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PROSPECTUS SUPPLEMENT
FEBRUARY 11, 1999
(TO PROSPECTUS DATED MAY 23, 1995)
[AMERICAN GENERAL CORPORATION LOGO]
AMERICAN GENERAL CORPORATION
$150,000,000
6 5/8% NOTES DUE 2029
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<TABLE>
<S> <C>
THE COMPANY: THE NOTES AND THE OFFERING:
American General Corporation - Maturity: February 15, 2029
2929 Allen Parkway - Interest Rate: 6 5/8%
Houston, Texas 77019-2155 - Interest Payments: semi-annually
(713) 522-1111 on February 15 and August 15,
commencing on August 15, 1999
- Closing: February 17, 1999
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</TABLE>
<TABLE>
<CAPTION>
PER NOTE TOTAL
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<S> <C> <C>
Public offering price: 99.818% $149,727,000
Underwriting fees: 0.875 1,312,500
Proceeds to Company: 98.943 148,414,500
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</TABLE>
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
We expect that the Notes will be ready for delivery in book-entry form through
The Depository Trust Company, on or about February 17, 1999.
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DONALDSON, LUFKIN & JENRETTE MORGAN STANLEY DEAN WITTER
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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PROSPECTUS SUPPLEMENT
Summary of the Offering..................................... S-3
American General............................................ S-4
Recent Developments......................................... S-4
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends...... S-5
Selected Financial Data of American General................. S-6
Description of Notes........................................ S-8
Underwriting................................................ S-9
Legal Opinions.............................................. S-9
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
The Company................................................. 3
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends...... 4
Description of Debt Securities.............................. 4
Description of the Preferred Stock.......................... 14
Description of Common Stock................................. 16
Description of Warrants..................................... 19
Plan of Distribution........................................ 20
Legal Opinions.............................................. 21
Experts..................................................... 21
</TABLE>
S-2
<PAGE> 3
SUMMARY OF THE OFFERING
The following summary describes the notes we are offering to you in general
terms only. You should read the summary together with the more detailed
information that is contained in the rest of this prospectus supplement and in
the accompanying prospectus.
Issuer.......................... American General Corporation
Principal Amount................ $150,000,000
Maturity Date................... February 15, 2029
Issue Date...................... February 17, 1999
Issue Price..................... 99.818%
Interest Rate................... 6 5/8% per annum
Interest Payment Period......... Semi-annually
Interest Payment Dates.......... Each February 15 and August 15, commencing
August 15, 1999
Early Redemption................ We will not be entitled to redeem the Notes
prior to maturity.
Form............................ Fully registered global Notes in book-entry
form
Minimum Denomination............ $1,000
CUSIP........................... 026351AZ9
Trustee......................... The Chase Manhattan Bank
Delivery and Clearance.......... We will deposit the global Notes with The
Depository Trust Company in New York. You may
hold an interest in the global Notes through
The Depository Trust Company, directly as a
participant of such system or indirectly
through organizations which are participants
in such system.
S-3
<PAGE> 4
AMERICAN GENERAL
American General Corporation (the "Company" or "American General"), with
assets of $105 billion and shareholders' equity of $8.9 billion as of December
31, 1998, is the parent company of one of the nation's largest diversified
financial services organizations. American General's operating subsidiaries are
leading providers of retirement services, life insurance, and consumer loans,
providing financial services directly to consumers with an emphasis on personal
service and frequent customer contact. The principal executive offices of
American General are located at 2929 Allen Parkway, Houston, Texas 77019-2155,
and its telephone number is (713) 522-1111.
RECENT DEVELOPMENTS
On January 27, 1999, American General released unaudited information about
its full-year 1998 earnings. Net income was $764 million in 1998 compared to
$542 million in 1997. Net income for 1998 included a $246 million aftertax
charge associated with the Company's market conduct litigation settlements
announced in fourth quarter 1998 (see American General's Current Report on Form
8-K dated December 16, 1998, incorporated herein by reference). Net income for
1997 included $353 million of aftertax charges primarily associated with the
USLIFE Corporation (USLIFE) acquisition. Net income per share for full-year 1998
was $3.02 (basic) and $2.96 (diluted) as compared to $2.21 (basic) and $2.19
(diluted) for the year ended December 31, 1997.
The Retirement Services division reported 1998 division earnings of $466
million compared to $246 million in 1997. The earnings increase reflected the
contribution from Western National Corporation which was acquired during first
quarter 1998, and the growth in assets and higher spreads for the division's
existing business. Earnings for the Life Insurance division increased 14% from
$589 million in 1997 to $674 million in 1998. This increase in division earnings
reflected the growth in insurance in force, increased investment spreads, and
continued efficiency gains from expansion of the division's shared services
operations. Consumer Finance division earnings were $201 million in 1998,
compared to $165 million in 1997. The division achieved a 22% increase in
earnings as a result of growth in the receivables portfolio and improved credit
quality.
The unaudited results of each division include earnings from the division's
business operations and earnings on that amount of equity considered necessary
to support its business. Division earnings exclude goodwill amortization, net
realized investment gains, and non-recurring items. This methodology reflects
the Company's adoption of Statement of Financial Accounting Standards (SFAS)
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective December 31, 1998. With the adoption of SFAS 131, the Company reports
division earnings consistent with the manner in which management reviews
division results. Application of SFAS 131 does not impact the Company's
consolidated results of operations or financial position.
S-4
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RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and preferred stock dividends for
the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- ------------------------------------
1998 1997 1997 1996 1995 1994 1993
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
Consolidated operations.................. 3.5 2.3 2.5 2.5 2.3 2.6 2.3
Consolidated operations, corporate fixed
charges only.......................... 9.2 5.6 6.4 6.4 5.3 6.3 5.3
Ratio of earnings to combined fixed charges
and preferred stock dividends:
Consolidated operations.................. 2.9 1.9 2.1 2.3 2.2 2.6 2.3
Consolidated operations, corporate fixed
charges and preferred stock dividends
only.................................. 5.4 3.3 3.7 4.7 4.7 6.3 5.3
</TABLE>
For purposes of computing these ratios, earnings represent income before
income tax expense, net dividends on preferred securities of subsidiaries, and
the cumulative effect of accounting changes, adjusted for undistributed income
of an equity investee and fixed charges (excluding capitalized interest). Fixed
charges consist primarily of interest expense (including capitalized interest)
on short-term and long-term borrowings. Preferred stock dividends consist of
dividends on preferred securities of subsidiaries and convertible preferred
stock.
S-5
<PAGE> 6
SELECTED FINANCIAL DATA OF AMERICAN GENERAL
The following table presents selected financial data of American General
and its consolidated subsidiaries for the periods indicated. All data presented
includes the operating results and financial position of USLIFE, which was
acquired June 17, 1997. The acquisition was accounted for using the pooling of
interests method and, accordingly, American General's consolidated financial
statements for all periods prior to the acquisition have been restated to
include the results of operations, financial position, and cash flows of USLIFE.
The financial data as of December 31, 1997, 1996, and 1995 and for the
three years ended December 31, 1997 was derived from American General's audited
consolidated financial statements, incorporated herein by reference from
American General's Annual Report on Form 10-K for the year ended December 31,
1997. The financial data as of December 31, 1994 and 1993, and for the two years
ended December 31, 1994 was derived from American General's and USLIFE's
separate audited consolidated financial statements and, in the opinion of
American General's management, reflects all adjustments (relating to conformity
of accounting policies) necessary for a fair presentation of such data.
The financial data as of and for the nine months ended September 30, 1998
and 1997 was derived from American General's unaudited quarterly financial
statements (incorporated herein by reference from American General's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1998), which,
in the opinion of management, reflect all adjustments necessary for a fair
presentation of such data. The data for the nine months ended September 30, 1998
and 1997 is not necessarily indicative of results of operations for the entire
year. The data should be read in conjunction with the consolidated financial
statements, related notes, "Management's Discussion and Analysis," and other
financial information incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Premiums and other considerations.... $ 2,685 $ 2,472 $ 3,362 $ 3,244 $ 2,969 $ 2,374 $ 2,371
Net investment income................ 3,790 2,983 4,020 3,773 3,584 2,955 2,882
Finance charges...................... 1,002 950 1,265 1,450 1,492 1,248 1,083
Realized investment gains (losses)... 6 25 40 62 18 (173)(a) 17
Equity in earnings of investee....... -- 39 54 40 43 -- --
Other................................ 141 134 186 145 130 88 77
-------- ------- ------- ------- ------- ------- -------
Total revenues.............. 7,624 6,603 8,927 8,714 8,236 6,492 6,430
-------- ------- ------- ------- ------- ------- -------
Insurance and annuity benefits....... 3,847 3,197 4,332 4,218 4,085 3,229 3,277
Operating costs and expenses......... 1,814 1,635 2,220 2,129 1,852 1,538 1,422
Provision for finance receivable
losses............................. 153 187 248 417 574(b) 214 163
Interest expense
Corporate........................ 138 117 158 162 197 146 140
Consumer Finance................. 376 343 461 493 518 416 375
Write-down of goodwill............... -- -- -- -- -- -- 300(c)
Merger-related costs................. -- 272(d) 272(d) -- -- -- --
Loss on sale of non-strategic
assets............................. -- 113(d) 113(d) 165(d) -- -- --
Litigation settlement and other
charges............................ -- 50(d) 50(d) 50(d) -- -- --
-------- ------- ------- ------- ------- ------- -------
Total benefits and
expenses.................. 6,328 5,914 7,854 7,634 7,226 5,543 5,677
-------- ------- ------- ------- ------- ------- -------
Income before income tax expense..... 1,296 689 1,073 1,080 1,010 949 753
Income tax expense................... 455 315 447 387 341 340 406
-------- ------- ------- ------- ------- ------- -------
Income before minority interest and
net dividends on preferred
securities of subsidiaries......... 841 374 626 693 669 609 347
Minority interest in net income of
investee........................... 11 -- -- -- -- -- --
Net dividends on preferred securities
of subsidiaries.................... 67 62 84 40 19 -- --
-------- ------- ------- ------- ------- ------- -------
Income before cumulative effect...... 763 312 542 653 650 609 347
Cumulative effect of accounting
changes............................ -- -- -- -- -- -- 169
-------- ------- ------- ------- ------- ------- -------
Net income.................. $ 763 $ 312(e)$ 542(e)$ 653(f)$ 650(g)$ 609 $ 178(h)
======== ======= ======= ======= ======= ======= =======
</TABLE>
S-6
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
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1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Total assets(i)...................... $102,197 $79,416 $80,620 $74,134 $69,083 $53,300 $51,003
Invested assets(i)................... 71,049 53,589 54,006 50,832 49,598 36,420 37,779
Finance receivables, net............. 8,442 7,146 7,639 7,230 7,918 7,694 6,390
Debt (including short-term)
Corporate........................ 2,567 2,025 1,916 2,102 2,295 2,381 2,200
Consumer Finance................. 8,083 6,856 7,266 7,630 7,470 7,090 5,843
Total liabilities (excluding debt)... 80,350 61,490 62,129 56,331 51,480 39,448 36,686
Redeemable equity.................... 1,728 1,726 1,726 1,227 729 47 --
Shareholders' equity(i).............. 9,469 7,319 7,583 6,844 7,109 4,334 6,274
</TABLE>
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(a) Results primarily from capital gains offset program.
(b) See "Management's Discussion and Analysis" within American General's
Current Report on Form 8-K dated October 10, 1997, which is hereby
incorporated herein by reference.
(c) Relates to write-down of goodwill in the Life Insurance division following
a strategic review of American General's ordinary life insurance
subsidiaries.
(d) See Note 3 of Item 8 within American General's Annual Report on Form 10-K
for the year ended December 31, 1997, incorporated herein by reference.
(e) Includes effect of $247 million aftertax USLIFE merger-related costs, $73
million aftertax loss on sale of non-strategic assets, and $33 million
aftertax litigation charge (see Note (d) above).
(f) Includes effect of $111 million aftertax loss on sale of non-strategic
assets and $32 million aftertax write-down of USLIFE group business (see
Note (d) above).
(g) Includes effect of $140 million aftertax adjustment to the allowance for
finance receivable losses (see Note (b) above).
(h) Includes effect of $300 million write-down of goodwill (see Note (c) above)
and $169 million aftertax charge for cumulative effect of accounting
changes.
(i) Includes effect of SFAS 115. To facilitate analysis of period-to-period
balances, the effect of SFAS 115 on reported balances was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
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1998 1997 1997 1996 1995 1994 1993
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(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in assets... $3,186 $1,460 $1,782 $ 949 $1,956 $(1,225) $1,303
Increase (decrease) in invested
assets........................ 4,491 2,268 2,786 1,488 3,071 (1,639) 1,974
Increase (decrease) in
shareholders' equity.......... 2,059 937 1,154 610 1,265 (1,105) 847
</TABLE>
S-7
<PAGE> 8
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements the description of the general terms and provisions of Debt
Securities set forth in the prospectus under the caption "Description of Debt
Securities".
GENERAL
The Notes are to be issued as a series of Debt Securities under the Senior
Indenture dated as of May 15, 1995 between the Company and The Chase Manhattan
Bank (formerly known as Chemical Bank), which is more fully described in the
prospectus. Certain terms used herein are defined in the prospectus.
The Notes are to mature on February 15, 2029 and bear interest at the rate
set forth on the cover page of this prospectus supplement, payable semi-annually
on February 15 and August 15, commencing August 15, 1999, to the registered
holders thereof on the preceding February 1 or August 1, as the case may be.
The Notes are not redeemable at the option of the Company or repayable at
the option of any holder prior to maturity.
The Notes will be issued as a global Debt Security. See "Description of
Debt Securities -- Global Debt Securities" in the prospectus. The Depository
Trust Company, New York, New York (the "Depository" or "DTC") will be the
Depository with respect to the Notes. The Notes will be issued as fully
registered securities in the name of Cede & Co., the Depository's partnership
nominee, and will be deposited with the Depository.
BOOK-ENTRY NOTES
The Depository has advised the Company that it is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934, as amended. The Depository
holds securities that its Participants deposit with it and facilitates the
settlement among Participants of securities transactions in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to DTC's book-entry system is
also available to others, such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Notes will be
made by the Company in immediately available funds. The Notes will trade in
DTC's Same-Day Funds Settlement System until maturity, and secondary market
trading activity in the Notes will therefore be required by DTC to settle in
immediately available funds.
S-8
<PAGE> 9
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions of the Underwriting Agreement with the Company, to purchase the
principal amount of Notes set forth below opposite their respective names. The
Underwriters are committed to purchase all of such Notes if any are purchased.
Under certain circumstances the commitments of non-defaulting Underwriters may
be increased.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
----------- ------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... $112,500,000
Morgan Stanley & Co. Incorporated........................... 37,500,000
------------
Total.................................................. $150,000,000
============
</TABLE>
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
prospectus supplement and in part to certain securities dealers at such price
less a concession of 0.500% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
0.300% of the principal amount of the Notes to certain brokers and dealers.
After the Notes are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
In connection with the offering of the Notes, the Underwriters may engage
in overallotment, stabilizing transactions and short covering transactions in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended. Overallotment involves sales in excess of the offering size, which
creates a short position for the Underwriters. Stabilizing transactions involve
bids to purchase the Notes in the open market for the purpose of pegging, fixing
or maintaining the price of the Notes. Short covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover short positions. Such stabilizing transactions and
short covering transactions may cause the price of the Notes to be higher than
it would otherwise be in the absence of such transactions. Such activities, if
commenced, may be discontinued at any time.
All secondary trading in the Notes will settle in immediately available
funds. See "Description of Notes -- Same-Day Settlement and Payment."
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they intend
to make a market in the Notes. The Underwriters are not obligated, however, to
make a market in the Notes and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriters and
certain of their affiliates have engaged and may in the future engage in
investment banking and commercial banking transactions with the Company.
The Company estimates that it will spend approximately $150,000 for
printing, rating agency, trustee, accounting and legal fees and other expenses
relating to the offering.
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the
Company by Susan A. Jacobs, Senior Vice President, Deputy General Counsel and
Corporate Secretary of the Company and certain legal matters relating to the
Notes offered hereby will be passed upon for the Underwriters by Brown & Wood
LLP, New York, New York. Brown & Wood LLP may rely as to matters of Texas law on
the opinion of Susan A. Jacobs.
S-9
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FEBRUARY 11, 1999
AMERICAN GENERAL CORPORATION
$150,000,000
6 5/8% NOTES DUE 2029
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PROSPECTUS SUPPLEMENT
-------------------------------------
DONALDSON, LUFKIN & JENRETTE
MORGAN STANLEY DEAN WITTER
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No person has been authorized to give any information or to make any
representations other than those contained in this prospectus supplement or the
prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized. This prospectus supplement and the
prospectus do not constitute an offer to sell or the solicitation of an offer to
buy any securities other than the securities described in this prospectus
supplement or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus supplement or the prospectus nor any
sale made hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein or therein is correct
as of any time subsequent to its date.
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