AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
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, 1996
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 .
As of April 30, 1996, there were 206,818,343 shares (excluding shares held in
treasury and by a subsidiary) of American General's Common Stock and 2,317,701
shares of American General's 7% Convertible Preferred Stock outstanding.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
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, 1996 and 1995 ............. 2
Consolidated Balance Sheet at March 31, 1996 and
December 31, 1995 ................................ 3
Consolidated Condensed Statement of Cash Flows for
the three months ended March 31, 1996 and 1995 ... 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 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, 1996
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,
1996 1995
Revenues
Premiums and other considerations ................ $ 480 $ 403
Net investment income ............................ 800 722
Finance charges .................................. 371 359
Realized investment gains ........................ 27 2
Equity in earnings of Western National Corporation 8 9
Other ............................................ 25 23
Total revenues ............................... 1,711 1,518
Benefits and expenses
Insurance and annuity benefits ................... 774 677
Policyholder dividends ........................... 23 16
Operating costs and expenses ..................... 264 234
Commissions ...................................... 125 126
Change in deferred policy acquisition costs and
cost of insurance purchased ..................... (16) (43)
Provision for finance receivable losses .......... 109 72
Interest expense
Corporate ....................................... 30 39
Consumer Finance ................................ 126 125
Total benefits and expenses .................. 1,435 1,246
Earnings
Income before income tax expense ................. 276 272
Income tax expense ............................... 97 97
Income before net dividends on preferred
securities of subsidiaries ...................... 179 175
Net dividends on preferred securities of
subsidiaries .................................... 10 -
Net income ................................... $ 169 $ 175
Net income per share ............................. $ .81 $ .85
Dividends paid per common share .................. $ .325 $ .31
Average fully diluted shares outstanding
(in thousands) .................................. 212,653 205,244
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Consolidated Balance Sheet
(Unaudited)
(In millions, except share data)
March 31, December 31,
1996 1995
Assets
Investments
Fixed maturity securities (amortized cost:
$36,034; $34,590) ........................... $37,214 $37,213
Mortgage loans on real estate ................. 3,115 3,041
Equity securities (cost: $143; $138) .......... 175 186
Policy loans .................................. 1,653 1,605
Investment real estate ........................ 618 577
Other long-term investments ................... 174 179
Short-term investments ........................ 119 103
Total investments ......................... 43,068 42,904
Cash ........................................... 188 161
Finance receivables, net ....................... 7,533 7,918
Investment in Western National Corporation ..... 391 407
Deferred policy acquisition costs .............. 2,109 1,625
Cost of insurance purchased .................... 762 504
Acquisition-related goodwill ................... 572 577
Other assets ................................... 1,938 1,887
Assets held in Separate Accounts ............... 5,741 5,170
Total assets .............................. $62,302 $61,153
Liabilities
Insurance and annuity liabilities .............. $39,192 $37,983
Debt (short-term)
Corporate ($657; $553) ........................ 1,827 1,723
Consumer Finance ($2,222; $2,490) ............. 7,081 7,470
Income tax liabilities ......................... 1,107 1,268
Other liabilities .............................. 1,090 1,009
Liabilities related to Separate Accounts ....... 5,741 5,170
Total liabilities ......................... 56,038 54,623
Redeemable equity
Company-obligated mandatorily redeemable
preferred securities of subsidiaries
holding solely company subordinated notes
Non-convertible ............................. 485 485
Convertible ................................. 245 244
Total redeemable equity.................... 730 729
Shareholders' equity
Mandatorily convertible preferred stock
(shares issued and outstanding: 2,317,701).... 85 -
Common stock (shares issued: 220,122,120;
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
outstanding: 207,152,400; 203,948,246)........ 398 364
Net unrealized gains on securities ............. 526 1,100
Retained earnings .............................. 4,890 4,787
Cost of treasury stock ......................... (365) (450)
Total shareholders' equity ................ 5,534 5,801
Total liabilities and equity .............. $62,302 $61,153
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In millions)
Three Months Ended
March 31,
1996 1995
Operating activities
Net cash provided by operating activities .... $ 667 $ 667
Investing activities
Investment purchases ............................... (2,040) (1,829)
Investment calls, maturities, and sales ............ 1,589 1,168
Finance receivable originations or acquisitions .... (1,010) (1,521)
Finance receivable principal payments received ..... 1,270 1,209
Acquisition of Independent ......................... (105) -
Acquisition of Franklin Life ....................... - (920)
Other, net ......................................... (52) (45)
Net cash used for investing activities ....... (348) (1,938)
Financing activities
Retirement Annuities and Life Insurance
Policyholder account deposits .................... 695 803
Policyholder account withdrawals ................. (618) (535)
Total Retirement Annuities and Life Insurance . 77 268
Consumer Finance
Net decrease in short-term debt .................. (268) (281)
Long-term debt issuances ......................... 30 733
Long-term debt redemptions ....................... (151) (283)
Total Consumer Finance ........................ (389) 169
Corporate
Net increase in short-term debt .................. 104 725
Long-term debt issuances ......................... - 148
Common share dividend payments ................... (66) (63)
Common share purchases ........................... (22) -
Other, net ....................................... 4 -
Total Corporate ............................... 20 810
Net cash provided by (used for)
financing activities ........................ (292) 1,247
Net increase (decrease) in cash ..................... 27 (24)
Cash at beginning of period ......................... 161 45
Cash at end of period ............................... $ 188 $ 21
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for
Income taxes ..................................... $ (49) $ (78)
Interest
Corporate ...................................... 32 40
Consumer Finance ............................... 121 113
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Dividends on preferred securities of
subsidiaries .................................... 14 -
Item 1. Financial Statements (continued).
AMERICAN GENERAL CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996
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, 1996, and the consolidated results of operations and cash flows
for the three months ended March 31, 1996 and 1995.
To conform with the 1996 presentation, certain items in the prior period
have been reclassified.
2. Acquisitions.
Independent Insurance Group, Inc. On February 29, 1996, American
General, through its wholly-owned subsidiary, AGC Life Insurance Company
(AGC Life), acquired Independent Insurance Group, Inc. (Independent) for
$362 million. Prior to closing, Independent shareholders could elect to
exchange each share of Independent stock for $27.50 in cash, .7480 share
of American General common stock, or .7480 share of American General 7%
mandatorily convertible preferred stock. The exchange ratio was based on
$36.7625, the average market price of American General common stock
during the ten trading days ending on and including the fifth trading day
prior to closing. The consideration at closing consisted of: 1) $139
million of cash (38%), 2) 3.7 million shares of common stock (38%), and
3) 2.3 million shares of preferred stock (24%).
The acquisition was accounted for using the purchase method, and the
results of operations of Independent were included in the company's
consolidated statement of income from the date of acquisition. The
acquired assets and liabilities were reflected in American General's
consolidated balance sheet as of February 29, 1996, at management's best
estimate of their fair values. Evaluation of fair values assigned to
Independent's assets and liabilities, primarily related to insurance,
employee benefits, and litigation liabilities, is continuing, and
allocation of the purchase price may be adjusted when additional
information is available.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Item 1. Financial Statements (continued).
Noncash investing and financing activities related to the acquisition of
Independent that are not reflected in the consolidated condensed
statement of cash flows for the three months ended March 31, 1996 were as
follows:
(In millions)
Fair value of assets acquired, excluding $34 million of cash $1,279
Liabilities assumed (951)
Issuance of common treasury shares (138)
Issuance of mandatorily convertible preferred stock (85)
Net cash paid for acquisition of Independent $ 105
Franklin Life Insurance Company. On January 31, 1995, American General,
through AGC Life, acquired American Franklin Company (AFC), the holding
company of The Franklin Life Insurance Company (Franklin Life). The
following unaudited proforma information presents the consolidated
results of operations of the company and AFC for the three months ended
March 31, 1995. The proforma information is presented as if the
acquisition and its permanent financing had been effective at January 1,
1995. This information is intended for informational purposes only and
may not necessarily be indicative of American General's future results of
operations.
Proforma
Three Months Ended
March 31, 1995
(In millions, except share data)
Total revenues $ 1,598
Income before income tax expense $ 285
Income before net dividends on
preferred securities of subsidiaries $ 183
Net income $ 176
Net income per share $ .86
Average fully diluted shares
outstanding (thousands) 205,244
Included in net income above are aftertax realized gains of $1 million.
3. Mandatorily Convertible Preferred Stock. In connection with the
acquisition of Independent, American General issued 2.3 million shares,
or $85 million, of mandatorily convertible preferred stock. Holders of
the preferred stock are entitled to receive annual cumulative dividends
of 7% and have the right to vote, together with holders of American
General common stock, on the basis of four-fifths of one vote for each
share of preferred stock. The preferred stock is non-callable for four
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
years, and each share is mandatorily convertible into not more than one
share of American General common stock during the fifth year.
Item 1. Financial Statements (continued).
4. Derivative Financial Instruments. During the three months ended March
31, 1996, the company entered into two interest rate swap agreements with
a total notional amount of $20 million to convert specific investment
securities from a floating to a fixed-rate basis. No other transactions
involving derivative financial instruments were entered into during the
period. Derivative financial instruments related to debt securities did
not have a material effect on the weighted-average borrowing rate or
reported interest expense in the three months ended March 31, 1996 or
1995. Derivative financial instruments related to investment securities
did not have a material effect on net investment income in the three
months ended March 31, 1996 or 1995.
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. On January 29,
1996, the Texas First Court of Appeals rendered a two-to-one decision
that affirmed the trial court judgment. The company intends to
vigorously contest the matter through the appellate process. Although
substantial risks and uncertainties remain with respect to the ultimate
outcome, legal counsel has advised the company that it is not probable
within the meaning of Statement of Financial Accounting Standards 5,
"Accounting for Contingencies," that the company will ultimately incur a
material liability in connection with this matter. 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 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 United States Court of Federal Claims.
On February 7, 1996, the court ruled in favor of the company on all legal
issues related to this contingency. The company does not yet know
whether the IRS will appeal this decision; however, the company intends
to pursue a full refund of the amounts paid. Accordingly, 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 March 31, 1996
Item 1. Financial Statements (continued).
American General and certain of its subsidiaries are parties to various
other lawsuits and proceedings arising in the ordinary course of
business. Many of these lawsuits and proceedings arise in jurisdictions,
such as Alabama, that permit punitive damages disproportionate to the
actual damages alleged. Based upon information presently available, the
company believes that the total amounts that ultimately will be paid, if
any, arising from these lawsuits and proceedings will have no material
adverse effect on the company's consolidated results of operations and
financial position. However, it should be noted that the frequency of
large punitive damage awards that bear little or no relation to actual
damages awarded by juries in jurisdictions like Alabama continues to
increase and creates the potential for unpredictable judgments in any
given punitive damage suit.
6. Status of Federal Tax Return Examinations. The company and the majority
of its subsidiaries file a consolidated federal income tax return. The
IRS is currently examining the company's tax returns for 1986 through
1992. One issue from prior tax returns is currently being litigated, as
described in Note 5.
7. Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends. The ratio of earnings to
fixed charges and the ratio of earnings to combined fixed charges and
preferred stock dividends were as follows:
Three Months Ended
March 31,
1996 1995
Ratio of Earnings to Fixed
Charges:
Consolidated operations .................... 2.65 2.54
Consolidated operations,
corporate fixed charges only .............. 8.40 6.71
American General Finance, Inc. ............. 1.34 1.75
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends:
Consolidated operations .................... 2.44 2.54
Consolidated operations,
corporate fixed charges and
preferred stock dividends only ............ 6.01 6.71
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
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 1995 Annual
Report to Shareholders, including the Management's Discussion and Analysis 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 8 of this Quarterly Report on
Form 10-Q.
STATEMENT OF INCOME
Comparison of Three Months Ended March 31, 1996 and March 31, 1995
Revenues. Total revenues increased $193 million, or 13%, for the three months
ended March 31, 1996 compared to the same period in 1995, primarily due to
increases in premiums and other considerations, net investment income, and
realized investment gains.
The increase in premiums and other considerations of $77 million, or 19%, was
substantially due to including only two months of operations for Franklin Life
in first quarter 1995 and the acquisition of Independent in 1996.
The increase in net investment income of $78 million, or 11%, was primarily
due to including only two months of operations for Franklin Life in first
quarter 1995, the acquisition of Independent in 1996, and growth in invested
assets of 5% since March 31, 1995, partially offset by a decline in market
yields on fixed maturity securities.
Realized investment gains for the three months ended March 31, 1996 were $27
million, compared to $2 million for the same period in 1995. Realized
investment gains for first quarter 1996 included $14 million of gains due to
early redemption of fixed maturity and equity securities at the election of
the issuer (calls) and $17 million of net gains from sales of equity
securities and investment real estate. These gains were partially offset by
$4 million of losses related to permanent impairments on fixed maturity
securities and increased allowances for mortgage loan losses.
Insurance and Annuity Benefits. Insurance and annuity benefits increased $97
million, or 14%, for the first three months of 1996 compared to the same
period in 1995. The increase was primarily due to first quarter 1995
including only two months of operations for Franklin Life, the acquisition of
Independent in 1996, first quarter 1996 including $27 million of group annuity
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
purchases by the Franklin Retirement Plan for early retirees, and interest
credited on higher policy reserves in the Retirement Annuities segment.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Operating Costs and Expenses. Operating costs and expenses increased $30
million, or 14%, for the three months ended March 31, 1996 compared to the
same period in 1995, primarily due to a $22 million increase in expenses in
the Consumer Finance segment. The Consumer Finance segment increase was a
result of significant branch office expansion and receivables growth in 1994
and the first half of 1995 and the decrease in deferral of finance receivable
origination costs in first quarter 1996, resulting from slower growth in
finance receivables. Additionally, expenses increased due to Independent's
March 1996 operating expenses.
Change in Deferred Policy Acquisition Costs (DPAC) and Cost of Insurance
Purchased (CIP). The change reported in the income statement represents
capitalization during the period, net of amortization. The change in DPAC and
CIP decreased $27 million, or 62%, for the three months ended March 31, 1996
compared to the same period in 1995, primarily due to estimated first quarter
1995 purchase accounting adjustments for Franklin Life (finalized in fourth
quarter 1995) and decreased deferrals of acquisition costs in 1996, resulting
from lower Life Insurance segment sales.
Provision for Finance Receivable Losses. The provision for finance receivable
losses increased $37 million, or 50%, for the first three months of 1996
compared to the same period in 1995. The increase reflects higher charge
offs, partially offset by a decrease in the amounts provided for finance
receivable losses. See "Consumer Finance" on page 12 for additional
discussion about the provision for finance receivable losses.
Interest Expense. Interest expense on corporate debt decreased $9 million, or
23%, for the first three months of 1996 compared to the first three months of
1995, primarily due to a decrease in short-term borrowings used for the
initial financing of the Franklin Life acquisition. The company issued
preferred securities of subsidiaries in 1995 to refinance this and other
short-term debt.
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
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 income from its business
operations and earnings on that amount of equity considered necessary to
support its business, and exclude net realized investment gains (losses), 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,
1996 1995
(In millions)
Revenues
Retirement Annuities ........................ $ 432 $ 398
Consumer Finance ............................ 439 431
Life Insurance .............................. 804 673
Total business segments .................... 1,675 1,502
Corporate Operations
Realized investment gains .................. 27 2
Equity in earnings of WNC .................. 8 9
Other ...................................... 1 5
Total corporate operations ................ 36 16
Total consolidated revenues ............. $1,711 $1,518
Policyholder Account Deposits
Retirement Annuities ........................ $ 709 $ 637
Life Insurance .............................. 297 361
Total deposits .......................... $1,006 $ 998
Earnings
Retirement Annuities ........................ $ 60 $ 54
Consumer Finance ............................ 28 60
Life Insurance .............................. 91 84
Total business segments .................... 179 198
Corporate Operations
Net interest on corporate debt ............. (21) (27)
Net dividends on preferred securities of
subsidiaries.............................. (10) -
Expenses not allocated to segments ......... (6) (9)
Earnings on corporate assets ............... 5 6
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Net equity in earnings of WNC .............. 5 6
Net realized investment gains .............. 17 1
Total corporate operations ................ (10) (23)
Total consolidated net income ........... $ 169 $ 175
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Retirement Annuities. Revenues for the first three months of 1996 compared to
1995 increased $34 million, or 9%, primarily due to a 6% increase in net
investment income, reflecting growth in invested assets, partially offset by a
14 basis point decrease in the average investment yield. Invested assets
(excluding the fair value adjustment related to fixed maturity securities)
increased $1.4 billion, or 7%, from March 31, 1995 to March 31, 1996,
reflecting growth in policyholder account balances. Segment earnings
increased $6 million, or 10%, primarily due to the growth in margin between
net investment income and interest credited to policyholders.
The ratio of operating expenses to average assets improved to .52% for the
three months ended March 31, 1996 from .54% for the same period in 1995. The
ratio of policyholder surrenders to average fixed deferred annuity liabilities
increased to 5.44% for the first three months of 1996 compared to 4.19% for
the same period in 1995. The increase was primarily due to lower interest
crediting rates on fixed accounts, which made transfers to variable accounts
relatively more attractive as the stock market continued its strong
performance. In addition, plan terminations in the health care market and
systematic withdrawals were higher than experienced in the prior year.
Variable account deposits increased $100 million while fixed deposits
decreased $28 million in the first three months of 1996 compared to the same
period of 1995, due to customer preference for equity-based investments.
Consumer Finance. Segment revenues, primarily finance charges, increased 2%
in first quarter 1996 compared to the same period in 1995, due to higher
average receivables and improved yields on real estate loans. Segment
earnings for the first three months of 1996 decreased $32 million, or 53%,
from the same period in 1995, primarily due to a higher provision for finance
receivable losses, related to a decline in credit quality during the last six
months of 1995, and increased operating expenses.
Operating expenses increased $22 million, or 21%, for the three months ended
March 31, 1996, compared to the same period in 1995. The increase was
primarily due to the expansion in the number of branch offices and accounts
during 1994 and 1995, which resulted in a 10% increase in staffing at March
31, 1996 as compared to March 31, 1995 to support the segment's growth and
provide collection efforts related to the increased level of delinquent
finance receivables. In addition, operating expenses increased due to the
decrease in deferral of finance receivable origination costs in first quarter
1996, as a result of slower growth in finance receivables.
The first quarter 1996 provision for finance receivable losses increased $37
million, or 50%, over the same period of 1995. The increase reflects higher
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
charge offs, partially offset by a decrease in the amounts provided for
finance receivable losses.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Information regarding delinquencies and the allowance for finance receivable
losses at March 31, 1996, December 31, 1995, and March 31, 1995, and the
provision for finance receivable losses and charge offs for the three months
then ended, was as follows:
March 31, December 31, March 31,
($ in millions) 1996 1995 1995
Delinquencies as a percent of
finance receivables 4.03% 4.11% 2.91%
Allowance for finance receivable
losses $487 $492 $242
Allowance as a percentage of
finance receivables 6.07% 5.85% 2.96%
Provision for finance receivable
losses $109 $313 $ 72
Charge offs, net of recoveries $114 $127 $ 56
Net charge offs as a percentage
of average finance receivables 5.50% 6.04% 2.81%
The Consumer Finance segment's strategy in recent years has emphasized
improvement of risk-adjusted returns by extending credit to customers with
risk characteristics somewhat higher than those traditionally serviced by the
company. As expected, growth in higher-yielding finance receivables adversely
affected credit quality; however, the delinquencies and charge offs
experienced by this segment sharply increased to greater than anticipated
levels beginning in third quarter 1995.
In response to this unanticipated increase in delinquencies and charge offs, a
comprehensive review of the Consumer Finance segment was initiated in fourth
quarter 1995. This review, which consisted of extensive internal analysis,
together with credit loss development projections supplied by outside credit
consultants, indicated a need for an increase in the allowance for finance
receivable losses. A $216 million increase in the allowance was recorded in
fourth quarter 1995. In addition, the company adopted an action program for
improving credit quality that included raising underwriting standards,
expanding the use of credit scoring, and slowing branch expansion and
receivable growth (other than real estate loan growth), while stressing
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AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
collections and improved branch office training.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
The allowance for finance receivable losses decreased $5 million from December
31, 1995 to March 31, 1996; however, the allowance as a percentage of finance
receivables increased during the same period. This increase was due to a $390
million decrease in finance receivables resulting from the company's action
program to improve credit quality. Management believes that the allowance for
finance receivable losses is adequate given the current level of delinquencies
and charge offs.
Delinquencies have leveled off since year-end 1995, and charge offs are
expected to moderate in the second half of 1996. As a result, management
believes that there will be an improvement in earnings in the third and fourth
quarters of the current year.
Life Insurance. First quarter 1996 results for the Life Insurance segment
reflect three months of operations for Franklin Life, acquired January 31,
1995, and one month of operations for Independent, acquired February 29, 1996.
The increases in segment revenues (consisting principally of premiums and net
investment income) of $131 million, or 19%, and segment earnings of $7
million, or 9%, were primarily due to the acquisitions.
Strict adherence to pricing standards, which is essential to long-term
profitability objectives, has caused short-term pressure on both annuity and
life insurance sales in 1996. Annuity sales for the three months ended March
31, 1996 were 49% below comparable prior year sales, primarily due to
increasingly competitive market conditions related to interest crediting
rates. Life insurance sales for first quarter 1996 were 9% below first
quarter 1995 sales due to price competition in higher-end products and major
changes in field administration systems. Deposits decreased $64 million, or
18%, primarily due to the lower annuity sales and a coinsurance agreement
which lowered structured settlement deposits, despite increased gross sales of
structured settlement products.
Insurance and annuity benefits expense was adversely affected by an unusually
high number of death claims in first quarter 1996. The ratio of operating
expenses to premiums and deposits increased to 14.3% in the first three months
of 1996 compared to 12.3% in the same period of 1995, reflecting Independent's
higher overall expense ratio and the lower level of annuity deposits.
Corporate Operations. Corporate operations includes net interest on corporate
debt, net dividends on preferred securities of subsidiaries, expenses not
allocated to the business segments, earnings on corporate assets, net equity
-15-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
in earnings of Western National Corporation (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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Net interest on corporate debt decreased $6 million, or 22%, in first quarter
1996 compared to first quarter 1995, primarily due to the issuance of
preferred securities of subsidiaries in 1995 to refinance short-term debt used
for the initial financing of the Franklin Life acquisition and short-term real
estate debt.
BALANCE SHEET
Fair Value of Securities. An increase in market interest rates and resulting
decreases in bond values during the first three months of 1996 caused a $564
million decrease in shareholders' equity related to the fair value adjustment
to fixed maturity securities at March 31, 1996.
The components of the adjustment to report fixed maturity and equity
securities at fair value at March 31, 1996 and December 31, 1995, and the
change, were as follows:
March 31, December 31,
1996 1995 Change
(In millions)
Fair value adjustment to fixed
maturity securities $ 1,180 $ 2,623 $(1,443)
Adjusted by:
Decrease in DPAC/CIP (467) (1,061) 594
Increase in deferred income taxes (278) (586) 308
Equity in WNC's unrealized gains 70 93 (23)
Net unrealized gains on fixed
maturity securities 505 1,069 (564)
Net unrealized gains on equity
securities 21 31 (10)
Net unrealized gains on
securities $ 526 $ 1,100 $ (574)
Accounting rules do not permit adjustment to fair value of the insurance
liabilities supported by these securities, thereby creating volatility in
shareholders' equity as interest rates change. Care should be exercised in
drawing conclusions based on balance sheet amounts that are only partially
adjusted to fair value.
-16-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Assets. At March 31, 1996, consolidated assets of $62 billion were
distributed as follows: 69% in investments, principally supporting insurance
and annuity liabilities, 12% in net finance receivables, 6% in intangible
assets, and 13% in other assets.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Investments. From December 31, 1995 to March 31, 1996, the increase in
investments reflected $1.1 billion due to the acquisition of Independent
in addition to fixed premium deposits in the Retirement Annuities
segment, partially offset by a decrease of $1.4 billion in the fair value
adjustment related to fixed maturity securities. For more information on
the investment portfolio at March 31, 1996, see "INVESTMENTS" beginning
on page 17.
Finance Receivables. Net finance receivables decreased $385 million, or
5%, from December 31, 1995 to March 31, 1996, primarily due to the action
program for improving credit quality in the Consumer Finance segment,
which slowed branch expansion and receivables growth and tightened
underwriting standards for all loan types, beginning in fourth quarter
1995.
Deferred Policy Acquisition Costs (DPAC). The $484 million increase in
DPAC was primarily due to a $478 million increase in the fair value
adjustment related to fixed maturity securities at March 31, 1996
compared to December 31, 1995 (see "Fair Value of Securities" on page 15)
and deferral of acquisition costs, partially offset by amortization of
DPAC.
Cost of Insurance Purchased (CIP). The $258 million increase in CIP was
primarily due to the acquisition of Independent and a $116 million
increase in the fair value adjustment related to fixed maturity
securities, partially offset by amortization of CIP.
Separate Account Assets and Liabilities. The $571 million increase in
assets and liabilities related to Separate Accounts from December 31,
1995 to March 31, 1996 reflects increases in market value and sales of
variable annuity products, primarily in the Retirement Annuities segment.
Liabilities and Equity. At March 31, 1996, consolidated liabilities and
equity were distributed as follows: 63% in insurance and annuity liabilities,
11% in consumer finance debt, 10% in equity (including redeemable equity), 3%
in corporate debt, and 13% in other liabilities.
Insurance and Annuity Liabilities. The $1.2 billion increase in
insurance and annuity liabilities from December 31, 1995 to March 31,
1996 was primarily due to the acquisition of Independent, which added
-17-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
$834 million of insurance reserves, and to fixed annuity deposits and
interest credited in the Retirement Annuities segment.
Corporate Debt. Corporate debt increased $104 million from December 31,
1995 to March 31, 1996 primarily due to $139 million in short-term debt
used to finance the cash portion of the Independent acquisition.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
The ratio of corporate debt (including real estate debt) to corporate
capital (excluding the fair value adjustment related to fixed maturity
securities) was 24.1% at March 31, 1996, compared to 24.0% at December
31, 1995. Management expects to maintain the ratio at or below 25% in
1996.
Consumer Finance Debt. Consumer finance debt decreased $389 million from
December 31, 1995 to March 31, 1996, primarily due to the decline in
finance receivables.
Income Tax Liabilities. The liability for income taxes decreased $161
million from December 31, 1995 to March 31, 1996, primarily due to the
change in the fair value adjustment related to fixed maturity securities,
partially offset by the timing of income tax payments.
Shareholders' Equity. Shareholders' equity decreased from $5.8 billion
at December 31, 1995 to $5.5 billion at March 31, 1996, primarily due to
the $574 million decrease in net unrealized gains, partially offset by
issuances of stock in connection with the acquisition of Independent.
The issuances consisted of 3.7 million shares of common stock out of
treasury, which increased shareholders' equity by $138 million, and 2.3
million shares of American General 7% mandatorily convertible preferred
stock, which increased shareholders' equity by $85 million.
Due to the requirements of certain accounting rules, shareholders' equity
will be subject to future volatility from the effects of interest rate
fluctuations on the fair value of fixed maturity securities (see "Fair
Value of Securities" on page 15).
INVESTMENTS
Invested assets consist primarily of fixed maturity securities, mortgage loans
on real estate, policy loans, 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.
-18-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Fixed Maturity Securities. Fixed maturity securities represented 86% of
invested assets at March 31, 1996. Fixed maturity securities are carried at
fair value (see "Fair Value of Securities" on page 15). Information regarding
the fixed maturity securities portfolio at March 31, 1996, which included
bonds and redeemable preferred stocks, was as follows:
March 31, Average Credit
(In millions) 1996 % Rating
Investment grade $24,319 65% A
Mortgage-backed 11,449 31 AAA
Below investment grade 1,446 4 BB-
Total fixed maturities $37,214 100% AA-
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 90% of mortgage-backed
securities at March 31, 1996 and December 31, 1995, respectively.
At December 31, 1995, below investment grade fixed maturity securities, those
rated below BBB-, were $1,439 million, or 4%, of total fixed maturity
securities. Net income from below investment grade fixed maturity securities,
including realized investment gains and losses, was $23 million and $16
million for the first three months of 1996 and 1995, respectively.
Non-performing fixed maturity securities, defined as securities for which
payment of interest is sufficiently uncertain as to preclude accrual of
interest, represented .01% of total fixed maturity securities at March 31,
1996 and December 31, 1995.
Mortgage Loans. Mortgage loans on real estate totaled 7% of invested assets
at March 31, 1996. Information regarding the mortgage loan portfolio at March
31, 1996 was as follows:
March 31, Non-Performing Loans
(In millions) 1996 Amount %
Commercial $3,123 $182 5.8%
Residential 75 5 6.4%
-19-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Allowance for losses (83) (28)
Total mortgage loans $3,115 $159
Non-performing (impaired) mortgage loans include loans delinquent 60 days or
more and commercial loans that have been restructured. These loans
represented 5.8% of total commercial loans at March 31, 1996, compared to 5.5%
at December 31, 1995. The increase in non-performing loans was a result of
the Independent acquisition.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
At March 31, 1996, $260 million of performing commercial mortgage loans were
included on the company's watch list because they were either delinquent 30-59
days, the borrower was in bankruptcy, or the loan was potentially under-
collateralized. This amount compares to $263 million at year-end 1995. While
the watch list loans may be predictive of higher non-performing loans in the
future, the company does not anticipate a significant effect on operations,
liquidity, or capital from these loans.
Investment Real Estate. Investment real estate totaled 1% of invested assets
at March 31, 1996 and December 31, 1995. The breakdown of investment real
estate was as follows:
March 31, December 31,
(In millions) 1996 1995
Land development projects $ 369 $ 366
American General Center, Houston 116 115
Income-producing real estate 69 56
Foreclosed real estate 92 75
Allowance for losses (28) (35)
Total investment real estate $ 618 $ 577
The increases in income-producing and foreclosed real estate primarily related
to the acquisition of Independent and an $8 million foreclosure in first
quarter 1996.
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 $132 million and $78 million for the three months ended
March 31, 1996 and 1995, respectively. The increase related primarily to
higher dividends paid by subsidiaries. Dividends from subsidiaries are the
primary source of cash for operating requirements of the company and are used
-20-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
to fund interest obligations, dividends to shareholders, acquisitions, 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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
During the first three months of 1996, the companies in the Life Insurance and
Retirement Annuities segments paid cash dividends of $78 million to American
General. During the first three months of 1995, the Life Insurance and
Retirement Annuities segments paid $52 million of cash dividends to AGC Life,
a subsidiary of American General, which were used by AGC Life to reduce
intercompany borrowings. The increase in dividends paid by the Life Insurance
and Retirement Annuities segments is primarily attributable to cash dividends
paid by Franklin Life in the first three months of 1996. Cash dividends paid
to American General by the Consumer Finance segment totaled $27 million in the
first three months of 1996, compared to $31 million for the same period of
1995.
Segment Cash Flows. Net cash flows generated by the Life Insurance and
Retirement Annuities segments in the first three months of 1996 included $530
million provided by operating activities and $77 million provided by fixed
policyholder account deposits, net of withdrawals. This compared to $438
million and $268 million, respectively, during the first three months of 1995.
The $92 million increase in cash provided by operating activities was
primarily due to an increase in net investment income in the first three
months of 1996. The decrease in cash provided by fixed policyholder account
deposits, net of withdrawals, was primarily due to policyholders' increased
demand for variable accounts. Variable account deposits net of withdrawals
related to Separate Accounts, which are not included in the consolidated
condensed statement of cash flows, increased to $404 million in the first
three months of 1996, compared to $350 million in the same period of 1995.
The Consumer Finance segment's operating cash flows were $173 million during
the first three months of 1996, compared to $204 million during the first
three months of 1995. This decrease was primarily due to an increase in
operating expenses.
Investing Activities. The source of cash flow from investment calls,
maturities, and sales was as follows:
Three Months Ended
(In millions) March 31,
1996 1995
Fixed maturity securities
-21-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Sales $ 904 $ 486
Repayments of mortgage-backed securities 200 144
Calls 158 201
Maturities 108 84
Mortgage loans 95 112
Equity securities 87 83
Other 37 58
Total $1,589 $1,168
Share Buyback. In first quarter 1996, the company purchased 591,800 shares of
its common stock at a cost of $21 million, pursuant to its share buyback
program.
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 to provide an additional source of cash for operating requirements.
At March 31, 1996, committed credit facilities totaled $3.2 billion; there
were no outstanding borrowings under these facilities. On May 6, 1996, total
committed credit facilities were reduced by $100 million to $3.1 billion.
OTHER FACTORS
Environmental. American General's principal exposure to environmental
regulation arises from its ownership of investment real estate. Probable
costs related to environmental cleanup are immaterial.
Guaranty Associations. State guaranty fund expense included in operating
costs and expenses was $2.4 million and $1.0 million for the three months
ended March 31, 1996 and 1995, respectively. Amounts assessed American
General's life insurance and annuity subsidiaries by state life and health
insurance guaranty funds resulting from past industry insolvencies were $6.2
million during the first three months of 1996 compared to $6.6 million for the
same period in 1995. These assessments are expected to be partially recovered
against the payment of future premium taxes.
At March 31, 1996, the accrued liability for anticipated assessments was $50
million, compared to $51 million at December 31, 1995. The company has
recorded receivables of $46 million at March 31, 1996, compared to $44 million
at December 31, 1995, for expected recoveries against the payment of future
premium taxes.
FORWARD-LOOKING STATEMENTS
The statements contained in this filing on Form 10-Q that are not historical
facts are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. Actual results may differ materially from
those included in the forward-looking statements. These forward-looking
-22-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
statements involve risks and uncertainties including, but not limited to, the
following: changes in general economic conditions, including the performance
of financial markets and interest rates; competitive, regulatory, or tax
changes that affect the cost of or demand for the company's products; adverse
litigation results; and failure to achieve the company's anticipated levels of
expense savings from cost-saving initiatives. The Consumer Finance segment's
results also could be adversely affected by lower than anticipated finance
receivable volume as a result of management's recently implemented action
program to tighten underwriting standards and increase branch office training,
and the failure of finance receivable delinquencies and net charge offs to
trend downward to the extent anticipated despite management's initiatives.
Investors are also directed to other risks and uncertainties discussed in
documents filed by the company with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In addition to those lawsuits or proceedings disclosed in the company's 1995
Form 10-K, American General and certain of its subsidiaries are parties to
various other lawsuits and proceedings arising in the ordinary course of
business. Many of these lawsuits and proceedings arise in jurisdictions, such
as Alabama, that permit punitive damages disproportionate to the actual
damages alleged. Based upon information presently available, the company
believes that the total amounts that ultimately will be paid, if any, arising
from these lawsuits and proceedings will have no material adverse effect on
the company's consolidated results of operations and financial position.
However, it should be noted that the frequency of large punitive damage awards
that bear little or no relation to actual damages awarded by juries in
jurisdictions like Alabama continues to increase and creates the potential for
unpredictable judgments in any given punitive damage suit.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 10 Supplemental Retirement Benefit for Jon P. Newton.
Exhibit 11 Computation of Earnings per Share.
Exhibit 12 Computation of Ratio of Earnings to Fixed
Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends.
Exhibit 27 Financial Data Schedule.
b. Reports on Form 8-K.
None.
-23-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
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 14, 1996
-24-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
EXHIBIT INDEX
Exhibit
10 Supplemental Retirement Benefit for Jon P. Newton
11 Computation of Earnings per Share.
12 Computation of Ratio of Earnings to Fixed
Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends.
27 Financial Data Schedule.
-25-
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Exhibit 10
SUPPLEMENTAL RETIREMENT BENEFIT FOR JON P. NEWTON
Following his completion of three full years of employment, American
General Corporation has agreed to provide an additional retirement benefit to
Mr. Newton, provided he remains with the company for a minimum of five years.
This supplemental retirement benefit is to be paid outside of the qualified
American General Retirement Plan and is in addition to his accrued benefit
under that Plan. This supplemental benefit will vest after five continuous
years of employment and is calculated as an additional year of benefit service
for every year of continuous service with the company after completion of this
third year, up to a maximum of six additional years.
<PAGE>
<PAGE>
AMERICAN GENERAL CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1996
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(In millions, except share data)
Three Months Ended
March 31,
1996 1995
Primary:
Net income available to common stock ....... $ 169 $ 175
Average shares outstanding
Common shares ............................ 205,083,849 204,768,719
Assumed conversion of mandatorily
convertible preferred stock ............. 652,481 -
Assumed exercise of stock options ........ 635,510 423,399
Total .................................. 206,371,840 205,192,118
Net income per share ....................... $ .82 $ .85
Fully Diluted:
Net income ................................. $ 169 $ 175
Plus: Net dividends on convertible
preferred securities of subsidiary ........ 3 -
Net income available to common stock ... $ 172 $ 175
Average shares outstanding
Common shares ............................ 205,083,849 204,768,719
Assumed conversion of convertible
preferred securities of subsidiary ...... 6,144,016 -
Assumed conversion of mandatorily
convertible preferred stock ............. 789,546 -
Assumed exercise of stock options ........ 635,510 475,705
Total .................................. 212,652,921 205,244,424
Net income per share ....................... $ .81 $ .85
<PAGE>
<PAGE>
Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Unaudited)
($ in millions)
Three Months Ended
March 31,
1996 1995
Consolidated operations:
Income before income tax expense and net dividends
on preferred securities .......................... $ 276 $ 272
Fixed charges deducted from income
Interest expense ................................. 158 165
Implicit interest in rents ....................... 4 4
Total fixed charges deducted from income ....... 162 169
Earnings available for fixed charges.......... $ 438 $ 441
Fixed charges per above ............................ $ 162 $ 169
Capitalized interest ............................... 3 5
Total fixed charges ............................ 165 174
Dividends on preferred securities .............. 15 -
Total fixed charges and dividends on
preferred securities ....................... $ 180 $ 174
Ratio of earnings to fixed charges ......... 2.65 2.54
Ratio of earnings to combined fixed charges
and preferred stock dividends ............ 2.44 2.54
Consolidated operations, corporate fixed charges
and preferred stock dividends only:
Income before income tax expense and net dividends
on preferred securities ........................ $ 276 $ 272
Corporate fixed charges deducted from income -
corporate interest expense ..................... 34 42
Earnings available for fixed charges ........... $ 310 $ 314
Total corporate fixed charges per above .......... $ 34 $ 42
Capitalized interest related to real estate
operations ..................................... 3 5
Total fixed charges ............................ 37 47
Dividends on preferred securities .............. 15 -
Total fixed charges and dividends on
preferred securities ....................... $ 52 $ 47
Ratio of earnings to corporate fixed charges 8.40 6.71
Ratio of earnings to combined corporate
fixed charges and preferred stock
dividends ................................ 6.01 6.71
American General Finance, Inc.:
Income before income tax expense ................... $ 44 $ 96
Fixed charges deducted from income
Interest expense ................................. 126 125
Implicit interest in rents ....................... 3 3
Total fixed charges deducted from income ....... 129 128
Earnings available for fixed charges ......... $ 173 $ 224
Ratio of earnings to fixed charges ......... 1.34 1.75
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 37,214<F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 175
<MORTGAGE> 3,115
<REAL-ESTATE> 618
<TOTAL-INVEST> 43,068
<CASH> 188
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 2,871<F2>
<TOTAL-ASSETS> 62,302
<POLICY-LOSSES> 36,968<F3>
<UNEARNED-PREMIUMS> 230<F3>
<POLICY-OTHER> 199<F3>
<POLICY-HOLDER-FUNDS> 1,795<F3>
<NOTES-PAYABLE> 8,908
<COMMON> 398
730<F4>
85<F5>
<OTHER-SE> 5,051<F6>
<TOTAL-LIABILITY-AND-EQUITY> 62,302
480<F7>
<INVESTMENT-INCOME> 800
<INVESTMENT-GAINS> 27
<OTHER-INCOME> 404<F8>
<BENEFITS> 797
<UNDERWRITING-AMORTIZATION> 88<F9>
<UNDERWRITING-OTHER> (104)<F10>
<INCOME-PRETAX> 276<F11>
<INCOME-TAX> 97<F12>
<INCOME-CONTINUING> 169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.81
<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 POLICYHOLDER
FUNDS COMPRISES INSURANCE AND ANNUITY LIABILITIES.
<F4>CONSISTS OF NON-CONVERTIBLE AND CONVERTIBLE MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARIES.
<F5>CONSISTS OF MANDATORILY CONVERTIBLE PREFERRED STOCK.
<F6>CONSISTS OF NET OF THE FOLLOWING: NET UNREALIZED GAINS (LOSSES) ON
SECURITIES; RETAINED EARNINGS; AND COST OF TREASURY STOCK.
<F7>INCLUDES TOTAL INSURANCE CHARGES.
<F8>INCLUDES PRIMARILY FINANCE CHARGES ON FINANCE RECEIVABLES.
<F9>CONSISTS OF AMORTIZATION OF POLICY ACQUISITION COSTS AND CIP, NET OF
ACCRETION OF INTEREST.
<F10>CONSISTS OF CAPITALIZATION OF POLICY ACQUISITION COSTS AND CIP.
<F11>EXCLUDES $15 MILLION OF DIVIDENDS ON PREFERRED SECURITIES OF
SUBSIDIARIES SHOWN SEPARATELY, NET OF TAX, IN THE CONSOLIDATED INCOME STATEMENT.
<F12>EXCLUDES $5 MILLION TAX BENEFIT FOR TAX DEDUCTIBLE DIVIDENDS ON PREFERRED
SECURITIES OF SUBSIDIARIES.
</FN>
</TABLE>
