LifeUSA to file detailed periodic reports with the
regulatory agencies in each of the states in which it writes business, and these
agencies may examine LifeUSA's business and accounts at any time. Under NAIC
rules, one or more of the regulatory agencies will periodically examine LifeUSA,
normally at three-year intervals, on behalf of the states in which LifeUSA is
licensed. During 1996, the Minnesota Department of Commerce conducted a
triennial examination of LifeUSA for the three years ended December 31, 1995.
The Company expects to receive the final examination report in the near future
and has not been made aware of any issues or recommendations that will be
material individually or in the aggregate.
In April 1996, the B++ (Very Good) rating initially assigned LifeUSA in June
1994 was reaffirmed by the A.M. Best Company. The A. M. Best Company assigns the
B++ rating to companies which, in its opinion, have achieved very good overall
performance when compared to the standards established by the A. M. Best
Company. B++ companies have a good ability to meet their obligations to
policyholders over a long period of time.
In December 1996, Standard & Poor's assigned LifeUSA an initial claims-paying
ability rating of BBB+ (Adequate). Standard & Poor's assigns the BBB+ rating to
insurers which, in its opinion, offer adequate financial security, but capacity
to meet policyholder obligations is susceptible to adverse economic and
underwriting conditions.
The Company is subject to the Minnesota insurance holding company laws and
applicable regulations which require it to file certain information regarding
the Company primarily relating to ownership and transactions between it and each
life insurance subsidiary, and to obtain prior approval for certain changes of
control and certain extraordinary transactions, including certain distributions
or dividend payments. Approval by the Minnesota Department of Commerce is
required for LifeUSA to pay dividends in any 12 month period in an amount
exceeding the lesser of (i) 10% of the insured's statutory earned surplus at the
end of the preceding year or (ii) the insured's statutory net gain from
operations, not including realized capital gains, for the year preceding the
distribution, both of which are determined in accordance with the Minnesota
insurance laws and regulations. Although LifeUSA did not have any earned surplus
at December 31, 1996, the Department of Commerce of the State of Minnesota
allowed its request to pay a $2.5 million extraordinary dividend to the Company
during February of 1997. The Company does not currently intend to pay dividends
to its common shareholders.
Competition
The industry in which the Company operates is highly competitive, with many
competitors offering diverse products through various alternative marketing or
distribution systems. The Company's products compete not only with life
insurance and annuities but with other retirement-oriented financial products.
Many of the Company's competitors have substantially greater financial resources
and more established products. Nonetheless, management believes that LifeUSA's
unique and innovative products will continue to attract policyholders to LifeUSA
and its products. Competition for FMOs and agents with demonstrated ability is
also intense. However, management believes that LifeUSA has been able to attract
and will continue to be able to attract, motivate and retain productive,
independent FMOs and agents by providing innovative products and quality
service.
Forward-Looking Statements
Statements other than historical information contained in this Annual Report are
considered forward-looking and involve a number of risks and uncertainties. In
addition to the factors discussed in this Annual Report, there are other factors
that could cause actual results to differ materially from expected results
including, but not limited to, development and acceptance of new products,
impact of changes in federal and state regulation, dependence upon key
personnel, changes in interest rates generally and credited rates on the new
business retained or assumed by LifeUSA, the level of premium production,
competition and other risks described from time to time in the Company's
Securities and Exchange Commission filings, including but not limited to this
Form 10-K, copies of which are available from the Company without charge.
ITEM 2. PROPERTIES
Under leases expiring in February 2001, the Company leases approximately 144,000
square feet of office space at Interchange North Building, 300 South Highway
169, Minneapolis, Minnesota. See Note 6 of the Notes to Consolidated Financial
Statements included in the annual shareholder report for the year ended December
31, 1996 as incorporated herein by reference for additional information
regarding the lease commitments. Based on the Company's business plan,
management believes the Company's current facilities will be adequate through
1997.
ITEM 3. LEGAL PROCEEDINGS
As of the date hereof, the Company was not involved in any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted to the vote of security holders during the fourth
quarter of 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the executive officers of the Company, their ages and
titles:
[Enlarge/Download Table]
Name Age Title
------------------- --- ----------------------------------------------------------------
Robert W. MacDonald 54 Chairman and Chief Executive Officer
Margery G. Hughes 46 President and Chief Operating Officer
Mark A. Zesbaugh 32 Executive Vice President, Chief Financial Officer , Treasurer and
Secretary
Daniel J. Rourke 67 Senior Vice President and Chief Marketing Officer
Donald J. Urban 55 Senior Vice President and Director of Sales
Bradley E. Barks 37 Senior Vice President Finance
Bruce D. Bengtson 47 Senior Vice President and Chief Actuary
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock trades on the Nasdaq National Market Tier of The
Nasdaq Stock Market under the symbol: "LUSA." Over-the-counter market quotations
reflect inter-dealer prices without retail mark-up, mark-down or commissions and
may not necessarily represent actual transactions. The following table shows the
range of high and low sales prices per share of the Company's common stock as
reported by Nasdaq for the periods indicated.
High Low
-------- --------
1996
------------
4th Quarter $ 12.00 $ 8.63
3rd Quarter 9.25 7.75
2nd Quarter 9.38 7.63
1st Quarter 9.88 7.63
1995
------------
4th Quarter $ 9.25 $ 7.63
3rd Quarter 10.13 8.25
2nd Quarter 10.50 8.63
1st Quarter 11.38 7.19
As of February 14, 1997, there were 7,950 holders of record of the Company's
common stock. On March 24, 1997, the closing sale price per share of the
Company's common stock as reported by Nasdaq was $10.38.
DIVIDENDS
Since its inception, the Company has not paid any dividends on its common stock.
Currently, the Company's Board of Directors has a policy of retaining earnings
for future growth, and the Company does not anticipate paying dividends on its
common stock in the near future. In addition, there are statutory and regulatory
limitations upon the extent to which dividends may be paid to the Company from
an insurance subsidiary, including the restriction that an insurance company may
only pay dividends out of earned surplus. Approval by the Minnesota Department
of Commerce is required for LifeUSA to pay dividends in any 12-month period in
an amount exceeding the lesser of (i) 10% of the insured's statutory earned
surplus at the end of the preceding year or (ii) the insured's statutory net
gain from operations, not including realized capital gains, for the year
preceding the distribution, both of which are determined in accordance with the
Minnesota insurance laws and regulations. Although LifeUSA did not have any
earned surplus at December 31, 1996, the Department of Commerce of the State of
Minnesota allowed its request to pay a $2.5 million extraordinary dividend to
the Company during February of 1997.
ITEM 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial and Operating Data on pages 4 and 5 of the
annual shareholder report for the year ended December 31, 1996 is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 6 through 18 of the annual shareholder report for the year
ended December 31, 1996 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements included on pages 19 through 44 of the
annual shareholder report for the year ended December 31, 1996 are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained on pages 4 and 5 and page 8 of Life USA Holding,
Inc.'s Proxy Statement dated March 12, 1997, under the captions "Business
Experience of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" with respect to directors and executive officers of the Company, is
incorporated herein by reference in response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 6 through 13 of Life USA Holding, Inc.'s
Proxy Statement dated March 12, 1997, under the captions "Compensation of
Directors," "Executive Compensation," "Compensation Committee Interlocks and
Insider Participation," "Report of the Compensation Committee and the Stock
Option Committee on Executive Compensation" and "Common Stock Price Performance
Chart" with respect to executive compensation and transactions, is incorporated
herein by reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on pages 2 and 3 of Life USA Holding, Inc.'s Proxy
Statement dated March 12, 1997, under the caption "Principal Shareholders and
Security Ownership of Management Table" with respect to security ownership of
certain beneficial owners and management, is incorporated herein by reference in
response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 6 of Life USA Holding, Inc.'s Proxy Statement
dated March 12, 1997, under the caption "Arrangements with Directors, Nominees,
Executive Officers and Their Family Members" with respect to certain
relationships and related transactions, is incorporated herein by reference in
response to this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of Life USA Holding,
Inc. included in the annual shareholder report for the year ended
December 31, 1996 are incorporated herein by reference in Item 8:
Consolidated Balance Sheet as of December 31, 1996 and 1995
Consolidated Statement of Income for the years ended December 31,
1996, 1995 and 1994
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a)(2) The following consolidated financial statement schedules of Life USA
Holding, Inc. required by Item 14(d) are included in a separate section
of this Report:
II Condensed Financial Information of Registrant
III Supplementary Insurance Information
IV Reinsurance
V Valuation and Qualifying Accounts
All other schedules to the consolidated financial statements required
by Article 7 of Regulation S-X are not required under the related
instructions or are inapplicable and therefore have been omitted.
(a)(3) Listing of Exhibits
The Exhibits required to be a part of this Report are listed in the
Index to Exhibits which follows the Financial Statement Schedules.
(b) Reports on Form 8-K
None.
(c) Exhibits
Included in Item 14(a)(3) above.
(d) Financial Statement Schedules
Included in Item 14(a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of l934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Life USA HOLDING, INC.
By /s/ Mark A. Zesbaugh
------------------------------
Mark A. Zesbaugh
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Robert W. MacDonald Chief Executive Officer March 25, 1997
------------------------ (Principal Executive Officer)
Robert W. MacDonald and Director
/s/ Mark A. Zesbaugh Chief Financial Officer March 25, 1997
------------------------ (Principal Financial and
Mark A. Zesbaugh Accounting Officer)
and Director
* Director
------------------------
Hugh Alexander
* Director
------------------------
Jack H. Blaine
* Director
------------------------
Joseph W. Carlson
* Director
------------------------
Margery G. Hughes
* Director
------------------------
Barbara J. Lautzenheiser
* Director
------------------------
Robert J. Oster
* Director
------------------------
Daniel J. Rourke
* Director
------------------------
Ralph Strangis
* Director
------------------------
Donald J. Urban
*By /s/ Mark A. Zesbaugh March 25, l997
-----------------------
Mark A. Zesbaugh
Attorney-in-Fact
* Mark A. Zesbaugh, on his own behalf and pursuant to Powers of
Attorney, dated prior to the date hereof, attested by the officers and directors
listed above and filed with the Securities and Exchange Commission, by signing
his name hereto does hereby sign and execute this Report of Life USA Holding,
Inc. on behalf of each of the officers and directors named above, in the
capacities in which the name of each appears above.
SCHEDULE II
Page 1
Life USA HOLDING, INC.
CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEET
(Dollars in thousands, except per share amounts)
[Enlarge/Download Table]
ASSETS December 31, December 31,
1996 1995
--------- ---------
Fixed maturity investments - available for sale,
at fair value (amortized cost: $5,190 at December 31, 1996
and $13,204 at December 31, 1995) $ 5,392 $ 14,333
Cash and cash equivalents 182 57
Fixed assets and leasehold improvements, net 5,652 4,160
Investments in subsidiaries, net 206,722 183,273
Deferred income taxes 1,937 998
Other assets 6,382 8,443
--------- ---------
$ 226,267 $ 211,264
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Other policyholders' funds $ 3,028 $ 2,091
Amounts due reinsurers 231 150
Accounts payable 6,617 4,478
Accrued commissions to agents 4,029 4,315
Convertible subordinated debentures 36,030 36,030
Other liabilities 3,717 7,304
--------- ---------
Total liabilities 53,652 54,368
Shareholders' equity:
Preferred stock, $.01 par value; 15,000,000 shares
authorized, none issued -- --
Common stock, $.01 par value; 45,000,000 shares
authorized, 20,953,517 shares issued and outstanding
(20,279,343 shares at December 31, 1995) 210 203
Common stock to be issued, 21,384 shares
(45,404 shares at December 31, 1995) 357 382
Additional paid-in capital 86,474 80,931
Notes receivable from stock sales (3,888) --
Unrealized gain on fixed maturity
investments - available for sale 3,335 12,707
Retained earnings 86,127 62,673
--------- ---------
Total shareholders' equity 172,615 156,896
--------- ---------
$ 226,267 $ 211,264
========= =========
SCHEDULE II
Page 2
Life USA HOLDING, INC.
CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENT OF INCOME
(Dollars in thousands)
Year ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------
Revenues:
Management fees $ 32,476 $ 29,389 $ 24,707
Net investment income 1,378 1,825 1,003
Commissions and expense allowances, net 63,222 59,286 57,027
Equity in income of wholly-owned subsidiaries 21,321 16,083 10,814
Other 316 8 --
-------- -------- --------
Total revenues 118,713 106,591 93,551
Expenses:
Commissions 38,133 36,483 35,113
Salaries and employee benefits 24,720 19,189 14,064
Depreciation and amortization 1,246 676 771
Interest expense 1,982 1,785 474
Other 27,609 27,168 25,892
-------- -------- --------
Total expenses 93,690 85,301 76,314
-------- -------- --------
Income before income taxes 25,023 21,290 17,237
Income taxes 1,569 2,193 2,768
-------- -------- --------
Net income $ 23,454 $ 19,097 $ 14,469
======== ======== ========
SCHEDULE II
Page 3
Life USA HOLDING, INC.
CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
(Dollars in thousands)
[Enlarge/Download Table]
Year ended December 31,
1996 1995 1994
-------- -------- --------
Cash flows from operating activities:
Net income $ 23,454 $ 19,097 $ 14,469
Adjustments to reconcile net income to net
cash provided by operating activities (10,147) (1,660) (8,703)
-------- -------- --------
Net cash provided by operating activities 13,307 17,437 5,766
Cash flows from investing activities:
Fixed maturity investments -
available for sale:
Purchases -- (22,954) (861)
Proceeds from maturities and principal payments on
mortgage-backed securities -- 1,660 1,825
Investment in LifeUSA Insurance Company -- (23,675) (13,606)
Investment in LifeUSA Securities, Inc. (285) -- --
Investment in LifeUSA Marketing, Inc. (9,250) -- --
Loans to field marketing organizations (1,219) -- --
Acquisition of Fidelity Union Life Insurance Company -- -- (1,100)
Capital expenditures (2,629) (3,079) (491)
-------- -------- --------
Net cash used in investing activities (13,383) (48,048) (14,233)
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants 226 195 937
Proceeds from convertible subordinated debenture issuance -- 30,000 --
Other financing activities (25) 230 282
-------- -------- --------
Net cash provided by financing activities 201 30,425 1,219
-------- -------- --------
Net (decrease) increase in cash and cash equivalents 125 (186) (7,248)
Cash and cash equivalents at beginning of the year 57 243 7,491
-------- -------- --------
Cash and cash equivalents at end of the year $ 182 $ 57 $ 243
======== ======== ========
Cash paid during the year for interest $ 1,984 $ 1,223 $ 473
======== ======== ========
Cash paid during the year for income taxes $ 2,032 $ 2,550 $ 2,354
======== ======== ========
Supplemental schedule of noncash investing and financing activities:
Issuance of stock upon conversion of convertible
subordinated debentures $ -- $ 11 $ 309
Cancellation of convertible subordinated debentures -- -- 1
Issuance of stock to employees as compensation 1,436 831 943
Fixed assets contributed to LifeUSA Insurance Company 1,362 1,766 997
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
Life USA HOLDING, INC. AND SUBSIDIARIES
(Dollars in thousands)
[Enlarge/Download Table]
Col. A Col. B Col. C Col. D Col. E Col. F
Future policy
Deferred benefits, Other policy
policy losses, claims claims and
acquisition and loss Unearned benefits Premium
Segment costs expenses (1) premiums payable revenue (2)
------------------------------ ----------- ------------ ---------- ------------ ---------
Year ended December 31, 1996:
Life insurance and annuities $ 212,138 $4,078,621 $ -- $ -- $ 46,842
========== ========== =========== ============ ==========
Year ended December 31, 1995:
Life insurance and annuities $ 175,296 $3,566,012 $ -- $ -- $ 35,983
========== ========== =========== ============ ==========
Year ended December 31, 1994:
Life insurance and annuities $ 174,702 $2,877,447 $ -- $ -- $ 21,659
========== ========== =========== ============ ==========
[WIDE TABLE CONTINUED FROM ABOVE]
Col. G Col. H Col. I Col. J
Benefits, Amortization
claims, of deferred
Net losses and policy Other
investment settlement acquisition operating
Segment income expenses (3) costs expenses
------------------------------ ----------- ------------ ---------- ----------
Year ended December 31, 1996:
Life insurance and annuities $ 129,412 $ 116,931 $ 24,495 $ 138,407
========== ========== ========== ==========
Year ended December 31, 1995:
Life insurance and annuities $ 109,092 $ 99,363 $ 22,096 $ 121,361
========== ========== ========== ==========
Year ended December 31, 1994:
Life insurance and annuities $ 74,510 $ 65,111 $ 11,643 $ 106,527
========== ========== ========== ==========
-------------------------------
(1) Amounts shown are gross with respect to amounts recoverable from
reinsurers of $2,166,116, $1,853,540 and $1,593,025 at December 31,
1996, 1995 and 1994, respectively. The liabilities net of related
amounts recoverable from reinsurers are $1,912,505, $1,712,472 and
$1,284,422 at December 31, 1996, 1995 and 1994, respectively.
(2) Includes policyholder charges.
(3) Includes interest credited to policyholder account values and other
benefits to policyholders.
Column K (Premiums written) has not been included as it does not apply to life
insurance.
[Enlarge/Download Table]
SCHEDULE IV - REINSURANCE
Life USA HOLDING, INC. AND SUBSIDIARIES
(Dollars in thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
------------- ------------- ------------- ------------- -------
Year ended December 31, 1996:
Life insurance in force $ 6,428,513 $ 4,747,188 $ 704,009 $ 2,385,334 29.5%
============= ============= ============= ============= =======
Premiums:
Life insurance $ 61,973 $ 40,341 $ 7,254 $ 28,886 25.1%
Annuities 547,748 397,566 115,461 265,643 43.5%
------------- ------------- ------------- ------------- -------
$ 609,721 $ 437,907 $ 122,715 $ 294,529 41.7%
============= ============= ============= ============= =======
Year ended December 31, 1995:
Life insurance in force $ 6,270,169 $ 4,666,062 $ 730,804 $ 2,334,911 31.3%
============= ============= ============= ============= =======
Premiums:
Life insurance $ 60,869 $ 38,518 $ 7,604 $ 29,955 25.4 %
Annuities 585,739 312,325 167,857 441,271 38.0%
------------- ------------- ------------- ------------- -------
$ 646,608 $ 350,843 $ 175,461 $ 471,226 37.2%
============= ============= ============= ============= =======
Year ended December 31, 1994:
Life insurance in force $ 5,585,565 $ 4,132,874 $ 662,138 $ 2,114,829 31.3%
============= ============= ============= ============= =======
Premiums:
Life insurance $ 54,928 $ 36,271 $ 6,785 $ 25,442 26.7%
Annuities 481,138 249,803 175,257 406,592 43.1%
------------- ------------- ------------- ------------- -------
$ 536,066 $ 286,074 $ 182,042 $ 432,034 42.1%
============= ============= ============= ============= =======
[Enlarge/Download Table]
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
Life USA HOLDING, INC. AND SUBSIDIARIES
(Dollars in thousands)
Col. A Col. B Col. C Col. D Col. E
------------------------------
Balance Charged to Balance
at beginning costs and Charged to at end
of period expenses other accounts Deductions of period
------------ ---------- -------------- ---------- ---------
Year ended December 31, 1995:
Reserve and allowances deducted from asset accounts:
Valuation allowance for deferred tax assets $ 8,578(2) -- -- $ 8,578(1) --
-----------------------------------------------------
(1) Due to the fact that an unrealized gain on fixed maturity investments -
available for sale was recorded as a separate component of shareholders'
equity at both December 31, 1996 and December 31, 1995, the deferred tax
assets and related valuation allowance recorded at December 31, 1994 were
no longer required.
(2) Established to cover 100% of the deferred tax assets recorded for
unrealized losses on fixed maturity investments available for sale and
included in the unrealized loss on fixed maturity investments-available for
sale shown as a separate component of shareholders' equity.
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(3) AND 14(c)
EXHIBITS
Life USA HOLDING, INC.
INDEX TO EXHIBITS
[Enlarge/Download Table]
Regulation S-K
Exhibit Table Sequential
Item Reference Page No.
---- -------------- ----------
Restated Articles of Incorporation of the Company................................. 3(12)
Bylaws of the Company............................................................. 3(3)
Amendment to Bylaws of the Company................................................ 3(7)
Form of Stock Certificate......................................................... 4(11)
Form of Option Certificate........................................................ 4(12)
Form of Debenture filed as part of Indenture
between the Company and Continental Bank,
National Association............................................................. 4(8)
Indenture between the Company and Continental Bank,
National Association, as trustee, dated as of April 1, 1991...................... 4(8)
Warrant dated as of October 1, 1992 to Lions Gate Capital, Ltd.
covering 192,000 shares of common stock at an exercise price
of $10.00 per share, subject to adjustment....................................... 4(16)
Service Agreement dated January 27, 1988 between
the Company and North American Life and Casualty Company......................... 10(2)
Agreement dated April 6, 1987 with Transamerica Insurance
Corporation of California........................................................ 10(1)
Life Coinsurance Agreement effective September 1, 1987
between Transamerica Occidental Life Insurance Company
and Universal Security Assurance Life Insurance Company
and Addendum thereto............................................................. 10(3)
Amendment to Life Coinsurance Agreement effective
January 1, 1989.................................................................. 10(2)
Addenda No. 2, 3, 4 and 5 to Life Coinsurance Agreement
between LifeUSA and Transamerica Occidental Life
Insurance Company................................................................ 10(13)
Addenda No. 6, 7 and 8 to Life Coinsurance Agreement between
LifeUSA and Transamerica Occidental Life Insurance Company....................... 10(20)
Life and Annuity Retrocession Agreement effective
January 1, 1990 between LifeUSA and Transamerica
Occidental Life Insurance Company................................................ 10(13)
Addenda No. 1, 2 and 3 to Life and Annuity Retrocession Agreement
between LifeUSA and Transamerica Occidental Life Insurance Company............... 10(20)
Termination Addendum to Life and Annuity Retrocession Agreement between
LifeUSA and Transamerica Occidental Life Insurance Company....................... 10(20)
Life and ADB YRT Retrocession Agreement between LifeUSA
and Transamerica Occidental Life Insurance Company
effective January 1, 1990........................................................ 10(14)
Addendum No. 1 to Life and ADB YRT Retrocession Agreement between
LifeUSA and Transamerica Occidental Life Insurance Company....................... 10(20)
Retrocessional Agreement between LifeUSA and
Transamerica Occidental Life Insurance Company
effective April 1, 1991.......................................................... 10(13)
Addenda No. 1, 2 and 3 to Retrocessional Agreement between LifeUSA
and Transamerica Occidental Life Insurance Company............................... 10(20)
Trust Agreement dated April 1, 1993 among LifeUSA Insurance Company,
Continental Trust Company and Transamerica Occidental Life
Insurance Company................................................................ 10(16)
Restated Trust Agreement among LifeUSA Insurance Company, Continental
Trust Company and Transamerica Occidental Life Insurance Company................. 10(20)
Information Services Agreement with Universal Systems
of America, Inc. dated as of January 1, 1993..................................... 10(13)
License Agreement with Universal Systems of America, Inc.
dated as of January 1, 1993...................................................... 10(13)
Agreement dated September 24, 1991, between David Mitchell
and Associates and Life USA Holding, Inc......................................... 10(13)
Office Lease, as amended on July 25, 1989 with
The Equitable Life Assurance Society of the United States........................ 10(2)
Amendment No. 2 to Office Lease dated November 29, 1990........................... 10(5)
Amendment No. 3 to Office Lease dated November 15, 1993........................... 10(16)
Sublease Agreement dated February 3, 1992, between the
Company and Tonka Corporation.................................................... 10(12)
Sublease Modification Agreement dated November 5, 1993, between
the Company and Tonka Corporation................................................ 10(16)
Form of Indemnification Agreement dated as of December 31, 1989................... 10(2)
Life USA Holding, Inc. Employee Savings Plan effective
January 1, 1990.................................................................. 10(4)
First Amendment to Employee Savings Plan.......................................... 10(9)
Second Amendment to Employee Savings Plan......................................... 10(11)
Third Amendment to Employee Savings Plan.......................................... 10(13)
Fourth Amendment to Employee Savings Plan......................................... 10(17)
Fifth Amendment to Employee Savings Plan.......................................... 10(17)
Restated Life USA Holding, Inc. Stock Option Plan................................. 10(12)
Life USA Director Option Plan..................................................... 10(16)
Agreement dated June 8, 1989 among Robert W. MacDonald,
Life USA Holding, Inc. and LifeUSA Insurance Company............................. 10(13)
Consulting Agreement with Peyton J. Huffman dated
August 1, 1993................................................................... 10(16)
Life and Annuity Coinsurance Agreement effective April 1, 1991
among LifeUSA Insurance Company, Employers Reassurance
Corporation, Munich American Reassurance Company and
Republic-Vanguard Life Insurance Company......................................... 10(6)
Addenda Nos. 1 through 4 to the Life and Annuity
Coinsurance Agreement............................................................ 10(13)
Addendum No. 5 to the Life and Annuity Coinsurance Agreement...................... 10(16)
Addendum No. 6 to the Life and Annuity Coinsurance Agreement...................... 10(20)
Life and Annuity Retrocession Agreement effective
April 1, 1991 between LifeUSA Insurance Company
and Employers Reassurance Corporation............................................ 10(6)
Addendum No. 1 to Life and Annuity Retrocession
Agreement between LifeUSA Insurance Company and
Employers Reassurance Corporation................................................ 10(13)
Addendum No. 2 to Life and Annuity Retrocession Agreement
between LifeUSA Insurance Company and Employers
Reassurance Corporation.......................................................... 10(16)
Termination Addendum to the Life and Annuity Retrocession
Agreement between LifeUSA Insurance Company and
Employers Reassurance Corporation................................................ 10(20)
Trust Agreement among LifeUSA Insurance Company,
Continental Bank, N.A. and Employers Reassurance Corporation..................... 10(16)
Amendment to Trust Agreement among LifeUSA Insurance Company,
Continental Bank, N.A. and Employers Reassurance Corporation..................... 10(16)
Life and Annuity Retrocession Agreement effective
April 1, 1991 between LifeUSA Insurance Company
and Munich American Reassurance Company.......................................... 10(6)
Addendum No. 1 to Life and Annuity Retrocession Agreement
between LifeUSA Insurance Company and Munich American
Reassurance Company.............................................................. 10(13)
Addendum No. 2 to Life and Annuity Retrocession Agreement
between LifeUSA Insurance Company and Munich American
Reassurance Company.............................................................. 10(16)
Termination Addendum to Life and Annuity Retrocession Agreement
between LifeUSA Insurance Company and Munich American
Reassurance Company.............................................................. 10(20)
Restated Trust Agreement among LifeUSA Insurance Company,
Continental Bank, N.A. and Munich American Reassurance Company................... 10(16)
Amendment No. 1 to Restated Trust Agreement among
LifeUSA Insurance Company, Continental Bank, N.A. and
Munich American Reassurance Company.............................................. 10(16)
Life and Annuity Retrocession Agreement effective
April 1, 1991 between LifeUSA Insurance Company and
Republic-Vanguard Life Insurance Company......................................... 10(6)
Addendum No. 1 to Life and Annuity Retrocession Agreement
between LifeUSA Insurance Company and Republic-Vanguard
Life Insurance Company........................................................... 10(13)
Addendum No. 2 to Life and Annuity Retrocession Agreement
between LifeUSA Insurance Company and Republic-Vanguard
Life Insurance Company........................................................... 10(16)
Termination Addendum to Life and Annuity Retrocession Agreement
between LifeUSA Insurance Company and Republic-Vanguard
Life Insurance Company........................................................... 10(20)
Trust Agreement among LifeUSA Insurance Company, Continental
Bank, N.A. and Republic-Vanguard Life Insurance Company.......................... 10(16)
Amendment to Trust Agreement among LifeUSA Insurance Company,
Continental Bank, N.A. and Republic-Vanguard Life Insurance Company.............. 10(16)
Life and ADB YRT Retrocession Agreements between
LifeUSA and each of Employers Reassurance Corporation,
Munich American Reassurance Company and Republic-Vanguard
Life Insurance Company ("Reinsurers") effective April 1, 1991.................... 10(13)
Addenda No. 1 to Life and ADB YRT Retrocession Agreements......................... 10(16)
Termination Addendum to Life and ADB YRT Retrocession Agreements.................. 10(20)
Life and ADB YRT Reinsurance Agreement between LifeUSA and
the Reinsurers effective January 1, 1993......................................... 10(13)
Addendum No. 1 to Life and ADB YRT Reinsurance Agreement
between LifeUSA and the Reinsurers............................................... 10(16)
Addendum No. 2 to Life and ADB YRT Reinsurance Agreement
between LifeUSA and the Reinsurers............................................... 10(20)
Investment Management Agreement between the Company
and Investment Advisers, Inc. dated April 9, 1991................................ 10(10)
Stock Purchase Agreement among Allianz of America, Inc.,
Allianz Life Insurance Company of North America and
Life USA Holding, Inc., dated November 19, 1993.................................. 10(15)
Plan and Agreement of Merger By and Between LifeUSA
Insurance Company and Fidelity Union Life Insurance Company...................... 10(18)
Articles of Merger of LifeUSA Insurance Company into
Fidelity Union Life Insurance Company............................................ 10(18)
Debenture Purchase Agreement dated February 17, 1995 among Life USA
Holding, Inc. and Allianz Life Insurance Company of North America................ 10(19)
Variable Rate Convertible Subordinated Debenture.................................. 10(19)
Conversion Protection Warrant Certificate for Purchase of Shares of Common
Stock of Life USA Holding, Inc. ................................................. 10(19)
Life and Annuity Coinsurance Agreement effective January 1, 1995 between Allianz
Life Insurance Company of North America and LifeUSA Insurance Company............ 10(19)
Trust Agreement between Allianz Life Insurance Company of North America,
LifeUSA Insurance Company and Continental Trust Company.......................... 10(19)
Joint Marketing Agreement entered into by and between Allianz Life Insurance
Company of North America and Life USA Holding, Inc............................... 10(19)
Investment Management Agreement entered into by and between LifeUSA
Insurance Company and Allianz Investment Corporation............................. 10(19)
Investment Management Agreement entered into by and between Life USA
Holding, Inc. and Allianz Investment Corporation................................. 10(19)
Addendum No. 8 to the Interests and Liabilities Agreement of Employers
Reassurance Corporation with respect to the Life and Annuity Coinsurance
Agreement issued to LifeUSA Insurance Company.................................... 10(21)
Addendum No. 8 to the Interests and Liabilities Agreement of Munich
American Reassurance Company with respect to the Life and Annuity
Coinsurance Agreement issued to LifeUSA Insurance Company........................ 10(21)
Addendum No. 8 to the Interests and Liabilities Agreement of Republic-
Vanguard Life Insurance Company with respect to the Life and Annuity
Coinsurance Agreement issued to LifeUSA Insurance Company........................ 10(21)
Consulting Agreement dated April 17, 1996 between
Life USA Holding, Inc. and Joseph W. Carlson..................................... 10(22)
Loan Agreement dated May 17, 1996 between Life USA Holding, Inc.
and Employers Reassurance Corporation and Named Lenders.......................... 10(23)
Stock Pledge Agreement dated May 17, 1996 between Life USA Holding, Inc.
and Employers Reassurance Corporation............................................ 10(23)
Claims Administration Agreement dated December 30, 1996
between Allianz Life Insurance Company of North America
and LifeUSA Insurance Company.................................................... 10.1(24)
Administration and Marketing Agreement dated December 30, 1996
between Allianz Life Insurance Company of North America
and Life USA Holding, Inc........................................................ 10.2(24)
Employment Agreement dated January 1, 1997 between
Life USA Holding, Inc. and Margery G. Hughes..................................... 10.3(24)
Employment Agreement dated January 1, 1997 between
Life USA Holding, Inc. and Mark A. Zesbaugh...................................... 10.4(24)
Statement of Computation of Per Share Earnings
(Years Ended December 31, 1996, 1995 and 1994)................................... 11(24)
1996 Annual Report to Shareholders................................................ 13(24)
Subsidiaries of the Registrant.................................................... 21(24)
Consent of Ernst & Young LLP...................................................... 23(24)
Powers of Attorney................................................................ 24(24)
Financial Data Schedule (electronic filing only).................................. 27(24)
------------------------------
(1) Filed with the Company's Registration Statement No. 33-21989 and
incorporated by reference herein.
(2) Filed with the Company's 1989 Annual Report on Form 10-K, as amended,
and incorporated by reference herein.
(3) Filed with the Company's Registration Statement No. 33-30506, as
amended by Post-Effective Amendment No. 1, and incorporated by
reference herein.
(4) Filed with the Company's Registration Statement No. 33-37981 and
incorporated by reference herein.
(5) Filed with Post-Effective Amendment No. 1 to the Company's Registration
Statement No. 33-37981 and incorporated by reference herein.
(6) Filed with the Company's 1990 Annual Report on Form 10-K and
incorporated by reference herein.
(7) Filed with Pre-Effective Amendment No. 1 to the Company's Registration
Statement No. 33-41359 and incorporated by reference herein.
(8) Filed with Pre-Effective Amendment No. 2 to the Company's Registration
Statement No. 33-41359 and incorporated by reference herein.
(9) Filed with the Company's 1991 Annual Report on Form 10-K and
incorporated by reference herein.
(10) Filed with the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1991 and incorporated by reference herein.
(11) Filed with the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1992 and incorporated by reference herein.
(12) Filed with the Company's Registration Statement No. 33-52624 and
incorporated by reference herein.
(13) Filed with the Company's Registration Statement No. 33-68528 and
incorporated by reference herein.
(14) Filed with Amendment No. 1 to the Company's Registration Statement No.
33-68528 and incorporated by reference herein.
(15) Filed with Amendment No. 1 to the Company's Registration Statement No.
33-71068 and incorporated by reference herein.
(16) Filed with the Company's 1993 Annual Report on Form 10-K and
incorporated by reference herein.
(17) Filed with the Company's Registration Statement No. 33-81426 and
incorporated by reference herein.
(18) Filed with the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994 and incorporated by reference herein.
(19) Filed with the Company's Current Report on Form 8-K filed March 3, 1995
and incorporated by reference herein.
(20) Filed with the Company's 1994 Annual Report on Form 10-K and
incorporated by reference herein.
(21) Filed with the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1995 and incorporated by reference herein.
(22) Filed with the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1996 and incorporated by reference herein.
(23) Filed with the Company's Current Report on Form 8-K filed June 17, 1996
and incorporated by reference herein.
(24) Filed with this Annual Report on Form 10-K.
The exhibits filed with this Annual Report on Form 10-K may be obtained by
writing to:
Mark A. Zesbaugh
Executive Vice President, Chief Financial Officer and Treasurer
Life USA Holding, Inc.
300 South Highway 169 Suite 95
Minneapolis, MN 55426
Dates Referenced Herein and Documents Incorporated by Reference
| This ‘10-K’ Filing | | Date | | Other Filings |
|---|
| |  |
| | 4/15/97 | | DEF 14A |
| | 3/31/97 | | 10-Q |
| Filed on: | | 3/25/97 |
| | 3/24/97 |
| | 3/12/97 |
| | 2/14/97 | | SC 13G |
| | 1/1/97 |
| For Period End: | | 12/31/96 |
| | 12/30/96 |
| | 6/17/96 | | 8-K |
| | 5/17/96 |
| | 4/17/96 |
| | 3/31/96 | | 10-Q |
| | 1/1/96 |
| | 12/31/95 |
| | 9/30/95 |
| | 3/3/95 |
| | 2/17/95 |
| | 1/1/95 |
| | 12/31/94 |
| | 6/30/94 |
| | 11/19/93 |
| | 11/15/93 |
| | 11/5/93 |
| | 8/1/93 |
| | 4/1/93 |
| | 1/1/93 |
| | 12/31/92 |
| | 10/1/92 |
| | 3/31/92 |
| | 2/3/92 |
| List all Filings |
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