American General Reports Second Quarter Results.Business Editors HOUSTON--(BUSINESS WIRE)--July 27, 2001 American General (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 reported second quarter operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per share of $0.71, an increase of 11% from $0.64 per share in the second quarter of 2000. Operating earnings for the quarter increased to $360 million from $325 million in the prior-year period. Operating return on equity for the quarter was 17.3%, up from 16.2% in the second quarter of 2000. Operating earnings per share for the six months ended June 30, 2001 increased 10% to $1.40 compared to $1.27 in the prior-year period. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. operating earnings increased to $706 million from $643 million in the six-month 2000 period. "American General had excellent operating results across all its major businesses in the second quarter," said Robert M. Devlin, 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. . "I am particularly pleased with these results given the challenges of the current market environment, as well as management's focus on ensuring a timely approval of our pending acquisition by American International Group
American International Group, Inc. (AIG) (NYSE: AIG; TYO: 8685 ) is a major American insurance corporation based in New York City. (AIG AIG addressee indicator group (US DoD) AIG American International Group, Inc AiG Answers in Genesis (religious group in defense of Scripture) AIG Artificial Intelligence Group AIG Australian Industry Group ) and developing integration plans to optimize optimize - optimisation the efficiency and effectiveness of the combined companies." During the quarter, the company recorded the following charges, primarily related to its pending acquisition by AIG: -- Costs totaling $425 million aftertax related to the termination of the proposed merger with Prudential plc, consisting primarily of the previously announced $600 million (pretax) termination fee; -- Net investment losses of $198 million aftertax relating to actions taken by the company to optimize its tax position in anticipation of the pending AIG acquisition and credit impairments of certain securities reflecting conditions in fixed income markets; and -- An aftertax charge of $49 million representing the cumulative effect of the required adoption of an accounting change (EITF 99-20) for the valuation of beneficial interests related to collateralized debt obligations. These items led to a current period net loss of $312 million and net income of $11 million for the six months ended June 30, 2001. AIG has agreed that the current period charges will not have any impact on the pending acquisition. In addition, as previously disclosed, it is anticipated that the company will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. certain merger restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other charges upon completion of the acquisition by AIG. Enterprise Highlights Total revenues and deposits were $6.1 billion, up 7% from the second quarter of 2000. Total premiums and deposits of life, annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. , and mutual fund products increased 9% to $4.2 billion from $3.9 billion in the prior-year period. Operating efficiency continued to improve as evidenced by a modest 2% growth in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. from the year-ago period. Assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. , from which fee and spread revenues are generated, increased 4% to $120 billion from $116 billion at June 30, 2000. Assets supporting general account products grew 8%, while the value of assets held in separate accounts was 14% lower as a result of the decline in equity market values that more than offset positive net funds flow from variable products. Asset Accumulation Second quarter operating earnings were $187 million, up 13% from the prior-year period. The earnings growth reflects continued strong net annuity flows, an increase in the fixed investment margin, and improved operating efficiency. These items were partially offset by a decrease in variable fees, consistent with the lower average value of separate accounts that has resulted from the decline in equity market values over the past year. The fixed investment margin was $283 million, up 15% from $247 million in the second quarter of 2000. Operating expenses declined from $84 million to $81 million in the current quarter. Net annuity flows totaled $1.8 billion, an increase of 49% from $1.2 billion in the prior-year quarter. This improvement reflects a 12% increase in annuity deposits to $2.7 billion, including particularly strong sales of fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. sold through financial institutions, and significantly lower surrenders. Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. - Life Insurance Second quarter operating earnings were $202 million, an increase of 6% from the second quarter of 2000, reflecting growth in life insurance in force, a higher investment spread, and improved persistency. Life insurance in force increased 6% to $404 billion from $382 billion at June 30, 2000. The fixed investment spread for the quarter improved to 2.35% from 2.17% in the prior-year quarter. Direct premiums and deposits increased 7% to $1.4 billion from $1.3 billion reflecting strong sales of individual variable life and corporate markets products, partially offset by lower premiums from the sale of variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. , life insurance sold through the career distribution channel, and the continued runoff Runoff The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape. Notes: If the "tape is late" then it can take a long time to print off all the closing prices. of discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: and de-emphasized lines. Insurance charges on interest-sensitive products grew 10% to $221 million. Individual life sales were $327 million for the quarter, compared to $140 million in the prior-year period, reflecting particularly strong sales of private placement variable universal life products in the independent distribution channel. Financial Services - Consumer Lending Consumer lending or consumer loans refers to any type of loan product that is not a mortgage; such as a car, boat, manufactured home, home equity loan, home equity line of credit, signature loan, signature line of credit, recreational vehicle, or Certificate of Deposit loans. Second quarter operating earnings were $76 million, up 21% from the prior-year period. Return on average equity for the quarter was 20.8% compared to 18.0% in the second quarter of 2000. Results for the quarter reflected both an increase in average finance receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed and a wider spread between yield and borrowing costs, partially offset by an increase in credit costs. Average finance receivables in the quarter grew 4% to $11.8 billion from $11.3 billion in the prior-year quarter. Contributing to growth in the portfolio during the quarter were loans originated and renewed of $1.7 billion and purchased loans of $249 million. Credit quality measures remain well within target ranges. The delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. ratio at quarter end remained unchanged from the first-quarter ratio of 3.26% and compares to 3.02% at June 30, 2000. The charge-off ratio for the quarter was 2.13% and compares to 2.05% in the first quarter and 1.72% in the second quarter of last year. Corporate Items Corporate expense, which consists of items not allocated to divisions, totaled $105 million for the quarter, compared to $93 million in the prior-year quarter. This change is primarily due to a decline in earnings on corporate equity investments. On May 11, 2001, American General entered into a definitive agreement to be acquired by American International Group, Inc. for $46 per American General share in AIG common stock, subject to a collar mechanism. The acquisition remains on track and the American General shareholder meeting to vote on the transaction is scheduled for August 15, 2001. A number of approvals have already been received and all remaining approvals are expected in August, with the transaction expected to close as soon as possible thereafter. For additional information on the proposed transaction, please consult the company's proxy statement/prospectus dated June 26, 2001 and other filings with the Securities and Exchange Commission (SEC) available via the company's website or from the SEC at www.sec.gov. 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 $128 billion and market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. of $23 billion. Headquartered in Houston, it is a leading provider of retirement services, investments, life insurance, and consumer loans to 12 million customers. American General 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 SWX SWX Swiss Exchange (trademark of SWX Swiss Exchange) SWX SolidWorks (3D solid modeling CAD software) SWX Splitter / Wave Division Multiplexer Swiss stock exchanges. Additional financial information is available in American General's Quarterly Financial Supplement, which can be obtained on the company's website at www.americangeneral.com or by calling 800/410-4676. All statements, trend analyses, and other information contained herein relative to markets for the company's products and trends in the company's operations or financial results, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," and other similar expressions, constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments affecting the company will be those anticipated by management. Actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: (1) changes in general economic conditions, including the performance of financial markets and interest rates; (2) customer responsiveness to both products and distribution channels; (3) competitive, regulatory, accounting, or tax changes that affect the cost of, or demand for, the company's products; (4) the company's ability to secure necessary regulatory approvals including approvals for dividends and products; (5) the company's ability to realize projected expense savings; (6) adverse litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. or arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the results or resolution of litigation or arbitration, including proceedings related to industrial life insurance, satellite dish satellite dish n. A dish antenna used to receive and transmit signals relayed by satellite. satellite dish A parabolic antenna used to receive signals relayed by satellite. financing, and workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. insurance; (7) the formation of strategic alliances or business combinations among the company's competitors or the company's business partners; and (8) the company's ability to obtain shareholder and regulatory approvals and complete its acquisition by AIG. Investors are also directed to other risks and uncertainties discussed in documents filed by the company with the Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future developments, or otherwise.
SUPPLEMENT TO NEWS RELEASE 2001-21 DATED JULY 27, 2001
TITLED "AMERICAN GENERAL REPORTS SECOND QUARTER RESULTS"
American General
Comparative Results
(In millions, except per share data) (Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- -----------------------------
2001 2000 2001 2000
-------- -------- --------- ---------
1.Revenues and Deposits $6,134 $5,718 $11,974 $11,283
======= ======= ======= =======
Business Division
Earnings:
2.Asset Accumulation $ 187 $ 166 $ 370 $ 328
3.Financial Services
- Life Insurance 202 190 400 377
4.Financial Services
- Consumer Lending 76 62 142 121
-------- -------- --------- ---------
5.Total Business
Division Earnings 465 418 912 826
-------- ------- --------- ---------
Corporate Expense:
6.Interest on Corporate
Debt (36) (38) (75) (76)
7.Dividends on Preferred
Securities of
Subsidiaries (28) (25) (56) (50)
8.Expenses Not Allocated
to Divisions (14) (14) (25) (26)
9.Earnings on Assets Not
Allocated to Divisions (15) (4) (26) (7)
10.Goodwill Amortization (12) (12) (24) (24)
-------- -------- ---------- ----------
11.Total Corporate Expense (105) (93) (206) (183)
-------- -------- --------- ---------
12.Operating Earnings(a) 360 325 706 643
13.Net Investment Losses (198) (38) (221) (71)
14.Non-recurring/Merger-
related Charges (425) (193) (425) (193)
15.Cumulative Effect of
Accounting Change (49) - (49) -
-------- --------- --------- ---------
16.Net Income (Loss) $ (312) $ 94 $ 11 $ 379
======== ======= ======= =======
17.Operating Earnings
per Share (diluted) $ 0.71 $ 0.64 $ 1.40 $ 1.27
18.Net Income (Loss)
per Share (diluted) $(0.62) $ 0.19 $ 0.02 $ 0.75
19.Average Diluted Shares 506.6 509.8 505.5 511.3
At June 30,
2001 2000
---------- -----------
20.Assets $ 128,112 $ 121,163
21.Shareholders' Equity $ 7,980 $ 6,429
22.Book Value per Share $ 15.72 $ 12.69
23.Market Price per Share$ 46.45 $ 30.50
Excluding Unrealized
Gains (Losses)(b)
24.Assets $ 127,951 $ 122,866
25.Shareholders' Equity $ 7,912 $ 7,911
26.Book Value per Share $ 15.59 $ 15.62
(a) Operating earnings exclude aftertax realized investment gains
(losses), unrealized gains (losses) on equity partnerships and
derivatives, non-recurring items, and one-time accounting changes.
(b) Excludes Statement of Financial Accounting Standard (SFAS) 115 and
SFAS 133 unrealized gains (losses).
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