NEW YORK, June 6 /PRNewswire/ -- Standard & Poor's today has affirmed its
ratings on American General Corp., its finance company subsidiary American
General Finance Corp. (AGFC), and the claims-paying ability ratings of its
insurance subsidiaries Franklin Life Insurance Co. and American Franklin Life
Insurance Co., (see list below) and has removed them from CreditWatch where
they were placed February 13, 1997 following the announcement of the $1.8
billion merger of American General with USLIFE Corp.
The ratings of American General's other insurance subsidiaries, along
with the ratings of USLIFE and its insurance subsidiaries remain on
CreditWatch, pending the successful completion of the merger, which is
expected to occur on June 16.
These rating actions affect about $1.2 billion of American General
long-term debt, $1.7 billion of American General preferred stock, and
$5.5 billion of AGFC senior unsecured debt.
The affirmation of American General's debt and preferred stock ratings
reflects the company's commitment to maintaining financial leverage and
interest/fixed charge coverage ratios at levels supportive of the current
ratings, as well as the diversification of earnings at the holding company
level. Including the USLIFE acquisition, American General's debt/capital ratio
will be approximately 23%, preferred/capital will be around 16%, double
leverage is approximately 121%, and fixed charge coverage is anticipated to be
approximately 5.1 times (x) during 1997. Earnings flowing into the holding
company are diversified, with approximately 15% of 1997 operating earnings
expected to come from American General's finance company operations. With the
redirection of this company's business, this percentage is expected to grow.
Of the remaining 85% of earnings coming from the insurance operating units,
earnings are well-diversified between the life insurance and qualified annuity
markets, and home service market, as well as on a legal-entity basis.
EXPECTATIONS:
-- Debt/capital will remain at or below 25% over the long term, while
hybrid issues are expected to constitute 15% of the capital structure. Fixed
charge coverage (including preferred dividends) will remain at 5x to 6x.
-- Earnings will remain strong.
-- Capitalization of American General's life insurance group will be at
superior levels as measured by Standard & Poor's capital adequacy model.
OUTLOOK: Negative.
Standard & Poor's anticipates that, given American General's active role
in the rapidly consolidating life insurance industry, as management considers
its options for financing future acquisitions, the commitment to its current
financial leverage targets may become strained.
ISSUER RATING
RATINGS AFFIRMED AND
REMOVED FROM CREDITWATCH
American General Corp.
Issuer credit rating AA-/A-1+
Senior unsecured debt AA-
Subordinated debt A+
Preferred stock A+
Commercial paper A-1+
American General Capital Services Inc.
Commercial paper* A-1+
American General Capital LLC
American General Delaware LLC
American General Institutional Capital A
Preferred stock A+
American General Finance Corp.
Senior unsecured debt A+
Long-term counterparty A+
American Franklin Life Insurance Co.
Franklin Life Insurance Co.
Issuer credit rating AA+
Claims-paying ability AA+
* Gtd. by American General Corp.
RATINGS REMAINING ON CREDITWATCH WITH NEGATIVE IMPLICATIONS
American General Life Insurance Co.
American General Life Insurance Co. of NY
American General Life & Accident Insurance Co.
Variable Annuity Life Insurance Co.
Issuer credit rating AAA
Claims-paying ability AAA
RATINGS REMAINING ON CREDITWATCH WITH DEVELOPING IMPLICATIONS
USLIFE Corp.
Issuer credit rating A+
Senior debt rating A+
United States Life Insurance Co. in the City of New York
All American Life Insurance Co.
Old Line Life Insurance Co. of America
Issuer credit rating AA+
Claims-paying ability AA+
SOURCE American General Finance Corp.
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CONTACT:
Jon Reichert, New York, 212-208-1775, Jack
Reichman, New York, 212-208-8432, or Dan Martin, New York,
212-208-1299, all of Standard & Poor's
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