SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549
                                   FORM 10-K

             [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                    For fiscal year ended December 31, 1996
                                       OR
             [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the transition period from      to
                         Commission File Number 0-5562

                          HOME BENEFICIAL CORPORATION
             (Exact name of registrant as specified in its charter)

          VIRGINIA                                       54-0884714
(State or other jurisdiction of                       (I.R.S. employer
 incorporation or organization)                      Identification No.)

3901 West Broad Street, Richmond, Virginia                   23230
 (Address of principal executive office)                  (Zip Code)

        Registrant's telephone number, including area code: 804-358-843l

          Securities registered pursuant to Section 12(b) of the Act:
      Title of each class          Name of each exchange on which registered
           None

          Securities registered pursuant to Section 12(g) of the Act:
                              CLASS B COMMON STOCK
                                (Title of Class)
  Indicate  by check  mark  whether  the  Registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
  The  Registrant's  Class A  Voting  Common  Stock is  closely  held and is not
publicly traded.  The aggregate market value of Class B Non-Voting  Common Stock
held by  nonaffiliates  of the  Registrant was  $334,094,012  as of December 31,
1996.
  Number of shares  outstanding  of each of the  Registrant's  classes of common
stock as of December 31, 1996:

              Class                                   Shares
              -----                                   ------
        Class A Common Stock
          $.3125 Par Value                           8,060,660
        Class B Common Stock
          $.3125 Par Value                          8,992,910

                      Documents Incorporated by Reference
                                      NONE



                                       1

<PAGE>



                               TABLE OF CONTENTS
                               -----------------



                                                                           PAGE
                                                                           ----

                                     PART I

ITEM 1.  Business..............................................................3
ITEM 2.  Properties............................................................6
ITEM 3.  Legal Proceedings.....................................................6
ITEM 4.  Submission of Matters to a Vote of Security Holders...................6

                                    PART II

ITEM 5.  Market for the Registrants' Common Equity and Related Stockholder
   Matters.....................................................................7
ITEM 6.  Selected Consolidated Financial Data .................................7
ITEM 7.  Management's Discussion and Analysis of Financial Condition and
   Results of Operations.......................................................9
ITEM 8.  Financial Statements and Supplementary Data......................... 11
ITEM 9.  Changes in and Disagreements With Accountants on Accounting and
   Financial Disclosures......................................................11

                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant ..................12
ITEM 11. Executive Compensation ..............................................14
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.......17
ITEM 13. Certain Relationships and Related Transactions ......................20


                                    PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ....21

SIGNATURES....................................................................42


                                       2

<PAGE>



                                     PART I


ITEM 1.  Business

                          HOME BENEFICIAL CORPORATION

      Home  Beneficial  Corporation  ("the  Corporation")  was  incorporated  in
      Virginia on March 5, 1970,  for the purpose of becoming a holding  company
      for Home  Beneficial Life Insurance  Company ("the Life  Company"),  which
      originated  in  1899.  On  December  31,  1970,  pursuant  to  a  Plan  of
      Reorganization  proposed  by the Board of  Directors  and  approved by the
      stockholders  of the Life  Company,  the  Corporation  acquired all of the
      issued and outstanding  capital stock of the Life Company by merger of the
      Life Company into a wholly-owned  subsidiary of the Corporation,  the name
      of  which  was  immediately  changed  to Home  Beneficial  Life  Insurance
      Company.  At the present time,  the Life Company,  which is engaged in the
      life and accident and health insurance  business,  is the major subsidiary
      of the Corporation.

      There  was no  material  change  in the  nature  of  business  done by the
      Corporation during 1996.

      On December 22, 1996, the  Corporation  entered into an Agreement and Plan
      of Merger, as amended as of January 22, 1997, (the  "Merger  Agreement")
      with  American  General  Corporation ("American  General")  and AGC Life
      Insurance  Company,  a  wholly  owned subsidiary of American General
      ("Sub").  The Merger Agreement provides for the merger (the "Merger") of
      the Corporation with and into Sub, subject to the terms and conditions set
      forth therein.  Pursuant to the terms of the Merger Agreement,  each
      stockholder of the Corporation will have the right to elect to  receive,
      in exchange  for each share of common  stock of the Corporation,   shares
      of  common   stock  of   American   General,   cash consideration of
      $39.00 per share of common stock of the  Corporation,  or any  combination
      thereof  (subject to certain  proration  limitations  as further described
      in the Merger  Agreement).  Total cash elections by the Corporation's
      shareholders will be limited to 50 percent of the aggregate consideration,
      while stock  elections will be limited to 75 percent.  The Merger is
      intended to be a tax-free  transaction  for all  stockholders of the
      Corporation who elect stock.  The exchange ratio for American  General
      common stock will be determined by dividing  $39.00 by an average  trading
      price of American  General common stock prior to closing and is subject to
      a maximum of 1.1143  shares of American  General for each Home  Beneficial
      Corporation common share. The consideration per share may be reduced by up
      to $0.55 per share if, and to the extent  that,  the Life  Company  pays a
      dividend of less than $250 million to the Corporation prior to the closing
      of the Merger.

      Consummation of the Merger is subject to the approval of the Corporation's
      stockholders and certain regulatory  authorities,  and the satisfaction or
      waiver of various other  conditions as more fully  described in the Merger
      Agreement. There can be no assurance that the Merger will be consummated.

                          BUSINESS OF THE LIFE COMPANY

      The Life Company sells group life insurance and  substantially  all of the
      forms of ordinary  insurance,  including universal life, whole life, term,
      and annuities,  together with accidental death and disability  riders. The
      Life Company's business is concentrated in six Mid-Atlantic states and the
      District of Columbia,  and its products are marketed through its own sales
      force of  approximately  1,150  full-time  personnel  assigned  to some 48
      district offices located in principal cities and towns. In addition to the
      agency force,  there were some 220 supervisory,  administrative,  clerical
      and other personnel employed in the home office.

      The  following  table sets  forth the  geographic  distribution  of direct
      business premiums received during 1996:

                                                            Premiums
              Jurisdiction                               (In millions)

            Delaware                                      $  2.5
            District of Columbia                             2.8
            Maryland                                        15.2
            North Carolina                                  10.5
            Tennessee                                       22.2
            Virginia                                        40.5
            West Virginia                                    1.2

      The maximum amount of ordinary individual  insurance presently retained by
      the Life  Company  without  reinsurance  is  $200,000  plus an  additional
      $75,000 coverage for accidental  death. The total amount of life insurance
      in force at December  31, 1996  reinsured  by the Life  Company with other
      companies aggregated $70 million representing less than

                                       3

<PAGE>


      1% of the  Life  Company's  life  insurance  in  force  on  that  date.  A
      contingent  liability exists on insurance ceded to the reinsurer since the
      Life Company  would be liable in the event that the reinsurer is unable to
      meet obligations assumed by it under the reinsurance  agreement.  The Life
      Company  participates  in  several  group  life  insurance  programs  as a
      reinsurer and also assumes reinsurance on a facultative  (individual risk)
      basis from two other life  insurance  companies.  Life  insurance  assumed
      relates  principally to group life. Claims incurred under these group life
      insurance  programs   approximate  the  related  premium  income,  and  no
      significant assets or liabilities are required in the balance sheet.

   Accident and health insurance  premiums accounted for less than 4% of premium
   income for 1996. The Life Company offers no health  insurance  coverage other
   than to its own  employees.  The  Life  Company  writes  individual  accident
   policies with death and dismemberment benefits.  These policies accounted for
   approximately 71% of total accident and health premiums for 1996.

   The Life Company, as a legal reserve company, is required by the various laws
   of the  states  in which it is  licensed  to  transact  business  to carry as
   liabilities  aggregate policy reserves which are considered  adequate to meet
   its obligations on insurance  policies in force.  Such required  reserves are
   considered  statutory  reserves  because the methods and assumptions  used in
   their  calculation  are  explicitly  prescribed  by the  laws of the  various
   states.  The liabilities  shown herein for all policies issued since 1948 are
   based on guidelines  prescribed by the American Institute of Certified Public
   Accountants and have been  calculated in accordance  with generally  accepted
   accounting  principles.  Such  liabilities  are  calculated  by  the  use  of
   assumptions  as to mortality  rates,  interest  rates,  withdrawal  rates and
   expense  rates in  effect  at the time the gross  premiums  were  calculated.
   Liabilities on paid-up  policies  include a liability for future  maintenance
   expenses  which the Life Company  expects to incur.  See Revenues,  Benefits,
   Claims  and  Expenses,   Note  1  of  the  Notes  to  Consolidated  Financial
   Statements, on pages 30 and 31.

   The  investment  of the Life  Company's  funds and assets is determined by an
   Investment  Committee.  Generally,  investments  made must meet  requirements
   established  by the applicable  investment  statutes of the  Commonwealth  of
   Virginia governing the nature and quality of investments which may be made by
   life insurance companies.

   The  following  table shows  investments  of the Life Company at December 31,
   1996. Fixed maturities  (bonds,  notes and redeemable  preferred  stocks) and
   equity securities  (nonredeemable  preferred and common stocks) are stated at
   fair value;  mortgage  loans on real estate are stated at cost adjusted where
   appropriate for amortization of premium or discount;  short-term  investments
   are stated at cost; and policy loans are stated at unpaid balances.

                                                             Asset Value
                                                             -----------
                                                                     Percent
                                                          Amount     of Total
                                                          ------     --------
                                                             (In millions)
      Fixed Maturities:
         Bonds and notes:
             United States government and government
             agencies and authorities                    $    32.6       2.6%
             States, municipalities and political
                subdivisions                                 392.7      30.9
         Foreign government                                   22.5       1.8
         Public utilities                                    257.3      20.2
         All other corporate                                  74.3       5.8
                                                         ---------     -----
             Total fixed maturities                          779.4      61.3

      Equity securities                                       25.8       2.0
      Mortgage loans on real estate                          375.0      29.5
      Policy loans                                            55.0       4.3
      Short-term investments                                  29.7       2.3
      Other                                                    7.4        .6
                                                         ---------     -----
             Total investments                           $ 1,272.3     100.0%
                                                         =========     =====

   There were no principal and interest payments past due on fixed maturities at
   December 31, 1996.

   The  Life  Company's  mortgage  portfolio  consists  of  approximately  2,400
   conventional  first  mortgages on a wide range of residential  and commercial
   properties located primarily in those  Mid-Atlantic  states in which the Life
   Company conducts its insurance business.  At December 31, 1996, the aggregate
   carrying  value of mortgage  loans was $375  million,  with  residential  and
   commercial   loans  accounting  for  52%  and  48%  of  the  carrying  value,
   respectively.


                                       4

<PAGE>



   Commercial  loans  include  loans on  apartments,  shopping  centers,  office
   buildings and warehouses.  Generally, commercial loans range from $250,000 to
   $4,500,000  in principal  amount.  The Life Company also makes some  mortgage
   loans to churches.  Every property is inspected by a staff  underwriter prior
   to the  issuance  of a loan  commitment.  On  commercial  loans of more  than
   $250,000,  the property is inspected every two years after the loan is closed
   as long as the balance exceeds $250,000.

   The Life Company's  mortgage lending business is heavily  concentrated in the
   states of Virginia and North  Carolina.  At December 31, 1996,  approximately
   78% of the Life Company's  mortgages,  constituting  approximately 73% of the
   total  book  value  of  the  Life  Company's  mortgage  portfolio,   were  on
   residential  or  commercial  properties  located  in the  State of  Virginia.
   Additionally,  at the  same  date  approximately  13% of the  Life  Company's
   mortgages, constituting approximately 12% of the total book value of the Life
   Company's  mortgage  portfolio,  were on  properties in North  Carolina.  The
   relatively  high  percentage  of  mortgage  loans  made in these  two  states
   reflects  the  geographical  concentration  of the Life  Company's  insurance
   business  activities  in the same two  states.  Although  the Life  Company's
   mortgage  loan  portfolio  is  heavily  concentrated  in  Virginia  and North
   Carolina, the economies of those states are diversified, and the Life Company
   does not believe its mortgage  loan  portfolio  reflects  undue risk from the
   large percentage of its loans originated in those two states.

   The Life Company  presently  holds one real estate parcel  acquired  through
   foreclosure  with a  carrying  value  in the  financial  statements  of  $0.6
   million. Mortgage loans whose terms have been restructured over the past five
   years are immaterial,  and no mortgage loans were in foreclosure  proceedings
   at December 31, 1996. Except as indicated below, there were no mortgage loans
   otherwise not performing in accordance with the contractual terms.

   At December 31, 1996, the aging schedule for delinquent mortgage loans in
   terms of past due days was as follows:

                                              Past due days
                                              -------------
                                              (In millions)


                              30-60      60-90    Over 90   Total
                              -----      -----    -------   -----

          Principal          $ 3.1 (1)   $ .2     $  --     $ 3.3
          Percent of total
          mortgage loans       .82%       .05%       --        .87%

            (1) 30-60 days past due includes a substantial  amount of loan
            payments that have been  received by the Life  Company's  brokers
            after their December, 1996 cut-off reporting date to the Life
            Company. These amounts will be included in their next remittance
            report.

   The Life Company  believes the quality of its loan portfolio is  attributable
   to its relatively stringent  underwriting  standards which have been in force
   for many years.  At the  present  time,  and for a number of years,  the Life
   Company's  lending policies have restricted  mortgage loans to a maximum loan
   to value ratio of 75%,  based on the lower of cost or  appraisal,  except for
   purchase  money  mortgages  and  insured or  guaranteed  mortgages.  The Life
   Company's  policy is to place mortgage loans on non-accrual  status where any
   mortgage payment is 90 days or more past due.

   During  the  period  1986-1996,  the  Life  Company  experienced  only  seven
   foreclosures on real estate loans, one in each of the years 1986, 1989, 1990,
   1995 and  1996,  two in 1992,  and none in 1993 and  1994.  The  total of the
   unpaid  principal   balances  of  loans  in  these  seven   foreclosures  was
   approximately  $1.8  million.  The Life  Company  disposed of six  properties
   acquired in pre-1994 and 1996 foreclosure proceedings without a net loss. The
   Corporation  does not  provide a provision  for loan losses in its  financial
   statements.  Based upon the de minimis loss  experience  of the mortgage loan
   portfolio over many years and the continuing satisfactory  performance of its
   portfolio,  the  Corporation's  management  does not feel that a provision is
   required.

   See  Investment  Operations,  Note  2  of  Notes  to  Consolidated  Financial
   Statements, on pages 31, 32, and 33, and Schedule I included in Part IV, page
   37, for  additional  information  concerning the  Corporation's  consolidated
   investment portfolio.

   The Life Company,  in common with other  insurance  companies,  is subject to
   regulation  and  supervision in each of the states in which it does business.
   Such regulation is primarily for the benefit of the policyholders of the Life
   Company rather than the stockholders.  Although the extent of such regulation
   varies from state to state, in general,  the insurance laws of the respective
   states delegate broad administrative  powers to supervisory  agencies.  These
   powers  relate  to the  granting  and  revocation  of  licenses  to  transact
   business,  the  licensing  of agents,  the  approval of the forms of policies
   used,  reserve  requirements,  and the type and  concentration of investments
   permitted. In addition, the supervisory agencies have power over the form and
   content of required financial statements and reports,  including requirements
   regarding  accounting  practices to be employed in the  presentation  of such
   statements  and reports.  Certain of the required  accounting  practices vary
   from generally accepted accounting principles. See Notes 1 and 7 of the Notes
   to Consolidated Financial Statements on pages 30, 31 and 36.


                                       5

<PAGE>



   Several  jurisdictions in which the Life Company does business  including its
   domiciliary  state  of  Virginia,  have  enacted  legislation  providing  for
   specific  regulation of the relationship  between licensed insurers and their
   holding  companies and among  affiliated  members of a holding company group.
   These statutes vary in substance from state to state, but generally speaking,
   vest administrative control in the insurance regulatory authority.  Among the
   provisions  found  in  these  statutes  are  provisions  for  the  filing  of
   registration  statements by insurers  which are members of a holding  company
   group,  provisions  that the  holding  company  will be subject to  reporting
   requirements  and to  visitation  by the  insurance  regulatory  authorities,
   standards as to transactions  between insurers and their holding companies or
   between members of a holding  company group,  and control over the payment of
   extraordinary dividends. See Stockholders' Equity and Restrictions, Note 7 of
   the Notes to  Consolidated  Financial  Statements,  on page 36 for additional
   information  concerning   transactions  between  the  Life  Company  and  its
   affiliates.

   The life insurance business is intensely  competitive and the Life Company
   competes with many other  companies in the states in which it is licensed.
   The American Council of Life Insurance in its "1996 Fact Book",  estimates
   that  there  were  approximately  1,700  life  insurance  companies  doing
   business in the United States at the end of 1995.

   According  to figures  reported in the October  1996 issue of Best's  Review,
   Life/Health  Edition,  calculated on a statutory  accounting  basis, the Life
   Company  ranks in the top 20% of all life  insurance  companies in the United
   States based on total admitted assets as of December 31, 1995.

   No material  portion of the business of the Life Company is dependent  upon a
   single customer or a very few customers. The group life insurance sold by the
   Life Company consists largely of reinsurance participations described on page
   4.

   The Corporation's  only industry segment is the business of the Life Company,
   and its  operations  have  contributed  over  98% of the  total  consolidated
   revenues and income before income taxes for each of the past three years.

   Neither  the  Corporation  nor any of its  subsidiaries  engage  in  material
   operations  outside of the United States,  or derives material  business from
   customers outside the United States.

ITEM 2.  Properties

   The principal office of the Corporation is located at 3901 West Broad Street,
   Richmond,  Virginia  23230,  which also serves as the home office premises of
   the Life Company.  The home office  building,  which  contains  approximately
   110,000 square feet of office space, was originally  completed in 1950 with a
   30,000  square foot addition  completed in 1990.  The building is used solely
   for company purposes.

   The Life Company  presently leases space for 63 district and detached offices
   in Delaware,  Maryland,  the District of Columbia,  West Virginia,  Virginia,
   Tennessee and North  Carolina.  The  termination  dates on these leases range
   from 1997 to 2005;  all of the longer term leases being for  district  office
   purposes.  The  maximum  annual  rent paid  under any lease is  $29,000.  The
   annualized  rent  under  all  leases  in  effect  on  December  31,  1996 was
   approximately $770,000.

ITEM 3.  Legal Proceedings

   As of the  date  of  this  report,  neither  the  Corporation  nor any of its
   subsidiaries was a party to any material pending legal proceedings.

ITEM 4.  Submission of Matters to a Vote of Security Holders

   No matters were  submitted to a vote of the  Corporation's  security  holders
   during the fourth quarter of its fiscal year ended December 31, 1996.


                                       6

<PAGE>




                                    PART II

ITEM 5.  Market for the Registrant's Common Equity and Related Stockholder
         Matters

   The Corporation's  Class B Non-Voting Common Stock trades on the NASDAQ Stock
   Market under the symbol HBENB. The Corporation's  Class A Voting Stock is not
   publicly  traded,  but is  entitled  to the  same  cash  dividend  as Class B
   NonVoting  Common  Stock.  The  approximate  number of record  holders of the
   Corporation's common stock at December 31, 1996 was 2,000.

   The following table gives the high and low prices of the Corporation's  Class
   B  Non-Voting  Common  Stock and the cash  dividends  paid per share for each
   quarter in the past two years:


                                   High        Low        Dividend
                                   ----        ---        --------
      1996
      First Quarter               $26 1/4     $23 1/2     $ .21
      Second Quarter               26 1/2      24 3/4       .22
      Third Quarter                27 3/4      24 1/2       .22
      Fourth Quarter               38 1/2      24 3/4       .22

      1995
      First Quarter               $20 3/4     $19         $ .20
      Second Quarter               21 3/4      19           .21
      Third Quarter                24          20 1/4       .21
      Fourth Quarter               25 1/2      22 3/4       .21

ITEM 6.  Selected Consolidated Financial Data

RECORD OF GROWTH OF INSURANCE
Five Years Ended December 31

<TABLE>
<CAPTION>

                                                 1996           1995        1994        1993        1992
                                                                    (In millions)
<S> <C>
Insurance in force at end of period
   Direct sales
     Permanent...........................     $ 3,633.1      $ 3,588.8    $ 3,487.7    $3,475.9     $3,493.5
     Term................................       1,169.5        1,107.6      1,061.7     1,046.1      1,048.1
                                           ------------     ----------  -----------   ---------    ---------
       Total.............................       4,802.6        4,696.4      4,549.4     4,522.0      4,541.6
   Group.................................       6,946.5        6,029.5      5,674.4     5,466.6      5,249.9
                                           ------------     ----------  -----------   ---------    ---------
       Total.............................     $11,749.1      $10,725.9    $10,223.8    $9,988.6     $9,791.5

New insurance written
   Direct sales
     Permanent...........................     $   712.1      $   707.8    $   598.3    $  600.2     $  642.6
     Term................................         281.0          230.4        192.2       196.2        359.4
                                            -----------    -----------  ----------- -----------  -----------
       Total.............................         993.1          938.2        790.5       796.4      1,002.0
   Group.................................         967.1          372.2        225.6       258.2      3,215.2
                                            -----------    -----------  ----------- -----------   ----------
       Total.............................     $ 1,960.2      $ 1,310.4    $ 1,016.1    $1,054.6     $4,217.2

Life and annuity premium income               $   113.9      $   105.4    $   107.0    $  107.1     $  107.7

</TABLE>

                                       7

<PAGE>



SELECTED FINANCIAL INFORMATION
Five Years Ended December 31

<TABLE>
<CAPTION>
                                                           1996        1995       1994       1993     1992
                                                                 (In millions except for per share data)
<S> <C>
Premium income.......................................   $  117.6   $   114.0   $  116.1   $  116.4  $  117.9
Net investment income................................       89.4        88.1       84.8       86.0      90.7
Realized investment gains............................        6.9          --         --       10.8       2.9
Net income before accounting change..................       42.4        37.9       36.2       42.6      46.4
Accounting change(1).................................         --          --         --         --    (29.4)
Net income   ........................................       42.4        37.9       36.2       42.6      17.0
Net income per share(1)
   Before accounting change..........................       2.46        2.16       2.04       2.35      2.50
   Accounting change.................................         --          --         --         --    (1.58)
                                                          ------     -------    -------    -------    ------
      Net............................................       2.46        2.16       2.04       2.35       .92
Dividends paid per share.............................        .87         .83       .795       .775       .76
Investments(2).......................................    1,285.3     1,266.8    1,146.7    1,143.9   1,116.4
Total assets (2).....................................    1,423.5     1,403.4    1,288.8    1,280.2   1,248.4
Total liabilities....................................      874.9       861.3      822.0      806.9     788.0
Stockholders' equity (2).............................      548.6       542.1      466.8      473.3     460.4
Book value per share (2).............................      32.17       31.08      26.58      26.38     24.85
</TABLE>

(1)The Corporation adopted Statement of Financial  Accounting Standards No. 106,
"EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS" in 1992.
Adoption of this Standard was recognized as an accounting  change. See Note 4 of
Notes  to  Consolidated  Financial  Statements  on  pages  33  and  34..

(2)The Corporation  adopted Statement of Financial Standards (SFAS) No. 115
"ACCOUNTING FOR CERTAIN  INVESTMENTS  IN DEBT AND EQUITY  SECURITIES" as of
January 1, 1994. Adoption of SFAS No. 115  resulted in a $26.3  million
decrease in the carrying value of fixed  maturities at December 31, 1994 and
increased the carrying value $28.4  million and $51.7  million at December  31,
1996 and  December  31, 1995, respectively.  In accordance with SFAS No. 115,
prior period financial statement balances  were not  restated.  See Note 1 of
Notes  to  Consolidated  Financial Statements on pages 30 and 31.


                                       8

<PAGE>


ITEM 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

FINANCIAL CONDITION

The  Corporation  is  primarily  engaged in the life  insurance  business  which
historically has provided a positive cash flow. By statute,  the Life Company is
required to invest in quality  securities which provide ample protection for its
policyholders.   Policy  liabilities  of  the  Life  Company  are  predominately
long-term in nature and are  supported  primarily by  long-term  fixed  maturity
investments and mortgage loans on real estate.

In May 1993 the Financial Accounting Standards Boards (FASB) issued Statement of
Financial   Accounting   Standards  (SFAS)  No.  115,  "Accounting  for  Certain
Investments in Debt and Equity Securities," effective for fiscal years beginning
after  December  15,  1993.  Under  the new  rules,  debt  securities  that  the
Corporation  has both the positive  intent and ability to  hold-to-maturity  are
carried at amortized cost.  Debt  securities that the Corporation  does not have
the positive  intent or ability to  hold-to-maturity  and all marketable  equity
securities are classified as  available-for-sale  or trading and carried at fair
value.   Unrealized  holding  gains  and  losses  on  securities  classified  as
available-for-sale  are carried as a separate component of stockholders' equity.
Unrealized  holding  gains and losses on  securities  classified  as trading are
reported in earnings.  The Corporation adopted the provisions of SFAS No. 115 as
of January 1, 1994 and placed its entire fixed  maturity  and equity  securities
portfolio in the available-for-sale  classification. The Corporation believes it
has the ability to hold all fixed income  investments  until maturity;  however,
securities may be sold to take advantage of investment  opportunities  generated
by changing interest rates, prepayments or income tax considerations,  as a part
of the Corporation's  asset/liability  strategy,  or for similar factors. Due to
increasing  interest rates during 1996, a $15.1 million net unrealized loss (net
of  deferred  income  tax  benefit)  on fixed  maturities  was  charged  against
stockholders'  equity at December 31, 1996. Declining interest rates during 1995
produced a $50.7  million net  unrealized  gain (net of deferred  income  taxes)
which was credited to stockholders' equity at December 31, 1995.

Assets totaled $1.4 billion at December 31, 1996 with investment assets totaling
$1.3 billion or 90% of total assets.  Growth in  investment  assets for 1996 was
affected by reduced market value  adjustments to fixed maturities as a result of
increasing  interest  rates  during  1996  and  the  use of  internal  funds  to
repurchase $9.3 million of the Corporation's  common stock. At December 31, 1996
there were no principal and interest  payments past due on fixed  maturities and
over 99% of the mortgage  loans on real estate were  current for both  principal
and interest.  The Corporation is not aware of any potential  problem loans, and
there are no mortgage loans whose terms were restructured during 1996.

Cash and investment  assets for 1996 exceeded total liabilities by 47%. The Life
Company continually matches the investment portfolio to the cash flow demands of
the types of insurance being written and maintains  adequate cash and short-term
investments  to meet cash  requirements  for policy loans and  voluntary  policy
terminations,  as well as investment  commitments.  Policy loans  increased $0.5
million  for 1996 and  accounted  for less than 5% of total cash and  investment
assets.

As disclosed in the Notes to Consolidated  Financial  Statements at December 31,
1996, $157 million of consolidated stockholders' equity represents net assets of
the Life Company that cannot be transferred  in the form of dividends,  loans or
advances to the Corporation.  However,  this poses no liquidity  concerns to the
Corporation as it has sufficient cash flow to meet its operational requirements.

In May 1993,  the FASB  issued  SFAS No.  114,  "Accounting  for  Creditors  for
Impairment of a Loan".  SFAS No. 114 requires  that impaired  loans be valued at
the  present  value of  expected  future  cash  flows  discounted  at the loan's
effective interest rate or, as a practical  expedient,  at the loan's observable
market  price,  or the  fair  market  value  of the  collateral  if the  loan is
collateral dependent.  The Corporation adopted the provisions of SFAS No. 114 as
of January 1, 1995.  Adoption of this  Standard  does not have any effect on the
financial condition or results of operations of the Corporation.

Effective December 31, 1993 the National Association of Insurance  Commissioners
adopted  Risk-Based   Capital  (RBC)  requirements  for  life/health   insurance
companies to evaluate the adequacy of statutory  capital and surplus in relation
to  investment  and  insurance  risks  such  as  asset  quality,  mortality  and
morbidity, asset and liability

                                       9

<PAGE>



matching,  and other business factors. The RBC formula will be used by states as
an early warning tool to identify  companies that  potentially are  inadequately
capitalized for the purpose of initiating  regulatory action. The Life Company's
statutory  adjusted  capital  exceeds the  authorized  control  level of the RBC
requirement.

On December 22, 1996 the Corporation's Board of Directors approved the merger of
the  Corporation  with and into a wholly owned  subsidiary  of American  General
Corporation.  Subject to  shareholder  approval  and  regulatory  consents,  the
transaction is expected to close during the first quarter of 1997.

RESULTS OF OPERATIONS

Individual life insurance  sales for 1996 increased 6% over 1995 results,  which
were up 18%. Premiums increased 3% compared to decreases of approximately 2% and
1% for 1995 and 1994,  respectively.  The growth in premiums  for 1996  resulted
principally  from  increased  individual  premiums.  Premium growth for 1995 was
affected by a decline in premiums recognized from participation in a large group
reinsurance contract. Premium growth for 1994 was affected by reduced individual
life insurance sales. Net investment income, excluding realized investment gains
and  losses,  increased  1.5%  compared  to an  increase  of 3.6% for 1995 and a
decrease of 1.4% for 1994. The  improvement for both 1996 and 1995 resulted from
growth in invested  assets.  Net investment  income for 1994 was affected by the
downward trend experienced in portfolio interest rates during 1993. In addition,
the  Corporation  used $34 million of internally  generated  funds between April
1991 and July 1994 to repurchase 1.5 million shares of its common stock.  During
1996  the  Corporation  used  $9.3  million  of  internally  generated  funds to
repurchase 0.4 million shares of its common stock. Realized investment gains and
losses for 1995 and 1994 were insignificant.  Realized investment gains amounted
to $6.9  million for 1996.  Benefits  and claims  increased 2% for both 1996 and
1995 compared to a decrease of 4% for 1994.  Mortality costs  contributed to the
changes in each of the years.  Amortization of deferred policy acquisition costs
for 1996  increased as a result of  increased  individual  policy  terminations.
General  expenses  increased 9% for 1996 compared to a 9% decrease for 1995. The
decline for 1995 was attributable to increased policy  acquisition cost deferral
related to increased individual sales and an improvement in employee health plan
cost  provisions.  The increase for 1996 resulted  primarily  from  increases in
employee health plan cost provisions.

                                       10

<PAGE>



ITEM 8.  Financial Statements and Supplementary Data

         The  information  for this item is submitted  in a separate  section of
this report. See page 22.

ITEM 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosures

         None.


                                       11

<PAGE>


                                    PART III

ITEM 10.  Directors and Executive Officers of the Registrant

       (a) and (b)  The following table gives the name and age of each of the
       directors (all of whom, except L. W. Richardson and D. N. Hoppes are
       executive officers of the Corporation and the Life Company) and their
       positions and offices with the Corporation and the Life Company and the
       dates first elected to those positions with the Corporation.

                                        Position and Offices with the
                                        Corporation and the Life Company and
                                        Date Elected to Corporation Officer
           Name             Age         Position

       H. D. Garnett         54         Vice President (since 1979), Controller
                                        (since 1974) and a director of the
                                        Corporation and the Life Company

       W. G. Hancock         46         Counsel (since 1984) and a director of
                                        the Corporation and the Life Company

       D. N. Hoppes          51         Director of the Corporation and the Life
                                        Company

       G. T. Richardson      44         Vice President (since 1983) and a
                                        director of the Corporation and the Life
                                        Company

       L. W. Richardson      77         Retired Vice President and a director of
                                        the Corporation and the Life Company

       J. M. Wiltshire, Jr.  71         Secretary (since 1994) and a director of
                                        the Corporation and the Life Company

       R. W. Wiltshire       75         Chairman of the Board (since 1983) and a
                                        director of the Corporation and the Life
                                        Company

       R. W. Wiltshire, Jr.  51         President (since 1988) and Chief
                                        Executive Officer (since 1992) and a
                                        director of  the Corporation and the
                                        Life Company

       W. B. Wiltshire       48         Vice President (since 1983) and a
                                        director of the Corporation and the Life
                                        Company


              Mrs. Hoppes was first elected to the Board of Directors of the
              Corporation on February 15, 1994, Messrs. Garnett, Hancock, G. T.
              Richardson, and W. B. Wiltshire were first elected to the Board in
              1983, and Messrs. R. W. Wiltshire, Jr. and J. M. Wiltshire, Jr.
              were first elected to the Board in 1976 and 1971, respectively,
              all to fill then existing vacancies on the Board.  Messrs. R. W.
              Wiltshire and L. W. Richardson have served as directors of the
              Corporation since its organization in 1970.

              All of the above persons serve one year terms as both executive
              officers and directors, or in the case of L. W. Richardson and
              Mrs. Hoppes, as directors only, which expire when their successors
              are duly elected. There are no executive officers of the
              Corporation who are not directors.

       (c)    Not applicable.

       (d)     L. W. Richardson is the father of  G. T. Richardson and the first
              cousin of  R. W. Wiltshire.  R. W. Wiltshire is the father of R.
              W. Wiltshire, Jr. and W. B. Wiltshire and the first cousin of J.
              M. Wiltshire, Jr.

       (e)(1) Except as set forth below, each of the persons named in (a) and
              (b) above has been principally employed by the Corporation and the
              Life Company in the present position for more than the past five
              years.  D. N. Hoppes has been a Trustee of the 1984 Voting Trust
              described in Item 12 below since January 4, 1994 and a volunteer
              in the Richmond, Virginia community for more than the past five
              years. W. G.  Hancock has been a partner of the law firm of Mays &
              Valentine since 1981 specializing in real estate and mortgage
              lending, insurance company

                                       12

<PAGE>



              regulation and general business matters.  He was designated as
              Counsel to the Corporation and the Life Company effective  June
              13, 1984.  L. W. Richardson retired on December 31, 1987, having
              served in the office shown for more than five years immediately
              prior to his retirement.  J. M. Wiltshire, Jr. retired as an
              employee and salaried officer of the Corporation and the Life
              Company on December 31, 1995, having served as Vice President and
              Counsel for more than five years immediately prior to his
              retirement.  He was elected Secretary of the Corporation and Life
              Company effective January 18, 1994 and continues to serve in that
              capacity. Effective April 7, 1992, R. W. Wiltshire, Jr. was
              elected Chief Executive Officer of the Corporation and the Life
              Company to succeed R. W. Wiltshire who had served in that office
              for more than five years immediately prior thereto.  Prior to his
              election as Chief Executive Officer, R. W. Wiltshire, Jr. was
              responsible for the general management of the operations of the
              Corporation and the Life Company.  R. W. Wiltshire retired as an
              employee and salaried officer of the Corporation and the Life
              Company effective September 6, 1993.

       (e)(2) Not applicable.

       (f)    Not applicable.

       (g)    Not applicable.

       Section 16(a) Beneficial Ownership Reporting Compliance

              The Corporation's directors and executive officers are required to
              file reports with the  Securities  and  Exchange  Commission  (the
              "Commission")  concerning their initial ownership of shares of the
              Corporation's  Class A and Class B Common Stock and any subsequent
              changes in that ownership,  and the Corporation  traditionally has
              assisted its  directors  and  executive  officers in the filing of
              these reports. In making these reports, the Corporation has relied
              on written representations of its directors and executive officers
              and  copies  of  the  reports   that  they  have  filed  with  the
              Commission.   The   Corporation   believes   that   these   filing
              requirements  were  satisfied  in 1996 and  prior  years  with the
              following   exception,   as  well  as  certain  other   exceptions
              previously  reported by the Corporation.  In 1996 G. T. Richardson
              reported  his  exchange of certain  shares of Class A Common Stock
              for an equal  number of shares of Class B Common  Stock owned by a
              related  family  member.  The  exchange  occurred  in 1994 and Mr.
              Richardson's  failure  to file a report  of the  transaction  on a
              timely basis was inadvertent.


                                       13

<PAGE>



ITEM 11.  Executive Compensation

       (a) and (b) Summary Compensation Table

       The following Summary  Compensation Table sets forth certain  information
       concerning  cash  compensation  paid to or contributed for the benefit of
       the four individuals named below for services rendered to the Corporation
       and its subsidiaries as executive officers during each of the three years
       in the period ended December 31, 1996.  During 1996, the  Corporation had
       no additional salaried executive officers not listed in the table.

                                     SUMMARY COMPENSATION TABLE
                                     --------------------------

<TABLE>
<CAPTION>

                                                                          All Other
    Name and Principal Position (1)   Year   Compensation-Salary (2)    Compensation(3)
    -------------------------------   ----   -----------------------    ---------------
<S> <C>
     R. W. Wiltshire, Jr.             1996         $ 180,912              $5,427
     President and Chief              1995           160,112               4,803
     Executive Officer                1994           139,312               4,179

     W. B. Wiltshire                  1996           143,295               4,299
     Vice President                   1995           130,284               3,909
                                      1994           117,294               3,519

     G. T. Richardson                 1996           138,735               4,162
     Vice President                   1995           128,597               3,858
                                      1994           117,074               3,512

     H. D. Garnett                    1996           134,722               4,042
     Vice President and               1995           126,922               3,808
     Controller                       1994           119,122               3,574
</TABLE>


         (1)  Offices shown are of both the Corporation and the Life Company.

         (2)  The amounts shown include employee contributions to the Thrift
         Plan.

         (3) All of the amounts  shown  reflect  matching  contributions  by the
         Corporation and the Life Company to the Thrift Plan. The Thrift Plan is
         a defined  contribution  plan available to  substantially  all salaried
         employees.  Participants  may make thrift  contributions to the plan in
         any  whole  percentage  of 2-14% of their  compensation  (not  over the
         compensation  limit,  as adjusted  from time to time under the Internal
         Revenue Code of 1986, as amended,  which was $150,000 in 1996), and the
         Corporation  and the Life Company will make a matching  contribution to
         the plan in an amount  equal to  three-fourths  of the first 4% of each
         eligible  employee's  compensation  so  contributed  for the year.  All
         matching  amounts  shown for each  executive  officer are fully vested.
         Benefits  under the Thrift  Plan are  payable at death,  retirement  or
         other  termination of employment (or at January of the calendar year of
         age 70 1/2, if  earlier).  The amount  shown for R. W.  Wiltshire,  Jr.
         includes the amount  allocated  under the excess benefit program of the
         Home  Beneficial  Supplemental  Retirement  Plan,  which  is in part an
         unfunded  non-qualified  plan  designed  to  provide  matching  company
         contributions  which are not made to the Thrift  Plan on account of the
         compensation limit.

       (c)    Not applicable

       (d)    Not applicable

       (e)    Not applicable

       (f)    Pension, Supplemental Executive Retirement,  and Postretirement
       Medical Benefits Plans

              Pension Plan The Corporation's Retirement Plan, a defined benefit
              pension plan, covers substantially all employees of the
              Corporation and the Life Company with two months of service. The
              Plan provides a retirement annuity,  payable  by the Life  Company
              as the  insurer  under the Plan, to each employee who is credited
              with five years of service, who attains his normal  retirement age
              (which is age 65 or, if the employee  becomes  a  participant  at
              or after  age 60,  his fifth anniversary  of  becoming a
              participant)  while  employed  by the Corporation or the Life
              Company, or who is totally and permanently disabled while an
              employee.  The  retirement  annuity is earned in the form

                                       14

<PAGE>


              of a single life annuity for the life of the employee,  commencing
              at the employee's  normal  retirement age, and is equal to the sum
              of  retirement  annuity  credits  earned by the  employee for each
              calendar  year he is credited  with a year of service.  Retirement
              annuity  benefits under the plan can be paid as early as age 55 if
              the  employee  retires  with at least ten years of service  (or at
              disability  retirement,  if earlier) and must be paid  starting in
              January of the calendar year the employee reaches age 70 1/2, even
              though he has not then retired. The annuity is payable monthly and
              is  subject  to  actuarial  reduction  in the event  the  employee
              commences to receive his  retirement  annuity  prior to his normal
              retirement  age (other than as a result of disability  retirement)
              or receives his retirement  annuity in a joint and survivor rather
              than a single life  annuity  form of payment.  A survivor  annuity
              benefit is provided to the  employee's  spouse in certain cases if
              the employee dies before his retirement annuity payments begin.

              The annual  annuity  credit for years after 1988 is equal to 2% of
              the first  $10,000 of the  employee's  compensation  for the year,
              plus 2.5% of the employee's compensation for the year in excess of
              $10,000.  Once an employee  is credited  with 35 years of service,
              whether before or after 1989, the annual annuity credit after 1988
              becomes 2.5% of the employee's compensation for the year. Prior to
              1989,  several  different  benefit  formulas  were  applied,   and
              employees  who were  participants  before 1989 will  retain  their
              annuity credits as determined  through  December 31, 1988 based on
              those earlier formulas.  Covered  compensation for purposes of the
              Plan is aggregate  cash  compensation  up to $150,000 per year, as
              adjusted  from time to time  under the  Internal  Revenue  Code of
              1986, as amended,  which in the case of each executive  officer is
              identical   to  the  amount   shown  as  salary  in  the   Summary
              Compensation Table appearing in Item 11(a) and (b).

              The estimated annual benefits payable under the Plan for each of
              the individuals listed in the Summary Compensation Table are as
              follows: R. W. Wiltshire, Jr.  -  $93,965, W. B. Wiltshire  -
              $99,329, G. T. Richardson   -  $108,102, and  H. D. Garnett  -
              $79,330.  The benefits as shown are estimated on the basis that
              the persons named will continue to receive, until the end of the
              calendar year in which they reach age 65, salaries at the same
              rates in effect during 1996 and will then retire and elect a
              single life rather than a joint and survivor annuity form of
              payment.

              Amounts  payable  under the Plan are not subject to deduction  for
              social security benefits under the Federal Social Security Act.

              Supplemental Executive Retirement Plan
              In  1996,  the  Corporation adopted  a  Supplemental   Executive
              Retirement Plan which became effective  November 1, 1996. The Plan
              is an  unfunded, nonqualified  defined  benefit  plan  maintained
              primarily for the purpose of providing  deferred  compensation  to
              certain senior management  employees of the  Corporation and Life
              Company.  The Plan  provides  supplemental  retirement  income  to
              participants in excess of their employer-  provided benefits under
              certain other plans and  arrangements  up to the maximum  benefit
              specified  in  the  Plan.  The  Plan  also  provides  supplemental
              survivor's income to a participant's  spouse, a death benefit to a
              participant's beneficiaries and certain limited medical benefits.

              A participant's accrued benefit under the Plan is an annual amount
              payable  monthly,  equal to a stated  percentage  (from 55% to 70%
              depending on the participant) of the participant's  highest weekly
              compensation as determined pursuant to the Plan reduced by (i) ten
              percent  for each year of future  service  (beginning  November 1,
              1996) less than ten; (ii)  benefits  paid under the  Corporation's
              pension  plan,  (iii)  except  in the  event of  disability,  five
              percent for each year  payment  begins  before age 65; and (iv) in
              the event of disability, any benefits paid under the Corporation's
              welfare benefit plan providing long-term disability benefits

              The retirement benefit under the Plan is payable beginning at age
              65, and is payable monthly in the form of a 100% joint and spouse
              survivor annuity for R. W. Wiltshire, Jr., W. B. Wiltshire and G.
              T. Richardson, if married at their benefit starting dates, and a
              life annuity for all other participants.  The  other participants,
              who include H. D. Garnett, may elect to receive payment in the
              form of an actuarially reduced 100% joint and spouse survivor
              annuity.

              A participant  will become fully vested in his accrued  retirement
              benefit under the Plan upon the earliest to occur of the following
              events,   while  he  is  an  active  employee:   (i)  death;  (ii)
              termination of employment due to disability;  or (iii)  completion
              of five years of service.  A participant will forfeit any benefits
              in the event of termination  from  employment  prior to satisfying
              the vesting requirements.

              Notwithstanding  the forgoing,  additional benefits are payable on
              account of a change in control  (as  defined in the Plan).  Upon a
              change in control, participants in the Plan are deemed to have ten
              years of future  service and become  100% vested in their  accrued
              benefit, and their accrued benefit is payable immediately without

                                       15

<PAGE>


              reduction  for  payment  before  age 65.  In  addition,  the  Plan
              provides participants with certain retiree life insurance benefits
              after termination of employment comparable to the retiree benefits
              they would have received if they were  considered  retirees  under
              the  Corporation's  welfare  benefit plan  providing  retiree life
              insurance  benefits.  The participants who are eligible to receive
              an  unreduced  100% joint and  spouse  survivor  annuity  are also
              provided  medical  insurance  benefits until age 65 for themselves
              and  their  dependents   comparable  to  the  benefits  under  the
              Corporation's  welfare  benefit  plan  providing  medical  expense
              benefits.  While it is believed  that payments or benefits are not
              subject to the excise tax imposed by Section  4999 of the Internal
              Revenue  Code  of  1986,  as  amended,   the  Plan  provides  that
              participants  will  be  reimbursed  for  any  excise  tax on  such
              payments and benefits  and for any income,  employment  and excise
              taxes payable on the reimbursement.

              The estimated gross annual retirement benefits under the Plan
              before reduction for benefits payable under the Corporation's
              pension plan (that is, the sum of the benefit under the Plan and
              the benefit payable under the Corporation's pension plan) for each
              of the individuals listed in the Summary Compensation Table are as
              follows: R. W. Wiltshire, Jr. - $126,638, W. B. Wiltshire -
              $100,306, G. T. Richardson - $97,114, and H. D. Garnett - $80,833.
              The benefits as shown are estimated on the basis that the persons
              named will continue to receive, until they reach age 65, or until
              there is a change in control, if earlier, salaries at the same
              rates in effect during 1996 and will then be paid, in
              the cases of R. W. Wiltshire, Jr., W. B. Wiltshire and G. T.
              Richardson, in the form of a 100% joint and spouse survivor
              annuity, and in the case of H. D. Garnett, in the form of a single
              life rather than a 100% joint and spouse survivor annuity.

              Postretirement Medical Benefits Plan
              In addition to the Corporation's defined benefit pension plan, the
              Corporation has a Postretirement  Medical Benefits Plan consisting
              of defined  benefit  medical  coverage for  pre-1993  retirees and
              defined  contribution  medical coverage for post-1992 retirees who
              were active  employees on December 31, 1992. The pre-1993  retiree
              program   covers  all   employees   who  had  retired   under  the
              Corporation's  pension plan as of December 31, 1992. The post-1992
              retiree  program  covers  all full  time  active  employees  as of
              December 31, 1992 who retire under the Corporation's  pension plan
              thereafter.  Employees who joined the  Corporation  after December
              31, 1992 are not  eligible  for  participation  in either  program
              under the postretirement medical benefits plan.

              The pre-1993  retiree  program  reimburses  its  participants  for
              actual  covered  costs  subject  to  specified   deductibles   and
              coinsurance.  The pre-1993  retiree  program is  contributory  and
              participant  contribution  requirements may be increased from time
              to  time  and  benefits  may  be  modified  or  terminated  by the
              Corporation.  The post-1992 retiree program is noncontributory and
              reimburses its  participants  for the cost of health insurance and
              other health care coverage premiums up to a maximum benefit amount
              (stated in terms of health care  spending  credits)  determined in
              accordance  with the plan based on years of service as of December
              31, 1992. The unused maximum benefit amount,  initially determined
              as of December 31, 1992, is increased thereafter only for interest
              from January 1, 1993 until it is fully expended.

              Use of the  healthcare  spending  account  may be  limited  by the
              Corporation  prior to a change  in  control  (defined  in the same
              manner as in the Supplemental Executive Retirement Plan). Upon the
              occurrence of a change in control,  the amounts in the  healthcare
              spending  accounts  become  vested  for all active  employees  and
              retirees.

              All current salaried executive officers of the Corporation, upon
              their retirement, will be covered under the post- 1992 retiree
              program.  The spending account credit balances determined as of
              December 31, 1996 (without interest to be credited thereafter) for
              each of them are as follows:  R. W. Wiltshire, Jr. - $31,607,  W.
              B. Wiltshire - $32,377, G. T. Richardson - $29,294, and H. D.
              Garnett - $29,294.

              The Corporation is self insured with respect to benefits under the
              postretirement medical benefits plan.

       (g)    Compensation of Directors

              All directors of the Corporation (other than Messrs. L. W.
              Richardson, R. W. Wiltshire, J. M. Wiltshire, Jr., and Hancock and
              Mrs. Hoppes) are salaried executive officers. Messrs. L. W.
              Richardson, R. W. Wiltshire and J. M. Wiltshire, Jr. have retired
              as salaried executive officers of the Corporation and the Life
              Company on December 31, 1987, September 6, 1993, and December 31,
              1995, respectively.  In consideration of their past services to
              the Corporation and the Life Company, the Corporation agreed to
              pay L. W. Richardson (more than 42 years of continuous service)
              $30,000 per year, R. W. Wiltshire (more than 47 years of
              continuous service) $90,000 per year and J. M. Wiltshire, Jr.
              (more than 27 years of continuous service) $25,000 per year, in
              addition to their respective annual benefits of $34,109, $55,002
              and $33,936 under the Corporation's pension plan.  The
              Corporation's agreements with each of them provide that they will
              not compete with the Corporation or its subsidiaries, directly or
              indirectly, on a full time or a part time or on a consulting or
              advisory basis.  L.

                                       16

<PAGE>

              W. Richardson also is a participant in the pre-1993 retiree
              program under the Corporation's postretirement medical benefits
              plan.  R. W. Wiltshire and J. M. Wiltshire, Jr. are each
              participants in the post-1992 retiree program under the plan and
              have spending account credit balances as of December 31, 1996,
              after payment of premiums subsequent to their retirement, of
              $39,020 and $32,687, respectively.  (See "Pension, Supplemental
              Executive Retirement, and Postretirement Medical Benefits Plans"
              in Item 11(f)). Effective January 1, 1996, J. M. Wiltshire, Jr.
              entered into a two-year consulting arrangement with the
              Corporation to provide consulting services as a non-employee at
              $50 per hour for 20 hours per week.  The Corporation may
              discontinue this arrangement at any time.  Mr. Hancock is a
              partner in the law firm of Mays & Valentine.  The amount of legal
              fees paid to that firm by the Corporation and its subsidiaries and
              affiliates in 1996, including amounts for legal services provided
              by Mr. Hancock, did not exceed 5% of the firm's gross revenues for
              its last fiscal year.  No director of the Corporation receives any
              additional compensation in the form of directors' fees or
              otherwise for attendance at meetings of the Board or committees
              thereof, or other services performed solely in his or her capacity
              as a director.

       (h)    Employment Contracts and Termination of Employment and
              Change-in-Control Arrangements

              (1)   Not applicable
              (2)   The Corporation's Supplemental Executive Retirement Plan and
                    Postretirement  Medical Benefits Plan contain provisions for
                    payments  to the  Corporation's  executive  officers  upon a
                    "change  of  control"  as  defined  in the  Plans.  See  the
                    description  of these  plans  under  "Pension,  Supplemental
                    Executive  Retirement and  Postretirement  Medical  Benefits
                    Plans in Item 11(f).

       (i)    Not applicable

       (j)    Board of Director Interlocks and Insider Participation

              The Corporation has no formal compensation committee, and all
              final decisions as to executive officer compensation are made by
              the entire Board of Directors.  All members of the Board of
              Directors, except Mrs. Hoppes,  are present or retired officers of
              the Corporation.  Messrs. R. W. Wiltshire, Jr., W. B. Wiltshire,
              G. T. Richardson and Garnett are salaried executive officers of
              the Corporation.  Messrs. R. W. Wiltshire and J. M. Wiltshire, Jr.
              have retired as employees of the Corporation and now serve as
              unsalaried executive officers in the capacities of Chairman of the
              Board and Secretary, respectively.  L. W. Richardson is a retired
              executive officer of the Corporation.  Mr. Hancock is an
              unsalaried executive officer of the Corporation and a partner in
              the law firm of Mays & Valentine which is general counsel to the
              Corporation.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management

          (a) and (b) As of December 31,1996, 5,181,165 shares of Class A Common
              Stock of the  Corporation,  constituting  64.3%  of the  8,060,660
              shares  then  outstanding,  were held by  trustees  under a voting
              trust  agreement  dated as of May 1, 1984,  which,  by virtue of a
              voting  trust  extension  agreement  dated  as  of  May  1,  1987,
              continues in force until May 11, 1997 (1984 Voting Trust),  unless
              earlier  terminated  pursuant to its terms.  The Voting  Trustees,
              each of whom is a director of the Corporation and the Life Company
              are R. W. Wiltshire, L. W. Richardson, R. W. Wiltshire, Jr., G. T.
              Richardson,  and D. N.  Hoppes  (together,  the  Trustees).  Their
              mailing  address is 3901 West  Broad  Street,  Richmond,  Virginia
              23230.  The Trustees are given exclusive voting power of the Class
              A Common Stock subject to the 1984 Voting Trust,  but must vote or
              execute  consents  in  accordance  with  the  instructions  of the
              holders of voting  trust  certificates  with respect to any action
              submitted  to a vote of the holders of Class A Common  Stock as to
              which  a  majority  of  the  Trustees  then  in  office  favor  an
              affirmative vote, where such action, if approved by the holders of
              Class A Common Stock in accordance with and to the extent required
              by law and the  Corporation's  Articles  of  Incorporation,  would
              result in: (a) the increase or decrease of the  authorized  number
              of   shares   of  Class  A   Common   Stock;   (b)  an   exchange,
              reclassification,  or cancellation of all or part of the shares of
              Class A Common Stock;  (c) an exchange,  or right of exchange,  of
              all or any part of the shares of another  class into the shares of
              Class A Common  Stock;  (d) any change  that may be adverse to the
              designations,  preferences, limitations, voting rights or relative
              to other  rights  of any  nature  of the  shares of Class A Common
              Stock; (e) any change of the shares of Class A Common Stock into a
              different number of shares of the same class or into the same or a
              different  number of shares,  either with or without par value, of
              other classes of stock;  (f) the creation of a new class of stock,
              or change of a class with  subordinate  and inferior rights into a
              class having rights and  preferences  prior and superior to shares
              of  Class A  Common  Stock,  or any  increase  of the  rights  and
              preferences  of any class having rights and  preferences  prior or
              superior to shares of Class A Common Stock;  (g) any limitation or
              denial of preemptive rights of shares of Class A Common Stock; (h)
              the sale, lease, exchange,  mortgage,  pledge or other disposition
              of all,  or  substantially  all,  the  property  and assets of the
              Corporation; (i) the merger or consolidation of the Corporation

                                       17

<PAGE>


              with or into any other  corporation,  or of any other  corporation
              with or  into  the  Corporation;  or (j)  the  dissolution  of the
              Corporation.  If a majority of the Trustees  shall oppose any such
              matter, the Trustees need not solicit, obtain or follow directions
              from  the  holders  of the  voting  trust  certificates,  and such
              majority of Trustees opposing any such proposal are authorized and
              empowered  to vote all the shares of Class A Common  Stock held by
              the Trustees under the 1984 Voting Trust against such proposal.  A
              majority  vote of the  Trustees  controls  actions  to be taken by
              them;  they may vote in person or by proxy to another Trustee with
              or without  direction how to vote. They may vote for themselves as
              directors   and  officers  of  the   Corporation   and  fix  their
              compensation  provided  it be  commensurate  with the  duties  and
              responsibilities  of the office or  position  held.  They may name
              successor  trustees in event of death,  resignation,  removal from
              the  Commonwealth  of Virginia or incapacity of any Trustee.  They
              receive no  compensation  for their  services as Trustees.  In the
              event  that  by  virtue  of  a  stock   dividend,   stock   split,
              reclassification  of stock or  subscription,  the Trustees receive
              further Class A Common Stock,  it is to be held by them subject to
              all of the provisions of the 1984 Voting Trust.  In the event that
              as a  result  of any  merger,  consolidation,  sale of  assets  or
              property,  exchange or other  cause,  the shares of Class A Common
              Stock of the held by the  Trustees  should be  converted  into and
              become shares of another corporation,  the 1984 Voting Trust shall
              be terminated  automatically  unless the amount of voting stock in
              such  other  corporation  received  as a result of the  conversion
              would  thereafter  represent more than one-third of the issued and
              outstanding  voting stock of such other  corporation  if it has no
              class of stock  registered  under the  Securities  Exchange Act of
              1934,  or more than  one-twentieth  of the issued and  outstanding
              voting stock of such other  corporation if it has a class of stock
              so  registered,  in either of which  cases the 1984  Voting  Trust
              shall continue in force according to its terms.

              Class B  Common  Stock,  which  has no vote  on most  matters,  is
              publicly traded in the over-the-counter  market and is not subject
              to the 1984 Voting Trust.

              Due to the  substantial  number of shares of Class A Common  Stock
              held subject to the 1984 Voting Trust,  the Trustees  individually
              and  collectively  may be deemed to be  "control  persons"  of the
              Corporation  under rules and  regulations  of the  Securities  and
              Exchange Commission.

              As of December 31, 1996,  the Trustees under the 1984 Voting Trust
              beneficially   owned,   directly  or   indirectly,   voting  trust
              certificates  evidencing an aggregate of 1,199,760 shares of Class
              A Common Stock subject thereto,  as well as another 280,437 shares
              of Class A Common  Stock that are not  subject to the 1984  Voting
              Trust.

              The following  table shows as of December 31, 1996, the beneficial
              ownership of all Class A and Class B Common Stock by each director
              of  the   Corporation,   and  the  beneficial   ownership  of  the
              Corporation's  Class A Common  Stock by any other person or entity
              known to the  Corporation  to own more than 5% of the  outstanding
              shares of such class.  The Corporation  has no executive  officers
              who are not directors.  The amounts shown for Class A Common Stock
              include   beneficial   ownership   evidenced   by   voting   trust
              certificates of the 1984 Voting Trust,  but exclude Class A shares
              held by the Trustees thereunder.


                                    DIRECTORS
                                    ---------

                                         TITLE OF AMOUNT              PERCENT OF
    NAME OF DIRECTOR          CLASS     BENEFICIALLY OWNED(1)          CLASS(2)
    ----------------          -----     ---------------------         ----------
    H. D. Garnett             Class A          --                           --
                              Class B       2,600 (3)                        *
    W. G. Hancock             Class A      89,560 (4)(5)(6)               1.11
                              Class B           4                            *
    D. N. Hoppes              Class A      13,536 (7)(8)(9)                  *
                              Class B       7,264 (8)                        *
    G. T. Richardson          Class A     291,475 (7)(9)(10)              3.62
                              Class B      11,774                            *
    L. W. Richardson          Class A     349,324 (4)(7)(9)(10)(11)       4.33
                              Class B      89,179 (4)(11)                    *
    J. M. Wiltshire, Jr.      Class A           -                           --
                              Class B       6,000                            *
    R. W. Wiltshire           Class A     788,752 (4)(7)(9)(12)           9.79
                              Class B         660 (12)                       *
    R. W. Wiltshire, Jr.      Class A      37,110 (7)(9)(12)                 *
                              Class B      32,679 (4)(12)                    *
    W. B. Wiltshire           Class A      36,950 (9)(12)                    *
                              Class B      21,786 (4)(12)                    *
    All directors as a group  Class A   1,606,707                        19.93
                              Class B     171,946                         1.91

                                       18

<PAGE>




                            5% CLASS A STOCKHOLDERS
                      (OTHER THAN DIRECTORS AND TRUSTEES)

                                                 AMOUNT
       NAME AND ADDRESS OF                     BENEFICIALLY       PERCENT OF
       5% CLASS A STOCKHOLDER                   OWNED (1)            CLASS
       ----------------------                   ---------         --------

     Dixie Company (13)                        2,373,552  (8)(9)    29.45
     PO Box 12312
     Richmond, Virginia 23241-0312

     Estate of Mary Morton Parsons(14)         1,174,427  (9)       14.57
     PO Box 85678
     Richmond, Virginia 23285-5678

              (1)   Beneficial  ownership has been determined in accordance with
                    Rule 13d-3 under the Securities Exchange Act of 1934.
              (2)   Where an asterisk is shown, the percentage is less than 1%.
              (3)   All of the Class B shares shown for Mr. Garnett are owned
                    jointly with his wife.
              (4)   Includes an aggregate of 26,240  shares of Class A (of which
                    22,696 shares are evidenced by voting trust  certificates of
                    the 1984 Voting  Trust) and 12,710  shares of Class B Common
                    Stock held by  directors as trustees or  custodians  for the
                    benefit  of  children  (that  are  not  described  in  other
                    footnotes  to this  table),  or by  their  wives,  and  with
                    respect  to  which  beneficial   ownership  is  or  will  be
                    disclaimed  by  individual  directors in  ownership  reports
                    filed with the Securities and Exchange Commission.
              (5)   The ownership shown for Mr. Hancock  excludes 188,800 shares
                    of Class A Common Stock held in trust for the benefit of his
                    mother,  with  remainder to her issue,  in which Mr. Hancock
                    has  a  vested  one-third  beneficial  interest  subject  to
                    partial divestment upon any further children of his mother.
              (6)   Includes  2,400  shares of Class A Common  Stock held by Mr.
                    Hancock and his  brother and sister as trustees  under inter
                    vivos trusts  created by their mother for the benefit of her
                    six  grandchildren,  three  of  whom  are  children  of  Mr.
                    Hancock.
              (7)   5,181,165 shares of Class A Common Stock constituting 64.3%
                    of the 8,060,660 shares outstanding are held by R. W.
                    Wiltshire, L. W. Richardson, R. W. Wiltshire, Jr., G. T.
                    Richardson and D. N. Hoppes, as Trustees under the 1984
                    Voting Trust.
              (8)   All of the voting trust  certificates for Class A shares and
                    the Class B shares are held of record by Dixie  Company  and
                    may be  acquired  by Mrs.  Hoppes  pursuant  to her power to
                    revoke an inter vivos trust. Such voting trust  certificates
                    are also included in the table for Dixie Company.
              (9)   Some portion or all of the Class A shares shown for each of
                    the indicated directors or stockholders are subject to the
                    1984 Voting Trust, and their beneficial ownership as to
                    those shares is evidenced by voting trust certificates that
                    have been issued to them thereunder.  The number of Class A
                    shares deposited in the 1984 Voting Trust by each of them is
                    as follows: D. N. Hoppes - 13,536; G. T. Richardson -
                    258,448; L. W. Richardson - 330,860; R. W. Wiltshire -
                    586,276; R. W. Wiltshire, Jr. - 10,640; W. B. Wiltshire
                    -10,492; Dixie Company - 2,313,656; and  Estate of Mary
                    Morton Parsons - 1,174,427.
              (10)  Includes voting trust certificates for 235,138 shares of
                    Class A Common Stock held by a trust of which G. T.
                    Richardson is one of two trustees sharing voting and
                    investment power.  L. W. Richardson has a contingent
                    one-half remainder interest in the assets of the trust.  The
                    ownership shown includes all such shares for G. T.
                    Richardson and excludes all such shares for L. W.
                    Richardson.
              (11)  Includes 4,253 shares of Class A Common Stock,  voting trust
                    certificates  for  25,538  shares  of Class A  Common  Stock
                    subject to the 1984 Voting Trust and 37,712  shares of Class
                    B Common Stock held by Mr. Richardson,  as trustee with sole
                    voting and shared investment  power,  for the  benefit of a
                    member of his immediate family.
              (12)  141,804 shares of Class A Common Stock, voting trust
                    certificates for 94,976 shares of Class A Common Stock
                    subject to the 1984 Voting Trust and 660 shares of Class B
                    Common Stock are held by the Estate of Essie Lee Wiltshire
                    for the life of R. W. Wiltshire with a vested remainder
                    interest in the children of R. W. Wiltshire.  R. W.
                    Wiltshire is the sole executor of the Estate of Essie Lee
                    Wiltshire. During the life of R. W. Wiltshire the income
                    from the foregoing shares is paid to his children.  In
                    addition, R. W. Wiltshire has a life estate in voting trust
                    certificates evidencing 450,524 shares of Class A Common
                    Stock subject to the 1984 Voting Trust, with remainder to
                    his children.  R. W. Wiltshire, Jr. and W. B. Wiltshire have
                    vested one-fourth beneficial interests in all of the
                    foregoing shares, subject to partial divestment upon any
                    further children of R. W. Wiltshire. The ownership shown
                    includes such shares for R. W. Wiltshire and excludes all
                    such shares for R. W. Wiltshire, Jr. and W. B. Wiltshire.

                                       19

<PAGE>



                    Both R. W. Wiltshire, Jr. and W. B. Wiltshire also have the
                    same vested one-fourth remainder interests subject to
                    partial divestment in voting trust certificates for 17,528
                    Class A shares and 123,308 shares of Class B Common Stock in
                    which various children and grandchildren of R. W. Wiltshire
                    residing in other households have an interest for his life.
                    The ownership shown for R. W. Wiltshire, R. W. Wiltshire,
                    Jr. and W. B. Wiltshire does not reflect any of such shares,
                    except in the case of R. W. Wiltshire, Jr. for voting trust
                    certificates evidencing 8,764 Class A shares held by him for
                    his own benefit and 26,445 Class B shares held by him as
                    custodian for his minor children and, in the case of W. B.
                    Wiltshire, for voting trust certificates evidencing 8,764
                    Class A shares held by him for his own benefit and 17,630
                    Class B shares held by him as custodian for his minor
                    children.
              (13)  Dixie  Company is the nominee of  Jefferson  National  Bank,
                    Richmond,  Virginia,  which holds  59,896 Class A shares and
                    voting  trust  certificates  for another  2,313,656  Class A
                    shares in a number of fiduciary accounts that it administers
                    (including  voting  trust  certificates  for 13,536  Class A
                    shares previously reported in the table for Mrs. Hoppes).
              (14)  Clinton Webb and NationsBank,  N.A., Richmond,  Virginia are
                    the co-executors of the Estate of Mary Morton Parsons.

       (c)    Other than the Merger Agreement, the Corporation  has no knowledge
              of any  contractual  arrangement which may at a  subsequent  date
              result in a change of control of the Corporation,  except that the
              1984 Voting Trust will expire on the  earlier  of (i) consummation
              of the  Merger or (ii) May 11, 1997.

ITEM 13.  Certain Relationships and Related Transactions

       (a)    On September 4, 1996, the Corporation repurchased 150,000 shares
              of its Class A Common Stock at a price of $3,526,500, or $23.51
              per share, from an inter vivos trust created by George L.
              Richardson prior to his death. At the time of the repurchase, the
              Estate of George L. Richardson was the beneficial owner of more
              than 5% of the Corporation's outstanding Class A Common Stock.  G.
              T. Richardson, a director and executive officer of the
              Corporation, is a co-executor of the estate and co-trustee of the
              trust.  L. W. Richardson, a director of the Company, and G. T.
              Richardson are beneficiaries of the estate. On September 27, 1996,
              the Corporation repurchased voting trust certificates for 86,110
              shares of its Class A Common Stock at a price of $2,098,931 or
              $24.375 per share from Lee R. Jones who is the sister of  L. W.
              Richardson.  Lee R. Jones received such voting trust certificates
              as a distribution from the Estate of George L. Richardson. In the
              case of each of the above purchases, the price paid by the
              Corporation was below the then applicable bid price for the
              Corporation's Class B Common Stock in the over-the-counter market,
              and the Board of Directors determined that reacquisition of the
              shares was in the best interest of the Corporation and its
              stockholders when compared with alternative investments available
              to the Corporation.  Immediately upon their reacquisition, all of
              the shares became authorized but unissued shares under Virginia
              law.
       (b)    W. G.  Hancock  is a partner  in the law firm of Mays &  Valentine
              which  provided   legal   services  as  general   counsel  to  the
              Corporation and its subsidiaries  and affiliates  during 1996, and
              is expected to serve in the same  capacity in 1997.  The amount of
              legal  fees  paid  to  that  firm  by  the   Corporation  and  its
              subsidiaries  and  affiliates  for 1996 did not  exceed  5% of the
              firm's gross revenues for its last full fiscal year.

       (c)    Not applicable.

       (d)    Not applicable.


                                       20

<PAGE>


                                    PART  IV



ITEM 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

       (a)    1. and 2.  -  Financial Statements and Financial Statement
              Schedules

              The financial  statements and financial statement schedules listed
              in the  accompanying  Index to Financial  Statements and Financial
              Statement  Schedules  on page 23 are filed as part of this  annual
              report.

              3.  Exhibits

              The  exhibits  listed in the  accompanying  Index to Exhibits  are
              filed as part of this annual report.

       (b)    Reports on Form 8-K

              The Corporation filed a Report on Form 8-K dated December 27, 1996
              with the Securities and Exchange  Commission  reporting on Item 1,
              Changes in Control of Registrant to reflect the Agreement and Plan
              of Merger with American General Corporation and AGC Life Insurance
              Company and Home Beneficial Corporation.


                                       21

<PAGE>



                           ANNUAL REPORT ON FORM 10-K

                       ITEM 8 AND ITEMS 14(a)(1) and (2)

                       INDEX OF FINANCIAL STATEMENTS AND

                         FINANCIAL STATEMENT SCHEDULES

                  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         FINANCIAL STATEMENT SCHEDULES

                          YEAR ENDED DECEMBER 31, 1996

                          HOME BENEFICIAL CORPORATION

                               RICHMOND, VIRGINIA


                                       22

<PAGE>



                          HOME BENEFICIAL CORPORATION
                         Index to Financial Statements
                       and Financial Statement Schedules
                      (Item 8 and Items 14(a)(1) and (2))

                                                                           Page

The following  consolidated  financial statements of Home Beneficial
Corporation are in response to the requirements of Item 8:

    Report of Ernst & Young LLP, Independent Auditors                       24

    Consolidated Balance Sheet
        -- December 31, 1996 and 1995                                     25-26

    Consolidated Statement of Income
        -- Years ended December 31, 1996, 1995, and 1994                    27

    Consolidated Statement of Retained Earnings
        -- Years ended December 31, 1996, 1995, and 1994                    28

    Consolidated Statement of Cash Flows
        -- Years ended December 31, 1996, 1995, and 1994                    29

    Notes to Consolidated Financial Statements
        -- December 31, 1996                                              30-36

The following financial statement schedules of Home Beneficial Corporation
are in response to the requirements of Item 14 (a)(1) and (2):

    Schedule I - Summary of Investments - Other Than Investments
       in Related Parties                                                   37

    Schedule II - Condensed Financial Information of Registrant           38-40

    Schedule IV - Reinsurance                                               41

All other  schedules for which  provision is made in the  applicable  accounting
regulation of the  Securities  Exchange  Commission  are not required  under the
related instructions or are inapplicable and therefore have been omitted.


                                       23

<PAGE>


REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders Home Beneficial Corporation

We have audited the accompanying  consolidated balance sheets of Home Beneficial
Corporation  as of  December  31, 1996 and 1995,  and the  related  consolidated
statements of income,  retained  earnings,  and cash flows for each of the three
years in the period  ended  December  31,  1996.  Our audits also  included  the
financial statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Corporation's management.
Our  responsibility  is to express an opinion on these financial  statements and
schedules based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Home Beneficial
Corporation at December 31, 1996 and 1995, and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1996, in conformity with generally accepted accounting  principles.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial  statements taken as a whole,  present fairly
in all material respects the information set forth therein.


                                                      /S/ ERNST & YOUNG LLP

Richmond, Virginia
February 7, 1997


                                       24

<PAGE>

                          HOME BENEFICIAL CORPORATION
                           CONSOLIDATED BALANCE SHEET
                           DECEMBER 31, 1996 AND 1995



                                                              1996        1995
                                                                (In millions)
ASSETS

INVESTMENTS - Note 2

   Securities available-for-sale at fair value
     Fixed maturities (amortized cost: 1996,  $751.0;
     1995, $744.0)........................................ $   779.4   $   795.7
     Equities (cost: 1996, $8.5; 1995, $8.7)                    34.7        29.5
   Mortgage loans on real estate..........................     375.0       339.8
   Policy loans...........................................      55.0        54.5
   Short-term investments.................................      31.4        41.1
   Other..................................................       9.8         6.2
                                                           ---------   ---------
       Total investments..................................   1,285.3     1,266.8

CASH   ...................................................       1.0         3.1

RECEIVABLES ..............................................      26.3        23.0

DEFERRED POLICY ACQUISITION COSTS.........................     102.4        99.3

PROPERTY AND EQUIPMENT AT COST
   (less accumulated depreciation: 1996, $8.2; 1995, $7.4)       6.1         6.9

DEFERRED CHARGES AND OTHER ASSETS.........................       2.4         4.3
                                                           ---------   ---------
                                                           $ 1,423.5   $ 1,403.4
                                                           =========   =========

See accompanying notes.


                                       25

<PAGE>



                          HOME BENEFICIAL CORPORATION
                           CONSOLIDATED BALANCE SHEET
                           DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>


                                                                    1996       1995
                                                                     (In millions)
<S> <C>
LIABILITIES

Policy liabilities and accruals - Note 1
   Future policy benefits.................................        $  682.3  $  672.3
   Unearned premiums......................................            26.6      26.3
   Policy claims and benefits payable.....................            12.7      10.8
                                                                  --------  --------
     Total policy liabilities and accruals................           721.6     709.4

Other policyholder funds..................................            74.8      71.5

Income taxes - Notes 2 and 5..............................            17.0      21.0

Other liabilities.........................................            61.5      59.4
                                                                  --------  --------

     Total liabilities....................................           874.9     861.3

COMMITMENTS AND CONTINGENT LIABILITIES - Note 3

STOCKHOLDERS' EQUITY - Notes 2, 6 and 7

   Capital stock
   Class A Common Stock, Voting, $.3125 par value, 12,800,000
   shares authorized; 8,060,660 issued at December 31, 1996
   and 8,446,200 issued at December 31, 1995                           2.5       2.6

   Class B  Common  Stock,  Non-Voting,  $.3125  par  value,
   19,200,000  shares authorized; 8,992,910 issued at December 31,
   1996 and at December 31, 1995..........................             2.8       2.8
                                                                  --------  --------

     Total capital stock..................................             5.3       5.4

   Unrealized gains on securities available-for-sale less
   deferred income taxes..................................            36.6      48.2

   Retained earnings......................................           506.7     488.5
                                                                  --------  --------

     Total stockholders' equity...........................           548.6     542.1
                                                                  --------  --------

                                                                  $1,423.5  $1,403.4
                                                                  ========  ========
</TABLE>



See accompanying notes.


                                       26

<PAGE>



                          HOME BENEFICIAL CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
                 YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>


                                                               1996          1995         1994
                                                              (In millions except per share data)
<S> <C>
REVENUES

   Premiums...............................................   $ 117.6        $114.0       $116.1
   Net investment income - Note 2.........................      96.3          88.1         84.8
                                                             -------        ------       ------
       Total revenues.....................................     213.9         202.1        200.9


BENEFITS, CLAIMS AND EXPENSES

   Benefits and claims....................................      94.7          92.8         91.1
   Underwriting, acquisition and insurance expenses:
     Amortization of deferred policy acquisition costs          17.1          12.3         13.2
     Commission and related sales expenses................       8.3          11.7         11.3
     General, administrative and other....................      29.6          27.2         29.7
                                                             -------        ------       ------
       Total benefits, claims and expenses................     149.7         144.0        145.3
                                                             -------        ------       ------

INCOME BEFORE INCOME TAXES................................      64.2          58.1         55.6


INCOME TAXES - Note 5
   Current................................................      21.5          19.9         18.5
   Deferred...............................................        .3            .3           .9
                                                             -------        ------       ------

       Total income taxes.................................      21.8          20.2         19.4
                                                             -------        ------       ------

NET INCOME................................................   $  42.4        $ 37.9       $ 36.2
                                                             =======        ======       ======


NET INCOME PER SHARE OF COMMON STOCK
   (Average shares outstanding: 1996, 17,244,257; 1995,
   17,528,836; and 1994, 17,757,315) - Note 6                $  2.46        $ 2.16       $ 2.04
                                                             =======        ======       ======

</TABLE>

See accompanying notes.

                                       27

<PAGE>



                          HOME BENEFICIAL CORPORATION
                  CONSOLIDATED STATEMENT OF RETAINED EARNINGS
                 YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994


<TABLE>
<CAPTION>

                                                              1996         1995         1994
                                                             (In millions except per share data)
<S> <C>
Balance at beginning of year..............................  $488.5        $467.9       $453.4

Additions (deductions)
   Net income.............................................    42.4          37.9         36.2
   Dividends paid to stockholders (per share: 1996, $.87;
     1995, $.83; 1994, $.795).............................   (15.0)        (14.5)       (14.1)
   Purchase and retirement of Class A and Class B
     Common Stock - Note 6................................    (9.2)         (2.8)        (7.6)
                                                            ------        ------       ------

Balance at end of year....................................  $506.7        $488.5       $467.9
                                                            ======        ======       ======

</TABLE>

See accompanying notes.

                                       28

<PAGE>



                          HOME BENEFICIAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>


                                                                        1996          1995       1994
                                                                                 (In millions)
<S> <C>
Increase (Decrease) in Cash

Operating Activities
   Net income ............................................            $ 42.4       $  37.9       $  36.2
   Adjustments to reconcile net income to net cash
     provided by operating activities
     Depreciation and amortization........................               1.4           1.4           1.4
     Amortization of discount and premiums on
       investments, net...................................              (1.4)         (1.4)          (.9)
     Increase in policy liabilities and accruals                        12.2          12.6          10.7
     Increase (decrease) in income tax liability                         2.4            .9           (.9)
     Policy acquisition costs deferred....................             (20.2)        (15.3)        (13.1)
     Amortization of deferred policy acquisition costs                  17.1          12.3          13.2
     Realized investment (gains) .........................              (6.9)           --            --
     Other................................................              (1.3)         ( .9)          1.6
                                                                      ------       -------       -------
       Net cash provided by operating activities                        45.7          47.5          48.2

Investing Activities
   Proceeds from sales, calls or maturities of investments
     Securities available-for-sale........................             160.0         125.8         259.2
     Mortgage loans on real estate........................              39.7          35.4          44.4
     Policy loans.........................................              12.7          11.2          10.6
     Short term investments, net..........................               9.7            --           3.0
     Real estate..........................................               5.8            --            --
     Other................................................                .4            .7            --
                                                                      ------       -------       -------
       Total proceeds.....................................             228.3         173.1         317.2
                                                                      ------       -------       -------

   Costs of investments acquired
     Securities available-for-sale........................            (160.2)       (149.0)       (273.1)
     Mortgage loans on real estate........................             (74.8)        (37.1)        (66.4)
     Short term investments, net..........................                --          (8.6)           --
     Policy loans.........................................             (13.2)        (12.2)        (11.3)
     Other................................................              (6.9)          (.5)         (1.7)
                                                                      ------       -------       -------
       Total costs........................................            (255.1)       (207.4)       (352.5)
                                                                      ------       -------       -------
         Net cash used in investing activities                         (26.8)        (34.3)        (35.3)

Financing Activities
   Dividends paid.........................................             (15.0)        (14.5)        (14.1)
   Purchase of Class A and Class B Common Stock                         (9.3)         (2.8)         (7.7)
   Other..................................................               3.3           5.5           4.6
                                                                      ------       -------       -------
     Net cash used in financing activities................             (21.0)        (11.8)        (17.2)
                                                                      ------       -------       -------

Net (decrease) increase in cash...........................              (2.1)          1.4          (4.3)
Cash at beginning of year.................................               3.1           1.7           6.0
                                                                      ------       -------       -------
Cash at end of year.......................................            $  1.0       $   3.1       $   1.7
                                                                      ======       =======       =======
Supplemental disclosure of cash flow information
   Income tax payments....................................            $ 19.2       $  20.4       $  20.3
                                                                      ======       =======       =======

</TABLE>


See accompanying notes.

                                       29

<PAGE>



                          HOME BENEFICIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation -- The consolidated  financial  statements include the accounts of
the  Corporation,  its principal  subsidiary,  Home  Beneficial  Life  Insurance
Company  (the  Life  Company),  and  its  other  subsidiaries.  All  significant
inter-company  accounts and  transactions  are  eliminated.  The  Corporation is
engaged predominantly in the life and accident and health insurance business.

Basis of Presentation -- The accompanying consolidated financial statements have
been prepared on the basis of generally accepted  accounting  principles (GAAP),
which  reflect  certain  major  adjustments  to  the  Life  Company's  financial
statements as filed with insurance regulatory authorities (statutory basis). The
preparation of financial  statements  requires  management to make estimates and
assumptions that affect amounts reported herein.  Such estimates and assumptions
could change in the future as more information becomes known. See Note 7.

Investments  --The  Corporation's  entire fixed  maturity  (bonds and redeemable
preferred  stocks)  and equity  (non-redeemable  preferred  and  common  stocks)
securities are classified as available-for-sale.  Accordingly,  these securities
are reported at estimated  fair value with related  unrealized  gains and losses
(net of  deferred  taxes)  reported  as a separate  component  of  stockholders'
equity.  Mortgage  loans on real  estate are  reported at cost,  adjusted  where
appropriate for amortization of premium or discount.  Short-term investments are
reported  at cost and policy  loans are  reported at unpaid  balances.  Realized
investment  gains and losses  are  included  as a  component  of net  investment
income. The cost of investments sold is generally  determined under the specific
identification method.

Fair Value Disclosures -- The following methods and assumptions were used by the
Corporation in estimating its fair value disclosures for financial  investments:
The carrying amounts of cash and short-term  investments reported in the balance
sheet approximate their fair values.  Fair values for fixed maturity  securities
(including redeemable preferred stocks) are based on quoted market prices, where
available.  For fixed maturity  securities not actively traded,  fair values are
estimated using values  obtained from  independent  pricing  services or, in the
case of private  placements,  are estimated by discounting  expected future cash
flows using a current market rate applicable to the yield,  credit quality,  and
maturity of the investments.  The fair values for equity securities are based on
quoted market prices and are  recognized in the balance  sheet.  The fair values
for mortgage  loans and policy loans are estimated  using  discounted  cash flow
analyses,  using  interest  rates  currently  being offered for similar loans to
borrowers with similar credit ratings.  Loans with similar  characteristics  are
aggregated for purposes of the  calculations.  Fair values for the Corporation's
liabilities  under  investment-type  insurance  contracts  (included with policy
liabilities and accruals in the balance sheet) approximate  recorded values. See
Note 2.

Revenues, Benefits, Claims, and Expenses

Traditional  Life  Insurance  Products -- Traditional  life  insurance  products
include  those  products  with fixed and  guaranteed  premiums  and benefits and
consist principally of whole life and  limited-payment  life insurance policies.
Premiums are recognized as revenues when due.  Liabilities  for policy  benefits
and expenses for  traditional  life insurance  policies are computed using a net
level premium method including  assumptions as to investment yields,  mortality,
withdrawals,  and  other  assumptions  which  were  appropriate  at the time the
policies  were  issued  based  on the  Life  Company's  experience  modified  as
necessary to reflect  anticipated  trends and to include provisions for possible
unfavorable  deviations.  Investment yield assumptions are graded and range from
9% to 3% and the weighted average assumed  investment yield was  approximately 4
1/2%  for  1996.   Unearned   premiums   include  certain  deferred  profits  on
limited-payment policies which are being recognized in income over the estimated
lives of the policies.

Interest-Sensitive   Insurance  Products  --  Premiums  for   interest-sensitive
policies are recorded in a policyholder account as a liability.  Premium revenue
is  recognized  as amounts are  assessed  against the  policyholder  account for
mortality  coverage and policy  administration.  Surrender  benefits  reduce the
account value.  Policy  benefits and claims that are charged to expense  include
interest credited to policyholder accounts and benefit claims incurred in excess
of the account balances. Interest credit rates for interest-sensitive  insurance
products  range from 6% to 5.4%. A liability  equal to the current  value of the
policyholder  accounts is included  in other  policyholder  funds in the balance
sheet.

Deferred  Policy  Acquisition  Costs -- The  costs of  acquiring  new  business,
principally  commissions and certain policy  underwriting and issue costs, which
generally vary with and are primarily related to the production of new business,
have been deferred to the extent such costs are deemed  recoverable  from future
premiums.  Costs  deferred  related  to  traditional  life  insurance  are being
amortized  over  the  premium  paying  period  of  the  related  policies  using
assumptions consistent with those

                                       30

<PAGE>


used  in  computing   future  policy   benefits.   Costs  deferred   related  to
interest-sensitive  policies are being amortized over the lives of the policies,
in relation to the present  value of estimated  gross  profits  from  mortality,
investment and expense margins.

Income Taxes -- Income taxes have been provided  using the  liability  method in
accordance with SFAS No. 109,  "Accounting for Income Taxes". Under that method,
deferred  tax assets and  liabilities  are  determined  based on the  difference
between their financial reporting and their tax bases and are measured using the
enacted tax rates.

2. INVESTMENT OPERATIONS

The  following  is a summary of  available-for-sale  securities  at December 31,
1996:

<TABLE>
<CAPTION>

                                                        Cost or       Gross         Gross      Estimated
                                                       Amortized    Unrealized    Unrealized     Fair
                                                         Cost         Gains         Losses      Value
                                                                          (In millions)
<S> <C>
US Treasury securities and obligations of US
  government corporations and agencies                 $   29.9      $   2.7      $     --     $  32.6
Obligations of states and political subdivisions          381.4         12.2            .9       392.7
Debt securities issued by foreign governments              21.5          1.0            --        22.5
Corporate securities                                      318.2         13.9            .5       331.6
                                                       --------      -------      --------     -------
    Total fixed maturities                                751.0         29.8           1.4       779.4
Equity securities                                           8.5         26.5            .3        34.7
                                                       --------      -------      --------     -------

      Total                                            $  759.5      $  56.3      $    1.7     $ 814.1
                                                       ========      =======      ========     =======

</TABLE>


The  following  is a summary of  available-for-sale  securities  at December 31,
1995:

<TABLE>
<CAPTION>


                                                           Cost or      Gross       Gross     Estimated
                                                          Amortized   Unrealized  Unrealized     Fair
                                                            Cost        Gains      Losses       Value
                                                                               (In millions)
<S> <C>
US Treasury securities and obligations of US
   government corporations and agencies                   $  31.2        $ 4.9      $  --        $ 36.1
Obligations of states and political subdivisions            350.2         20.0         .7         369.5
Debt securities issued by foreign governments                22.2          1.8         --          24.0
Corporate securities                                        340.4         26.6         .9         366.1
                                                          -------        -----      -----        ------
    Total fixed maturities                                  744.0         53.3        1.6         795.7
Equity securities                                             8.7         20.8         --          29.5
                                                          -------        -----      -----        ------
      Total                                               $ 752.7        $74.1      $ 1.6        $825.2
                                                          =======        =====      =====        ======

The amortized cost and estimated fair value of fixed maturities,  by contractual
maturity, and equities available-for-sale at December 31, 1996, are shown below.
Expected  maturities will differ from contractual  maturities  because borrowers
may have  the  right  to call or  prepay  obligations  with or  without  call or
prepayment penalties.

                                            Cost or          Estimated
                                           Amortized           Fair
                                              Cost            Value
                                                 (In millions)
Due in one year or less                    $  23.1           $  23.5
Due after one year through five years        223.2             231.0
Due after five years through ten years       449.3             465.8
Due after ten years                           47.2              49.3
                                           -------           -------
                                             742.8             769.6
US government mortgage backed securities       8.2               9.8
Equities                                       8.5              34.7
                                           -------           -------
  Total                                    $ 759.5           $ 814.1
                                           =======           =======


                                       31

<PAGE>



The  carrying  amounts  and fair  values  of the  Corporation's  investments  in
mortgage loans on real estate and policy loans were as follows at December 31,
1996 and 1995:

                                       1996                       1995
                                           Estimated                  Estimated
                               Carrying       Fair         Carrying     Fair
                               Amount        Value          Amount      Value
                                                   (In millions)
      Commercial mortgages    $ 179.6      $ 183.4         $172.0      $186.6
      Residential mortgages     195.4        189.8          167.8       176.7
                              -------      -------         ------      ------
                              $ 375.0      $ 373.2         $339.8      $363.3
                              =======      =======         ======      ======
      Policy loans            $  55.0      $  54.0         $ 54.5      $ 55.0
                              =======      =======         ======      ======

Details of net investment income for the three years ended December 31, 1996 are
as follows:

                                       1996         1995        1994
                                               (In millions)
      Fixed maturities                $  56.9      $ 55.4      $ 54.0
      Equity securities                    .8          .9         1.0
      Mortgage loans on real estate      30.4        28.6        28.3
      Short-term investments              1.9         3.2         1.7
      Realized investment gains           6.9          --          --
      Other                               4.3         4.4         4.1
                                      -------      ------      ------
        Total investment income         101.2        92.5        89.1
      Investment expenses                (4.9)       (4.4)       (4.3)
                                      -------      ------      ------
        Net investment income         $  96.3      $ 88.1      $ 84.8
                                      =======      ======      ======

Realized  investment  gains  (losses) and unrealized  investment  gains (losses)
representing the change in difference  between fair value and cost  (principally
amortized cost for fixed maturities) on fixed maturities,  equity securities and
other  investments  for the three years ended  December 31, 1996 are  summarized
below:


</TABLE>
<TABLE>
<CAPTION>

                                                             Investment Gains (Losses)
                                                  ---------------------------------------------
                                                  Realized     Change in Unrealized         Net
                                                                 (In millions)
<S> <C>
1996
Fixed maturities available-for-sale              $  (2.5)           $  (15.1) (1)          $ (17.6)
Equity securities available-for-sale                 7.8                 3.5  (2)             11.3
Other                                                1.6                  --                   1.6
                                                 -------            --------               -------
                                                 $   6.9            $  (11.6)              $  (4.7)
                                                 =======            ========               =======
(1)Net of $8.2 deferred income tax benefit.
(2)Net of $1.9 deferred income taxes.

1995
Fixed maturities available-for-sale              $  (1.6)           $   50.7  (1)          $  49.1
Equity securities available-for-sale                 1.6                 4.1  (2)              5.7
Other                                                 --                  --                    --
                                                 -------            --------               -------
                                                 $    --            $   54.8               $  54.8
                                                 =======            ========               =======
(1)Net of $27.4 million deferred income taxes.
(2)Net of $2.2 million deferred income taxes.

1994
Fixed maturities available-for-sale                $(5.9)           $  (49.4) (1)          $ (55.3)
Equity securities available-for-sale                 5.9                (3.8) (2)              2.1
Other                                                 --                  --                    --
                                                --------            --------               -------

                                                $     --            $  (53.2)              $ (53.2)
                                                ========            ========               =======
</TABLE>

(1)Net of $9.2 million  deferred income tax benefit.
(2)Net of $2.1 million deferred income tax benefit.


                                       32

<PAGE>



Proceeds from the sales of available-for-sale  securities during 1996 were $93.1
million.  Gross investment  losses of $2.3 million were realized on those sales,
and there were no gross investment gains realized.  1995 proceeds from the sales
of  available-for-sale  securities were $80.7 million and gross investment gains
and gross  investment  losses of $0.1 million and $1.9 million were  realized on
those sales, respectively.

As of December 31, 1996,  approximately 52% of the mortgage loans on real estate
were on  single  family  homes  and 48% were on  commercial  properties  such as
apartments, shopping centers, office buildings and warehouses. Approximately 73%
and 12%,  respectively,  of the mortgage loans are on properties  geographically
dispersed  throughout  Virginia and North Carolina.  The Corporation manages the
credit risk on its mortgage  loan  portfolio  by,  among other items,  generally
restricting  loan to collateral value ratios to a maximum of 75% at the time the
loan is made,  limiting  the total  amount of loans  outstanding  by  individual
borrower and monitoring the type of loans and extent of geographic concentration
within the region in which the Life Company operates.

No  investment  in any person or  affiliates  of the  Corporation  exceeded  ten
percent of stockholders' equity at December 31, 1996.

3. REINSURANCE

Future policy benefits and claims are stated after deducting benefits applicable
to life insurance  reinsured by other  companies.  The contingent  liability for
such deducted  benefits was less than 1% of future  policy  benefits at December
31, 1996. Premiums related to such reinsurance are insignificant.

The  Life  Company  participates  in two  group  life  insurance  programs  as a
reinsurer and also assumes reinsurance on a facultative  (individual risk) basis
from  two  other  life  insurance  companies.  Life  insurance  assumed  relates
principally to group life and  represented  approximately  20% of premium income
for 1996 and 17% for 1995 and 1994.  Claims  incurred  under  these  group  life
insurance  programs  approximate the related premium income,  and no significant
assets or liabilities are required in the balance sheet.

4. PENSION PLAN AND HEALTH AND LIFE INSURANCE BENEFITS

A  noncontributory   defined  benefit  pension  plan  covers  substantially  all
employees.  The  benefits  are  based  on years of  service  and the  employee's
compensation.  As of December 31, 1996 and 1995, annuity contracts issued by the
Life Company  covered  benefit  obligations  of $59.2 million and $60.0 million,
respectively,  for employees for service prior to 1989 and for all retirees. The
following  table  sets  forth  the  plan's  status  for  employees  for  service
subsequent to 1988 as of the indicated actuarial valuation dates:

                                                                 December 31
                                                                 1996    1995
                                                                (In millions)
Actuarial present value of benefit obligations:
  Vested                                                        $17.3    $15.8
  Non-vested                                                      1.1      1.2
                                                                -----    -----

    Total accumulated benefit obligations                       $18.4    $17.0
                                                                =====    =====

Pension assets at fair value (held in a Deposit Administration
  Contract issued by the Life company to the pension plan)      $18.9    $15.5
                                                                =====    =====

Projected benefit obligation                                    $25.4    $24.3
                                                                =====    =====

Unrecognized net transition asset                               $ 1.1    $ 1.3
                                                                =====    =====

The pension  liabilities  and reserves are  included in future  policy  benefits
which are held by the Life Company and are supported by the general  investments
of the Life Company.

The  weighted-average  discount rate used in determining  the actuarial  present
value of the above  projected  benefit  obligations was 7.3% for 1996 and 7% for
1995. The rate of increase used for future compensation was 4 1/2% for both 1996
and 1995.


                                       33

<PAGE>



The components of net pension  expense for years ended  December 31, 1996,  1995
and 1994 are as follows:

                                                       1996     1995     1994
                                                           (In millions)
Service cost -- benefits earned                       $ 1.7    $1.9     $2.1
Interest cost on projected benefit obligation           1.7     1.4      1.3
Net amortization and deferral                           (.2)    (.2)     (.2)
                                                      -----    ----     ----
    Net pension expense                               $ 3.2    $3.1     $3.2
                                                      =====    ====     ====

Supplemental  retirement  benefits  are provided to certain  highly  compensated
participants under non-qualified  plans. Such individuals were designated by the
Board of Directors to receive  supplemental  retirement  payments in addition to
their retirement  benefits from the qualified  retirement plans described above.
In addition,  one of these plans  provides  for  benefits  which would have been
available  from the qualified  plans except for Internal  Revenue Code limits on
compensation which can be counted in the benefit calculations.

In addition to the above plans, the Corporation has two postretirement  plans --
a medical plan  (consisting  of defined  benefit  medical  coverage for pre-1993
retirees and defined  contribution  medical coverage for post-1992  retirees who
were active  employees  on December  31, 1992) and a life  insurance  plan.  The
pre-1993  retiree medical  benefits program covers all employees who had retired
under the  Corporation's  pension plan as of December 31,  1992.  The  post-1992
retiree medical  benefits program covers all employees who were full time active
at December 31, 1992 and who retire under the  Corporation's  pension plan after
December 31, 1992.  Employees who joined the Corporation after December 31, 1992
are not eligible for  participation  in either program under the  postretirement
medical benefits plan. The  postretirement  life insurance  benefits plan covers
all employees who retire under the Corporation's pension plan.

The pre-1993 retiree medical  benefits  program  reimburses its participants for
actual  covered  costs subject to specified  deductibles  and  coinsurance.  The
pre-1993   retiree   program  is  contributory   and  participant   contribution
requirements  may be increased from time to time and benefits may be modified or
terminated by the Corporation. The post-1992 retiree medical benefits program is
noncontributory and reimburses its participants for the cost of health insurance
and  other  health  care  coverage  premiums  up  to a  maximum  benefit  amount
determined in accordance  with the plan based on years of service as of December
31, 1992. A participant's  unused maximum benefit amount for post-1992  retirees
determined  as of December 31, 1992, is increased for interest only from January
1, 1993 until it is fully expended. The Corporation is self insured with respect
to benefits under both the medical and life insurance benefit plans.

The following is an analysis of the Corporation's accrued postretirement benefit
obligation for postretirement  medical and life insurance benefit plans which is
included in other liabilities in the consolidated  balance sheet at December 31,
1996 and 1995:

                                                            1996          1995
                                                              (In millions)
Retirees                                                   $26.1         $36.2
Fully eligible active plan participants                     11.4          11.6
Other active plan participants                               7.7           6.5
                                                           -----         -----
    Accumulated postretirement benefit obligation           45.2          54.3
Unrecognized net gain                                       10.7           1.6
                                                           -----         -----
    Accrued postretirement benefit obligation              $55.9         $55.9
                                                           =====         =====

The assumed  rate of increase  in the per capita cost of covered  benefits  (the
health care cost trend rate) at December 31, 1996 is 5% for 1997 and  subsequent
years.  At December 31, 1995,  the assumed rate of increase was 10.4% to 15% for
1996 decreasing to 5 1/2% over  approximately 14 years. The change in the health
care  cost  trend  rate  assumption  resulted  in a  reduction  in  the  accrued
post-retirement  benefit obligation at December 31, 1996 of approximately  $10.2
million.  The health care cost trend rate assumption has a significant effect on
the amounts reported. For example, increasing the assumed health care cost trend
rate by one  percentage  point  in each  year  would  increase  the  accumulated
postretirement  benefit obligation as of December 31, 1996 by $2.3 million,  and
the net periodic postretirement benefit cost for 1996 by $200,000.

The   weighted-average   discount  rate  used  in  determining  the  accumulated
postretirement   benefit   obligation  was  7.3%  for  1996  and  7%  for  1995.
Postretirement  benefits expense was $2.9 million, $1.6 million and $3.5 million
for the years ended December 31, 1996, 1995 and 1994, respectively. This expense
primarily represents interest expense on the accumulated  postretirement benefit
obligation and claims cost.


                                       34

<PAGE>



5. FEDERAL INCOME TAXES

Under the tax law in effect prior to 1984, $78 million has been accumulated in a
"Policyholders'  Surplus  Account"  which  has not  been  subject  to  taxation.
Amounts,  if any,  distributed  to  stockholders  from the account or  exceeding
prescribed  balance  limitations will become taxable at the then current federal
income tax rates.  Under the present  circumstances,  the  Corporation  does not
anticipate such account  becoming taxable and no provision has been made for the
related deferred income taxes of $27.3 million.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the  Corporation's  deferred tax  liabilities and assets as of December 31, 1996
and 1995 are as follows:

                                                                1996      1995
                                                                (In millions)
Deferred tax assets:
  Postretirement benefit obligation                           $  17.3   $  16.9
  Policy liabilities                                             14.6      16.6
  Other -- net                                                    3.1       2.3
                                                              -------   -------
                                                                 35.0      35.8
Deferred tax (liabilities):
  Deferred policy acquisition expenses                          (28.1)    (27.2)
  Discount on fixed maturities                                   (2.6)     (2.9)
  Unrealized investment gain on available-for-sale securities   (19.0)    (25.4)
  Other -- net                                                   ( .1)     (1.1)
                                                              -------   -------
                                                                (49.8)    (56.6)
      Net deferred tax (liability)                            $ (14.8)  $ (20.8)
                                                              =======   =======

The  Corporation is required to establish a valuation  allowance for any portion
of the deferred tax asset that management believes will not be realized.  In the
opinion of  management,  it is more  likely than not that the  Corporation  will
realize the benefit of the deferred tax assets, and therefore, no such valuation
allowance has been established.

The  provision  for income taxes  differs from amounts  computed by applying the
statutory tax rate to income before income taxes,  and these  differences  arise
from the following:

<TABLE>
<CAPTION>

                                            1996                    1995                  1994
                                                 Percent of             Percent of           Percent of
                                                  Pre-Tax                 Pre-Tax              Pre-Tax
                                     Amount       Income      Amount      Income    Amount    Income
                                                               (In millions)
<S> <C>
Tax computed at the
  prevailing statutory rate           $22.5        35.0%      $20.3        35.0%    $19.4      35.0%
Deduct tax effect of:
  Investment income not taxable         (.5)        (.8)        (.5)        (.8)      (.5)      (.9)
  Other                                 (.2)        (.2)         .3          .5        .5        .8
                                      -----       -----       -----        ----     -----      ----
                                        (.7)       (1.0)        (.2)        (.3)       --       (.1)
                                      -----       -----       -----        ----     -----      ----

Provision for income taxes            $21.8        34.0%      $20.1        34.7%    $19.4      34.9%
                                      =====       =====       =====        ====     =====      ====
</TABLE>


6. CAPITAL STOCK

The Corporation  purchased 385,540 shares of its Class A Common Stock in 1996 at
a cost of $9.3  million.  The cost was  allocated to reduce Class A Common Stock
par value by $.1 million and retained earnings by $9.2 million.

In 1995 the Corporation purchased 30,376 shares of its Class A and 94,624 shares
of its Class B Common Stock at a cost of $2.8 million. The cost was allocated to
reduce  Class A and  Class B  Common  Stock  par  value by $9  thousand  and $30
thousand respectively, and retained earnings by $2.8 million.

In 1994 the Corporation  purchased 374,948 shares of its Class B Common Stock at
a cost of $7.7  million.  The cost was  allocated to reduce Class B Common Stock
par value and retained earnings by $ 0.1 million and $7.6 million, respectively.

                                       35

<PAGE>


7. STOCKHOLDERS' EQUITY AND RESTRICTIONS

Consolidated  stockholders'  equity at December 31, 1996  includes  $157 million
representing   GAAP  adjustments  and  minimum  statutory  capital  and  surplus
requirements  of the Life  Company  that  cannot be  transferred  in the form of
dividends, loans or advances to the Corporation.

In addition,  the Corporation and the Life Company are subject to the provisions
of the  Insurance  Holding  Company Act of the State of Virginia,  which governs
transactions  between the Corporation and the Life Company. The Act, among other
things,  (1) requires that transactions among affiliates be fair and reasonable,
and (2)  assures  maintenance  of  reasonable  statutory  capital and surplus in
relation to the insurer's outstanding liabilities and its other financial needs.
Also the Act requires the prior approval of the State Corporation Commission for
transactions  among  affiliates  that  exceed  three  percent  of the  insurer's
admitted assets or twenty-five  percent of the insurer's  statutory  capital and
surplus,  whichever is the lesser,  and, at December 31, 1996 the maximum amount
available under this provision without prior approval  approximated $39 million.
The payment of dividends in any one year by the Life Company without approval by
the State Corporation  Commission is limited to the lesser of (1) ten percent of
the insurer's  prior year end statutory  capital and surplus,  or (2) prior year
statutory net gain from operations before realized capital gains or losses.

On a statutory basis, the net gain from operations before realized capital gains
or losses of the Life Company was $29.6 million, $29.4 million and $27.0 million
for the  years  ended  December  31,  1996,  1995 and  1994,  respectively;  and
stockholder's  equity  (capital and  surplus) as of December 31, 1996,  1995 and
1994 was $349.3 million, $343.2 million and $328.3 million, respectively.

8.  ACQUISITION

On December 22, 1996, the Corporation's  Board of Directors  approved the merger
of the  Corporation  with and into AGC Life  Insurance  Company,  a wholly-owned
subsidiary of American General Corporation.  Subject to shareholder approval and
regulatory  consents,  the  transaction  is expected  to close  during the first
quarter of 1997.

9.  UNAUDITED QUARTERLY FINANCIAL INFORMATION

                                    First       Second      Third       Fourth
                                   Quarter      Quarter     Quarter     Quarter
                                      (In millions except for per share data)
   1996
      Premium income               $ 29.3       $ 29.2      $ 29.1     $ 30.0
      Net investment income          22.2         22.3        22.7       22.2
      Realized investment gains        --           --          --        6.9
      Income before income taxes     13.7         14.1        15.4       21.0
      Net income                      9.5          9.1         9.4       14.4
      Net income per share             .54          .53         .55        .84

   1995
      Premium income               $ 28.8       $ 28.5      $ 28.4     $ 28.3
      Net investment income          21.9         22.0        22.1       22.1
      Income before income taxes     13.7         14.7        13.8       15.9
      Net income                      9.5          9.0         9.4       10.0
      Net income per share             .54          .51         .54        .57


                                       36

<PAGE>

                                                                     Schedule I

                          HOME BENEFICIAL CORPORATION
                                 (CONSOLIDATED)

       SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

                              At December 31, 1996


       Column A                        Column B      Column C     Column D
       --------                        --------      --------     --------
                                                                 Amount at
                                                                 which shown in
    Type of Investment                   Cost          Value    balance sheet
    ------------------                   ----          -----    -------------
                                                  (In millions)
Fixed maturity securities
   available-for-sale:
   Bonds and notes:
     United States Government
       and government agencies
       and authorities                  $   29.9     $  32.6      $   32.6
     States, municipalities
       & political subdivisions            381.4       392.7         392.7
     Foreign governments                    21.5        22.5          22.5
     Public utilities                      246.0       256.5         256.5
       All other corporate                  71.4        74.3          74.3
   Redeemable preferred stock                 .8          .8            .8
                                        --------     -------      --------

       Total fixed maturities              751.0     $ 779.4         779.4
                                        --------     =======      --------

Equity securities available-for-sale:
   Common stocks:
     Public utilities                         .6     $   1.7           1.7
     Banks, trust and insurance companies    2.4         8.2           8.2
       Industrial, miscellaneous and other   5.0        24.2          24.2
   Nonredeemable preferred stocks             .5          .6            .6
                                        --------     -------      --------

        Total equity securities              8.5     $  34.7          34.7
                                        --------     =======      --------

Mortgage loans on real estate              375.0                     375.0
Policy loans                                55.0                      55.0
Other long-term investments                  9.8                       9.8
Short-term investments                      31.4                      31.4
                                        --------                  --------
        Total investments               $1,230.7                  $1,285.3
                                        ========                  ========


                                       37

<PAGE>

                                                                    Schedule II


                          HOME BENEFICIAL CORPORATION
                                (PARENT COMPANY)

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                 BALANCE SHEET
                           December 31, 1996 and 1995



                                                    1996         1995
                                                    ----         ----
                                                      (In millions)
ASSETS
Cash and cash equivalents                         $   1.7       $   1.5
Investment in subsidiaries, at equity               542.1         535.6
Other assets                                          5.2           5.2
                                                  -------       -------

                                                  $ 549.0       $ 542.3
                                                  =======       =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities                                       $    .4       $    .2

Stockholders' equity (*)
Capital stock:
   Class A Common Stock, Voting, $.3125 par
     value 12,800,000 shares authorized;
     8,060,660 issued at December 31, 1996
     and 8,446,200 issued at December 31, 1995        2.5           2.6

   Class B Common Stock, Non-Voting,
     $.3125 par value, 19,200,000 shares
     authorized; 8,992,910 issued at
     December 31, 1996 and December 31, 1995          2.8           2.8
                                                  -------       -------

       Total capital stock                            5.3           5.4

   Unrealized gains on available-for-sale
      securities of subsidiaries
     less deferred income taxes                      36.6          48.2
   Retained earnings                                506.7         488.5
                                                  -------       -------
      Total stockholders' equity                    548.6         542.1
                                                  -------       -------
                                                  $ 549.0       $ 542.3
                                                  =======       =======


(*)  See Notes 6 and 7 to Consolidated Financial Statements



                                       38

<PAGE>


                                                                   Schedule II


                          HOME BENEFICIAL CORPORATION
                                (PARENT COMPANY)

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                              STATEMENT OF INCOME
                  Years Ended December 31, 1996, 1995 and 1994


                                              1996        1995        1994
                                              ----        ----        ----
                                                      (In millions)
Revenues:
   Dividends from subsidiaries               $ 24.4     $ 17.4       $ 22.3
   Other investment income                      1.2        1.1          1.0
                                             ------     ------       ------
     Total Revenues                            25.6       18.5         23.3

Expenses:
   Operating and administrative                 1.4         .7           .8
                                             ------     ------       ------

Income before income taxes and
   equity in undistributed income
   of subsidiaries                             24.2       17.8         22.5

Income taxes - current                           .1         .1           .1
                                             ------     ------       ------

Income before equity in
   undistributed income of
   subsidiaries                                24.1       17.7         22.4

Equity in undistributed income
   of subsidiaries                             18.3       20.2         13.8
                                             ------     ------       ------

Net income                                   $ 42.4     $ 37.9       $ 36.2
                                             ======     ======       ======


                                       39

<PAGE>

                                                                   Schedule II


                          HOME BENEFICIAL CORPORATION
                                (PARENT COMPANY)

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            STATEMENT OF CASH FLOWS
                  Years Ended December 31, 1996, 1995 and 1994


<TABLE>
<CAPTION>

                                                         1996          1995      1994
                                                         ----          -----     ----
                                                                  (In millions)
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents (*)

Operating activities:
   Net income                                           $ 42.4        $ 37.9   $ 36.2
   Adjustments to reconcile net income to
     net cash provided from operating activities:
       Undistributed net income of subsidiaries          (18.3)        (20.2)   (13.8)
       Other                                                .4            .1       .3
                                                        ------        ------   ------
          Net cash provided by operating activities       24.5          17.8     22.7

Investing activities:
   Additional investment in subsidiary                      --            --     (1.5)
                                                        ------        ------   ------
          Net cash used in investing activities             --            --     (1.5)
Financing activities:
   Purchase of common stock                               (9.3)         (2.8)    (7.7)
   Cash dividends to stockholders                        (15.0)        (14.5)   (14.1)
                                                        ------        ------   ------

          Net cash used in financing activities          (24.3)        (17.3)   (21.8)
                                                        ------        ------   ------

Increase (Decrease) in cash and cash equivalents            .2            .5      (.6)

Cash and cash equivalents, beginning of year               1.5           1.0      1.6
                                                        ------        ------   ------

Cash and cash equivalents, end of year                  $  1.7        $  1.5   $  1.0
                                                        ======        ======   ======

</TABLE>


(*) Short-term  investments,  which consist of investments with maturities of 30
days or less, are considered cash equivalents



                                       40

<PAGE>


                                                                   Schedule IV

                          HOME BENEFICIAL CORPORATION
                                 (CONSOLIDATED)
                                  REINSURANCE
                  Years Ended December 31, 1996, 1995 and 1994


 Column A            Column B    Column C     Column D       Column E   Column F
 --------            --------    --------     --------       --------   --------
                                                                          % of
                                  Ceded        Assumed                   amount
                      Gross      to other     from other       Net       assumed
                      amount     companies    companies       amount     to net
                                            (In millions)

1996:
 Life insurance
  in force           $4,865.0      $70.0      $6,954.1       $11,749.1    59.2%
                     ========      =====      ========       =========    ====

 Premiums:
   Life insurance    $   91.4      $  .4      $   22.9       $   113.9    20.1%
   Accident and
    health insurance      2.6         --           1.1             3.7    29.7
                     --------      -----      --------       ---------    ----


     Total premiums  $   94.0      $  .4      $   24.0       $   117.6    20.4%
                     ========      =====      ========       =========    ====

1995:
 Life insurance
  in force           $4,774.0      $84.9      $6,036.8       $10,725.9    56.3%
                     ========      =====      ========       =========    ====

 Premiums:
   Life insurance    $   87.7      $  .4      $   18.1       $   105.4    17.2%
   Accident and
    health insurance      7.8         --            .8             8.6     9.3
                     --------      -----      --------       ---------    ----

     Total premiums  $   95.5      $  .4      $   18.9       $   114.0    16.6%
                     ========      =====      ========       =========    ====

1994:
 Life insurance
   in force          $4,641.8      $96.6      $5,678.6       $10,223.8    55.5%
                     ========      -----      ========       =========    ====

 Premiums:
   Life insurance    $   88.3      $  .5      $   19.2       $   107.0    17.9%
   Accident and
     health insurance     8.4         --            .7             9.1     7.7
                     --------      -----      --------       ---------    ----

     Total premiums  $   96.7      $  .5      $   19.9       $   116.1    17.1%
                     ========      =====      ========       =========    ====


                                       41

<PAGE>

                                   SIGNATURES


Pursuant to the  requirements of Section 12 or 15(d) of the Securities  Exchange
Act of 1934 the  Registrant  has duly caused this Annual  Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

HOME BENEFICIAL CORPORATION
---------------------------
Registrant

By:     H. D. Garnett
   -----------------------------------
Vice President and Controller, 2/18/97


Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated:

R. W. Wiltshire
-------------------------------------------
Chairman of the Board and Director, 2/18/97

L. W. Richardson
--------------------------------------------
Retired Vice President and Director, 2/18/97

R. W. Wiltshire, Jr.
--------------------------------------------------------
President, Chief Executive Officer and Director, 2/18/97

J. M. Wiltshire, Jr.
-------------------------------
Secretary and Director, 2/18/97

W. B. Wiltshire
------------------------------------
Vice President and Director, 2/18/97

H. D. Garnett
------------------------------------------------
Vice President, Controller and Director, 2/18/97

G. T. Richardson
------------------------------------
Vice President and Director, 2/18/97

W. G. Hancock
-----------------------------
Counsel and Director, 2/18/97

D. N. Hoppes
-----------------
Director, 2/18/97

                                       42

<PAGE>



                          HOME BENEFICIAL CORPORATION
                               Index to Exhibits
                                 (Items 14(c))

<TABLE>
<CAPTION>
                                                                                Sequential
                                                                                Page Number
<S> <C>
EXHIBITS

 2(i) -    Agreement and Plan of Merger, dated as of December 22, 1996, (the
           "Merger Agreement") with American General Corporation and AGC Life
           Insurance Company and the Corporation incorporated herein by
           reference from December 27, 1996 Form 8-K

 (ii) -    Amendment No. 1, dated as of January 22, 1997, to the Merger
           Agreement                                                                     44

 3(i) -    Restated Articles of Incorporation incorporated herein by reference
           from December 31, 1993 Form 10-K
 (ii) -    Bylaws incorporated herein by reference from December 31, 1992 Form
           10-K
    4 -    Instruments defining the rights of security holders, including
           indentures - See Article III of the Restated Articles of
           Incorporation incorporated herein by reference from December 31, 1993
           Form 10-K
    9 -    Voting Trust Agreement dated May 1, 1984, effective May 31, 1984, and
           Voting Trust Extension Agreement dated May 1, 1987, effective May 11,
           1987 incorporated herein by reference from December 31, 1992 Form
           10-K
   10 -    Material Contracts -
          (i)   Consulting and compensation agreement with L. W. Richardson, a
                Director of the Corporation, incorporated herein by reference
                from December 31, 1992 Form 10-K.
           (ii)  Supplemental Compensation Agreement with R. W. Wiltshire,
                 Chairman of the Board of Directors of the Corporation,
                 incorporated herein by reference from September 30, 1993 Form
                 10-Q.
           (iii) Supplemental Compensation Agreement with J. M. Wiltshire, Jr.,
                 a Director and Secretary of the Corporation, incorporated
                 herein by reference from September 30, 1995 Form 10-Q.
           (iv)  Supplemental Retirement Plan                                         45-64
           (v)   Supplemental Executive Retirement Plan                               65-89
           (vi)  Consulting agreement with J. M. Wiltshire, Jr.                          90
   11 -    Statement reference computation of per share earnings
           - Not applicable
   12 -    Statement reference computation of ratios - Not applicable
   13 -    Annual Report to Security Holders - Not applicable
   16 -    Letter reference change in certifying accountant - Not applicable
   18 -    Letter reference change in accounting principles - Not applicable
   21 -    Subsidiaries of the Registrant incorporated herein by reference
           from December 31, 1995 Form 10-K
   22 -    Published report regarding matters submitted to vote of security
           holders - Not applicable
   23 -    Consents of experts and counsel
   24 -    Power of Attorney - Not applicable
   27 -    Financial Data Schedule                                                       91
   99 -    Additional exhibits - Not applicable



                                       43

<PAGE>


</TABLE>