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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-K (Mark One)

/  /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
	EXCHANGE ACT OF 1934 [No Fee Required]
	For the transition period from                to

 

Common Stock (par value $1,000 per share)

3,511 shares

PART I ITEM 1.  BUSINESS GENERAL DESCRIPTION       AIG SunAmerica Life Assurance Company (DBA Anchor National Life Insurance Company), including its wholly owned subsidiaries, (the "Company") is an indirect wholly-owned subsidiary of SunAmerica Inc. ("SunAmerica"), which is a wholly-owned subsidiary of American International Group, Inc. ("AIG"), a holding company, which through its subsidiaries is engaged in a broad range of insurance and insurance-related activities, financial services, retirement services and asset management. The Company changed its name to SunAmerica National Life Insurance Company on October 5, 2001 and further changed its name to AIG SunAmerica Life Assurance Company on January 24, 2002. However, the Company is continuing to do business as Anchor National Life Insurance Company. It is currently anticipated that the Company will seek regulatory approval in each state in which it does business to change its name to AIG SunAmerica Life Assurance Company effective sometime in the first quarter of 2003.       The Company is incorporated in Arizona and maintains its principal executive offices at 1 SunAmerica Center, Los Angeles, California 90067-6022, telephone (310) 772-6000. The Company has no employees; however, employees of SunAmerica and its other subsidiaries perform various services for the Company. SunAmerica had approximately 2,300 employees at December 31, 2001, approximately 1,600 of whom perform services for the Company as well as for certain of its affiliates.       Founded in 1965, the Company is an Arizona-chartered company licensed in 49 states and the District of Columbia. The Company is a life insurance company and conducts its business through three segments: annuity operations, asset management operations, and broker-dealer operations. Annuity operations focus primarily on the marketing, sale and administration of deposit-type insurance contracts such as fixed and variable annuity products, guaranteed investment contracts ("GICs") and the administration of a closed block of universal life business (See Note 3 of Notes to Consolidated Financial Statements). The Company's variable annuity products offer investors a broad spectrum of fund alternatives, with a choice of investment managers, as well as guaranteed fixed-rate account options. The Company earns fee income on investments in the variable account options and net investment income on the fixed-rate account options. Asset management operations, which include the sale and management of mutual funds, are conducted by SunAmerica Asset Management Corp. ("SunAmerica Asset Management"), the Company's registered investment advisor subsidiary and its related distributor, SunAmerica Capital Services, Inc. ("SACS"). These companies earn fee income by distributing and managing a diversified family of mutual funds, managing certain subaccounts within the Company's variable annuity products and providing professional management of individual, corporate and pension plan portfolios. SACS earns commissions and distribution fees by selling proprietary mutual funds. Broker-dealer operations are conducted by the Company's broker-dealer subsidiary, Royal Alliance Associates, Inc. ("Royal Alliance"), which sells proprietary annuities and mutual funds, as well as a full range of non-proprietary investment products. Net retained commissions are derived from commissions on the sales of these products after deducting approximately 90% of such commissions that is passed on to registered representatives.

The Company has declared a distribution to its Parent, effective January 1, 2002, of 100% of the outstanding capital stock of its consolidated subsidiary Saamsun Holdings Corp ("Saamsun"). This distribution was declared subject to the approval of the Arizona Department of Insurance. Saamsun is comprised of both the Company's asset management and broker-dealer segments. Upon approval of this distribution, the company will conduct its business through only one segment, Annuity operations (see Note 13 of Notes to consolidated financial statements).       The Company ranks among the largest U.S. issuers of variable annuities. At December 31, 2001, the Company managed $34.92 billion of assets through its fixed-rate business and asset management operations, consisting of $26.94 billion of assets on its balance sheet and $7.97 billion of assets managed in mutual funds. Its asset management operations provide a broad range of financial planning and investment services through more than 10,700 independent registered representatives nationwide. The Company also distributes its products and services through an extensive network of independent broker-dealers, full-service securities firms, independent general insurance agents, major financial institutions and, in the case of its GICs, by marketing directly to banks, municipalities, asset management firms and direct plan sponsors and through intermediaries, such as managers or consultants servicing these groups.       The Company believes that demographic trends have produced strong consumer demand for long-term, investment-oriented products. According to U.S. Census Bureau projections, the number of individuals between the ages of 45 to 64 grew from 46 million to 62 million from 1990 to 2000, making this age group the fastest-growing segment of the U.S. population. Between 1990 and 2000, annual industry premiums from fixed and variable annuities and fund deposits increased from $129.3 billion to $303.8 billion. During the same period, annual industry sales of mutual funds, excluding money market accounts, rose from $149.1 billion to $1.63 trillion.       Benefiting from continued strong growth of the retirement savings market, industry sales of tax-deferred savings products have represented, for a number of years, a significantly larger source of new premiums for the U.S. life insurance industry than have traditional life insurance products. Recognizing the growth potential of this market, the Company focuses its life insurance operations on the sale of annuities and GICs.       In recent years, the Company has enhanced its marketing efforts and expanded its offerings of fee-based products such as variable annuities and mutual funds. The Company's fee-generating businesses entail no portfolio credit risk and require significantly less capital support than its fixed-rate business, which generates net investment income.       The Company and its affiliates have made significant investments in technology over the past several years in order to lower operating costs and enhance marketing efforts. Its use of optical disk imaging and artificial intelligence has substantially reduced the more traditional paper-intensive life insurance processing procedures, reducing annuity processing and servicing costs and improving customer service. This has also enabled the Company to more efficiently assimilate acquired business. The Company has also implemented technology to interface with its wholly owned or affiliated broker-dealers, which enables the Company to more effectively market its products and help the affiliated financial professionals to better serve their clients.

On December 31, 1998, the Company acquired the individual life business and the individual and group annuity business of MBL Life Assurance Corporation ("MBL Life"), via a 100% coinsurance transaction ("the Acquisition"). The Company assumed reserves in this acquisition totaling $5,793,256,000, including $3,460,503,000 of fixed annuity contracts, $2,308,742,000 of universal life insurance contracts and $24,011,000 of guaranteed investment contracts. Policyholders of MBL annuity products were required to transfer their funds into an existing product of the Company or one of its affiliates by December 31, 1999 in order to receive the policy enhancements due under the MBL Life rehabilitation agreement. Over 92% of the deferred annuity reserves had either been transferred or surrendered by December 31, 1999.       Included in the block of business acquired from MBL Life were policies whose owners are residents of New York State (the "New York Business"). On July 1, 1999, the New York Business was acquired by the Company's New York affiliate, First SunAmerica Life Insurance Company ("FSA"), via an assumption reinsurance agreement, and the remainder of the business converted to assumption reinsurance, which superseded the coinsurance agreement. As part of this transfer, invested assets equal to $678,272,000, universal life reserves equal to $282,247,000, group pension reserves equal to $406,118,000, and other net assets of $10,093,000 were transferred to FSA.       The following table shows the Company's net investment income and net realized investment losses and fee income for the year ended December 31, 2001 by business segment:

For additional financial information on the Company's business segments, see Note 12 of Notes to Consolidated Financial Statements.

ANNUITY OPERATIONS - VARIABLE ANNUITIES       The variable annuity products of the Company offer investors a broad spectrum of fund alternatives, with a choice of investment managers, as well as guaranteed fixed-rate account options. The Company earns fee income through the sale, administration and management of the variable account options of its variable annuity products. The Company also earns investment income on monies allocated to the fixed-rate account options of these products. Variable annuities offer retirement planning features similar to those offered by fixed annuities, but differ in that the contractholder's rate of return is generally dependent upon the investment performance of the particular equity, fixed-income, money market or asset allocation fund selected by the contractholder. Because the investment risk is borne by the customer in all but the fixed-rate account options, these products require significantly less capital support than fixed annuities.       The Company's flagship Polaris and Seasons variable annuity products are multimanager variable annuities that offer investors a choice of 4 to 37 variable funds and up to 10 guaranteed fixed-rate funds. Seasons sales have increased significantly in recent years due to enhanced distribution efforts and growing consumer demand for flexible retirement savings products that offer a variety of equity, fixed-income and guaranteed fixed account investment choices.       In addition to distributing its variable annuity products through its eight wholly-owned or affiliated broker-dealers, the Company distributes its products through a vast network of independent broker-dealers, full-service securities firms and financial institutions as well as through independent general insurance agents. In total, more than 60,000 independent sales representatives nationally are licensed to sell the Company's annuity products.        At December 31, 2001, total variable product liabilities were $21.36 billion, of which $18.53 billion were held in separate accounts and $2.83 billion were the liabilities of the fixed-rate account options which are held in the general accounts. The Company's variable annuity products incorporate surrender charges to encourage persistency. At December 31, 2001, 80% of the Company's variable annuity liabilities held in the separate accounts were subject to surrender penalties or other restrictions. The Company's variable annuity products also generally limit the number of transfers made in a specified period between account options without the assessment of a fee. The average size of a new variable annuity contract sold by the Company in 2001 was approximately $70,000.       ANNUITY OPERATIONS - FIXED ANNUITIES AND GICs The Company's general account obligations are fixed-rate products, including fixed annuities and universal life contracts issued in prior years and fixed-rate options of its variable annuity contracts. Such fixed-rate account options on its variable annuity contracts provide interest rate guarantees of one, two, three, five, seven or ten years. Although the Company's annuity contracts remain in force an average of seven to ten years, a majority (approximately 84% at December 31, 2001) of the annuity contracts, as well as all of the universal life contracts, reprice annually at discretionary rates determined by the Company. In repricing, the Company takes into account yield characteristics of its investment portfolio, surrender assumptions and competitive industry pricing, among other factors.

The Company augments its retail annuity business with the sale of institutional products. At December 31, 2001, the Company had $477.9 million of fixed-maturity, variable-rate GIC obligations that reprice periodically based upon certain defined indices and $6.0 million of fixed-maturity, fixed-rate GICs. Of the total GIC portfolio at December 31, 2001, approximately 92% was sold to asset management firms, 7% was sold to state and local government entities and 1% was sold to corporations.       The Company designs its fixed-rate products and conducts its investment operations in order to closely match the duration of the assets in its investment portfolio to its fixed annuity, universal life and GIC obligations. The Company seeks to achieve a predictable spread between what it earns on its assets and what it pays on its liabilities by investing principally in fixed-rate securities. The Company's fixed annuity and universal life products incorporate surrender charges and its GIC products incorporate other restrictions in order to encourage persistency. Approximately 75% of the Company's fixed annuity, universal life and GIC reserves had surrender penalties or other restrictions at December 31, 2001.       The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed-rate investments that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its rates of return vary over time depending on the current interest rate environment, the slope of the yield curve, the spread at which fixed-rate investments are priced over the yield curve, default rates and general economic conditions. The Company manages most of its invested assets internally. Its portfolio strategy is constructed with a view to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety.       As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-rate assets and liabilities under commonly used stress-test interest rate scenarios. With the results of these computer simulations, the Company can measure the potential gain or loss in fair value of its interest-rate sensitive instruments and seek to protect its economic value and achieve a predictable spread between what it earns on its invested assets and what it pays on its liabilities by designing its fixed-rate products and conducting investment operations to closely match the duration of the fixed-rate assets to that of its fixed-rate liabilities. The Company's fixed-rate assets include: cash and short-term investments; bonds, notes and redeemable preferred stocks; mortgage loans; policy loans, and investments in limited partnerships that invest primarily in fixed-rate securities. At December 31, 2001, these assets had an aggregate fair value of $6.21 billion with a duration of 3.3 (See further discussion of duration under Capital Resources and Liquidity - Asset Liability Matching). The Company's fixed-rate liabilities include fixed annuity, GIC and universal life reserves and subordinated notes. At December 31, 2001, these liabilities had an aggregate fair value (determined by discounting future contractual cash flows by related market rates of interest) of $5.83 billion with a duration of 2.7. For the years ended December 31, 2001, 2000, and 1999, the Company's yields on average invested assets were 6.63%, 7.15% and 6.95%, respectively; its average rates paid on all interest-bearing liabilities were 4.48%, 4.96% and 4.98%, respectively; and it realized net investment spreads on average invested assets of 2.18%, 2.35% and 2.08%, respectively. Net realized investment losses were 0.76%, 0.28% and 0.27% of average invested assets, respectively.

At December 31, 2001, the Bond Portfolio (excluding $21.5 million of redeemable preferred stocks) included $4.49 billion of bonds rated by S&P, Moody's, Fitch or the Securities Valuation Office of the National Association of Insurance Commissioners ("NAIC"), and $31.3 million of bonds rated by the Company pursuant to statutory ratings guidelines established by the NAIC. At December 31, 2001, approximately $4.31 billion of the Bond Portfolio was investment grade, including $1.57 billion of mortgage-backed securities and U.S. government/agency securities.       At December 31, 2001, the Bond Portfolio included $215.5 million of bonds that were not investment grade. These non-investment-grade bonds accounted for approximately 0.8% of the Company's total assets and approximately 3.2% of its invested assets.

 

BROKER-DEALER OPERATIONS       Broker-dealer operations are conducted by the Company's broker-dealer subsidiary, Royal Alliance, which sells proprietary annuities and mutual funds, as well as a full range of non-proprietary investment products. Net retained commissions are derived from commissions on the sales of these products after deducting approximately 90% of such commissions that is passed on to registered representatives. Royal Alliance currently has a network of approximately 2,600 representatives. Royal Alliance, along with the Company's six affiliated broker-dealers, comprise the largest network of independent registered representatives in the nation and the fifth-largest securities sales force, based on industry data. Its wholly-owned or affiliated broker-dealers accounted for approximately one-third of the Company's total annuity sales in 2001.       REGULATION       The Company, in common with other insurers, is subject to regulation and supervision by the states and other jurisdictions in which it does business. Within the United States, the method of such regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to a state insurance official. The regulation and supervision relate primarily to approval of policy forms and rates, the standards of solvency that must be met and maintained, including risk based capital measurements, the licensing of insurers and their agents, the nature of and limitations on investments, restrictions on the size of risks which may be insured under a single policy, deposits on securities for the benefit of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, the form and content of reports of financial condition required to be filed, and reserves for unearned premiums, losses and other purposes. In general, such regulation is for the protection of policyholders rather than security holders.       Risk-based capital ("RBC") standards are designed to measure the adequacy of an insurer's statutory capital and surplus in relation to the risks inherent in its business. The standards are intended to help identify inadequately capitalized companies and require specific regulatory actions in the event an insurer's RBC is deficient. The RBC formula develops a risk-adjusted target level of adjusted statutory capital and surplus by applying certain factors to various asset, premium and reserve items. Higher factors are applied to more risky items and lower factors are applied to less risky items. Thus, the target level of statutory surplus varies not only as a result of the insurer's size, but also on the risk profile of the insurer's operations. The RBC Model Law provides four incremental levels of regulatory attention for insurers whose surplus is below the calculated RBC target. These levels of attention range in severity from requiring the insurer to submit a plan for corrective action to actually placing the insurer under regulatory control. The statutory capital and surplus of the Company exceeded its RBC requirements by a considerable margin as of December 31, 2001.

In 1998, the NAIC adopted the codification of statutory accounting principles ("Codification") which replaced the NAIC's previous primary guidance on statutory accounting, which became effective January 1, 2001. Codification changed prescribed statutory accounting practices and has resulted in changes to the accounting practices that the Company uses to prepare its statutory basis financial statements. Codification has been adopted by all fifty states as the prescribed basis of accounting, including Arizona. The adoption of Codification resulted in an increase to the Company's statutory surplus of approximately $92.4 million.       Privacy provisions of the Gramm-Leach-Bliley Act are fully effective in 2001 and establish new consumer protections regarding the security, confidentiality, and uses of nonpublic personal information of individuals. The law also requires financial institutions to disclose their privacy policies to their customers. Additional privacy legislation pending in the United States Congress and several states is designed to provide further privacy protections to consumers of financial products and services. These statutes and regulations may result in additional regulatory compliance costs, may limit the Company's ability to market its products, and may otherwise constrain the nature or scope of the Company's insurance and financial services operations. The Gramm-Leach-Bliley Act also allows combinations between insurance companies, banks and other entities. In addition, from time to time, Federal initiatives are proposed that could affect the Company's businesses. Such initiatives include employee benefit plan regulations and tax law changes affecting the taxation of insurance companies and the tax treatment of insurance and other investment products. Proposals made in recent years to limit the tax deferral of annuities or otherwise modify the tax rules related to the treatment of annuities have not been enacted. While certain of such proposals, if implemented, could have an adverse effect on the Company's sales of affected products, and, consequently, on its results of operations, the Company believes these proposals have a small likelihood of being enacted, because they would discourage retirement savings and there is strong public and industry opposition to them.       SunAmerica Asset Management is registered with the Securities and Exchange Commission ("SEC") as an investment adviser under the Investment Advisers Act of 1940. The mutual funds that it markets are subject to regulations under the Investment Company Act of 1940. SunAmerica Asset Management and the mutual funds are also subject to regulation and examination by the SEC. In addition, variable annuities and the related separate accounts of the Company are subject to regulation by the SEC under the Securities Act of 1933 and the Investment Company Act of 1940.       Royal Alliance is subject to regulation and supervision by the states in which its representatives transact business, as well as by the SEC and the National Association of Securities Dealers ("NASD"). The SEC and the NASD have broad administrative and supervisory powers relative to all aspects of broker-dealer business and may examine each subsidiary's business and accounts at any time. The SEC also has broad jurisdiction to oversee various activities of the Company and its other subsidiaries.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA (continued)

		Years Ended December 31,								Three Months Ended				Years Ended September 30,
		2001			2000			1999		December 31, 1998				1998			1997
		(In thousands)
FINANCIAL POSITION
Investments and cash		$	6,751,326		$	5,262,734		$	5,554,701		$	8,306,943		$	2,734,742		$	2,608,301