<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: February 7, 1995
----------------
HOUSEHOLD INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8198 36-3121988
- --------------- ----------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File Identification
incorporation) Number) Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 564-5000
--------------
<PAGE>
<PAGE> 2
Item 5. Other Events
Press Release pertaining to the financial results of
Household International, Inc. for the quarter and year
ended December 31, 1994. Said release is filed as an
exhibit hereto.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not Applicable
(b) Pro forma financial information.
Not Applicable
(c) Exhibits.
No. Exhibit
--- -------
27 Financial Data Schedule.
99 Press Release titled "Household Reports
Quarterly and Full Year Records" dated
February 7, 1995.
<PAGE>
<PAGE> 3
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 hereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Registrant)
By: /s/ John W. Blenke
-----------------------------
John W. Blenke
Assistant General Counsel &
Secretary
Dated: February 7, 1995
----------------
U:\WP\HFSC98\EDGAR\I8K295.WP <PAGE>
<PAGE> 4
Exhibit Index
-------------
Exhibit
No. Exhibit
- ------- -------
27 Financial Data Schedule.
99 Press Release titled "Household
Reports Quarterly and Full Year Records"
dated February 7, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SUMMARY FINANCIAL INFORMATION OF THE COMPANY AND ITS
SUBSIDIARIES IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION
AND FINANCIAL STATEMENTS PREVIOUSLY FILED WITH THE SECURITIES &
EXCHANGE COMMISSION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 541,200
<SECURITIES> 9,004,500
<RECEIVABLES> 20,555,600
<ALLOWANCES> 882,500
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 999,100
<DEPRECIATION> 487,100
<TOTAL-ASSETS> 34,338,400
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10,274,100
<COMMON> 115,000
2,600
320,000
<OTHER-SE> 2,085,400
<TOTAL-LIABILITY-AND-EQUITY> 34,338,400
<SALES> 0
<TOTAL-REVENUES> 4,603,300
<CGS> 0
<TOTAL-COSTS> 2,225,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 606,800
<INTEREST-EXPENSE> 1,242,700
<INCOME-PRETAX> 528,300
<INCOME-TAX> 160,700
<INCOME-CONTINUING> 367,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367,600
<EPS-PRIMARY> 3.52
<EPS-DILUTED> 3.50
<FN>
<F1>FINANCIAL STATEMENTS OF THE COMPANY WERE PREPARED IN ACCORDANCE WITH
FINANCIAL INSTITUTION INDUSTRY STANDARDS. ACCORDINGLY, THE COMPANY'S
BALANCE SHEETS WERE NON-CLASSIFIED.
</FN>
</TABLE>
<PAGE> 1
FOR RELEASE: Immediately
CONTACT: Michael H. Morgan
Vice President - Corp. Communications
(708) 564-6053 or home (708) 231-6999
Howard J. Adamski
Director - Financial Relations
Media Contact
(708) 564-6054 or home (708) 291-1467
HOUSEHOLD REPORTS QUARTERLY AND FULL YEAR RECORDS:
FOURTH QUARTER INCOME UP 19%, EPS UP 20%;
FULL YEAR INCOME AND EPS UP 23%
-------------------------------------------------
PROSPECT HEIGHTS, IL. February 7, 1995 -- Household
International today reported that net income increased 19 percent
to $111 million for the fourth quarter of 1994, compared with
$93 million for the fourth quarter of 1993. Fully diluted
earnings per share were $1.07, compared with 89 cents a year
earlier, an increase of 20 percent. This represented a record
level of quarterly income and earnings per share for the company.
Household said full-year net income and earnings per share
also increased to record levels. Full year net income of $367.6
million and earnings per share of $3.50 were both 23 percent
higher than 1993.
Donald C. Clark, chairman of Household, said, "We finished
the year with a very strong quarter. The fourth quarter saw
improved performance at most of our businesses. The quarter
benefited from seasonal factors, including solid growth in
interchange income from our credit card business. Domestic
managed consumer receivables grew 5 percent in the quarter and 13
percent for all of 1994, due largely to the continuing success of
our credit cards and increasing growth of HFC unsecured products
in the second half of the year."
During the fourth quarter, the company sold its Australian
subsidiary, which resulted in an after tax loss of $14 million.
Household also took several actions during the quarter to improve
its efficiency and lower its cost structure. Expenses had risen
earlier in the year due to investment spending and the rapid
growth of the credit card portfolio. In the quarter, the company
discontinued its domestic traditional first mortgage origination
business, further integrated its Canadian business into its
domestic operations and reduced staff, primarily in its consumer
banking and related support operations. These actions reduced its
workforce by 12 percent and resulted in $ 14 million, after tax,<PAGE>
<PAGE> 2
of nonrecurring charges. Collectively, the sale of Australia and
the nonrecurring charges reduced earnings by 29 cents per share
in the quarter. Substantially offsetting these events, the
company said, were seasonally stronger operating results, lower
loss provisions because of improved consumer credit quality and
reduced exposure to liquidating commercial assets, and higher
securitization income.
Household said its liquidating commercial assets were
reduced significantly during 1994, including a $600 million
reduction in the fourth quarter. During the quarter the company
sold at book value and without recourse $120 million of real
estate owned. The company also entered into an agreement to sell,
without recourse, $398 million of performing commercial loans,
$193 million of which related to previously discontinued product
lines, at book value to a joint venture in which it would retain
a 50 percent interest. The joint venture has negotiated
commitments for third party nonrecourse financing, and the sale
is scheduled to close in the first quarter of 1995.
Liquidating commercial assets were $699 million at year-end
1994, a decline from $1.3 billion at September 30, 1994, $1.6
billion at year-end 1993 and $2.1 billion when the company
announced its decision to discontinue these product lines at
year-end 1991. Importantly, problem liquidating commercial assets
totaled $205 million at year-end 1994, a sharp decline from $514
million a year earlier. As a result of the reduced size and
substantially improved risk profile of these liquidating
commercial assets, the company said it would no longer report
Liquidating Commercial Lines as a separate line of business.
William F. Aldinger, Household's president and chief
executive officer, said, "In addition to actions already taken,
we have reached agreements to sell the Virginia/Maryland and
California divisions of our domestic bank branch network. When
concluded, these sales will reduce goodwill, positively impact
earnings and help us to achieve our goal of improving overall
efficiency."
Mr. Aldinger concluded, "We are quickly becoming more
focused on our high return consumer businesses which have
excellent potential."
Finance and Banking Segment Results
- -----------------------------------
Household said income from its Finance and Banking segment,
which included results previously reported in the Liquidating
Commercial Lines and Corporate segments, was $99.6 million for
the fourth quarter, up 20 percent from $82.8 million for the
fourth quarter of 1993. The improvement was due to increased
profitability in the credit card businesses, domestic HFC
operation and the United Kingdom.
Net interest margin on a managed basis of 6.42 percent
declined from 6.63 percent in the previous quarter and 6.93
percent in the year ago quarter. The lower margin was due to
narrower spreads on variable rate products, including lags in<PAGE>
<PAGE> 3
repricing assets in response to higher interest rates, and higher
funding costs.
At year-end, overall two-months-and-over consumer
delinquency was 3.11 percent of managed consumer receivables,
improved from 3.24 percent at the previous quarter-end and 3.58
percent a year ago. This level was the lowest level of
delinquency since 1988.
Annualized consumer net chargeoffs as a percent of average
consumer receivables managed were 2.65 percent for the fourth
quarter, down slightly from the prior quarter, and substantially
lower than 2.96 percent for the fourth quarter of 1993.
Commercial net chargeoffs for the quarter totaled $21.1 million,
down from $32.2 million in the year ago quarter.
Credit loss reserves for the managed Finance and Banking
portfolio at December 31 were $883 million and higher than a year
ago by $38 million, or 4 percent. Reserves as a percent of
nonperforming consumer and commercial receivables were 104
percent, compared to 85 percent a year earlier.
Operating expenses for the Finance and Banking segment
totaled $431 million in the quarter, compared with $395 million
in the year ago quarter. Excluding the nonrecurring charges,
operating expenses increased about 4 percent from the prior year
quarter.
The Finance and Banking segment tax rate equaled 22 percent
in the quarter, a decline from 30 percent in the third quarter
and 34 percent in the fourth quarter of 1993. The lower tax rate
resulted from tax benefits related to the sale of the Australian
subsidiary.
Individual Life Insurance Segment Results
- -----------------------------------------
Net income in the Individual Life Insurance segment was
$11.4 million, compared with $10.2 million for the fourth quarter
of 1993. The improved performance was due to higher premium and
contract revenues and reduced policyholder benefits due to lower
interest credited to policyholders.
Full Year Results
- -----------------
For 1994, Household's net income totaled a record $ 367.6
million, an increase of 23 percent over 1993. Fully diluted
earnings per share were $3.50 compared with $2.85 in the prior
year, an increase of 23 percent, and also a record result. Return
on shareholders' equity for the year was 16 percent in 1994,
compared with 14 percent in 1993.
Finance and Banking segment earnings were $316.5 million, 25
percent higher than 1993 earnings of $253.5 million. The higher
earnings were due to higher profits from the credit card
businesses, domestic HFC and the United Kingdom.
<PAGE>
<PAGE> 4
Income for the Individual Life Insurance segment was $51.1
million, a 13 percent increase over 1993.
Household International, Inc. is a major provider of
consumer finance and banking services and consumer insurance and
investment products.
(See attached financial tables)
# # #
<PAGE>
<PAGE> 5
HOUSEHOLD INTERNATIONAL, INC.
FOURTH QUARTER FINANCIAL HIGHLIGHTS
Household International, Inc. and Subsidiaries
All dollar amounts other than per share data are stated in millions.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Percent
Three months ended December 31 1994 1993 Change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 111.0 $ 93.0 19.4%
===================================================================================================
Earnings per common share:
Primary $ 1.07 $ .90 18.9%
Fully diluted 1.07 .89 20.2
Average number of common shares outstanding:
Primary 97.2 95.1 2.2
Fully diluted 97.6 96.9 0.7
Return on average common shareholders' equity 19.2% 16.8% 14.3%
Dividends declared per common share $ .315 $ .30 5.0%
- ---------------------------------------------------------------------------------------------------
Segment income:
Finance and Banking $ 99.6 $ 82.8 20.3%
Individual Life Insurance 11.4 10.2 11.8
- ---------------------------------------------------------------------------------------------------
Total $ 111.0 $ 93.0 19.4%
===================================================================================================
Pro forma segment comparative results, assuming that the reclassification of the Liquidating
Commercial Lines and Corporate segments into the Finance and Banking segment had not been made, are
as follows:
- ---------------------------------------------------------------------------------------------------
Percent
Three months ended December 31 1994 1993 Change
- ---------------------------------------------------------------------------------------------------
Finance and Banking $ 93.1 $ 91.0 2.3%
Liquidating Commercial Lines 0.0 (2.5) +100.0
Corporate 6.5 (5.7) +100.0
- ---------------------------------------------------------------------------------------------------
Subtotal 99.6 82.8 20.3
Individual Life Insurance 11.4 10.2 11.8
- ---------------------------------------------------------------------------------------------------
Total* $ 111.0 $ 93.0 19.4%
===================================================================================================
*Core earnings, as previously defined, included operating results of the Finance and Banking, Individual
Life Insurance and Corporate segments. Such earnings were $111.0 million and $95.5 million for the
fourth quarters of 1994 and 1993.
Dec. 31, Sept. 30, Dec. 31,
1994 1994 1993
- ---------------------------------------------------------------------------------------------------
Assets $34,338.4 $34,804.5 $32,961.5
Receivables Managed 33,050.7 32,750.2 30,358.2
Assets pending sale 398.3 -- --
Deposits 8,439.0 7,490.9 7,516.1
Convertible preferred stock 2.6 3.7 19.3
Preferred Stock 320.0 320.0 320.0
Common shareholders' equity 2,200.4 2,122.1 2,078.3
Book value per common share $ 22.78 $ 22.05 $ 22.01
Total shareholders' equity as a percent of assets** 7.34% 7.03% 7.28%
Number of common shares outstanding:
Primary 97.4 97.1 95.3
Fully diluted 97.5 97.1 97.1
- ---------------------------------------------------------------------------------------------------
**Excludes convertible preferred stock. At December 31, 1994, equity includes a negative adjustment
of $103.6 million and at December 31, 1993, a positive adjustment of $40.5 million related to the
adoption of FAS 115, which marks certain investment securities to market. Excluding the impact of
the adoption of FAS 115, this ratio equals 7.64% at year-end 1994 and 7.15% at year-end 1993.
</TABLE>
<PAGE>
<PAGE> 6
HOUSEHOLD INTERNATIONAL, INC.
FULL YEAR FINANCIAL HIGHLIGHTS
Household International, Inc. and Subsidiaries
All dollar amounts other than per share data are stated in millions.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Percent
Year ended December 31 1994 1993 Change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 367.6 $ 298.7 23.1%
===================================================================================================
Earnings per common share:
Primary $ 3.52 $ 2.91 21.0%
Fully diluted 3.50 2.85 22.8
Average number of common shares outstanding:
Primary 96.3 92.0 4.7
Fully diluted 97.2 94.8 2.5
Return on average common shareholders' equity 16.0% 14.2% 12.7%
Dividends declared per common share $ 1.23 $ 1.18 4.2%
===================================================================================================
Segment Income
Finance and Banking $ 316.5 $ 253.5 24.9%
Individual Life Insurance 51.1 45.2 13.1
- ---------------------------------------------------------------------------------------------------
Total $ 367.6 $ 298.7 23.1%
===================================================================================================
Pro forma segment comparative results, assuming that the reclassification of the Liquidating
Commercial Lines and Corporate segments into the Finance and Banking segment had not been made,
are as follows:
- ---------------------------------------------------------------------------------------------------
Percent
Year ended December 31 1994 1993 Change
- ---------------------------------------------------------------------------------------------------
Finance and Banking $ 330.3 $ 303.2 8.9%
Liquidating Commercial Lines (7.2) (21.2) 66.0
Corporate (6.6) (28.5) 76.8
- ---------------------------------------------------------------------------------------------------
Subtotal 316.5 253.5 24.9
Individual Life Insurance 51.1 45.2 13.1
- ---------------------------------------------------------------------------------------------------
Total* $ 367.6 $ 298.7 23.1%
===================================================================================================
*Core earnings, as previously defined, included operating results of the Finance and Banking,
Individual Life Insurance and Corporate segments. Such earnings were $374.8 million and $319.9
million in 1994 and 1993, respectively.
/TABLE
<PAGE>
<PAGE> 7
QUARTERLY FINANCIAL SUPPLEMENT
December 31, 1994
RECEIVABLES ANALYSIS
<TABLE>
<CAPTION>
=====================================================================================================================
% Change from Prior:
Managed Portfolio ($ millions) 12/31/94 9/30/94 12/31/93 Qtr. Year
- ---------------------------------------------------------------------------------------------------------------------
The combination of receivables owned and receivables which have been sold to public and private investors with
limited recourse.
<S> <C> <C> <C> <C> <C>
First mortgage $ 3,659.2 $ 3,722.7 $ 3,534.1 (1.7)% 3.5 %
Home equity 7,645.2 7,814.4 7,880.4 (2.2) (3.0)
Other secured 676.9 863.8 875.4 (21.6) (22.7)
Bankcard 11,100.2 10,207.5 8,842.6 8.7 25.5
Merchant participation 3,433.1 3,218.8 2,949.1 6.7 16.4
Other unsecured 5,378.2 5,185.0 4,320.8 3.7 24.5
Equipment financing and other commercial 1,157.9 1,738.0 1,955.8 (33.4) (40.8)
- ---------------------------------------------------------------------------------------------------------------------
Managed Portfolio $33,050.7 $32,750.2 $30,358.2 0.9 % 8.9 %
=====================================================================================================================
Receivables (% of Managed Portfolio)
- ---------------------------------------------------------------------------------------------------------------------
First mortgage 11.1% 11.4% 11.6%
Home equity 23.1 23.9 26.0
Other secured 2.0 2.6 2.9
Bankcard 33.6 31.2 29.1
Merchant participation 10.4 9.8 9.7
Other unsecured 16.3 15.8 14.2
Equipment financing and other commercial 3.5 5.3 6.5
- ---------------------------------------------------------------------------------------------------------------------
Receivables ($ millions)
- ---------------------------------------------------------------------------------------------------------------------
First mortgage $ 3,490.8 $ 3,572.7 $ 3,534.1 (2.3)% (1.2)%
Home equity 2,739.0 3,222.0 2,850.9 (15.0) (3.9)
Other secured 676.9 863.8 875.4 (21.6) (22.7)
Bankcard 4,788.9 4,379.2 4,356.9 9.4 9.9
Merchant participation 2,564.9 3,063.7 2,636.5 (16.3) (2.7)
Other unsecured 5,137.2 5,185.0 4,320.8 (0.9) 18.9
Equipment financing and other commercial 1,157.9 1,738.0 1,955.8 (33.4) (40.8)
- ---------------------------------------------------------------------------------------------------------------------
Total receivables owned 20,555.6 22,024.4 20,530.4 (6.7) 0.1
- ---------------------------------------------------------------------------------------------------------------------
Accrued finance charges 343.8 297.9 261.0 15.4 31.7
Credit loss reserve for receivables owned (546.0) (633.6) (621.9) (13.8) (12.2)
Unearned credit insurance premiums and claims reserves (122.2) (128.0) (117.5) (4.5) 4.0
Amounts due and deferred from consumer receivable sales 883.6 791.0 760.0 11.7 16.3
Reserve for receivables serviced with limited recourse (336.5) (241.5) (222.8) 39.3 51.0
- ---------------------------------------------------------------------------------------------------------------------
Total receivables owned, net 20,778.3 22,110.2 20,589.2 (6.0) 0.9
- ---------------------------------------------------------------------------------------------------------------------
Receivables serviced with limited recourse:
First mortgage 168.4 150.0 -- 12.3 +100.0
Home equity 4,906.2 4,592.4 5,029.5 6.8 (2.5)
Bankcard 6,311.3 5,828.3 4,485.7 8.3 40.7
Merchant participation 868.2 155.1 312.6 +100.0 +100.0
Other unsecured 241.0 --- -- +100.0 +100.0
- ---------------------------------------------------------------------------------------------------------------------
Total receivables serviced with limited recourse 12,495.1 10,725.8 9,827.8 16.5 27.1
- ---------------------------------------------------------------------------------------------------------------------
Receivables serviced with no recourse
First mortgage 17,059.7 16,095.0 13,917.5 6.0 22.6
Other unsecured 692.5 777.5 1,311.9 (10.9) (47.2)
- ---------------------------------------------------------------------------------------------------------------------
Total receivables serviced with no recourse 17,752.2 16,872.5 15,229.4 5.2 % 16.6 %
- ---------------------------------------------------------------------------------------------------------------------
Total receivables owned or serviced $51,025.6 $49,708.5 $45,646.4 2.6 % 11.8 %
=====================================================================================================================
/TABLE
<PAGE>
<PAGE> 8
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended: % Change from Prior:
CONSOLIDATED ($ MILLIONS) 12/31/94 9/30/94 12/31/93 Qtr. Year
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Finance income $ 696.7 $ 677.6 $ 628.5 2.8 % 10.9 %
Interest income from noninsurance investment securities 41.2 29.8 27.5 38.3 49.8
Interest expense 364.1 327.0 271.3 11.3 34.2
- ---------------------------------------------------------------------------------------------------------------------
Net interest margin 373.8 380.4 384.7 (1.7) (2.8)
Provision for credit losses on owned receivables 104.6 173.3 174.7 (39.6) (40.1)
- ---------------------------------------------------------------------------------------------------------------------
Net interest margin after provision for credit losses 269.2 207.1 210.0 30.0 28.2
- ---------------------------------------------------------------------------------------------------------------------
Securitization and servicing fee income 213.0 183.8 158.7 15.9 34.2
Insurance premiums and contract revenues 85.9 36.1 72.3 +100.0 18.8
Investment income 126.3 128.7 132.3 (1.9) (4.5)
Fee income 56.6 65.1 72.8 (13.1) (22.3)
Other income (19.9) 21.6 50.4 (+100.0) (+100.0)
- ---------------------------------------------------------------------------------------------------------------------
Total other revenues 461.9 435.3 486.5 6.1 (5.1)
- ---------------------------------------------------------------------------------------------------------------------
Salaries and fringe benefits 159.6 165.3 164.6 (3.4) (3.0)
Other operating expenses 304.8 254.7 256.4 19.7 18.9
Policyholders' benefits 120.5 84.7 133.7 42.3 (9.9)
- ---------------------------------------------------------------------------------------------------------------------
Total costs and expenses 584.9 504.7 554.7 15.9 5.4
- ---------------------------------------------------------------------------------------------------------------------
Income before taxes 146.2 137.7 141.8 6.2 3.1
Income taxes 35.2 43.2 48.8 (18.5) (27.9)
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 111.0 $ 94.5 $ 93.0 17.5 % 19.4 %
=====================================================================================================================
Efficiency ratio 64.9% 57.5% 57.1%
=====================================================================================================================
NET INCOME BY SEGMENT
- ---------------------------------------------------------------------------------------------------------------------
Finance and Banking* $ 99.6 $ 77.1 $ 82.8 29.2 % 20.3 %
Individual Life Insurance 11.4 17.4 10.2 (34.5) 11.8
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 111.0 $ 94.5 $ 93.0 17.5 % 19.4 %
=====================================================================================================================
*Includes operating results of the former Liquidating Commercial Lines ("LCL") and Corporate segments.
FINANCE AND BANKING SEGMENT
- ---------------------------------------------------------------------------------------------------------------------
Finance income $ 696.7 $ 677.6 $ 628.5 2.8 % 10.9 %
Interest income from noninsurance investment securities 41.2 29.8 27.5 38.3 49.8
Interest expense 361.7 325.9 268.9 11.0 34.5
- ---------------------------------------------------------------------------------------------------------------------
Net interest margin 376.2 381.5 387.1 (1.4) (2.8)
Provision for credit losses on owned receivables 104.6 173.3 174.7 (39.6) (40.1)
- ---------------------------------------------------------------------------------------------------------------------
Net interest margin after provision for credit losses 271.6 208.2 212.4 30.5 27.9
- ---------------------------------------------------------------------------------------------------------------------
Securitization and servicing fee income 213.0 183.8 158.7 15.9 34.2
Insurance premiums and contract revenues 51.2 47.5 39.2 7.8 30.6
Investment income 4.3 4.2 5.3 2.4 (18.9)
Fee income 56.6 65.1 72.8 (13.1) (22.3)
Other income (19.9) 21.6 50.4 (+100.0) (+100.0)
- ---------------------------------------------------------------------------------------------------------------------
Total other revenues 305.2 322.2 326.4 (5.3) (6.5)
- ---------------------------------------------------------------------------------------------------------------------
Salaries and fringe benefits 159.6 165.3 164.6 (3.4) (3.0)
Other operating expenses 271.8 235.4 230.1 15.5 18.1
Policyholders' benefits 16.9 19.2 18.1 (12.0) (6.6)
Income taxes 28.9 33.4 43.2 (13.5) (33.1)
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 99.6 $ 77.1 $ 82.8 29.2 % 20.3 %
=====================================================================================================================<PAGE>
<PAGE> 9
Average receivables owned* $21,732.0 $21,411.1 $20,391.0 1.5 % 6.6%
Average receivables serviced with limited recourse 11,262.8 10,193.5 9,199.6 10.5 22.4
- ---------------------------------------------------------------------------------------------------------------------
Average receivables managed 32,994.8 31,604.6 29,590.6 4.4 11.5
Average receivables serviced with no recourse 17,849.3 17,098.2 15,131.0 4.4 18.0
- ---------------------------------------------------------------------------------------------------------------------
Average receivables owned or serviced $50,844.1 $48,702.8 $44,721.6 4.4 % 13.7 %
=====================================================================================================================
*Includes receivables of the former LCL segment.
INDIVIDUAL LIFE INSURANCE SEGMENT
- ---------------------------------------------------------------------------------------------------------------------
Investment and other income $ 122.0 $ 124.5 $ 127.0 (2.0)% (3.9)%
Contract revenues 34.7 (11.4) 33.1 +100.0 4.8
- ---------------------------------------------------------------------------------------------------------------------
Revenues 156.7 113.1 160.1 38.5 (2.1)
- ---------------------------------------------------------------------------------------------------------------------
Policyholders' benefits 103.6 65.5 115.6 58.2 (10.4)
Operating expenses 35.4 20.4 28.7 73.5 23.3
Income taxes 6.3 9.8 5.6 (35.7) 12.5
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 11.4 $ 17.4 $ 10.2 (34.5)% 11.8 %
=====================================================================================================================
/TABLE
<PAGE>
<PAGE> 10
MANAGED BASIS INCOME STATEMENT - FINANCE AND BANKING SEGMENT
Since 1989, securitizations and sales of consumer receivables have
been an important source of liquidity and capital management for
the company. The company continues to service the securitized
receivables after such receivables are sold, and retains a limited
recourse obligation. Securitizations impact the classification
of revenues and expenses in the income statement. Net interest
margin, non-interest income such as interchange fee income and
provision for credit losses related to receivables sold are
reported net in securitization and servicing fee income.
To aid in analysis, the following table shows the pro forma
impact on income statement classificiations assuming the
receivables securitized and sold were instead held in portfolio.
This pro forma analysis does not adjust the results to reflect
the differences between the company's accounting policies for
receivables held in portfolio and receivables sold and serviced
with limited recourse. Accordingly, net income on a pro forma
managed basis equals net income on a historical owned basis.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED 12/31/94 As Managed
($ MILLIONS) Reported Adjustments Basis
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest margin $ 376.2 $ 201.7 $ 577.9
Provision for credit losses 104.6 168.9 273.5
- --------------------------------------------------------------------------------------------
Net interest margin after provision for
credit losses 271.6 32.8 304.4
- --------------------------------------------------------------------------------------------
Securitization and servicing fee income 213.0 (189.6) 23.4
Insurance premiums and contract revenues 51.2 0.0 51.2
Investment income 4.3 0.0 4.3
Fee income 56.6 156.8 213.4
Other income (19.9) 0.0 (19.9)
- --------------------------------------------------------------------------------------------
Total other revenues 305.2 (32.8) 272.4
- --------------------------------------------------------------------------------------------
Total costs and expenses 448.3 0.0 448.3
- --------------------------------------------------------------------------------------------
Income before taxes 128.5 (0.0) 128.5
Income taxes 28.9 0.0 28.9
- --------------------------------------------------------------------------------------------
Net income $ 99.6 $ (0.0) $ 99.6
============================================================================================
/TABLE
<PAGE>
<PAGE> 11
<TABLE>
<CAPTION>
For the quarter
MANAGED BASIS INCOME STATEMENT ended: % Change from Prior:
($ MILLIONS) 12/31/94 * 9/30/94 * 12/31/93 * Qtr. Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income $ 1,068.3 13.0% $ 994.2 12.6% $ 897.8 12.1% 7.5 % 19.0 %
Interest income from noninsurance
investment securities 41.2 5.4 29.8 5.4 27.5 4.3 38.3 49.8
Interest expense 531.6 6.4 463.8 5.9 368.6 5.0 14.6 44.2
- ------------------------------------------------------------------------------------------------------------------------
Net interest margin 577.9 6.4% 560.2 6.6% 556.7 6.9% 3.2 3.8
Provision for credit losses 273.5 233.3 279.5 17.2 (2.1)
- ------------------------------------------------------------------------------------------------------------------------
Net interest margin after provision for
credit losses 304.4 326.9 277.2 (6.9) 9.8
- ------------------------------------------------------------------------------------------------------------------------
Servicing fee income 23.4 20.5 20.7 14.1 13.0
Insurance premiums and contract revenues 51.2 47.5 39.2 7.8 30.6
Investment income 4.3 4.2 5.3 2.4 (18.9)
Fee income 213.4 109.7 146.0 94.5 46.2
Other income (19.9) 21.6 50.4 (+100.0) (+100.0)
- ------------------------------------------------------------------------------------------------------------------------
Total other revenues 272.4 203.5 261.6 33.9 4.1
- ------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 448.3 419.9 412.8 6.8 8.6
- ------------------------------------------------------------------------------------------------------------------------
Income before taxes 128.5 110.5 126.0 16.3 2.0
Income taxes 28.9 33.4 43.2 (13.5) (33.1)
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 99.6 $ 77.1 $ 82.8 29.2 % 20.3 %
========================================================================================================================
Average receivables managed $32,994.8 $31,604.6 $29,590.6 4.4 % 11.5 %
Average noninsurance investments 3,032.7 2,219.7 2,542.1 36.6 % 19.3 %
- ------------------------------------------------------------------------------------------------------------------------
Average interest-earning assets $36,027.5 $33,824.3 $32,132.7 6.5 % 12.1 %
========================================================================================================================
*% Columns: comparison to appropriate earning assets, annualized.
</TABLE>
<PAGE>
<PAGE> 12 CREDIT QUALITY/CREDIT LOSS RESERVES
<TABLE>
<CAPTION>
================================================================================================================
($ millions) 12/31/94 9/30/94 12/31/93
- ----------------------------------------------------------------------------------------------------------------
TWO-MONTHS-AND-OVER CONTRACTUAL DELINQUENCY
As a percent of managed consumer receivables, excludes commercial.
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic:
First mortgage 1.93% 1.66% 1.42%
Home equity 2.64 2.67 3.16
Other secured 1.08 1.71 1.38
Bankcard 2.30 2.40 2.41
Merchant participation 4.87 5.03 5.01
Other unsecured 5.06 5.43 6.63
- ----------------------------------------------------------------------------------------------------------------
Total domestic 2.98 3.07 3.28
- ----------------------------------------------------------------------------------------------------------------
United Kingdom 4.24 4.71 6.74
Canada 3.95 3.57 4.65
Australia -- 6.84 8.93
- ----------------------------------------------------------------------------------------------------------------
Total foreign 4.08 4.34 5.82
- ----------------------------------------------------------------------------------------------------------------
Total 3.11% 3.24% 3.58%
================================================================================================================
QUARTER-TO-DATE CHARGEOFFS, NET OF RECOVERIES
As a percent of average managed consumer receivables, annualized, excludes commercial.
- ----------------------------------------------------------------------------------------------------------------
Domestic:
First mortgage 0.13% 0.43% 0.21%
Home equity 0.92 1.00 1.17
Other secured 0.46 0.99 0.64
Bankcard 4.03 3.82 3.99
Merchant participation 4.31 3.91 4.26
Other unsecured 3.63 4.36 5.41
- ----------------------------------------------------------------------------------------------------------------
Total domestic 2.73 2.76 2.82
- ----------------------------------------------------------------------------------------------------------------
United Kingdom 2.88 2.77 4.07
Canada 1.63 1.82 3.86
Australia 1.83 2.24 3.77
- ----------------------------------------------------------------------------------------------------------------
Total foreign 2.14 2.23 3.92
- ----------------------------------------------------------------------------------------------------------------
Total 2.65% 2.69% 2.96%
================================================================================================================
CONSUMER NONPERFORMING ASSETS (managed basis)
- ----------------------------------------------------------------------------------------------------------------
Nonaccrual receivables $ 485.6 $ 489.1 $ 522.2
Accruing receivables 90 or more days delinquent* 228.2 225.3 207.3
- ----------------------------------------------------------------------------------------------------------------
Total nonperforming receivables 713.8 714.4 729.5
Real estate owned 115.2 153.4 168.9
- ----------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 829.0 $ 867.8 $ 898.4
================================================================================================================
*Consists of bankcard and merchant participation receivables.
COMMERCIAL NONPERFORMING ASSETS (managed basis)*
- ----------------------------------------------------------------------------------------------------------------
Real estate nonaccrual loans $ 36.9 $ 48.5 $ 54.8
Other nonaccrual loans 59.0 74.4 180.4
- ----------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 95.9 122.9 235.2
- ----------------------------------------------------------------------------------------------------------------
Renegotiated loans 41.8 44.9 28.7
Real estate owned (REO) 67.6 241.7 256.6
Other assets acquired through foreclosure 51.7 58.1 82.9
- ----------------------------------------------------------------------------------------------------------------
Total nonperforming assets 257.0 467.6 603.4
================================================================================================================
*Includes continuing commercial and the former LCL segment.<PAGE>
<PAGE> 13
CREDIT LOSS RESERVES
- ----------------------------------------------------------------------------------------------------------------
Reserves for owned receivables at beginning of quarter $ 633.6 $ 613.2 $ 625.7
Provision for credit losses-owned 104.6 173.3 174.7
Owned receivables-chargeoffs, net of recoveries (153.3) (153.8) (184.4)
Credit loss reserves on receivables purchased, net (30.6) -- 1.1
Other, net (8.3) 0.9 4.8
- -----------------------------------------------------------------------------------------------------------------
Reserves for owned receivables at end of quarter 546.0 633.6 621.9
- -----------------------------------------------------------------------------------------------------------------
Credit loss reserves for receivables serviced
with limited recourse at beginning of quarter 241.5 240.4 170.6
Provision for credit losses 168.9 60.0 104.8
Chargeoffs, net of recoveries (75.6) (62.3) (52.3)
Credit loss reserves on receivables purchased, net -- -- (2.1)
Other, net 1.7 3.4 1.8
- -----------------------------------------------------------------------------------------------------------------
Credit loss reserves for receivables serviced
with limited recourse at end of quarter 336.5 241.5 222.8
- -----------------------------------------------------------------------------------------------------------------
Total credit loss reserves at end of quarter $ 882.5 $ 875.1 $ 844.7
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Credit loss reserves
Consumer owned $ 402.9 2.08%* $ 433.1 2.13%* $ 407.9 2.20%*
Serviced with limited recourse 336.5 2.69 241.5 2.25 222.8 2.27
- -----------------------------------------------------------------------------------------------------------------
Consumer managed 739.4 2.32 674.6 2.18 630.7 2.22
Commercial** 143.1 12.36 175.5 10.10 189.0 9.66
Unallocated corporate -- -- 25.0 -- 25.0 --
- -----------------------------------------------------------------------------------------------------------------
Total managed credit loss reserves $ 882.5 2.67% $ 875.1 2.67% $ 844.7 2.78%
=================================================================================================================
*% Columns: comparisons to appropriate receivables
**Includes continuing commercial and the former LCL segment.
</TABLE>
