HOUSTON, Oct. 22, /PRNewswire/ -- American General Corporation
(NYSE: AGC), one of the nation's largest diversified financial services
organizations with assets of $64 billion and market capitalization of
$8 billion, today reported third quarter operating earnings of $174 million or
$.83 per share compared to $178 million or $.85 per share for the 1995 period.
Lower earnings in the consumer finance segment offset record third quarter
earnings in the retirement annuities and life insurance segments.
Net income, which includes net realized gains on investments and losses on
assets held for sale, was $172 million or $.82 per share compared to $181
million or $.86 per share in the third quarter of 1995.
Year-to-date consolidated operating earnings were $490 million or $2.33
per share compared to $531 million or $2.57 per share for the nine month
period in 1995.
Following is a comparative table of third quarter and year-to-date results
for 1996 and 1995:
Quarter Ended Sept. 30, Nine Months Ended Sept. 30,
----------------------- ---------------------------
In Millions: 1996 1995 1996 1995
------------ ---- ---- ---- ----
Pretax Operating
Earnings $272 $250 $762 $800
Operating
Earnings 174 178 490 531
Net Income 172 181 509 536
Per Share:
----------
Operating
Earnings $.83 $.85 $2.33 $2.57
Net Income .82 .86 2.42 2.59
Average Share
(in millions)
-------------- 213.4 (a) 211.8 213.9 (a) 208.2
(a) Average shares outstanding increased due to the issuance of
convertible preferred securities and common stock in 1995 and 1996, partially
offset by share purchases under the company's share buyback program.
Commenting on the results, Harold S. Hook, chairman and CEO, said, "The
nine month results put us on track for another record year in earnings, the
eighth record year in the last 10. It is also important to note that the debt
levels related to the acquisitions of the past two years have been reduced;
and the company is once again well positioned to take advantage of
opportunities for growth through acquisitions."
Corporate Financial Highlights
The following financial highlights have been adjusted to exclude the
effect of Financial Accounting Standard 115 (see note).
Sept. 30, 1996 Compared to Sept. 30, 1995
-----------------------------------------
* Assets increased $5.1 billion to $64 billion, up 9 percent;
* Shareholders' equity increased $284 million to $5.1 billion,
up 6 percent;
* Book value increased to $24.77 per share, up 5 percent; and
* Corporate debt-to-capital ratio was 25 percent compared to
26 percent a year ago.
Nine Months 1996 Results
------------------------
* Revenues and deposits increased $388 million to $8.1 billion,
up 5 percent;
* Operating return on shareholders' equity was 13.4 percent;
* Annualized total return to shareholders was 14.7 percent; and
* The common stock dividend rate was increased for the 21st consecutive
year resulting in total common dividends paid of $200 million,
up 5 percent.
Corporate Development
Corporate development is an important part of American General's strategy
that includes acquisitions, divestitures, and systems for improvement in
internal operations. This strategy has produced a balanced network of
companies able to perform well over a long period of time and through all
phases of the business cycle. Corporate development activities include a
disciplined approach to mergers and acquisitions; the integration,
rationalization, and consolidation of acquired companies; and an active share
buyback program. Following is an update of corporate development activities.
Life Insurance
Over the last two years, American General acquired the operations of
Franklin Life and Independent Life for an aggregate cost of $1.5 billion.
These acquisitions accounted for 38 percent of the record quarterly earnings
of $105 million for the life insurance segment. The consolidation of
Independent Life into American General Life and Accident is on schedule and is
expected to result in annualized expense savings of $75 million. American
General expects to benefit further through participation in the ongoing life
insurance industry consolidation.
Consumer Finance
American General Finance purchased a $276 million portfolio of real estate
secured receivables in the third quarter. Year-to-date real estate
receivables purchased total nearly $500 million. These acquisitions are
consistent with the company's strategy to rebalance its loan portfolio to
include a higher concentration of real estate secured receivables, which now
account for 42 percent of receivables compared to 34 percent a year ago.
Western National
In December 1994, American General purchased 40 percent of the common
stock of Western National Corporation for $274 million or $11.00 per share.
During the third quarter this year, the company purchased 7.25 million shares
of convertible preferred stock of Western National for a total purchase price
of $130 million or $17.92 per common equivalent share, increasing its
ownership interest to 46 percent on a fully diluted basis. Western National
is a leading provider of annuities marketed through banks and other financial
institutions.
Share Buyback
American General purchased 1.8 million shares of its common stock in the
open market for a total cost of $65 million or $36.26 per share in the third
quarter. Year-to-date purchases total 4.2 million shares for an aggregate
cost of $152 million. Purchases under the program since 1987 total
102 million shares, or 34 percent of the shares then outstanding, for an
aggregate cost of $2.1 billion.
Segment Reporting
American General reports its financial results in three business segments
and a category for corporate operations. Following is a comparative table of
third quarter and nine month earnings for 1996 and 1995 by business segment:
Quarter Ended Sept. 30, Nine Months Ended Sept. 30,
----------------------- ---------------------------
In Millions: 1996 1995 1996 1995
---- ---- ---- ----
Retirement
Annuities $ 57 $ 54 $175 $162
Consumer
Finance 43 55 102 177
Life Insurance 105 95 296 265
---- ---- ---- ----
Business Segment
Earnings $205 $204 $573 $604
==== ==== ==== ====
Retirement Annuities
VALIC, with $29 billion in assets, is a leading provider of tax-deferred
retirement annuities and employer-sponsored retirement programs to employees
of educational, health care, public sector, and other not-for-profit
organizations. VALIC has 1.5 million customer accounts serviced by a sales
force of 950 retirement planning specialists.
Third Quarter Results
VALIC reported record third quarter earnings of $57 million compared to
$54 million for the 1995 period. Strong asset growth combined with higher
investment income led to the increase. Assets (excluding the effect of SFAS
115) increased $731 million in the quarter to $28.9 billion at Sept. 30, 1996.
Year-over-year asset growth was $3.4 billion, up 13 percent. VALIC's
surrender rate improved to 5.0 percent from 5.2 percent in the second quarter
and 5.4 percent in the first quarter of 1996. Year-to-date return on equity
was 16.2 percent.
Sales increased 26 percent for the third quarter as a result of the
positive response to VALIC's third quarter introduction of its Portfolio
Director 2 variable annuity product, continued strong market demand for
equity-based products, and increased capital transfers. The Portfolio
Director product series, supported by VALIC's Portfolio Optimizer(R) asset
allocation service, accounted for 60 percent of 1996 premium.
Total fixed and variable premium deposits were $692 million, up 20 percent
from a year ago. Strong demand for equity-based products continued with
variable premium deposits accounting for 47 percent of total premium deposits
in the quarter compared to 35 percent in the prior year period. The growth in
variable premium deposits contributed to a 58 percent increase in separate
account assets to $6.4 billion at Sept. 30, 1996.
Consumer Finance
American General Finance is a leading provider of consumer and home equity
loans, credit cards, and credit-related products. The company ranks among the
nation's largest consumer finance companies with a nationwide network of 1,400
branch offices, 3.2 million customer accounts, and finance receivables of over
$8 billion.
Third Quarter Results
Consumer finance earnings were $43 million in the third quarter compared
to $31 million in the second quarter of 1996 and $55 million in the third
quarter of 1995. Earnings for the 1995 period included an aftertax benefit of
$15 million from an adjustment to state income taxes.
For the quarter, finance receivables increased $155 million to $8.2
billion primarily due to the purchase of a $276 million portfolio of real
estate secured receivables.
Yield on finance receivables was 17.8 percent compared to 18.2 percent in
the year-ago period reflecting the targeted change in the receivables mix. At
Sept. 30, 1996, delinquencies were 4.28 percent of receivables, up from 3.99
percent in the second quarter and 4.13 percent at year end.
The charge off rate was 5.37 percent of receivables compared to 5.33
percent for the second quarter.
The allowance for loan losses was $465 million or 5.67 percent of
receivables compared to 5.85 percent at year-end 1995. The current allowance
for loan losses reflects the effects of the higher percentage of lower risk
real estate secured receivables. For the quarter, the allowance declined $17
million compared to a $50 million increase in the 1995 period.
Operating results for the segment were below company expectations
primarily due to the decline in credit fundamentals within the consumer
finance market including the record level of personal bankruptcies. The
consumer finance operations have begun to benefit from actions taken to
stabilize credit quality including the elimination of certain underperforming
non-branch marketing programs, the establishment of higher underwriting
standards, and revisions to the field office incentive compensation system.
The company will introduce additional programs later this year and in 1997 to
improve credit quality, increase loan volume, and further reduce expenses.
Life Insurance
American General is the largest writer of individual life insurance
premiums in the United States among shareholder owned companies. The
principal operating companies in this segment are American General Life,
Franklin Life, and American General Life and Accident. Combined, these
companies have assets of $25 billion, life insurance in force of $149 billion,
and serve over 5 million customers through a field force of 16,000 agents.
Third Quarter Results
Third quarter earnings for the life insurance segment were $105 million, a
10 percent increase over the prior year and the highest level of quarterly
earnings for any segment in the company's history. Earnings during the 1995
period were $95 million. The current period earnings include the operations
of Independent Life acquired on Feb. 29, 1996.
The face amount of life insurance sold was $4.9 billion and life insurance
in force increased to $149 billion, up 7 percent from a year ago. Annualized
premiums for continuous-pay life insurance sales were $59 million compared to
$62 million in the 1995 third quarter. Life insurance deposits for the
quarter were essentially unchanged at $167 million.
The life insurance segment has undertaken a number of significant steps to
increase sales and improve operations. American General Life has introduced a
line of more competitive products and has established strategic marketing
alliances with major mutual fund companies and brokerage firms. At Franklin
Life, operating efficiencies and expense reductions have contributed to a
12 percent increase in third quarter operating earnings. Consolidation of
Independent Life into American General Life and Accident is progressing as
planned and is expected to be completed in 1997.
Corporate Operations
Corporate operations include income, interest, and other expenses not
directly associated with business segment operations. Following is a
comparative table of third quarter and nine month corporate operations
(aftertax) for 1996 and 1995:
Quarter Ended Sept. 30, Nine Months Ended Sept. 30,
----------------------- ---------------------------
In Millions: 1996 1995 1996 1995
----------- ---- ---- ---- ----
Interest on
Corporate Debt $(24) $(26) $(67) $(82)
Dividends on
Preferred Securities (10) (8) (29) (10)
Equity in Earnings of
Western National 6 7 18 21
Other (3) 1 (5) (2)
---- ---- ---- ----
Subtotal (31) (26) (83) (73)
Realized Investment
Gains 16 3 37 5
Losses on Assets Held
for Sale (18) -- (18) --
---- ---- ---- ----
Total Corporate
Operations $(33) $(23) $(64) $(68)
==== ==== ==== ====
The decrease in interest on corporate debt during 1996 reflects the
repayment of short-term debt from the issuance of $752 million of preferred
securities during 1995. At Sept. 30, 1996, debt-to-total capital was at the
target ratio of 25 percent which supports the company's AA- (Very Strong)
senior debt ratings and AAA (Excellent) claims-paying ability ratings for its
principal life insurance subsidiaries. The increase in realized investment
gains resulted from gains on the sale of securities within the investment
portfolio. The losses on assets held for sale include charges related to the
potential sale of the company's Canadian life insurance subsidiary and a
portfolio of commercial mortgage loans.
American General Corporation is one of the nation's largest diversified
financial services organizations. Headquartered in Houston, it is a leading
provider of retirement annuities, consumer loans, and life insurance.
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 are also directed to other risks and uncertainties discussed in
documents filed by the company with the Securities and Exchange Commission.
American General Corporation
Comparative Results
(In millions, except per share data) (Unaudited)
Quarter ended Nine months ended
September 30, September 30,
---------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
1. Revenues and Deposits $2,687 $2,576 $8,090 $7,702
====== ====== ====== ======
Business Segment Earnings:
2. Retirement Annuities $ 57 $ 54 $ 175 $ 162
3. Consumer Finance 43 55 102 177
4. Life Insurance 105 95 296 265
------ ------ ------ ------
5. Total Business Segment
Earnings 205 204 573 604
------ ------ ------ ------
Corporate Operations:
6. Interest on Corporate Debt (24) (26) (67) (82)
7. Dividends on Preferred
Securities of Subsidiaries (10) (8) (29) (10)
8. Expenses Not Allocated
to Segments (9) (12) (24) (29)
9. Earnings on Corporate Assets 6 13 19 27
10. Equity in Earnings of
Western National Corporation 6 7 18 21
11. Realized Investment Gains 16 3 37 5
12. Losses on Assets Held
for Sale (18) -- (18) --
------ ------ ------ ------
13. Total Corporate Operations (33) (23) (64) (68)
------ ------ ------ ------
14. Net Income $ 172 $ 181 $ 509 $ 536
====== ====== ====== ======
15. Net Income Per Share $ .82 $ .86 $ 2.42 $ 2.59
====== ====== ====== ======
16. Average Shares Outstanding 213.4 211.8 213.9 208.2
-----------------------------------------------------------------------
17. Operating Earnings (a) $ 174 $ 178 $ 490 $ 531
18. Operating Earnings
Per Share (a) .83 .85 2.33 2.57
-----------------------------------------------------------------------
At September 30,
--------------------
1996 1995
-------- --------
19. Assets $ 64,345 $ 59,897
20. Shareholders' Equity 5,373 5,512
21. Book Value Per Share 26.09 26.94
22. Market Price Per Share 37.75 37.38
Excluding Fair Value Adjustment Related to Securities (SFAS 115) (b):
23. Assets $63,918 $58,817
24. Shareholders' Equity 5,099 4,815
25. Book Value Per Share 24.77 23.58
-----------------------------------------------------------------------
(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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