NEW YORK, June 18 /PRNewswire/ -- Standard & Poor's today has lowered its
claims-paying ability ratings of American General Corp.'s (AGC) insurance
subsidiaries -- American General Life Insurance Co., American General Life
Insurance Co. of New York, Variable Annuity Life Insurance Co., and American
General Life & Accident Insurance Co. to double-'A'-plus from triple-'A'.
    These ratings have been removed from CreditWatch where they were placed
Feb. 13, 1997 following the announcement of the $1.8 billion merger of AGC
with USLIFE Corp.
    Additionally, Standard & Poor's has raised USLIFE Corp.'s senior debt
rating, to place it on par with AGC's senior debt rating, and has affirmed its
claims-paying ability ratings of USLIFE's insurance subsidiaries.  These
ratings have been removed from CreditWatch. (See table below.)
    These actions affect about $300 million of long-term debt.
    The rating downgrades of American General's insurance operations primarily
reflect the company's inability to maintain life insurance sales momentum
during its recent period of significant acquisition activity.  The downgrade
also reflects Standard & Poor's prospective concern that American General's
rapid growth through mergers and acquisitions in a competitive operating
environment for its business segments will make it more challenging for
management to focus on generating internal growth.  American General has
successfully executed mergers and consolidation of units in which the purpose
of the acquisition was to reduce expenses and improve profitability.  However,
the company has not increased sales of life insurance products in existing
operations as a result of the mergers and acquisitions.
    The rating actions continue to recognize the significant strengths of the
American General family of companies, including its diverse business profile
with strong market positions, good earnings, superior capitalization at the
life insurance operating units, high quality investments, above-average
liquidity, and good financial flexibility.
    EXPECTATIONS:
    -- AGC's 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 5 times-6
times.
    -- 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.
    LONG-TERM DEBT OUTLOOK: Negative.
    Standard & Poor's anticipates that, given American General's active role
in the rapidly consolidating life insurance industry, as USLIFE's management
considers its options for financing future acquisitions, the commitment to its
current financial leverage targets may become strained. --  CreditWire

    RATINGS LOWERED AND REMOVED FROM CREDITWATCH
                                             To        From
    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                     AA+       AA
    Caims-paying ability                     AA+       AAA

    RATINGS RAISED AND REMOVED FROM CREDITWATCH
                                            To        From
    USLIFE Corp.
    Issuer credit rating                     AA-       A+
    Senior debt rating                       AA-       A+

    RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH
    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+

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