AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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 1-7981
American General Corporation
(Exact name of registrant as specified in its articles of incorporation)
Texas 74-0483432
(State of Incorporation) (I.R.S. Employer
Identification No.)
2929 Allen Parkway, Houston, Texas 77019-2155
(Address of principal executive offices) (Zip Code)
(713) 522-1111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X . No .
The number of shares outstanding of the registrant's common stock at
October 31, 1994 was 205,625,207 (excluding shares held in treasury and by a
subsidiary).
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
INDEX TO FORM 10-Q
Page
Part I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
Consolidated Statement of Income for the nine months
and quarter ended September 30, 1994 and 1993 ...... 2
Consolidated Balance Sheet at September 30, 1994 and
December 31, 1993 .................................. 3
Consolidated Condensed Statement of Cash Flows for
the nine months ended September 30, 1994 and 1993 .. 4
Notes to Consolidated Financial Statements ........... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 7
Part II. OTHER INFORMATION.
Item 1. Legal Proceedings .................................... 20
Item 5. Other Information .................................... 20
Item 6. Exhibits and Reports on Form 8-K ..................... 20
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN GENERAL CORPORATION
Consolidated Statement of Income
(Unaudited)
(In millions, except share data)
Nine Months Ended Quarter Ended
September 30, September 30,
1994 1993 1994 1993
Revenues
Premiums and other considerations. $ 891 $ 930 $ 304 $ 311
Net investment income ............ 1,860 1,825 622 619
Finance charges .................. 907 809 324 275
Realized investment gains ........ 5 7 1 2
Other ............................ 48 43 14 15
Total revenues ............... 3,711 3,614 1,265 1,222
Benefits and expenses
Insurance and annuity benefits ... 1,647 1,706 555 588
Operating costs and expenses ..... 593 569 206 188
Commission expense ............... 295 307 100 102
Provision for credit losses ...... 147 113 59 44
Change in deferred policy
acquisition costs ............... (98) (135) (35) (54)
Interest expense
Corporate ....................... 82 83 28 28
Consumer Finance ................ 300 281 107 93
Total benefits and expenses .. 2,966 2,924 1,020 989
Earnings
Income before income tax expense
and cumulative effect ........... 745 690 245 233
Income tax expense
Excluding tax rate related
adjustment .................... 267 246 86 84
Tax rate related adjustment .... - 30 - 30
Total income tax expense ..... 267 276 86 114
Income before cumulative effect .. 478 414 159 119
Cumulative effect of accounting
changes ......................... - (46) - -
Net income ................... $ 478 $ 368 $ 159 $ 119
Earnings per share
Income before cumulative effect .. $ 2.27 $ 1.91 $ .77 $ .55
Cumulative effect of accounting
changes ......................... - (.21) - -
Net income per share ......... $ 2.27 $ 1.70 $ .77 $ .55
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Dividends paid per common share ... $ .87 $ .825 $ .29 $ .275
Average fully diluted shares
outstanding (in thousands) ...... 210,711 216,954 208,691 216,872
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Consolidated Balance Sheet
(Unaudited)
(In millions)
September 30, December 31,
1994 1993
Assets
Investments
Fixed maturity securities (amortized cost:
$26,730; $24,885) ......................... $25,766 $26,479
Mortgage loans on real estate .............. 2,735 3,032
Equity securities (cost: $275; $182) ....... 304 233
Policy loans ............................... 1,184 1,156
Investment real estate ..................... 741 772
Other long-term investments ................ 120 137
Short-term investments ..................... 75 67
Total investments ........................ 30,925 31,876
Cash ........................................ 11 6
Finance receivables, net .................... 7,219 6,390
Deferred policy acquisition costs ........... 2,668 1,637
Acquisition-related goodwill ................ 602 618
Other assets ................................ 1,325 1,205
Net assets of life insurance companies held
for sale ................................... - 153
Assets held in Separate Accounts ............ 2,634 2,097
Total assets ............................. $45,384 $43,982
Liabilities
Insurance and annuity liabilities ........... $29,019 $27,239
Debt (short-term)
Corporate ($305; $312) ..................... 1,250 1,257
Real Estate ($391; $414) ................... 410 429
Consumer Finance ($2,312; $1,824) .......... 6,632 5,843
Income tax liabilities ...................... 739 1,241
Other liabilities ........................... 702 739
Liabilities related to Separate Accounts .... 2,634 2,097
Total liabilities ........................ 41,386 38,845
Redeemable equity
Common stock subject to put contracts ....... 44 -
Shareholders' equity
Common stock ................................ 364 365
Net unrealized gains (losses) on securities . (512) 709
Retained earnings ........................... 4,522 4,229
Cost of treasury stock ...................... (420) (166)
Total shareholders' equity ............... 3,954 5,137
Total liabilities and equity ............. $45,384 $43,982
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In millions)
Nine Months Ended
September 30,
1994 1993
Operating activities
Net cash provided by operating activities ... $ 1,072 $ 1,135
Investing activities
Investment purchases .............................. (5,348) (6,343)
Investment calls, maturities, and sales ........... 3,956 4,544
Finance receivable originations or acquisitions ... (4,081) (3,155)
Finance receivable principal payments received .... 3,104 2,795
Proceeds from sale of subsidiary .................. 95 -
Net increase in short-term investments ............ (8) (106)
Other, net ........................................ (29) (74)
Net cash used for investing activities ...... (2,311) (2,339)
Financing activities
Retirement Annuities and Life Insurance
Policyholder account deposits ................... 1,847 1,996
Policyholder account withdrawals ................ (956) (688)
Total Retirement Annuities and Life Insurance. 891 1,308
Consumer Finance
Net increase (decrease) in short-term debt ...... 488 (167)
Long-term debt issuances ........................ 737 884
Long-term debt redemptions ...................... (439) (520)
Total Consumer Finance ....................... 786 197
Corporate
Net increase (decrease) in short-term debt
Corporate ..................................... (7) (158)
Real Estate ................................... (23) (69)
Long-term debt issuance (redemptions) ........... (22) 100
Dividend payments ............................... (184) (179)
Common share purchases .......................... (199) (12)
Other, net ...................................... 2 10
Total Corporate .............................. (433) (308)
Net cash provided by financing activities ... 1,244 1,197
Net increase (decrease) in cash .................... 5 (7)
Cash at beginning of period ........................ 6 17
Cash at end of period .............................. $ 11 $ 10
Supplemental disclosure of cash flow information:
Cash paid during the period for
Income taxes .................................... $ 323 $ 223
Interest
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Corporate ..................................... 83 83
Real Estate ................................... 4 4
Consumer Finance .............................. 290 292
Supplemental disclosure of noncash investing
activity:
Acquisition of block of life insurance
liabilities with related assets ................ $ - $ 144
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Notes to Consolidated Financial Statements
September 30, 1994
1. Accounting Policies. The accompanying unaudited consolidated financial
statements of American General Corporation ("American General" or "the
company") and its subsidiaries have been prepared in accordance with
generally accepted accounting principles for interim periods. In the
opinion of management, these statements include all adjustments,
consisting only of normal recurring accruals, that are necessary for a
fair presentation of the company's consolidated financial position at
September 30, 1994 and the consolidated results of operations and cash
flows for the nine months ended September 30, 1994 and 1993.
To conform with the 1994 presentation, certain items in the prior period
have been reclassified. Additionally, certain amounts previously
reported in the 1993 third quarter Form 10-Q have been restated to
reflect the retroactive adoption of Statement of Financial Accounting
Standards (SFAS) 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993.
In October 1994, the Financial Accounting Standards Board issued SFAS
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments," which requires additional disclosures about
derivative financial instruments and amends existing fair value
disclosure requirements. This statement is effective for fiscal years
ending after December 15, 1994. Adoption of SFAS 119 will result in
additional footnote disclosures but will not have an impact on the
company's consolidated results of operations or consolidated financial
position.
2. Income Taxes. At September 30, 1994, the company recorded a deferred tax
asset of $337 million related to unrealized losses on securities in
accordance with SFAS 115, "Accounting for Certain Investments in Debt and
Equity Securities." The company partially offset this deferred tax asset
with a valuation allowance of $127 million, established in accordance
with SFAS 109, "Accounting for Income Taxes." The initial establishment
of the valuation allowance was recorded in net unrealized gains (losses)
on securities in shareholders' equity and had no income statement impact.
3. Status of Federal Tax Return Examinations. The company and its
subsidiaries file a consolidated federal income tax return. The Internal
Revenue Service (IRS) has completed examinations of the company's tax
returns through 1985 and has commenced examination of the company's tax
returns for 1986 through 1988.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 1. Financial Statements (continued).
The IRS is disputing the company's tax treatment of some items for the
years 1977 through 1985. Some of these issues will require litigation to
resolve, and any amounts ultimately settled with the IRS would also
include interest. Although the final outcome is uncertain, the company
believes that the ultimate liability, including interest, resulting from
these issues will not exceed amounts currently recorded in the
consolidated financial statements.
4. Common Stock Subject to Put Contracts. In conjunction with its share
buyback program, the company has entered into put option contracts that
give the option holder the right, but not the obligation, to sell to
American General its common stock at a fixed price, approximately one
year from date of issuance. At September 30, 1994, 1,600,000 shares of
common stock of the company were subject to put option contracts at an
average strike price of $27.59 per share; and $44 million of related
shareholders' equity was reported as redeemable equity.
5. Legal Contingencies. Two real estate subsidiaries of the company were
defendants in a lawsuit that alleged damages based on lost profits and
related claims arising from certain loans and joint venture contracts.
On July 16, 1993, a judgment was entered against the subsidiaries jointly
for $47.3 million in compensatory damages and against one of the
subsidiaries for $189.2 million in punitive damages. On September 17,
1993, a Texas state district court reduced the previously-awarded
punitive damages by $60.0 million, resulting in a reduced judgment in the
amount of $176.5 million plus post-judgment interest. An appeal on
numerous legal grounds has been filed. The company believes, based on
advice of legal counsel, that plaintiffs' claims are without merit, and
the company is continuing to contest the matter vigorously through the
appeals process. No provision has been made in the consolidated
financial statements related to this contingency.
In April 1992, the IRS issued Notices of Deficiency in the amount of
$12.4 million for the 1977-1981 tax years of certain insurance
subsidiaries. The basis of the dispute was the tax treatment of modified
coinsurance agreements. During 1992, the company elected to pay the
assessment plus associated interest. A claim for refund of tax and
interest was disallowed by the IRS in January 1993. On June 30, 1993, a
suit for refund was filed in the Court of Federal Claims. The company
believes that the IRS's claims are without merit, and is continuing to
vigorously pursue refund of the amounts paid. No provision has been made
in the consolidated financial statements related to this contingency.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 1. Financial Statements (continued).
American General and certain of its subsidiaries are defendants in
various other lawsuits and proceedings arising in the normal course of
business. American General and its subsidiaries believe that there are
meritorious defenses for all of these claims and are defending them
vigorously. The company also believes that the total amounts that would
ultimately be paid, if any, arising from these claims would have no
material effect on the company's consolidated results of operations and
consolidated financial position.
6. Ratios of Earnings to Fixed Charges. The ratios of earnings to fixed
charges are as follows:
Nine Months Ended Quarter Ended
September 30, September 30,
1994 1993 1994 1993
Consolidated operations ............ 2.8X 2.7X 2.7X 2.8X
Consolidated operations, corporate
fixed charges only ............... 9.3X 8.5X 9.1X 8.6X
American General Finance, Inc. ..... 1.9X 1.9X 1.9X 1.9X
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This item presents specific comments on material changes to the company's
results of operations, capital resources, and liquidity for the periods
reflected in the interim financial statements filed with this report. The
reader is presumed to have read or have access to the company's 1993 Annual
Report to Shareholders including the Management's Discussion and Analysis
found on pages 18 through 24, 26, 28, and 30 thereof, and the company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and
June 30, 1994.
This analysis should be read in conjunction with the consolidated financial
statements and related notes on pages 2 through 7 of this Quarterly Report on
Form 10-Q.
STATEMENT OF INCOME
Comparison of Nine Months Ended September 30, 1994 and September 30, 1993
Revenues. Total revenues increased $97 million, or 3%, for the nine months
ended September 30, 1994 compared to the same period in 1993, due to increases
in finance charges and net investment income, offset by a decrease in premiums
and other considerations. The $98 million, or 12%, increase in finance
charges resulted from an increase in average finance receivables and higher
yields on those receivables. The $35 million, or 2%, increase in net
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
investment income was attributable to a 6% growth in invested assets
(excluding the effect of SFAS 115) from September 30, 1993, partially offset
by a decline in investment yields. The decline in yields largely relates to
the prepayment of higher yielding bonds and mortgage-backed securities and
subsequent reinvestment of the proceeds at lower interest rates throughout
1993. While premiums and other considerations decreased 4%, the decline
primarily was due to reporting the activity of life insurance companies held
for sale during 1994 in other revenues, and the ceding of a block of business
on January 1, 1994. The revenues ceded were largely offset by a related
decrease in insurance benefit expense.
Realized Investment Gains. Realized investment gains for the nine months
ended September 30, 1994 included $31 million of gains due to early redemption
of securities at the election of the issuer (calls) and $13 million of net
gains from sales of real estate joint ventures, investment real estate, and
fixed maturity securities, partially offset by additions to reserves of $39
million related to investment real estate and mortgage loans.
For the same period in 1993, gains of $105 million on calls and $80 million
from sales of investments, primarily equity securities, were offset by a $178
million increase in reserves on investment real estate and mortgage loans.
On October 27, 1994, the company's Board of Directors authorized the company
to realize capital losses for tax purposes of approximately $135 million on or
before December 31, 1994. The company estimates that this amount will be
sufficient to offset 1994 net capital gains and 1991 net capital gains that
will expire for tax loss carryback purposes on December 31, 1994. Although
this action will result in net realized investment losses in fourth quarter
1994, it will enable the company to receive a refund of federal income taxes
previously paid. The company has additional net capital gains from 1992 and
1993 that will expire for tax loss carryback purposes in 1995 and 1996,
respectively, unless offset by future net capital losses; however, no decision
has been made to realize future capital losses for tax purposes at this time.
Other Revenues. Other revenues increased $5 million, or 12%, for the nine
months ended September 30, 1994 compared to 1993, primarily due to reporting
pretax earnings of $7 million from life insurance companies held for sale
during 1994 in other revenues. The 1993 activity of those companies is
included in the 1993 financial statement line items as originally reported.
Insurance and Annuity Benefits. Insurance and annuity benefits decreased $59
million, or 3%, for the first nine months of 1994 compared to the same period
in 1993, primarily due to the ceding of a block of business on January 1, 1994
and reporting the activity of life insurance companies held for sale during
1994 in other revenues.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Operating Costs and Expenses. Operating costs and expenses increased $24
million, or 4%, for the nine months ended September 30, 1994 compared to the
same period in 1993, primarily due to higher branch operating expenses in the
Consumer Finance segment, partially offset by increased deferrals of loan
origination fees due to growth in finance receivables and reporting the 1994
activity of life insurance companies held for sale in other revenues.
Commission Expense. Commission expense decreased $12 million, or 4%, for
1994 compared to 1993, primarily due to reporting the activity of life
insurance companies held for sale during 1994 in other revenues, partially
offset by higher sales in the Life Insurance segment.
Provision for Credit Losses. The provision for credit losses increased $34
million, or 29%, and the allowance for finance receivable losses increased $14
million for the nine months ended September 30, 1994 compared to the same
period in 1993. These increases were to bring the provision and the allowance
to an appropriate level based on finance receivables outstanding, the
portfolio mix, levels of delinquencies, net charge offs, and the economic
climate.
Change in Deferred Policy Acquisition Costs (DPAC). The change reported in
the income statement represents capitalization of DPAC during the period, net
of related amortization. The change in DPAC decreased $37 million, or 28%,
for the nine months ended September 30, 1994 compared to the same period in
1993, primarily due to lower capitalizable commissions in 1994 and the acqui-
sition of a block of business in 1993, both in the Life Insurance segment.
Interest Expense. Interest expense on corporate debt decreased $1 million, or
1%, due to the redemption and replacement of 8-1/2% notes with lower rate
commercial paper. Interest expense on consumer finance debt increased $19
million, or 7%, due to higher average borrowings and short-term rates in the
nine months ended September 30, 1994 compared to the 1993 period.
In August 1994, the company entered into two off-balance-sheet forward
interest rate swap agreements, related to a total notional amount of $150
million, to receive floating-rate payments based on a market rate and make
payments at a fixed rate averaging 7.5%, beginning in December 1994 and
continuing for ten years unless otherwise terminated. The agreements are
intended to hedge interest rate risk associated with long-term debt expected
to be issued in fourth quarter 1994.
Income Tax Expense. Income tax expense decreased $9 million, or 4%, for the
first nine months of 1994 compared to the same period in 1993, due to a one-
time charge in 1993 to revalue deferred tax liabilities to reflect the 1%
federal corporate tax rate increase, effective January 1, 1993. This 1993
charge was partially offset by taxes on higher pretax earnings in 1994.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
BUSINESS SEGMENTS
To facilitate meaningful period-to-period comparisons of business segment
results, operating earnings of each segment include earnings from its business
operations and earnings on that amount of equity considered necessary to
support its business, and exclude net realized investment gains, non-recurring
items, and the effect of accounting changes. Earnings on equity not allocated
to the business segments are included in earnings on corporate assets.
Nine Months Ended Quarter Ended
September 30, September 30,
1994 1993 1994 1993
(In millions)
Revenues
Retirement Annuities ............. $1,144 $1,095 $ 385 $ 372
Consumer Finance ................. 1,083 958 387 326
Life Insurance ................... 1,436 1,542 482 518
Total business segments ......... 3,663 3,595 1,254 1,216
Corporate Operations
Realized investment gains ....... 5 7 1 2
Other ........................... 43 12 10 4
Total consolidated revenues .. $3,711 $3,614 $1,265 $1,222
Policyholder Account Deposits
Retirement Annuities ............. $1,634 $1,542 $ 485 $ 479
Life Insurance ................... 815 717 271 252
Total deposits ............... $2,449 $2,259 $ 756 $ 731
Earnings
Retirement Annuities ............. $ 150 $ 125 $ 47 $ 38
Consumer Finance ................. 178 156 64 53
Life Insurance ................... 194 219 67 77
Total business segments ......... 522 500 178 168
Corporate Operations
Net interest on corporate debt .. (56) (62) (19) (19)
Expenses not allocated to
segments ...................... (23) (16) (8) (5)
Earnings on corporate assets .... 34 17 9 4
Realized investment gains ....... 1 5 (1) 1
Income before cumulative effect
and tax rate related adjustment . 478 444 159 149
Cumulative effect of accounting
changes ......................... - (46) - -
Tax rate related adjustment ...... - (30) - (30)
Total consolidated net income. $ 478 $ 368 $ 159 $ 119
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<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Retirement Annuities. Revenues for the first nine months of 1994 compared to
1993 increased $49 million, or 4%, primarily due to a 4% increase in net
investment income, reflecting growth in invested assets, partially offset by a
decrease in the average investment yield. Invested assets increased $1.6
billion (excluding the effect of SFAS 115), or 9%, from September 30, 1993 to
September 30, 1994, primarily due to fixed premium deposits and reinvestment
of investment income over the last twelve months. Operating earnings
increased $25 million, or 20%, reflecting growth in the business and an
increasing spread between the average yield earned on investments and the
average rate of interest credited to policyholders. The ratio of operating
expenses to average assets improved from .60% for the nine months ended
September 30, 1993 to .55% for the same period in 1994. The ratio of
policyholder surrenders to average deferred policy reserves was 5.22% for the
nine months ended September 30, 1994 compared to 3.79% for the same period in
1993, primarily due to a $75 million transfer of one group account and
participants seeking higher returns in equity-based investments in 1994. The
shift to equity-based investments also resulted in a $119 million increase in
variable account deposits and a $27 million decrease in fixed deposits in the
first nine months of 1994 compared to the same period of 1993.
Consumer Finance. Revenues for the first nine months of 1994 compared to 1993
increased $125 million, or 13%, primarily from increased finance charges due
to growth in finance receivables through business development efforts and
higher yields resulting from a change in the portfolio mix to emphasize non-
real estate secured consumer loans. Operating earnings increased $22 million,
or 14%, due to increased spread on a higher receivables balance, partially
offset by a higher provision for credit losses and increased operating
expenses. Annualized charge offs increased to 2.3% for the first nine months
of 1994 from 2.1% for the same period of 1993, and delinquencies increased to
2.8% at September 30, 1994 from 2.5% at September 30, 1993 and December 31,
1993. The increase in charge offs, delinquencies, and the provision for
credit losses was primarily due to the increase in finance receivables and the
change in portfolio mix described above.
Life Insurance. Total revenues decreased $106 million, or 7%, for the nine
months ended September 30, 1994 compared to 1993, due to reclassification to
corporate operations of the activity related to the life insurance companies
held for sale during 1994, the ceding of a block of business on January 1,
1994, and lower investment income. The decrease in investment income resulted
from lower yields, due to prepayment of higher yielding securities and
reinvestment at lower rates throughout 1993, partially offset by growth in
invested assets. Deposits increased 14% to $815 million due to growth in
variable annuity and interest-sensitive life products. Operating earnings
decreased $25 million, or 11%, in the first nine months of 1994 compared to
the first nine months of 1993, due to the decrease in investment income,
higher death claims, and $7 million of 1993 earnings of the life insurance
companies held for sale reported in corporate operations in 1994, partially
offset by increased mortality charges and reduction in goodwill amortization.
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<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Corporate Operations. Corporate operations include interest on corporate
debt, expenses not allocated to the business segments, earnings on corporate
assets, and net realized investment gains. For reporting purposes, corporate
assets include assets representing equity of the subsidiaries not considered
necessary to support their businesses. Corporate debt is that debt incurred
primarily to fund acquisitions, share purchases, and capital needs of
subsidiaries. Earnings on corporate assets increased $17 million for the nine
months ended September 30, 1994 compared to 1993, primarily due to higher
income from investment real estate and net operations of life insurance
companies held for sale reported in corporate operations during 1994.
Interest on corporate debt decreased $6 million, or 9%, due to various debt
redemptions since September 30, 1993, partially offset by increases in
commercial paper issued and higher short-term interest rates.
Comparison of Quarters Ended September 30, 1994 and September 30, 1993
The nature of and reasons for any significant variations between the quarters
ended September 30, 1994 and 1993 are the same as those discussed above for
the respective nine month periods, except where otherwise noted herein.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
BALANCE SHEET
Effect of SFAS 115. The company adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities," at December 31, 1993, and all
fixed maturity and equity securities were classified as available-for-sale and
recorded at fair value. SFAS 115 does not permit a company to value the
related insurance and annuity liabilities at fair value. Therefore, care
should be exercised in drawing conclusions based on balance sheet amounts that
include the SFAS 115 effect.
Increases in market interest rates and resulting decreases in bond values
during the first nine months of 1994 caused the SFAS 115 adjustment to
shareholders' equity to decrease from a net unrealized gain of $676 million at
December 31, 1993 to a net unrealized loss of $531 million at September 30,
1994. The adjustments to record the effect of unrealized gains on fixed
maturity securities and the related balance sheet accounts under SFAS 115 were
as follows:
September 30, December 31,
1994 1993
(In millions)
Fair value adjustment to fixed maturity securities $ (964) $1,594
Adjusted by:
Increase (decrease) in DPAC 349 (550)
(Increase) in insurance and annuity liabilities (6) (4)
Decrease (increase) in deferred federal
income taxes 217 (364)
Valuation allowance on deferred tax asset (127) -
Net unrealized gains (losses) on securities $(531) $ 676
Assets. At September 30, 1994, the $45 billion of consolidated assets were
distributed as follows: 68% in investments, principally supporting insurance
and annuity liabilities, 16% in net finance receivables, 7% in intangible
assets, and 9% in other assets.
Investments. As shown above, from December 31, 1993 to September 30,
1994, investments decreased $2.6 billion due to the effect of SFAS 115.
For more information on the investment portfolio at September 30, 1994,
see the section titled "INVESTMENTS" beginning on page 15.
Finance Receivables. Net finance receivables increased $829 million, or
13%, from December 31, 1993 to September 30, 1994, primarily due to
business development efforts in the Consumer Finance segment.
-15-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Deferred Policy Acquisition Costs (DPAC). The $1.0 billion increase in
DPAC was primarily due to the reversal of the $550 million reserve
recorded at December 31, 1993 under SFAS 115 and the reinstatement of
$349 million of DPAC at September 30, 1994 due to the decline in bond
values (see discussion titled "Effect of SFAS 115" on page 13).
Separate Account Assets and Liabilities. The $537 million increase in
assets and liabilities related to Separate Accounts from December 31,
1993 to September 30, 1994 reflects increased sales of variable annuity
products in the Retirement Annuities and Life Insurance segments.
Liabilities and Equity. At September 30, 1994, consolidated liabilities and
equity were distributed as follows: 64% in insurance and annuity liabilities,
15% in consumer finance debt, 9% in equity (including redeemable equity), 3%
in corporate and real estate debt, and 9% in other liabilities.
Insurance and Annuity Liabilities. The $1.8 billion increase in
insurance and annuity liabilities from December 31, 1993 to September 30,
1994 primarily reflects growth in the Retirement Annuities segment from
fixed annuity deposits and the crediting of policyholder interest.
Corporate Debt. Corporate debt was $7 million lower at September 30,
1994 than at December 31, 1993, principally due to cash dividends
received from subsidiaries and proceeds from the sale of a subsidiary in
August 1994, partially offset by the purchase of the company's common
shares, payment of dividends to shareholders, and the purchase of
corporate investments. Excluding the effect of SFAS 115, the ratio of
corporate debt to corporate capital (the sum of corporate debt plus
equity) was 22% at September 30, 1994 and December 31, 1993.
Consumer Finance Debt. Consumer finance debt increased $789 million from
December 31, 1993 to September 30, 1994, to support the growth in finance
receivables.
Income Taxes. The liability for income taxes decreased $502 million from
December 31, 1993 to September 30, 1994, primarily due to a $454 million
change in the effect of SFAS 115 on deferred taxes (see discussion titled
"Effect of SFAS 115" on page 13 and footnote 2 on page 5).
Redeemable Equity. At September 30, 1994, 1,600,000 shares of common
stock of the company were subject to put option contracts and $44 million
of related shareholders' equity was reported as redeemable equity.
-16-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Shareholders' Equity. Shareholders' equity decreased from $5.1 billion
at December 31, 1993 to $4.0 billion at September 30, 1994, primarily due
to a $1.2 billion reduction in the effect of SFAS 115 on net unrealized
gains (see discussion titled "Effect of SFAS 115" on page 13). In
addition, shareholders' equity decreased $217 million for share purchases
since December 31, 1993. Due to the requirements of SFAS 115, share-
holders' equity will be subject to future volatility from the effects of
interest rate fluctuations on the fair value of fixed maturity
securities.
INVESTMENTS
Invested assets consist primarily of fixed maturity securities, mortgage loans
on real estate, and investment real estate, which are discussed below. The
company reviews invested assets on a regular basis and records write-downs
where declines in fair value below cost are not considered temporary.
Fixed Maturity Securities. Fixed maturity securities represented 83% of
invested assets at September 30, 1994. Fixed maturity securities are carried
at fair value in accordance with SFAS 115 (see discussion titled "Effect of
SFAS 115" on page 13). Information regarding the fixed maturity securities
portfolio at September 30, 1994, which included bonds and redeemable preferred
stocks, was as follows:
% of
Average Credit Total Fixed
($ in millions) Rating Fair Value Maturities
Mortgage-backed AAA $10,206 40%
Other investment grade A 14,733 57
Below investment grade BB- 827 3
Total fixed maturities AA- $25,766 100%
Below investment grade bonds, those rated below BBB-, totaled $800 million at
September 30, 1994, or 3% of total fixed maturity securities, compared to 2.8%
at December 31, 1993. Net income from below investment grade bonds, including
realized investment gains and losses, was $40 million and $28 million for the
first nine months of 1994 and 1993, respectively.
Non-performing bonds, defined as bonds for which payment of interest is
sufficiently uncertain as to preclude accrual of interest, were $48 million
and $46 million, or 0.2% of total fixed maturity securities, at September 30,
1994 and December 31, 1993, respectively.
-17-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Mortgage Loan Portfolio. Mortgage loans on real estate totaled 9% of invested
assets at September 30, 1994. Information regarding the mortgage loan
portfolio at September 30, 1994 was as follows:
Book Non-Performing Loans
($ in millions) Value Amount %
Commercial $2,740 $158 5.8%
Residential 89 3 3.5%
Allowance for losses (94) (32)
Total mortgage loans $2,735 $129
Non-performing (impaired) mortgage loans consist of delinquent loans (60+
days) and restructured loans for which the company determines all amounts due
under the contractual terms probably will not be collected. These loans
represented 5.8% of total commercial loans at September 30, 1994, compared to
4.4% at December 31, 1993. The increase was primarily due to the decline in
the portfolio from $3.0 billion at December 31, 1993 to $2.7 billion at
September 30, 1994 and additional non-performing loans in California, Nevada,
and New Jersey.
At September 30, 1994, $311 million of performing commercial mortgage loans
were on the company's watch list due to non-monetary defaults or concerns that
future payments may not be made on a timely basis. This amount compares to
$340 million at June 30, 1994 and $467 million at year-end 1993. The decrease
in the watch list amount primarily is due to improved collections during
second quarter 1994. The company does not anticipate a significant effect on
operations, liquidity, or capital from these loans.
Investment Real Estate. Investment real estate totaled 2% of invested assets
at September 30, 1994 and December 31, 1993. The breakdown of investment real
estate was as follows:
(In millions) September 30, December 31,
1994 1993
Land development projects $ 620 $ 642
Income-producing real estate 191 189
American General Center, Houston 120 125
Foreclosed real estate 61 69
Allowance for losses (251) (253)
Total investment real estate $ 741 $ 772
The decrease in land development projects resulted from property sales,
partially offset by development costs capitalized to projects during the nine
months ended September 30, 1994.
-18-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
CASH FLOWS
Management believes that the overall sources of cash and liquidity available
to the company and its subsidiaries will continue to be sufficient to satisfy
its foreseeable financial obligations.
Cash Flows of the Company. Net operating cash flows generated by the company
were $430 million and $302 million for the nine months ended September 30,
1994 and 1993, respectively. The increase related to higher dividends from
subsidiaries, partially offset by an increase in income taxes paid. Dividends
from subsidiaries are the primary source of cash for operating requirements of
the company and are used to fund interest obligations, dividends to
shareholders, and purchase of the company's common stock. The company's
insurance subsidiaries are restricted by state insurance laws as to the
amounts they may pay as dividends without prior notice to, or in some cases
prior approval from, their respective state insurance departments. Certain
non-insurance subsidiaries are similarly restricted by long-term debt
agreements. These restrictions have not affected, and are not expected to
affect, the ability of the company to meet its cash obligations.
During the first nine months of 1994, the companies in the Life Insurance and
Retirement Annuities segments paid cash dividends to American General of $367
million, compared to $229 million during the first nine months of 1993. The
1994 amount includes a $90 million dividend resulting from the sale of a
subsidiary in August 1994. Cash dividends paid to the company by the Consumer
Finance segment totaled $126 million and $110 million in the first nine months
of 1994 and 1993, respectively.
On October 13, 1994, the company issued $100 million of non-redeemable debt
securities due October 15, 1999, which bear interest at 7.70% payable semi-
annually.
Segment Cash Flows. Net cash flows generated by the Life Insurance and
Retirement Annuities segments in the first nine months of 1994 included $876
million provided by operating activities and $891 million provided by the
increase in fixed policyholder account deposits, net of withdrawals. This
compared to $849 million and $1.3 billion, respectively, during the first nine
months of 1993. The decrease in fixed policyholder account deposits, net of
withdrawals, was primarily due to the 1993 acquisition of a block of business
in the Life Insurance segment and policyholders' increased demand for variable
accounts. Variable account deposits, related to Separate Accounts which are
not included in the consolidated statement of cash flows, increased to $602
million in the first nine months of 1994 from $341 million in the same period
of 1993. The Consumer Finance segment's operating cash flows totaled $385
million during the first nine months of 1994, compared to $351 million during
the first nine months of 1993.
-19-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Consolidated Operating Activities. Net cash flows from operating activities
on a consolidated basis decreased $63 million in the first nine months of 1994
compared to the comparable period in 1993, primarily due to an increase in
income taxes paid.
Investing Activities. The source of cash flow from investment calls,
maturities, and sales was as follows:
Nine Months Ended
(In millions) September 30,
1994 1993
Fixed maturity securities
Repayments of mortgage-backed securities $1,642 $1,800
Sales 895 179
Calls 686 1,672
Maturities 245 153
Mortgage loans 300 440
Equity securities 25 195
Other 163 105
Total $3,956 $4,544
Common Share Purchases. During the first nine months of 1994, the company
purchased 7,888,200 shares of its common stock for an aggregate cost of $217
million.
Credit Facilities. Committed credit facilities are maintained by American
General and certain of its subsidiaries to support the issuance of commercial
paper and provide an additional source of cash for operating requirements. At
September 30, 1994, committed credit facilities totaled $3.0 billion;
outstanding borrowings under these facilities were $45 million.
On October 14, 1994, the company entered into two new unsecured committed
credit facilities with 47 banks totaling $2.5 billion. These facilities
replaced existing bank credit facilities of equal amount.
Credit Ratings. Debt and claims-paying ability ratings for the company and
its subsidiaries did not change from December 31, 1993; however, because of
American General's merger offer to acquire Unitrin, Inc., all such ratings are
under review. On October 20, 1994, Standard & Poor's (S&P) placed the ratings
of the company and its subsidiaries on CreditWatch with negative implications
as a result of recent developments connected with the offer. S&P has
indicated that any change in ratings will depend on their assessment of how
such a purchase may affect American General's resulting financial structure.
-20-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
OTHER FACTORS
Environmental. American General's principal exposure to environmental
regulations arises from its ownership of investment real estate. Probable
costs related to environmental clean-up are estimated to be $3 million, and
appropriate liabilities have been recorded to reflect these costs. The
company is continuing to review these costs, as well as the cost of compliance
with federal, state, and local environmental laws and regulations.
Guaranty Associations. The amount assessed the company's life insurance and
annuity subsidiaries by State Guaranty Associations for the first nine months
of 1994 was $9.7 million, of which $4.8 million had been accrued at December
31, 1993. Assessments in the first nine months of 1993 were $9.8 million, of
which $5.9 million was accrued at December 31, 1992. The assessments for
1994 and 1993 were offset by $3.6 million and $3.1 million, respectively,
considered recoverable against future premium taxes. At September 30, 1994,
the accrued liability for anticipated unrecoverable assessments was $18
million, compared to $19 million at December 31, 1993.
<PAGE>
-21-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Other than those lawsuits or proceedings disclosed previously, American
General and certain of its subsidiaries are defendants in various other
lawsuits and proceedings arising in the normal course of business. Although
no assurances can be given and no determination can be made at this time as to
the outcome of any particular lawsuit or proceeding, American General and its
subsidiaries believe that there are meritorious defenses for all of these
claims and are defending them vigorously. The company also believes that the
total amounts that would ultimately be paid, if any, arising from these claims
would have no material effect on the company's consolidated results of
operations and consolidated financial position.
Item 5. Other Information.
Common Stock Buyback Program. From December 31, 1993 through October 31,
1994, the company purchased 8,663,900 shares of its common stock pursuant to
its stock buyback program at a cost of approximately $238 million and issued
put option contracts on 1,700,000 shares of the company's common stock at an
average strike price of $27.55.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 4.1 Indenture dated as of April 15, 1986 as supplemented by a
First Supplemental Indenture dated as of August 31, 1987,
between the company and The Bank of New York, as Trustee,
incorporated by reference to Exhibit 4 to the Registration
Statement on Form S-3 (Registration No. 33-30693) filed
with the Securities and Exchange Commission on August 24,
1989.
Exhibit 4.2 Form of 7.70% Notes Due 1999 incorporated by reference to
Exhibit 4(b) to the company's Current Report on Form 8-K
dated October 13, 1994.
Exhibit 11 Computation of Earnings per Share.
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges for
Consolidated Operations.
Exhibit 12.2 Computation of Ratio of Earnings to Fixed Charges for
Consolidated Operations, Corporate Fixed Charges Only.
-22-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
PART II. OTHER INFORMATION (continued).
Exhibit 12.3 Computation of Ratio of Earnings to Fixed Charges for
American General Finance, Inc.
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K.
Current Report on Form 8-K dated August 2, 1994, with respect to the
company's offer to acquire Unitrin, Inc. (Unitrin) in an all-cash merger
transaction based upon a proposed price of $50-3/8 for each of Unitrin's
51.8 million outstanding shares.
Current Report on Form 8-K dated October 13, 1994, with respect to the
authorization for issuance of $100 million aggregate principal amount of
the company's 7.70% Notes Due 1999.
<PAGE>
-23-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN GENERAL CORPORATION
(Registrant)
By: PAMELA J. PENNY
Pamela J. Penny
Vice President and Controller
(Duly Authorized Officer and
Chief Accounting Officer)
Date: November 14, 1994
<PAGE>
-24-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
EXHIBIT INDEX
Exhibit
4.1 Indenture dated as of April 15, 1986 as
supplemented by a First Supplemental
Indenture dated as of August 31, 1987,
between the company and The Bank of New
York, as Trustee, incorporated by reference
to Exhibit 4 to the Registration Statement
on Form S-3 (Registration No. 33-30693)
filed with the Securities and Exchange
Commission on August 24, 1989.
4.2 Form of 7.70% Notes Due 1999 incorporated
by reference to Exhibit 4(b) to the
company's Current Report on Form 8-K dated
October 13, 1994.
11 Computation of Earnings per Share.
12.1 Computation of Ratio of Earnings to Fixed
Charges for Consolidated Operations.
12.2 Computation of Ratio of Earnings to Fixed
Charges for Consolidated Operations,
Corporate Fixed Charges Only.
12.3 Computation of Ratio of Earnings to Fixed
Charges for American General Finance, Inc.
27 Financial Data Schedule
<PAGE>
-25-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
($ in millions, except share data)
Nine Months Ended
September 30,
1994 1993
Income before cumulative effect ................ $ 478 $ 414
Cumulative effect of accounting changes* ....... - (46)
Net income available to common stock ......... $ 478 $ 368
Average shares outstanding
Common shares ................................ 210,446,874 216,422,239
Assumed exercise of stock options ............ 264,408 532,179
Total ...................................... 210,711,282 216,954,418
Earnings per share
Income before cumulative effect .............. $2.27 $1.91
Cumulative effect of accounting changes* ..... - (.21)
Net income ................................. $2.27 $1.70
* 1993 restated to reflect adoption of SFAS 112.
<PAGE>
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Exhibit 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CONSOLIDATED OPERATIONS
(Unaudited)
($ in millions)
Nine Months Ended Quarter Ended
September 30, September 30,
1994 1993 1994 1993
Income before income tax expense and
cumulative effect ................... $ 745 $ 690 $245 $233
Fixed charges deducted from income
Interest expense .................... 382 368 136 122
Implicit interest in rents .......... 11 12 3 4
Total fixed charges deducted from
income .......................... 393 380 139 126
Earnings available for fixed charges .. $1,138 $1,070 $384 $359
Fixed charges per above ............... $ 393 $ 380 $139 $126
Capitalized interest .................. 13 12 5 4
Total fixed charges ............... $ 406 $ 392 $144 $130
Ratio of earnings to fixed charges .... 2.8X 2.7X 2.7X 2.8X
<PAGE>
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Exhibit 12.2
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CONSOLIDATED OPERATIONS, CORPORATE FIXED CHARGES ONLY
(Unaudited)
($ in millions)
Nine Months Ended Quarter Ended
September 30, September 30,
1994 1993 1994 1993
Income before income tax expense and
cumulative effect ..................... $745 $690 $245 $233
Corporate fixed charges deducted from
income - corporate interest expense ... 90 92 30 31
Earnings available for fixed charges .... $835 $782 $275 $264
Ratio of earnings to fixed charges ...... 9.3X 8.5X 9.1X 8.6X
<PAGE>
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 1994
Exhibit 12.3
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AMERICAN GENERAL FINANCE, INC.
(Unaudited)
($ in millions)
Nine Months Ended Quarter Ended
September 30, September 30,
1994 1993 1994 1993
Income before income tax expense and
cumulative effect ..................... $285 $254 $101 $ 87
Fixed charges deducted from income
Interest expense ...................... 300 286 107 95
Implicit interest in rents ............ 8 8 3 3
Total fixed charges deducted from
income ............................ 308 294 110 98
Earnings available for fixed charges .... $593 $548 $211 $185
Ratio of earnings to fixed charges ...... 1.9X 1.9X 1.9X 1.9X
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<DEBT-HELD-FOR-SALE> 25,766<F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 304
<MORTGAGE> 2,735
<REAL-ESTATE> 741
<TOTAL-INVEST> 30,925
<CASH> 11
<RECOVER-REINSURE> 6
<DEFERRED-ACQUISITION> 2,668
<TOTAL-ASSETS> 45,384
<POLICY-LOSSES> 28,301
<UNEARNED-PREMIUMS> 140
<POLICY-OTHER> 124
<POLICY-HOLDER-FUNDS> 454
<NOTES-PAYABLE> 8,292
<COMMON> 364
0
0
<OTHER-SE> 3,590<F2>
<TOTAL-LIABILITY-AND-EQUITY> 45,384
891
<INVESTMENT-INCOME> 1,860
<INVESTMENT-GAINS> 5
<OTHER-INCOME> 955<F3>
<BENEFITS> 1,647
<UNDERWRITING-AMORTIZATION> 155
<UNDERWRITING-OTHER> (253)
<INCOME-PRETAX> 745
<INCOME-TAX> 267
<INCOME-CONTINUING> 478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 478
<EPS-PRIMARY> 2.27
<EPS-DILUTED> 2.27
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> ALL FIXED MATURITY SECURITIES ARE CLASSIFIED AS AVAILABLE-FOR-SALE AND
RECORDED AT FAIR VALUE.
<F2> CONSISTS OF NET OF THE FOLLOWING: NET UNREALIZED GAINS (LOSSES) ON
SECURITIES; RETAINED EARNINGS; AND COST OF TREASURY STOCK.
<F3> INCLUDES FINANCE CHARGES.
</FN>
</TABLE>
