<PAGE>
- --------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1998
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 1-8007
FREMONT GENERAL CORPORATION
(Exact name of registrant as specified in this charter)
NEVADA 95-2815260
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2020 Santa Monica Blvd.
Santa Monica, California 90404
(Address of principal executive offices)
(Zip Code)
(310) 315-5500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15 (d) of 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 __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
SHARES OUTSTANDING
CLASS APRIL 30, 1998
- ------------------------------ ------------------
Common Stock, $1.00 par value 34,767,514
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<PAGE>
FREMONT GENERAL CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
--------
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 ................... 3
Consolidated Statements of Income
Three Months Ended March 31, 1998 and 1997 ............. 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 ............. 5
Notes to Consolidated Financial Statements on
Form 10-Q .............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 7
Item 3. Quantitative and Qualitative Disclosure About
Market Risk ............................................... 16
PART II - OTHER INFORMATION
Items 1-5. Not applicable
Item 6. Exhibits and Reports on Form 8-K ............................ 17
Signature .............................................................. 22
2
<PAGE>
FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- -----------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Securities available for sale at fair value:
Fixed maturity investments (cost: 1998 - $1,746,873; 1997 - $1,835,086) .... $ 1,807,965 $ 1,893,876
Non-redeemable preferred stock (cost: 1998 - $365,587; 1997 - $356,223) .... 388,889 378,832
----------- -----------
Total securities available for sale ..................................... 2,196,854 2,272,708
Loans receivable ............................................................... 2,097,083 1,983,687
Short-term investments ......................................................... 230,464 164,626
Other investments .............................................................. 5,559 5,479
----------- -----------
Total Investments and Loans ............................................. 4,529,960 4,426,500
Cash ........................................................................... 33,407 64,987
Accrued investment income ...................................................... 32,417 42,038
Premiums receivable and agents' balances ....................................... 154,766 146,144
Reinsurance recoverable on paid losses ......................................... 11,926 20,287
Reinsurance recoverable on unpaid losses ....................................... 603,709 522,928
Deferred policy acquisition costs .............................................. 38,344 38,014
Costs in excess of net assets acquired ......................................... 147,802 149,321
Deferred income taxes .......................................................... 143,579 148,757
Other assets ................................................................... 259,281 275,144
Assets held for discontinued operations ........................................ 251,863 256,507
----------- -----------
Total Assets ............................................................ $ 6,207,054 $ 6,090,627
=========== ===========
LIABILITIES
Claims and policy liabilities:
Losses and loss adjustment expenses ......................................... $ 2,143,457 $ 2,163,323
Life insurance benefits and liabilities ..................................... 169,758 180,976
Unearned premiums ........................................................... 81,842 78,625
Dividends to policyholders .................................................. 33,189 37,626
----------- -----------
Total Claims and Policy Liabilities ..................................... 2,428,246 2,460,550
Reinsurance premiums payable and funds withheld ................................ 29,912 13,049
Other liabilities .............................................................. 237,273 250,877
Thrift deposits ................................................................ 1,572,333 1,492,985
Short-term debt ................................................................ 47,418 26,290
Long-term debt ................................................................. 708,573 691,068
Liabilities of discontinued operations ......................................... 218,349 222,993
----------- -----------
Total Liabilities ....................................................... 5,242,104 5,157,812
Commitments and contingencies
Company-obligated mandatorily redeemable preferred securities of
subsidiary Trust holding solely Company junior subordinated debentures ...... 100,000 100,000
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share -- Authorized: 49,500,000 shares;
issued and outstanding: (1998 - 34,766,000 and 1997 - 34,571,000) ........... 34,766 34,571
Additional paid-in capital ..................................................... 337,812 323,065
Retained earnings .............................................................. 535,077 508,533
Deferred compensation .......................................................... (97,561) (86,263)
Accumulated other comprehensive income ......................................... 54,856 52,909
----------- -----------
Total Stockholders' Equity .............................................. 864,950 832,815
----------- -----------
Total Liabilities and Stockholders' Equity .............................. $ 6,207,054 $ 6,090,627
=========== ===========
See notes to consolidated financial statements on Form 10-Q.
</TABLE>
3
<PAGE>
FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
---------- ---------
(THOUSANDS OF DOLLARS,
EXCEPT PER SHARE DATA)
REVENUES
<S> <C> <C>
Property and casualty premiums earned ....................................... $ 154,162 $ 115,228
Loan interest ............................................................... 51,026 44,177
Net investment income ....................................................... 46,978 29,777
Realized investment losses .................................................. (458) (531)
Other revenue ............................................................... 11,631 6,084
--------- ---------
Total Revenues ...................................................... 263,339 194,735
Expenses
Losses and loss adjustment expenses ......................................... 103,256 73,097
Policy acquisition costs .................................................... 25,715 23,511
Provision for loan losses ................................................... 2,387 1,729
Other operating costs and expenses .......................................... 49,361 29,800
Interest expense ............................................................ 35,487 30,776
--------- ---------
Total Expenses ...................................................... 216,206 158,913
--------- ---------
Income before taxes ......................................................... 47,133 35,822
Income tax expense .......................................................... 15,481 11,463
--------- ---------
NET INCOME ........................................................ $ 31,652 $ 24,359
========= =========
PER SHARE DATA
Net income:
Basic ................................................................. $ 1.00 $ 0.93
Diluted ............................................................... 0.91 0.75
Cash dividends ............................................................. 0.15 0.15
Weighted average shares:
Basic ................................................................. 31,804 26,126
Diluted ............................................................... 35,025 33,879
See notes to consolidated financial statements on Form 10-Q.
</TABLE>
4
<PAGE>
FREMONT GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
---------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................................. $ 31,652 $ 24,359
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in premiums receivable and agents' balances
and reinsurance recoverable on paid losses ......................... (156) 1,239
Change in accrued investment income .................................... 9,621 4,593
Change in claims and policy liabilities ................................ (75,743) (38,639)
Amortization of policy acquisition costs ............................... 25,715 23,511
Policy acquisition costs deferred ...................................... (26,548) (24,426)
Provision for deferred income taxes .................................... 4,130 3,215
Provision for loan losses .............................................. 2,387 1,729
Provision for depreciation and amortization ............................ 9,368 7,119
Net amortization on fixed maturity investments ......................... (10,940) (4,335)
Realized investment losses ............................................. 458 531
Change in other assets and liabilities ................................. (5,593) (5,519)
---------- -----------
Net Cash Used in Operating Activities ............................... (35,649) (6,623)
INVESTING ACTIVITIES
Securities available for sale:
Purchases of securities ................................................ (172,246) (1,138,265)
Sales of securities .................................................... 120,556 1,066,262
Securities matured or called ........................................... 141,021 12,315
(Increase) decrease in short-term and other investments .................... (65,918) (38,242)
Loan originations and bulk purchases funded ................................ (399,185) (224,559)
Receipts from repayments of loans and bulk sales of loans .................. 283,402 104,933
Purchase of property and equipment ......................................... (5,989) (3,876)
---------- ------------
Net Cash Used in Investing Activities ............................... (98,359) (221,432)
FINANCING ACTIVITIES
Proceeds from short-term debt .............................................. 14,961 159,801
Repayments of short-term debt .............................................. (800) -
Proceeds from long-term debt ............................................... 30,000 15,000
Repayments of long-term debt ............................................... (1,228) (6,000)
Net increase in thrift deposits ............................................ 79,348 70,668
Annuity contract receipts .................................................. 144 878
Annuity contract withdrawals ............................................... (10,124) (5,233)
Dividends paid ............................................................. (5,107) (4,059)
Stock options exercised .................................................... 71 12,857
Net increase in deferred compensation plans ................................ (4,837) (20,392)
---------- ------------
Net Cash Provided by Financing Activities ........................... 102,428 223,520
---------- ------------
DECREASE IN CASH ........................................................... (31,580) (4,535)
Cash at beginning of year .................................................. 64,987 55,378
---------- -----------
CASH AT MARCH 31, .......................................................... $ 33,407 $ 50,843
========== ===========
See notes to consolidated financial statements on Form 10-Q.
</TABLE>
5
<PAGE>
FREMONT GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ON FORM 10-Q
(Unaudited)
NOTE A --- BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
These statements have been prepared in accordance with generally
accepted accounting principles and, accordingly, adjustments (consisting of
normal accruals) have been made as management considers necessary for fair
presentations. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997. Certain 1997 amounts have been
reclassified to conform to the 1998 presentation.
NOTE B --- COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130 ("FASB 130"), "Reporting Comprehensive
Income." This new standard establishes new rules for the reporting of
comprehensive income and its components; however, the adoption of this standard
had no impact on the Company's net income or stockholders' equity. FASB 130
requires unrealized gains or losses on the Company's securities
available-for-sale to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to these requirements.
Total comprehensive income amounted to $33.6 million and $10.4 million
for the first quarter ended March 31, 1998 and 1997, respectively.
NOTE C - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the first quarter ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net income (numerator for basic earnings per share) ................... $ 31,652 $ 24,359
Effect of dilutive securities:
Liquid Yield Option Notes ("LYONs") ............................... 109 974
-------- --------
Income available to common stockholders after assumed
conversions (numerator for diluted earnings per share) .............. $ 31,761 $ 25,333
======== ========
Weighted-average shares (denominator for basic earnings
per share) .......................................................... 31,804 26,126
Effect of dilutitve securities:
Restricted stock .................................................. 2,085 1,861
Stock options ..................................................... 515 89
LYONs ............................................................. 621 5,803
-------- --------
Dilutive potential common shares ...................................... 3,221 7,753
-------- --------
Adjusted weighted-average shares and assumed
conversions (denominator for diluted earnings per share) ........... 35,025 33,879
======== ========
Basic earnings per share .............................................. $ 1.00 $ 0.93
======== ========
Diluted earnings per share ............................................ $ 0.91 $ 0.75
======== ========
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS INCLUDING THOSE SET FORTH ELSEWHERE IN THIS QUARTERLY
REPORT ON FORM 10-Q.
RESULTS OF OPERATIONS
Fremont General is a nationwide insurance and financial services holding
company operating select businesses in niche markets. Fremont General's
insurance business includes one of the largest underwriters of workers'
compensation insurance in the nation. The Company's financial services business
includes commercial real estate lending, residential real estate lending,
commercial finance and insurance premium financing. The Company's reported
assets as of March 31, 1998 were $6.2 billion. Income before taxes for the first
quarter ended March 31, 1998 was $47.1 million. The primary operating strategy
of the Company is to build upon its core business units through acquisition
opportunities and new business development. The Company's secondary strategy is
to achieve income balance and geographic diversity among its business units in
order to limit the exposure of the Company to industry, market and regional
concentrations. The Company's stock is traded on the New York Stock Exchange
under the symbol "FMT."
Consistent with its primary operating strategy, the Company's workers'
compensation insurance operations have recently expanded through the acquisition
on August 1, 1997 of Industrial Indemnity Holdings, Inc. ("Industrial") from
Talegen Holdings, Inc ("Talegen"), a subsidiary of Xerox Corporation, whereby a
subsidiary of the Company purchased all of the issued and outstanding capital
stock of Industrial. The purchase price paid by the Company consisted of $365
million in cash and the pay-off of approximately $79 million of an outstanding
debt obligation that Industrial owed to Talegen. Financing for the transaction
was provided by internal funds and bank borrowings. Industrial, which
specializes in underwriting workers' compensation insurance, has a strong
presence in the western United States dating back over 70 years. The acquisition
was treated as a purchase for accounting purposes.
The following table presents information for the quarters ended March 31,
1998 and 1997 with respect to the Company's primary business segments.
THREE MONTHS ENDED
MARCH 31,
1998 1997
--------- ---------
(THOUSANDS OF DOLLARS)
Revenues:
Property and casualty .................... $ 197,443 $ 142,503
Financial services ....................... 65,737 52,223
Corporate ................................ 159 9
--------- ---------
Total .......................... $ 263,339 $ 194,735
========= =========
Income (Loss) Before Taxes:
Property and casualty .................... $ 41,009 $ 32,409
Financial services ....................... 13,103 10,479
Corporate ................................ (6,979) (7,066)
--------- ---------
Total .......................... $ 47,133 $ 35,822
========= =========
The Company generated revenues of $263.3 million in the first quarter ended
March 31, 1998, as compared to $194.7 million for the first quarter of 1997.
Revenues were higher in the first quarter of 1998 as compared to the same prior
year period, due primarily to higher workers' compensation insurance premiums
and net investment income in the Company's property and casualty segment, as
well as higher loan interest and other revenues within the financial services
segment. The higher workers' compensation insurance premiums and net investment
income were due mainly to the acquisition of Industrial on August 1, 1997. See
"Property and Casualty
7
<PAGE>
Insurance Operations - Premiums." Higher revenues in the financial services
segment were due mainly to higher loan interest resulting from growth in the
average loan portfolios of the real estate lending operations, as well as higher
other revenues resulting primarily from real estate loan sales. See "Financial
Services." Realized investment losses in the first quarter of 1998 were
$458,000, compared to $531,000 for the first quarter of 1997.
The Company posted a 30% increase in net income to $31.7 million or $0.91
diluted earnings per share for the first quarter of 1998, from $24.4 million or
$0.75 diluted earnings per share for the first quarter of 1997. Income before
taxes for the first quarter of 1998 was $47.1 million as compared to $35.8
million for the same period of 1997, representing an increase of 32%.
The property and casualty insurance operations, consisting primarily of
workers' compensation insurance, posted income before taxes of $41.0 million for
the quarter ended March 31, 1998, as compared to $32.4 million for the same
period in 1997. The increase in income before taxes of 27% for the three months
ended, was due primarily to the acquisition of Industrial. The combined ratio
for the quarter ended March 31, 1998 was 96.9% compared to 91.2% for the same
period in 1997. The higher combined ratio was due mainly to higher underwriting
expenses associated with Industrial's operations, as well as to higher incurred
losses. See "Property and Casualty Insurance Operations - Loss and Loss
Adjustment Expense."
The financial services operations posted income before taxes for the
quarter ended March 31, 1998 of $13.1 million, as compared to $10.5 million for
the same quarter of 1997. This increase was due mainly to the growth in the
average loan portfolio of the real estate lending operation, as well as to gains
on residential real estate loan sales. The average loan portfolio of the
financial services operations grew to $2.0 billion in the first quarter ended
March 31, 1998, from $1.79 billion for the same period of 1997.
Corporate revenues during the quarter ended March 31, 1998 and 1997
consisted primarily of investment income, while corporate expenses consisted
primarily of interest expense and general and administrative expenses. The
corporate loss before income taxes for the quarter ended March 31, 1998 was $7.0
million, flat as compared to $7.1 million for the same period of 1997.
Income tax expense of $15.5 million and $11.5 million for the quarters
ended March 31, 1998 and 1997, respectively, represents effective tax rates of
32.9% and 32.0% on respective income before taxes of $47.1 million and $35.8
million. These effective tax rates are lower than the enacted federal income tax
rate of 35%, due primarily to tax exempt investment income which reduces the
Company's taxable income.
Property and Casualty Insurance Operations
The following table represents information for the quarters ended March 31,
1998 and 1997 with respect to the Company's property and casualty insurance
operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
--------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Revenues ........................................ $ 197,443 $ 142,503
Expenses ........................................ 156,434 110,094
--------- ---------
Income Before Taxes ............................. $ 41,009 $ 32,409
========= =========
</TABLE>
Premiums. Premiums earned from the Company's property and casualty
insurance operations were $154.2 million in the quarter ended March 31, 1998, as
compared to $115.2 million for the same period of 1997. The higher premiums were
due primarily to the acquisition of Industrial. With this acquisition, the
Company has broadened the geographic diversity of its premium writings. Using
the Company's estimated annual premiums on policies in effect at March 31, 1998
and 1997 (referred to as "inforce premium"), the percentage of the Company's
combined inforce premium in California and Illinois was 58% at March 31, 1998,
down significantly from 75% at March 31, 1997. See "Variability of Operating
Results" and "Workers' Compensation Regulation." The Industrial acquisition has
also afforded the Company a significant presence in the western United States,
in addition to California. Historically, these western states, excluding
California, have collectively exhibited relatively stable competitive
environments; however, there can be no assurance that this stability will
continue in the future.
8
<PAGE>
Partially offsetting the increases in workers' compensation insurance
premiums resulting from the acquisition of Industrial, the Company incurred
higher reinsurance costs in the quarter ended March 31, 1998, due to additional
excess of loss reinsurance purchased for the workers' compensation insurance
business which became effective January 1, 1998. The Company purchased the
additional reinsurance in an effort to further reduce the volatility of
operating results which occurs through fluctuations in loss costs. The
additional reinsurance reduces the point at which reinsurers assume liability
from $1 million per loss occurrence to $100,000 per loss occurrence.
Net Investment Income. Net investment income within the property and
casualty insurance operations increased to $39.6 million in the first quarter
ended March 31, 1998, from $27.8 million in the quarter ended March 31, 1997.
This increase was due primarily to the acquisition of Industrial.
Loss and Loss Adjustment Expense. The property and casualty loss and loss
adjustment expenses ("LAE") were $103.3 million for the first quarter ended
March 31, 1998, as compared to $73.1 million for the same period of 1997. In
addition, the ratio of these losses and LAE to property and casualty insurance
premiums earned ("loss ratio") was 67.0% and 63.4% for the first quarters ended
March 31, 1998, and 1997, respectively. The increase in the loss ratio was due
primarily to the recognition of savings generated in the first quarter of 1997
by the Company's implementation of more effective claims handling procedures in
its mid-west region, as well as higher loss ratios in the first quarter of 1998
associated with Industrial.
The Company regularly reviews its reserving techniques, overall reserve
position and reinsurance. In light of present facts and current legal
interpretations, management believes that adequate provisions have been made for
loss reserves. In making this determination, management has considered its
claims experience to date, loss development history for prior accident years and
estimates of future trends of claims frequency and severity. However,
establishment of appropriate reserves is an inherently uncertain process, and
there can be no certainty that currently established reserves will prove
adequate in light of subsequent actual experience. Subsequent actual experience
has resulted and could result in loss reserves being too high or too low. Future
loss development could require reserves for prior periods to be increased, which
would adversely impact earnings in future periods.
Policy Acquisition Costs and Other Operating Costs and Expenses. The ratio
of policy acquisition costs and other operating costs and expenses to premiums
earned is referred to as the expense ratio, which was 28.9% for the quarter
ended March 31, 1998, as compared to 27.8% for same quarter of 1997. The
increase in this ratio was due primarily to a lower earned premium base in the
first quarter of 1998, resulting from additional reinsurance costs incurred in
the quarter ended March 31, 1998. See "Premiums."
Variability of Operating Results. The Company's profitability can be
affected significantly by many factors including competition, the severity and
frequency of claims, interest rates, regulations, court decisions, the judicial
climate, and general economic conditions and trends, all of which are outside of
the Company's control. These factors have contributed, and in the future could
contribute, to significant variation of results of operations in different
aspects of the Company's business from quarter to quarter and year to year. With
respect to the workers' compensation insurance business, changes in economic
conditions can lead to reduced premium levels due to lower payrolls as well as
increased claims due to the tendency of workers who are laid off to submit
workers' compensation claims. Legislative and regulatory changes can also
contribute to variable operating results for workers' compensation insurance
businesses. For example, in 1995 the Company experienced the negative impact of
lower premiums and lower profitability on the Company's California workers'
compensation business due to increased price competition resulting from
legislation enacted in California in July 1993 which, among other things,
repealed the minimum rate law effective January 1, 1995. Additionally, price
competition in Illinois, where the Company has a significant presence, continues
to impact the Company's profitability, where overall average decreases of 7.9%
and 10.0% in advisory premium rates, which workers' compensation insurance
companies in Illinois tend to follow, became effective January 1, 1998 and 1997,
respectively. See "Workers' Compensation Regulation." The acquisition of
Industrial has mitigated the adverse effects of this price competition in
Illinois by providing the Company with a broader geographic diversity of its
premium writings. The Company anticipates that its results of operations and
financial condition will continue to be adversely affected by the continued
price competition in Illinois and California. Also, the establishment of
appropriate reserves necessarily involves estimates, and reserve adjustments
have caused significant fluctuations in operating results from year to year.
Workers' Compensation Regulation. At March 31, 1998, approximately 58% of
the Company's inforce premiums were in California and Illinois. Illinois began
operating under an open rating system in 1982 and
9
<PAGE>
California began operating under such a system effective January 1, 1995. In an
open rating system, workers' compensation companies are provided with advisory
premium rates by job classification and each insurance company determines its
own rates based in part upon its particular operating and loss costs. Although
insurance companies are not required to adopt such advisory premium rates,
companies in Illinois generally follow such rates. This characteristic has
resulted in increased price competition in Illinois, where overall average
decreases in advisory premium rates of 7.9% and 10.0% became effective January
1, 1998 and 1997, respectively. In contrast, insurance companies in California
have, since the adoption of an open rating system, generally set their premium
rates below such advisory premium rates. Before January 1, 1995, California
operated under a minimum rate law, whereby premium rates established by the
California Department of Insurance were the minimum rates which could be charged
by an insurance carrier. Most of the states in which the Company writes premiums
operate under some form of open rating system.
Financial Services
The Company's financial services operations, which are comprised primarily
of the results of Fremont General Credit Corporation ("FGCC"), are principally
engaged in commercial and residential real estate lending, commercial finance
and insurance premium financing. Revenues consist primarily of interest income
and to a lesser extent fees and other income.
The following table presents information for the first quarter ended March
31, 1998 and 1997 with respect to the Company's financial services operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
--------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Revenues ..................................... $ 65,737 $ 52,223
Expenses ..................................... 52,634 41,744
--------- ---------
Income Before Taxes .......................... $ 13,103 $ 10,479
========= =========
</TABLE>
Revenues increased 26% in the first quarter ended March 31, 1998, as
compared to the same period of 1997, due primarily to greater loan interest
revenue attributable to the growth in the average loan portfolio of the
commercial and residential real estate lending operations. Additionally, higher
revenues resulted from increased residential real estate loan sales. These loan
sales are pursuant to a program, begun by the Company's real estate lending
operation in 1995 and expanded in 1997, of selling certain residential real
estate loans to other financial institutions. This has allowed the Company an
opportunity to become more selective in its residential real estate loan
portfolio, as well as to offer a broader range of residential real estate loans
to its customers, primarily through independent brokers. These loan sales are
made without recourse to the Company or its subsidiaries.
Income before taxes in the financial services operations was $13.1 million
for the quarter ended March 31, 1998, as compared to $10.5 million for the same
period of 1997. The 25% increase in income before taxes in the first quarter of
1998 was due primarily to higher income before taxes in the real estate lending
operation. Contributing to this higher income before taxes were higher loan
interest revenue due to a greater average real estate loan portfolio, as well as
the previously described gains on residential real estate loan sales. These
conditions were partially offset by increases in operating expenses.
10
<PAGE>
The following table identifies the interest income, interest expense,
average interest-bearing assets and liabilities, and interest margins for the
Company's financial services operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------------------------
1998 1997
------------------------------------- ------------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST (1) BALANCE INTEREST COST (1)
----------- --------- -------- ----------- --------- --------
(THOUSANDS OF DOLLARS, EXCEPT PERCENTS)
Interest bearing assets (2) :
<S> <C> <C> <C> <C> <C> <C>
Commercial finance and other loans ............. $ 565,506 $ 14,742 10.43% $ 584,134 $ 15,400 10.55%
Thrift and loan:
Cash equivalents ............................. 81,381 1,037 5.10 91,945 1,172 5.10
Investments .................................. 120,210 1,728 5.75 44,311 622 5.61
Commercial real estate loans ................. 1,063,326 26,051 9.80 872,406 20,712 9.50
Residential real estate loans ................ 382,559 8,988 9.40 280,163 6,735 9.62
Insurance premium financing
and other thrift loans .................... 58,193 1,561 10.73 54,718 1,499 10.96
----------- --------- ----------- ---------
Total interest bearing assets .................. $ 2,271,175 $ 54,107 9.53% $ 1,927,677 $ 46,140 9.57%
=========== ========= =========== =========
Interest bearing liabilities:
Savings deposits ............................... $ 323,872 $ 4,161 5.14% $ 238,303 $ 2,924 4.91%
Time deposits .................................. 1,211,034 17,316 5.72 917,629 13,153 5.73
Other .......................................... 1,083 6 2.22 1,757 12 2.73
Securitization obligation ...................... 280,421 4,303 6.14 294,353 4,395 5.97
Debt with banks ................................ 163,369 2,726 6.67 218,179 3,549 6.51
Debt from affiliates ........................... 53,137 767 5.77 49,772 612 4.92
----------- --------- ----------- ---------
Total interest bearing liabilities ............. $ 2,032,916 $ 29,279 5.76% $ 1,719,993 $ 24,645 5.73%
=========== ========= =========== =========
Net interest income ................................ $ 24,828 $ 21,495
========= =========
Net yield .......................................... 4.37% 4.46%
- ----------------
(1) Annualized.
(2) Average loan balances include non-accrual loan balances.
</TABLE>
The margin between the Company's interest income and cost of funds
decreased a modest 0.09% in the quarter ended March 31, 1998 as compared to the
first quarter ended March 31, 1997, due primarily to a decrease in the yields in
the commercial finance segment as increases in the credit quality of the
commercial finance portfolio and continued competition resulted in lower yields.
Partially offsetting this was a slight increase in the net margins in the real
estate lending operation, due mainly to an increase in the yield on commercial
real estate loans offset partially by a decrease in the yield on residential
real estate loans.
11
<PAGE>
Loans Receivable and Reserve Activity. The following table shows loans
receivable in the various financing categories and the percentages of the total
represented by each category:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------------- -------------------
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
----------- ----- ----------- -----
(THOUSANDS OF DOLLARS, EXCEPT PERCENTS)
<S> <C> <C> <C> <C>
Accounts receivable and inventory loans:
Commercial finance ......................... $ 399,155 19% $ 389,252 19%
Term loans:
Thrift and loan ............................ 1,560,050 73 1,480,824 73
Commercial finance loans ................... 183,827 8 158,013 8
----------- ----- ----------- -----
Total term loans ...................... 1,743,877 81 1,638,837 81
----------- ----- ----------- -----
Total loans ........................... 2,143,032 100 2,028,089 100
Less allowance for possible loan losses ......... 45,949 2 44,402 2
----------- ----- ----------- -----
Loans receivable ........................... $ 2,097,083 98% $ 1,983,687 98%
=========== ===== =========== =====
</TABLE>
The following table illustrates the maturities of the Company's loans
receivable:
<TABLE>
<CAPTION>
MATURITIES AT MARCH 31, 1998
-----------------------------------------------
1 TO 24 25 TO 60 OVER 60
MONTHS MONTHS MONTHS TOTAL
--------- --------- --------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Accounts receivable and inventory
loans -- variable rate ................. $ 399,155 $ - $ - $ 399,155
Term loans -- variable rate .................. 297,328 641,533 557,321 1,496,182
Term loans -- fixed rate ..................... 106,806 66,088 74,801 247,695
--------- --------- --------- -----------
Total .................................. $ 803,289 $ 707,621 $ 632,122 $ 2,143,032
========= ========= ========= ===========
</TABLE>
The Company monitors the relationship of fixed and variable rate loans and
interest bearing liabilities in order to minimize interest rate risk.
During 1996, the Company began originating both commercial and residential
real estate loans outside of California. The Company intends to seek portfolio
growth outside of California in order to achieve greater geographic diversity in
its loan portfolio and thereby lessen the Company's exposure to regional
economic conditions. The total amount of commercial and residential real estate
loans outstanding on properties located outside of California at March 31, 1998
was $93.7 million and $69.8 million, respectively.
Adverse economic developments can negatively affect the Company's business
and results of operations in a number of ways. Such developments can, among
other things, reduce the demand for loans, impair the ability of borrowers to
pay loans and impair the value of the underlying collateral.
12
<PAGE>
The following table describes the asset classifications, loss experience
and reserve reconciliation of the real estate lending and commercial finance
operations as of or for the periods ended as shown below:
<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1998 1997
--------------- ----------
(THOUSANDS OF DOLLARS,
EXCEPT PERCENTS)
<S> <C> <C>
Non-accrual loans .......................................................... $ 25,112 $ 22,958
Accrual loans 90 days past due ............................................. 945 1,128
Real estate owned ("REO") .................................................. 11,992 11,285
----------- -----------
Total non-performing assets ................................................ $ 38,049 $ 35,371
=========== ===========
Beginning allowance for possible loan losses ............................... $ 44,402 $ 37,747
Provision for loan losses .................................................. 2,387 1,729
Charge-offs:
Commercial finance loans .............................................. 656 705
Thrift and loan:
Commercial real estate ............................................ - 142
Residential real estate loans ..................................... 262 205
Insurance premium financing and other thrift loans ................ 87 53
----------- -----------
Total charge-offs 1,005 1,105
----------- -----------
Recoveries:
Commercial finance loans .............................................. 8 2
Thrift and loan:
Commercial real estate ............................................ 93 167
Residential real estate loans ..................................... 39 532
Insurance premium financing and other thrift loans ................ 25 45
----------- -----------
Total recoveries ...................................................... 165 746
----------- -----------
Net charge-offs ............................................................ 840 359
----------- -----------
Ending allowance for possible loan losses .................................. $ 45,949 $ 39,117
=========== ===========
Allocation of allowance for possible loan losses:
Commercial finance loans .............................................. $ 11,184 $ 11,630
Thrift and loan ....................................................... 34,765 27,487
----------- -----------
Total allowance for possible loan losses .............................. $ 45,949 $ 39,117
=========== ===========
Total loans receivable ..................................................... $ 2,143,002 $ 1,845,054
Average total loans receivable ............................................. $ 2,045,995 $ 1,786,059
Net charge-offs to average total loans receivable (annualized) ............. 0.16% 0.08%
Non-performing assets to total loans receivable ............................ 1.78% 1.92%
Allowance for possible loan losses to total loans receivable ............... 2.14% 2.12%
Allowance for possible loan losses to non-performing assets ................ 120.76% 110.59%
Allowance for possible loan losses to non-accrual
loans and accrual loans 90 days past due .............................. 176.34% 162.41%
</TABLE>
Non-performing assets increased a modest 7.6% to $38.0 million at March 31,
1998 from $35.4 million at March 31, 1997, which is a lower rate of increase
than the 16.2% increase in total loans receivable to $2.1 billion at March 31,
1998 from $1.8 billion at March 31, 1997.
The higher provision for loan losses in the quarter ended March 31, 1998 as
compared to the same quarter of the prior year, is also consistent with the
overall increase in total loans receivable. The Company continues to experience
low loan loss experience as evidenced by the continued low ratio of net
charge-offs to average total
13
<PAGE>
loans receivable. The Company's low loan loss experience is further evidenced by
the decrease in the ratio of non-performing assets to total loans receivable in
the preceding table. The Company's allowance for possible loan losses
strengthened in the first quarter of 1998 as indicated by the increase in the
ratio of the allowance for possible loan losses to non-accrual loans and accrual
loans 90 days past due to 176.34% from 162.41% at the quarters ended March 31,
1998 and 1997, respectively.
MARKET RISK
The Company is subject to market risk resulting primarily from fluctuations
in interest rates arising from balance sheet financial instruments such as
investments, loans and debt. In the property and casualty insurance operations,
the greatest interest rate risk exposure occurs where the interest rate of the
financial instrument is fixed in nature and there is a difference between the
fixed rate of the financial instrument and the market rate. The greatest
interest rate risk exposure in the financial services operations occurs when
interest rate gaps arise wherein assets are funded with liabilities having
different repricing intervals or different market indices to which the
instruments' interest rates are tied. Changes in interest rates will affect the
Company's net investment income, loan interest, interest expense and total
stockholders' equity. The objective of the Company's asset and liability
management activities is to provide the highest level of net interest income and
to seek cost effective sources of capital, while maintaining acceptable levels
of interest rate and liquidity risk. The Company has designated its entire
investment portfolio as investments that would be available for sale in response
to changing market conditions, liquidity requirements, interest rate movements
and other investment factors. The Company currently owns no derivative financial
instruments and, consequently, is not subject to market risk for such
off-balance sheet financial instruments. Furthermore, the Company does not have
exposure to foreign currency or commodity price risk.
For additional information regarding market risk, see the discussion set
forth under the subheadings "Property and Casualty Insurance Operations-Interest
Rate Risk," "Financial Services Operations-Interest Rate Risk" and "Fremont
General Corporation (Parent-only)-Interest Rate Risk" in the corresponding
Management's Discussion and Analysis in the Company's 1997 Annual Report on Form
10-K. No material changes in market risk have occurred since year-end.
LIQUIDITY AND CAPITAL RESOURCES
The property and casualty insurance operations must have cash and liquid
assets available to meet their obligations to policyholders in accordance with
contractual obligations, in addition to having the funds available to meet
ordinary operating costs. These operations have several sources of funds to meet
their obligations, including cash flow from operations, recoveries from
reinsurance contracts and investment securities. By statute, the majority of the
cash from these operations is required to be invested in investment grade
securities to provide protection for policyholders. The Company invests in fixed
income and preferred equity securities with an objective of providing a
reasonable return while limiting credit and liquidity risk. The Company's
investment portfolio had an unrealized gain of $84.4 million and $81.4 million
at March 31, 1998 and December 31, 1997, respectively.
The Company's thrift and loan subsidiary, which is principally engaged in
real estate lending, finances its lending activities primarily through customer
deposits, which have grown to $1.6 billion at March 31, 1998 from $1.5 billion
at December 31, 1997. In addition, this subsidiary is eligible for financing
through the Federal Home Loan Bank of San Francisco ("FHLB"). This financing is
available at varying rates and terms. As of March 31, 1998, $370 million was
available under the facility with no outstanding advances.
The Company's commercial finance operation funds its lending activities
primarily through its asset securitization program, an unsecured revolving line
of credit with a syndicated bank group and its capital. The asset securitization
program was established to provide a stable and cost effective source of funds
to facilitate the expansion of this business. As of March 31, 1998, an aggregate
$235 million senior series and an aggregate $39 million subordinated series of
asset-backed certificates were outstanding. The interest rate on the
certificates, set monthly, ranged from LIBOR plus 0.23% to LIBOR plus 0.95% at
March 31, 1998. The securities issued in this program have a scheduled maturity
of three to five years, but could mature earlier depending on fluctuations in
outstanding balances of loans in the portfolio and other factors. As of March
31, 1998, up to $265 million in additional publicly offered asset-backed
certificates may be issued pursuant to a shelf registration statement to fund
future growth in the commercial finance portfolio. In April 1997, $109.26
million in certificates ("Series D") were issued, comprised of $100 million in
senior certificates and $9.26 million in subordinated certificates. The Series D
14
<PAGE>
certificates were issued to retire $100 million in maturing Series B
certificates. In December 1995, a commercial paper facility was established as
part of the asset securitization program. This facility, which expires in
December 1998, provides for the issuance of up to $150 million in commercial
paper, dependent upon the level of assets within the asset securitization
program. As of March 31, 1998, $28.0 million was outstanding under this
facility. The commercial finance operation's unsecured revolving line of credit
is with a syndicated bank group that presently permits borrowings of up to $450
million, which includes a revolving credit facility of $350 million and a term
loan of $100 million. The revolving credit facility converts to a term loan in
August 2000, with ultimate maturity of the term loan in June 2002. The $100
million term loan matures July 2001. The balance outstanding at March 31, 1998
of the revolving credit facility and the term loan was $181 million, with a
weighted average interest rate of 6.09%. This credit line is primarily used to
finance assets which are not included in the Company's asset securitization
program.
As a holding company, Fremont General pays its operating expenses, meets
its other obligations and pays stockholders' dividends from its cash on hand,
management fees paid by its subsidiaries and dividends paid by its subsidiaries.
Stockholders' dividends declared aggregated $5.1 million and $4.3 million for
the quarters ended March 31, 1998 and 1997, respectively. Several of the
Company's subsidiaries are subject to certain statutory and regulatory
restrictions and various agreements, principally loan agreements, that restrict
their ability to distribute dividends to the Company. The Company expects that
during the next few years dividends from its subsidiaries will consist of
dividends from its property and casualty insurance subsidiaries and dividends on
preferred stock of its thrift and loan holding company and commercial finance
subsidiaries. The maximum amount available for payment of dividends by the
property and casualty insurance subsidiaries during 1998, without prior
regulatory approval, is approximately $67.8 million.
To facilitate general corporate operations, the Company maintains a
revolving line of credit with a syndicated bank group that permits borrowings of
up to $400 million, of which $255 million was outstanding as of March 31, 1998.
This credit facility expires in July 2002.
During 1997, an aggregate $185,952,000 principal amount at maturity of
Liquid Yield OptionTM Notes due October 12, 2013 (Zero Coupon-Subordinated)
("LYONs") were converted into 3,586,000 shares of the Company's Common Stock.
The effect of these conversions was an increase in stockholders' equity and a
decrease in long-term debt of $81 million. During the first quarter of 1998, an
aggregate $9,869,000 principal amount at maturity of LYONs were converted into
190,000 shares of the Company's Common Stock. The effect of the conversions was
an increase in stockholders' equity and a decrease in long-term debt of $4.5
million.
On March 1, 1996, Fremont General Financing I, a statutory business trust
(the "Trust") and consolidated wholly-owned subsidiary of the Company, sold $100
million of 9% Trust Originated Preferred SecuritiesSM ("the Preferred
Securities") in a public offering. The Preferred Securities represent preferred
undivided beneficial interests in the assets of the Trust. The proceeds from the
sale of the Preferred Securities were invested in 9% Junior Subordinated
Debentures of the Company ("the Junior Subordinated Debentures"). The proceeds
from the sale of the Junior Subordinated Debentures were used to repay
approximately $50 million in revolving bank line of credit indebtedness, with
the remainder used for general corporate purposes. The $100 million Junior
Subordinated Debentures are the sole asset of the Trust. The Preferred
Securities will be redeemed upon maturity of the Junior Subordinated Debentures
in 2026, subject to the election available to the Company to extend the maturity
up to 2045, and they may be redeemed, in whole or in part, at any time on or
after March 31, 2001 and under certain specified circumstances. The Junior
Subordinated Debentures are subordinate and junior to all senior indebtedness of
the Company. Payment of distributions out of cash held by the Trust, and
payments on liquidation of the Trust or the redemption of the Preferred
Securities are guaranteed by the Company.
Net cash used in operating activities of continuing operations was $35.6
million and $6.6 million for the quarters ended March 31, 1998 and 1997,
respectively. Net cash used in continuing operations increased in the first
quarter ended March 31, 1998, due primarily to a higher reduction in claims and
policy liabilities and a higher net amortization on fixed maturity investments,
offset partially by an increase in net income and a higher chan-ge in accrued
investment income.
Net cash used in investing activities decreased to $98.4 million from
$221.4 million for the quarters ended March 31, 1998 and 1997, respectively. The
decrease in net cash used in investing activities was due mainly to an increase
in investment sales, maturities and calls, net of purchases and short-term
investment activity.
15
<PAGE>
Net cash provided by financing activities was $102.4 million and $223.5
million for the quarters ended March 31, 1998 and 1997, respectively. Net cash
provided by financing activities decreased in the quarter ended March 31, 1998,
due primarily to a decrease in short-term and long-term debt proceeds, net of
repayments. Contributing to the decrease in short-term debt proceeds was $104
million in borrowings in the first quarter of 1997 pursuant to certain reverse
repurchase agreements within the property and casualty insurance operations.
The amortized cost of the Company's invested assets were $2.35 billion and
$2.36 billion at March 31, 1998 and December 31, 1997, respectively. The
invested assets are flat at March 31, 1998 as compared to December 31, 1997, due
mainly to the offsetting effects of a modest increase in the liquidity portfolio
of the real estate lending operation and a modest decrease in the invested
assets of the property and casualty operations.
The Company's property and casualty premium to surplus ratio for the year
ended December 31, 1997 was 1.5 to 1, which is within industry guidelines. The
FDIC has established certain capital and liquidity standards for its member
institutions, and the Company's thrift and loan subsidiary was in compliance
with these standards as of March 31, 1998.
The Company believes that its existing cash, its bank lines of credit,
revenues from operations and other available sources of liquidity will be
sufficient to satisfy its liquidity needs for at least the next twelve months.
INFORMATION SYSTEMS - "YEAR 2000"
The Company's operations rely on various computer-based information systems
in the conduct of its businesses ("Systems"). Currently, some of these Systems
will be unable to function properly after December 31, 1999 due to the inability
of the affected Systems to recognize the year 2000. This problem exists for a
substantial number of business enterprises, both domestically and
internationally, and has been referred to as the "Year 2000" problem.
As of March 31, 1998, significant Year 2000 compliance issues remain only
within the Company's workers' compensation operation. The Company's financial
services Systems, administrative Systems (personnel, payroll and accounting) and
treasury Systems (cash management and investment portfolio management) have all
been rendered substantially Year 2000 compliant. The Company also has initiated
discussions with its significant policyholders, agents, suppliers, borrowers and
financial institutions to ensure that those parties have appropriate plans to
remediate Year 2000 issues where their computer systems interface with the
Company's Systems or otherwise impact its operations.
With regard to the workers' compensation operation, the Company developed
an action plan in 1996 to render its workers' compensation Systems Year 2000
compliant. Based on an evaluation of the progress made as of March 31, 1998, the
Company estimates that its workers' compensation Systems, excluding those
Systems supporting Industrial which were acquired August 1, 1997, will be Year
2000 compliant by September 30, 1998. The Industrial Systems are expected to be
converted to Year 2000 compliant systems by June 30, 1999. The costs to be
incurred by the Company in completing these Year 2000 initiatives are not
expected to have a material impact on the Company's results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the subheading "Market Risk" in the
Company's Management Discussion and Analysis contained in this Quarterly Report
on Form 10-Q and the information set forth under the subheadings "Market Risk,"
"Property and Casualty Insurance Operations - Interest Rate Risk, "Financial
Services Operations Interest Rate Risk," and "Fremont General Corporation
(Parent-only) - Interest Rate Risk" in the Company's Management's Discussion and
Analysis contained in the 1997 Annual Report on Form 10-K is incorporated herein
by reference.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1: Legal Proceedings.
None.
Item 2: Changes in Securities and Use of Proceeds.
None.
Item 3: Defaults Upon Senior Securities.
None.
Item 4: Submission of Matters to a Vote of Security Holders.
None.
Item 5: Other Information.
None.
Item 6: Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Exhibits.
EXHIBIT NO. DESCRIPTION
------------ --------------------------------------------------------------
2.1 Stock Purchase Agreement by and among Talegen Holdings, Inc.,
Fremont Indemnity Company and Fremont General Corporation
dated as of May 16, 1997 including exhibits thereto. (Filed as
Exhibit No. 2.1 to Current Report on Form 8-K, as of August 1,
1997, Commission File Number 1-8007, and incorporated herein
by reference.)
2.2 Tax Allocation and Indemnification Agreement, dated as of May
16, 1997 by and among Xerox Financial Services, Inc., Talegen
Holdings, Inc., Industrial Indemnity Holdings, Inc., Fremont
General Corporation, and Fremont Indemnity Corporation, a
California corporation. (Filed as Exhibit No. 2.2 to Current
Report on Form 8-K, as of August 1, 1997, Commission File
Number 1-8007, and incorporated herein by reference.)
3.1 Restated Articles of Incorporation of Fremont General
Corporation. (Filed as Exhibit No. 3.1 to Registration
Statement on Form S-3 File No 33-64771 which was declared
effective on March 1, 1996, and incorporated herein by
reference.)
3.2 Certificate of Amendment of Articles of Incorporation of
Fremont General Corporation. (Filed as Exhibit 3.2 to
Registration Statement on Form S-3 File No. 33-64771
which was declared effective on March 1, 1996 and
incorporated herein by reference.)
3.3 Amended and Restated By-Laws of Fremont General Corporation.
(Filed as Exhibit No. 3.3 to Annual Report on Form 10-K, for
the fiscal year ended December 31, 1995, Commission File
Number 1-8007, and incorporated herein by reference.)
4.1 Form of Stock Certificate for Common Stock of the Registrant.
(Filed as Exhibit No. (1) Form 8-A filed on March 17, 1993,
Commission File Number 1-8007, and incorporated herein by
reference.)
4.2 Indenture with respect to Liquid Yield Option Notes Due 2013
between the Registrant and Bankers Trust Company. (Filed as
Exhibit No. 4.4 to Registration Statement on Form S-3 filed on
October 1, 1993, and incorporated herein by reference.)
17
<PAGE>
EXHIBIT NO. DESCRIPTION
------------ --------------------------------------------------------------
4.3 Indenture among the Registrant, the Trust and First Interstate
Bank of California, a California banking corporation, as
trustee. (Filed as Exhibit No. 4.3 to Annual Report on Form
10-K, for the fiscal year ended December 31, 1995, Commission
File Number 1-8007, and incorporated herein by reference.)
4.4 Amended and Restated Declaration of Trust among the
Registrant, the Regular Trustees, The Chase Manhattan Bank
(USA), a Delaware banking corporation, as Delaware trustee,
and The Chase Manhattan Bank, N.A., a national banking
association, as Institutional Trustee. (Filed as Exhibit No.
4.5 to Annual Report on Form 10-K, for the fiscal year ended
December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
4.5 Preferred Securities Guarantee Agreement between the
Registrant and The Chase Manhattan Bank, N.A., a national
banking association, as Preferred Guarantee Trustee. (Filed as
Exhibit No. 4.6 to Annual Report on Form 10-K, for the fiscal
year ended December 31, 1995, Commission File Number 1-8007,
and incorporated herein by reference.)
4.6 Common Securities Guarantee Agreement by the Registrant.
(Filed as Exhibit No. 4.7 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission
File Number 1-8007, and incorporated herein by reference.)
4.7 Form of Preferred Securities. (Included in Exhibit 4.5).
(Filed as Exhibit No 4.8 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission
File Number 1-8007, and incorporated herein by reference.)
4.8 Form of 9% Junior Subordinated Debenture. (Included in Exhibit
4.3). (Filed as Exhibit No. 4.9 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission File
Number 1-8007, and incorporated herein by reference.)
10.1(a) Fremont General Corporation Employee Stock Ownership Plan
as amended. (Filed as Exhibit No. 10.1 to Annual Report on
Form 10-K, for the fiscal year ended December 31, 1995,
Commission File Number 1-8007, and incorporated herein by
reference.)
10.1(b) Amendment Number Two to the Fremont General Corporation
Employee Stock Ownership Plan. (Filed as Exhibit No. 10.1 (b)
to Annual Report on Form 10-K, for the fiscal year ended
December 31, 1997, Commission File Number 1-8007, and
incorporated herein by reference.)
10.2 Amended and Restated Trust Agreement for Fremont General
Corporation Employee Stock Ownership Plan. (Filed as Exhibit
No. 10.2 to Annual Report on Form 10-K, for the fiscal year
ended December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.3(a) Fremont General Corporation and Affiliated Companies
Investment Incentive Plan. (Filed as Exhibit No. 10.3 to
Annual Report on Form 10-K, for the fiscal year ended December
31, 1995, Commission File Number 1-8007, and incorporated
herein by reference.)
10.3(b) Amendments Number One, Two and Three to the Fremont General
Corporation and Affiliated Companies Investment Incentive
Plan. (Filed as Exhibit No. 10.3 (b) to Quarterly Report on
Form 10-Q, for the period ended September 30, 1997,Commission
File Number 1-8007, and incorporated herein by reference.)
10.3(c) Amendment Number Four to the Fremont General Corporation
and Affiliated Companies Investment Incentive Plan. (Filed as
Exhibit No. 10.3 (c) to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1997, Commission File Number
1-8007, and incorporated herein by reference.)
18
<PAGE>
EXHIBIT NO. DESCRIPTION
------------ --------------------------------------------------------------
10.4(a) Trust Agreement for Investment Incentive Plan. (Filed as
Exhibit No. (10)(xi) to Annual Report on Form 10-K, for the
Fiscal Year Ended December 31, 1993, Commission File Number
1-8007, and incorporated herein by reference.)
10.4(b) Amendment to Trust Agreement for Investment Incentive Plan.
(Filed as Exhibit No. 10.4 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission File
Number 1-8007, and incorporated herein by reference.)
10.5(a) Supplemental Retirement Plan of the Company, as restated
January 1, 1997. (Filed as Exhibit No. 10.5 to Quarterly
Report on Form 10-Q, for the period ended September 30, 1997,
Commission File Number 1-8007, and incorporated herein by
reference.)
10.5(b) Amendment Number One to the Fremont General Corporation
Supplemental Retirement Plan of the Company.
10.6 Trust Agreement for Supplemental Retirement Plan of the
Company and the Senior Supplemental Retirement Plan of The
Company, as amended. (Filed as Exhibit No. 10.6 to Annual
Report on Form 10-K, for the fiscal year ended December 31,
1995, Commission File Number 1-8007, and incorporated herein
by reference.)
10.7 Senior Supplemental Retirement Plan, as restated January 1,
1997. (Filed as Exhibit No. 10.7 to Quarterly Report on Form
10-Q, for the period ended September 30, 1997, Commission File
Number 1-8007, and incorporated herein
by reference).
10.8(a) Excess Benefit Plan of the Company. (Filed as Exhibit No.
(10)(vi) to Annual Report on Form 10-K, for the Fiscal Year
Ended December 31, 1993, Commission File Number 1-8007, and
incorporated herein by reference.)
10.8(b) Amendment to Excess Benefit Plan of the Company. (Filed as
Exhibit No. 10.8 to Annual Report on Form 10-K, for the fiscal
year ended December 31, 1995, Commission File Number 1-8007,
and incorporated herein by reference.)
10.8(c) Trust Agreement for Excess Benefit Plan. (Filed as Exhibit
No. 10.8 to Annual Report on Form 10-K, for the fiscal year
ended December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.9 Amended Non-Qualified Stock Option Plan of 1989 and related
agreements of the Company. (Filed as Exhibit No. 10.9 to
Annual Report on Form 10-K, for the fiscal year ended December
31, 1996, Commission File Number 1-8007, and incorporated
herein by reference.)
10.10 1997 Stock Plan and related agreements. (Filed as Exhibit No.
10.10 to Quarterly Report on Form 10-Q, for the period ended
June 30, 1997, Commission File Number 1-8007, and incorporated
herein by reference.)
10.11(a) Long-Term Incentive Compensation Plan of the Company -
Senior Executive Plan. (Filed as Exhibit No. 10.10 (a) on Form
10-Q for the period ended September 30, 1996, Commission File
Number 1-8007, and incorporated herein by reference.)
19
<PAGE>
EXHIBIT NO. DESCRIPTION
------------ --------------------------------------------------------------
10.11(b) Long-Term Incentive Compensation Plan of the Company
(Filed as Exhibit No. 10.10 (b) on Form 10-Q for the period
ended September 30, 1996, Commission File Number 1-8007, and
incorporated herein by reference.)
10.12 1995 Restricted Stock Award Plan as amended and forms
of agreement thereunder. (Filed as Exhibit No. 4.1 to
Registration Statement on Form S-8/S-3 File No. 333-17525
which was filed on December 9, 1997, and incorporated
herein by reference.)
10.13 Fremont General Corporation Employee Benefits Trust Agreement
("Grantor Trust") dated September 7, 1995 between the Company
and Merrill Lynch Trust Company of California. (Filed as
Exhibit No. 10.12 to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1995, Commission File Number
1-8007, and incorporated herein by reference.)
10.14(a) Employment Agreement between the Company and James A.
McIntyre dated January 1, 1994. (Filed as Exhibit No. (10)(i)
to Quarterly Report on Form 10-Q for the period ended March
31, 1994, Commission File Number 1-8007, and incorporated
herein by reference.)
10.14(b) First Amendment to Employment Agreement between the
Company and James A. McIntyre dated August 1, 1996. (Filed as
Exhibit No. 10.10 to Quarterly Report on Form 10-Q, for the
period ended June 30, 1997, Commission File Number 1-8007, and
incorporated herein by reference.)
10.14(c) Second Amendment to Employment Agreement between the
Company and James A. McIntyre dated August 8, 1997. (Filed as
Exhibit No. 10.14 (c) to Quarterly Report on Form 10-Q, for
the period ended September 30, 1997, Commission File Number
1-8007, and incorporated herein by reference.)
10.15(a) Employment Agreement between the Company and Louis J.
Rampino dated February 8, 1996. (Filed as Exhibit No. 10.14
(a) to Annual Report on Form 10-K, for the fiscal year ended
December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.15(b) Employment Agreement between the Company and Wayne R.
Bailey dated February 8, 1996. (Filed as Exhibit No. 10.14 to
Annual Report on Form 10-K, for the fiscal year ended December
31, 1995, Commission File Number 1-8007, and incorporated
herein by reference.)
10.16 Management Continuity Agreement between the Company and
Raymond G. Meyers dated February 8, 1996. (Filed as Exhibit
No. 10.15 to Annual Report on Form 10-K, for the fiscal year
ended December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.17 1998 Management Incentive Compensation Plan of the Company.
(Filed as Exhibit No. 10.17 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1997, Commission File
Number 1-8007, and incorporated herein by reference.)
10.18 Continuing Compensation Plan for Retired Directors. (Filed
as Exhibit No. 10.17 to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1995, Commission File Number
1-8007, and incorporated herein by reference.)
20
<PAGE>
EXHIBIT NO. DESCRIPTION
------------ --------------------------------------------------------------
10.19 Non-Employee Directors' Deferred Compensation Plan. (Filed
as Exhibit No.10.18 to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1995, Commission File Number
1-8007, and incorporated herein by reference.)
10.20 Credit Agreement among Fremont General Corporation, Various
Lending Institutions and the Chase Manhattan Bank, N.A., As
Agent dated August 1, 1997. (Filed as Exhibit No. 10.20 to
Quarterly Report on Form 10-Q, for the period ended September
30, 1997, Commission File Number 1-8007, and incorporated
herein by reference).
10.21 Credit Agreement $15,000,000 by and among Merrill Lynch Trust
Company of California as trustee for the Fremont General
Corporation Employee Stock Ownership Trust. The Plan Committee
(hereinafter described) on behalf of the Fremont General
Corporation Employee Stock Ownership Plan, Fremont General
Corporation, and First Interstate Bank of California August
10, 1995. (Filed as Exhibit No. (10)(viii) to Quarterly Report
on Form 10-Q for the period ended September 30, 1995, and
incorporated herein by reference.)
27 Financial Data Schedule
(b) Report on Form 8-K. None filed during the quarter ended March 31, 1998.
21
<PAGE>
SIGNATURES
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.
FREMONT GENERAL CORPORATION
Date: May 13, 1998 /s/ LOUIS J. RAMPINO
----------------------------
Louis J. Rampino, President,
Chief Operating Officer and Director
Date: May 13, 1998 /s/ JOHN A. DONALDSON
-----------------------------
John A. Donaldson, Senior Vice
President, Controller and Chief
Accounting Officer
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
------------ -------------------------------------------------------------- -------------
<C> <S> <C>
2.1 Stock Purchase Agreement by and among Talegen Holdings, Inc.,
Fremont Indemnity Company and Fremont General Corporation
dated as of May 16, 1997 including exhibits thereto. (Filed as
Exhibit No. 2.1 to Current Report on Form 8-K, as of August 1,
1997, Commission File Number 1-8007, and incorporated herein
by reference.)
2.2 Tax Allocation and Indemnification Agreement, dated as of May
16, 1997 by and among Xerox Financial Services, Inc., Talegen
Holdings, Inc., Industrial Indemnity Holdings, Inc., Fremont
General Corporation, and Fremont Indemnity Corporation, a
California corporation. (Filed as Exhibit No. 2.2 to Current
Report on Form 8-K, as of August 1, 1997, Commission File
Number 1-8007, and incorporated herein by reference.)
3.1 Restated Articles of Incorporation of Fremont General
Corporation. (Filed as Exhibit No. 3.1 to Registration
Statement on Form S-3 File No 33-64771 which was declared
effective on March 1, 1996, and incorporated herein by
reference.)
3.2 Certificate of Amendment of Articles of Incorporation of
Fremont General Corporation. (Filed as Exhibit 3.2 to
Registration Statement on Form S-3 File No. 33-64771
which was declared effective on March 1, 1996 and
incorporated herein by reference.)
3.3 Amended and Restated By-Laws of Fremont General Corporation.
(Filed as Exhibit No. 3.3 to Annual Report on Form 10-K, for
the fiscal year ended December 31, 1995, Commission File
Number 1-8007, and incorporated herein by reference.)
4.1 Form of Stock Certificate for Common Stock of the Registrant.
(Filed as Exhibit No. (1) Form 8-A filed on March 17, 1993,
Commission File Number 1-8007, and incorporated herein by
reference.)
4.2 Indenture with respect to Liquid Yield Option Notes Due 2013
between the Registrant and Bankers Trust Company. (Filed as
Exhibit No. 4.4 to Registration Statement on Form S-3 filed on
October 1, 1993, and incorporated herein by reference.)
4.3 Indenture among the Registrant, the Trust and First Interstate
Bank of California, a California banking corporation, as
trustee. (Filed as Exhibit No. 4.3 to Annual Report on Form
10-K, for the fiscal year ended December 31, 1995, Commission
File Number 1-8007, and incorporated herein by reference.)
4.4 Amended and Restated Declaration of Trust among the
Registrant, the Regular Trustees, The Chase Manhattan Bank
(USA), a Delaware banking corporation, as Delaware trustee,
and The Chase Manhattan Bank, N.A., a national banking
association, as Institutional Trustee. (Filed as Exhibit No.
4.5 to Annual Report on Form 10-K, for the fiscal year ended
December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
4.5 Preferred Securities Guarantee Agreement between the
Registrant and The Chase Manhattan Bank, N.A., a national
banking association, as Preferred Guarantee Trustee. (Filed as
Exhibit No. 4.6 to Annual Report on Form 10-K, for the fiscal
year ended December 31, 1995, Commission File Number 1-8007,
and incorporated herein by reference.)
4.6 Common Securities Guarantee Agreement by the Registrant.
(Filed as Exhibit No. 4.7 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission
File Number 1-8007, and incorporated herein by reference.)
4.7 Form of Preferred Securities. (Included in Exhibit 4.5).
(Filed as Exhibit No 4.8 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission
File Number 1-8007, and incorporated herein by reference.)
4.8 Form of 9% Junior Subordinated Debenture. (Included in Exhibit
4.3). (Filed as Exhibit No. 4.9 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission File
Number 1-8007, and incorporated herein by reference.)
10.1(a) Fremont General Corporation Employee Stock Ownership Plan
as amended. (Filed as Exhibit No. 10.1 to Annual Report on
Form 10-K, for the fiscal year ended December 31, 1995,
Commission File Number 1-8007, and incorporated herein by
reference.)
10.1(b) Amendment Number Two to the Fremont General Corporation
Employee Stock Ownership Plan. (Filed as Exhibit No. 10.1 (b)
to Annual Report on Form 10-K, for the fiscal year ended
December 31, 1997, Commission File Number 1-8007, and
incorporated herein by reference.)
10.2 Amended and Restated Trust Agreement for Fremont General
Corporation Employee Stock Ownership Plan. (Filed as Exhibit
No. 10.2 to Annual Report on Form 10-K, for the fiscal year
ended December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.3(a) Fremont General Corporation and Affiliated Companies
Investment Incentive Plan. (Filed as Exhibit No. 10.3 to
Annual Report on Form 10-K, for the fiscal year ended December
31, 1995, Commission File Number 1-8007, and incorporated
herein by reference.)
10.3(b) Amendments Number One, Two and Three to the Fremont General
Corporation and Affiliated Companies Investment Incentive
Plan. (Filed as Exhibit No. 10.3 (b) to Quarterly Report on
Form 10-Q, for the period ended September 30, 1997,Commission
File Number 1-8007, and incorporated herein by reference.)
10.3(c) Amendment Number Four to the Fremont General Corporation
and Affiliated Companies Investment Incentive Plan. (Filed as
Exhibit No. 10.3 (c) to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1997, Commission File Number
1-8007, and incorporated herein by reference.)
10.4(a) Trust Agreement for Investment Incentive Plan. (Filed as
Exhibit No. (10)(xi) to Annual Report on Form 10-K, for the
Fiscal Year Ended December 31, 1993, Commission File Number
1-8007, and incorporated herein by reference.)
10.4(b) Amendment to Trust Agreement for Investment Incentive Plan.
(Filed as Exhibit No. 10.4 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1995, Commission File
Number 1-8007, and incorporated herein by reference.)
10.5(a) Supplemental Retirement Plan of the Company, as restated
January 1, 1997. (Filed as Exhibit No. 10.5 to Quarterly
Report on Form 10-Q, for the period ended September 30, 1997,
Commission File Number 1-8007, and incorporated herein by
reference.)
10.5(b) Amendment Number One to the Fremont General Corporation
Supplemental Retirement Plan of the Company.
10.6 Trust Agreement for Supplemental Retirement Plan of the
Company and the Senior Supplemental Retirement Plan of The
Company, as amended. (Filed as Exhibit No. 10.6 to Annual
Report on Form 10-K, for the fiscal year ended December 31,
1995, Commission File Number 1-8007, and incorporated herein
by reference.)
10.7 Senior Supplemental Retirement Plan, as restated January 1,
1997. (Filed as Exhibit No. 10.7 to Quarterly Report on Form
10-Q, for the period ended September 30, 1997, Commission File
Number 1-8007, and incorporated herein
by reference).
10.8(a) Excess Benefit Plan of the Company. (Filed as Exhibit No.
(10)(vi) to Annual Report on Form 10-K, for the Fiscal Year
Ended December 31, 1993, Commission File Number 1-8007, and
incorporated herein by reference.)
10.8(b) Amendment to Excess Benefit Plan of the Company. (Filed as
Exhibit No. 10.8 to Annual Report on Form 10-K, for the fiscal
year ended December 31, 1995, Commission File Number 1-8007,
and incorporated herein by reference.)
10.8(c) Trust Agreement for Excess Benefit Plan. (Filed as Exhibit
No. 10.8 to Annual Report on Form 10-K, for the fiscal year
ended December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.9 Amended Non-Qualified Stock Option Plan of 1989 and related
agreements of the Company. (Filed as Exhibit No. 10.9 to
Annual Report on Form 10-K, for the fiscal year ended December
31, 1996, Commission File Number 1-8007, and incorporated
herein by reference.)
10.10 1997 Stock Plan and related agreements. (Filed as Exhibit No.
10.10 to Quarterly Report on Form 10-Q, for the period ended
June 30, 1997, Commission File Number 1-8007, and incorporated
herein by reference.)
10.11(a) Long-Term Incentive Compensation Plan of the Company -
Senior Executive Plan. (Filed as Exhibit No. 10.10 (a) on Form
10-Q for the period ended September 30, 1996, Commission File
Number 1-8007, and incorporated herein by reference.)
10.11(b) Long-Term Incentive Compensation Plan of the Company
(Filed as Exhibit No. 10.10 (b) on Form 10-Q for the period
ended September 30, 1996, Commission File Number 1-8007, and
incorporated herein by reference.)
10.12 1995 Restricted Stock Award Plan as amended and forms
of agreement thereunder. (Filed as Exhibit No. 4.1 to
Registration Statement on Form S-8/S-3 File No. 333-17525
which was filed on December 9, 1997, and incorporated
herein by reference.)
10.13 Fremont General Corporation Employee Benefits Trust Agreement
("Grantor Trust") dated September 7, 1995 between the Company
and Merrill Lynch Trust Company of California. (Filed as
Exhibit No. 10.12 to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1995, Commission File Number
1-8007, and incorporated herein by reference.)
10.14(a) Employment Agreement between the Company and James A.
McIntyre dated January 1, 1994. (Filed as Exhibit No. (10)(i)
to Quarterly Report on Form 10-Q for the period ended March
31, 1994, Commission File Number 1-8007, and incorporated
herein by reference.)
10.14(b) First Amendment to Employment Agreement between the
Company and James A. McIntyre dated August 1, 1996. (Filed as
Exhibit No. 10.10 to Quarterly Report on Form 10-Q, for the
period ended June 30, 1997, Commission File Number 1-8007, and
incorporated herein by reference.)
10.14(c) Second Amendment to Employment Agreement between the
Company and James A. McIntyre dated August 8, 1997. (Filed as
Exhibit No. 10.14 (c) to Quarterly Report on Form 10-Q, for
the period ended September 30, 1997, Commission File Number
1-8007, and incorporated herein by reference.)
10.15(a) Employment Agreement between the Company and Louis J.
Rampino dated February 8, 1996. (Filed as Exhibit No. 10.14
(a) to Annual Report on Form 10-K, for the fiscal year ended
December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.15(b) Employment Agreement between the Company and Wayne R.
Bailey dated February 8, 1996. (Filed as Exhibit No. 10.14 to
Annual Report on Form 10-K, for the fiscal year ended December
31, 1995, Commission File Number 1-8007, and incorporated
herein by reference.)
10.16 Management Continuity Agreement between the Company and
Raymond G. Meyers dated February 8, 1996. (Filed as Exhibit
No. 10.15 to Annual Report on Form 10-K, for the fiscal year
ended December 31, 1995, Commission File Number 1-8007, and
incorporated herein by reference.)
10.17 1998 Management Incentive Compensation Plan of the Company.
(Filed as Exhibit No. 10.17 to Annual Report on Form 10-K,
for the fiscal year ended December 31, 1997, Commission File
Number 1-8007, and incorporated herein by reference.)
10.18 Continuing Compensation Plan for Retired Directors. (Filed
as Exhibit No. 10.17 to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1995, Commission File Number
1-8007, and incorporated herein by reference.)
10.19 Non-Employee Directors' Deferred Compensation Plan. (Filed
as Exhibit No.10.18 to Annual Report on Form 10-K, for the
fiscal year ended December 31, 1995, Commission File Number
1-8007, and incorporated herein by reference.)
10.20 Credit Agreement among Fremont General Corporation, Various
Lending Institutions and the Chase Manhattan Bank, N.A., As
Agent dated August 1, 1997. (Filed as Exhibit No. 10.20 to
Quarterly Report on Form 10-Q, for the period ended September
30, 1997, Commission File Number 1-8007, and incorporated
herein by reference).
10.21 Credit Agreement $15,000,000 by and among Merrill Lynch Trust
Company of California as trustee for the Fremont General
Corporation Employee Stock Ownership Trust. The Plan Committee
(hereinafter described) on behalf of the Fremont General
Corporation Employee Stock Ownership Plan, Fremont General
Corporation, and First Interstate Bank of California August
10, 1995. (Filed as Exhibit No. (10)(viii) to Quarterly Report
on Form 10-Q for the period ended September 30, 1995, and
incorporated herein by reference.)
27 Financial Data Schedule
</TABLE>
AMENDMENT NUMBER ONE
TO THE
FREMONT GENERAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
Effective for the plan year ending December 31, 1997, the Fremont
General Corporation Supplemental Retirement Plan (the "Supplemental Plan") is
amended as follows:
FIRST: Section 2.1(1) of the Supplemental Plan is hereby amended to read
as follows:
(1) "ESOP EXCESS CONTRIBUTIONS" shall mean Company contributions to the
Supplemental Plan pursuant to Paragraph 4.1(c) that are intended to compensate
Participants for benefits lost under the ESOP as a result of Sections 415 and
401(a)(17) of the Code. For each Category 1 Participant, the ESOP Excess
Contribution shall be based on the difference between the value (as a percentage
of Compensation) of Employer Stock allocated to the accounts of ESOP
participants whose ESOP benefit is not limited by Section 415 or Section
401(a)(17) of the Code, and the value of Employer Stock allocated to the
accounts of ESOP participants whose ESOP benefit is limited by Section 415 or
Section 401(a)(17) of the Code and who are Participants in the Supplemental
Plan. For each Category 2 Participant, the ESOP Excess Contribution shall be the
amount such Participant would have received as a special allocation under
Section 1.24 of the ESOP but for the fact that such person was a highly
compensated employee under the ESOP.
SECOND: Section 2.1(p) of the Plan is hereby amended to read as follows:
(p) "PARTICIPANT" shall mean (i) any Management Employee who meets the
requirements set forth in Article 3 to participate in the Supplemental Plan
(Category 1 Participants), and (ii) any other highly compensated employee who
meets the requirements set forth in Article 3 to participate in the Supplemental
Plan (Category 2 Participants).
THIRD: The following paragraph shall be added to Section 3.1 of the
Supplemental Plan:
"Management Employees who meet the immediately preceding requirements
shall be deemed Category 1 Participants. Notwithstanding any of the foregoing to
the contrary, highly compensated employees of the Company who (i) do not
otherwise meet the eligibility requirements above, and (ii) for a given year are
not entitled to a special allocation under Section 1.24 of the ESOP because of
their highly compensated status, shall be deemed Category 2 Participants and
shall receive an ESOP Excess Contribution, in accordance with Section 2.1(1) of
this Supplemental Plan, for such year. A Category 2 Participant shall not be
entitled to make Salary Deferral Elections under the Supplemental Plan."
IN WITNESSS WHEREOF, Fremont General Corporation has caused this instrument to
be executed by its duly authorized officers on April 6, 1998.
FREMONT GENERAL CORPORATION,
a Nevada corporation
By: /s/ RAYMOND MEYERS
-----------------------------------
RAYMOND MEYERS
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000038984
<NAME> FREMONT GENERAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 1,807,965
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 388,889
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 4,529,960<F1>
<CASH> 33,407
<RECOVER-REINSURE> 11,926
<DEFERRED-ACQUISITION> 38,344
<TOTAL-ASSETS> 6,207,054
<POLICY-LOSSES> 2,313,215
<UNEARNED-PREMIUMS> 81,842
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 33,189
<NOTES-PAYABLE> 755,991
100,000
0
<COMMON> 34,766
<OTHER-SE> 830,184<F2>
<TOTAL-LIABILITY-AND-EQUITY> 6,207,054
154,162
<INVESTMENT-INCOME> 46,978
<INVESTMENT-GAINS> (458)
<OTHER-INCOME> 62,657<F3>
<BENEFITS> 103,256
<UNDERWRITING-AMORTIZATION> 25,715
<UNDERWRITING-OTHER> 18,903
<INCOME-PRETAX> 47,133
<INCOME-TAX> 15,481
<INCOME-CONTINUING> 31,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,652
<EPS-PRIMARY> 1.00<F4>
<EPS-DILUTED> 0.91<F5>
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Includes Loans receivable, Short-term and Other investments.
<F2>Sum of Additional paid-in-capital, Retained earnings, Deferred Compensation
and Accumulated other comprehensive income.
<F3>Includes Loan interest and Other revenue.
<F4>Basic earnings per share
<F5>Diluted earnings per share
</FN>
</TABLE>
