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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 June 30, 1996
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.
At August 8, 1996, there were 2,000,000 shares of the registrant's common
stock, $.50 par value, outstanding.
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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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(dollars in thousands)
Revenues
Finance charges $362,261 $370,104 $733,661 $728,660
Insurance 52,086 56,465 103,273 110,603
Other 15,557 22,580 31,928 40,634
Total revenues 429,904 449,149 868,862 879,897
Expenses
Interest expense 121,271 130,280 247,251 255,075
Operating expenses 132,934 113,699 264,328 223,090
Provision for finance
receivable losses 101,783 74,454 210,584 146,842
Insurance losses and loss
adjustment expenses 26,506 31,157 55,054 59,801
Total expenses 382,494 349,590 777,217 684,808
Income before provision for
income taxes 47,410 99,559 91,645 195,089
Provision for Income Taxes 17,822 37,154 33,869 72,583
Net Income $ 29,588 $ 62,405 $ 57,776 $122,506
See Notes to Condensed Consolidated Financial Statements.
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AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
1996 1995
Assets (dollars in thousands)
Finance receivables, net of unearned
finance charges:
Real estate loans $3,107,116 $2,904,016
Non-real estate loans 2,528,855 2,765,361
Retail sales contracts 1,053,313 1,240,708
Private label 844,983 942,706
Credit cards 518,703 557,603
Net finance receivables 8,052,970 8,410,394
Allowance for finance receivable
losses (482,154) (492,124)
Net finance receivables, less allowance
for finance receivable losses 7,570,816 7,918,270
Investment securities 835,513 884,775
Cash and cash equivalents 113,417 103,238
Goodwill 275,493 279,995
Other assets 365,936 375,072
Total assets $9,161,175 $9,561,350
Liabilities and Shareholder's Equity
Long-term debt $4,654,686 $4,979,883
Short-term notes payable:
Commercial paper 2,265,397 2,194,771
Banks and other 171,000 289,100
Investment certificates 5,581 6,197
Insurance claims and policyholder
liabilities 464,654 483,971
Other liabilities 288,004 273,485
Accrued taxes 16,678 12,162
Total liabilities 7,866,000 8,239,569
Shareholder's equity:
Common stock 1,000 1,000
Additional paid-in capital 696,128 696,128
Net unrealized gains on investment
securities 11,118 38,412
Retained earnings 586,929 586,241
Total shareholder's equity 1,295,175 1,321,781
Total liabilities and shareholder's equity $9,161,175 $9,561,350
See Notes to Condensed Consolidated Financial Statements.
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AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1996 1995
(dollars in thousands)
Cash Flows from Operating Activities
Net income $ 57,776 $122,506
Reconciling adjustments to net cash
provided by operating activities:
Provision for finance receivable losses 210,584 146,842
Depreciation and amortization 48,594 59,274
Deferral of finance receivable
origination costs (26,482) (40,476)
Deferred federal income tax charge (benefit) 1,780 (3,237)
Change in other assets and other liabilities 10,754 88,032
Change in insurance claims and
policyholder liabilities (19,317) 12,186
Gain on finance receivables sold through
securitization - (4,552)
Other, net 51,312 (3,353)
Net cash provided by operating activities 335,001 377,222
Cash Flows from Investing Activities
Finance receivables originated or purchased (2,403,223) (3,081,031)
Principal collections on finance receivables 2,529,637 2,447,903
Securitized finance receivables sold - 100,000
Investment securities purchased (102,233) (93,795)
Investment securities called, matured and sold 109,171 40,515
Other, net (25,751) (27,820)
Net cash provided by (used for) investing
activities 107,601 (614,228)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 31,109 1,340,325
Repayment of long-term debt (358,354) (518,961)
Change in investment certificates (616) (355)
Change in short-term notes payable (47,474) (468,686)
Dividends paid (57,088) (70,200)
Net cash (used for) provided by financing
activities (432,423) 282,123
Increase in cash and cash equivalents 10,179 45,117
Cash and cash equivalents at beginning of period 103,238 52,729
Cash and cash equivalents at end of period $113,417 $ 97,846
Supplemental Disclosure of Cash Flow Information
Income taxes paid $ 1,663 $ 78,028
Interest paid $249,524 $237,505
See Notes to Condensed Consolidated Financial Statements.
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AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1996
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. and its subsidiaries. American General Finance, Inc. is hereinafter
referenced as "AGFI" or collectively, with its subsidiaries, whether
directly or indirectly owned, as 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 June 30, 1996 and December 31, 1995, its consolidated results
of operations for the three months and six months ended June 30, 1996 and
1995, and its consolidated cash flows for the six months ended June 30,
1996 and 1995. 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, 1995.
To conform with the 1996 presentation, certain items in the prior period
have been reclassified.
Note 3. Derivative Financial Instruments
The Company's principal borrowing subsidiary is American General Finance
Corporation (AGFC), a wholly-owned subsidiary of AGFI. AGFC makes limited
use of derivative financial instruments to manage the cost of its debt.
AGFC has used interest conversion agreements to reduce its exposure to
future fluctuations in interest rates by effectively converting short-term
and medium-term floating-rate debt to fixed-rate. At June 30, 1996,
outstanding interest conversion agreements in which AGFC contracted to pay
interest at fixed rates and receive floating rates totaled $540 million of
notional amount, with an average fixed pay rate of 8.05% and an average
floating receive rate of 6.06%. AGFC's use of such agreements did not have
a material effect on the Company's weighted-average interest rate or
reported interest expense in the first six months of 1996 or 1995.
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Note 4. Accounting Changes
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." This statement
provides accounting standards for determining whether transfers of
financial assets are sales or secured borrowings. The statement must be
applied prospectively to all applicable transactions occurring after
December 31, 1996. Earlier or retroactive application is not permitted.
The impact of this statement on the Company's consolidated results of
operations and financial position is not expected to be material.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company's sources of funds include operations, issuances of fixed-rate
and floating-rate debt, borrowings under credit facilities, and the sale of
finance receivables through securitization. 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.
Liquidity
Operating cash flow, which includes net income adjusted for non-cash
revenues and expenses, totaled $335.0 million for the six months ended June
30, 1996 compared to $377.2 million for the same period in 1995. Operating
cash flow combined with the net collections of finance receivables
generated cash flow of $461.4 million for the six months ended June 30,
1996. This cash flow was used to fund the net repayments of debt of $375.3
million and to pay dividends of $57.1 million to the Company's parent for
the six months ended June 30, 1996. Operating cash flow combined with the
net proceeds of increased debt and the proceeds of securitized finance
receivables sold generated cash flow of $829.5 million for the same period
in 1995. This cash flow was used to fund the net originations and
purchases of finance receivables of $633.1 million and to pay dividends of
$70.2 million to the Company's parent for the six months ended June 30,
1995.
Dividends are managed to maintain the Company's targeted leverage of 7.5 to
1 of debt to tangible equity (equity less goodwill and net unrealized gains
or losses on fixed-maturity investment securities). The debt to tangible
equity ratio at June 30, 1996 was 7.03 due to the decrease in debt
resulting from the net decline in finance receivables which management
considers to be temporary. (See Analysis of Operating Results herein.)
The ability of AGFI to pay dividends is substantially dependent on the
receipt of dividends or other funds from its subsidiaries. The total
amount of dividends available for certain subsidiaries to pay is
effectively limited by restrictions contained in certain financing
agreements.
Capital Resources
The Company's requirement for capital varies directly with net finance
receivables. The mix of capital between debt and equity is based primarily
upon maintaining leverage that supports cost-effective funding. At June
30, 1996, the Company's capital was $8.4 billion, consisting of $7.1
billion of debt and $1.3 billion of equity, compared to $8.7 billion at
June 30, 1995, consisting of $7.4 billion of debt and $1.3 billion of
equity.
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The Company 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 principal borrowing subsidiary, AGFC, and one of
its subsidiaries sell commercial paper notes with maturities ranging from 1
to 270 days directly to banks, insurance companies, corporations, and other
institutional investors. AGFC may also offer medium-term notes with
original maturities of nine months or longer to certain institutional
investors. The remainder of AGFC's capital is obtained primarily through
underwritten public debt offerings with maturities generally ranging from
three to ten years.
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 has used interest
conversion agreements to synthetically create fixed-rate debt by altering
the nature of floating-rate funding, thereby limiting its exposure to
interest rate movements.
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 June 30, 1996, the Company had committed credit
facilities of $700.0 million and was an eligible borrower under $2.4
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 .06% to
.09%. The Company pays commitment fees for the shared committed facilities
only on its allocated portion which at June 30, 1996 was $1.6 billion. At
June 30, 1996, the Company also had $611.0 million of uncommitted credit
facilities and was an eligible borrower under $165.0 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 June 30, 1996, Company borrowings
outstanding under all credit facilities totaled $212.0 million with
remaining availability to the Company of $3.1 billion in committed
facilities and $564.0 million in uncommitted facilities.
Securitization
The Company has securitized a portion of its portfolio of private label and
credit card finance receivables to establish additional sources of funding
and liquidity. During the second quarter of 1995, the Company sold $100
million of securitized finance receivables with limited recourse. At June
30, 1996, securitized finance receivables sold remained at $100 million.
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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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(dollars in thousands)
Average finance receivables,
net of unearned finance
charges (average net
receivables) $8,021,088 $8,262,758 $8,119,868 $8,158,989
Average borrowings $7,049,447 $7,356,311 $7,159,378 $7,266,752
Yield - finance charges
(annualized) as a
percentage of average
net receivables 18.13% 17.94% 18.13% 17.95%
Borrowing cost - interest
expense (annualized) as
a percentage of average
borrowings 6.89% 7.08% 6.91% 7.03%
Spread between yield
and borrowing cost 11.24% 10.86% 11.22% 10.92%
Insurance revenues
(annualized) as a
percentage of average
net receivables 2.60% 2.73% 2.54% 2.71%
Operating expenses
(annualized) as a
percentage of average
net receivables 6.63% 5.50% 6.51% 5.47%
Return on average assets
(annualized) 1.30% 2.64% 1.25% 2.63%
Return on average equity
(annualized) 9.07% 19.27% 8.79% 19.30%
Charge-off ratio -
net charge-offs
(annualized) as a
percentage of average
net receivables 5.33% 2.94% 5.41% 2.88%
Allowance ratio -
allowance for finance
receivable losses as a
percentage of net
finance receivables - - 5.99% 3.07%
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Selected Financial Information (Continued)
At or for the
Six Months Ended
June 30,
1996 1995
Ratio of earnings to fixed charges (refer to
Exhibit 12 herein for calculations) 1.36 1.75
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) 3.99% 3.04%
Debt to tangible equity ratio - debt to
equity less goodwill and net unrealized
gains or losses on fixed-maturity
investment securities 7.03 7.46
Debt to equity ratio 5.48 5.71
ANALYSIS OF OPERATING RESULTS
Net income decreased $32.8 million, or 53%, for the three months ended June
30, 1996 and $64.7 million, or 53%, for the six months ended June 30, 1996
when compared to the same periods in 1995 primarily due to increases in the
provision for finance receivable losses and operating expenses.
Finance Charges
Finance charge revenues decreased $7.8 million, or 2%, for the three months
ended June 30, 1996 and increased $5.0 million, or .7%, for the six months
ended June 30, 1996 when compared to the same periods in 1995. The
decrease in finance charge revenues for the quarter was due to a decrease
in average net receivables, partially offset by an increase in yields. The
increase in finance charge revenues for the six month period was due to an
increase in yields and an additional day in 1996, partially offset by a
decrease in average net receivables. Average net receivables decreased
$241.7 million, or 3%, for the three months ended June 30, 1996 and $39.1
million, or .5%, for the six months ended June 30, 1996 when compared to
the same periods in 1995 primarily due to the action program to improve
credit quality. (See Provision for Finance Receivable Losses herein.)
Yields increased 19 basis points for the three months ended June 30, 1996
and 18 basis points for the six months ended June 30, 1996 when compared to
the same periods in 1995 primarily due to higher yield on loans. The loan
yield increased primarily due to higher yield on real estate loans,
resulting from the higher interest rate environment and rate management,
partially offset by a larger proportion of the loan portfolio in real
estate loans which generally have lower yields than non-real estate loans.
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Insurance Revenues
Insurance revenues decreased $4.4 million, or 8%, for the three months
ended June 30, 1996 and $7.3 million, or 7%, for the six months ended June
30, 1996 when compared to the same periods in 1995 primarily due to a
decrease in earned premiums. Earned premiums decreased primarily due to a
decrease in net written premiums. The decrease in net written premiums
reflected the decrease in loan volume, which resulted from the action
program to improve credit quality.
Other Revenues
Other revenues decreased $7.0 million, or 31%, for the three months ended
June 30, 1996 and $8.7 million, or 21%, for the six months ended June 30,
1996 when compared to the same periods in 1995 primarily due to the gain
recorded in the second quarter of 1995 for the securitized finance
receivables sold and a decrease in investment revenue on the invested
assets for the insurance operations. The decrease in investment revenue
was primarily due to realized losses on investments of $2.1 million and
$2.2 million, respectively, for the three months and six months ended June
30, 1996 compared to $.2 million of realized gains on investments for the
three months and six months ended June 30, 1995. The decrease in
investment revenue was also due to a decrease in return on invested assets
of 20 basis points for the three months ended June 30, 1996 and 26 basis
points for the six months ended June 30, 1996 when compared to the same
periods in 1995, partially offset by growth in average invested assets of
$66.8 million, or 8%, for the three months ended June 30, 1996 and $76.4
million, or 10%, for the six months ended June 30, 1996 when compared to
the same periods in 1995.
Interest Expense
Interest expense decreased $9.0 million, or 7%, for the three months ended
June 30, 1996 and $7.8 million, or 3%, for the six months ended June 30,
1996 when compared to the same periods in 1995 due to decreases in average
borrowings and borrowing cost. Average borrowings decreased $306.9
million, or 4%, for the three months ended June 30, 1996 and $107.4
million, or 1%, for the six months ended June 30, 1996 when compared to the
same periods in 1995 primarily due to the decrease in average net
receivables. The borrowing cost decreased 19 basis points for the three
months ended June 30, 1996 and 12 basis points for the six months ended
June 30, 1996 when compared to the same periods in 1995 due to a decrease
in short-term borrowing cost, with long-term borrowing cost remaining at
near the same level. The reduction in income before provision for income
taxes, partially offset by the decrease in interest expense, resulted in
the decrease in the ratio of earnings to fixed charges for the six months
ended June 30, 1996 when compared to the same period in 1995.
Operating Expenses
Operating expenses increased $19.2 million, or 17%, for the three months
ended June 30, 1996 and $41.2 million, or 18%, for the six months ended
June 30, 1996 when compared to the same periods in 1995 primarily due to
growth in the business that occurred in the first three quarters of 1995
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and in 1994, the decrease in deferral of finance receivable origination
costs, and collection efforts on the increased level of delinquent finance
receivables. Such growth in the business resulted in operational staffing
increases and other growth-related expenses.
Since late 1995, certain underperforming marketing initiatives have either
been restructured or discontinued. Certain non-recurring operating
expenses associated with the discontinued initiatives negatively impacted
the financial results for the second quarter of 1996 by $7.3 million. The
comprehensive review of the Company initiated in fourth quarter 1995 and
the decrease in finance receivables during 1996 resulted in a second
quarter workforce reduction of approximately 450 positions throughout the
U.S., primarily through attrition. Management believes the improvement
programs implemented in late 1995 and throughout 1996 will continue to
address the overall credit quality issues and lead to further expense
reductions.
Provision for Finance Receivable Losses
Provision for finance receivable losses increased $27.3 million, or 37%,
for the three months ended June 30, 1996 and $63.7 million, or 43%, for the
six months ended June 30, 1996 when compared to the same periods in 1995
primarily due to increases in net charge-offs.
Net charge-offs for the three months ended June 30, 1996 increased to
$106.8 million from $60.5 million for the same period in 1995. Net charge-
offs for the three months ended March 31, 1996 were $113.9 million. The
charge-off ratio for second quarter 1996 was 5.33% compared to 5.50% for
first quarter 1996 and 2.94% for second quarter 1995.
In recent years, the Company's operational strategy had 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. As expected, this strategy adversely influenced credit
quality. However, the delinquency ratios and the charge-off ratios
experienced by the Company sharply increased to greater than anticipated
levels beginning in the third quarter of 1995. Due to these increases in
delinquencies and net charge-offs, a comprehensive review of the Company
was initiated in the fourth quarter of 1995. This review consisted of
extensive internal analysis, together with finance receivable loss
development projections supplied by outside credit consultants. The
results of the analysis indicated a need for an increase in the allowance
for finance receivable losses. A $216.0 million increase in the allowance
for finance receivable losses was recorded in fourth quarter 1995.
In addition, the Company adopted an action program for improving credit
quality that included raising underwriting standards, expanding the use of
credit scoring, and slowing branch expansion and receivable growth (other
than real estate loan growth), while stressing collections and improving
branch office training. This action program is being accomplished
primarily by redirecting Company resources rather than employing additional
resources. At June 30, 1996, net finance receivables were $8.1 billion, a
decrease of $357.4 million from the balance at December 31, 1995, but an
increase of $32.8 million from the balance at March 31, 1996 primarily due
to an increase in real estate loans.
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At June 30, 1996, delinquencies were $350.3 million compared to $353.9
million at March 31, 1996 and $282.8 million at June 30, 1995. The
delinquency ratio decreased from 4.03% at March 31, 1996 to 3.99% at June
30, 1996 (compared to 3.04% at June 30, 1995).
The allowance for finance receivable losses decreased $4.8 million from
$487.0 million at March 31, 1996 to $482.2 million at June 30, 1996. The
allowance ratio at June 30, 1996 was 5.99% compared to 6.07% at March 31,
1996. Management believes that the allowance for finance receivable losses
is adequate given the current level of delinquencies and net charge-offs.
Net charge-offs are expected to moderate in the second half of 1996.
However, adverse changes in general economic conditions, which include the
recent increase in the level of personal bankruptcies, could negatively
impact expected results.
Insurance Losses and Loss Adjustment Expenses
Insurance losses and loss adjustment expenses decreased $4.7 million, or
15%, for the three months ended June 30, 1996 and $4.7 million, or 8%, for
the six months ended June 30, 1996 when compared to the same periods in
1995 due to a decrease in provision for future benefits. The decrease in
insurance losses and loss adjustment expenses for the six month period was
partially offset by an increase in claims. Provision for future benefits
decreased $4.4 million for the quarter and $7.0 million for the six month
period due to reduced sales of non-credit insurance products. Claims for
the six month period increased $2.3 million primarily due to increased loss
experience on credit insurance. Claims for the quarter decreased $.3
million primarily due to reduced claims on non-credit insurance.
Provision for Income Taxes
The provision for income taxes decreased $19.3 million, or 52%, for the
three months ended June 30, 1996 and $38.7 million, or 53%, for the six
months ended June 30, 1996 when compared to the same periods in 1995
primarily due to lower taxable income.
Forward-looking Statements
The statements contained in this filing on Form 10-Q that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Actual results may differ
materially from those included in the forward-looking statements. These
forward-looking statements involve risks and uncertainties including, but
not limited to, the following: changes in general economic conditions,
including the performance of financial markets, interest rates, and the
level of personal bankruptcies; competitive, regulatory, or tax changes
that affect the cost of or demand for the Company's products; adverse
litigation results; and failure to achieve the Company's anticipated levels
of expense savings from cost-saving initiatives. The Company's future
results also could be adversely affected if finance receivable volume is
lower than anticipated (which could occur, for example, as a result of the
Company's recently implemented action program to tighten underwriting
standards) or if, despite the Company's initiatives to improve credit
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quality, finance receivable delinquencies and net charge-offs fail to trend
downward to the extent anticipated by management. Investors are also
directed to other risks and uncertainties discussed in documents filed by
the Company with the Securities and Exchange Commission.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In addition to those lawsuits or proceedings disclosed in the Company's
1995 Form 10-K, AGFI and certain of its subsidiaries are parties to various
other lawsuits and proceedings arising in the ordinary course of business.
Many of these lawsuits and proceedings arise in jurisdictions, such as
Alabama, that permit damage awards disproportionate to the actual economic
damages incurred. Based upon information presently available, the Company
believes that the total amounts that ultimately will be paid, if any,
arising from these lawsuits and proceedings will have no material adverse
effect on the Company's consolidated results of operations and financial
position. However, it should be noted that the frequency of large damage
awards, including large punitive damage awards, that bear little or no
relation to actual economic damages incurred by plaintiffs in jurisdictions
like Alabama continues to increase and creates the potential for an
unpredictable judgment in any given suit.
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.
No Current Reports on Form 8-K were filed during the second quarter of
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.
(Registrant)
Date: August 8, 1996 By /s/ John S. Poelker
John S. Poelker
Senior Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
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Exhibit Index
Exhibits Page
(12) Computation of Ratio of Earnings to Fixed Charges. 17
(27) Financial Data Schedule. 18
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Exhibit 12
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
Six Months Ended
June 30,
1996 1995
(dollars in thousands)
Earnings:
Income before provision for income
taxes $ 91,645 $195,089
Interest expense 247,251 255,075
Implicit interest in rents 6,249 6,304
Total earnings $345,145 $456,468
Fixed charges:
Interest expense $247,251 $255,075
Implicit interest in rents 6,249 6,304
Total fixed charges $253,500 $261,379
Ratio of earnings to fixed charges 1.36 1.75
<PAGE>
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 113,417
<SECURITIES> 835,513
<RECEIVABLES> 8,052,970<F1>
<ALLOWANCES> 482,154<F2>
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F4>
<PP&E> 0<F4>
<DEPRECIATION> 0<F4>
<TOTAL-ASSETS> 9,161,175
<CURRENT-LIABILITIES> 0<F4>
<BONDS> 4,654,686<F5>
0<F3>
0<F3>
<COMMON> 1,000
<OTHER-SE> 1,294,175<F6>
<TOTAL-LIABILITY-AND-EQUITY> 9,161,175
<SALES> 0<F3>
<TOTAL-REVENUES> 868,862<F7>
<CGS> 0<F3>
<TOTAL-COSTS> 0<F4>
<OTHER-EXPENSES> 319,382<F8>
<LOSS-PROVISION> 210,584<F9>
<INTEREST-EXPENSE> 247,251<F10>
<INCOME-PRETAX> 91,645
<INCOME-TAX> 33,869
<INCOME-CONTINUING> 57,776
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 57,776
<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 GAINS (LOSSES) ON INVESTMENT SECURITIES, 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>
