HOUSTON, April 29 /PRNewswire/ -- American General Corporation (NYSE: AGC)
today reported a 13% increase in first quarter operating earnings per share to
a record $.98 compared to $.87 per share in the 1997 period. Total operating
earnings increased 17% to $250 million in the quarter compared to $214 million
in the first quarter of 1997. Net income, which includes net realized gains
and other non-recurring items, was $244 million or $.96 per share in the first
quarter of 1998 compared to $210 million or $.85 per share in the 1997 period.
Quarter Ended March 31,
Operating Earnings 1998 1997 Change
In Millions $250 $214 + 17%
Per Share (diluted) $.98 $.87 + 13%
Commenting on the results, Robert M. Devlin, chairman and chief executive
officer, said, "Our earnings per share growth of 13% and return on equity of
15% in the first quarter reflect the success of American General's performance
and growth strategy. Our long-term objectives of 12-14% earnings per share
growth and a return on equity of 15% are being achieved. The improvement in
results was broad based, with strong earnings growth in all three of our
divisions. American General continues to produce excellent operating
performance while executing its winning long-term strategy.
"We are exceeding our targets for cost savings and new product
initiatives. The consolidation and integration of acquired companies have
enabled us to realize operating efficiencies while expanding distribution of
products and services. We are beginning to take advantage of our expanded
distribution network through product sharing among companies and cross-company
marketing of financial products.
"As the financial services industry continues to evolve, we remain
committed to our disciplined strategy of internal expansion and growth through
acquisition. We intend to pursue only those acquisition opportunities that
can add value for the long-term benefit of our shareholders. The Western
National acquisition, which was completed during the first quarter, was that
kind of opportunity. We will continue to focus on producing consistently
strong operating results while looking for additional opportunities to build
upon our success. And we expect to surpass two significant milestones in 1998
-- $1 billion of operating earnings and $100 billion of assets."
Additional Financial Highlights
-- Operating return on share holders' equity was 15%, up from 14%;
-- Revenues and deposits increased to $4.4 billion, up 30%;
-- Assets increased $22 billion to $96 billion, up 29% from a year ago;
and,
-- Common stock price per share increased 20% in the quarter to $64.69.
Corporate Activities
Western National Acquisition. On February 25, 1998, American General
completed the acquisition of the remaining 54% of Western National Corporation
for $1.2 billion, consisting of $580 million in cash and 10.2 million shares
of American General common stock.
Share Buyback Activity. American General purchased 0.5 million shares of
its common stock for a total cost of $31 million during the quarter at an
average cost of $59.89 per share.
Division Reporting
American General reports its financial results in three business divisions
and a category for corporate items. In anticipation of adoption of SFAS 131
regarding segment reporting, the company has reclassified goodwill
amortization from division operating results to corporate operations. Prior
period division earnings have been adjusted to conform with this change.
Division Operating Earnings
Quarter Ended March 31,
In Millions: 1998 1997 Change
Retirement Services* $114 $63 + 80%
Life Insurance 161 141 + 14
Consumer Finance 47 41 + 14
Division Earnings $322 $245 + 31%
(*) Retirement Services includes operating results for Western National at
100% from the beginning of the 1998 period, with a reduction for the
54% interest not owned by American General prior to February 25
recorded as minority interest in corporate operations. During 1997,
American General's 46% equity interest in Western National was
accounted for using the equity method and reported in corporate
operations.
The Retirement Services division is a leading provider of retirement
products and services consisting primarily of tax-qualified annuities sold
through a sales force of more than 1,000 retirement planning specialists, and
non-qualified annuities marketed through financial institutions in 7,500
locations. The division has $50 billion in assets and 1.5 million customers.
The Life Insurance division is the second-largest writer of new individual
life insurance premium in the United States. With assets of $35 billion, this
division has life insurance in force of $330 billion, and serves over eight
million customers through 35,000 agents.
The Consumer Finance division is a leading provider of home equity loans,
consumer loans, and credit-related life insurance products. With finance
receivables of $8.1 billion and a nationwide network of 1,350 branches, this
division serves 2.3 million customer accounts.
Retirement Services
Performance Highlights
-- Earnings increased 80% to $114 million;
-- Assets increased 62% to $50 billion; and,
-- Premium deposits increased 74% to $1.5 billion.
First Quarter Results. The inclusion of Western National's results
contributed $30 million to division operating earnings, $556 million to
premium deposits, and $12 billion to assets. Excluding the acquisition,
earnings increased 33% in the quarter as a result of the higher fixed
investment spread and a 22% increase in assets. The expense ratio improved to
43 basis points from 48 basis points in the prior year period as a result of
the strong growth in assets and the addition of Western National.
Excluding Western National, the number of participants increased 11% which
led to a 17% increase in continuing premium, while deposits grew 8%. Consumer
preference for equity-based variable products continued during the quarter.
Increased variable premium, combined with market appreciation, led to a 68%
increase in separate account assets to $12.5 billion.
The operations of Western National and VALIC are being combined under
centralized management in the retirement services division. Benefits of
centralized management include a shared approach to new product development,
integration of certain administrative functions, and expense reduction. This
combination will enhance the division's ability to sell additional products
through Western National's existing financial institution relationships.
Effective May 1, 1998, Western National will be renamed American General
Annuity Insurance Company.
Life Insurance
Performance Highlights.
-- Earnings increased 14% to $161 million;
-- Annualized premium life sales increased 53% to $177 million; and,
-- Total deposits increased 14% to $475 million.
First Quarter Results. The life insurance division produced a 14%
increase in earnings as a result of growth in premium, improvement in the
investment margin, expense reductions, and the addition of an acquired
company. Annualized premium life sales increased 53% as a result of the
recent entry into the corporate executive benefits market and the contribution
of an acquired company. Annuity sales increased 13% primarily due to recently
introduced variable annuity products.
The life insurance division continues to make progress toward building its
marketing and shared services infrastructure. The division is exceeding
expected operating efficiency gains as a result of ongoing consolidation and
integration activities. A portion of the expense savings has been reinvested
in the development and introduction of the division's new variable life and
annuity products, and new systems designed to support the division's growth
and efficiency objectives. Current period division expenses include
$10 million of additional expenses from an acquired company not in prior
period results.
The benefits of product sharing are beginning to be realized as initial
sales results indicate strong acceptance of these additional products. To
take advantage of the strong demand for variable products, two new variable
universal life insurance products were introduced in the quarter. During the
second quarter, a new private placement variable universal life product will
be introduced and the marketing of new variable annuity products will be
expanded.
Consumer Finance
Performance Highlights.
-- Earnings increased 14% to $47 million;
-- Charge-off ratio improved to 2.70% from 3.83%; and,
-- Delinquency ratio improved to 3.49% from 3.76%.
First Quarter Results. The consumer finance division achieved a 14%
increase in earnings during the quarter reflecting improved credit quality and
an increase in average receivables. The improvement in credit quality
resulted from the shift toward a higher percentage of real estate-secured
receivables and enhanced underwriting and risk management technology. The
lower level of charge offs led to an improvement in risk-adjusted spread to
7.07% from 6.55% in the prior year.
The receivables portfolio increased 8% to $8.1 billion at quarter end.
This increase resulted from a 22% rise in loan volume, including a significant
increase in loan volume by the branch office network. The receivables
portfolio consisted of 53% real estate-secured loans at quarter end, up from
48% a year ago. At the and of the quarter, the allowance for loan losses was
$368 million or 4.56% of finance receivables, and remained conservative near
the high end of the company's historic range of charge-off coverage.
The division's focus on developing new customer relationships has
contributed to the growth in receivables recently introduced marketing
programs have led to an 11% increase in retail sales contract receivables
which represent the primary source of new customers. In addition, the
division will be introducing new and expanded direct marketing and
telemarketing programs to further increase the customer base.
Corporate Operations
Corporate operations include: operating items such as cost of debt and
preferred capital, corporate expenses, goodwill amortization, and earnings on
assets not allocated to divisions; and non-operating items such as realized
investment gains and non-recurring items.
Quarter Ended March 31,
In Millions: 1998 1997
Interest on Corporate Debt $(32) $(25)
Dividends on Preferred Securities (22) (17)
Net Equity (Minority Interest) in
Earnings of Western National (11) 9
Other Corporate (7) 2
Total Corporate Operations $(72) $(31)
Realized Investment Gains (Losses) $-- $(4)
Non-recurring Item $(6) $--
The increase in interest on corporate debt resulted from the higher level
of debt outstanding following the Western National acquisition and a one-time
$4 million aftertax charge for the early retirement of higher-cost debt.
Dividends on preferred securities increased as a result of securities issued
during the first quarter of 1997. In the first quarter of 1998, the minority
interest represents the portion of Western National's earnings which were not
attributable to American General. The change in the other corporate category
resulted from a decrease in earnings on assets not allocated to divisions and
an increase in goodwill amortization. The non-recurring item in the 1998
period consists of a portion of the costs associated with the company's Year
2000 compliance efforts which are expected to be substantially completed by
year end.
American General Corporation is one of the nation's largest diversified
financial services organizations with asserts of $96 billion and market
capitalization of $17 billion. Headquartered in Houston, it is a leading
provider of retirement services, life insurance, and consumer loans to over
12 million customers. American General common stock is listed on the New
York, Pacific, London, and Swiss stock exchanges.
Certain information included in this press release is forward looking and
involves risks and uncertainties, including general economic and competitive
conditions, that could significantly impact expected results. Investors also
are directed to other risks and uncertainties discussed in documents filed by
the company with the Securities and Exchange Commission.
SUPPLEMENT TO NEWS RELEASE 98-07 DATED APRIL 29, 1998
TITLED "AMERICAN GENERAL REPORTS 13% INCREASE IN FIRST QUARTER..."
American General Corporation
Comparative Results Quarter ended
(in millions, except per share data) (Unaudited) March 3l,
1998 1997
1. Revenues and Deposits $4,409 $3,403
Business Division Earnings:
2. Retirement Services $114 $63
3. Life Insurance 161 141
4. Consumer Finance 47 41
5. Total Business Division Earnings 322 245
Corporate Operations:
6. Interest on Corporate Debt (32) (25)
7. Dividends on Preferred Securities (22) (17)
8. Expenses Not Allocated to Divisions (10) (10)
9. Earnings on Corporate Assets 12 18
10. Goodwill Amortization (9) (6)
11. Net Equity (Minority Interest) in
Earnings of Western National Corp. (11) 9
12. Total Corporate Operations (72) (31)
13. Operating Earnings (a) 250 214
14. Realized Investment Gains (Losses) -- (4)
15. Non-recurring Item -- Year 2000 Costs (6) --
16. Net Income $244 $210
17. Operating Earnings per Share (diluted) $.98 $.87
18. Net Income Per Share (diluted) .96 .85
19. Average Diluted Shares 257.3 249.4
At March 31,
1998 1997
20. Assets $96,051 $74,443
21. Shareholders' Equity 8,474 6,359
22. Book Value Per Share 33.03 26.34
23. Market Price Per Share 64.69 40.75
Excluding Fair Value Adjustment Related
To Securities (SFAS 115)(b):
24. Assets $94,055 $74,267
25. Shareholders' Equity 7,184 6,248
26. Book Value Per Share 28.14 25.89
(a) Operating earnings exclude aftertax realized investment gains
(losses), non-recurring items, and one-time accounting changes.
(b) Under Financial Accounting Standard 115, American General classifies
all fixed maturity and equity securities as available-for-sale and
records them at fair value. The company adjusts related balance
sheet accounts and shareholders' equity as if the associated
unrealized gains (losses) had been realized at the balance sheet
date.
SOURCE American General Corporation
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CONTACT:
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- Investor Relations, 713-831-1346, or Media, John E. Pluhowski,
Director - Corporate Communications, 713-831-1149, both of
American General Corporation
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