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 March 31, 2000
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 May 15, 2000, 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
<TABLE>
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
(dollars in thousands)
<S> <C> <C>
Revenues
Finance charges $390,600 $357,394
Insurance 48,167 42,934
Other 28,490 22,308
Total revenues 467,257 422,636
Expenses
Interest expense 163,141 137,545
Operating expenses 136,909 133,669
Provision for finance receivable losses 48,569 51,810
Insurance losses and loss adjustment
expenses 24,987 19,873
Total expenses 373,606 342,897
Income before provision for income taxes 93,651 79,739
Provision for Income Taxes 34,127 29,032
Net Income $ 59,524 $ 50,707
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
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<TABLE>
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
<CAPTION>
March 31, December 31,
2000 1999
(dollars in thousands)
<S> <C> <C>
Assets
Finance receivables, net of unearned
finance charges:
Real estate loans $ 7,232,182 $ 7,104,227
Non-real estate loans 2,520,755 2,576,081
Retail sales finance 1,359,584 1,349,689
Net finance receivables 11,112,521 11,029,997
Allowance for finance receivable losses (368,576) (395,626)
Net finance receivables, less allowance
for finance receivable losses 10,743,945 10,634,371
Investment securities 1,035,069 988,563
Cash and cash equivalents 143,600 146,710
Other assets 838,262 865,663
Total assets $12,760,876 $12,635,307
Liabilities and Shareholder's Equity
Long-term debt $ 5,701,502 $ 5,716,991
Short-term notes payable:
Commercial paper 4,330,183 4,245,961
Banks and other 208,437 211,559
Deposits 31,237 32,118
Insurance claims and policyholder
liabilities 466,327 462,100
Other liabilities 421,398 416,572
Accrued taxes 46,879 22,771
Total liabilities 11,205,963 11,108,072
Shareholder's equity:
Common stock 1,000 1,000
Additional paid-in capital 876,708 876,708
Accumulated other comprehensive loss (11,536) (6,696)
Retained earnings 688,741 656,223
Total shareholder's equity 1,554,913 1,527,235
Total liabilities and shareholder's equity $12,760,876 $12,635,307
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE> 4
<TABLE>
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
(dollars in thousands)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 59,524 $ 50,707
Reconciling adjustments:
Provision for finance receivable losses 48,569 51,810
Depreciation and amortization 34,159 30,727
Deferral of finance receivable origination
costs (13,353) (12,693)
Deferred income tax charge (benefit) 1,208 (58)
Change in other assets and other liabilities 23,502 (12,849)
Change in insurance claims and policyholder
liabilities 4,227 (5,274)
Change in taxes receivable and payable 28,269 29,098
Other, net 6,240 26,661
Net cash provided by operating activities 192,345 158,129
Cash Flows from Investing Activities
Finance receivables originated or purchased (1,505,112) (1,452,457)
Principal collections on finance receivables 1,332,937 1,248,448
Investment securities purchased (119,160) (110,991)
Investment securities called, matured and sold 67,429 78,714
Change in premiums on finance receivables
purchased and deferred charges (1,523) (7,161)
Other, net (6,848) (10,703)
Net cash used for investing activities (232,277) (254,150)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 379,134 314,559
Repayment of long-term debt (395,531) (25,859)
Change in deposits (881) (148)
Change in short-term notes payable 81,100 (178,687)
Dividends paid (27,000) (41,001)
Net cash provided by financing activities 36,822 68,864
Decrease in cash and cash equivalents (3,110) (27,157)
Cash and cash equivalents at beginning of period 146,710 148,002
Cash and cash equivalents at end of period $ 143,600 $ 120,845
Supplemental Disclosure of Cash Flow
Information
Income taxes paid $ 4,161 $ 648
Interest paid $ 194,517 $ 155,021
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 5
<TABLE>
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
(dollars in thousands)
<S> <C> <C>
Net income $ 59,524 $ 50,707
Other comprehensive income:
Net unrealized losses on investment
securities (3,775) (15,658)
Income tax effect 1,321 5,494
Net unrealized losses on investment
securities, net of tax (2,454) (10,164)
Reclassification adjustment for realized
gains included in net income (3,671) (305)
Income tax effect 1,285 93
Realized gains included in net income,
net of tax (2,386) (212)
Other comprehensive loss, net of tax (4,840) (10,376)
Comprehensive income $ 54,684 $ 40,331
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 6
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2000
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. will be referred
to as "AGFI" or collectively with its subsidiaries, whether directly or
indirectly owned, as the "Company" or "we". The subsidiaries are all
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
Our condensed consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, that we considered
necessary for a fair presentation of the Company's consolidated financial
position at March 31, 2000 and December 31, 1999, our consolidated results
of operations for the three months ended March 31, 2000 and 1999, our
consolidated cash flows for the three months ended March 31, 2000 and 1999,
and our consolidated comprehensive income for the three months ended March
31, 2000 and 1999. Our condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and
related notes included in our Annual Report on Form 10-K for the year ended
December 31, 1999.
To conform with the 2000 presentation, certain items in the prior period
have been reclassified.
Note 3. Accounting Changes
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires all derivative
instruments to be recognized at fair value in the balance sheet. Changes
in the fair value of a derivative instrument will be reported as earnings
or other comprehensive income, depending upon the intended use of the
derivative instrument. We will adopt SFAS 133 on January 1, 2001. We do
not expect adoption to have a material impact on the Company's consolidated
results of operations or financial position.
Note 4. Derivative Financial Instruments
Our 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 and is
neither a dealer nor a trader in derivative financial instruments. AGFC
has generally limited its use of derivative financial instruments to
interest rate swap agreements.
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<PAGE> 7
AGFC uses interest rate swap agreements to reduce its exposure to market
interest expense rate increases by synthetically converting certain
floating-rate debt to a fixed-rate basis. At March 31, 2000, interest rate
swap agreements in which AGFC contracted to pay interest at fixed rates and
receive interest at floating rates totaled $1.3 billion in notional amount,
with a weighted average pay rate of 6.72% and a weighted average receive
rate of 5.78%.
As an alternative to fixed-rate term debt, AGFC's interest rate swap
agreements did not have a material effect on the Company's weighted-average
interest rate or reported interest expense in the first three months of
2000 or 1999.
Note 5. Segment Information
We have two business segments: consumer finance and insurance. Our
segments are defined by financial service product. During first quarter
2000, the centralized real estate operation was decentralized and merged
into the consumer branches operation. The resulting new segment has been
named the consumer finance operation. The consumer finance operation
originates home equity and consumer loans, acquires individual first and
second mortgage loans originated by real estate brokers, purchases
portfolios of mortgage loans originated by various real estate lenders,
extends lines of credit, offers retail sales financing to merchants, and
sells credit and non-credit insurance products. The insurance operation
writes and assumes credit and non-credit insurance through products that
are sold principally by the consumer finance operation.
The following tables display information about the Company's segments as
well as a reconciliation of total segment pretax income to the condensed
consolidated financial statement amounts.
For the three months ended March 31, 2000:
Consumer Total
Finance Insurance Segments
(dollars in thousands)
Revenues:
External:
Finance charges $408,866 $ - $408,866
Insurance 247 47,920 48,167
Other 442 22,020 22,462
Intercompany 19,394 (18,619) 775
Pretax income 97,339 18,793 116,132
For the three months ended March 31, 1999:
Consumer Total
Finance Insurance Segments
(dollars in thousands)
Revenues:
External:
Finance charges $371,193 $ - $371,193
Insurance 443 42,491 42,934
Other 2,556 19,868 22,424
Intercompany 17,511 (16,900) 611
Pretax income 81,185 18,126 99,311
<PAGE>
<PAGE> 8
Reconciliation of total segment pretax income to the condensed consolidated
financial statement amounts is summarized below:
Three Months Ended
March 31,
2000 1999
(dollars in thousands)
Pretax income:
Segments $116,132 $ 99,311
Corporate (23,953) (17,045)
Adjustments 1,472 (2,527)
Total consolidated pretax income $ 93,651 $ 79,739
Note 6. Legal Contingencies
Satellite Dish Litigation
In the mid-1990s, one of our subsidiaries, A.G. Financial Service Center,
Inc. (Financial Service Center), formerly named American General Financial
Center, provided financing for satellite dishes sold by independent
unaffiliated dealers. On May 18, 1999, the Chancery Court of the First
Judicial District of Jones County, Mississippi in a case captioned Clayton
D. Smith, et al. v. Delta TV Corporation, Don Acy, US Electronics, American
General Financial Center, Civil Action No. 96-0254 (the Clayton Smith
matter), rendered a judgment awarding approximately $500,000 in
compensatory damages and $167 million in punitive damages against Financial
Service Center. The lawsuit was filed on November 15, 1996, by 29
individuals who had each purchased a satellite dish. Financial Service
Center, together with certain other American General companies, currently
are named as defendants in other pending cases involving the financing of
satellite dishes.
In August 1999, Financial Service Center filed a voluntary petition to
reorganize under Chapter 11 of the United States Bankruptcy Code with the
United States Bankruptcy Court for the Southern District of Indiana. The
decision to reorganize was necessitated by the judgment rendered against
Financial Service Center by the Mississippi state court. The filing for
reorganization under Chapter 11 is limited to Financial Service Center and
was intended to provide a fair and orderly process for managing the claims
against Financial Service Center.
In January 2000, settlement agreements were entered into in connection with
the Clayton Smith matter and other pending cases relating to satellite dish
financing. Accordingly, we recorded a charge of $57.0 million ($36.2
million aftertax) in fourth quarter 1999 to cover the proposed settlements
and other litigation. Resolution of the satellite dish litigation within
the recorded charge is dependent upon a number of factors, including
obtaining the bankruptcy court's approval of Financial Service Center's
plan of reorganization. If court approvals are obtained and appeals are
not taken, we expect that the settlements will be final in third quarter
2000.
<PAGE>
<PAGE> 9
Other
AGFI and certain of its subsidiaries are parties to various other lawsuits
and proceedings, including certain class action claims, arising in the
ordinary course of business. In addition, many of these claims arise in
jurisdictions, such as Alabama and Mississippi, that permit damage awards
disproportionate to the actual economic damages alleged to have been
incurred. Based upon information presently available, we believe that the
total amounts that will ultimately be paid, if any, arising from these
lawsuits and proceedings will not have a material adverse effect on the
Company's consolidated results of operations and financial position.
However, 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 some jurisdictions, continues to create the
potential for an unpredictable judgment in any given suit.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our sources of funds include operations, issuances of long-term debt,
short-term borrowings in the commercial paper market, borrowings from banks
under credit facilities, and acceptance of bank demand and time deposits.
American General has also contributed capital to the Company when needed
for finance receivable growth or other circumstances.
The following table shows principal sources and uses of cash flow:
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Principal sources of cash flow:
Operations $192.3 $158.1
Net issuance of debt 63.8 109.9
Principal sources of cash flow $256.1 $268.0
Principal uses of cash flow:
Net originations and purchases
of finance receivables $172.2 $204.0
Dividends paid 27.0 41.0
Principal uses of cash flow $199.2 $245.0
We believe that the overall sources of liquidity available to the Company
will continue to be sufficient to satisfy our foreseeable financial
obligations and operational requirements.
<PAGE>
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Capital Resources
March 31,
2000 1999
(dollars in millions)
Long-term debt $ 5,701.5 $ 5,466.6
Short-term debt 4,538.7 3,505.0
Deposits 31.2 1.7
Total debt 10,271.4 8,973.3
Equity 1,554.9 1,502.7
Total capital $11,826.3 $10,476.0
Net finance receivables $11,112.5 $ 9,805.6
Debt to tangible equity ratio 7.50 7.48
Our capital requirements vary directly with the level of net finance
receivables. The mix of capital between debt and equity is based primarily
upon maintaining leverage that supports cost-effective funding.
We issue a combination of fixed-rate debt, principally long-term, and
floating-rate debt, principally short-term. AGFC obtains most of our
fixed-rate debt through issuances of medium-term notes and underwritten
debt offerings with maturities generally ranging from two to ten years.
AGFC and one of its subsidiaries obtain most of our floating-rate debt
through sales of commercial paper. Commercial paper, with maturities
ranging from 1 to 270 days, is sold directly to banks, insurance companies,
corporations, and other institutional investors. AGFC also sells
extendible commercial notes with initial maturities of up to 90 days, which
may be extended by AGFC to 390 days.
AGFI has paid dividends to (or received capital contributions from)
American General to manage our leverage of debt to tangible equity (equity
less goodwill and net unrealized gains or losses on investment securities)
to 7.50 to 1. AGFI's ability to pay dividends is substantially dependent
on the receipt of dividends or other funds from its subsidiaries, primarily
AGFC. An AGFC financing agreement limits the amount of dividends AGFC may
pay but has not prevented the Company from managing its capital to
targeted leverage.
Liquidity Facilities
We participate in credit facilities to support the issuance of commercial
paper and to provide an additional source of funds for operating
requirements. The Company is an eligible borrower under committed credit
facilities extended to American General and certain of its subsidiaries
(the "shared committed facilities"). At March 31, 2000, the annual
commitment fees for the shared committed facilities ranged from .05% to
.07%. We pay only an allocated portion of the commitment fees for the
shared committed facilities. The Company also has uncommitted credit
facilities and is an eligible borrower under uncommitted credit facilities
extended to American General and certain of its subsidiaries (the "shared
uncommitted facilities"). Available borrowings under all facilities are
reduced by any outstanding borrowings.
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Information concerning the credit facilities follows:
March 31,
2000 1999
(dollars in millions)
Committed credit facilities:
Shared committed facilities $5,600.0 $5,000.0
Borrowings - -
Remaining availability $5,600.0 $5,000.0
Uncommitted credit facilities:
Company uncommitted facilities $ 271.0 $ 363.5
Shared uncommitted facilities 50.0 150.0
Borrowings (208.0) (171.0)
Remaining availability $ 113.0 $ 342.5
In addition, a subsidiary of AGFI arranges interim financing for third-
party mortgage originators through a purchase facility. At March 31, 2000,
this facility totaled $250.0 million with remaining availability of $75.0
million.
ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION
Net Income
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Net income $ 59.5 $ 50.7
Return on average assets (annualized) 1.87% 1.81%
Return on average equity (annualized) 15.40% 13.38%
Ratio of earnings to fixed charges 1.56x 1.56x
Net income increased $8.8 million, or 17%, for the three months ended March
31, 2000 when compared to the same period in 1999. See Note 5. of the
Notes to Condensed Consolidated Financial Statements for information on the
results of the Company's business segments.
Factors that specifically affected the Company's operating results are as
follows:
Finance Charges
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Finance charges $ 390.6 $ 357.4
Average net receivables $11,057.7 $ 9,720.9
Yield 14.19% 14.85%
Finance charges increased $33.2 million, or 9%, for the three months ended
March 31, 2000 when compared to the same period in 1999 primarily due to
higher average net receivables, partially offset by lower yield. Average
net receivables increased $1.3 billion, or 14%, for the three months ended
March 31, 2000 when compared to the same period in 1999 primarily due to
growth in real estate loans. At March 31, 2000, real estate loans
accounted for 65% of total net finance receivables outstanding, compared
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<PAGE> 12
to 62% at March 31, 1999. Yield decreased 66 basis points for the three
months ended March 31, 2000 when compared to the same period in 1999
reflecting the larger proportion of finance receivables that are real
estate loans, which generally have lower yields, and a decline in real
estate loan yield.
Insurance Revenues
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Insurance revenues $48.2 $42.9
Premiums earned $47.5 $42.2
Insurance revenues (annualized)
as a percentage of average net
receivables 1.74% 1.77%
Insurance revenues increased $5.3 million, or 12%, for the three months
ended March 31, 2000 when compared to the same period in 1999 primarily due
to higher earned premiums. Earned premiums increased primarily due to
higher related loan volume during 1998 and 1999.
Other Revenues
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Other revenues $28.5 $22.3
Investment revenue $25.7 $20.1
Other revenues increased $6.2 million, or 28%, for the three months ended
March 31, 2000 when compared to the same period in 1999 primarily due to
higher investment revenue. The increase in investment revenue for the
three months ended March 31, 2000 reflected growth in average invested
assets, higher realized gains, and higher adjusted portfolio yield.
Interest Expense
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Interest expense $ 163.1 $ 137.5
Average borrowings $10,169.5 $ 8,872.3
Borrowing cost 6.42% 6.22%
Interest expense increased $25.6 million, or 19%, for the three months
ended March 31, 2000 when compared to the same period in 1999 primarily due
to higher average borrowings and higher borrowing cost. Average borrowings
increased $1.3 billion, or 15%, for the three months ended March 31, 2000
when compared to the same period in 1999 primarily to support finance
receivable growth. Borrowing cost increased 20 basis points for the three
months ended March 31, 2000 when compared to the same period in 1999 due
to higher rates on short-term debt, partially offset by lower rates on
long-term debt.
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Operating Expenses
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Operating expenses $136.9 $133.7
Operating expenses (annualized)
as a percentage of average
net receivables 4.95% 5.50%
Operating expenses increased $3.2 million, or 2%, for the three months
ended March 31, 2000 when compared to the same period in 1999 primarily due
to increases in data processing expenses, salaries, and advertising
expenses, partially offset by lower litigation expenses. Operating
expenses were also favorably impacted by a workforce reduction of
approximately 400 positions during the last twelve months due to improved
productivity.
The improvement in operating expenses as a percentage of average net
receivables for the three months ended March 31, 2000 when compared to the
same period in 1999 reflects continued improvement in operating
efficiencies.
Provision for Finance Receivable Losses
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Provision for finance receivable
losses $ 48.6 $ 51.8
Net charge-offs $ 48.6 $ 51.8
60 day+ delinquency $354.7 $377.9
Allowance for finance receivable
losses $368.6 $384.2
Provision for finance receivable losses decreased $3.2 million, or 6%, for
the three months ended March 31, 2000 when compared to the same period in
1999 due to lower net charge-offs.
The following table shows charge-off ratios by type of finance receivable:
Three Months Ended
March 31,
2000 1999
Real estate loans 0.65% 0.47%
Non-real estate loans 4.68 5.56
Retail sales finance 2.08 2.96
Total charge-off ratio 1.76 2.14
The decrease in the charge-off ratio for the three months ended March 31,
2000 when compared to the same period in 1999 reflected the results of past
and ongoing credit quality improvement efforts, including consistent
adherence to strict underwriting guidelines, improved credit risk
management systems, and an increased proportion of real estate loans.
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<PAGE> 14
The following table shows delinquency ratios by type of finance receivable:
March 31, December 31,
2000 1999 1999
Real estate loans 2.98% 3.34% 3.02%
Non-real estate loans 4.04 5.22 5.37
Retail sales finance 1.55 1.96 1.85
Total delinquency ratio 3.05 3.65 3.46
The decrease in the delinquency ratio at March 31, 2000 when compared to
March 31, 1999 reflected the continued improvement in credit quality
resulting from consistent adherence to strict underwriting guidelines,
improved credit risk management systems, and the increased proportion of
real estate loans. The decrease in the delinquency ratio also reflected
the sale of fully-reserved delinquent net finance receivables totaling
$27.1 million (gross balances totaling $34.8 million) in first quarter
2000, consisting of non-real estate loans ($25.0 million) and retail sales
finance ($2.1 million). The delinquency ratio at December 31, 1999 would
have been 3.20% had this sale occurred at year-end 1999.
The following table shows selected statistics relating to the allowance for
finance receivable losses:
At or for the At or for the
Three Months Ended Three Months Ended
March 31, December 31,
2000 1999 1999
Allowance ratio 3.32% 3.92% 3.59%
Charge-off coverage 1.90x 1.85x 1.75x
We periodically evaluate our finance receivable portfolio to determine the
level of the allowance for finance receivable losses. In our opinion, the
allowance is adequate to absorb anticipated losses in our existing
portfolio. The charge-off coverage, which compares the allowance for
finance receivable losses to net charge-offs (annualized), improved for
first quarter 2000 when compared to the same period in 1999. The allowance
ratio at December 31, 1999 and charge-off coverage for the three months
ended December 31, 1999 would have been 3.35% and 1.63x, respectively, had
the sale of $27.1 million of fully-reserved net finance receivables
occurred at year-end 1999.
Insurance Losses and Loss Adjustment Expenses
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Claims incurred $22.7 $20.6
Change in benefit reserves 2.3 (0.7)
Insurance losses and loss
adjustment expenses $25.0 $19.9
Insurance losses and loss adjustment expenses increased $5.1 million, or
26%, for the three months ended March 31, 2000 when compared to the same
period in 1999 due to increases in provision for future benefits and
claims. Provision for future benefits increased $3.0 million for the three
months ended March 31, 2000 due to increased sales of non-credit insurance
products. Claims increased $2.1 million for the three months ended March
31, 2000 primarily due to unusually low loss experience in first quarter
1999.
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Provision for Income Taxes
Three Months Ended
March 31,
2000 1999
(dollars in millions)
Provision for income taxes $ 34.1 $ 29.0
Pretax income $ 93.7 $ 79.7
Effective income tax rate 36.44% 36.41%
The provision for income taxes increased $5.1 million, or 18%, for the
three months ended March 31, 2000 when compared to the same period in 1999
primarily due to higher taxable income.
Asset/Liability Management
We manage anticipated cash flows of our assets and liabilities in an effort
to reduce the risk associated with unfavorable changes in interest rates.
Management determines the mix of fixed-rate and floating-rate debt based,
in part, on the nature of the assets being supported. We limit our
exposure to market interest rate increases by fixing interest rates that
we pay for term periods. The primary means by which we accomplish this is
through the issuance of fixed-rate debt. To supplement fixed-rate debt
issuances, AGFC also uses interest rate swap agreements to synthetically
create fixed-rate debt by altering the nature of certain floating-rate
funding, thereby limiting our exposure to market interest rate increases.
At March 31, 2000, floating-rate debt represented 35% of total debt
compared to 30% at March 31, 1999.
FORWARD-LOOKING STATEMENTS
All statements, trend analyses, and other information contained in this
report relative to trends in our operations or financial results, as well
as other statements including words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend," and other similar expressions,
constitute forward-looking statements under the Private Securities
Litigation Reform Act of 1995. We have made these forward-looking
statements based upon our current expectations and beliefs concerning
future developments and their potential effects on the Company. There can
be no assurance that future developments affecting the Company will be
those we anticipated. 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: (1) changes in general economic
conditions, including the performance of financial markets, interest rates,
and the level of personal bankruptcies; (2) customer responsiveness to both
products and distribution channels; (3) competitive, regulatory, or tax
changes that affect the cost of, or demand for, our products; (4) our
ability to secure necessary court and regulatory approvals; (5) adverse
litigation results or resolution of litigation; and (6) the formation of
strategic alliances or business combinations among our competitors or
business partners. Readers are also directed to other risks and
uncertainties discussed in other documents we filed with the Securities and
Exchange Commission. We undertake no obligation to update or revise any
forward-looking information, whether as a result of new information, future
developments, or otherwise.
<PAGE>
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 6. of the Notes to Condensed Consolidated Financial Statements in
Part I of this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company's exposure to market risk on the fair values of certain assets
and liabilities is primarily related to changes in interest rates.
Quantitative and qualitative disclosures about our market risk resulting
from changes in interest rates on such fair values are included in Item 7A.
in our 1999 Annual Report on Form 10-K. There have been no material changes
in such risks during the quarter ended March 31, 2000. Refer to Note 4.
of the Notes to Condensed Consolidated Financial Statements in Part I of
this Form 10-Q for a discussion of our derivative financial instrument
activity during first quarter 2000.
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 first quarter
of 2000.
<PAGE>
<PAGE> 17
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: May 15, 2000 By /s/ Robert A. Cole
Robert A. Cole
Senior Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
<PAGE>
<PAGE> 18
Exhibit Index
Exhibit
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
<PAGE>
<PAGE> 19
Exhibit 12
<TABLE>
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
(dollars in thousands)
<S> <C> <C>
Earnings:
Income before provision for income
taxes $ 93,651 $ 79,739
Interest expense 163,141 137,545
Implicit interest in rents 3,966 3,692
Total earnings $260,758 $220,976
Fixed charges:
Interest expense $163,141 $137,545
Implicit interest in rents 3,966 3,692
Total fixed charges $167,107 $141,237
Ratio of earnings to fixed charges 1.56 1.56
</TABLE>
<TABLE> <S> <C>
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 143,600
<SECURITIES> 1,035,069
<RECEIVABLES> 11,112,521<F1>
<ALLOWANCES> 368,576<F2>
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F4>
<PP&E> 0<F4>
<DEPRECIATION> 0<F4>
<TOTAL-ASSETS> 12,760,876
<CURRENT-LIABILITIES> 0<F4>
<BONDS> 5,701,502<F5>
0<F3>
0<F3>
<COMMON> 1,000
<OTHER-SE> 1,553,913<F6>
<TOTAL-LIABILITY-AND-EQUITY> 12,760,876
<SALES> 0<F3>
<TOTAL-REVENUES> 467,257<F7>
<CGS> 0<F3>
<TOTAL-COSTS> 0<F4>
<OTHER-EXPENSES> 161,896<F8>
<LOSS-PROVISION> 48,569<F9>
<INTEREST-EXPENSE> 163,141<F10>
<INCOME-PRETAX> 93,651
<INCOME-TAX> 34,127
<INCOME-CONTINUING> 59,524
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 59,524
<EPS-BASIC> 0<F3>
<EPS-DILUTED> 0<F3>
<FN>
<F1>RECEIVABLES IN THIS EXHIBIT REPRESENTS NET FINANCE RECEIVABLES REPORTED
IN THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F2>ALLOWANCES IN THIS EXHIBIT REPRESENTS ALLOWANCE FOR FINANCE RECEIVABLE
LOSSES REPORTED IN THE COMPANY'S UNAUDITED 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
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS WHICH INCLUDES
OTHER LONG-TERM DEBT.
<F6>OTHER STOCKHOLDER'S EQUITY IN THIS EXHIBIT REPRESENTS ADDITIONAL PAID-IN-
CAPITAL, ACCUMULATED OTHER COMPREHENSIVE INCOME, AND RETAINED EARNINGS
REPORTED IN THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
<F7>TOTAL REVENUES IN THIS EXHIBIT REPRESENTS TOTAL REVENUES REPORTED IN THE
COMPANY'S UNAUDITED 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
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<F9>LOSS PROVISION IN THIS EXHIBIT REPRESENTS PROVISION FOR FINANCE
RECEIVABLE LOSSES REPORTED IN THE COMPANY'S UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
<F10>INTEREST EXPENSE IN THIS EXHIBIT REPRESENTS INTEREST EXPENSE REPORTED
IN THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
