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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] 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 1-7422
AMERICAN GENERAL FINANCE, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1313922
(State of Incorporation) (I.R.S. Employer
Identification No.)
601 N.W. Second Street, Evansville, IN 47708
(Address of principal executive offices) (Zip Code)
(812) 424-8031
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with
the reduced disclosure format.
The number of shares outstanding of the registrant's common stock at
November 13, 1995 was 2,000,000.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(dollars in thousands)
Revenues
Finance charges $384,250 $324,212 $1,112,910 $ 906,836
Insurance 55,225 46,425 165,828 129,652
Other 19,905 16,291 60,539 46,440
Total revenues 459,380 386,928 1,339,277 1,082,928
Expenses
Interest expense 131,092 107,232 386,167 300,039
Operating expenses 122,200 95,324 345,290 279,890
Provision for finance
receivable losses 113,667 58,405 260,509 146,659
Insurance losses and loss
adjustment expenses 32,041 24,696 91,842 70,875
Total expenses 399,000 285,657 1,083,808 797,463
Income before provision for
income taxes 60,380 101,271 255,469 285,465
Provision for Income Taxes 5,424 37,691 78,007 107,578
Net Income $ 54,956 $ 63,580 $ 177,462 $ 177,887
See Notes to Condensed Consolidated Financial Statements.
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AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
1995 1994
Assets (dollars in thousands)
Finance receivables, net of unearned
finance charges:
Real estate loans $2,903,294 $2,704,929
Non-real estate loans 2,782,759 2,660,523
Retail sales finance 2,215,901 2,075,380
Credit cards 542,383 479,480
Net finance receivables 8,444,337 7,920,312
Allowance for finance receivable
losses (305,665) (226,226)
Net finance receivables, less allowance
for finance receivable losses 8,138,672 7,694,086
Marketable securities 846,277 702,510
Cash and cash equivalents 130,435 52,729
Goodwill 282,246 289,000
Other assets 295,689 242,403
Total assets $9,693,319 $8,980,728
Liabilities and Shareholder's Equity
Long-term debt $4,977,124 $4,312,932
Short-term notes payable:
Commercial paper 2,356,632 2,609,986
Banks and other 228,300 161,477
Investment certificates 6,086 6,601
Insurance claims and policyholder
liabilities 488,499 466,883
Other liabilities 296,940 191,278
Accrued taxes 19,956 19,831
Total liabilities 8,373,537 7,768,988
Shareholder's equity:
Common stock 1,000 1,000
Additional paid-in capital 616,021 616,021
Net unrealized investment gains (losses) 24,713 (18,407)
Retained earnings 678,048 613,126
Total shareholder's equity 1,319,782 1,211,740
Total liabilities and shareholder's equity $9,693,319 $8,980,728
See Notes to Condensed Consolidated Financial Statements.
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AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1995 1994
(dollars in thousands)
Cash Flows from Operating Activities
Net income $177,462 $177,887
Reconciling adjustments to net cash
provided by operating activities:
Provision for finance receivable losses 260,509 146,659
Depreciation and amortization 86,561 92,876
Deferral of finance receivable
origination costs (57,795) (62,393)
Deferred federal income tax benefit (26,981) (14,572)
Change in other assets and other liabilities 100,504 11,799
Change in insurance claims and
policyholder liabilities 21,616 32,678
Gain on finance receivables sold through
securitization (4,552) -
Other, net (9,611) (155)
Net cash provided by operating activities 547,713 384,779
Cash Flows from Investing Activities
Finance receivables originated or purchased (4,482,009) (4,080,956)
Principal collections on finance receivables 3,681,067 3,104,225
Finance receivables sold through securitization 100,000 -
Marketable securities purchased (145,619) (134,804)
Marketable securities called, matured and sold 70,862 64,214
Other, net (55,631) (16,478)
Net cash used for investing activities (831,330) (1,063,799)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 1,502,604 737,386
Repayment of long-term debt (841,695) (439,382)
Change in investment certificates (515) (2,252)
Change in short-term notes payable (186,531) 493,735
Dividends paid (112,540) (125,800)
Net cash provided by financing activities 361,323 663,687
Increase (decrease) in cash and cash equivalents 77,706 (15,333)
Cash and cash equivalents at beginning of period 52,729 48,374
Cash and cash equivalents at end of period $130,435 $ 33,041
Supplemental Disclosure of Cash Flow Information
Income taxes paid $116,686 $117,492
Interest paid $364,973 $290,417
See Notes to Condensed Consolidated Financial Statements.
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AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1995
Note 1. Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim periods and include the accounts of American General Finance,
Inc. (AGFI) and its subsidiaries (the Company). The subsidiaries are
wholly-owned, and all intercompany items have been eliminated. Per share
information is not included because AGFI is a wholly-owned subsidiary of
American General Corporation (American General).
Note 2. Adjustments and Reclassifications
These condensed consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, considered necessary by
management for a fair presentation of the Company's consolidated financial
position at September 30, 1995 and December 31, 1994, its consolidated
results of operations for the three months and nine months ended September
30, 1995 and 1994, and its consolidated cash flows for the nine months
ended September 30, 1995 and 1994. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
To conform with the 1995 presentation, certain items in the prior period
have been reclassified.
Note 3. Accounting Changes
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement establishes accounting standards for 1) the impairment of long-
lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used in the business, and 2) long-lived assets
and certain identifiable intangibles to be disposed of. This standard is
effective for fiscal years beginning after December 15, 1995, with earlier
application encouraged. The Company will adopt SFAS 121 during fourth
quarter 1995, effective January 1, 1995. Application of the statement as
of January 1, 1995 will not materially impact previously reported net
income for interim periods of 1995.
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Note 4. Derivative Financial Instruments
The Company's principal borrowing subsidiary is American General Finance
Corporation (AGFC), a wholly-owned subsidiary of AGFI. AGFC makes very
limited use of derivative financial instruments to manage the cost of debt
and does not use derivatives for speculative purposes. AGFC uses interest
rate swap agreements to reduce its exposure to future fluctuations in
interest rates. AGFC's use of swap agreements did not have a material
effect on the Company's weighted-average borrowing rate or reported
interest expense in the first nine months of 1995.
During the nine months ended September 30, 1995, AGFC entered into five
interest rate swap agreements with terms of two to three years and with a
total notional amount of $200 million. These swap agreements effectively
convert short-term and medium-term floating-rate debt to a fixed-rate
basis. At September 30, 1995, outstanding interest rate swaps totaled $590
million of notional amount, with an average fixed pay rate of 8.07% and an
average floating receive rate of 5.95%.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Management believes that the overall sources of cash and liquidity
available to the Company will continue to be sufficient to satisfy its
foreseeable financial obligations and operational requirements.
Operating Activities
Net cash flows from operating activities include the receipt of finance
charges on finance receivables, insurance premiums, and net investment
revenue, the payment of interest on borrowings, operating expenses,
contractual obligations to policyholders, and income taxes, and adjustments
for non-cash items which reconcile net income to net cash from operating
activities. See "Analysis of Operating Results" in Item 2. herein for
information on the Company's revenues and expenses. See the Condensed
Consolidated Statements of Cash Flows included in Item 1. herein for
adjustments for non-cash items which reconcile net income to net cash from
operating activities.
Investing Activities
Net cash flows from investing activities include funding finance
receivables originated or purchased, the Company's primary requirement for
cash, and principal collections on finance receivables, the Company's
primary source of cash. Net cash flows from investing activities also
include finance receivables sold through securitization and marketable
securities purchased and sold primarily by the insurance operations.
Finance receivables originated or purchased increased for the nine months
ended September 30, 1995, when compared to the same period in 1994,
primarily due to business development efforts. Principal collections on
finance receivables increased for the nine months ended September 30, 1995,
when compared to the same period in 1994, primarily due to the higher level
of average finance receivables net of unearned finance charges (average net
receivables).
On May 17, 1995, the Company sold $100.0 million of finance receivables
through securitization with limited recourse. At September 30, 1995, the
amount of finance receivables sold through securitization remained at
$100.0 million. Although the Company continues to service these finance
receivables and maintains the customer relationships, the securitization
was treated as a sale with an immaterial gain for financial reporting
purposes. Accordingly, the finance receivables sold through securitization
are not reflected on the Company's balance sheet. In addition,
securitization of finance receivables results in effectively recording
finance charge revenues and provision for finance receivable losses on such
finance receivables sold in other revenues.
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Financing Activities
To the extent net cash flows from operating activities do not match net
cash flows from investing activities, the Company adjusts its financing
activities accordingly. The major sources of cash flows from financing
activities include proceeds from issuance of long-term debt and short-term
debt, and the major uses of cash flows from financing activities include
repayments of maturing debt and dividend payments to the Company's
shareholder. The ability of AGFI to pay dividends is substantially
dependent on the receipt of dividends or other funds from its subsidiaries.
The amount of dividends certain subsidiaries may pay is effectively limited
by restrictions contained in certain financing agreements.
The Company's issuances of long-term debt for the nine months ended
September 30, 1995 reflect the repayment of maturing issues of long-term
interest obligations, the funding of asset growth, and the decrease in
short-term notes payable.
The Company's principal borrowing subsidiary is American General Finance
Corporation (AGFC), a wholly-owned subsidiary of AGFI. AGFC obtains funds
through the issuance of a combination of fixed-rate debt, principally long-
term, and floating-rate debt, principally short-term. The Company's mix of
fixed-rate and floating-rate debt is determined by management based, in
part, on the nature of the assets being supported. The Company limits its
exposure to market interest rate increases by fixing interest rates that it
pays for term periods. The primary means by which the Company accomplishes
this is through the issuance of fixed-rate debt. To supplement fixed-rate
debt issuances, AGFC also uses interest conversion agreements and has used
options on interest conversion agreements to synthetically create fixed-
rate debt by altering the nature of floating-rate debt, thereby limiting
its exposure to interest rate movements.
The Company currently manages capital to maintain its ratio of debt to
tangible equity at approximately 7.5:1. Tangible equity is calculated as
shareholder's equity less goodwill and net unrealized investment gains or
losses on fixed-maturity marketable securities. Managing capital to the
debt to tangible equity ratio resulted in an increase in the debt to equity
ratio at September 30, 1995 when compared to September 30, 1994, primarily
due to asset growth and goodwill amortization, partially offset by net
unrealized investment gains on fixed-maturity marketable securities.
Credit Facilities
Credit facilities are maintained to support the issuance of commercial
paper and to provide an additional source of funds for operating
requirements. At September 30, 1995, the Company had a committed credit
facility of $500.0 million and was an eligible borrower under $2.8 billion
of committed credit facilities extended to American General and certain of
its subsidiaries (the "shared committed facilities"). The annual
commitment fees for all committed facilities ranged from .07% to .11%. The
Company pays commitment fees for the shared committed facilities only on
its allocated portion which at September 30, 1995 was $1.6 billion. On
October 2, 1995, the $2.8 billion of shared committed facilities were
reduced to $2.4 billion, and the Company's allocated portion remained at
$1.6 billion. At September 30, 1995, the Company also had $571.0 million
of uncommitted credit facilities and was an eligible borrower under $185.0
million of uncommitted credit facilities extended to American General and
certain of its subsidiaries. Available borrowings under all facilities are
reduced by any amounts outstanding thereunder. At September 30, 1995,
Company borrowings outstanding under all credit facilities totalled $354.7
million with remaining availability to the Company of $3.3 billion in
committed facilities and $401.3 million in uncommitted facilities.
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SELECTED FINANCIAL INFORMATION
The following table sets forth certain selected financial information of
the Company for the periods indicated:
At or for the At or for the
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(dollars in thousands)
Average net receivables $8,400,456 $7,260,017 $8,239,478 $6,914,701
Average borrowings $7,473,690 $6,452,547 $7,336,489 $6,144,183
Yield - finance charges
(annualized) as a
percentage of average
net receivables 18.21% 17.78% 18.04% 17.51%
Borrowing cost - interest
expense (annualized) as
a percentage of average
borrowings 7.01% 6.65% 7.02% 6.51%
Spread between yield
and borrowing cost 11.20% 11.13% 11.02% 11.00%
Insurance revenues
(annualized) as a
percentage of average
net receivables 2.63% 2.56% 2.68% 2.50%
Operating expenses
(annualized) as a
percentage of average
net receivables 5.82% 5.25% 5.59% 5.40%
Return on average assets
(annualized) 2.28% 3.06% 2.51% 2.97%
Return on average equity
(annualized) 16.57% 21.88% 18.36% 20.84%
Charge-off ratio -
net charge-offs
(annualized) as a
percentage of average
net receivables 3.22% 2.49% 2.99% 2.30%
Allowance ratio -
allowance for finance
receivable losses as a
percentage of net
finance receivables - - 3.62% 2.86%
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Selected Financial Information (Continued)
At or for the
Nine Months Ended
September 30,
1995 1994
Ratio of earnings to fixed charges (refer to
Exhibit 12 herein for calculations) 1.65 1.93
Delinquency ratio - finance receivables any
portion of which was 60 days or more past
due as a percentage of related receivables
(including unearned finance charges and
excluding deferred origination costs, a
fair value adjustment on finance receivables,
and accrued interest) 3.75% 2.77%
Debt to tangible equity ratio - debt to
shareholder's equity less goodwill and
net unrealized investment gains or losses
on fixed-maturity marketable securities 7.47 7.49
Debt to equity ratio 5.73 5.68
ANALYSIS OF OPERATING RESULTS
Net income decreased $8.6 million, or 14%, for the three months ended
September 30, 1995 and $.4 million for the nine months ended September 30,
1995 when compared to the same periods in 1994.
Finance Charges
Finance charge revenues increased $60.0 million, or 19%, for the three
months ended September 30, 1995 and $206.1 million, or 23%, for the nine
months ended September 30, 1995 when compared to the same periods in 1994,
due to increases in average net receivables and yields. Average net
receivables increased primarily due to growth in the retail sales finance
and loan portfolios resulting from business development efforts. The yield
during the three months and nine months ended September 30, 1995 increased
when compared to the same periods in 1994 primarily due to higher yield on
loans and retail sales finance. The loan yield increased primarily due to
higher yield on real estate loans, resulting from the higher interest rate
environment, and rate management. The increase in loan yield for the nine
months ended September 30, 1995 when compared to the same period in 1994
also reflected the change in the amortization of premiums on certain
purchased finance receivables which were fully amortized in the second
quarter of 1994. The retail sales finance yield increased due to higher
yield on retail sales contracts reflecting improved pricing strategies and
market conditions. The increase in yield for the nine months ended
September 30, 1995 when compared to the same period in 1994 also reflected
higher yield on credit cards.
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Insurance Revenues
Insurance revenues increased $8.8 million, or 19%, for the three months
ended September 30, 1995 and $36.2 million, or 28%, for the nine months
ended September 30, 1995 when compared to the same periods in 1994,
primarily due to an increase in earned premiums. Earned premiums increased
primarily due to increased written premiums in prior periods. Written
premiums increased primarily due to the introduction of a new insurance
product and higher credit insurance sales on increased year-to-date loan
volumes.
Other Revenues
Other revenues increased $3.6 million, or 22%, for the three months ended
September 30, 1995 and $14.1 million, or 30%, for the nine months ended
September 30, 1995 when compared to the same periods in 1994, primarily due
to an increase in investment revenue. The increase in investment revenue
is primarily due to growth in invested assets for the insurance operations.
The increase in other revenues for the nine months ended September 30, 1995
when compared to the same period in 1994 also reflected the gain on finance
receivables sold through securitization.
Interest Expense
Interest expense increased $23.9 million, or 22%, for the three months
ended September 30, 1995 and $86.1 million, or 29%, for the nine months
ended September 30, 1995 when compared to the same periods in 1994, due to
increases in average borrowings and borrowing cost. Average borrowings for
the three months and nine months ended September 30, 1995 increased when
compared to the same periods in 1994 primarily to fund asset growth. The
borrowing cost for the three months ended September 30, 1995 increased when
compared to the same period in 1994 due to an increase in short-term and
long-term borrowing cost. The borrowing cost for the nine months ended
September 30, 1995 increased when compared to the same period in 1994 due
to an increase in short-term borrowing cost, partially offset by a decrease
in long-term borrowing cost. The increase in borrowing cost, as well as
the reduction in pretax income, contributed to a decrease in the ratio of
earnings to fixed charges for the nine months ended September 30, 1995 when
compared to the same period in 1994.
Operating Expenses
Operating expenses increased $26.9 million, or 28%, for the three months
ended September 30, 1995 and $65.4 million, or 23%, for the nine months
ended September 30, 1995 when compared to the same periods in 1994,
primarily due to increases in salaries and growth-related expenses. The
increase in salaries expense reflects operational staffing increases to
support the Company's growth and collection efforts on the increased level
of delinquent finance receivables. Since September 30, 1994, the Company
has increased its finance receivable portfolio by over 580,000 accounts,
and increased net finance receivables by $1.0 billion, or 14%, and opened
over 150 new consumer finance offices. The Company has added 1,600
employees, including 1,250 branch employees and 350 employees to process
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the growth in private label and credit card finance receivables. Other
growth-related expenses contributing to the increase in operating expenses
include data processing, supplies and postage, commissions, occupancy
costs, and credit and collection expenses.
Provision for Finance Receivable Losses
The Company's operational strategy has been focused on improving its risk-
adjusted returns by extending credit to customers with risk characteristics
somewhat higher than those traditionally serviced by the Company. Since
1991, the number of customer accounts serviced increased by 1.9 million,
net finance receivables increased $2.5 billion, yield increased to 18.21%
for the three months ended September 30, 1995 from 16.55% for the year
ended December 31, 1991 and insurance revenues as a percentage of average
net receivables increased to 2.63% for the three months ended September 30,
1995 from 1.86% for the year ended December 31, 1991. This strategy
anticipated increased levels of delinquency and net charge-offs. However,
the delinquency ratios and the charge-off ratios currently experienced by
the Company are higher than anticipated.
Recent economic statistics suggest that the U. S. economy remains in a four
year expansion and that employment is improving in both absolute and
relative terms. However, other reports suggest consumers may be becoming
overextended in their ability to repay obligations as evidenced by
increased consumer debt outstanding and increased frequency of personal
bankruptcies. Several financial services companies that have not adopted
strategies of accepting higher credit risks have also recently reported
increased levels of delinquency and net charge-offs, suggesting that
systemic economic conditions are partly the cause of the Company's higher-
than-anticipated delinquency ratios and charge-off ratios.
Provision for finance receivable losses increased $55.3 million, or 95%,
for the three months ended September 30, 1995 and $113.9 million, or 78%,
for the nine months ended September 30, 1995 when compared to the same
periods in 1994, due to increases in net charge-offs and amounts provided
for the allowance for finance receivable losses.
Net charge-offs for the three months ended September 30, 1995 increased to
$67.4 million from $60.5 million in the prior quarter and $44.8 million in
third quarter 1994. Net charge-offs for the nine months ended September
30, 1995 increased to $184.3 million from $118.6 in the prior year period.
The charge-off ratio for the three months ended September 30, 1995
increased to 3.22% from 2.94% in the prior quarter and 2.49% in third
quarter 1994. The charge-off ratio for the nine months ended September 30,
1995 increased to 2.99% from 2.30% in the prior year period. The
delinquency ratio at September 30, 1995 increased to 3.75% compared to
3.04% at June 30, 1995 and 2.77% at September 30, 1994.
The charge-off ratio increased more than anticipated in the third quarter
of 1995 due to the increase in such ratio on loans and retail sales
finance. The increase in charge-off ratio for the nine months ended
September 30, 1995 when compared to the same period in 1994 also reflected
higher charge-off ratio on credit cards. The charge-off ratio on loans
increased primarily due to the increase in such ratio on non-real estate
loans. The charge-off ratio on retail sales finance increased primarily
due to the increase in charge-off ratio on private label and the increased
proportion of private label in the retail sales finance portfolio over the
past eighteen months.
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Average net receivables for the three months ended September 30, 1995
increased $137.7 million, or 2%, from the prior quarter and $1.1 billion,
or 16%, from third quarter 1994. Average net receivables for the nine
months ended September 30, 1995 increased $1.3 billion, or 19%, from the
prior year period. Average net receivables increased primarily due to the
rapid growth resulting from business development efforts.
During the third quarter of 1995, the Company increased the allowance for
finance receivable losses by $49.4 million primarily due to the higher than
anticipated increase in delinquencies and net charge-offs in third quarter
1995. This additional reserving increased the allowance ratio to 3.62% at
September 30, 1995 compared to 3.07% at June 30, 1995 and 2.86% at
September 30, 1994 and increased the allowance for finance receivable
losses to the high end of the Company's historic 1.2 to 1.3 range for the
ratio of allowance to prior twelve months' net charge-offs.
The Company anticipates future increases in delinquencies and net charge-
offs due to lower credit quality associated with the substantial growth in
finance receivables in mid- to late- 1994. In response, the Company is
adopting an action program for improving credit quality that includes
raising underwriting standards and slowing receivable growth (other than
real estate loan growth), while stressing collections and improving branch
office training. This action program will be accomplished by redirecting
Company resources rather than employing additional resources. Although no
substantial improvement is anticipated in fourth quarter 1995, management
believes that the impact of these corrective actions will be realized
during 1996. A significant deterioration in the U.S. economic climate,
which is not currently anticipated, could delay this corrective program's
results.
Insurance Losses and Loss Adjustment Expenses
Insurance losses and loss adjustment expenses increased $7.3 million, or
30%, for the three months ended September 30, 1995 and $21.0 million, or
30%, for the nine months ended September 30, 1995 when compared to the same
periods in 1994, primarily due to an increase in claims and reserves. The
increase in claims of $4.7 million for the quarter and $10.2 million year-
to-date resulted from higher credit insurance sales on increased year-to-
date loan volumes. The increase in benefit reserves of $2.6 million for
the quarter and $10.8 million year-to-date related to a new life insurance
product sold in 1995.
Provision for Income Taxes
The provision for income taxes decreased $32.3 million, or 86%, for the
three months ended September 30, 1995 and $29.6 million, or 27%, for the
nine months ended September 30, 1995 when compared to the same periods in
1994. The decrease in the provision for income taxes is primarily due to a
non-recurring state income tax adjustment recorded in the third quarter of
1995 and lower taxable income. In October 1995, the Company received a
state income tax refund from a state in which the Company does business as
a result of filing an amended state income tax return. Receipt of this
refund substantiated the Company's net operating loss (NOL) carryforward
for that state which was created by an unusual state income tax exclusion
allowed by the tax law in effect in prior periods, which was subsequently
modified. In accordance with SFAS 109, "Accounting for Income Taxes," the
Company recognized a benefit in third quarter 1995 related to utilization
of the NOL carryforward since it is more likely than not that the benefit
will be realized.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Other than the lawsuits or proceedings disclosed previously, the Company is
a defendant in various other lawsuits and proceedings arising in the normal
course of business. Some of these lawsuits and proceedings arise in
jurisdictions such as Alabama that permit punitive damages disproportionate
to the actual damages alleged. Although no assurances can be given and no
determination can be made at this time as to the outcome of any particular
lawsuit or proceeding, the Company believes that there are meritorious
defenses for all of these claims and is defending them vigorously. The
Company also believes that the total amounts that would ultimately be paid,
if any, arising from these claims would have no material effect on the
Company's consolidated results of operations and consolidated financial
position.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(12) Computation of ratio of earnings to fixed charges.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
Current Report on Form 8-K dated November 8, 1995, with respect to the
election of Frederick W. Geissinger as Chairman and Chief Executive
Officer of AGFC and the Company.
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN GENERAL FINANCE, INC.
(Registrant)
Date: November 13, 1995 By /s/ Philip M. Hanley
Philip M. Hanley
Senior Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
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<PAGE> 16
Exhibit Index
Exhibits Page
(12) Computation of ratio of earnings to fixed charges. 17
(27) Financial Data Schedule. 18
<PAGE>
<PAGE>
<PAGE> 17
Exhibit 12
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
Nine Months Ended
September 30,
1995 1994
(dollars in thousands)
Earnings:
Income before provision for income
taxes $255,469 $285,465
Interest expense 386,167 300,039
Implicit interest in rents 9,695 8,034
Total earnings $651,331 $593,538
Fixed charges:
Interest expense $386,167 $300,039
Implicit interest in rents 9,695 8,034
Total fixed charges $395,862 $308,073
Ratio of earnings to fixed charges 1.65 1.93
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 130,435
<SECURITIES> 846,277
<RECEIVABLES> 8,444,337<F1>
<ALLOWANCES> 305,665<F2>
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F4>
<PP&E> 0<F4>
<DEPRECIATION> 0<F4>
<TOTAL-ASSETS> 9,693,319
<CURRENT-LIABILITIES> 0<F4>
<BONDS> 4,977,124<F5>
<COMMON> 1,000
0<F3>
0<F3>
<OTHER-SE> 1,318,782<F6>
<TOTAL-LIABILITY-AND-EQUITY> 9,693,319
<SALES> 0<F3>
<TOTAL-REVENUES> 1,339,277<F7>
<CGS> 0<F3>
<TOTAL-COSTS> 0<F4>
<OTHER-EXPENSES> 437,132<F8>
<LOSS-PROVISION> 260,509<F9>
<INTEREST-EXPENSE> 386,167<F10>
<INCOME-PRETAX> 255,469
<INCOME-TAX> 78,007
<INCOME-CONTINUING> 177,462
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 177,462
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0<F3>
<PAGE>
<FN>
<F1>RECEIVABLES IN THIS EXHIBIT REPRESENTS NET FINANCE RECEIVABLES REPORTED
IN THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F2>ALLOWANCES IN THIS EXHIBIT REPRESENTS ALLOWANCE FOR FINANCE RECEIVABLE
LOSSES REPORTED IN THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
<F3>NOT APPLICABLE.
<F4>NOT REPORTED SEPARATELY (OR NOT REPORTED SEPARATELY AS DEFINED BY
ARTICLE 5 OF REGULATION S-X) IN DOCUMENT FILED.
<F5>BONDS IN THIS EXHIBIT REPRESENTS LONG-TERM DEBT REPORTED IN THE COMPANY'S
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS WHICH INCLUDES OTHER LONG-TERM
DEBT.
<F6>OTHER STOCKHOLDER'S EQUITY IN THIS EXHIBIT REPRESENTS ADDITIONAL PAID-IN-
CAPITAL, NET UNREALIZED INVESTMENT GAINS (LOSSES), AND RETAINED EARNINGS
REPORTED IN THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F7>TOTAL REVENUES IN THIS EXHIBIT REPRESENTS TOTAL REVENUES REPORTED IN THE
COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F8>OTHER EXPENSES IN THIS EXHIBIT REPRESENTS OPERATING EXPENSES AND
INSURANCE LOSSES AND LOSS ADJUSTMENT EXPENSES REPORTED IN THE COMPANY'S
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F9>LOSS PROVISION IN THIS EXHIBIT REPRESENTS PROVISION FOR FINANCE
RECEIVABLE LOSSES REPORTED IN THE COMPANY'S CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<F10>INTEREST EXPENSE IN THIS EXHIBIT REPRESENTS INTEREST EXPENSE REPORTED
IN THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
</FN>
</TABLE>
