AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 April 28,
1995 was 204,820,775 (excluding shares held in treasury and by a subsidiary).
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
INDEX TO FORM 10-Q
Page
Part I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
Consolidated Statement of Income for the three
months ended March 31, 1995 and 1994 ............. 2
Consolidated Balance Sheet at March 31, 1995 and
December 31, 1994 ................................ 3
Consolidated Condensed Statement of Cash Flows for
the three months ended March 31, 1995 and 1994 ... 4
Notes to Consolidated Financial Statements ......... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............. 9
Part II. OTHER INFORMATION.
Item 1. Legal Proceedings .................................. 22
Item 5. Other Information .................................. 22
Item 6. Exhibits and Reports on Form 8-K ................... 22
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN GENERAL CORPORATION
Consolidated Statement of Income
(Unaudited)
(In millions, except share data)
Three Months Ended
March 31,
1995 1994
Revenues
Premiums and other considerations ................ $ 403 $ 289
Net investment income ............................ 722 621
Finance charges .................................. 359 281
Realized investment gains ........................ 2 3
Equity in earnings of Western National Corporation 9 -
Other ............................................ 23 20
Total revenues ............................... 1,518 1,214
Benefits and expenses
Insurance and annuity benefits ................... 677 537
Policyholder dividends ........................... 16 2
Operating costs and expenses ..................... 234 191
Commission expense ............................... 126 96
Provision for finance receivable losses .......... 72 43
Change in deferred policy acquisition costs and
cost of insurance purchased ..................... (43) (29)
Interest expense
Corporate ....................................... 39 28
Consumer Finance ................................ 125 93
Total benefits and expenses .................. 1,246 961
Earnings
Income before income tax expense ................. 272 253
Income tax expense ............................... 97 92
Net income ................................... $ 175 $ 161
Net income per share .............................. $ .85 $ .75
Dividends paid per common share ................... $ .31 $ .29
Average fully diluted shares outstanding
(in thousands) .................................. 205,244 213,331
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Consolidated Balance Sheet
(Unaudited)
(In millions)
March 31, December 31,
1995 1994
Assets
Investments
Fixed maturity securities (amortized cost:
$32,819; $27,087) ........................... $32,531 $25,700
Mortgage loans on real estate ................. 3,187 2,651
Equity securities (cost: $213; $202) .......... 248 224
Policy loans .................................. 1,538 1,197
Investment real estate ........................ 553 564
Other long-term investments ................... 199 152
Short-term investments ........................ 241 209
Total investments ........................... 38,497 30,697
Cash ........................................... 21 45
Finance receivables, net ....................... 7,930 7,694
Investment in Western National Corporation ..... 297 274
Deferred policy acquisition costs .............. 2,371 2,563
Cost of insurance purchased .................... 745 168
Acquisition-related goodwill ................... 592 597
Other assets ................................... 1,648 1,356
Assets held in Separate Accounts ............... 3,566 2,901
Total assets ................................ $55,667 $46,295
Liabilities
Insurance and annuity liabilities .............. $36,046 $29,623
Debt (short-term)
Corporate ($1,375; $639) ...................... 2,359 1,475
Real Estate ($349; $361) ...................... 349 361
Consumer Finance ($2,498; $2,777) ............. 7,261 7,090
Income tax liabilities ......................... 793 721
Other liabilities .............................. 824 620
Liabilities related to Separate Accounts ....... 3,566 2,901
Total liabilities ........................... 51,198 42,791
Redeemable equity
Common stock subject to put contracts .......... 47 47
Shareholders' equity
Common stock ................................... 365 364
Net unrealized losses on securities ............ (84) (935)
Retained earnings .............................. 4,606 4,495
Cost of treasury stock ......................... (465) (467)
Total shareholders' equity .................. 4,422 3,457
Total liabilities and equity ................ $55,667 $46,295
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In millions)
Three Months Ended
March 31,
1995 1994
Operating activities
Net cash provided by operating activities.. $ 667 $ 400
Investing activities
Investment purchases .............................. (1,829) (2,108)
Investment calls, maturities, and sales ........... 1,168 1,525
Finance receivable originations or acquisitions ... (1,521) (1,243)
Finance receivable principal payments received .... 1,209 1,072
Purchase of Franklin Life ......................... (920) -
Other, net ........................................ (45) 51
Net cash used for investing activities .... (1,938) (703)
Financing activities
Retirement Annuities and Life Insurance
Policyholder account deposits ................... 803 631
Policyholder account withdrawals ................ (535) (343)
Total Retirement Annuities and Life Insurance. 268 288
Consumer Finance
Net increase (decrease) in short-term debt ...... (281) 218
Long-term debt issuances ........................ 733 65
Long-term debt redemptions ...................... (283) (179)
Total Consumer Finance ....................... 169 104
Corporate
Net increase (decrease) in short-term debt
Corporate ..................................... 736 97
Real Estate ................................... (11) (33)
Long-term debt issuances ........................ 148 -
Long-term debt redemptions ...................... - (10)
Dividend payments ............................... (63) (62)
Common share purchases .......................... - (78)
Total Corporate .............................. 810 (86)
Net cash provided by financing activities.. 1,247 306
Net increase (decrease) in cash ..................... (24) 3
Cash at beginning of period ......................... 45 6
Cash at end of period ............................... $ 21 $ 9
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for
Income taxes .................................... $ (78) $ 60
Interest
Corporate ..................................... 39 9
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Real Estate ................................... 1 4
Consumer Finance .............................. 113 96
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Notes to Consolidated Financial Statements
March 31, 1995
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
March 31, 1995 and the consolidated results of operations and cash flows
for the three months ended March 31, 1995 and 1994.
To conform with the 1995 presentation, certain items in the prior period
have been reclassified.
2. New Accounting Standards. In January 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) 120, "Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts," and the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 95-1, "Accounting for
Certain Insurance Activities of Mutual Life Insurance Enterprises." SOP
95-1 establishes accounting for certain participating life insurance
contracts. SFAS 120 permits, but does not require, stock life insurance
companies to apply the provisions of SOP 95-1. If adopted, the standards
must be implemented by March 31, 1996. American General has not
determined if, or when, the new standards would be adopted and has not
determined the effect on net income, liquidity, or capital related to
adoption of these standards.
In March 1995, the FASB issued SFAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement establishes accounting standards for 1) the impairment of long-
lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used in the business, and 2) long-lived
assets and certain identifiable intangibles to be disposed of. This
standard, which must be adopted by March 31, 1996, will require the
company to report certain investment real estate at fair value, rather
than at net realizable value as previously required. American General
has not determined when SFAS 121 will be adopted. The company does not
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
anticipate a material effect on net income, liquidity, or capital related
to adoption of this standard.
Item 1. Financial Statements (continued).
3. Acquisitions. On January 31, 1995, American General, through its wholly-
owned subsidiary, AGC Life Insurance Company (AGC Life), acquired
American Franklin Company (AFC), the holding company of The Franklin Life
Insurance Company (Franklin Life), pursuant to a stock purchase agreement
dated as of November 29, 1994, between American General and American
Brands, Inc. (American Brands). The purchase price was $1.17 billion,
consisting of $920 million in cash paid at closing and a $250 million
cash dividend paid by AFC to American Brands prior to closing. The
dividend was paid on January 30, 1995. The permanent financing of this
acquisition will be finalized in 1995 and is expected to consist of a mix
of short-term debt, long-term debt, and preferred stock.
The acquisition was accounted for using the purchase method, and the
results of operations of Franklin Life were included in the consolidated
statement of income from the date of acquisition. The assets and
liabilities of Franklin Life were reflected in American General's
consolidated balance sheet as of January 31, 1995, at management's best
estimate of their fair values. Evaluation of fair values for acquired
assets and liabilities, including investments, cost of insurance
purchased, and insurance and annuity liabilities, is continuing and
allocation of the purchase price may be adjusted.
On December 23, 1994, American General, through AGC Life, acquired a 40%
interest in Western National Corporation (WNC), the holding company of
Western National Life Insurance Company, through the acquisition of
24,947,500 shares of WNC common stock from Conseco, Inc. for $274 million
in cash. For accounting purposes, the acquisition was recorded on an
equity basis, using the purchase method.
The following unaudited pro forma information presents the consolidated
results of operations of American General and AFC and reflects American
General's 40% equity in the earnings of WNC for the first quarter of each
year, as if the acquisitions had been effective at the beginning of the
periods presented, after giving effect to adjustments to reflect the
acquisitions and the permanent financing of the AFC acquisition.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Item 1. Financial Statements (continued).
(In millions, except share data)
Pro Forma
Three Months Ended
March 31,
1995 1994
Revenues $1,599 $1,467
Income before income taxes 282 291
Income before net dividends on
preferred stock of subsidiary 182 184
Net income 178 180
Net income per share $ .87 $ .84
Average fully diluted shares
outstanding (thousands) 205,244 213,331
Included in net income above are net realized gains of $1 million for the
three months ended March 31, 1995 and 1994.
The above unaudited pro forma information is intended for informational
purposes only and may not necessarily be indicative of American General's
future results of operations.
4. Derivative Financial Instruments. American General makes very limited
use of derivative financial instruments to manage the cost of debt and
investment transactions and does not use derivatives for speculative
purposes.
In February 1995, the company entered into an off-balance-sheet interest
rate swap agreement with a notional amount of $100 million, to receive
floating-rate payments based on a market index and to make fixed-rate
payments of 7.88% for a ten-year period unless otherwise terminated.
This agreement is intended to hedge interest rate risk associated with
long-term debt expected to be issued in second quarter 1995.
In March 1995, the company issued $150 million of fixed-rate debt and
terminated two off-balance-sheet interest rate swap agreements with a
total notional amount of $150 million, which had been an anticipatory
hedge of that debt. The termination of these agreements resulted in
settlement costs of $.9 million, which were included in the measurement
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
of the new debt and are being deferred and recognized as an increase to
interest expense over the ten-year term of the debt.
Item 1. Financial Statements (continued).
5. Deferred Income Taxes. Lower market interest rates and resulting
increases in bond values caused the deferred tax asset related to
unrealized losses on fixed maturity securities to decrease to $66 million
at March 31, 1995 from $351 million at December 31, 1994. The deferred
tax asset at December 31, 1994 was partially offset by a valuation
allowance of $315 million, recorded through shareholders' equity. The
company believes that the deferred tax asset at March 31, 1995 is
realizable; accordingly, no valuation allowance was considered necessary.
The reduction in the valuation allowance was recorded through
shareholders' equity.
6. 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 is continuing to
contest the matter vigorously through the appeals process; and the
company believes, based on advice of legal counsel, that plaintiffs'
claims are without merit. Accordingly, no provision has been made in the
consolidated financial statements related to this contingency.
In April 1992, the Internal Revenue Service (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. The company elected to pay
all related assessments plus associated interest, totaling $59 million.
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. Trial is expected to occur in mid-1995. The company
believes that the IRS's claims are without merit and is continuing to
vigorously pursue refund of the amounts paid. Accordingly, no provision
has been made in the consolidated financial statements related to this
contingency.
American General and certain of its subsidiaries are defendants in
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
various other lawsuits and proceedings arising in the normal course of
business. Some of these lawsuits and proceedings arise in jurisdictions
such as Alabama that permit punitive damages disproportionate to the
actual damages alleged. 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
Item 1. Financial Statements (continued).
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 financial position.
7. Status of Federal Tax Return Examinations. The company and its
subsidiaries file a consolidated federal income tax return. The IRS is
currently examining the company's tax returns for 1986 through 1988. One
issue from prior tax returns is currently being litigated, as described
in Note 6 above.
8. Ratios of Earnings to Fixed Charges. The ratios of earnings to fixed
charges were as follows:
Three Months Ended
March 31,
1995 1994
Consolidated operations ................... 2.5X 3.0X
Consolidated operations, corporate
fixed charges only ...................... 7.6X 9.3X
American General Finance, Inc. ............ 1.8X 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 1994 Annual
Report to Shareholders including the Management's Discussion and Analysis
found on pages 16 through 25 thereof.
This analysis should be read in conjunction with the consolidated financial
statements and related notes on pages 2 through 9 of this Quarterly Report on
Form 10-Q.
STATEMENT OF INCOME
Comparison of Three Months Ended March 31, 1995 and March 31, 1994
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Operating Revenues. Total revenues increased $304 million, or 25%, for the
three months ended March 31, 1995 compared to the same period in 1994, due to
increases in premiums and other considerations, net investment income, and
finance charges. The increases in premiums and other considerations and net
investment income of $114 million, or 39%, and $101 million, or 16%,
respectively, are primarily due to the acquisition of Franklin Life.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Excluding Franklin Life, premiums and other considerations increased $33
million, due to higher credit insurance premiums and the introduction of a new
life insurance product in the Consumer Finance segment, and premiums of
Financial Life Assurance Company of Canada (Financial Life), which was
excluded from segment reporting in first quarter 1994 and reported as held for
sale.
Excluding Franklin Life, net investment income increased $18 million,
reflecting growth in invested assets since March 31, 1994, partially offset by
a decline in investment yield. The decline in yield largely relates to the
prepayment of higher yielding bonds and mortgage-backed securities through
mid-1994 and subsequent reinvestment of the proceeds at lower interest rates.
The $78 million, or 27%, increase in finance charges resulted from an increase
in average finance receivables and higher yields on those receivables.
Realized Investment Gains. Realized investment gains for the three months
ended March 31, 1995 included $8 million of losses on the sale of fixed
maturity securities, partially offset by $4 million of net gains from sales of
investment real estate and $2 million of gains due to early redemption of
fixed maturity securities at the election of the issuer (calls).
For the same period in 1994, gains of $16 million on calls and $15 million
from sales of investments, primarily five real estate joint ventures, were
offset by a $28 million increase in reserves, primarily on investment real
estate.
During fourth quarter 1994, American General initiated a program to realize
capital losses for tax purposes to offset prior period capital gains. During
first quarter 1995, the company received a tax refund of $46 million,
generated by $136 million in net capital losses realized in fourth quarter
1994. Due to the decline in interest rates during first quarter 1995, no
additional capital losses were realized under this program. The ability to
realize additional losses to offset capital gains available for tax loss
carryback is dependent on future market conditions and alternative tax
planning strategies available to the company.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Equity in Earnings of WNC. Revenues for first quarter 1995 include 40% equity
in earnings of WNC. This amount includes purchase accounting adjustments and
reflects a one quarter lag in reporting.
Insurance and Annuity Benefits. Insurance and annuity benefits increased $140
million, or 26%, for the first three months of 1995 compared to the same
period in 1994, including $97 million due to the acquisition of Franklin Life.
Excluding Franklin Life, the increase was due to higher interest credited to
policyholders in the Retirement Annuities and Life Insurance segments, and the
exclusion of Financial Life from first quarter 1994 segment reporting.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Policyholder Dividends. Dividends paid to policyholders on participating life
insurance policies increased $14 million due to the acquisition of Franklin
Life.
Operating Costs and Expenses. Operating costs and expenses increased $43
million, or 22%, for the three months ended March 31, 1995 compared to the
same period in 1994, primarily due to a $20 million increase in salaries and
other expenses related to an increase in the number of branch offices and
customer accounts in the Consumer Finance segment, and $18 million of
operating expenses for Franklin Life.
Commission Expense. Commission expense increased $30 million, or 32%, for
1995 compared to 1994, of which $23 million was due to the acquisition of
Franklin Life. The remaining increase was due to higher insurance product
sales.
Provision for Finance Receivable Losses. The provision for finance receivable
losses increased $29 million, or 68%, for the three months ended March 31,
1995 compared to the same period in 1994; the allowance for finance receivable
losses increased $16 million compared to December 31, 1994. These increases
reflect the higher level of finance receivables outstanding, the change in the
portfolio mix, higher levels of delinquencies and net charge offs, and the
economic climate.
Change in Deferred Policy Acquisition Costs (DPAC) and Cost of Insurance
Purchased (CIP). The change reported in the income statement represents
capitalization of DPAC during the period, net of DPAC and CIP amortization.
The change in DPAC and CIP increased $14 million, or 47%, for the three months
ended March 31, 1995 compared to the same period in 1994, of which $18 million
was due to the acquisition of Franklin Life.
Interest Expense. Interest expense on corporate debt increased $11 million,
or 40%, of which $9 million was due to financing the Franklin Life acquisition
through short-term floating-rate debt. The increase in interest on short-term
debt was partially offset by lower interest on long-term debt, due to the
redemption of certain higher-rate debt issues during 1994. Interest expense
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
on consumer finance debt increased $32 million, or 34%, due to higher average
borrowings and short-term rates, partially offset by lower long-term borrowing
cost.
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, earnings of each segment include income 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.
Three Months Ended
March 31,
1995 1994
(In millions)
Revenues
Retirement Annuities ........................ $ 398 $ 379
Consumer Finance ............................ 431 335
Life Insurance .............................. 673 477
Total business segments ................. 1,502 1,191
Corporate operations
Realized investment gains .................. 2 3
Equity in earnings of WNC .................. 9 -
Other ...................................... 5 20
Total corporate operations .............. 16 23
Total consolidated revenues .......... $1,518 $1,214
Policyholder Account Deposits
Retirement Annuities ........................ $ 637 $ 587
Life Insurance .............................. 361 274
Total deposits .......................... $ 998 $ 861
Earnings
Retirement Annuities ........................ $ 54 $ 53
Consumer Finance ............................ 60 53
Life Insurance .............................. 84 64
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Total business segments ................. 198 170
Corporate operations
Net interest on corporate debt ............. (27) (19)
Expenses not allocated to segments ......... (9) (6)
Earnings on corporate assets ............... 6 15
Net equity in earnings of WNC .............. 6 -
Net realized investment gains .............. 1 1
Total corporate operations .............. (23) (9)
Total consolidated net income ........ $ 175 $ 161
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Retirement Annuities. Revenues for the first three months of 1995 compared to
1994 increased $19 million, or 5%, primarily due to a 5% increase in net
investment income, reflecting growth in invested assets, partially offset by a
decrease in the average investment yield. Invested assets increased $1.3
billion (excluding the effect of SFAS 115), or 7%, from March 31, 1994 to
March 31, 1995, primarily due to fixed premium deposits and reinvestment of
investment income over the last twelve months. Segment earnings increased $1
million, or 3%, reflecting growth in net investment income which exceeded the
increase in interest credited to policyholders. The ratio of operating
expenses to average assets increased slightly to .54% for the three months
ended March 31, 1995 from .53% for the same period in 1994. The ratio of
policyholder surrenders to average deferred policy reserves was 4.19% for
first quarter 1995 compared to 5.81% for first quarter 1994, primarily due to
a free bailout provision (surrender without charge) on certain accounts and
participants seeking higher returns in equity-based investments in the first
quarter of 1994, both due to low market interest rates. While customer
interest in equity-based investments has continued, resulting in a $32 million
increase in variable account deposits, fixed deposits also increased $18
million in first quarter 1995 compared to first quarter 1994, due to the
higher interest rate environment.
Consumer Finance. Revenues for the first three months of 1995 compared to
1994 increased $96 million, or 28%, primarily from increased finance charges
due to growth in finance receivables, through business development efforts and
branch expansion, and improved yields. Yields improved as a result of the
increased emphasis on non-real estate secured consumer loans and higher yields
on the retail sales finance and credit card portfolios. Segment earnings
increased $7 million, or 13%, due to increased spread on a higher receivables
balance, partially offset by a higher provision for finance receivable losses
and increased operating expenses. The charge off ratio increased to 2.8% for
first quarter 1995 from 2.2% for the same period of 1994, and delinquencies
increased to 2.9% at March 31, 1995 from 2.4% at March 31, 1994. The increase
in charge offs, delinquencies, and the provision for finance receivable losses
resulted from growth in finance receivables and the change in portfolio mix
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
described above.
Life Insurance. The Life Insurance segment includes two months of activity of
Franklin Life, acquired January 31, 1995. The acquisition increased segment
revenues $174 million, deposits $69 million, and earnings $21 million in first
quarter 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Excluding Franklin Life, revenues for the Life Insurance segment increased $22
million, or 5%, for the three months ended March 31, 1995 compared to 1994,
primarily due to Financial Life, excluded from first quarter 1994 segment
reporting, and higher investment income. The increase in investment income
resulted from growth in invested assets, partially offset by lower yields
which resulted from prepayment of higher yielding securities through mid-1994
and reinvestment at lower rates. Excluding Franklin Life, deposits increased
7% due to the introduction of structured settlement annuity products and
growth in interest-sensitive life deposits. Segment earnings excluding
Franklin Life decreased $1 million, or 3%, in first quarter 1995 compared to
the same period of 1994, primarily due to higher insurance and annuity benefit
expenses, partially offset by the increase in investment income.
Corporate Operations. Corporate operations include net interest on corporate
debt, expenses not allocated to the business segments, earnings on corporate
assets, the net equity in earnings of WNC, 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. Interest on corporate debt
increased $8 million, or 42%, due to increases in short-term debt, issued
primarily to fund the acquisition of Franklin Life, and higher short-term
interest rates, partially offset by redemptions of certain long-term debt
issues during 1994. Earnings on corporate assets decreased $9 million for the
three months ended March 31, 1995 compared to 1994, primarily due to lower
income from investment real estate and earnings of companies held for sale,
reported in corporate operations during first quarter 1994. Included in 1995
was the company's 40% equity in the earnings of WNC, net of the company's
related deferred taxes.
-14-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
BALANCE SHEET
Effect of SFAS 115. Decreases in market interest rates and resulting
increases in bond values during the first three months of 1995 caused the
adjustment to shareholders' equity related to fixed maturity securities under
SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities,"
to decrease from a net unrealized loss of $950 million at December 31, 1994 to
a net unrealized loss of $106 million at March 31, 1995.
The components of the fair value adjustment to report securities in accordance
with SFAS 115 at March 31, 1995 and December 31, 1994 were as follows:
March 31, December 31,
1995 1994 Change
(In millions)
Fair value adjustment to fixed
maturity securities $ (288) $(1,387) $1,099
Adjusted by:
Increase (decrease) in DPAC/CIP 102 401 (299)
Decrease (increase) in
deferred income taxes 66 351 (285)
Valuation allowance on deferred
tax asset - (315) 315
Equity in WNC's net unrealized gain 14 - 14
Net unrealized losses on fixed
maturity securities (106) (950) 844
Net unrealized gains on equity
securities 22 15 7
Net unrealized gains (losses)
on securities $ (84) $ (935) $ 851
-15-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Assets. At March 31, 1995, consolidated assets of $56 billion were
distributed as follows: 69% in investments, principally supporting insurance
and annuity liabilities, 14% in net finance receivables, 7% in intangible
assets, and 10% in other assets.
Investments. From December 31, 1994 to March 31, 1995, investments
increased $6.0 billion due to the acquisition of Franklin Life and $1.1
billion due to the effect of SFAS 115. For more information on the
investment portfolio at March 31, 1995, see "INVESTMENTS" beginning on
page 17.
Finance Receivables. Net finance receivables increased $236 million, or
3%, from December 31, 1994 to March 31, 1995, primarily due to business
development efforts and branch expansion in the Consumer Finance segment.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Deferred Policy Acquisition Costs (DPAC). The $192 million decrease in
DPAC was primarily due to a decline in the reinstatement of DPAC under
SFAS 115 at March 31, 1995 compared to December 31, 1994 (see "Effect of
SFAS 115" on page 15), partially offset by deferral of acquisition costs.
Cost of Insurance Purchased (CIP). The $577 million increase in CIP was
due to the acquisition of Franklin Life, net of a $54 million decrease
due to the effect of SFAS 115.
Other Assets. The $292 million increase in other assets was primarily
due to the acquisition of Franklin Life and an increase in due from
brokers for investment transactions.
Separate Account Assets and Liabilities. The $665 million increase in
assets and liabilities related to Separate Accounts from December 31,
1994 to March 31, 1995 reflects increased sales of variable annuity
products, primarily in the Retirement Annuities segment, the transfer of
a $218 million group account from fixed to variable, and $110 million due
to the acquisition of Franklin Life.
Liabilities and Equity. At March 31, 1995, consolidated liabilities and
equity were distributed as follows: 65% in insurance and annuity liabilities,
13% in consumer finance debt, 8% in equity (including redeemable equity), 5%
in corporate and real estate debt, and 9% in other liabilities.
Insurance and Annuity Liabilities. The $6.4 billion increase in
insurance and annuity liabilities from December 31, 1994 to March 31,
1995 was primarily due to the acquisition of Franklin Life.
Corporate Debt. Corporate debt was $884 million higher at March 31, 1995
than at December 31, 1994, primarily due to financing the acquisition of
Franklin Life with short-term debt. Excluding the effect of SFAS 115,
-16-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
the ratio of corporate debt to corporate capital (the sum of corporate
debt plus equity) was 34% at March 31, 1995, compared to 25% at December
31, 1994. Management expects to decrease this ratio to approximately 25%
by year-end 1995, through the issuance of various types of preferred
stock and current year retained earnings.
Consumer Finance Debt. Consumer finance debt increased $171 million from
December 31, 1994 to March 31, 1995, to support the growth in finance
receivables.
Income Tax Liabilities. The liability for income taxes increased $72
million from December 31, 1994 to March 31, 1995, primarily due to the
timing of income tax payments. Due to the substantial decrease in the
unrealized loss on fixed maturity securities during first quarter 1995
and the availability of capital gains to offset unrealized losses, no
valuation allowance was considered necessary at March 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Other Liabilities. Other liabilities increased $204 million primarily
due to the acquisition of Franklin Life and increases in amounts due to
brokers for investment transactions.
Shareholders' Equity. Shareholders' equity increased from $3.5 billion
at December 31, 1994 to $4.4 billion at March 31, 1995, primarily due to
the $851 million reduction in net unrealized losses (see "Effect of SFAS
115" on page 15). Due to the requirements of SFAS 115, shareholders'
equity will be subject to future volatility from the effects of interest
rate fluctuations on the fair value of 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 for
declines in fair value below cost that are considered other than temporary.
Fixed Maturity Securities. Fixed maturity securities represented 85% of
invested assets at March 31, 1995. Fixed maturity securities are carried at
fair value in accordance with SFAS 115 (see "Effect of SFAS 115" on page 15).
Information regarding the fixed maturity securities portfolio at March 31,
1995, which included bonds and redeemable preferred stocks, was as follows:
Average Credit
(In millions) Fair Value % Rating
Mortgage-backed $11,169 34% AAA
Other investment grade 20,232 62 A
Below investment grade 1,130 4 BB-
Total fixed maturities $32,531 100% AA-
-17-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Collateralized mortgage obligations (CMOs) are purchased to diversify the
portfolio risk characteristics from primarily corporate credit risk to a mix
of credit and cash flow risk. CMOs represented 88% and 92% of mortgage-backed
securities at March 31, 1995 and December 31, 1994, respectively.
At December 31, 1994, below investment grade fixed maturity securities, those
rated below BBB-, were $886 million, or 3%, of total fixed maturity
securities. The $244 million increase from December 31, 1994 to March 31,
1995 was primarily due to the acquisition of Franklin Life. Net income from
below investment grade fixed maturity securities, including realized
investment gains and losses, was $16 million and $12 million for the first
three months of 1995 and 1994, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Non-performing fixed maturity securities, defined as securities for which
payment of interest is sufficiently uncertain as to preclude accrual of
interest, were $71 million at March 31, 1995. These securities represented
.2% of total fixed maturity securities at March 31, 1995 and December 31,
1994.
Mortgage Loans. Mortgage loans on real estate totaled 8% of invested assets
at March 31, 1995. Information regarding the mortgage loan portfolio at March
31, 1995 was as follows:
Book Non-Performing Loans
(In millions) Value Amount %
Commercial $3,189 $179 5.6%
Residential 81 3 3.6%
Allowance for losses (83) (35)
Total mortgage loans $3,187 $147
Non-performing (impaired) mortgage loans include loans delinquent 60 days or
more and commercial loans that have been restructured. These loans
represented 5.6% of total commercial loans at March 31, 1995, compared to 5.8%
at December 31, 1994. The decrease was primarily due to the increase in the
portfolio from $2.7 billion at December 31, 1994 to $3.2 billion at March 31,
1995, due to the Franklin Life acquisition.
At March 31, 1995, $205 million of performing commercial mortgage loans were
included on the company's watch list if they were delinquent 30-59 days, the
borrower was in bankruptcy, or the loan was determined to be under-
collateralized. This amount compares to $239 million at year-end 1994. The
decrease in the watch list amount primarily was due to loans which became non-
performing during the quarter. The company does not anticipate a significant
-18-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
effect on operations, liquidity, or capital from these loans.
Investment Real Estate. Investment real estate totaled 1.4% of invested
assets at March 31, 1995, compared to 1.8% at December 31, 1994. The
breakdown of investment real estate was as follows:
(In millions) March 31, December 31,
1995 1994
Land development projects $ 612 $ 613
American General Center, Houston 119 120
Income-producing real estate 92 96
Foreclosed real estate 40 56
Allowance for losses (310) (321)
Total investment real estate $ 553 $ 564
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
With the adoption of SFAS 121 (see Note 2 on page 5), the carrying value of
certain land development projects will be permanently reduced by the amount of
the related allowance for losses.
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 Parent Company. Net operating cash flows generated by the
parent company were $78 million and $92 million for the three months ended
March 31, 1995 and 1994, respectively. The decrease related to lower
dividends from subsidiaries, higher intercompany receivables, and increased
interest expense due to the Franklin acquisition, partially offset by 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 to buy back 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 three months of 1995, the companies in the Life Insurance and
Retirement Annuities segments paid cash dividends of $52 million to American
General compared to $54 million during the first three months of 1994. Cash
dividends paid to the company by the Consumer Finance segment totaled $31
million in the first three months of 1995, compared to $81 million for the
-19-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
same period of 1994, which included $48 million of dividends accrued in 1993.
The increase in short-term debt during first quarter 1995 primarily resulted
from financing the Franklin Life acquisition.
On March 29, 1995, the company issued $150 million of non-redeemable debt
securities due April 1, 2005, which bear interest at 7-3/4% payable semi-
annually. Proceeds from this issuance were used to repay short-term corporate
debt. See Note 4 on page 7 concerning swaps related to this debt issuance.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Segment Cash Flows. Net cash flows generated by the Life Insurance and
Retirement Annuities segments in the first three months of 1995 included $438
million provided by operating activities and $268 million provided by the
increase in fixed policyholder account deposits, net of withdrawals. This
compared to $321 million and $288 million, respectively, during the first
three months of 1994. The $117 million increase in cash provided by operating
activities was primarily due to a $32 million tax payment in the Retirement
Annuities segment in first quarter 1994, and cash flows of Franklin Life. The
decrease in fixed policyholder account deposits, net of withdrawals, was
primarily due to 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 $350 million in the
first three months of 1995 from $207 million in the same period of 1994.
The Consumer Finance segment's operating cash flows increased to $204 million
during the first three months of 1995, compared to $166 million during the
first three months of 1994.
Consolidated Operating Activities. Net cash flows from operating activities
on a consolidated basis increased $267 million in first quarter 1995 compared
to the same period in 1994, primarily due to the increases in segment
operating cash flows discussed above and the tax refund received in first
quarter 1995 as a result of 1994 capital losses and overpayment of 1994 taxes.
Investing Activities. The source of cash flow from investment calls,
maturities, and sales was as follows:
Three Months Ended
(In millions) March 31,
1995 1994
-20-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Fixed maturity securities
Sales $ 486 $ 153
Calls 201 290
Repayments of mortgage-backed securities 144 801
Maturities 84 108
Mortgage loans 112 97
Equity securities 83 11
Other 58 65
Total $1,168 $1,525
Repayments of mortgage-backed securities in the first quarter of 1994 were
unusually high due to the low interest rate environment, which continued
through mid-1994.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
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
March 31, 1995, committed credit facilities totaled $4.3 billion; there were
no outstanding borrowings under these facilities.
Shelf Registration Statement. On March 30, 1995, the company filed a Form S-3
shelf registration statement with the Securities and Exchange Commission to
register $1.25 billion of debt and equity securities. Over the next several
months, the company intends to issue approximately $500 million in a
combination of convertible and non-convertible preferred securities as well as
$450 million of long-term debt under this registration statement. Proceeds
will be used to reduce the company's leverage ratio and to reduce corporate
and real estate short-term debt outstanding.
The registration statement filed on March 30, 1995 relating to these
securities has not yet become effective. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Form 10-Q shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation, or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
OTHER FACTORS
Environmental. American General's principal exposure to environmental
regulations arises from its ownership of investment real estate. Probable
-21-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
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 company's life insurance and annuity subsidiaries
were assessed $6.6 million by state guaranty associations during first quarter
1995, of which $4.2 million had been accrued at December 31, 1994.
Assessments during first quarter 1994 were $3.4 million, of which $2.4 million
was accrued at December 31, 1993. The assessments for 1995 and 1994 were
offset by $2.2 million and $.8 million, respectively, considered recoverable
against future premium taxes. At March 31, 1995, the accrued liability for
anticipated unrecoverable assessments was $23 million, compared to $21 million
at December 31, 1994.
<PAGE>
-22-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
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 lawsuits and
proceedings arising in the normal course of business. Some of these lawsuits
and proceedings arise in jurisdictions such as Alabama that permit punitive
damages disproportionate to the actual damages alleged. 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 financial position.
Item 5. Other Information.
The company's common stock buyback program is currently suspended and there
were no company purchases of shares during first quarter 1995.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
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.
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.
1) Current Report on Form 8-K dated February 14, 1995, with respect to
the acquisition of American Franklin Company and the related
financial statements, pro forma financial information, and exhibits.
-23-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
b. Reports on Form 8-K (continued).
2) Current Report on Form 8-K dated March 22, 1995, with respect to the
authorization of the issuance by the company of $150 million
aggregate principal amount of 7-3/4% Notes Due 2005 in an
underwritten public offering.
3) Current Report on Form 8-K dated April 14, 1995, with respect to the
financial statements, pro forma financial information, and exhibits
of American Franklin Company.
<PAGE>
-24-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN GENERAL CORPORATION
(Registrant)
By: PAMELA J. PENNY
Pamela J. Penny
Vice President and Controller
(Duly Authorized Officer and
Chief Accounting Officer)
Date: May 8, 1995
<PAGE>
-25-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
EXHIBIT INDEX
Exhibit
11 Computation of Earnings per Share.
12.1 Computation of Ratio of Earnings to Fixed
Charges for Consolidated Operations.
12.2 Computation of Ratio of Earnings to Fixed
Charges for Consolidated Operations,
Corporate Fixed Charges Only.
12.3 Computation of Ratio of Earnings to Fixed
Charges for American General Finance, Inc.
27 Financial Data Schedule.
<PAGE>
-26-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
($ in millions, except share data)
Three Months Ended
March 31,
1995 1994
Primary:
Net income available to common stock ....... $ 175 $ 161
Average shares outstanding
Common shares ............................ 204,768,719 213,010,865
Assumed exercise of stock options ........ 423,399 316,239
Total .................................. 205,192,118 213,327,104
Net income per share ....................... $ .85 $ .75
Fully Diluted:
Net income available to common stock ....... $ 175 $ 161
Average shares outstanding
Common shares ............................ 204,768,719 213,010,865
Assumed exercise of stock options ........ 475,705 320,394
Total .................................. 205,244,424 213,331,259
Net income per share ....................... $ .85 $ .75
<PAGE>
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Exhibit 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CONSOLIDATED OPERATIONS
(Unaudited)
($ in millions)
Three Months Ended
March 31,
1995 1994
Income before income tax expense ........... $ 272 $ 253
Fixed charges deducted from income
Interest expense ......................... 165 120
Implicit interest in rents ............... 4 4
Total fixed charges deducted from
income ............................... 169 124
Earnings available for fixed charges ....... $ 441 $ 377
Fixed charges per above .................... $ 169 $ 124
Capitalized interest ....................... 5 4
Total fixed charges .................... $ 174 $ 128
Ratio of earnings to fixed charges ......... 2.5X 3.0X
<PAGE>
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Exhibit 12.2
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CONSOLIDATED OPERATIONS, CORPORATE FIXED CHARGES ONLY
(Unaudited)
($ in millions)
Three Months Ended
March 31,
1995 1994
Income before income tax expense............ $ 272 $ 253
Corporate fixed charges deducted from
income - corporate interest expense ...... 42 31
Earnings available for fixed charges ....... $ 314 $ 284
Ratio of earnings to fixed charges ......... 7.6X 9.3X
<PAGE>
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1995
Exhibit 12.3
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AMERICAN GENERAL FINANCE, INC.
(Unaudited)
($ in millions)
Three Months Ended
March 31,
1995 1994
Income before income tax expense ........... $ 96 $ 86
Fixed charges deducted from income
Interest expense ......................... 125 93
Implicit interest in rents ............... 3 3
Total fixed charges deducted from
income ............................... 128 96
Earnings available for fixed charges ....... $ 224 $ 182
Ratio of earnings to fixed charges ......... 1.8X 1.9X
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 32,531<F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 248
<MORTGAGE> 3,187
<REAL-ESTATE> 553
<TOTAL-INVEST> 38,497
<CASH> 21
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 3,116<F2>
<TOTAL-ASSETS> 55,667
<POLICY-LOSSES> 33,987<F3>
<UNEARNED-PREMIUMS> 155<F3>
<POLICY-OTHER> 162<F3>
<POLICY-HOLDER-FUNDS> 1,742<F3>
<NOTES-PAYABLE> 9,969
<COMMON> 365
0
0
<OTHER-SE> 4,057<F4>
<TOTAL-LIABILITY-AND-EQUITY> 55,667
403
<INVESTMENT-INCOME> 722
<INVESTMENT-GAINS> 2
<OTHER-INCOME> 391<F5>
<BENEFITS> 693
<UNDERWRITING-AMORTIZATION> 65<F6>
<UNDERWRITING-OTHER> (108)<F7>
<INCOME-PRETAX> 272
<INCOME-TAX> 97
<INCOME-CONTINUING> 175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
<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 CURRENTLY CLASSIFIED AS AVAILABLE-FOR-
SALE AND ARE RECORDED AT FAIR VALUE.
<F2> INCLUDES COST OF INSURANCE PURCHASED (CIP).
<F3> THE SUM OF POLICY LOSSES, UNEARNED PREMIUMS, POLICY OTHER, AND POLICY-
HOLDER FUNDS COMPRISES INSURANCE AND ANNUITY LIABILITIES.
<F4> CONSISTS OF NET OF THE FOLLOWING: NET UNREALIZED GAINS (LOSSES) ON
SECURITIES; RETAINED EARNINGS; AND COST OF TREASURY STOCK.
<F5> INCLUDES FINANCE CHARGES.
<F6> CONSISTS OF THE FOLLOWING: AMORTIZATION OF POLICY ORIGINATION COSTS AND
AMORTIZATION OF CIP, NET.
<F7> CONSISTS OF THE FOLLOWING: CAPITALIZATION AND OTHER.
</FN>
</TABLE>
