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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 10, 1996
AMERICAN GENERAL FINANCE, INC.
(Exact Name of Registrant as Specified in Charter)
Indiana 1-7422 35-1313922
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation) No.)
601 N.W. Second Street, Evansville, IN 47708
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (812) 424-8031
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Item 5. Other Events.
On January 10, 1996, American General Corporation, the parent of
American General Finance, Inc. (the "Company"), issued a News Release
announcing that American General Finance will report an increase in the
allowance for losses on finance receivables of $216 million in the fourth
quarter of 1995 and that it had received a capital contribution of $80 million
from its parent corporation in December, 1995. The increase in the allowance
for finance receivable losses will result in a fourth quarter after-tax charge
of approximately $140 million to the Company's earnings.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits. The following Exhibit is filed as part of this Report:
Exhibit
Number Description
99 News Release issued by American General Corporation on
January 10, 1996.
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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.
Dated: January 11, 1996 By: /S/ GEORGE W. SCHMIDT
George W. Schmidt
Controller and Assistant
Secretary
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EXHIBIT INDEX
Exhibit
Number Description
99 News Release issued by American General
Corporation on January 10, 1996.
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96-01
Robert D. Mrlik or John E. Pluhowski
Vice President - Director - Corporate
Investor Relations Communications
(713) 831-1137 (713) 831-1149
FOR IMMEDIATE RELEASE
AMERICAN GENERAL'S CONSUMER FINANCE SEGMENT
TO INCREASE ALLOWANCE FOR LOAN LOSSES
Houston, January 10, 1996 -- American General Corporation (NYSE:AGC)
today announced that American General Finance, its consumer finance segment,
will report an increase in the allowance for losses on finance receivables of
$216 million in the fourth quarter of 1995. This action will result in a
fourth quarter after-tax charge of approximately $140 million, or $.67 per
share, to American General's earnings.
This increase was determined by extensive internal analysis, together
with credit loss development projections supplied by Fair, Isaac and Co.,
Inc., a nationally recognized credit consulting firm, and with the concurrence
of Ernst & Young LLP, the company's independent auditors. At year-end 1995,
the allowance for loan losses will be approximately $492 million or 5.9% of
receivables, compared to $226 million or 2.9% of receivables at year-end 1994.
The increased allowance represents the company's best estimate of the
segment's net credit losses on outstanding loans.
"The strength of American General Finance is its traditional branch
office network," said Harold S. Hook, Chairman and CEO of American General
Corporation. "Although the non-branch initiatives of the last few years
generated high receivables growth, they were followed by an unacceptable rise
in delinquencies. Therefore, each of these initiatives has been analyzed and
the underperforming programs have been restructured or discontinued. We
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believe the increase in the allowance and the other actions taken address the
overall credit quality issue and position the consumer finance segment to
return to the levels of earnings achieved over the last few years."
American General is one of the nation's largest diversified financial
services organizations with assets of $60 billion and shareholders' equity of
$5.5 billion. Headquartered in Houston, it is a leading provider of
retirement annuities, consumer loans, and life insurance to over eight million
households. American General Corporation common stock is listed on the New
York, Pacific, London, and Swiss stock exchanges.
# # #
Q&A SUPPLEMENT ATTACHED
Accompanying this news release are comments, in question-and-answer
format, regarding the January 10, 1996 announcement of the increased allowance
for losses on finance receivables.
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Supplement to: News Release 96-01, Dated January 10, 1996, Entitled:
"AMERICAN GENERAL'S CONSUMER FINANCE SEGMENT
TO INCREASE ALLOWANCE FOR LOAN LOSSES"
American General Corporation today announced that American General Finance,
its consumer finance segment, will increase the allowance for losses on
finance receivables by $216 million in the fourth quarter of 1995.
American General Finance with assets of $10 billion and equity of $1.3
billion, is a wholly-owned subsidiary of American General Corporation.
Headquartered in Evansville, Indiana, it is a leading provider of consumer
loans and credit-related products. With 1,400 branch offices in 41 states,
Puerto Rico, and the U.S. Virgin Islands, the company serves 3.8 million
customers.
Below, in question-and-answer format, are comments regarding the allowance
increase.
1. Q. Why was there a major increase in the allowance for loan losses in the
fourth quarter?
A. Due to the unexpected rise in delinquencies beginning in the third
quarter of 1995, a comprehensive analysis of the consumer finance
segment was initiated in the fourth quarter. The results of the recently
completed analysis indicated a need for the increase in the allowance
for loan losses.
60-day Delinquencies as % of Receivables
12/94 3/95 6/95 9/95 12/95
----- ---- ---- ---- -----
2.9% 2.9% 3.0% 3.8% 4.1%e
2. Q. Does the increased allowance resolve the credit quality issue?
A. Based on extensive internal and external analysis, we believe the
increased allowance represents the company s best estimate of the
segment's net credit losses on outstanding loans. At year-end 1995, the
allowance for loan losses will be approximately $492 million or 5.9% of
receivables.
Allowance as % of Receivables
12/94 3/95 6/95 9/95 12/95
----- ---- ---- ---- -----
2.9% 3.0% 3.1% 3.6% 5.9%
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3. Q. How will the increased allowance impact the capital ratio of American
General Finance?
A. To support the increased allowance, American General contributed $80
million of internally generated capital to American General Finance in
December 1995. This enabled American General Finance, Inc. to maintain
leverage below its target level of debt to tangible net worth (7.5-to-
1).
4. Q. What is the outlook for American General Finance in 1996?
A. We believe the actions taken will position American General Finance to
achieve a return on equity in the 14-16% range.
5. Q. Does American General still consider consumer finance a core business?
A. Yes. Since 1982, American General Finance has been a major contributor
to American General's growth strategy and complements the company's
balanced mix of financial service businesses.
6. Q. Will the $80 million capital contribution change the company's dividend
or share repurchase programs?
A. No. It is management's opinion that this action, in and of itself, will
not change the company's dividend or share repurchase programs.
7. Q. When do you expect to report 1995 earnings?
A. We expect to report fourth quarter and preliminary year-end 1995 results
on Monday, January 29, 1996.
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