HOUSTON, Oct. 28 /PRNewswire/ -- American General (NYSE: AGC) today
reported a 17% increase in third quarter operating earnings per share to $1.03
compared to $.88 in the third quarter of 1997. Operating earnings for the
quarter increased 22% to $268 million compared to $220 million in the third
quarter of 1997. Net income, which includes net realized gains and other
non-recurring items, was $255 million or $.98 per share in the third quarter
compared to $226 million or $.91 per share in the 1997 period.
Year-to-date operating earnings per share increased 16% to $3.03 compared
to $2.62 in the prior-year period. Operating earnings increased 21% to
$784 million from $649 million in the nine-month period in 1997. Net income
was $763 million or $2.95 per share compared to $312 million or $1.27 per
share in the 1997 period.
Following is a comparative table of third quarter and year-to-date
operating earnings for 1998 and 1997:
Quarter Ended Nine Months Ended
September 30, September 30,
Operating Earnings 1998 1997 Change 1998 1997 Change
In Millions $ 268 $ 220 + 22% $ 784 $ 649 + 21%
Per Share $ 1.03 $ .88 + 17% $ 3.03 $ 2.62 + 16%
Commenting on the results, Robert M. Devlin, chairman and chief executive
officer, said, "American General Financial Group continues to demonstrate
solid earnings growth and profitability through a period of changing economic
conditions. American General stands apart as a result of its strength and
stability during these turbulent times. We have built a well-diversified
company which has achieved success in a number of markets, providing a broad
array of financial products and services. Our company continues to present
shareholders with a valuable blend of strong earnings growth, high returns on
equity, and a balanced, lower-risk business profile. The outlook for each of
our divisions remains strong as we capitalize on the opportunities created by
our success in expanding both distribution and product capabilities.
"The strength and stability of American General also extends to our
investment operations. We have consistently managed our investment portfolio
in a conservative manner, and have continued to maintain high asset quality
and prudent asset/liability management. We are actively managing invested
assets to achieve optimal returns while mitigating risk.
"We continue to exceed our objectives for both earnings growth and
profitability, and believe American General provides an excellent risk-reward
relationship -- delivering to our shareholders a unique blend of growth,
profitability, and stability."
Additional Financial Highlights
-- Operating return on shareholders' equity was 15.4% for the nine months,
up from 13.6% a year ago;
-- Revenues and deposits increased $1.3 billion to $4.7 billion in the
quarter, up 38% from a year ago;
-- Assets increased $23 billion to $102 billion at quarter end, up 29%
from a year ago; and
-- Common stock price per share increased 18% for the nine months
to $63.88 at September 30.
Corporate Activities
National Advertising Campaign Launched. American General launched its
first-ever national television advertising campaign during the 1998 World
Series. Designed to differentiate American General in the highly competitive
financial services marketplace, the campaign positions the company as a
dynamic leader, focused on achieving a major strategic goal: to become the
nation's premier provider of lifetime financial solutions.
The campaign is uniquely American, highlighting great American authors,
leaders, and thinkers such as Mark Twain, Abraham Lincoln, and Emily
Dickinson. The campaign's theme is "Live the life you've imagined," inspired
by the works of writer and philosopher Henry David Thoreau. The 12-month,
$24 million campaign includes cable and network television and print ads in
many of the nation's leading financial and business publications.
Share Buyback Activity. American General purchased one million shares of
its common stock for a total cost of $67 million during the quarter.
Year-to-date, the company has purchased 2.2 million shares for a total cost of
$145 million or an average cost of $65.44 per share.
Division Reporting
Quarter Ended Nine Months Ended
September 30, September 30,
In Millions: 1998 1997 Change 1998 1997 Change
Retirement Services $ 117 $ 59 + 95% $ 354 $ 186 + 90%
Life Insurance 170 149 + 14 $ 500 433 + 15
Consumer Finance 52 43 + 20 146 127 + 15
Division Earnings $ 339 $ 251 + 35% $1,000 $ 746 + 34%
The Retirement Services division is a leading provider of retirement
products and services including tax-qualified annuities sold through a sales
force of more than 1,000 financial advisors, and non-qualified annuities
marketed through 15,000 financial institution representatives. The division
has $55 billion in assets and 1.5 million customers.
The Life Insurance division is the third-largest writer of new individual
life insurance premiums in the United States. With assets of $36 billion,
this division has life insurance in force of $335 billion, and serves over
eight million customers through 33,000 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 $8.8 billion and a nationwide network of 1,339 branches, this
division serves 2.3 million customer accounts.
Retirement Services
Performance Highlights:
-- Earnings increased 95% to $117 million;
-- Assets increased 60% to $55 billion; and
-- Total deposits increased 119% to $1.7 billion.
Third Quarter Results. In the quarter, the retirement services division
achieved strong earnings growth reflecting the contribution from American
General Annuity (formerly Western National) acquired in the first quarter, and
higher earnings from existing operations resulting from the growth in assets
and higher investment spreads. The division continues to benefit from strong
demand for retirement savings products in its primary markets as a result of
favorable demographic trends, combined with product and distribution
capabilities in both fixed and variable products for the tax-qualified and
non-qualified markets.
Total deposits increased sharply to $1.7 billion for the quarter, an
increase of 119%. The increase, which includes the addition of deposits from
American General Annuity (AGA), reflects strong sales in both the
tax-qualified and non-qualified annuity markets. Sales of tax-qualified
annuities increased 29% from the prior year as strong consumer demand for
equity-based products led to a significant increase in variable annuity sales.
Sales of non-qualified annuities increased 71% in the quarter, compared to the
year-ago period results -- reported when AGA was a stand alone company. The
exceptional sales increase is due to the strength of new and existing
financial institution proprietary relationships and the benefits of being part
of American General Financial Group. These proprietary relationships place
the division in a strong competitive position for the roll-out of its
non-qualified variable annuity products in first quarter 1999.
Within the division's tax-qualified markets, the shift from defined
benefit plans to defined contribution plans continues to be a key component of
industry growth. This is particularly important in the government market
where 11 states currently have legislation pending to convert portions of
their existing public employee retirement plans to defined contribution plans.
In response, the division has introduced an expanded portfolio of products and
services, including mutual funds, to best serve the needs of this growing
market.
Life Insurance
Performance Highlights:
-- Earnings increased 14% to $170 million;
-- Return on equity increased to 11.8% from 10.7%; and
-- Total premiums and deposits increased 4% to $1.2 billion.
Third Quarter Results. The life insurance division continued to produce
strong operating results in the quarter during a period of transition, as
consolidation and integration activities of acquired companies neared
completion and the division focused on additional product and marketing
initiatives. Earnings increased 14% as a result of improvement in the
investment margin, additional gains in operating efficiency, and growth in
premium and deposits.
The repositioning of the product portfolio to include variable-based
products and expansion of new distribution arrangements has positioned the
division to meet shifts in product demand. Sales of life insurance products
increased slightly over the prior-year period and reflect the transition to
higher sales of recently introduced variable and indexed universal life
products which increased 56%, partially offset by lower sales of fixed
universal life products, consistent with industry trends. Annuity sales were
flat with the prior year which reflects a 173% increase in variable annuity
sales in the quarter offset by lower fixed annuity and structured settlement
sales.
The division continues to expand product sharing and cross-marketing
initiatives introduced at the end of the first quarter. These initiatives
accounted for 3% of total life and annuity sales in the quarter and are
expected to increase in future periods. Product sharing initiatives currently
include term life insurance, and indexed and variable universal life
insurance. These products are being offered through all distribution channels
within the life insurance division. In addition, a full line of competitive
fixed annuity products developed and serviced by the retirement services
division will be introduced in the fourth quarter of 1998.
Consumer Finance
Performance Highlights:
-- Earnings increased 20% to $52 million;
-- Receivables portfolio increased 17% to $8.8 billion; and
-- Charge-off ratio improved to 2.44% from 3.27%.
Third Quarter Results. The consumer finance division achieved a 20%
increase in earnings for the quarter as a result of continued growth in
receivables and improved credit quality. Internally generated loan volume
increased by 5% over the prior-year period and was supplemented by bulk
purchases of primarily real estate secured loans. The division's strategy of
shifting its receivables portfolio toward higher-quality, real estate secured
loans continued, with the portfolio consisting of 56% real estate secured
loans at quarter end, up from 51% a year ago.
The higher quality receivables portfolio contributed to the lower level of
charge-offs and led to an improvement in risk-adjusted spread to 6.76% for the
quarter. The delinquency ratio improved to 3.75% from 3.83% a year ago, and
compares to 3.43% at the end of the 1998 second quarter. The charge-off ratio
continued to improve, declining to 2.44% at quarter end from 3.27% a year ago
and 2.62% at the end of the 1998 second quarter. At the end of the quarter,
the allowance for loan losses remained conservative at $365 million or 4.15%
of finance receivables, providing a coverage ratio of annualized charge-offs
of 171%. The expense ratio improved to 5.50% from 6.05% in the prior-year
period and reflects successful expense management efforts combined with the
growth in finance receivables.
The division has continued to expand the use of risk management systems
for loan underwriting and tracking of receivable credit quality. Newly
originated and purchased receivables are consistently monitored for credit
quality and prepayment trends permitting adjustments to underwriting criteria.
The risk management systems, combined with maintenance of strict underwriting
standards and a conservative receivables portfolio, have positioned the
division for continued profitable growth through changing market conditions.
Corporate Items
Quarter Ended Nine Months Ended
September 30, September 30,
In Millions: 1998 1997 1998 1997
Interest on Corporate
Debt $ (32) $ (29) $ (95) $ (81)
Dividends on Preferred
Securities (22) (23) (67) (62)
Net Equity (Minority
Interest) in Earnings
of Western National -- 14 (11) 31
Other Corporate (17) 7 (43) 15
Total Corporate
Operations $ (71) $ (31) $(216) $ (97)
Realized Investment
Gains $ -- $ 6 $ 3 $ 16
Non-recurring Items $ (13) $ -- $ (24) $(353)
The increase in interest on corporate debt primarily resulted from the
higher level of debt outstanding following the Western National acquisition,
partially offset by lower funding costs. The 1998 minority interest
represents the portion of Western National's earnings prior to February 25,
1998, which were not attributable to American General. The change in the
other corporate category resulted from a lower level of assets not allocated
to the business divisions and an increase in goodwill amortization. The
non-recurring item in the 1998 periods consists of a portion of the costs
associated with the company's Year 2000 compliance effort which is expected to
be substantially completed by year end. The 1997 non-recurring items are
primarily costs associated with the company's acquisition of USLIFE
Corporation and the sale of non-strategic assets.
American General Financial Group is one of the nation's largest
diversified financial services organizations, with assets of $102 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.
All statements, trend analyses, and other information contained in this
report and elsewhere (such as other filings by the company with the Securities
and Exchange Commission, press releases, presentations by the company or its
management, or oral statements) relative to markets for the company's products
and trends in the company's operations or financial results, as well as other
statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," and other similar expressions, constitute
forward-looking statements under the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects upon the company. There can be no assurance that future developments
affecting the company will be those anticipated by management. Actual results
may differ materially from those included in the forward-looking statements.
These forward-looking statements involve risks and uncertainties
including, but not limited to, the following: (1) changes in general economic
conditions, including the performance of financial markets and interest rates;
(2) customer responsiveness to both new products and distribution channels;
(3) competitive, regulatory, or tax changes that affect the cost of or demand
for the company's products; (4) the company's ability to achieve Year 2000
readiness for significant systems and operations on a timely basis; (5)
adverse litigation results or resolution of litigation, including market
conduct litigation; and (6) the company's failure to achieve anticipated
levels of earnings or operational efficiencies related to recently acquired
companies, as well as other cost-saving initiatives. Investors are also
directed to other risks and uncertainties discussed in documents filed by the
company with the Securities and Exchange Commission. The company undertakes
no obligation to update or revise any forward-looking information, whether as
a result of new information, future developments, or otherwise.
AMERICAN GENERAL FINANCIAL GROUP
Comparative Results
(in millions, except per share data) (Unaudited)
Quarter ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
1. Revenues and Deposits $ 4,703 $ 3,416 $13,579 $10,306
Business Division Earnings:
2. Retirement Services $ 117 $ 59 $ 354 $ 186
3. Life Insurance 170 149 $ 500 433
4. Consumer Finance 52 43 146 127
5. Total Business Division
Earnings 339 251 1,000 746
Corporate Operations:
6. Interest on Corporate Debt (32) (29) (95) (81)
7. Dividends on Preferred
Securities of
Subsidiaries (22) (23) (67) (62)
8. Expenses Not Allocated
to Divisions (12) (13) (35) (35)
9. Earnings on Corporate
Assets 7 27 24 68
10. Goodwill Amortization (12) (7) (32) (18)
11. Net Equity (Minority
Interest) in Earnings of
Western National
Corporation -- 14 (11) 31
12. Total Corporate
Operations (71) (31) (216) (97)
13. Operating Earnings (a) 268 220 784 649
14. Realized Investment Gains -- 6 3 16
15. Non-recurring Items (13) -- (24) (353)
16. Net Income $ 255 $ 226 $ 763 $ 312
17. Operating Earnings
per Share (diluted) 1.03 .88 3.03 2.62
18. Net Income Per Share
(diluted) .98 .91 2.95 1.27
19. Average Diluted Shares
- Operating Earnings 263.4 252.8 261.2 251.1
20. Average Diluted Shares
- Net Income 263.4 252.8 261.2 242.6
At September 30,
1998 1997
21. Assets $102,197 $ 79,416
22. Shareholders' Equity 9,469 7,319
23. Book Value Per Share 37.00 29.84
24. Market Price Per Share 63.88 51.88
Excluding Fair Value Adjustment Related
To Securities (SFAS 115) (b):
25. Assets $ 99,011 $ 77,956
26. Shareholders' Equity 7,410 6,382
27. Book Value Per Share 29.16 26.09
(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
most 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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800-758-5804, ext. 114643
CONTACT:
David W. Entrekin, Vice President -- Investor
Relations, 212-446-3109, or John E. Pluhowski, Director --
Corporate Communications, 713-831-1149, both for American General
Corporation
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