HOUSTON, April 23 /PRNewswire/ -- American General Corporation
(NYSE: AGC), one of the nation's largest diversified financial services
organizations with assets of $67 billion, today reported record operating
earnings of $186 million or $.90 per share in the first quarter of 1997, up
23% from $152 million or $.73 per share in the 1996 period and the highest
level of quarterly operating earnings in the company's 71-year history.
    Net income, which includes net realized gains on investments and other
non-recurring items, was $182 million or $0.88 per share compared to
$169 million or $0.81 per share in the 1996 period.  Average shares
outstanding were 210.7 million compared to 212.7 million in the year ago
period.

    Following is a comparative table of first quarter results for 1997 and
1996:

                             Quarter Ended March 31,
    In Millions:             1997     1996    Change
     Operating Earnings     $ 186    $ 152    + 23%
     Net Income               182      169    +  7

    Per Share:
     Operating Earnings     $ .90    $ .73    + 23%
     Net Income               .88      .81    +  9

    Commenting on the results, Robert M. Devlin, president and CEO, said, "The
record quarterly earnings not only validate American General's strategy but
demonstrate the company's ability to execute it effectively.  The success of
our strategy of improving existing operations while strengthening the business
segments through strategic acquisitions is evident in the first quarter
results -- we achieved the highest level of quarterly operating earnings in
the company's history, with increases realized in each business segment.
These results produced an operating return on equity of 14.5%, in line with
the company's target of 15%.
    "I am pleased to report solid operating results for our consumer finance
segment in the quarter, with an increase of 37% in operating earnings.  During
1995 and 1996 we took decisive actions within the segment, seeking to improve
our operations and position the company for continued growth and
profitability.  The first quarter results reflect the early benefits of this
effort -- delinquencies and charge-offs declined and profitability improved
significantly.  While we are pleased with our progress, we are focused on
further improving the returns from this business.
    "Within retirement services, our highly effective distribution system and
market-responsive products produced an impressive 46% increase in sales.  The
investment options available in our Portfolio Director product series provide
our customers with attractive choices from a company with a solid financial
position and strong ratings.  The demographic trends which have led to
increased retirement savings are compelling, and VALIC is well positioned to
continue to benefit from these trends.
    "Results for our life insurance segment demonstrate our success as an
industry consolidator.  We recorded double digit increases in sales, deposits,
and earnings.  On April 16, 1997, we completed the Home Beneficial acquisition
and are on schedule to close the USLIFE merger in June.  Through acquisitions,
American General has built a formidable life insurance operation.  We are the
largest writer of new individual life insurance premium among shareholder
owned companies.  Upon completion of the USLIFE merger, we will lead the
industry in universal life sales.  We are excited about the opportunity to
build upon our position as an industry leader through the addition of USLIFE.
"We continue to enhance shareholder returns through effective capital
management.  Since the first of the year, we repurchased 9.3 million shares of
our common stock, issued $500 million of capital securities, and increased our
annual dividend rate by 8% to $1.40 per common share.
    "Our record results during the quarter demonstrate the company's
commitment to improving and growing each of American General's businesses.  We
look forward to building upon this success as we progress through 1997."

    Recent Corporate Events
    Home Beneficial Acquisition. On April 16, 1997, American General completed
its $665 million acquisition of Home Beneficial Corporation for $283 million
in cash (43%) and 9.5 million shares of American General common stock (57%).
Adjusting for the excess capital of $300 million, the net purchase price was
$365 million.  Consolidation of Home Beneficial into the Nashville-based life
insurance operation is expected to be completed by year end and result in
annualized expense savings of $20 million.
    Share Buyback Activity. Year-to-date, the company has repurchased
9.3 million common shares for an estimated cost of $356 million, including
6.4 million shares in an accelerated share buyback transaction.
    Capital Securities Issued. During the first quarter, American General
issued $500 million of capital securities, which brings the total to
$1.0 billion issued in the last six months.  Unlike traditional preferred
stock, these preferred securities pay dividends that are tax deductible and
reduce the company's cost of capital.
    Stock Ownership Guidelines/Performance Incentive Plan.  During the
quarter, the board of directors of American General adopted stock ownership
guidelines for all officers and directors of the company.  Additionally, the
board has approved a new performance-based incentive compensation plan which
has been recommended for shareholder approval at tomorrow's annual
shareholders meeting.  These new programs are designed to further align the
interests of management and shareholders and will more closely tie the
compensation of senior management to performance of the company.
    USLIFE Corporation Merger Update.  On February 13, 1997, American General
announced a definitive agreement under which USLIFE Corporation will merge
into American General in an all stock transaction valued at $1.8 billion.  The
merger, which will be accounted for on a pooling of interests basis, is
scheduled to close in June.
    To ensure successful integration of USLIFE upon completion of the merger,
the companies have formed a transition task force to review all principal
functional areas and plan integration activities.  The task force is laying
the foundation for an effective and efficient integration and realization of
$50 million of expected cost savings from the consolidation.

    Additional Corporate Financial Highlights
    The following corporate financial highlights compare the results for the
quarter ending March 31, 1997 with the comparable 1996 period:
    -- Revenues and deposits increased to $2.8 billion, up 6%;
    -- Pretax operating earnings increased 24% to $289 million;
    -- Operating return on shareholders' equity was 14.5% compared to 12.6%;
    -- Annual common dividend rate was increased 8% to $1.40 per share; and,
    -- Common market value increased to $8.4 billion, up 15%.

    Segment Operations
    American General divides its operating subsidiaries into three business
segments: retirement services, life insurance, and consumer finance.  For the
quarter, retirement services accounted for 31% of segment earnings, life
insurance 50%, and consumer finance 19%.

                           Quarter Ended March 31,
    In Millions:            1997    1996    Change
      Retirement Services   $ 63    $ 60    +  6%
      Life Insurance         104      91    + 14
      Consumer Finance        39      28    + 37
        Segment Earnings    $206    $179    + 15%

    Retirement Services.  VALIC, with $31 billion in assets, is a leading
provider of retirement plans and employer-sponsored retirement programs to
employees of educational, health care, public sector, and other not-for-profit
organizations.  VALIC has 1.6 million customer accounts serviced by a sales
force of 1,000 retirement planning specialists.
    Life Insurance.  American General is the largest writer of new 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 $150 billion, and serve over five million customers through 15,000 agents.
    Consumer Finance.  American General Finance is a leading provider of
consumer and home equity loans and other credit-related products.  The company
ranks among the nation's largest consumer finance companies with a nationwide
network of 1,372 branch offices, 2.4 million customer accounts, and finance
receivables of $7.5 billion.

    Retirement Services
    Performance Highlights.  The following performance highlights compare the
results for the quarter ending March 31, 1997 with the comparable 1996 period:
    -- Sales increased 46% to $448 million;
    -- Segment earnings increased 6% to $63 million;
    -- Assets increased 13% or $3.5 billion to $31 billion; and,
    -- Return on equity increased to 17.4% from 16.7%.

    First Quarter Results.  VALIC reported strong sales growth in the first
quarter, with sales increasing 46% over the prior year period.  The continuing
growth in sales reflects the company's solid competitive position in the
tax-deferred annuity market.  The number of customers increased 11% over the
prior year period and reached the milestone of one million customers.  Premium
deposits increased 19%, while assets increased 13% over the prior year.
    The Portfolio Director product series accounted for 71% of premium in the
quarter demonstrating the strong market acceptance of VALIC's leading variable
annuity product.  Demand for equity-based products remained solid with
variable premium deposits accounting for 50% of total premium deposits.  As a
result, variable account assets increased 46% to $7.4 billion compared to the
prior year.
    Earnings increased 6% to a record $63 million in the first quarter due to
higher income generated from the growth in assets.  The continuing shift
towards variable products has the effect of slowing near-term operating
earnings growth but requires less capital.  As a result, return on equity for
the period increased to 17.4%.

    Life Insurance
    Performance Highlights.  The following performance highlights compare the
results for the quarter ending March 31, 1997 with the comparable 1996 period:
    -- Annualized life sales increased 14% to $78 million;
    -- Segment earnings increased 14% to a record $104 million;
    -- Total deposits increased 11% to $309 million; and,
    -- Return on equity improved to 10.5% from 9.6%.

    First Quarter Results.  The life insurance segment reported record first
quarter operating earnings of $104 million, up 14% from a year ago.  This
record level of earnings is due to improved operating results and the success
of the company's acquisition and integration activities.  For the quarter,
operating earnings for each of the principal life insurance companies
increased over the prior year period.  Improved earnings led to an increase in
return on equity to 10.5%.
    Annualized premium life sales increased 14% to $78 million in the quarter.
The increased sales were the result of a number of new marketing initiatives
and additional sales from acquired companies.
    During 1996, several new marketing initiatives were launched to increase
sales and improve penetration of certain markets.  Early results indicate that
the new marketing alliances with mutual fund companies and brokerage firms are
reaching the targeted markets as sales from these distribution arrangements
increased throughout the quarter.  Also, the life insurance segment is
continuing to broaden its product offering to include new variable life and
annuity products to be introduced in 1997.

    Consumer Finance
    Performance Highlights.  The following performance highlights compare the
results for the quarter ending March 31, 1997 with the comparable 1996 period:
    -- Segment earnings increased 37% to $39 million;
    -- Delinquency ratio improved to 3.76% from 4.03%;
    -- Charge off ratio improved to 3.83% from 5.50%; and
    -- Return on equity improved to 12.7% from 8.8%.

    First Quarter Results.  Consumer finance reported operating earnings of
$39 million, an increase of 37% over the prior year period.  The increase in
operating earnings was primarily due to significant improvement in overall
credit quality for the company's receivable portfolio.  The improved credit
quality resulted in part from the company's strategic decision in the fourth
quarter of 1996 to sell certain underperforming portfolios which have been
reclassified as assets held for sale.  In addition, credit quality for the
remaining portfolio improved as a result of actions taken to strengthen
underwriting and increase the percentage of higher quality loans.
    Charge offs declined to 3.83% of receivables for the quarter compared to
5.50% in the prior year period and 4.94% (excluding reclassified portfolios)
for the 1996 fourth quarter.  Also, the delinquency ratio declined to 3.76% at
the end of the quarter compared to 4.03% a year ago and 3.83% (excluding
reclassified portfolios) at the end of 1996.
    The receivables portfolio at quarter end totaled $7.5 billion and included
51% real estate-secured loans, up from 36% a year ago.  This reflects the
success of the company's strategy to shift its receivables portfolio to
include a greater percentage of higher quality, real estate-secured loans.
The allowance for loan losses was reduced by $5 million in the quarter as a
result of improved credit quality in the receivables portfolio.  The allowance
remained toward the high end of the company's historic range at 134% of
annualized charge offs.  Reflecting the decrease in charge offs, the risk
adjusted spread improved to 6.55% in the quarter from 5.71% in the prior year
period.

    Corporate Operations
    Corporate operations account for the difference between segment earnings
and net income.  Corporate operations include income, interest, and other
expenses not directly associated with business segment operations.

                                          Quarter Ended March 31,
     In Millions:                               1997    1996
      Interest on Corporate Debt               $ (18)  $ (21)
      Dividends on Preferred Securities          (17)    (10)
      Equity in Earnings of Western National       9       5
      Other                                        6      (1)
      Subtotal                                   (20)    (27)
      Realized Investment Gains                   (4)     17
      Total Corporate Operations                $(24)   $(10)

    The decrease in interest on corporate debt during 1997, offset by an
increase in dividends on preferred securities, reflects the repayment of debt
from the proceeds of preferred securities issuances.  The decrease in realized
investment gains resulted from losses on the sale of securities within the
investment portfolio.
    American General Corporation is one of the nation's largest diversified
financial services organizations.  Headquartered in Houston, it is a leading
provider of retirement services, life insurance, and consumer loans.  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.

    SUPPLEMENT TO NEWS RELEASE 97-11 DATED APRIL 23, 1997
    TITLED "AMERICAN GENERAL REPORTS 23% INCREASE IN QUARTERLY EARNINGS"

    American General Corporation
    Comparative Results                              Quarter ended
    (in millions, except per share data) (Unaudited)    March 31
                                                    1997       1996
    1.    Revenues and Deposits                  $ 2,846    $ 2,698

    Business Segment Earnings:

    2.    Retirement Services                        $63        $60
    3.    Life Insurance                             104         91
    4.    Consumer Finance                            39         28
    5.    Total Business Segment Earnings            206        179

    Corporate Operations:
    6.    Interest on Corporate Debt                 (18)       (21)
    7.    Dividends on Preferred Securities          (17)       (10)
    8.    Expenses Not Allocated to Segments         (11)        (6)
    9.    Earnings on Corporate Assets                17          5
    10.   Equity in Earnings of Western
           National Corp.                              9          5
    11.   Realized Investment Gains (Losses)          (4)        17
    12.   Total Corporate Operations                 (24)       (10)

    13.    Net Income                                182        169

    14.    Net Income Per Share                     $.88       $.81

    15.    Average Shares Outstanding              210.7      212.7

    16.    Operating Earnings (a)                   $186       $152
    17.    Operating Earnings Per Share              .90        .73

                                                      March 31,
                                                    1997       1996
    18.    Assets                               $ 66,667   $ 62,302
    19.    Shareholders' Equity                    5,198      5,534
    20.    Book Value Per Share                    25.68      26.42
    21.    Market Price Per Share                  40.75      34.50
           Excluding Fair Value Adjustment Related
           To Securities (SFAS 115)(b):

    22.    Assets                               $ 66,462   $ 61,519
    23.    Shareholders' Equity                    5,070      5,029
    24.    Book Value Per Share                    25.06      24.04

    (a) Operating earnings exclude after-tax realized investment gains
        (losses), nonrecurring 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.

Link to this page: