SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
_____________________
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _______ to ______
Commission file number 1-7981
Full title of the Plan:
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
AGENTS' AND MANAGERS' THRIFT PLAN
Name of the issuer of the securities held pursuant to the Plan
and the address of its principal executive office:
AMERICAN GENERAL CORPORATION
2929 Allen Parkway
Houston, Texas 77019
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 1998
Report of Independent Auditors 1
Audited Financial Statements
Statements of Net Assets Available for Benefits with Fund Information 2
Statements of Changes in Net Assets Available for Benefits with Fund
Information 8
Notes to Financial Statements 14
Supplemental Schedules
Item 27a - Schedule of Assets Held for Investment Purposes 20
Item 27d - Schedule of Reportable Transactions 21
<PAGE>
Report of Independent Auditors
Administrative Board
The Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan
We have audited the accompanying statements of net assets available for
benefits of the Variable Annuity Life Insurance Company Agents' and Managers'
Thrift Plan as of December 31, 1998 and 1997, and the related statements of
changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental
schedules of assets held for investment purposes as of December 31, 1998 and
reportable transactions for the year then ended are presented for the purpose
of additional analysis and are not a required part of the financial statements
but are supplementary information required by the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The Fund Information in the
statements of net assets available for benefits and the statements of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and the
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audits of the financial statements and, in our opinion, are
fairly stated in all material respects in relation to the financial statements
taken as a whole.
ERNST & YOUNG LLP
Houston, Texas
June 11, 1999
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1998
Participant Directed
Stock Cash Mutual Foreign
Fund Fund Fund A Fund
Assets
Investments at fair value
American General Corporation
common stock
(1,651,839 shares) $50,076,327 $ - $ - $ -
The Variable Annuity Life
Insurance Company group deposit
administration contract - 3,755,380 - -
American General Series Portfolio
Company Stock Index Fund
(290,641 shares) - - 10,910,660 -
Templeton Foreign Fund
(130,002 shares) - - - 1,090,716
Putnam OTC & Emerging Growth
Fund (138,207 shares) - - - -
American General Series Portfolio
Company Growth Fund
(85,335 shares) - - - -
Vanguard Fixed Income Securities
Fund(67,244 shares) - - -
Short-term investments 184,884 - - -
Participant Loans - - - -
Total investments 50,261,211 3,755,380 10,910,660 1,090,716
Receivables
Contributions
Participants' - 2,915 13,281 -
Interest 562 95,935 - -
Total receivables 562 98,850 13,281 -
Total assets 50,261,773 3,854,230 10,923,941 1,090,716
Liabilities
Payables
Excess contribution refunds 33,416 7,685 25,392 2,640
Forfeitures - - - -
Total liabilities 33,416 7,685 25,392 2,640
Net assets available for
benefits $50,228,357 $3,846,545 $10,898,549 $1,088,076
The accompanying notes are an integral part of these financial statements.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
(continued)
DECEMBER 31, 1998
Participant Directed
Small-Cap Large-Cap Bond
Fund Fund Fund
Assets
Investments at fair value
American General Corporation
common stock
(1,651,839 shares) $ - $ - $ -
The Variable Annuity Life
Insurance Company group deposit
administration contract - - -
American General Series Portfolio
Company Stock Index Fund
(290,641 shares) - - -
Templeton Foreign Fund
(130,002 shares) - - -
Putnam OTC & Emerging Growth
Fund (138,207 shares) 2,384,074 - -
American General Series Portfolio
Company Growth Fund
(85,335 shares) - 1,949,898 -
Vanguard Fixed Income Securities
Fund(67,244 shares) - - 624,695
Short-term investments - - -
Participant Loans - - -
Total investments 2,384,074 1,949,898 624,695
Receivables
Contributions
Participants' - 6,118 -
Interest - - -
Total receivables - 6,118 -
Total assets 2,384,074 1,956,016 624,695
Liabilities
Payables
Excess contribution refunds 4,601 4,286 2,160
Forfeitures - - -
Total liabilities 4,601 4,286 2,160
Net assets available for benefits $2,379,473 $1,951,730 $622,535
The accompanying notes are an integral part of these financial statements.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
(continued)
DECEMBER 31, 1998
Non-
Participant Participant
Directed Directed
Loan Stock
Fund Fund Total
Assets
Investments at fair value
American General Corporation
common stock
(1,651,839 shares) $ - $78,767,112 $128,843,439
The Variable Annuity Life
Insurance Company group deposit
administration contract - - 3,755,380
American General Series Portfolio
Company Stock Index Fund
(290,641 shares) - - 10,910,660
Templeton Foreign Fund
(130,002 shares) - - 1,090,716
Putnam OTC & Emerging Growth
Fund (138,207 shares) - - 2,384,074
American General Series Portfolio
Company Growth Fund
(85,335 shares) - - 1,949,898
Vanguard Fixed Income Securities
Fund(67,244 shares) - - 624,695
Short-term investments - - 184,884
Participant Loans 2,353,731 - 2,353,731
Total investments 2,353,731 78,767,112 152,097,477
Receivables
Contributions
Participants' - - 22,314
Interest - - 96,497
Total receivables - - 118,811
Total assets 2,353,731 78,767,112 152,216,288
Liabilities
Payables
Excess contribution refunds - 928,767 1,008,947
Forfeitures - 248,312 248,312
Total liabilities - 1,177,079 1,257,259
Net assets available for benefits $2,353,731 $77,590,033 $150,959,029
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1997
Participant Directed
Stock Cash Mutual
Fund Fund Fund A
Assets
Investments at fair value
American General Corporation common
stock (1,716,199 shares) $35,998,503 $ - $ -
The Variable Annuity Life Insurance
Company group deposit
administration contract - 2,081,554 -
American General Series Portfolio
Company Stock Index Fund
(296,591 shares) - - 8,808,762
Templeton Foreign Fund
(129,451 shares) - - -
Putnam OTC & Emerging Growth Fund
(115,368 shares) - - -
American General Series Portfolio
Company Growth Fund
(62,562 shares) - - -
Vanguard Fixed Income Securities Fund
(11,144 shares) - - -
Short-term investments 124,339 2,316 32,124
Total investments 36,122,842 2,083,870 8,840,886
Receivables
Contributions
Company - - -
Participants' 25,842 2,431 14,248
Interest 953 53,185 219
Total receivables 26,795 55,616 14,467
Total assets 36,149,637 2,139,486 8,855,353
Liabilities
Payables
Excess contribution refunds 142,926 6,965 61,233
Forfeitures - - -
Total liabilities 142,926 6,965 61,233
Net assets available for benefits $36,006,711 $2,132,521 $8,794,120
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
(continued)
DECEMBER 31, 1997
Participant Directed
Foreign Small-Cap Large-Cap
Fund Fund Fund
Assets
Investments at fair value
American General Corporation common
stock (1,716,199 shares) $ - $ - $ -
The Variable Annuity Life Insurance
Company group deposit
administration contract - - -
American General Series Portfolio
Company Stock Index Fund
(296,591 shares) - - -
Templeton Foreign Fund
(129,451 shares) 1,288,041 - -
Putnam OTC & Emerging Growth Fund
(115,368 shares) - 1,858,573 -
American General Series Portfolio
Company Growth Fund
(62,562 shares) - - 1,264,994
Vanguard Fixed Income Securities Fund
(11,144 shares) - - -
Short-term investments 16,007 24,780 19,726
Total investments 1,304,048 1,883,353 1,284,720
Receivables
Contributions
Company - - -
Participants' 6,057 9,735 8,661
Interest 74 94 73
Total receivables 6,131 9,829 8,734
Total assets 1,310,179 1,893,182 1,293,454
Liabilities
Payables
Excess contribution refunds 21,312 37,703 24,696
Forfeitures - - -
Total liabilities 21,312 37,703 24,696
Net assets available for benefits $1,288,867 $1,855,479 $1,268,758
The accompanying notes are an integral part of these financial statements.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
(continued)
DECEMBER 31, 1997
Non-
Participant Participant
Directed Directed
Bond Stock
Fund Fund Total
Assets
Investments at fair value
American General Corporation common
stock (1,716,199 shares) $ - $56,783,484 $ 92,781,987
The Variable Annuity Life Insurance
Company group deposit
administration contract - - 2,081,554
American General Series Portfolio
Company Stock Index Fund
(296,591 shares) - - 8,808,762
Templeton Foreign Fund
(129,451 shares) - - 1,288,041
Putnam OTC & Emerging Growth Fund
(115,368 shares) - - 1,858,573
American General Series Portfolio
Company Growth Fund
(62,562 shares) - - 1,264,994
Vanguard Fixed Income Securities
Fund (11,144 shares) 103,194 - 103,194
Short-term investments 1,274 - 220,566
Total investments 104,468 56,783,484 108,407,671
Receivables
Contributions
Company - 46,003 46,003
Participants' 469 - 67,443
Interest 6 - 54,604
Total receivables 475 46,003 168,050
Total assets 104,943 56,829,487 108,575,721
Liabilities
Payables
Excess contribution refunds 4,603 788,900 1,088,338
Forfeitures - 30,920 30,920
Total liabilities 4,603 819,820 1,119,258
Net assets available for benefits $100,340 $56,009,667 $107,456,463
The accompanying notes are an integral part of these financial statements.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND
INFORMATION
YEAR ENDED DECEMBER 31, 1998
Participant Directed
Stock Cash Mutual Foreign
Fund Fund Fund A Fund
Additions to net assets
Investment income
Dividends $ 988,177 $ - $ 161,200 $ 114,338
Interest 13,103 229,803 585 537
Net appreciation/(depreciation)
in fair value of
investments 15,317,484 - 2,260,131 (187,179)
Total investment income
(loss) 16,318,764 229,803 2,421,916 (72,304)
Contributions
Companies' - - - -
Participants' 1,420,393 117,580 1,058,984 421,982
Total contributions 1,420,393 117,580 1,058,984 421,982
Total additions 17,739,157 347,383 3,480,900 349,678
Deductions from net assets
Benefits paid to participants
American General Corporation
common stock
(105,488 shares) 1,619,880 - - -
Cash 316,429 171,084 562,250 124,421
Forfeitures - - - -
Expenses 1,972 576 1,545 289
Total deductions 1,938,281 171,660 563,795 124,710
Interfund transfers, net (1,579,230) 1,538,301 (812,676) (425,759)
Net increase (decrease) 14,221,646 1,714,024 2,104,429 (200,791)
Net assets available for benefits
Beginning of year 36,006,711 2,132,521 8,794,120 1,288,867
End of year $50,228,357 $3,846,545 $10,898,549 $1,088,076
The accompanying notes are an integral part of these financial statements.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND
INFORMATION (continued)
YEAR ENDED DECEMBER 31, 1998
Participant Directed
Small-Cap Large-Cap Bond
Fund Fund Fund
Additions to net assets
Investment income
Dividends $ 73,391 $ 81,788 $ 26,112
Interest 985 695 222
Net appreciation/(depreciation)
in fair value of
investments 100,447 171,559 (2,674)
Total investment income
(loss) 174,823 254,042 23,660
Contributions
Companies' - - -
Participants' 922,977 656,233 186,269
Total contributions 922,977 656,233 186,269
Total additions 1,097,800 910,275 209,929
Deductions from net assets
Benefits paid to participants
American General Corporation
common stock
(105,488 shares) - - -
Cash 177,373 94,588 9,929
Forfeitures - - -
Expenses 515 402 24
Total deductions 177,888 94,990 9,953
Interfund transfers, net (395,918) (132,313) 322,219
Net increase (decrease) 523,994 682,972 522,195
Net assets available for benefits
Beginning of year 1,855,479 1,268,758 100,340
End of year $2,379,473 $1,951,730 $622,535
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND
INFORMATION (continued)
YEAR ENDED DECEMBER 31, 1998
Non-
Participant Participant
Directed Directed
Loan Stock
Fund Fund Total
Additions to net assets
Investment income
Dividends $ - $ 1,538,178 $ 2,983,184
Interest 78,564 1,976 326,470
Net appreciation/(depreciation)
in fair value of
investments - 24,168,695 41,828,463
Total investment income
(loss) 78,564 25,708,849 45,138,117
Contributions
Companies' - 3,045,025 3,045,025
Participants' - - 4,784,418
Total contributions - 3,045,025 7,829,443
Total additions 78,564 28,753,874 52,967,560
Deductions from net assets
Benefits paid to participants
American General Corporation
common stock
(105,488 shares) - 5,117,687 6,737,567
Cash - 1,047,136 2,503,210
Forfeitures - 217,392 217,392
Expenses - 1,502 6,825
Total deductions - 6,383,717 9,464,994
Interfund transfers, net 2,275,167 (789,791) -
Net increase (decrease) 2,353,731 21,580,366 43,502,566
Net assets available for benefits
Beginning of year - 56,009,667 107,456,463
End of year $2,353,731 $77,590,033 $150,959,029
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND
INFORMATION
YEAR ENDED DECEMBER 31, 1997
Participant Directed
Stock Cash Mutual Mutual
Fund Fund Fund A Fund B
Additions to net assets
Investment income
Dividends $ 934,576 $ - $ 158,766 $ -
Interest 5,409 142,077 4,115 1,925
Net appreciation/(depreciation)
in fair value of
investments 8,861,685 - 2,020,074 -
Total investment income 9,801,670 142,077 2,182,955 1,925
Contributions
Company - - - -
Participants' 1,672,298 143,884 902,601 -
Total contributions 1,672,298 143,884 902,601 -
Total additions 11,473,968 285,961 3,085,556 1,925
Deductions from net assets
Benefits paid to participants
American General Corporation
common stock
(101,622 shares) 1,669,635 - - -
Cash 53,193 142,054 326,405 -
Forfeitures - - - -
Total deductions 1,722,828 142,054 326,405 -
Interfund transfers, net (2,547,679) 684,900 (476,716) (297,977)
Net increase (decrease) 7,203,461 828,807 2,282,435 (296,052)
Net assets available for benefits
Beginning of year 28,803,250 1,303,714 6,511,685 296,052
End of year $36,006,711 $2,132,521 $8,794,120 $ -
The accompanying notes are an integral part of these financial statements.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND
INFORMATION (continued)
YEAR ENDED DECEMBER 31, 1997
Participant Directed
Foreign Small-Cap Large-Cap
Fund Fund Fund
Additions to net assets
Investment income
Dividends $ 120,702 $ - $ 20,641
Interest 2,002 2,548 1,465
Net appreciation/(depreciation)
in fair value of
investments (119,162) 313,572 187,853
Total investment income 3,542 316,120 209,959
Contributions
Company - - -
Participants' 374,078 553,004 435,488
Total contributions 374,078 553,004 435,488
Total additions 377,620 869,124 645,447
Deductions from net assets
Benefits paid to participants
American General Corporation
common stock
(101,622 shares) - - -
Cash 18,501 17,399 14,263
Forfeitures - - -
Total deductions 18,501 17,399 14,263
Interfund transfers, net 929,748 1,003,754 637,574
Net increase (decrease) 1,288,867 1,855,479 1,268,758
Net assets available for benefits
Beginning of year - - -
End of year $1,288,867 $1,855,479 $1,268,758
The accompanying notes are an integral part of these financial statements.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND
INFORMATION (continued)
YEAR ENDED DECEMBER 31, 1997
Non-
Participant Participant
Directed Directed
Bond Stock
Fund Fund Total
Additions to net assets
Investment income
Dividends $ 4,791 $ 1,464,793 $ 2,704,269
Interest 132 7,427 167,100
Net appreciation/(depreciation)
in fair value of
investments 6,903 14,011,784 25,282,709
Total investment income 11,826 15,484,004 28,154,078
Contributions
Company - 2,179,098 2,179,098
Participants' 22,494 - 4,103,847
Total contributions 22,494 2,179,098 6,282,945
Total additions 34,320 17,663,102 34,437,023
Deductions from net assets
Benefits paid to participants
American General Corporation
common stock
(101,622 shares) - 3,019,176 4,688,811
Cash 376 72,607 644,798
Forfeitures - 224,272 224,272
Total deductions 376 3,316,055 5,557,881
Interfund transfers, net 66,396 - -
Net increase (decrease) 100,340 14,347,047 28,879,142
Net assets available for benefits
Beginning of year - 41,662,620 78,577,321
End of year $100,340 $56,009,667 $107,456,463
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan
(the "Plan") financial statements are prepared in conformity with generally
accepted accounting principles. The preparation of financial statements in
accordance with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities. Ultimate results could differ from those estimates.
The fair value of investments in American General Corporation ("American
General") common stock is based on published market prices. Fair values of
other investments not having an established market are reported as follows:
1) The Variable Annuity Life Insurance Company ("VALIC", also referred to as
the "Company") group deposit administration contract ("Cash Fund") at contract
value (see Note 3), 2) investments in American General Series Portfolio
Company ("AGSPC") Stock Index and Growth Funds, the Putnam OTC & Emerging
Growth Fund, the Templeton Foreign Fund, and the Vanguard Fixed Income
Securities Fund, at net asset value, which is based on the market value of the
underlying investments; and 3) short-term investments at cost which
approximates fair value. The contract value of the group deposit
administration contract approximates fair value because the interest crediting
rate is reset annually. AGSPC is an open-end management investment company
(mutual fund) whose investment adviser is VALIC.
Participant loans are valued at their outstanding balances.
Dividends are recorded as income on ex-dividend dates and interest income is
recorded using the accrual method of accounting.
Contributions are recorded as income on the date they become payable to the
Plan.
Interfund transfers are recorded at the fair value of the amount transferred.
Benefits paid to participants and related forfeitures are recorded upon
distribution at the fair value of the assets distributed or forfeited.
Benefits payable to participants are not accrued as liabilities in the
financial statements.
NOTE 2--DESCRIPTION OF THE PLAN
The following description of the Plan provides only general information. The
Plan document provides more complete descriptions of the Plan's provisions.
General
The Plan, which is subject to certain provisions of the Employee Retirement
Income Security Act of 1974, as amended (ERISA), is a defined contribution
plan offered to eligible agents and managers of VALIC and VALIC Investment
Services Company ("VISCO"), ("the Companies") who have completed at least one
year of service and have reached age twenty-one. The Plan provides for
participant elective salary deferrals (participant pretax contributions) in
accordance with Section 401(k) of the Internal Revenue Code of 1986, as
amended (IRC).
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE 2--DESCRIPTION OF THE PLAN--Continued
The cost of administering the Plan is paid by VALIC.
Investment Options
Participants may elect to have their contributions invested in one of seven
funds or a combination of funds. The funds invest in: 1) shares of American
General common stock (Stock Fund); 2) a group deposit administration contract
issued by VALIC (Cash Fund); 3) the AGSPC Stock Index Fund (Mutual Fund A); 4)
shares of the Templeton Foreign Fund (Foreign Fund); 5) shares of the Putnam
OTC & Emerging Growth Fund (Small-Cap Fund); 6) shares of the AGSPC Growth
Fund (Large-Cap Fund) and 7) shares of the Vanguard Fixed Income Securities
Fund (Bond Fund).
Contributions which have not been used to purchase investments in the Stock
Fund are temporarily invested in money-market fund investments. These
investments are held in a bank-administered trust fund and income from these
investments is allocated to Plan participants based on current contributions.
Contributions
Participants may contribute, on a pretax basis, a basic amount ranging from
one to six percent of base pay and an additional amount ranging from one to
four percent of base pay subject to the contribution limitations discussed
below. The Companies contribute an amount ranging from 50 percent to 100
percent of the participants' basic contributions. The Companies contributed
75 percent of the employee's basic contributions during 1998 and 1997.
The Plan allows participants to change their contribution rate and investment
elections for future contributions, as well as transfer all or part of their
account balances from one fund to another once a month.
Contribution Limitations
For 1998 and 1997, the total amount of participant pretax contributions is
limited to $10,000 and $9,500, respectively, for all plans. Additionally, the
total amount of annual participant and company contributions (including
forfeitures) to all company sponsored defined contribution plans must not
exceed the lesser of 25 percent of compensation or $30,000. During 1998 and
1997, the total amount of base pay that can be considered under the Plan is
$160,000.
The IRC provides that plans such as the Plan cannot discriminate in favor of
highly compensated individuals. To comply with these laws, certain highly
compensated individuals in the Plan may receive refunds of contributions in
excess of IRC Sections 401(k)(3) and 401(m) limits for employee pretax
contributions and employer matching contributions, respectively, and all
earnings attributable to such contributions. Refunds will be made from the
VALIC Agents' and Managers' Thrift Plan. Amounts in excess of the limits
discussed above are designated on the Statements of Net Assets Available for
Benefits as "Payables - Excess contribution refunds." These amounts will be
refunded to the affected highly compensated participants on or before the last
day of the subsequent plan year to ensure the tax qualified status of the
Plan.
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THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE 2--DESCRIPTION OF THE PLAN --Continued
Participant Accounts
Each participant's account is credited with the participant's contributions
and an allocation of the Companies' contributions and Plan earnings.
Allocations of Plan earnings are based on participants' account balances. The
benefit to which a participant is entitled is the benefit that can be provided
from the participant's account.
Vesting
Participants are immediately vested in their contributions plus the earnings
thereon. A participant obtains a vested interest in the Companies'
contributions and the earnings thereon at the rate determined by years of
service. The vesting schedule is provided below:
Years of Service Non-forfeitable Percentages
0 - 3 0
3 20
4 40
5 60
6 80
7 100
Vesting of the Companies' contributions shall be 100 percent upon death,
disability, or the attainment of normal retirement age.
Payment of Benefits
Upon termination of service, and if consented to by the participant (consent
only required if the total value, both vested and nonvested, of their account
exceeded $5,000 during 1998 or $3,500 during 1997 and the participant is under
the age of 65), a participant will receive a distribution equal to the vested
value of his or her account. For tax years prior to January 1, 1997, a
distribution must be made after a participant reaches age 70 1/2,
regardless of whether service has been terminated. Effective for tax years
beginning after December 31, 1996, distributions must begin by April 1st of
the calendar year following the later of the calendar year in which the
employee either reaches ages 70 1/2 or retires.
Direct Rollover
A participant may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the participant in a
direct rollover.
Participant Loans
Beginning in 1998, participants may borrow from their fund accounts, in a
single loan, a minimum of $1,000 and up to a maximum equal to the lesser of
$50,000 or 50% of the participant's vested account balance. Loan terms range
from 12 to 58 months. Loans are secured by the vested balance in the
participant's account and bear interest at a rate commensurate with prevailing
rates as determined from time to time. Principal and interest are paid to the
participant's account through payroll deductions. Early loan payoff is
allowed.
-16-
<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS--Continued
Forfeitures
Participants terminating employment shall forfeit their nonvested interest in
the Companies' contributions on the earlier of (1) the distribution of the
entire nonforfeitable portion of their account or (2) upon incurring a period
of severance equal to five consecutive one-year breaks in service.
Forfeitures are available to reduce the Companies' future contributions.
Participants who terminate and are reemployed with a participating company
before incurring five consecutive one-year breaks in service are entitled to
their nonvested or forfeited amounts, subject to certain provisions as stated
in the Plan document.
NOTE 3--INVESTMENT CONTRACT WITH INSURANCE COMPANY
The Plan maintains an investment contract with VALIC, a wholly owned
subsidiary of American General Corporation. The group deposit administration
contract is valued at contract value, which represents contributions and
transfers under
the contract, plus income earned, less funds used to pay benefits.
The contract had a guaranteed minimum rate of 6.00% through March 31, 1997;
effective April 1, 1997 the rate changed to 6.25%. This rate is declared
annually and remained at 6.25% through December 31, 1998. Any earnings in
excess of the guaranteed minimum rate are credited to the participants'
accounts.
The effective earned yield is calculated based on the calendar year. The
effective earned yield of the investment contract was 8.05% for 1998 and 7.79%
for 1997.
NOTE 4--PLAN TERMINATION
Although it has not expressed any intent to do so, the Companies have the
right under the Plan to discontinue its contributions at any time and to
terminate from the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100 percent vested in their
accounts.
-17-
<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE 5 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
December 31,
1998 1997
Net assets available for benefits per the
financial statements $150,959,029 $107,456,463
Benefits payable to withdrawing participants (351,043) (789,778)
Net assets available for benefits per the
Form 5500 $150,607,986 $106,666,685
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year Ended
December 31, 1998
Benefits paid to participants per the financial statements
American General Corporation common stock $6,737,567
Cash 2,503,210
Total benefits paid to participants per the financial
statements 9,240,777
Add: Amounts allocated to withdrawing participants
at December 31, 1998 351,043
Less: Amounts allocated to withdrawing participants
at December 31, 1997 (789,778)
Benefits paid to participants per the Form 5500 $8,802,042
Amounts allocated to withdrawing participants are recorded on the Form 5500
for benefit claims that have been processed and approved for payment prior to
December 31 but not yet paid as of that date.
NOTE 6--FEDERAL INCOME TAXES
Based on a favorable determination letter dated December 8, 1995, the Internal
Revenue Service (IRS) has ruled that the Plan, as restated and amended
effective August 31, 1990, December 6, 1991, March 4, 1992, May 26, 1993,
December 6, 1993, and August 25, 1995, is qualified under Section 401(a) of
the IRC and, therefore, exempt under Section 501(a) from federal income taxes.
Once qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Plan Administrator is not aware of any course
of action or series of events that have occurred that might adversely affect
the Plan's qualified status.
-18-
<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE 7--YEAR 2000 ISSUE (UNAUDITED)
As of December 31, 1998, the Companies have completed Year 2000 readiness
activities for substantially all of its critical internal systems, making them
Year 2000 ready. The Companies have also developed a plan to assess and
attempt to mitigate the risks associated with the potential failure of third
parties to achieve Year 2000 readiness. Due to the various stages of third
parties' Year 2000 readiness, the Companies' testing activities related to
third parties will continue throughout 1999.
The Companies have commenced contingency planning to reduce the risk of Year
2000 related business failures. The Companies have substantially completed
all significant planning activities.
Based on these activities and plans, the Companies believe that they will
experience at most isolated and minor disruptions of business processes
following the turn of the century. Such disruptions are not expected to have
a material effect on the Plan's operations.
NOTE 8--SUBSEQUENT EVENTS
Effective January 1, 1999, the following changes were made to the Plan:
The Companies contribute an amount equal to 100 percent of the first 3 percent
of the Participant's basic contribution, plus 50 percent of the next 3 percent
of the participant's basic contribution. Participants will be 100 percent
vested in the Companies' matching contributions made in 1999 and subsequent
years. Pre-1999 contributions by the Companies will continue to vest
under the existing vesting schedule. These changes place the Plan under the
safe harbor provisions of the IRC. Under the safe harbor provisions,
nondiscrimination testing and refunds of excess contributions will no longer
be required.
Also, effective January 1, 1999, the Plan's eligibility requirements were
changed from one year of service to 30 days of service.
-19-
<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
Identity of Description of Shares or Current
Issuer Investment Units Cost Value
*American General Common stock 1,651,839 shares $45,578,955 $128,843,439
Corporation
*The Variable Annuity Group deposit 3,755,380 3,755,380
Life Insurance administration
Company contract
*American General Mutual fund 290,641 shares 5,777,186 10,910,660
Series Portfolio
Company Stock
Index Fund
Templeton Foreign Mutual fund 130,002 shares 1,325,319 1,090,716
Fund
Putnam OTC & Mutual fund 138,207 shares 1,989,249 2,384,074
Emerging Growth
Fund
*American General Mutual fund 85,335 shares 1,628,902 1,949,898
Series Portfolio
Company Growth
Fund
Vanguard Fixed Mutual fund 67,244 shares 625,149 624,695
Income Securities
Fund
*State Street Bank Short-term investment 184,884 184,884
& Trust Company money-market fund
*Participant Loans Loans to participants
at interest rates ranging
from 8.75% to 9.5% and
maturities up to five years - 2,353,731
$60,865,024 $152,097,477
*Party-in-interest
-20-
<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
Identity of Purchase Selling Cost of
Party Involved Description Price Price Asset Sold
Category (iii) - series of transactions in excess of 5% of Plan assets
State Street Purchases of
Bank and money market
Trust Company fund investments 12,285,978 - -
State Street Sales of money
Bank and market fund
Trust Company investments - 12,321,660 23,321,660
American Purchases of
General American General
Corporation Corporation 10,465,460 - -
common stock
American Sales of
General American General
Corporation Corporation
common stock - 14,658,521 5,684,955
-21-
<PAGE>
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS (continued)
YEAR ENDED DECEMBER 31, 1998
Current Value
of Asset on
Identity of Transaction Net Gain/
Party Involved Description Date (Loss)
Category (iii) - series of transactions in excess of 5% of Plan assets
State Street Purchases of
Bank and money market
Trust Company fund investments 12,285,978 -
State Street Sales of money
Bank and market fund
Trust Company investments 12,321,660 -
American Purchases of
General American General
Corporation Corporation
common stock 10,465,460 -
American Sales of
General American General
Corporation Corporation
common stock 14,658,521 8,973,566
-22-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan
Administrative Board has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
AGENTS' AND MANAGERS' THRIFT PLAN
June 25, 1999 ELIZABETH A. DOBBS
Elizabeth A. Dobbs
Vice President - Benefits and Payroll
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-13395) pertaining to The Variable Annuity Life Insurance
Company Agents' and Managers' Thrift Plan of our report dated June 11, 1999,
with respect to the financial statements and supplemental schedules of The
Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan
included in this Annual Report (Form 11-K) for the year ended December 31,
1998.
ERNST & YOUNG LLP
Houston, Texas
June 23, 1999
