ITT FINANCIAL CORP, 10-K, 1994-03-29

ITT FINANCIAL CORP
10-K, 1994-03-29
PERSONAL CREDIT INSTITUTIONS

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<PAGE> 1
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ITT FINANCIAL
CORPORATION
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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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A N N U A L R E P O R T

O N

F O R M 1 0 - K

Pursuant to Section 13 of the Securities Exchange Act of 1934

For Fiscal Year Ended December 31, 1993

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<PAGE> 2

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NOTICE

This document is a copy of the Annual Report filed by the Corporation
with the Securities and Exchange Commission and the New York Stock
Exchange. It has not been approved or disapproved by the Commission nor
has the Commission passed upon its accuracy or adequacy.
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<PAGE> 3

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

COMMISSION FILE NUMBER 1-7437
----------

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1993

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.

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ITT FINANCIAL CORPORATION

INCORPORATED IN THE STATE OF DELAWARE 43-0815676

(I.R.S. Employer
Identification No.)

(Principal Executive Offices)

645 MARYVILLE CENTRE DRIVE
ST. LOUIS, MO. 63141-5832
TELEPHONE NUMBER: 314-542-3636

----------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

8 7/8% Senior Debentures Due 2003................. Registered on
New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

----------

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, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X].

As of March 11, 1994, there were outstanding ten (10) shares of
common stock, par value $100 per share, of the registrant, all of which
are owned by ITT Corporation.

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<PAGE> 4

<TABLE>
TABLE OF CONTENTS

<CAPTION>
ITEM PAGE
---- ----

<C> <C> <S> <C>
PART 1. Business............................................................................................. 1
I 2. Properties........................................................................................... 10
3. Legal Proceedings.................................................................................... 10
4. *

PART 5. Market for Registrant's Common Equity and Related Stockholder Matters................................ 11
II 6. *
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations**..................................................................................... 11
8. Financial Statements and Supplementary Data.......................................................... 12
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................................................ 12

PART 10. *
III 11. *
12. *
13. *

PART 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................... 13
IV Signatures........................................................................................... 2-1

Exhibit Index........................................................................................ 2-2

Ratios of Earnings to Fixed Charges.................................................................. 2-3

Consent of Independent Public Accountants............................................................ 2-4

<FN>
- -----

*Omitted pursuant to General Instruction J(2)(a) or (c) of Form 10-K.

**Item prepared in accordance with General Instruction J(2)(a) of Form
10-K.
</TABLE>

INDEX TO FINANCIAL STATEMENTS

Report of Management............................................... F-1

Report of Independent Public Accountants........................... F-2

Consolidated Income, Consolidated Retained Earnings (Deficit) and
Consolidated Capital Surplus for the three years ended
December 31, 1993................................................. F-3

Consolidated Balance Sheets as of December 31, 1993 and 1992....... F-4

Consolidated Cash Flows for the three years ended December 31, 1993 F-5

Consolidated Term Debt as of December 31, 1993 and 1992............ F-6

Notes to Financial Statements...................................... F-7

INDEX TO FINANCIAL STATEMENT SCHEDULES

All schedules have been omitted because either they are not applicable,
the required matter is not present, the amounts are insignificant or
immaterial, or the information has been otherwise supplied in the financial
statements or the notes thereto.

(i)

<PAGE> 5

PART I

ITEM 1.
BUSINESS

THE COMPANY

ITT Financial Corporation ("Financial" or "Company") is a Delaware
corporation with headquarters at 645 Maryville Centre Drive, St. Louis,
Missouri 63141-5832. It is the successor by merger in 1974 to ITT Aetna
Corporation and ITT Thorp Corporation, both Delaware corporations
established in 1964 and 1968, respectively. All of the Company's
outstanding stock is owned directly by ITT Corporation, a Delaware
corporation ("ITT"). Unless the context otherwise indicates, references
to Financial or to the Company include ITT Financial Corporation and
its subsidiaries.

Financial is a holding company offering a variety of financial
services to individuals and businesses, including: first mortgages,
home equity and consumer loans; inventory and accounts receivable
financing; commercial equipment loans and leasing; commercial real
estate loans; and related insurance products.

Financial's services are offered to individuals and businesses in the
United States, the Commonwealth of Puerto Rico, the U. S. Virgin
Islands, the Netherlands Antilles, Aruba and Panama. Commercial finance
operations also are conducted in Canada and the United Kingdom through
subsidiaries of ITT, which are not consolidated herein.

OPERATIONS

Financial's consumer markets are served through the following product
offerings and operating companies:

Consumer Real Estate: First-mortgage financing for one-to-four
family residential properties, including lending, portfolio
management, secondary marketing and mortgage servicing, are
provided by ITT Residential Capital Corporation. In addition, the
corporation also provides mortgage servicing to other home loan
originators and savings and loan services through ITT Federal Bank,
fsb ("Savings Bank").

ITT Consumer Financial Corporation is a home equity lending
business which generates loans through 10 retail offices under the
name "ITT Financial Services," and buys wholesale loans through
broker referral offices and correspondent financial institutions.

Small Loans and Sales Finance: Unsecured small loans and sales
financing to consumers are offered in the Commonwealth of Puerto
Rico, the U. S. Virgin Islands, the Netherlands Antilles and Aruba
by subsidiaries identified by local variations of the name "Island
Finance Corporation" and in Panama by a subsidiary bearing the name
"Financiera El Sol".

The Company's commercial markets are served through the following
product offerings and operating companies:

Inventory Financing: ITT Commercial Finance Corp. provides
inventory, accounts receivable and other asset-based financing to
manufacturers, distributors and retail dealers of computers and
computer peripherals; industrial equipment; manufactured housing;
recreational vehicles; consumer electronics and appliances; marine
products; motorcycles; keyboards and musical instruments; and
office automation equipment. Operations are conducted in the U. S.
and also in Canada and the United Kingdom through subsidiaries of
ITT.

Equipment, Other Loans and Real Estate: ITT Commercial Installment
Lending Group provides: financing for the acquisition and leasing
of capital assets, primarily to the trucking, construction,
printing and waste management industries; loans guaranteed by the
U. S. Small Business Administration to start-up and growing
businesses; and commercial mortgage financing, primarily in the
areas of anchored shopping centers, medical office buildings and
apartments.

1
<PAGE> 6

Financial's insurance activities are conducted by the Lyndon
Insurance Group ("Lyndon"). Credit life and credit accident and health
insurance, credit-related property insurance and involuntary
unemployment insurance is offered to borrowers in connection with
Financial's lending activities. Also, Lyndon reinsures risks not
related to Financial's lending activities from other life and health
insurance companies.

On December 31, 1993, Financial employed approximately 5,000 persons,
none of whom are represented by labor unions.

Certain 1992 and 1991 items herein have been reclassified to conform
to the 1993 presentation.

<TABLE>
Revenues by type of activity and income are shown below:

<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------

1993 1992 1991
---- ---- ----

(DOLLAR AMOUNTS IN MILLIONS)

<S> <C> <C> <C> <C> <C> <C>
REVENUES-

Consumer Finance........................................... $ 650.1 41% $1,042.8 52% $1,128.0 55%

Related Insurance.......................................... 250.8 16 328.3 16 355.9 18
-------- --- -------- --- -------- ---

900.9 57 1,371.1 68 1,483.9 73
-------- --- -------- --- -------- ---

Commercial Finance......................................... 484.4 30 473.8 24 445.3 22

Related Insurance.......................................... 9.5 1 11.8 1 12.3 1
-------- --- -------- --- -------- ---

493.9 31 485.6 25 457.6 23
-------- --- -------- --- -------- ---

Reinsurance................................................ 72.6 4 106.5 5 57.8 3

Servicing.................................................. 88.3 6 26.5 1 8.4 -

Other...................................................... 33.9 2 10.6 1 18.8 1
-------- --- -------- --- -------- ---

194.8 12 143.6 7 85.0 4
-------- --- -------- --- -------- ---

$1,589.6 100% $2,000.3 100% $2,026.5 100%
-------- --- -------- --- -------- ---

NET INCOME BEFORE ADJUSTMENTS................................ $ 183.7 $ 107.2 $ 78.1

GAIN ON SALE OF CONSUMER LOANS HELD FOR REPOSITIONING........ 62.7 - -

EXTRAORDINARY ITEM........................................... (49.5) - -

SPECIAL PROVISION............................................ - (612.2) -

CUMULATIVE EFFECT OF ACCOUNTING CHANGES...................... - (13.0) -
----- -------- -----

NET INCOME (LOSS)............................................ $ 196.9 $ (518.0) $ 78.1
-------- -------- --------
</TABLE>

See the Notes to Financial Statements for more information regarding
the Gain on Sale of Consumer Loans Held for Repositioning,
Extraordinary Item, Special Provision and Accounting Changes.

2
<PAGE> 7

SOURCES OF FUNDS

In addition to funds provided from operations, Financial obtains
funds through (i) unsecured commercial paper and other borrowings; (ii)
unsecured term borrowings; and (iii) capital contributions from ITT.
The Savings Bank and the Company's other depository institution, Lyndon
Guaranty Bank of New York ("Bank"), accept deposit accounts which are
insured up to $100,000 by the Federal Deposit Insurance Corporation. In
addition, the Savings Bank obtains secured term borrowings from the
Federal Home Loan Bank of San Francisco.

<TABLE>
Financial's weighted daily average interest rates on all borrowed
funds (the face amount less applicable unamortized debt discount and
premium) are computed by including with interest expense all other
income and expense items related to debt and derivative products. Such
rates during the periods indicated were:

<CAPTION>
WEIGHTED DAILY AVERAGE INTEREST RATES
--------------------------------------------------------------------------
COMMERCIAL
TERM PAPER AND DEPOSITS AND
YEAR TOTAL DEBT OTHER DEBT CERTIFICATES
---- ----- ---- ---------- ------------
<S> <C> <C> <C> <C>
1993................................ 5.74% 7.32% 3.63% 3.64%

1992................................ 6.70 8.45 4.37 4.98

1991................................ 8.06 9.27 6.86 6.97
</TABLE>

Subsequent to December 31, 1993, Financial and ITT replaced their
credit lines supporting commercial paper with $7 billion of credit
lines with 65 domestic and foreign banks. Financial's lines were
comprised of a Three-Year Competitive Advance and Revolving Credit
Facility Agreement and a 364-Day Competitive Advance and Revolving
Credit Facility Agreement in the amounts of $1 billion and $3 billion,
respectively. The three-year agreement requires the Company to maintain
stockholder equity of not less than $750.0 million. None of the
Company's bank lines contain "material adverse change" clauses.

See "Commercial Paper and Other Debt" in the Notes to Financial
Statements for additional information regarding these items.

CONSUMER FINANCE

The Company's consumer finance business consists primarily of the
origination and servicing of first mortgages, home equity loans,
unsecured loans and sales finance. First mortgage and home equity loans
are made in the United States to qualified consumers for the purchase
of a home, to refinance an existing first mortgage, to consolidate
debts, finance education expenses or make home improvements. Unsecured
consumer small loans are made and sales finance activity is conducted
in the Caribbean Basin. Loans are made to applicants whose income and
credit reputation warrant such loans and are limited to amounts the
Company believes to be within the borrower's ability to repay.

On June 3, 1993, the sale of the domestic consumer small loan
portfolio (consumer loans held for repositioning) was completed. As a
result of the sale, the Company's domestic emphasis has shifted to
secured consumer lending, namely first mortgage loans and home equity
products. Reference is made to "Finance Receivables and Consumer Loans
Held for Repositioning" in the Notes to Financial Statements for
further information concerning the sale.

3
<PAGE> 8

<TABLE>
The following table provides information regarding volume (exclusive
of loans purchased in bulk*) and gross outstandings as of the dates
indicated for the various consumer product lines offered by Financial:

<CAPTION>
VOLUME GROSS OUTSTANDINGS
---------------------------- ---------------------------
AMOUNT AMOUNT
(MILLIONS OF NUMBER OF (MILLIONS OF NUMBER OF
YEAR ENDED DECEMBER 31, DOLLARS) ACCOUNTS DOLLARS) ACCOUNTS
----------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
CONSUMER REAL ESTATE

1993.......................................................... $2,101.9 13,271 $2,363.0 52,848

1992.......................................................... 710.3 13,332 2,079.3 60,950

1991.......................................................... 593.0 16,780 1,868.3 63,510

CONSUMER LOANS AND SALES FINANCE**

1993.......................................................... $1,431.6 527,270 $1,257.5 580,762

1992.......................................................... 1,368.2 518,395 1,136.6 556,224

1991.......................................................... 915.2 418,437 919.5 546,652

ACCRUED INTEREST

1993.......................................................... $ 26.1

1992.......................................................... 35.0

1991.......................................................... 36.7

TOTAL CONSUMER FINANCE RECEIVABLES

1993.......................................................... $3,533.5 540,541 $3,646.6 633,610

1992.......................................................... 2,078.5 531,727 3,250.9 617,174

1991.......................................................... 1,508.2 435,217 2,824.5 610,162

<FN>
- -----

*Volume includes first mortgage loans purchased in bulk.

**Excludes domestic unsecured consumer small loan and sales finance
portfolios.
</TABLE>

Consumer finance receivables are generally repayable in equal
consecutive monthly installments. Financial offers home equity and
unsecured consumer small loans (except domestically) with terms ranging
from 12 to 180 months, depending upon the type of loan and the law and
regulations affecting maximum allowable terms.

See "Finance Receivables and Consumer Loans Held for Repositioning"
in the Notes to Financial Statements for additional information
regarding consumer finance receivables.

COMMERCIAL FINANCE

The Company provides a variety of financial services to businesses
including inventory and accounts receivable financing, loans and real
estate financing.

The Company makes loans to retail dealers and distributors to enable
them to purchase inventory and, in conjunction with such inventory
financing, also makes loans secured by accounts receivable. Commercial
loans are made to customers to acquire capital equipment or to provide
working capital. The Company's leasing activities consist of leasing
income producing equipment, generally non-cancellable by the lessee.
Such loans and leases are secured primarily by machinery and equipment
and have varying maturities and interest rates, depending upon the type
of collateral and the creditworthiness of the customer. The Company's
commercial real estate lending operations consist of loans secured by
income-producing real estate and construction financing.

4
<PAGE> 9

<TABLE>
The following table provides certain information regarding volume
(exclusive of loans purchased in bulk) and gross outstandings as of the
dates indicated for the various commercial product lines operated by
Financial:

<CAPTION>
GROSS
VOLUME AMOUNT
AMOUNT OUTSTANDING AVERAGE
(MILLIONS OF (MILLIONS OF NUMBER OF ACCOUNT
YEAR ENDED DECEMBER 31, DOLLARS) DOLLARS) ACCOUNTS BALANCE
----------------------- ------------ ----------- --------- -------
<S> <C> <C> <C> <C>
INVENTORY FINANCE*

1993.......................................................... $15,973.9 $1,766.8 14,451 $ 202,439**

1992.......................................................... 12,755.3 2,764.9 16,325 169,368

1991.......................................................... 8,938.6 2,184.2 17,738 123,135

COMMERCIAL LOANS

Equipment Loans and Leasing

1993.......................................................... $ 598.0 $1,095.0 4,194 $ 261,085

1992.......................................................... 534.0 894.7 4,867 183,820

1991.......................................................... 366.5 694.3 4,804 144,528

Small Business Loans

1993.......................................................... $ 102.2 $ 118.6 2,120 $ 55,938

1992.......................................................... 101.7 91.3 1,649 55,357

1991.......................................................... 78.2 82.9 1,459 56,838

Other Commercial Loans

1993.......................................................... $ 39.5 $ 113.6 163 $ 696,828

1992.......................................................... 31.5 118.7 89 1,334,438

1991.......................................................... 49.3 143.9 203 708,759

Total Commercial Loans

1993.......................................................... $ 739.7 $1,327.2 6,477

1992.......................................................... 667.2 1,104.7 6,605

1991.......................................................... 494.0 921.1 6,466

COMMERCIAL REAL ESTATE LOANS

1993.......................................................... $ 331.9 $1,321.6 563 $2,347,385

1992.......................................................... 253.2 1,372.9 610 2,250,623

1991.......................................................... 214.0 1,312.4 629 2,086,486

ACCRUED INTEREST

1993.......................................................... $ 10.7

1992.......................................................... 15.5

1991.......................................................... 25.7

TOTAL COMMERCIAL FINANCE RECEIVABLES

1993.......................................................... $17,045.5 $4,426.3 21,491

1992.......................................................... 13,675.7 5,258.0 23,540

1991.......................................................... 9,646.6 4,443.4 24,833

<FN>
- -----

*Includes accounts receivable financing gross outstandings of $329.8
million, $469.1 million and $107.3 million at December 31, 1993, 1992
and 1991, respectively.

**Calculated on the total amount of gross outstanding herein and the
aggregate unpaid balance of inventory finance receivables securitized
and sold at December 31, 1993.
</TABLE>

5
<PAGE> 10

The decrease in the inventory finance gross outstandings in 1993 is
due to the sale of $1.2 billion of receivables. See "Finance
Receivables and Consumer Loans Held for Repositioning" in the Notes to
Financial Statements for further information regarding finance
receivables securitized and sold. The increases in the amount and the
average account balance of commercial equipment loans and leasing were
the result of the Company's emphasis on attracting more creditworthy
customers with higher loan balances combined with a reduction in the
borrowers' traditional sources of available financing.

Approximately 90% of the total number and 92% of the total dollar
volume of commercial loans and commercial real estate loans made during
the year ended December 31, 1993 had maturities of 120 months or less.

PORTFOLIO SERVICING

<TABLE>
In addition to its financing activities, the Company services
mortgage loans, inventory finance receivables and Small Business
Administration loans. The Company also provides floorchecking and
receivable processing services. At December 31, 1993, 1992 and 1991,
the amounts of portfolios serviced by category are as follows:

<CAPTION>
1993 1992 1991
---- ---- ----

(MILLIONS OF DOLLARS)

<S> <C> <C> <C>
Mortgage Loans*............................. $6,876.3 $2,045.5 $338.2

Floorchecking/Receivable Processing......... 1,616.5 364.3 323.4

Small Business Administration Loans......... 445.2 319.4 277.7
-------- -------- ------

Total..................................... $8,938.0 $2,729.2 $939.3
-------- -------- ------

<FN>
- -----

*Excluding subservicing.
</TABLE>

The increase, in 1993, in the amount of portfolios serviced
was primarily due to the purchase of mortgage servicing rights and
the sale of $1.2 billion of inventory finance receivables with
servicing retained. Reference is made to "Acquisitions and Sale of Assets"
below and "Finance Receivables and Consumer Loans Held for Repositioning" in
the Notes to Financial Statements for further information regarding finance
receivables securitized and sold.

The increase in the amount of portfolios serviced in 1992 was
primarily due to the acquisition of a residential mortgage servicing
operation.

CREDIT LOSS EXPERIENCE

Reserve for Credit Losses: Effective December, 1993, consumer finance
receivables (except those secured by real estate) are written off by a
charge against the reserve for credit losses when considered to be
uncollectible or when they are over 180 days contractually past due.
Historically, consumer finance receivables (except those secured by
real estate) were written off by a charge against the reserve for
credit losses when considered to be uncollectible or when they were
past due over 180 days on a recency basis or over 720 days by
contractual terms. A full original contractual payment in the aggregate
was required to reduce delinquency. The Company reserved for the
estimated uncollectible portion of bankrupt consumer accounts and
charged-off uncollectible balances after discharge.

Commercial finance receivables, except inventory financing, and
consumer finance receivables secured by real estate are generally
written down to the value of the collateral by a charge against the
reserve for credit losses when repossession of the collateral actually
occurs or is deemed likely. Inventory finance receivables are written
off by a charge against the reserve for credit losses when considered
to be uncollectible or when they are over 180 days contractually past
due.

6
<PAGE> 11

<TABLE>
The following table shows information related to the credit loss
experience, excluding domestic consumer small loans and sales finance,
for the periods indicated:

GROSS CHARGE-OFFS RECOVERIES NET CHARGE-OFFS
---------------------------- FROM ------------------------
% OF RECEIVABLES % OF
AVERAGE PREVIOUSLY AVERAGE
NET CHARGED NET
YEAR ENDED DECEMBER 31, AMOUNT RECEIVABLES OFF AMOUNT RECEIVABLES PROVISION
- ----------------------- ------ ----------- ----------- ------ ----------- ---------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
CONSUMER

1993................................ $ 89.2 2.54% $ 8.3 $ 80.9 2.30% $ 68.1

1992................................ 61.1 2.28 7.4 53.7 2.01 84.3

1991................................ 54.9 2.31 5.4 49.5 2.09 39.8

COMMERCIAL

1993................................ $ 87.7 1.78% $ 9.4 $ 78.3 1.59% $ 38.5

1992................................ 73.3 1.60 10.6 62.7 1.37 141.2*

1991................................ 54.0 1.41 13.4 40.6 1.06 47.2

TOTAL

1993................................ $176.9 2.10% $17.7 $159.2 1.89% $106.6

1992................................ 134.4 1.85 18.0 116.4 1.60 225.5

1991................................ 108.9 1.76 18.8 90.1 1.45 87.0

<FN>
- -----

*Including a special provision of $68.8 million.
</TABLE>

Consumer charge-offs, in 1993, increased primarily as a result of the
standardization of collection policies and centralization of
repossession and foreclosure activities relative to the consumer home
equity portfolio. In addition, effective December, 1993, the Company
implemented a charge-off policy whereby consumer finance receivables
(except those secured by real estate) over 180 days contractually past
due are charged-off.

Commercial charge-offs in 1993 and 1992 increased principally as a
result of the depressed condition of the commercial real estate market
and in 1993 due to a change in strategy from holding properties for
long-term resolution to one of near-term liquidation.

PORTFOLIO CONDITION

<TABLE>
The following tables contain information as to the portfolio
condition of finance receivables excluding domestic consumer small
loans and sales finance in 1992 and 1991 as of the dates indicated:

<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------

1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----

EARNING DELINQUENCY*-61 DAYS OR MORE PERCENTAGE OF RELATED INSTALLMENT
(Installment Finance Receivables, Gross) DOLLAR AMOUNTS IN MILLIONS FINANCE RECEIVABLES, GROSS
- ---------------------------------------- --------------------------------------- --------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Consumer.................................. $122.6 $132.0 $153.8 3.39% 4.10% 5.52%

Commercial................................ 12.5 16.4 12.4 .47 .66 .55
------ ------ ------

Total................................... $135.1 $148.4 $166.2 2.16 2.61 3.31
------ ------ ------

<FN>
- -----

*Delinquency is measured on a contractual basis.
</TABLE>

Earning delinquency decreased in 1993 and 1992 as a result of
intensive collection efforts and charge-offs in the consumer portfolio.

7
<PAGE> 12

At December 31, 1993, 1992 and 1991, inventory finance receivables
which were earning and delinquent 61 days or more amounted to $.8
million, $1.7 million and $1.9 million or .03%, .06% and .09% of
related inventory finance receivables, respectively.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------

1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----

NON-EARNING* FINANCE PERCENTAGE OF RELATED
RECEIVABLES, NET DOLLAR AMOUNTS IN MILLIONS FINANCE RECEIVABLES, NET
- --------------------- ----------------------------------------- -------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Consumer

Bankrupt................................ $ 68.1 $ 79.5 $ 66.6 2.10% 2.81% 2.70%

Other................................... 135.4 126.5 64.8 4.17 4.46 2.62
------ ------ ------ ---- ---- ----

203.5 206.0 131.4 6.27% 7.27% 5.32%
------ ------ ------ ---- ---- ----

Commercial

Bankrupt................................ 28.8 39.8 43.9 0.68% 0.78% 1.03%

Other................................... 137.3 235.5 231.4 3.25 4.65 5.40
------ ------ ------ ---- ---- ----

166.1 275.3 275.3 3.93% 5.43% 6.43%
------ ------ ------ ---- ---- ----

Total

Bankrupt................................ 96.9 119.3 110.5 1.30% 1.51% 1.64%

Other................................... 272.7 362.0 296.2 3.65 4.58 4.38
------ ------ ------ ---- ---- ----

Total Non-Earning..................... $369.6 $481.3 $406.7 4.95% 6.09% 6.02%
------ ------ ------ ---- ---- ----

<FN>
- -----

*Bankrupt receivables presented in non-earning above include some
bankrupt accounts which are still earning in accordance with Company
policy.
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------

1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----

PERCENTAGE OF FINANCE RECEIVABLES,
DOLLAR AMOUNTS IN MILLIONS NET PLUS REPOSSESSIONS
---------------------------------------- -------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
REPOSSESSIONS/OPERATING ASSETS............ $136.4 $157.2 $113.4 1.78% 1.94% 1.64%
------ ------ ------ ---- ---- ----
</TABLE>

The decrease in commercial non-earning receivables in 1993 is
primarily a result of the sale of certain commercial real estate
receivables. The reduction in repossessions/operating assets in 1993 is
due to the sale of certain commercial real estate properties partially
offset by an increase in consumer home equity repossessions.

In 1992, the increases in non-earning receivables and repossessions/
operating assets were primarily due to the weak U. S. economy and the
depressed commercial real estate market.

MORTGAGE-BACKED SECURITIES

In conjunction with its lending operations, Financial purchased
during 1993, 1992 and 1991, $1,456.9 million, $298.4 million and $128.6
million, respectively, of mortgage-backed securities. At December 31,
1993, 1992 and 1991, mortgage-backed securities held by the Company
amounted to $1,425.9 million, $763.9 million and $487.4 million,
respectively. (The amounts above exclude mortgage-backed security
investments by Lyndon.)

See "Investment Securities" in the Notes to Financial Statements for
additional information regarding mortgage-backed securities.

INSURANCE ACTIVITIES

Financial's insurance activities are conducted by Lyndon through four
wholly-owned domestic insurance subsidiaries and one wholly-owned
Bermuda insurance subsidiary. Lyndon's principal products are credit-
related, but it also writes non-credit related products and surety
insurance.

8
<PAGE> 13

Lyndon also reinsures risks that are not related to the Company's
finance operations. Pursuant to reinsurance agreements with
nonaffiliated insurers, Lyndon reinsures ordinary, industrial and
interest-sensitive life insurance, group life, accident and health
insurance, disability insurance and individual and group annuities.
Under these reinsurance agreements Lyndon assumes a share of the risk
on specified blocks of business and participates in the results of the
business so reinsured.

Lyndon's investments consist primarily of bonds and notes issued by
corporations, by state and local governments in the United States, by
the United States and government agencies and authorities; asset-backed
securities and marketable equity securities. Such investments totaled
$1,566.9 million, $2,120.3 million and $2,026.0 million at December 31,
1993, 1992 and 1991, respectively.

See "Investment Securities" in the Notes to Financial Statements for
additional information regarding Lyndon's securities and the investment
portfolio decline in 1993.

COMPETITION

The Company competes on the basis of customer service, interest rates
and finance charges. Its consumer operations compete with other
consumer finance companies, mortgage companies, depository institutions
and retail establishments. Similarly, the Company's commercial
operations compete with depository institutions and other finance
companies, some of which are affiliated with major manufacturers.
Legislation has been introduced from time to time in the United States
Congress and in several state legislatures that could have an impact on
competition within the financial services industry.

REGULATION

The Company's consumer finance activities are extensively regulated
at both the state and federal levels. In addition to state licensing
requirements, state laws regulate interest rates and other authorized
charges, loan maturities, the maximum amount of individual loans as
well as the form and content of the legal documentation used in each
transaction and the collection remedies generally available to
creditors. Federal regulations include (i) The Truth-in-Lending Act
which regulates the substance of and sequence of required disclosure
information provided to the consumer and advertising materials; (ii)
The Equal Credit Opportunity Act which prohibits discrimination in
granting credit based upon the consumer's race, color, religion,
national origin, sex, age, marital status and other factors; (iii) The
Fair Credit Reporting Act which regulates the activities of credit
reporting agencies and the users of credit reports, restricts the use
of information derived from credit bureau files for marketing purposes
and provides rights to consumers affected by such reports; (iv) The
Real Estate Services Procedures Act which regulates settlement cost
disclosures and other fees related to the origination of mortgage
loans; and (v) The Home Mortgage Disclosure Act which requires the
reporting of certain data regarding mortgage applicants.

The Bank and Savings Bank are subject to federal and state laws and
regulations governing depository institutions. In addition, the Bank
statutorily is prohibited from engaging in any additional banking
activity and its growth statutorily is restricted to 7% per year of
average total assets. Financial, as a savings and loan holding company,
is subject to federal and state laws and regulations governing unitary
savings and loan holding companies. The Financial Institutions Reform,
Recovery and Enforcement Act of 1989 and The Federal Deposit Insurance
Corporation Improvement Act of 1991 provide the various governmental
agencies which regulate banks and thrifts with additional and
strengthened enforcement powers and, in general, reflects the greater
scrutiny being given to the operations of depository institutions by
the various agencies.

The Company's commercial finance activities, while less regulated
overall, remain subject to state regulations which, in a few instances,
restrict the interest rates or finance charges that can be charged to
its commercial customers. In some jurisdictions, the Company's
commercial lending activities are subject to examination by state
regulatory agencies.

State laws extensively regulate Lyndon's insurance operations,
including, but not limited to, premium rates, the licensing of insurers
and their authorized agents, policy forms, advertising and promotional
materials, the form and content of the insurer's financial statements,
reserve requirements, reinsurance arrangements, permitted investments
and minimum capital requirements. Financial, as an insurance holding
company, is subject to state laws and regulations governing insurance
holding companies.

9
<PAGE> 14

Several state regulators and private litigants have challenged the
Company's practices with respect to the sale of certain insurance
products to its consumer borrowers as well as compliance with specific
consumer lending laws and regulations. These matters are reflective of
regulatory scrutiny of consumer lending and insurance operations. See
"Litigation" below.

LITIGATION

Financial is plaintiff and defendant in numerous legal proceedings,
arising in the normal course of its business, which involve the
collection of accounts, the validity of liens and damage or loss claims
under various types of insurance. Proceedings in which the Company or
its subsidiaries are defendants often involve numerous allegations.
Several of these proceedings purport to be class actions alleging
improper consumer loan deferrals or the unauthorized sale of and/or the
involuntariness of the purchase of certain insurance products made
available by the Company to its consumer borrowers.

There are various other lawsuits pending against the Company and its
subsidiaries, some of which include claims for substantial amounts.
While no assurances can be made as to the ultimate outcome of any
particular action, management believes that meritorious defenses are
generally available and the aggregate liability, if any, likely to
result therefrom, will not have a material adverse effect on the
consolidated financial position or consolidated results of operations
of Financial.

PROPERTY

All space occupied by Financial is leased with lease periods
generally ranging from one to fifteen years.

ACQUISITIONS AND SALES OF ASSETS

Financial from time to time may increase or decrease its assets
through bulk purchases or sales. It is the present intention of
Financial's management to continually evaluate possible future
acquisitions or sales of assets.

During 1993, Financial securitized $2.4 billion of finance
receivables, of which $1.2 billion were sold. Financial remains as
servicer for which it is paid a servicing fee and retains excess
servicing cash flows. At December 31, 1993, the aggregate unpaid
balance of such securities was $2.2 billion.

In December, 1993, Financial sold to ITT $358.7 million of
subordinated mortgage-backed securities. In return, ITT executed a
promissory note payable to Financial for a like amount. Principal
payments shall be credited monthly against the outstanding principal
amount of the note equal to the amount of cash actually received on
behalf of ITT from the securities. The note shall bear and accrue
interest on a monthly basis at the rate per annum equal to the average
of the daily 90 day Libor rate for the month of calculation plus 50
basis points, both for the actual number of days outstanding during the
monthly interest period. Such monthly interest shall be payable
quarterly. The note matures on December 31, 2003.

Reference is made to "Finance Receivables and Consumer Loans Held for
Repositioning" and "Transactions with Affiliates" in the Notes to
Financial Statements for further information.

ITEM 2.
PROPERTIES

See "Item 1-Property".

ITEM 3.
LEGAL PROCEEDINGS

See "Item 1-Litigation".

10
<PAGE> 15

PART II

ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

All of Financial's stock is owned by ITT. There is no market for
Financial's common stock.

ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

(Prepared in accordance with General Instruction J(2)(a) of Form 10-K.)

Reference is made to the statement of Consolidated Income. The term
"finance receivables" as used under this item includes receivables
relative to ITT Financial's continuing businesses (inventory finance,
equipment finance and leasing, small business finance, commercial real
estate, consumer residential real estate lending and consumer lending
in the Caribbean).

RESULTS OF OPERATIONS

<TABLE>
An analysis of the increase in net income before extraordinary item
and cumulative effect of accounting changes for 1993 from 1992 follows
(thousands of dollars):

<CAPTION>
Net income increased (decreased) due to:

<S> <C>
Change in finance charges and fees........................................................ $(366,812)

Change in interest expense................................................................ 93,200

Change in insurance premiums.............................................................. (52,671)

Change in investment income............................................................... (72,073)

Change in servicing and other income...................................................... 80,866

Change in operating expense............................................................... 120,035

Change in provision for credit losses..................................................... 291,014

Change in insurance benefits.............................................................. 21,144

Gain on sale of consumer loans held for repositioning..................................... 95,000

Special provision......................................................................... 928,242

Change in applicable income tax........................................................... (386,647)
---------

$ 751,298
---------
<CAPTION>
EXTRAORDINARY ITEM

Provision for loss on retirement of debt.................................................. $ (49,500)
---------
</TABLE>

OPERATIONS

Finance charges on finance receivables increased 9% in 1993 compared
to 1992 primarily due to a higher level of average finance receivables,
partially offset by a lower average portfolio yield, the result of
lower market interest rates and a change in portfolio mix. However,
finance charges relative to consumer loans held for repositioning
decreased 71% due to the liquidation of the portfolio. This resulted in
a net decline in finance charges of 25%. Reference is made to "Finance
Receivables and Consumer Loans Held for Repositioning" in the Notes to
Financial Statements for further information concerning the portfolio
sale.

Interest expense decreased 14% in 1993 as compared to 1992 primarily
due to lower rates of interest.

Insurance premiums decreased 24% in 1993 compared to 1992 primarily
due to a lower number of policies in force as a result of the
liquidation of consumer loans held for repositioning and a reduction in
premiums due to a lower level of non-captive reinsurance activities.

Investment income decreased 27% in 1993 as compared to 1992 due to
lower gains on the sale of investment securities, write downs on
mortgage-backed securities and a lower portfolio yield, partially
offset by the impact of a higher level of investments.

11
<PAGE> 16

Servicing and other income increased by 189% in 1993 over 1992 due to
higher revenues from portfolio servicing activities, due in large part
to the temporary servicing fees relative to the consumer loans sold and
from finance receivables securitized and sold and the dividend on
Alcatel Alsthom stock.

Operating expense decreased 18% in 1993 compared to 1992 principally
due to a reduction in operating expense on consumer loans held for
repositioning as a result of the liquidation of this portfolio, cost
efficiency programs and a reduction in expenses relative to a decline
in non-captive reinsurance activities, partially offset by growth in
volume and mortgage-backed securities in the continuing businesses and
costs related to portfolio servicing activities.

The provision for credit losses decreased 73% in 1993 as compared to
1992 as a result of the reserves established in the fourth quarter of
1992, for anticipated loan losses in the domestic unsecured consumer
loan and commercial real estate portfolios. See "Accounting Policies:
Valuation Reserve" and "Finance Receivables and Consumer Loans Held for
Repositioning" in the Notes to Financial Statements for further
information.

Insurance benefits decreased 21% in 1993 as compared to 1992 as a
result of a lower number of policies in force and a lower incurred loss
experience on the captive business.

Results of operations increased in 1993 compared to 1992 partially as
a result of the special provision of $928.2 million recorded in the
fourth quarter of 1992. See "Finance Receivables and Consumer Loans
Held for Repositioning" in the Notes to Financial Statements for
further information.

GAIN ON SALE OF CONSUMER LOANS HELD FOR REPOSITIONING

On June 3, 1993, the sale of the domestic unsecured consumer small
loan portfolio (consumer loans held for repositioning) was completed.
As a result, a pre-tax gain of $95 million was recognized in the second
quarter of 1993. Reference is made to "Finance Receivables and Consumer
Loans Held for Repositioning" in the Notes to Financial Statements for
further information concerning the sale.

INCOME TAX (BENEFIT)

Income tax on income before extraordinary item and cumulative effect
of accounting changes increased from 1992 primarily due to an increase
in pre-tax income. See "Income Tax" in the Notes to Financial
Statements for further information concerning income taxes.

EXTRAORDINARY ITEM

An extraordinary loss was recognized at June 30, 1993 in anticipation
of retiring certain term debt prior to scheduled maturity. See
"Extraordinary Item" in the Notes to Financial Statements for further
information regarding the retirement of debt.

ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements and Financial Statement Schedules.

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

12
<PAGE> 17

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) DOCUMENTS FILED AS PART OF THIS REPORT:

1. See Index to Financial Statements and Financial Statement
Schedules.

2. See Exhibit Index.

(b) REPORTS ON FORM 8-K.

The registrant filed the following report on Form 8-K during the
last quarter of the period covered by this annual report:

Report dated November 10, 1993, reporting Item 7, "Financial
Statements and Exhibits," incorporating the following Exhibits
into Registration Statement No. 33-42236 relating to $125,000,000
Senior Floating Rate Notes due November 17, 1994 and $100,000,000
Senior Floating Rate Notes due January 17, 1995:

Exhibit 4(p)-Form of Senior Floating Rate Note due November 17,
1994.

Exhibit 4(q)-Form of Senior Floating Rate Note due January 17,
1995.

13
<PAGE> 18

REPORT OF MANAGEMENT

The management of ITT Financial Corporation ("Company") is
responsible for the preparation and integrity of the information
contained in the financial statements and other sections of the Annual
Report. The financial statements are prepared in accordance with
generally accepted accounting principles, and, where necessary, include
amounts that are based on management's informed judgments and
estimates. Other information in the Annual Report is consistent with
the financial statements.

The Company's financial statements are audited by Arthur Andersen &
Co., independent public accountants. Management has made the Company's
financial records and related data available to Arthur Andersen & Co.,
and believes that the representations made to the independent public
accountants are valid and complete.

The Company's system of internal controls is a major element in
management's responsibility to provide a fair presentation of the
financial statements. The system includes both accounting controls and
the internal auditing program, which are designed to provide reasonable
assurance that the Company's assets are safeguarded, that transactions
are properly recorded and executed in accordance with management's
authorization, and that fraudulent financial reporting is prevented or
detected.

The Company's internal controls provide for the careful selection and
training of personnel and for appropriate divisions of responsibility.
The controls are documented in written codes of conduct, policies and
procedures that are communicated to the Company's employees. Management
continually monitors the system of internal controls for compliance.
The Company's internal auditors independently assess the effectiveness
of internal controls and make recommendations for improvement on a
regular basis. The independent public accountants also evaluate
internal controls and perform tests of procedures and accounting
records to enable them to express their opinion on the Company's
financial statements. They also make recommendations for improving
internal controls, policies and practices. Management takes appropriate
action in response to each recommendation from the internal auditors
and the independent public accountants.

F-1
<PAGE> 19

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO ITT FINANCIAL CORPORATION:

We have audited the accompanying consolidated balance sheets and
statements of consolidated term debt of ITT Financial Corporation (a
Delaware corporation and wholly-owned subsidiary of ITT Corporation)
and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, retained earnings (deficit), capital
surplus and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of
the Company'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 financial position of ITT
Financial Corporation and subsidiaries as of December 31, 1993 and
1992, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.

As discussed in the accompanying notes to financial statements, ITT
Financial Corporation adopted new accounting standards promulgated by
the Financial Accounting Standards Board, changing its methods of
accounting, effective January 1, 1992, for postretirement benefits
other than pensions and postemployment benefits.

ARTHUR ANDERSEN & CO.

St. Louis, Missouri,
January 31, 1994.

F-2
<PAGE> 20

<TABLE>
CONSOLIDATED INCOME
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
(IN THOUSANDS)

Year Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finance Charges and Fees....................................................... $1,109,585 $1,476,397 $1,539,901
Interest Expense............................................................... 596,131 689,331 769,084
---------- ---------- ----------

Lending Spread............................................................... 513,454 787,066 770,817
Insurance Premiums............................................................. 164,364 217,035 202,243
Investment Income.............................................................. 192,062 264,135 264,349
Servicing and Other Income..................................................... 123,609 42,743 19,984
---------- ---------- ----------

993,489 1,310,979 1,257,393
---------- ---------- ----------

Operating Expense.............................................................. 555,829 675,864 603,096
Provision for Credit Losses.................................................... 106,580 397,594 483,641
Insurance Benefits............................................................. 77,418 98,562 82,461
Gain on Sale of Consumer Loans Held for Repositioning.......................... (95,000) - -
Special Provision.............................................................. - 928,242 -
---------- ---------- ------

644,827 2,100,262 1,169,198
---------- ---------- ----------

Income (Loss) Before Income Tax (Benefit)...................................... 348,662 (789,283) 88,195
Income Tax (Benefit)........................................................... 102,304 (284,343) 10,132
---------- --------- ----------

Net Income (Loss) Before Extraordinary Item and Cumulative Effect of Accounting
Changes....................................................................... 246,358 (504,940) 78,063
Extraordinary Item-Provision for loss on retirement of debt (less applicable
income tax benefit of $25,500)................................................ (49,500) - -
Cumulative Effect of Accounting Changes, net of tax benefit of $6,708.......... - (13,021) -
---------- --------- ------

Net Income (Loss).............................................................. $ 196,858 $ (517,961) $ 78,063
---------- ---------- ----------
</TABLE>

<TABLE>
CONSOLIDATED RETAINED EARNINGS (DEFICIT)
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
(IN THOUSANDS)

Year Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance-Beginning of Period.................................................... $(239,525) $ 359,555 $320,957
Add (Deduct):
Net income (loss)............................................................ 196,858 (517,961) 78,063
Dividends.................................................................... - (81,119) (39,465)
--------- --------- ---------

Balance-End of Period.......................................................... $ (42,667) $(239,525) $359,555
--------- --------- --------
</TABLE>

<TABLE>
CONSOLIDATED CAPITAL SURPLUS
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
(IN THOUSANDS)

Year Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance-Beginning of Period.................................................... $1,733,592 $1,072,522 $1,007,522
Add (Deduct):
Capital Contributions........................................................ 56,500 661,070 65,000
Dividends.................................................................... (690,238) - -
----------- ---------- ----------

Balance-End of Period.......................................................... $1,099,854 $1,733,592 $1,072,522
---------- ---------- ----------

The accompanying notes to financial statements are an integral part of
the above statements.

</TABLE>

F-3
<PAGE> 21

<TABLE>
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE)

December 31, 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS

Finance Receivables (net of unearned income):
Consumer...................................................................................... $ 3,272,537 $ 2,868,227
Commercial.................................................................................... 4,233,909 5,089,700
----------- -----------

Total Finance Receivables................................................................... 7,506,446 7,957,927
Reserve for credit losses..................................................................... (220,277) (270,014)
------------ ------------

Finance Receivables, net.................................................................... 7,286,169 7,687,913
Investment Securities........................................................................... 3,097,442 2,989,980
Deferred Income Tax............................................................................. 2,494 229,920
Other Assets.................................................................................... 1,327,242 1,117,497
Consumer Loans Held for Repositioning, net...................................................... - 1,564,116
----------- -----------

$11,713,347 $13,589,426
----------- -----------

LIABILITIES AND STOCKHOLDER EQUITY

Term Debt (including current maturities of $1,775,673 and $1,196,188)........................... $ 6,247,804 $ 5,887,760
Commercial Paper and Other Debt................................................................. 2,466,315 4,313,762
Deposits and Certificates....................................................................... 558,243 713,725
Insurance Policy and Claim Reserves............................................................. 228,012 300,080
Accounts Payable and Accrued Liabilities........................................................ 1,098,733 875,973
Deferred Income Tax............................................................................. 55,136 1,399
----------- -----------

Total Liabilities........................................................................... 10,654,243 12,092,699
----------- -----------

Stockholder Equity:
Common stock-Authorized 1,000 shares, $100 par value
Outstanding 10 shares held by ITT Corporation................................... 1 1
Capital surplus............................................................................... 1,099,854 1,733,592
Net unrealized gain on equity securities, net of tax.......................................... 1,916 2,659
Retained earnings (deficit)................................................................... (42,667) (239,525)
------------ ------------

Total Stockholder Equity.................................................................... 1,059,104 1,496,727
----------- -----------

$11,713,347 $13,589,426
----------- -----------

The accompanying notes to financial statements are an integral part of
the above statements.

</TABLE>

F-4
<PAGE> 22

<TABLE>
CONSOLIDATED CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
(IN THOUSANDS)

Year Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income (loss)........................................................ $ 196,858 $ (517,961) $ 78,063
Extraordinary item....................................................... 49,500 - -
Cumulative effect of accounting changes.................................. - 13,021 -
------------ ----------- -------

Income (loss) before extraordinary item and cumulative effect of
accounting changes.................................................... 246,358 (504,940) 78,063
Adjustments to income (loss) before extraordinary item and cumulative
effect of accounting changes:
Change in accrued and deferred income taxes............................ 311,212 (262,149) 2,329
Provision for credit losses............................................ 106,580 397,594 483,641
Depreciation and amortization.......................................... 67,860 36,833 34,243
Decrease (increase) in finance charges earned but not collected........ 22,753 33,443 (70,488)
Gain on sale of consumer loans held for repositioning.................. (95,000) - -
Decrease in insurance policy and claim reserves........................ (72,068) (51,104) (42,468)
(Decrease) increase in accounts payable and accrued liabilities........ (55,342) (14,594) 121,450
Gain on investment securities.......................................... (6,242) (67,665) (63,531)
Amortization of debt discount and premium, net......................... (880) 3,688 16,295
Special provision...................................................... - 928,242 -
Other, net............................................................. (10,170) (1,563) 84
------------ ------------ ------------

Net cash provided from operating activities............................ 515,061 497,785 559,618
------------ ------------ ------------

Investing Activities
Finance receivables originated or purchased.............................. (19,272,926) (14,937,783) (12,004,972)
Finance receivables repaid or sold....................................... 19,777,876 14,133,156 10,918,236
Investment securities purchased.......................................... (11,109,761) (6,595,506) (5,397,831)
Investment securities matured or sold.................................... 10,665,788 6,240,292 5,081,410
Proceeds from sale of consumer loans held for repositioning.............. 1,479,507 - -
Acquisition.............................................................. - (36,011) -
(Increase) decrease in other assets...................................... (98,275) (15,507) 12,728
------------ ------------ ------------

Net cash provided from (used for) investing activities................. 1,442,209 (1,211,359) (1,390,429)
------------ ------------ ------------

Financing Activities
Issuance of term debt.................................................... 2,515,336 1,352,411 2,153,611
Repayments of term debt.................................................. (2,247,263) (1,011,094) (893,940)
(Decrease) increase in commercial paper and other debt................... (1,871,401) 315,996 (657,485)
Deposits................................................................. 2,621,656 1,212,283 738,477
Withdrawals.............................................................. (2,777,138) (1,092,421) (656,493)
Capital contributions.................................................... 291,835 10,000 201,800
Dividends paid........................................................... (490,457) (73,615) (55,172)
------------ ------------ ------------

Net cash provided from (used for) financing activities................. (1,957,432) 713,560 830,798
------------ ------------ ------------

(Decrease) in Cash......................................................... (162) (14) (13)
Cash-beginning of year..................................................... 263 277 290
------------ ------------ ------------

Cash-end of year........................................................... $ 101 $ 263 $ 277
------------ ------------ ------------

Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest............................................................... $ 647,087 $ 689,040 $ 740,930
Income tax (refund), net............................................... $ 265,349 $ (1,086) $ (2,816)

The accompanying notes to financial statements are an integral part of
the above statements.

</TABLE>
F-5
<PAGE> 23

<TABLE>
CONSOLIDATED TERM DEBT
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
(IN THOUSANDS)
December 31,
- ------------------------------------------------------------------------------------------------------------------------------

WEIGHTED
SENIOR(a) SUBORDINATED(a) AVERAGE
(3.06%-13.80%) (3.66%-9.88%) TOTAL RATE
-------------- --------------- ----- --------
<S> <C> <C> <C> <C>
Debt Maturities:
1994....................................... $1,429,673(b)(c) $346,000(d) $1,775,673 6.67%
1995....................................... 1,328,051(c) - 1,328,051 6.84%
1996....................................... 958,485 75,000(d) 1,033,485 4.94%
1997....................................... 549,093(c) 297,500(d) 846,593 8.00%
1998....................................... 505,376(c) - 505,376 6.71%
1999-2048.................................. 869,958 - 869,958 10.36%
---------- -------- ----------

Total Term Debt-1993......................... $5,640,636 $718,500 $6,359,136(e)(f)(g)
---------- -------- ----------

Total Term Debt-1992......................... $5,103,213 $895,000 $5,998,213(e)(f)
---------- -------- ----------

Weighted Average Rate:

1993....................................... 6.95% 8.35% 7.11%
---- ---- ----

1992....................................... 8.16% 8.49% 8.21%
---- ---- ----

<FN>
- -----

Notes:

(a) Senior term debt is senior to all other term debt. Subordinated
term debt is subordinate and junior to all other borrowings.

(b) Includes Floating Rate Debentures due August 25, 2048, repayable at
the option of the holder on August 25, 1994 at 99.22% of their
principal amount and on each third anniversary thereafter at
increasing prices. The rate of interest payable on each Debenture
is a variable rate, based on the monthly commercial paper rate. In
addition, Financial shall have the option every three years to
elect to pay a fixed rate for a period of three years which shall
be calculated based on the then current three year U.S. Treasury
security, as adjusted.

8.88% Medium-Term Notes, Series B redeemable on May 18, 1994 and
annually thereafter through May 18, 1999

Floating Rate Medium-Term Notes, Series F redeemable on July 20,
1994 or July 19, 1995.

Floating Rate Medium-Term Notes, Series F redeemable on September
13, 1994 or September 13, 1995.

8.875% Senior Debentures redeemable on June 1, 1995 or June 1, 2000
or June 1, 2005

8.50% Senior Debentures redeemable on October 15, 1995

8.875% Senior Debentures redeemable on June 15, 1997

8.55% Senior Debentures redeemable on June 15, 1998 or June 15,
2004

(d) Includes the following subordinated term debt redeemable at the
holder's option:

Floating Rate Medium-Term Notes, Series A redeemable on May 27,
1994

8.35% Subordinated Debentures redeemable on November 1, 1994

8.75% Subordinated Debentures redeemable on March 1, 1996

8.85% Subordinated Debentures redeemable on July 15, 1997

(e) The balances as of December 31, 1993 and 1992 exclude net
amortizable discount of $111,332 and $110,453, respectively.
Original issue discount and premium are amortized over the term of
the issue by use of the interest method.

(f) At December 31, 1993 and 1992, the fair value of consolidated term
debt exceeded carrying value by approximately $342,000 and
$215,000, respectively. Fair value was determined by discounting
the projected cash flows, at December 31, 1993 and 1992, using
quoted market interest rates. Where quoted market rates were not
available, fair value was determined using estimated interest rates
at which Financial could issue similar debt with like remaining
maturities.

(g) See "Extraordinary Item" in the accompanying notes to financial
statements regarding the retirement of debt.

The accompanying notes to financial statements are an integral part of
the above statements.
</TABLE>

F-6
<PAGE> 24

NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------

ACCOUNTING POLICIES

Consolidation Principles: The consolidated financial statements include
the accounts of ITT Financial Corporation and its subsidiaries
("Financial" or "Company"), all of which are wholly-owned. Certain 1992
and 1991 items have been reclassified to conform with the 1993
presentation.

Finance Charges and Related Expenses: Revenues from finance receivables
are recognized using the interest method. Under the interest method,
finance charges are recognized and loan origination fees and direct
loan origination costs are deferred and amortized over the life of the
related loan to provide a constant effective yield.

Insurance Premiums and Related Expenses: Credit accident and health
premiums are recognized in reasonable relationship to anticipated
claims. Premiums from all other credit and credit-related insurance
products are recognized in proportion to the amount of insurance
protection provided.

Costs of acquiring new business, principally reinsurance fees and
premium taxes, are deferred and charged to expense in the same manner
as the related premiums are taken into earnings.

Life, health and annuity premiums from reinsurance treaties not related
to the Company's finance operations, are generally recognized when due
from policyholders. Related costs are expensed when reported by ceding
companies. However, in compliance with accounting standards for certain
specialized reinsurance, premiums and expenses are reported on a net
basis, where appropriate, and included in other income. The
responsibility for substantially all reserves on this insurance remains
with the ceding insurers.

Servicing Income and Related Expenses: Revenues from servicing
activities primarily consist of fees earned for servicing mortgage
loans, inventory finance receivables, Small Business Administration
loans and from the temporary servicing fees relative to the sale of
Financial's domestic consumer small loan portfolio (consumer loans held
for repositioning-see "Finance Receivables and Consumer Loans Held for
Repositioning" for further information). The fees are generally
calculated either on the outstanding principal balance of the loans
serviced or on a contractual fee per loan basis and are recorded as
income when earned. Also included are certain ancillary fees related to
the servicing of such loans which are recognized on a cash basis. Costs
of purchased mortgage servicing rights are capitalized and amortized in
proportion to, and over the period of, estimated net servicing income.

In conjunction with Financial's mortgage servicing activities, trust
funds, which are not included in the financial statements, on deposit
in special bank accounts totalled approximately $90,000,000 and
$185,000,000 at December 31, 1993 and 1992, respectively.

Reserve for Credit Losses: The reserve for credit losses is maintained
at a level which management believes is sufficient to cover losses
taking into consideration historical loss experience, current economic
conditions and other factors.

Effective December, 1993, consumer finance receivables (except those
secured by real estate) are written off by a charge against the reserve
for credit losses when considered to be uncollectible or when they are
over 180 days contractually past due. Historically, consumer finance
receivables (except those secured by real estate) were written off by a
charge against the reserve for credit losses when considered to be
uncollectible or when they were past due over 180 days on a recency
basis or over 720 days by contractual terms. A full original
contractual payment in the aggregate was required to reduce
delinquency. The Company reserved for the estimated uncollectible
portion of bankrupt consumer accounts and charged-off uncollectible
balances after discharge.

Valuation Reserve: In December, 1992, the valuation reserve for
consumer loans held for repositioning was established at a level
management believed provided for the ultimate losses in the portfolio.
In determining the adequacy of the reserve, management considered,
among other factors, current delinquencies, credit bureau scores
applied to performing loans to predict losses and past charge-off
experience. Consumer loans held for repositioning were written off by a
charge against the valuation reserve when considered to be
uncollectible or when they were past due over 180 days on a recency
basis or over 720 days by contractual terms. Also, commencing in
December, 1992, all Chapter 7 consumer bankrupt accounts held for
repositioning were written off by a charge against the valuation
reserve. The Company provided a valuation reserve for the estimated
uncollectible portion of other bankrupt consumer accounts held for
repositioning and charged-off uncollectible balances after discharge.

As a result of the sale of Financial's domestic consumer small loan
portfolio (consumer loans held for repositioning), the valuation
reserve was eliminated (see "Finance Receivables and Consumer Loans
Held for Repositioning" for further information).

Pension: All eligible salaried employees of Financial participate in
the Retirement Plan for Salaried Employees of ITT Corporation, which is
non-contributory. The cost of the plan to Financial is based on an
actuarial allocation and for the years ended December 31, 1993, 1992
and 1991 was $12,243,000, $12,857,000 and $10,297,000, respectively. No
allocation of the present value of accumulated plan benefits or assets
available for benefits has been made, as it is not readily
determinable.

In addition to pension benefits, ITT Corporation ("ITT") provides
health care and life insurance for certain retired employees of
Financial.

Effective January 1, 1992, ITT adopted Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," using the
immediate recognition method. Accordingly, cumulative after-tax
adjustments (through December 31, 1991) of $9,569,000 and $3,452,000,
respectively, were allocated by ITT to Financial and recognized at
January 1, 1992. Except for the one-time cumulative
F-7
<PAGE> 25
Notes to Financial Statements (Continued)
- ------------------------------------------------------------------------------
adjustment, the adoption of SFAS No. 112 was not material to the 1992
results of operations.

ITT adopted certain changes to a number of its postretirement benefit
plans during 1992. The effect of these changes are reflected in the
determination of the expense reported for 1993 and 1992 and were not
significant.

FINANCE RECEIVABLES AND CONSUMER LOANS HELD FOR
REPOSITIONING

On January 19, 1993, Financial announced a strategic plan to shift its
emphasis to secured lending and downsize unsecured lending. The plan
called for the repositioning of its consumer finance operations to
considerably reduce Financial's business in the domestic unsecured loan
area, reserving fully for potential losses on certain assets in the
commercial real estate portfolio and a change in strategy from holding
properties for long-term resolution to one of near-term liquidation.

Accordingly, Financial established reserves of $928,242,000 pre-tax
($612,219,000 after-tax) in the fourth quarter of 1992, including a
$693,000,000 provision to cover future unsecured consumer loan losses
from the run-off of its existing domestic portfolio; $103,000,000 for
repositioning, including consolidation of consumer loan offices; and a
$132,242,000 provision for anticipated losses in its commercial real
estate portfolio. As a result of these actions, domestic consumer small
and sales finance receivables were identified and segregated in the
financial statements as consumer loans held for repositioning. Consumer
loans held for repositioning, after deducting the valuation reserve,
were carried at the lower of the unpaid loan balance or net realizable
value.

On June 3, 1993, Financial completed the sale of its domestic unsecured
consumer small loan portfolio (consumer loans held for repositioning)
to a group of investors led by an affiliate of Goldman, Sachs & Co. The
transaction, which was announced on May 5, 1993, involved the sale of
loans in the portfolio at February 28, 1993. Proceeds from the sale
(excluding cash collections on the loans between February 28, 1993 and
the closing date) aggregated approximately $1.5 billion, of which
approximately $1.4 billion were used to reduce Financial's commercial
paper. In addition, Financial acquired a 15% equity interest in the
purchasing group at a cost of approximately $29 million.

Accordingly, Financial recognized a pre-tax gain of $95 million in the
second quarter of 1993, based on recorded values as of the closing of
the sale and certain costs and restructuring expenses incurred by
Financial as part of the transaction.

During 1993, Financial securitized $2.4 billion of finance receivables,
of which $1.2 billion were sold. Financial remains as servicer for
which it is paid a servicing fee and retains excess servicing cash
flows. At December 31, 1993, the aggregate unpaid balance of such
securities was $2.2 billion.

The Company has a limited recourse obligation for losses on the
receivables securitized and sold. At December 31, 1993, the maximum
exposure of all such recourse obligations was $106.7 million. Financial
maintains, in Accounts Payable and Accrued Liabilities, a balance which
management believes is sufficient to cover its probable future recourse
obligation on the securities sold.

<TABLE>
Finance receivables and consumer loans held for repositioning at
December 31, 1993 and 1992 consisted of the following:

<CAPTION>
1993 1992
---- ----

(THOUSANDS OF DOLLARS)
<S> <C> <C>
Finance Receivables
Consumer:
Real estate...................................................... $2,362,975 $2,079,326
Small loans...................................................... 1,221,133 1,106,246
Sales finance.................................................... 36,448 30,302
Accrued interest................................................. 26,082 34,989
---------- ----------

Consumer finance
receivables..................................................... 3,646,638 3,250,863
---------- ----------

Commercial:
Inventory financing.............................................. 1,766,791 2,764,933
Equipment and other loans........................................ 1,327,162 1,104,699
Real estate...................................................... 1,321,578 1,372,880
Accrued interest................................................. 10,727 15,477
---------- ----------

Commercial finance receivables................................... 4,426,258 5,257,989
---------- ----------

Finance receivables, gross........................................ 8,072,896 8,508,852
Unearned income................................................... (566,450) (550,925)
Reserve for credit losses......................................... (220,277) (270,014)
---------- ----------

Finance receivables, net.......................................... 7,286,169 7,687,913
---------- ----------

Consumer Loans Held for Repositioning
Consumer loans................................................... - 2,602,361
Sales finance.................................................... - 95,670
Accrued interest................................................. - 36,193
--------- ----------

Consumer loans, gross............................................. - 2,734,224
Unearned income................................................... - (365,366)
Valuation reserve................................................. - (804,742)
--------- ----------

Consumer loans held for repositioning, net........................ - 1,564,116
--------- ----------

Total Finance Receivables and Consumer Loans Held for
Repositioning, net................................................ $7,286,169 $9,252,029
---------- ----------
</TABLE>

<TABLE>
At December 31, 1993 and 1992, finance receivables, including those
held for repositioning, were concentrated in the following:

<CAPTION>
1993 1992
---- ----

<S> <C> <C>
California....................................................... 28.5% 20.6%
Puerto Rico...................................................... 12.8 8.5
Minnesota........................................................ 3.9 3.3
Texas............................................................ 3.6 6.4
Ohio............................................................. 3.4 5.3
Florida.......................................................... 3.2 5.1
</TABLE>

<TABLE>
Consumer Real Estate: At December 31, 1993 and 1992, consumer real
estate loans of $1,279,966,000 and $1,462,648,000 were secured by
second mortgages and $1,083,009,000 and $616,678,000 were secured by
first mortgages, respectively. For receivables secured by second
mortgages, the Company must buy out the first mortgage lender before
obtaining title to the property. The maximum home equity advance is
limited to 80% of the first $200,000 of appraised value, 60% of the
next $100,000 of appraised
F-8
<PAGE> 26
- ------------------------------------------------------------------------------
value and 50% of any appraised value over $300,000 minus the amount of
all encumbrance against the property. The Company is the principal
lienholder on first mortgage real estate loans and may pursue
foreclosure proceedings when deemed necessary. The maximum loan amount
for first mortgage consumer real estate is generally limited to 80% of
the appraised value of the property. At December 31, 1993 and 1992,
consumer real estate receivables were concentrated in the following
states:

<CAPTION>
1993 1992
---- ----

<S> <C> <C>
California....................................................... 46.7% 33.2%
Minnesota........................................................ 5.0 5.8
Ohio............................................................. 3.7 5.7
Florida.......................................................... 3.7 5.1
Washington....................................................... 3.4 1.7
Maryland......................................................... 3.2 3.7
</TABLE>

The estimated fair value of consumer real estate receivables at
December 31, 1993 and 1992 approximated carrying value. Fair value was
estimated by discounting the projected cash flows at December 31, 1993
and 1992, using current market rates and Financial's estimated cost to
service those receivables.

<TABLE>
Consumer Loans: Of the consumer loan receivables, including those held
for repositioning, at December 31, 1993 and 1992, 10.8% and 56.9%,
respectively, were secured by automobiles, household goods and/or other
security. For purposes of the Company's repositioning strategy these
loans are considered unsecured. Concentrations of consumer loans,
including those held for repositioning, at December 31, 1993 and 1992
were as follows:

<CAPTION>
1993 1992
---- ----

<S> <C> <C>
Puerto Rico...................................................... 81.1% 24.3%
Netherland Antilles.............................................. 6.6 2.0
Panama........................................................... 6.3 1.6
Virgin Islands................................................... 6.0 1.8
Texas............................................................ - 8.9
California....................................................... - 8.6
Ohio............................................................. - 7.7
</TABLE>

The estimated fair value of consumer loan receivables at December 31,
1993 and 1992 approximated carrying value. Fair value was estimated by
discounting the projected cash flows at December 31, 1993 and 1992,
using the current rate at which similar loans would be made to
borrowers with similar credit ratings for the same maturities and in
1992 after considering the future costs related to the Company's
repositioning strategy.

Inventory Financing: At December 31, 1993 and 1992, inventory financing
generally consisted of receivables from distributors and manufacturers
of consumer goods. In addition, the Company makes loans secured by
accounts receivable and, in certain cases, inventory and other assets
of the debtor. Inventory finance receivables outstanding were
concentrated primarily in recreational products, computer hardware,
manufactured housing, appliances and industrial equipment.

<TABLE>
A security interest is given by the dealer on virtually all inventory
financed. At December 31, 1993 and 1992, substantially all of the
outstanding inventory financed was covered by repurchase agreements,
whereby manufacturers or distributors agree to buy back inventory
repossessed by the Company. Inventory finance receivables were
concentrated in the following states at December 31, 1993 and 1992:

<CAPTION>
1993 1992
---- ----

<S> <C> <C>
California....................................................... 10.6% 10.9%
Georgia.......................................................... 7.7 7.1
Texas............................................................ 5.2 5.5
Colorado......................................................... 5.2 4.3
Florida.......................................................... 4.9 6.1
New York......................................................... 4.7 6.6
</TABLE>

The carrying amount of inventory finance receivables at December 31,
1993 and 1992 approximated fair value because of the short maturity of
these receivables.

Commercial Real Estate: Commercial real estate receivables at December
31, 1993 and 1992 were concentrated primarily in apartment buildings,
retail centers, mobile home parks, hotels/motels, and office buildings.

<TABLE>
The general collateral requirement on commercial real estate is for the
Company to be listed as the lienholder on the title of the property.
Access to the property varies by state, but generally requires going
through foreclosure. The maximum commercial real estate loan is
generally limited to 80% of the appraised value of the property. At
December 31, 1993 and 1992, commercial real estate receivables were
concentrated in the following states:

<CAPTION>
1993 1992
---- ----
<S> <C> <C>
California....................................................... 62.6% 63.8%
Minnesota........................................................ 7.1 3.4
Texas............................................................ 4.7 5.4
Florida.......................................................... 3.7 9.5
Georgia.......................................................... 2.8 .3
Illinois......................................................... 1.5 5.3
</TABLE>

The estimated fair value of commercial real estate receivables at
December 31, 1993 and 1992 approximated carrying value. Fair value was
estimated by discounting the projected cash flows at December 31, 1993
and 1992, using the current rate at which similar loans would be made
to borrowers with similar credit ratings for the same maturities.

Commercial Loans: Commercial loans outstanding at December 31, 1993 and
1992 were to customers concentrated in industries categorized by
standard industrial classifications of transportation, manufacturing,
services and construction.

<TABLE>
For commercial loans secured by equipment, the Company acquires title
to or a security interest in such equipment. Commercial loans
F-9
<PAGE> 27
Notes to Financial Statements (Continued)
- ------------------------------------------------------------------------------
outstanding were concentrated in the following states at December 31,
1993 and 1992:

<CAPTION>
1993 1992
---- ----
<S> <C> <C>
California....................................................... 12.7% 13.2%
Ohio............................................................. 8.5 3.9
Texas............................................................ 7.3 9.1
New York......................................................... 6.7 6.9
Illinois......................................................... 6.0 2.7
Michigan......................................................... 3.2 4.3
Pennsylvania..................................................... 2.9 4.2
</TABLE>

The estimated fair value of commercial loans at December 31, 1993 and
1992, approximated carrying value. Fair value was estimated by
discounting the projected cash flows at December 31, 1993 and 1992,
using the current rate at which similar loans would be made to
borrowers with similar credit ratings for the same maturities.

<TABLE>
Other Finance Receivables Data: Contractual maturities of finance
receivables at December 31, 1993 were as follows:

<CAPTION>
CONSUMER COMMERCIAL TOTAL
-------- ---------- -----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
1994................................... $ 804,028 $2,307,501 $3,111,529
1995................................... 467,768 333,941 801,709
1996................................... 377,834 432,573 810,407
1997................................... 218,597 322,352 540,949
1998 and after......................... 1,778,411 1,029,891 2,808,302
---------- ---------- ----------
$3,646,638 $4,426,258 $8,072,896
---------- ---------- ----------
</TABLE>

Historically, a portion of the receivables has been renewed prior to
maturity. Accordingly, the schedule of maturities may not be indicative
of future cash collections.

In the normal course of business, financing arrangements may be
renegotiated as a result of changing client requirements and/or
economic conditions of growth or contraction. Such renegotiated
transactions have always represented a portion of the portfolio and are
inherent in the finance business conducted by Financial.

In some cases, Financial ceases or reduces the rate of recognition of
revenues on accounts where collectibility is doubtful due to weakened
financial condition of the borrower. Such accounts outstanding at
December 31, 1993 and 1992 totalled $362,587,000 and $705,349,000,
respectively. Interest at original contract rates on these receivables
would have totalled $39,360,000 in 1993 and $85,096,000 in 1992. Actual
interest recognized was $13,305,000 in 1993 and $29,282,000 in 1992.

The maximum terms, not considering any further refinancings or
extensions, over which the installment finance receivables are
generally written are 48 months for consumer small loans, 84 months for
commercial loans, 180 months for consumer mortgages and 120 months for
commercial mortgages. Inventory finance receivables are generally due
upon sale of the inventory; however in some instances, the Company
grants to the more creditworthy dealers the option to make scheduled
payments with a maximum term generally not exceeding 90 days.

<TABLE>
An analysis of the reserve for credit losses and the valuation reserve
is as follows:

<CAPTION>
Year Ended December 31, 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Reserve for credit losses:
Balance beginning of year................................ $ 270,014 $ 358,368 $ 299,669
Charged to expense....................................... 106,580 397,594 483,641
Special provision........................................ - 68,801 -
Recoveries from receivables previously charged off....... 17,709 59,630 49,350
Net reserves purchased................................... 2,252 2,038 2,480
Charge-offs of uncollectible receivables................. (176,898) (447,131) (477,289)
Transfers in/(out)....................................... 620 (169,286) 517
--------- --------- ---------
Balance end of year...................................... 220,277 270,014 358,368
--------- ---------- ---------
Valuation reserve:
Balance beginning of year................................ 804,742 - -
Special provision........................................ - 693,000 -
Recoveries from consumer loans previously charged off.... 21,783 - -
Net reserves sold........................................ (599,590) - -
Charge-offs of uncollectable consumer loans.............. (102,381) (71,999) -
Transfers in/(out)....................................... (124,554) 183,741 -
--------- ---------- --------
Balance end of year...................................... - 804,742 -
-------- ---------- --------
Total reserve for credit losses and valuation reserve..... $ 220,277 $1,074,756 $ 358,368
--------- ---------- ---------
</TABLE>

In 1993, the decrease in the reserve for credit losses, and the
corresponding decrease in charge-offs, was primarily a result of the
reserves established in the fourth quarter of 1992, for anticipated
loan losses in the domestic unsecured consumer loan and commercial real
estate portfolios. This decrease was partially offset by an increase in
charge-offs due to the standardization of collection policies and
centralization of repossession and foreclosure activities relative to
the consumer home equity portfolio and to the implementation of a
charge-off policy whereby consumer finance receivables (except those
secured by real estate) over 180 days contractually past due are
charged-off.

The valuation reserve was eliminated, in 1993, as a result of the sale
of Financial's domestic consumer small loan portfolio (consumer loans
held for repositioning).

In 1992, the increase in charge-offs was primarily due to consumer
portfolio control policies, increased bankruptcies and a weak U. S.
economy, particularly in the commercial real estate market.

Real estate and other property acquired in the liquidation of finance
receivables are included in other assets at the lower of the unpaid
loan balance or net realizable value. Such assets, net of reserve,
totalled $105,213,000 and $114,222,000 at December 31, 1993 and 1992,
respectively.

F-10
<PAGE> 28
- ------------------------------------------------------------------------------
<TABLE>
An analysis of the reserve for real estate and other properties
acquired in the liquidation of finance receivables is as follows:

<CAPTION>
Year Ended December 31, 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)

<S> <C> <C> <C>
Balance beginning of year................................. $ 43,959 $ 565 $ -
Charged to expense........................................ 3,164 1,326 1,289
Special provision......................................... - 58,741 -
Charge-offs of real estate and other properties........... (29,779) (2,218) (207)
Net reserves sold......................................... (1,077) - -
Transfers in/(out)........................................ 14,928 (14,455) (517)
-------- -------- -----
Balance end of year....................................... $ 31,195 $ 43,959 $ 565
-------- -------- ------
</TABLE>

In May 1993, the Financial Accounting Standards Board issued a new
standard related to the accounting by creditors for the impairment of a
loan (SFAS No. 114). The standard, which must be adopted by 1995,
requires that impaired loans, as defined, be measured based on the
present value of expected future cash flows. Financial is reviewing the
requirements of the standard, however, the impacts are not expected to
be material to the Company's financial position or results of
operations.

------------------------------

INVESTMENT SECURITIES

<TABLE>
A summary of fixed maturity investment securities at December 31, 1993
and 1992 is as follows:

<CAPTION>
1993 1992
--------------------------------------------------- ---------------------------------------------------
GROSS GROSS ESTIMATED GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
TYPE COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE
---- --------- ---------- ---------- --------- --------- ---------- ---------- ---------
(THOUSANDS OF DOLLARS)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds and notes:
Corporate........... $ 924,523 $ 7,656 $ (25) $ 932,154 $ 860,187 $ 2,544 $(1,542) $ 861,189
States and
municipalities..... 327,568 31,189 (5) 358,752 456,123 20,312 (267) 476,168
U.S. Government and
government agencies
and authorities.... 40,040 293 (4) 40,329 104,331 350 (211) 104,470
Other............... 125,221 515 - 125,736 142,647 212 - 142,859
---------- ------- ------- ---------- ---------- ------- ------- ----------
1,417,352 39,653 (34) 1,456,971 1,563,288 23,418 (2,020) 1,584,686
Mortgage-backed
securities........... 1,607,036 17,141 (10,991) 1,613,186 1,355,393 299 (301) 1,355,391
Certificates of
deposit.............. 8,218 - - 8,218 8,839 - - 8,839
---------- ------ ------- ---------- ---------- ------- ------- ----------
$3,032,606 $56,794 $(11,025) $3,078,375 $2,927,520 $23,717 $(2,321) $2,948,916
---------- ------- -------- ---------- ---------- ------- ------- ----------
</TABLE>

------------------------------

At December 31, 1993 and 1992, approximately 38% and 17%, respectively,
of Financial's fixed maturity investment securities were with borrowers
in the state of California. No other state had a concentration
exceeding 5% in either year.

The amortized cost and estimated fair value of fixed maturity
investment securities at December 31, 1993, by estimated maturity are
shown in the following table. Maturities are reflected by contract date
except for mortgage-backed securities which are distributed to maturity
year based on Financial's estimate of the rate of prepayments of
principal over the remaining life of the securities. Actual maturities
will differ from contractual and estimated maturities reflecting the
borrowers' right to call or prepay their obligations.

<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
ESTIMATED MATURITY COST VALUE
------------------ --------- ---------
(THOUSANDS OF DOLLARS)

<S> <C> <C>
Due in one year or less............................................ $1,288,229 $1,292,204
Due after one year through five years.............................. 1,115,448 1,123,081
Due after five years through ten years............................. 381,822 395,451
Due after ten years................................................ 247,107 267,639
---------- ----------
$3,032,606 $3,078,375
---------- ----------
</TABLE>

F-11
<PAGE> 29
Notes to Financial Statements (Continued)
- ------------------------------------------------------------------------------

As a result of the significant repositioning of Financial's domestic
consumer operations, the level of invested capital in the insurance
operations is being reduced through sales of investments and cash
dividends. Accordingly, further sales of portions of the investment
portfolio of the insurance subsidiaries are likely. The Company's
investment strategy has resulted in a significant shift from tax-exempt
to taxable securities as well as a substantial decrease in the average
maturity of the fixed income portfolio. Given the absence of clear
intent to hold to maturity, the investment portfolio of Financial's
insurance subsidiaries is recorded at the lower of cost or market.
Investments of finance subsidiaries are carried at amortized cost. Net
after-tax gains on investment securities of $4,057,000, $44,659,000 and
$41,930,000 are included in net income at December 31, 1993, 1992 and
1991, respectively. Future investment earnings and yield will not be
materially affected as a result of the security sales.

In May 1993, the Financial Accounting Standards Board issued a new
standard of accounting and reporting for certain investments in debt
and equity securities (SFAS No. 115). The new standard must be
implemented by the 1994 first quarter and requires, among other things,
that securities be classified as "held-to-maturity", "available for
sale" or "trading" based on the Company's intentions with respect to
the ultimate disposition of the security and its ability to effect
those intentions. The classification determines the appropriate
accounting carrying value (cost basis or fair value) and, in the case
of fair value, whether the adjustment impacts Stockholder Equity
directly or is reflected in Consolidated Income.

Financial is reviewing the standard. It is anticipated that generally,
portfolios will be classified as available for sale and, accordingly,
most investments will be reflected at fair value with the corresponding
impact included in Stockholder Equity. At December 31, 1993, the
estimated impact of the standard is an increase to Stockholder Equity
of approximately $30,000,000 after tax.

Securities with a book value of $98,228,000 and $89,828,000, as of
December 31, 1993 and 1992, respectively, were on deposit with various
states for the protection of policyholders or were held in trust, as a
condition of reinsurance, for the satisfaction of statutory
requirements of ceding companies.

Equity securities carried at market value were $64,836,000 and
$62,460,000 at December 31, 1993 and 1992, respectively. Gross
unrealized gains and losses on equity securities were $6,076,000 and
$3,129,000, respectively, in 1993 and $5,279,000 and $1,249,000,
respectively, in 1992. The after-tax difference from cost for equity
securities is reflected in Stockholder Equity.

INCOME TAX

The accounts of Financial and its United States subsidiaries are
included in the consolidated Federal income tax return of ITT. ITT's
policy is generally to allocate to Financial current tax benefits and
charges on the basis of statutory U.S. tax rates applied to Financial's
taxable income or loss included in the consolidated return.

<TABLE>
Pretax income (loss), including the extraordinary item in 1993 and the
cumulative effect of accounting changes in 1992, and the related
provision (benefit) for income tax were as follows:

Deferred-
U.S. ................................................. 286,956 (249,610) (116)
State and local....................................... (146) (2,602) 150
Puerto Rico........................................... 798 (613) 120
Foreign............................................... (92) (145) 72
--------- --------- --------
287,516 (252,970) 226
--------- --------- --------
Income Tax (Benefit)...................................... $ 76,804 $(291,051) $ 10,132
--------- --------- --------
</TABLE>

<TABLE>
Deferred income tax assets and liabilities are the tax effect related
to recording revenues and expenses in different periods for financial
reporting and tax purposes. Deferred tax assets (liabilities) included
the following:

<CAPTION>
Year Ended December 31, 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Loss reserves...................................................... $ 78,048 $ 355,062
Insurance commission liabilities................................... (227,640) (196,457)
Other reserve items................................................ 79,183 37,202
Unearned insurance commissions..................................... 14,547 21,492
Financing leases................................................... (43,648) (30,475)
Other items........................................................ 46,868 41,697
--------- ---------
$ (52,642) $ 228,521
--------- ---------
</TABLE>

F-12
<PAGE> 30

No deferred tax liability has been recognized for the federal income
tax payable upon distribution of retained earnings of certain
subsidiaries since these earnings, $228,420,000 at December 31, 1993
have been permanently reinvested or are subject to the indefinite
deferral of taxes.

<TABLE>
A reconciliation of the U.S. statutory rate to the effective income tax
rate was:

<CAPTION>
Year Ended December 31, 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory rate....................................... 35% 34% 34%
Change in effective income tax rate resulting from-
Bond interest and other income not subject to tax....... (3) 2 (29)
Change in U.S. tax law.................................. (2) - -
State income taxes...................................... (1) 1 3
Foreign income taxes.................................... (1) (1) 3
Other, net.............................................. - - 1
--- --- ---
Effective income tax rate................................. 28% 36% 12%
-- -- ---
</TABLE>

INTEREST RATE EXCHANGE AGREEMENTS

Financial has entered into interest rate exchange agreements. Under
certain agreements ($387,500,000 and $797,500,000 notional principal
amount at December 31, 1993 and 1992, re-spectively), Financial makes
fixed interest payments and receives variable interest payments. Under
other agreements ($645,000,000 and $600,000,000 notional principal
amount at December 31, 1993 and 1992, respectively), Financial makes
variable interest payments and receives fixed interest payments. In
addition, under yet other agreements ($435,000,000 and $225,000,000
notional principal amount at December 31, 1993 and 1992, respectively),
Financial makes and receives variable interest payments based on
different indices. Maturities of the agreements range from 1994 to
1999. The net interest settlements are recorded as an adjustment to
interest expense. Financial is exposed to market risk in the event of
nonperformance by the counterparties. Nonperformance by the
counterparties is not anticipated nor would it have a material adverse
effect on the results of operations or the financial position of the
Company.

The estimated fair value of interest rate exchange agreements is the
amount Financial would receive/(pay) to terminate all of its exchange
agreements. At December 31, 1993 and 1992 the amount the Company would
receive/(pay) to terminate all interest rate exchange agreements was
approximately $5,000,000 and $(21,000,000), respectively. Fair value of
the interest rate exchange agreements was estimated by calculating the
present value of the change in cash flows that would result from the
exchange agreements being replaced at the current market rate for the
remaining term of the agreements.

COMMERCIAL PAPER AND OTHER DEBT

<TABLE>
The following table sets forth information concerning Financial's
commercial paper and other debt and their related cost:

<CAPTION>
1993 1992 1991
---- ---- ----

(THOUSANDS OF DOLLARS)

<S> <C> <C> <C>
End of Period Borrowings:
Commercial paper................................... $2,008,766 $3,873,165 $3,739,993
Medium-term notes.................................. 82,000 285,250 214,000
Other debt......................................... 375,549 155,347 72,978
---------- ---------- ----------
Total............................................. $2,466,315 $4,313,762 $4,026,971
---------- ---------- ----------
Maximum Month-end Borrowings:
Commercial paper................................... $4,332,203 $3,873,165 $4,411,449
Medium-term notes.................................. 335,250 285,250 214,000
Other debt......................................... 500,720 155,347 72,978
---------- ---------- ----------
Total............................................. $5,168,173 $4,313,762 $4,698,427
---------- ---------- ----------
Daily Average Borrowings:
Commercial paper................................... $3,269,303 $3,606,081 $4,055,711
Medium-term notes.................................. 275,570 176,047 179,344
Other debt......................................... 272,444 61,669 42,734
---------- ---------- ----------
Total............................................. $3,817,317 $3,843,797 $4,277,789
---------- ---------- ----------
Weighted Average Interest Rates:
End of Period-
Commercial paper................................... 3.41% 3.59% 5.69%
Medium-term notes.................................. 3.54 3.67 5.53
Other debt......................................... 4.05 4.50 7.64
Total............................................. 3.51 3.63 5.72
During the Period*-
Commercial paper................................... 3.39% 4.18% 6.72%
Medium-term notes.................................. 3.78 4.55 7.17
Other debt......................................... 4.18 7.31 9.84
Total............................................. 3.48 4.25 6.77

<FN>
- -----

*Computed by dividing the interest expense (including the impact of
interest rate exchange agreements) by the daily average debt
outstanding without giving effect to commitment fees. The weighted
average interest rates on total commercial paper, medium-term notes
and other debt, giving effect to interest exchange agreements and
commitment fees for the years ended December 31, 1993, 1992 and 1991,
were 3.63%, 4.37% and 6.86%, respectively. The weighted average
interest rates during the period on commercial paper, without giving
effect to interest rate exchange agreements and commitment fees for
the years ended December 31, 1993, 1992 and 1991, were 3.17%, 3.65%
and 5.93%, respectively.
</TABLE>

The carrying amount of commercial paper and bank debt outstanding at
December 31, 1993 and 1992 approximated fair value due to
F-13
<PAGE> 31
Notes to Financial Statements (Continued)
- ------------------------------------------------------------------------
the short maturity of the instruments. The average yield of the
commercial paper and bank debt outstanding at December 31, 1993 and
1992, approximated the current market rate for like maturities. The
estimated fair value of outstanding medium-term notes at December 31,
1993 and 1992, approximated the carrying amount. Fair value of these
medium-term notes was estimated by using a rate at which Financial
could issue similar debt with like remaining maturities.

Lines of credit were maintained with various domestic and foreign banks
amounting to $3,386,732,000 and $3,255,075,000 at December 31, 1993 and
1992, respectively. Of such amounts, $3,336,183,000 and $3,153,532,000
were unused at December 31, 1993 and 1992, respectively, of which
$3,315,000,000 and $3,145,000,000, respectively, supported commercial
paper outstanding. Approximately $1,325,000,000 of the lines of credit
were under irrevocable multi-year revolving credit agreements and
approximately $1,990,000,000 of the lines of credit were under
irrevocable credit agreements of one year or less. The remaining
$71,732,000 may be terminated by Financial or withdrawn by the banks at
any time and are generally supported by payment of annual commitment
fees. Commitment fees during 1993, 1992 and 1991 amounted to
$5,721,000, $4,514,000 and $3,767,000, respectively. Financial may be
exposed to market risk in the event of nonperformance by the banks on
irrevocable lines of credit. Because nonperformance by a significant
number of banks is not anticipated, the Company does not expect a
material adverse effect on its results of operations or financial
position. Subsequent to December 31, 1993, Financial and ITT replaced
their credit lines supporting commercial paper with $7 billion of
credit lines with 65 domestic and foreign banks. Financial's lines were
comprised of a Three-Year Competitive Advance and Revolving Credit
Facility Agreement and a 364-Day Competitive Advance and Revolving
Credit Facility Agreement in the amounts of $1 billion and $3 billion,
respectively. The three-year agreement requires Financial to maintain
stockholder equity of not less than $750 million.

DEPOSITS AND CERTIFICATES

Financial's depository institutions obtain funds from customer deposits
and issuance of various types of savings certificates. The weighted
average interest rates on all such deposits and certificates
outstanding at December 31, 1993 and 1992 were 2.97% and 4.15%,
respectively.

The aggregate amount of certificates in denominations of $100,000 or
more was $54,773,000 and $174,490,000 at December 31, 1993 and 1992,
respectively.

The fair value of demand deposits is the amount payable on demand as of
December 31, 1993 and 1992. The estimated fair value of interest
bearing certificates of deposit at December 31, 1993 and 1992
approximated carrying amount. Fair value of interest bearing
certificates of deposit was estimated using the rates currently offered
for deposits with similar remaining maturities.

TRANSACTIONS WITH AFFILIATES

In December, 1993, Financial sold to ITT $358.7 million of subordinated
mortgage-backed securities. In return, ITT executed a promissory note
payable to Financial for a like amount. Principal payments shall be
credited monthly against the outstanding principal amount of the note
equal to the amount of cash actually received on behalf of ITT from the
securities. The note shall bear and accrue interest on a monthly basis
at the rate per annum equal to the average of the daily 90 day Libor
rate for the month of calculation plus 50 basis points, both for the
actual number of days outstanding during the monthly interest period.
Such monthly interest shall be payable quarterly. The note matures on
December 31, 2003. The note receivable from ITT is included in Other
Assets on the December 31, 1993 balance sheet of Financial.

RETAINED EARNINGS AND CAPITAL SURPLUS

In December, 1993, Financial declared and accrued its fourth quarter
dividend to ITT in the amount of $207.3 million. The dividend payable
is included in Accounts Payable and Accrued Liabilities on the December
31, 1993 balance sheet of Financial. The dividend was paid to ITT
subsequent to December 31, 1993.

Due to the reduction in retained earnings resulting from the fourth
quarter, 1992 reserve actions, Financial received from ITT a capital
contribution of $612,219,000, including 4,808,267 shares of Alcatel
Alsthom stock valued at $425,735,000 as of December 31, 1992. This
contribution was a receivable carried in Other Assets at year-end 1992,
and was received in the first quarter of 1993. The Alcatel Alsthom
stock is included in Other Assets on the December 31, 1993 balance
sheet of Financial.

Under the most restrictive of Financial's term agreement provisions
covering restricted payments, consolidated retained earnings and
capital surplus at December 31, 1993 aggregating $638,779,000 were
unrestricted as to the payment of dividends.

A support agreement between ITT and the Company was executed on
February 9, 1993, whereby ITT agreed to retain, directly or indirectly,
ownership of a majority of the shares of capital stock of the Company
having voting power for the election of directors and will assure that
the consolidated debt to equity ratio (excluding depository
institutions) of the Company at the end of each calendar quarter will
not exceed 6.75 to 1. The agreement also provides for ITT to make loans
to the Company on a subordinated basis up to $300,000,000 in the event
that the Company lacks sufficient cash, other liquid assets or credit
facilities to meet an obligation to pay principal of, or premium or
interest on any commercial paper or other short-term debt obligation
for money borrowed. Furthermore, the proceeds of any loan thereunder
may only be used by the Company to meet such payment obligations. Any
loan from ITT will be repayable upon demand anytime after the business
day following the 29th day after such loan was made, provided there is
no default in the payment by the Company of any indebtedness for money
borrowed. Interest on the outstanding amount of any loan shall be at
the fluctuating rate per annum equal to the announced prime rate of
Chase Manhattan Bank, N.A. In addition, the agreement provides for ITT
to assure that the Company will maintain unused committed bank lines of
credit to back up 100% of its outstanding commercial paper. The
agreement shall remain in full force and effect for so long as any debt
for borrowed money by the Company is outstanding unless terminated by
either party. Either party may terminate the agreement upon notice to
the other party of not less than 60 nor more than 90 days prior to such
termination, but in no event shall such termination be earlier than
July 31, 1994. This agreement superseded a similar agreement executed
on July 31, 1992.

F-14
<PAGE> 32
- ----------------------------------------------------------------------------
Financial information pertaining to ITT is available in its periodic
reports filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.

EXTRAORDINARY ITEM

In conjunction with the sale of the domestic unsecured consumer small
loan portfolio, Financial decided to retire a portion of its fixed rate
term debt. Fixed rate term debt was issued to finance this portfolio.
In anticipation of these retirements and the related premiums,
Financial recognized an extraordinary pre-tax loss at June 30, 1993, of
$75 million ($49.5 million after-tax). In an invitation dated July 26,
1993, as supplemented on August 5, 1993, Financial offered to purchase
between 25% and 35% of each of twelve series of securities aggregating
$1.9 billion in outstanding principal amount. As a result of the
invitation, Financial purchased, during the third quarter of 1993,
$528.3 million principal amount of securities with interest rates
ranging from 7% to 11%. The funds for the retirements were obtained
from operations and from the issuance of other debt.

COMMITMENTS AND CONTINGENCIES

<TABLE>
At December 31, 1993, Financial was obligated under long-term lease
contracts, principally for office rental, furniture and fixtures and
data processing equipment which expire on various dates. Minimum annual
rental commitments under noncancellable operating and capital leases
were as follows:

<S> <C>
1994....................................................... $26,278,000
1995....................................................... $17,698,000
1996....................................................... $14,933,000
1997....................................................... $12,909,000
1998....................................................... $10,913,000
1999 and after............................................. $30,115,000
</TABLE>

Rental expenses included in the statement of consolidated income for
the years ended December 31, 1993, 1992 and 1991 were $50,852,000,
$47,387,000 and $43,792,000, respectively.

In the normal course of business, Financial commits to originate or
purchase loans and to purchase mortgage servicing rights. In addition,
the insurance subsidiaries of Financial are obligated under financial
guarantee bonds. These commitments and obligations are not expected to
have any material adverse effect on the results of operations or the
financial position of the Company.

Financial and its subsidiaries have been named as defendants and as
potential defendants in various lawsuits and threatened litigation
which include allegations regarding Financial's insurance sales
practices. After consideration of established reserves, management
believes that the outcome of such litigation, and other contingencies,
will have no material adverse impact on the Company's results of
operations or its financial position.

SUPPLEMENTARY INCOME STATEMENT INFORMATION

Advertising costs for the years ended December 31, 1993, 1992and 1991
were $8,487,000, $23,011,000 and $21,404,000, respectively.

INDUSTRY INFORMATION

For purposes of segment reporting, management considers Financial to
operate in the finance industry.

UNAUDITED QUARTERLY FINANCIAL DATA

<TABLE>
Summarized unaudited quarterly financial data for 1993 and 1992 are as
follows:

<CAPTION>
THREE MONTHS ENDED,
------------------------------------------------------------------------------------------------------
1993 1992
------------------------------------------------ ------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 Mar. 31 June 30 Sept. 30 Dec. 31
----------------------------------------------- ------------------------------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $449,786 $411,213 $376,451 $352,170 $495,410 $483,081 $489,895 $ 531,924
-------- -------- -------- -------- -------- -------- -------- ----------
Expenses................ $384,914 $248,462 $304,839 $302,743 $464,936 $455,686 $441,184 $1,427,787
-------- -------- -------- -------- -------- -------- -------- ----------
Net Income (Loss) Before
Extraordinary Item and
Cumulative Effect of
Accounting Changes..... $ 43,355 $106,608 $ 57,910 $ 38,485 $ 23,627 $ 21,512 $ 34,433 $ (584,512)
-------- -------- -------- -------- -------- -------- -------- ----------
Net Income (Loss)....... $ 43,355 $ 57,108 $ 57,910 $ 38,485 $ 10,606 $ 21,512 $ 34,433 $ (584,512)
-------- -------- -------- -------- -------- -------- -------- ----------
</TABLE>

A special provision of $612.2 million after-tax was recorded in the
fourth quarter of 1992, principally as a result of Financial adopting a
strategic plan to shift its emphasis to secured lending and downsize
unsecured lending.

F-15
<PAGE> 33

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 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.

ITT FINANCIAL CORPORATION

by TERENCE L. PAYNE
...............................
(Terence L. Payne)
SENIOR VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)

March 25, 1994

<TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
FRANK J. SCHULTZ Chairman of the Board, President, 3/9/94
---------------------------- Chief Executive Officer and Director
(Frank J. Schultz)
(PRINCIPAL EXECUTIVE OFFICER)

DAVID K. ZWIENER Executive Vice President, 3/9/94
---------------------------- Treasurer, Chief Financial
(David K. Zwiener) Officer and Director
(PRINCIPAL FINANCIAL OFFICER)
</TABLE>

SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
HOWARD J. AIBEL Director 3/9/94
- --------------------------------------------------------------------
(Howard J. Aibel)

BETTE B. ANDERSON Director 3/9/94
- --------------------------------------------------------------------
(Bette B. Anderson)

ROBERT A. BOWMAN Director 3/25/94
- --------------------------------------------------------------------
(Robert A. Bowman)

JOHN D. BRODERICK Director 3/9/94
- --------------------------------------------------------------------
(John D. Broderick)

MELVIN F. BROWN Director 3/21/94
- --------------------------------------------------------------------
(Melvin F. Brown)

DALE R. COMEY Director 3/9/94
- --------------------------------------------------------------------
(Dale R. Comey)

STEPHEN R. LESKOVSKY Director 3/9/94
- --------------------------------------------------------------------
(Stephen R. Leskovsky)

EDWARD C. MEYER Director 3/9/94
- --------------------------------------------------------------------
(Edward C. Meyer)

RALPH W. PAUSIG Director 3/9/94
- --------------------------------------------------------------------
(Ralph W. Pausig)

DALE R. WALKER Director 3/9/94
- --------------------------------------------------------------------
(Dale R. Walker)

GRAHAM J. WILLIAMS Director 3/9/94
- --------------------------------------------------------------------
(Graham J. Williams)
</TABLE>

2-1

<PAGE> 34

<TABLE>
EXHIBIT INDEX

<CAPTION>
INCORPORATED BY REFERENCE TO
----------------------------
EXHIBIT NO. TITLE EXHIBIT/REGISTRATION NO.
- ----------- ----- ------------------------

<S> <C>
2 - Plan of acquisition, reorganization, Not Applicable
arrangement, liquidation or succession

3(i) - Restated Certificate of Incorporation Exhibit 3.1 to Registrant's Form
8-K filed February 6, 1991 (File
No. 1-7437)

3(ii)- By-Laws Exhibit 3.2 to Registrant's Form
8-K filed February 6, 1991 (File
No. 1-7437)

4 - Instruments defining the rights of security holders, --
including indentures*

9 - Voting trust agreement None

10 - Material contracts None

11 - Statement re computation of per share earnings Not Applicable

12 - Statements re computation of ratios Filed herewith

13 - Annual report to security holders, Form 10-Q or Not Applicable
quarterly report to security holders

16 - Letter re change in certifying accountant Not Applicable

18 - Letter re changes in accounting principles Not Applicable

21 - Subsidiaries of the registrant** --

22 - Published report regarding matters submitted to Not Applicable
vote of security holders

23 - Consents of experts and counsel Filed herewith
Opinions and Consents of independent public accountants

24 - Power of Attorney None

27 - Financial Data Schedule

28 - Information from reports furnished to state Not required to be filed
insurance regulatory authorities

99 - Additional exhibits None

<FN>
- -----

*Instruments defining rights of holders of Financial's long-term debt
(which are its only securities registered under Section 12 of the
Securities and Exchange Act of 1934) are not referred to herein
because the total amount of securities authorized under any such
individual instrument does not exceed 10% of the total assets of
Financial and its subsidiaries on a consolidated basis. Financial
will furnish a copy of any such instrument to the Commission upon
request.

**Omitted pursuant to General Instruction J(2)(b) of Form 10-K.
</TABLE>

2-2

<PAGE> 1

EXHIBIT 12.

<TABLE>
ITT FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNINGS:

Net income (loss) before extraordinary item and
cumulative effect of accounting changes....... $246,358 $(504,940) $ 78,063 $ 54,395 $155,673

Add income tax (benefit)....................... 102,304 (284,343) 10,132 (16,795) 28,589
-------- --------- -------- -------- --------

348,662 (789,283) 88,195 37,600 184,262
-------- --------- -------- -------- --------

Add fixed charges:

Interest expense.............................. 596,131 689,331 769,084 797,443 753,872

Interest factor attributable to rentals*...... 8,819 9,407 8,652 8,491 7,786
-------- --------- -------- -------- --------

604,950 698,738 777,736 805,934 761,658
-------- --------- -------- -------- --------

Income (loss), as adjusted, before
extraordinary item and cumulative effect of
accounting changes............................ $953,612 $ (90,545) $865,931 $843,534 $945,920
-------- --------- -------- -------- --------

RATIOS:

Income (loss), as adjusted, before
extraordinary item and cumulative effect of
accounting changes to fixed charges**......... 1.58 - 1.11 1.05 1.24
---- --- ---- ---- ----

<FN>
- -----

*The interest factor attributable to rentals was computed by applying
to the estimated present value of all long-term rental commitments
the approximate weighted average interest rate inherent in the lease
obligations, and adding thereto the interest element assumed in
short-term cancellable rentals excluded from the commitment data but
included in rental expense.

**Earnings for the year ended December 31, 1992 were insufficient to
cover the fixed charges by $789,283, therefore, no ratio is presented
for 1992.
</TABLE>

2-3

<PAGE> 1

EXHIBIT 23.

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into ITT
Financial Corporation's previously filed S-3 Registration Statements
File No. 2-98360, File No. 33-23341, File No. 33-31957, File No.
33-42236 and File No. 33-62882.

ARTHUR ANDERSEN & CO.

St. Louis, Missouri,
March 25, 1994.

2-4