American General's Consumer Finance Segment to Increase Allowance for Loan Losses.HOUSTON--(BUSINESS WIRE)--Jan. 10, 1996--American General Corporation (NYSE NYSE See: New York Stock Exchange :AGC AGC Automatic Gain Control AGC Automotive Glass Cartridge (fuse) AGC Associated General Contractors AGC Associated General Contractors of America AGC Atypical Glandular Cells AGC Attorney-General's Chambers ) today announced that American General Finance, its consumer finance segment, will report an increase in the allowance for losses on finance receivables of $216 million in the fourth quarter of 1995. This action will result in a fourth quarter after-tax charge of approximately $140 million, or $.67 per share, to American General's earnings. This increase was determined by extensive internal analysis, together with credit loss development projections supplied by Fair, Isaac and Co., Inc., a nationally recognized credit consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a , and with the concurrence CONCURRENCE, French law. The equality of rights, or privilege which several persons-have over the same thing; as, for example, the right which two judgment creditors, Whose judgments were rendered at the same time, have to be paid out of the proceeds of real estate bound by them. Dict. de Jur. h.t. of Ernst & Young LLP LLP - Lower Layer Protocol , the company's independent auditors Independent Auditor An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report. Notes: These auditors aren't affiliated with the company being audited. . At year-end 1995, the allowance for loan losses will be approximately $492 million or 5.9 percent of receivables, compared to $226 million or 2.9 percent of receivables at year-end 1994. The increased allowance represents the company's best estimate of the segment's net credit losses on outstanding loans. "The strength of American General Finance is its traditional branch office network," said Harold S Harold, 1022?–1066, king of England (1066). The son of Godwin, earl of Wessex, he belonged to the most powerful noble family of England in the reign of Edward the Confessor. Through Godwin's influence Harold was made earl of East Anglia. . Hook, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of American General Corporation. "Although the non-branch initiatives of the last few years generated high receivables growth, they were followed by an unacceptable rise in delinquencies. Therefore, each of these initiatives has been analyzed and the underperforming programs have been restructured or discontinued. We believe the increase in the allowance and the other actions taken address the overall credit quality issue and position the consumer finance segment to return to the levels of earnings achieved over the last few years." American General is one of the nation's largest diversified financial The diversified financial services segment includes a range of consumer and commercially-oriented companies offering a wide variety of products and services, including various lending products (such as home equity loans and credit cards), insurance, and securities and investment services organizations with assets of $60 billion and shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. of $5.5 billion. Headquartered in Houston, it is a leading provider of retirement annuities, consumer loans, and life insurance to over eight million households. American General Corporation common stock is listed on the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Pacific, London, and Swiss stock exchanges. Q&A SUPPLEMENT FOLLOWS Accompanying this news release are comments, in question-and-answer format, regarding the Jan. 10, 1996 announcement of the increased allowance for losses on finance receivables. American General Corporation today announced that American General Finance, its consumer finance segment, will increase the allowance for losses on finance receivables by $216 million in the fourth quarter of 1995. American General Finance with assets of $10 billion and equity of $1.3 billion, is a wholly-owned subsidiary of American General Corporation. Headquartered in Evansville, Ind., it is a leading provider of consumer loans and credit-related products. With 1,400 branch offices in 41 states, Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. , and the U.S. Virgin Islands, the company serves 3.8 million customers. Below, in question-and-answer format, are comments regarding the allowance increase. 1. Q. Why was there a major increase in the allowance for loan losses in the fourth quarter? A. Due to the unexpected rise in delinquencies beginning in the third quarter of 1995, a comprehensive analysis of the consumer finance segment was initiated in the fourth quarter. The results of the recently completed analysis indicated a need for the increase in the allowance for loan losses. 60-day Delinquencies as % of Receivables ---------------------------------------- 12/94 3/95 6/95 9/95 12/95 ----- ---- ---- ---- ----- 2.9% 2.9% 3.0% 3.8% 4.1%e 2. Q. Does the increased allowance resolve the credit quality issue? A. Based on extensive internal and external analysis, we believe the increased allowance represents the company's best estimate of the segment's net credit losses on outstanding loans. At year-end 1995, the allowance for loan losses will be approximately $492 million or 5.9 percent of receivables. Allowance as % of Receivables ----------------------------- 12/94 3/95 6/95 9/95 12/95 ----- ---- ---- ---- ----- 2.9% 3.0% 3.1% 3.6% 5.9% 3. Q. How will the increased allowance impact the capital ratio of American General Finance? A. To support the increased allowance, American General contributed $80 million of internally generated capital to American General Finance in December 1995. This enabled American General Finance, Inc. to maintain leverage below its target level of debt to tangible net worth Tangible Net Worth Total assets less intangible assets and total liabilities. Notes: In terms of a consumer, tangible net worth is the sum of all your tangible assets (cash, home, cars, etc). (7.5-to-1). 4. Q. What is the outlook for American General Finance in 1996? A. We believe the actions taken will position American General Finance to achieve a return on equity in the 14-16 percent range. 5. Q. Does American General still consider consumer finance a core business? A. Yes. Since 1982, American General Finance has been a major contributor to American General's growth strategy and complements the company's balanced mix of financial service businesses. 6. Q. Will the $80 million capital contribution change the company's dividend or share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. programs? A. No. It is management's opinion that this action, in and of itself, will not change the company's dividend or share repurchase programs. 7. Q. When do you expect to report 1995 earnings? A. We expect to report fourth quarter and preliminary year-end 1995 results on Monday, Jan. 29, 1996. CONTACT: American General Corp. Robert D. Mrlik, 713/831-1137, John E. Pluhowski, 713/831-1149 |
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