Annual Report (Form 10-K), fiscal year 1993

Item 1. Business.
GENERAL
American General Finance Corporation (AGFC) is a financial services holding company, the subsidiaries of which are engaged primarily in the consumer finance and credit insurance business. The credit insurance operations are conducted by Merit Life Insurance Co. (Merit) and Yosemite Insurance Company (Yosemite) as a part of the Company's consumer finance business. Unless the context otherwise indicates, references to the Company relate to AGFC and its subsidiaries, whether directly or indirectly owned.
At December 31, 1993, the Company had 1,200 offices in 38 states, Puerto Rico, and the Virgin Islands. In January 1994, a purchasing office was opened in Texas increasing the total number of states in which the Company operates to 39. Total finance receivables net of unearned finance charges as of December 31, 1993, were $5.9 billion. At December 31, 1993, the Company employed approximately 7,000 persons. The Company's executive offices are located in Evansville, Indiana.
AGFC was incorporated under the laws of the State of Indiana in 1927 as successor to a business started in 1920. All of the common stock of AGFC is owned by American General Finance, Inc. (AGFI), which was incorporated under the laws of the State of Indiana in 1974. Since 1982, AGFI has been a direct or indirect wholly-owned subsidiary of American General Corporation (American General), a consumer financial services organization incorporated in the State of Texas in 1980 as the successor to American General Insurance Company, a Texas insurance company incorporated in 1926.
Certain amounts in the 1992 and 1991 information presented herein have been reclassified to conform to the 1993 presentation.
Item 1. Continued
Selected Financial Statistics
The following table sets forth certain selected financial information and ratios of the Company and illustrates certain aspects of the Company's business for the years indicated:
1993 1992 1991 (dollars in thousands) Average finance receivables net of unearned finance charges (ANR) $5,776,256 $5,365,479 $4,874,477
Average borrowings $5,453,440 $5,010,378 $4,439,513
Finance charges as a percentage of ANR (yield) 16.8% 16.6% 16.4%
Interest expense as a percentage of average borrowings (borrowing cost) 6.8% 7.6% 8.5%
Spread between yield and borrowing cost 10.0% 9.0% 7.9%
Insurance revenues as a percentage of ANR 2.5% 2.2% 2.3%
Operating expenses as a percentage of ANR 5.3% 5.2% 5.0%
Allowance for finance receivable losses as a percentage of net finance receivables 2.6% 2.4% 2.3%
Net charge-offs as a percentage of ANR (charge-off ratio) 2.0% 1.9% 1.9%
Delinquency ratio - 60 days or more (defined in Finance Receivable Loss and Delinquency Experience in Item 1. herein.) 2.5% 2.2% 2.5%
Debt to equity ratio 4.7 4.7 4.4
Return on average assets 2.6% 2.4% 2.2%
Return on average assets before deducting cumulative effect of accounting changes 2.8% 2.4% 2.2%
Item 1. Continued
1993 1992 1991
Return on average equity 16.4% 14.5% 12.2%
Return on average equity before deducting cumulative effect of accounting changes 17.5% 14.5% 12.2%
Ratio of earnings to fixed charges (refer to Exhibit 12 in Item 14. herein for calculations) 1.9 1.7 1.6
CONSUMER FINANCE OPERATIONS
Through its subsidiaries, the Company makes loans directly to individuals and purchases retail sales contract obligations of individuals.
In its lending operations, the Company generally takes a security interest in real property and/or personal property of the borrower. Of the loans outstanding at December 31, 1993, 89% were secured by such property. At December 31, 1993, mortgage loans (generally second mortgages) accounted for 11% of the total number of loans outstanding and 53% of the aggregate dollar amount of loans outstanding; compared to 12% and 57%, respectively, at December 31, 1992. Loans secured by real property generally have maximum original terms of 180 months. Loans secured by personal property or that are unsecured generally have maximum original terms of 60 months.
The Company purchases retail sales contracts arising from the retail sale of consumer goods and services. Retail sales contracts are secured by the real property or personal property giving rise to the contract. Retail sales contracts generally have a maximum original term of 60 months.
Finance Receivables
All data in this report on finance receivables (except as otherwise indicated) are calculated on a net basis -- that is, after deduction of unearned finance charges but before deduction of an allowance for finance receivable losses.
Item 1. Continued
The following table sets forth certain information concerning finance receivables of the Company: Years Ended December 31, 1993 1992 1991 Originated, renewed and purchased:
Amount (in thousands): Real estate loans $ 930,493 $ 815,290 $ 732,800 Non-real estate loans 2,475,855 1,924,479 1,468,105 Retail sales contracts 1,161,933 889,176 611,537
Total originated and renewed 4,568,281 3,628,945 2,812,442 Purchased (net of sales) (a) 105,171 546,923 491,090
Total originated, renewed, and purchased $4,673,452 $4,175,868 $3,303,532
(a) Includes purchases of finance receivables from affiliates for 1993, 1992, and 1991 of $62 million, $308 million, and $304 million, respectively.
Number: Real estate loans 57,648 47,549 42,325 Non-real estate loans 1,272,065 898,130 684,885 Retail sales contracts 1,028,432 786,892 514,246
Average size (to nearest dollar): Real estate loans $16,141 $17,146 $17,314 Non-real estate loans 1,946 2,143 2,144 Retail sales contracts 1,130 1,130 1,189
Balance at end of period:
Amount (in thousands): Real estate loans $2,637,266 $2,724,677 $2,767,417 Non-real estate loans 2,313,478 2,022,055 1,704,937 Retail sales contracts 920,904 860,346 665,588
Total $5,871,648 $5,607,078 $5,137,942
Number: Real estate loans 153,273 150,366 147,250 Non-real estate loans 1,268,178 1,061,339 886,598 Retail sales contracts 886,679 744,857 516,132
Total 2,308,130 1,956,562 1,549,980
Average size (to nearest dollar): Real estate loans $17,206 $18,120 $18,794 Non-real estate loans 1,824 1,905 1,923 Retail sales contracts 1,039 1,155 1,290
Item 1. Continued
ANR
The following table details ANR by type of finance receivable for the years indicated: 1993 1992 1991 (dollars in thousands)
Loans $4,887,347 $4,613,542 $4,205,538 Retail sales contracts 888,909 751,937 668,939 Total $5,776,256 $5,365,479 $4,874,477
Yield
The following table details yield for the years indicated:
1993 1992 1991
Loans 17.0% 16.7% 16.6% Retail sales contracts 15.7% 16.1% 15.6% Total 16.8% 16.6% 16.4%
Finance Receivable Loss and Delinquency Experience
The finance receivable loss experience for the Company for the periods indicated is set forth in the net charge-off and charge-off ratio(a) information below: Years Ended December 31, 1993 1992 1991 (dollars in thousands) Real estate loans: Net charge-offs $ 20,206 $ 21,156 $ 17,395 Charge-off ratio .7% .8% .7%
Non-real estate loans: Net charge-offs $ 78,407 $ 70,113 $ 65,115 Charge-off ratio 3.8% 4.0% 4.5%
Total loans: Net charge-offs $ 98,613 $ 91,269 $ 82,510 Charge-off ratio 2.0% 2.0% 2.0%
Retail sales contracts: Net charge-offs $ 17,015 $ 11,331 $ 11,221 Charge-off ratio 1.9% 1.5% 1.7%
Total: Net charge-offs $115,628 $102,600 $ 93,731 Charge-off ratio 2.0% 1.9% 1.9% Allowance for finance receivable losses (b) $152,696 $133,211 $115,624 Allowance ratio (b) 2.6% 2.4% 2.3%
Item 1. Continued
(a) The charge-off ratio represents charge-offs net of recoveries as a percentage of the average of the amount of net finance receivables at the beginning of each month during the period.
(b) The amount shown for allowance for finance receivable losses represents the balance at the end of the period. The allowance ratio represents the allowance for finance receivable losses at the end of the period as a percentage of net finance receivables.
The allowance for finance receivable losses is maintained at a level based on management's periodic evaluation of the finance receivable portfolio and reflects an amount that, in management's opinion, is adequate to absorb losses in the existing portfolio. In evaluating the portfolio, management takes into consideration numerous factors, including current economic conditions, prior finance receivable loss and delinquency experience, the composition of the finance receivable portfolio, and management's estimate of anticipated finance receivable losses.
AGFC's basic policy is to charge off each month loan accounts, except those secured by real estate, on which little or no collections were made in the prior six-month period. Retail sales contracts are charged off when four installments are past due. In the case of loans secured by real estate, foreclosure proceedings are instituted when four monthly installments are past due. When foreclosure is completed and the Company has obtained title to the property, the real estate is established as an asset valued at market value, and any loan value in excess of that amount is charged off. Exceptions are made to the charge-off policies when, in the opinion of management, such treatment is warranted.
Based upon contract terms in effect at the respective dates, delinquency(a) was as follows: December 31, 1993 1992 1991 (dollars in thousands)
Real estate loans $ 48,426 $ 52,239 $ 57,142 % of related receivables 1.8% 1.8% 2.0%
Non-real estate loans $102,818 $ 74,868 $ 72,824 % of related receivables 3.8% 3.2% 3.7%
Total loans $151,244 $127,107 $129,966 % of related receivables 2.8% 2.5% 2.7%
Retail sales contracts $ 14,885 $ 10,735 $ 9,975 % of related receivables 1.4% 1.0% 1.3%
Total $166,129 $137,842 $139,941 % of related receivables 2.5% 2.2% 2.5%
Item 1. Continued
(a) Finance receivables any portion of which was 60 days or more past due (including unearned finance charges and excluding deferred origination costs, a fair value adjustment on finance receivables and accrued interest).
Geographic Distribution
See Note 5. of the Notes to Consolidated Financial Statements in Item 8. herein for information on geographic distribution of finance receivables.
Sources of Funds
AGFC funds its consumer finance operations principally through net cash flows from operating activities, issuances of long-term debt, short-term borrowings in the commercial paper market, and borrowings from banks. The spread between the rates charged in consumer finance operations and the cost of borrowed funds is one of the major factors determining the Company's earnings. The Company is limited by statute in most states to a maximum rate which it may charge in its lending operations. A relatively high ratio of borrowings to invested capital is customary in the consumer finance industry and is an important element in profitable operations.
Average Borrowings
The following table details average borrowings by type of debt for the years indicated: 1993 1992 1991 (dollars in thousands)
Long-term debt $3,805,890 $3,138,376 $2,518,162 Short-term debt 1,647,550 1,872,002 1,921,351
Total $5,453,440 $5,010,378 $4,439,513
Borrowing Cost
The following table details interest expense as a percentage of average borrowings by type of debt for the years indicated:
1993 1992 1991
Long-term debt 7.9% 8.7% 9.2% Short-term debt 4.2% 5.7% 7.5%
Total 6.8% 7.6% 8.5%
Item 1. Continued
Contractual Maturities
Contractual maturities of finance receivables and debt as of December 31, 1993 were as follows: Finance Receivables Debt (dollars in thousands) Due in: 1994 $2,076,750 $2,301,555 1995 1,216,653 926,220 1996 756,292 556,384 1997 374,697 341,130 1998 223,796 232,302 1999 and thereafter 1,223,460 1,255,642
Total $5,871,648 $5,613,233
See Note 5. of the Notes to Consolidated Financial Statements in Item 8. herein for further information on principal cash collections of finance receivables.
INSURANCE OPERATIONS
Merit is a life and health insurance company domiciled in Indiana and currently licensed in 43 states and the District of Columbia. Merit writes or assumes (through affiliated and non-affiliated insurance companies) credit life, credit accident and health, and ordinary insurance coverages.
Yosemite is a property and casualty insurance company domiciled in California and licensed in 41 states which principally underwrites credit- related property and casualty coverages.
Both Merit and Yosemite market their products through the consumer finance network of the Company. The credit life insurance policies typically cover the life of the borrower in an amount equal to the unpaid balance of the obligation and provide for payment in full to the lender of the insured's obligation in the event of death. The credit accident and health insurance policies provide for the payment of the installments on the insured's obligation to the lender coming due during a period of unemployment or disability due to illness or injury. The credit-related property and casualty insurance is written to protect property pledged as security for the obligation. The purchase by the borrower of credit life, credit accident and health, and credit property and casualty insurance is voluntary with the exception of property damage coverage for automobiles, dwellings, and commercial real estate pledged as collateral. In these instances, property damage coverage is provided under the terms of the lending agreement if the borrower does not provide evidence of coverage with another insurance carrier. Premiums for insurance products are financed as part of the insured's obligation to the lender.
Item 1. Continued
Merit has from time to time entered into reinsurance agreements with other insurance companies, including certain American General subsidiaries, for assumptions of various shares of annuities and ordinary, group, and credit life insurance on a coinsurance basis. The reserves attributable to this business fluctuate over time and in certain instances are subject to recapture by the ceding company. At December 31, 1993, life reserves on the books of Merit attributable to this business amounted to $74.2 million.
The following tables set forth information concerning the insurance operations:
Life Insurance in Force December 31, 1993 1992 1991 (dollars in thousands)
Credit life $2,547,784 $2,221,940 $1,955,560 Ordinary life 2,373,685 2,208,685 2,189,817
Total $4,921,469 $4,430,625 $4,145,377
Premiums Earned Years Ended December 31, 1993 1992 1991 (dollars in thousands) Insurance premiums earned in connection with affiliated finance and loan activities: Credit life $ 35,711 $ 30,324 $ 28,794 Credit accident and health 42,978 34,222 29,968 Property 25,686 18,594 15,370 Other insurance premiums earned: Ordinary life 20,823 19,344 22,177 Premiums assumed under coinsurance agreements 12,318 6,984 5,783
Total $137,516 $109,468 $102,092
Premiums Written Years Ended December 31, 1993 1992 1991 (dollars in thousands) Insurance premiums written in connection with affiliated finance and loan activities: Credit life $ 41,036 $ 36,605 $ 27,975 Credit accident and health 56,839 44,029 36,695 Property 47,358 19,344 18,250 Other insurance premiums written: Ordinary life 20,823 23,968 20,233 Premiums assumed under coinsurance agreements 12,318 6,984 5,035
Total $178,374 $130,930 $108,188
Item 1. Continued
Investments and Investment Results
The investment portfolio of the Company's insurance subsidiaries is subject to state insurance laws and regulations which prescribe the nature, quality and percentage of various types of investments which may be made by insurance companies.
The following table summarizes the investment results of the Company's insurance subsidiaries for the periods indicated:
Years Ended December 31, 1993 1992 1991 (dollars in thousands)
Net investment revenue (a) $ 55,654 $ 54,134 $ 51,023
Average invested assets $666,982 $597,631 $549,359
Return on invested assets (a) 8.3% 9.1% 9.3%
Net realized investment gains (losses) (b) $ 7,101 $ 1,937 $ (1,694)
(a) Net investment revenue and return on invested assets are after deduction of investment expense but before net realized investment gains (losses) and provision for income taxes.
(b) Includes net realized investment gains (losses) on marketable securities and other invested assets before provision for income taxes.
REGULATION
Consumer Finance
The Company operates under various state laws which regulate the consumer lending and retail sales financing businesses. The degree and nature of such regulation varies from state to state. In general, the laws under which a substantial amount of the Company's business is conducted provide for state licensing of lenders, impose maximum term, amount, interest rate and other charge limitations, and enumerate whether and under what circumstances insurance and other ancillary products may be sold in connection with a lending transaction. In addition, certain of these laws prohibit the taking of liens on real estate except liens resulting from judgments.
The Company also is subject to various types of federal regulation, including the Federal Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and certain Federal Trade Commission rules.
Item 1. Continued
It is difficult for the Company to predict to what extent its business will be affected by changes in economic, competitive, political and international conditions, state and federal laws and regulations, judicial or administrative interpretations, and taxation.
Insurance
The operations of the Company's insurance subsidiaries are subject to regulation and supervision by state authorities. The extent of such regulation varies but relates primarily to conduct of business, types of products offered, standards of solvency, payment of dividends, licensing, nature of and limitations on investments, deposits of securities for the benefit of policyholders, the approval of policy forms and premium rates, periodic examination of the affairs of insurers, form and content of required financial reports and establishment of reserves required to be maintained for unearned premiums, losses and other purposes. Substantially all of the states in which the Company operates regulate the rates of premiums charged for credit life and credit accident and health insurance issued with respect to all credit transactions by the Company in those states.
COMPETITION
Consumer Finance
The consumer finance business in which the Company engages is highly competitive. The Company competes with other consumer finance companies, industrial banks, industrial loan companies, commercial banks, sales finance companies, savings and loan associations, credit unions, mutual or cooperative agencies and others. See Competitive Factors in Item 7. herein for more information.
Insurance
The Company's insurance business generally operates as an ancillary business to the consumer lending operations. As such, the competition for this business is relatively limited.
Item 2.



Item 2. Properties.
Due to the nature of the Company's business, its investment in real estate and tangible property is not significant in relation to its total assets. AGFI and certain of its subsidiaries own real estate on which AGFC and other affiliates conduct business. Branch office operations are generally conducted in leased premises. Leases are ordinarily entered into for three- to five-year terms.
Item 2. Continued
The Company's exposure to environmental regulation arises from its ownership of such properties. The properties are monitored for compliance with federal and local guidelines. Potential costs related to environmental clean-up are estimated to be immaterial.
Item 3.

Item 3. Legal Proceedings.
The Company is a defendant in various lawsuits arising in the normal course of business. The Company believes it has valid defenses in these lawsuits and is defending them vigorously. The Company also believes that the total amounts that would ultimately have to be paid, if any, arising from these lawsuits would have no material effect on its consolidated financial position or its consolidated results of operations.
PART II
Item 5.


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
There is no trading market for AGFC's common stock, all of which is owned by AGFI. The frequency and amount of cash dividends declared on AGFC's common stock for the years indicated were as follows:
Quarter Ended 1993 1992 (dollars in thousands)
March 31 $ 19,754 $ 36,373 June 30 39,001 37,999 September 30 50,089 30,390 December 31 32,512 21,273
$141,356 $126,035
See Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7. herein, as well as Note 14. of Notes to Consolidated Financial Statements in Item 8. herein, with respect to limitations on the ability of AGFC to pay dividends.
Item 6.

Item 6. Selected Financial Data.
The following selected financial data are derived from the consolidated financial statements of the Company. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein.
Selected Financial Data
Years Ended December 31, 1993(a) 1992 1991 1990 1989 (dollars in thousands)
Total revenues $1,212,917 $1,092,858 $993,405 $969,373 $926,711
Net income (b) 189,628 160,171 135,837 122,947 100,398
December 31, 1993(a) 1992 1991 1990 1989 (dollars in thousands)
Total assets $7,504,798 $6,999,570 $6,464,519 $5,917,962 $5,805,340
Long-term debt 3,965,772 3,558,401 2,776,561 2,191,695 2,290,313
Item 6. Continued
(a) The Company adopted three new accounting standards through cumulative adjustments as of January 1, 1993, resulting in a one-time reduction of net income of $12.6 million. See Note 2. of the Notes to Consolidated Financial Statements in Item 8. herein for information on the adoption of new accounting standards.
(b) Per share information is not included because all of the common stock of AGFC is owned by AGFI.
Item 7.

Item 7. Continued
Factors which specifically affected the Company's operating results are as follows:
Finance Charges. Changes in finance charge revenues, the principal component of total revenues, are a function of period to period changes in the levels of ANR, the yield, and the number of days in the periods compared. ANR for 1993 and 1992 increased when compared to the respective previous year. The increases resulted from the purchase of receivables from affiliates, receivables originated or renewed by the Company due to business development efforts and the continuance of the Company's historical practice of purchasing portfolios of receivables. The yield for 1993 and 1992 increased when compared to the respective previous year primarily due to increased emphasis on higher-rate non-real estate secured loans during 1993 and 1992 and higher yield on retail sales contracts for 1992. The additional day in 1992 also increased finance charge revenues for 1992 when compared to 1993 and 1991.
Insurance Revenues. There was an increase in insurance premiums earned for 1993 when compared to 1992 primarily due to the increase in premiums written in 1992 when compared to 1991. Insurance premiums written also increased for 1993 when compared to 1992 primarily due to an increase in the sale of the core credit and credit-related insurance products that resulted from increased loan volume, insurance product roll-outs, and the assumption of additional reinsurance business. Insurance premiums earned increased in 1992 when compared to 1991 primarily due to the increase in premiums written in 1991 when compared to 1990.
Other Revenues. Other revenues increased for 1993 and 1992 when compared to the respective previous year primarily due to an increase in investment revenue. The increase in investment revenue is due to the increased amount of investments in marketable securities and realized investment gains partially offset by a decline in investment yields. The decline in investment yields is primarily due to the low interest rate environment which caused some higher-yielding investments to be called. The proceeds of the called investments were reinvested at then current rates. Other revenues also increased for 1993 when compared to 1992 due to an increase in interest revenue on notes receivable from parent and affiliates.
Interest Expense. Changes in interest expense are a function of period to period changes in the borrowing cost, average borrowings, and the number of days in the periods compared. The borrowing cost for 1993 and 1992 decreased when compared to the respective previous year due to the decline in short-term interest rates and the issuance of long-term debt at rates lower than the rates on fixed-rate obligations maturing, redeemed or that remain outstanding. Average borrowings for 1993 and 1992 increased when compared to the respective previous year primarily to fund asset growth.
Operating Expenses. Operating expenses increased for 1993 and 1992 when compared to the respective previous period. The increases were primarily due to increases in salaries, benefits, and occupancy costs. These expenses increased primarily due to an increase in the number of consumer finance offices in the third quarter of 1992 and the additional employees required to operate such offices. The increase in operating expenses for 1993 and 1992 when compared to the respective previous year was partially
Item 7. Continued
offset by the increase in deferral of finance receivable origination costs. Operating expenses also increased for 1993 when compared to 1992 due to a major branch office automation program.
Provision for Finance Receivable Losses. Provision for finance receivable losses for 1993 and 1992 increased when compared to the respective previous year due to an increase in net charge-offs and amounts provided for the allowance for finance receivable losses. Net charge-offs for 1993 and 1992 increased when compared to the respective previous year primarily due to the increase in ANR. The allowance for finance receivable losses for 1993 and 1992 increased when compared to the respective previous year primarily due to the increase in net finance receivables and to bring the balance to appropriate levels based upon the economic climate, portfolio mix, levels of delinquency, and net charge-offs.
Insurance Losses and Loss Adjustment Expenses. Insurance losses and loss adjustment expenses for 1993 increased when compared to 1992 primarily due to an increase in premiums written and the assumption of additional reinsurance business, slightly offset by a decrease in loss ratios. Insurance losses and loss adjustment expenses for 1992 also increased when compared to 1991. This increase was primarily due to an increase in premiums written and annuity payments that were made beginning in 1992 on annuity business which was acquired in 1991.
Cumulative Effect of Accounting Changes. The adoption of three new accounting standards resulted in a cumulative adjustment effective January 1, 1993 consisting of a one-time charge to earnings of $12.6 million. Other than the cumulative effect, adoption of these new accounting standards did not have a material effect on 1993 net income and is not expected to have a material impact in the future. See Note 2. of the Notes to Consolidated Financial Statements in Item 8.


Item 8. Financial Statements and Supplementary Data.
The Report of Independent Auditors and the related consolidated financial statements are presented on the following pages.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors American General Finance Corporation
We have audited the accompanying consolidated balance sheets of American General Finance Corporation (a wholly-owned subsidiary of American General Finance, Inc.) as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholder's equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American General Finance Corporation and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 2. of the Notes to Consolidated Financial Statements, in 1993 the Company changed its method of accounting for postretirement benefits other than pensions, income taxes, postemployment benefits, reinsurance, loan impairments, and certain investments in debt and equity securities, as a result of adopting recently promulgated accounting standards governing the accounting treatment for these items.
ERNST & YOUNG
Nashville, Tennessee February 14, 1994
American General Finance Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, Assets 1993 1992 (dollars in thousands)
Finance receivables, net of unearned finance charges (Note 5.): Loans $4,950,744 $4,746,732 Retail sales contracts 920,904 860,346
Net finance receivables 5,871,648 5,607,078
Deduct allowance for finance receivable losses (Note 6.) 152,696 133,211
Net finance receivables, less allowance for finance receivable losses 5,718,952 5,473,867
Marketable securities (Note 4.) 699,332 585,511
Cash and cash equivalents 11,793 15,928
Notes receivable from parent and affiliates (Note 7.) 585,385 399,500
Goodwill (Note 8.) 299,158 310,225
Other assets (Note 8.) 190,178 214,539
Total assets $7,504,798 $6,999,570
December 31, Liabilities and Shareholder's Equity 1993 1992 (dollars in thousands)
Long-term debt (Note 12.) $3,965,772 $3,558,401
Short-term notes payable (Notes 9. and 10.) Commercial paper 1,643,961 1,708,281 Banks and other 3,500 10,558
Insurance claims and policyholder liabilities 415,488 363,174
Other liabilities 207,687 198,421
Accrued taxes 66,501 40,241
Total liabilities 6,302,909 5,879,076
Shareholder's equity (Notes 4., 13., and 14.) Common stock 5,080 5,080 Additional paid-in capital 611,914 611,914 Net unrealized investment gains 33,740 617 Retained earnings 551,155 502,883
Total shareholder's equity 1,201,889 1,120,494
Total liabilities and shareholder's equity $7,504,798 $6,999,570
See Notes to Consolidated Financial Statements.
American General Finance Corporation and Subsidiaries
Consolidated Statements of Income
Years Ended December 31, 1993 1992 1991 (dollars in thousands) Revenues Finance charges $ 974,276 $ 890,989 $ 801,040 Insurance 142,333 118,950 110,069 Other 96,308 82,919 82,296
Total revenues 1,212,917 1,092,858 993,405
Expenses Interest expense 368,986 378,679 375,349 Operating expenses 304,037 280,605 243,619 Provision for finance receivable losses 133,577 107,608 96,732 Insurance losses and loss adjustment expenses 79,214 66,603 59,410
Total expenses 885,814 833,495 775,110
Income before provision for income taxes and cumulative effect of accounting changes 327,103 259,363 218,295
Provision for Income Taxes (Note 11.) 124,884 99,192 82,458
Income before cumulative effect of accounting changes 202,219 160,171 135,837
Cumulative Effect of Accounting Changes (Note 2.) 12,591 - -
Net Income $ 189,628 $ 160,171 $ 135,837
See Notes to Consolidated Financial Statements.
American General Finance Corporation and Subsidiaries
Consolidated Statements of Shareholder's Equity
Years Ended December 31, 1993 1992 1991 (dollars in thousands) Preferred Stock Balance at beginning of year $ - $ 4,000 $ 4,000 Redeemed - 4,000 - Balance at end of year - - 4,000
Common Stock Balance at beginning of year 5,080 5,080 5,080 Balance at end of year 5,080 5,080 5,080
Additional Paid-in Capital Balance at beginning of year 611,914 611,914 611,914 Balance at end of year 611,914 611,914 611,914
Net Unrealized Investment Gains Balance at beginning of year 617 655 427 Change in non-redeemable preferred stock investments (318) (38) 228 Effect of accounting change on fixed-maturity investments 33,441 - - Balance at end of year 33,740 617 655
Retained Earnings Balance at beginning of year 502,883 469,107 468,270 Net income 189,628 160,171 135,837 Cash dividends: Preferred stock - (360) (360) Common stock (141,356) (126,035) (134,640) Balance at end of year 551,155 502,883 469,107 Total common equity 1,201,889 1,120,494 1,086,756
Total Shareholder's Equity $1,201,889 $1,120,494 $1,090,756
See Notes to Consolidated Financial Statements.
American General Finance Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1993
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of American General Finance Corporation (AGFC) and all of its subsidiaries (the Company). The subsidiaries are all wholly-owned and all intercompany items have been eliminated. All of the issued and outstanding common stock of AGFC is owned by American General Finance, Inc. (AGFI), a holding company organized to acquire AGFC in a reorganization during 1974. AGFI is a wholly-owned subsidiary of American General Corporation (American General).
Reclassifications
Certain amounts in the 1992 and 1991 financial statements have been reclassified to conform to the 1993 presentation.
Finance Receivable Revenue
Revenue on finance receivables is accounted for as follows:
(1) Finance charges on discounted finance receivables and interest on interest-bearing finance receivables are recognized as revenue on the accrual basis using the interest method. The accrual of revenue is suspended when the fourth contractual payment becomes past due.
(2) Extension fees and late charges are recognized as revenue when received.
(3) Nonrefundable points and fees on finance receivables are recognized on the accrual basis using the interest method over the lesser of the contractual term or the estimated life based upon prepayment experience. Effective January 1, 1992, the Company changed, on a prospective basis, the estimated life over which nonrefundable points and fees are amortized to finance charges to the lesser of the contractual term or 50 months for real estate secured finance receivables and 19 months for non-real estate secured finance receivables. This change did not have a material impact on the results of operations of the Company. For finance receivables originated prior to January 1, 1992, the estimated life over which nonrefundable points and fees are amortized to finance charges continues to be 36 months. If a finance receivable liquidates before amortization is completed, any unamortized fees are recognized as revenue at the date of liquidation.
Notes to Consolidated Financial Statements, Continued
Finance Receivable Origination Costs
The Company defers costs associated with the origination of loans. Deferred origination costs are included in finance receivables and are required to be amortized to finance charges using the interest method over the contractual term or the estimated economic life of the finance receivables. In 1992, the Company changed, on a prospective basis, the method used to amortize deferred origination costs to revenue, and the term over which such deferred costs are amortized. Effective January 1, 1992, deferred costs on loans originated are amortized to finance charges using the interest method over the lesser of the contractual term or 50 months for real estate secured loans and 19 months for non-real estate secured loans. This change did not have a material impact on the results of operations of the Company. For loans originated prior to January 1, 1992, the Company amortizes these deferred costs over the contractual term or 24 months on a straight-line basis; which produces a result not materially different from the interest method over 36 months, which was the estimated life based upon prepayment experience. If a loan liquidates before amortization is completed, any unamortized costs are charged to revenue at the date of liquidation.
Allowance For Finance Receivable Losses
The allowance for finance receivable losses is maintained at a level based on management's periodic evaluation of the finance receivable portfolio and reflects an amount that, in management's opinion, is adequate to absorb losses in the existing portfolio. In evaluating the portfolio, management takes into consideration numerous factors, including current economic conditions, prior finance receivable loss and delinquency experience, the composition of the finance receivable portfolio, and management's estimate of anticipated finance receivable losses.
AGFC's basic policy is to charge off each month loan accounts, except those secured by real estate, on which little or no collections were made in the prior six-month period. Retail sales contracts are charged off when four installments are past due. In the case of loans secured by real estate, foreclosure proceedings are instituted when four monthly installments are past due. When foreclosure is completed and the Company has obtained title to the property, the real estate is established as an asset valued at market value and any loan value in excess of that amount is charged off. Exceptions are made to the charge-off policies when, in the opinion of management, such treatment is warranted.
Cash Equivalents
The Company considers all short-term investments with a maturity at date of purchase of three months or less to be cash equivalents.
Notes to Consolidated Financial Statements, Continued
Marketable Securities
Prior to December 31, 1993, the Company reported marketable securities in accordance with the then-existing accounting standards. Investments in bonds and redeemable preferred stocks were considered held for investment purposes and were carried at cost, adjusted where appropriate for amortization of premiums or discounts. Investments in non-redeemable preferred stocks were stated at fair value and net unrealized gains or losses on revaluation of these stocks were credited or charged to shareholder's equity.
Effective with the adoption of Statement of Financial Accounting Standards 115 (see Note 2.), management determines the appropriate classification of marketable securities at the time of purchase and re-evaluates such designation as of each balance sheet date. All marketable securities are currently classified as available-for-sale and recorded at fair value. The fair value adjustment, net of deferred taxes, is recorded in net unrealized investment gains within shareholder's equity.
Interest Conversion Agreements
The interest differential to be paid or received on interest conversion agreements is accrued as interest rates change and is recognized over the life of the agreements as an adjustment to interest expense.
Realized Gains or Losses
The difference between the selling price and cost of an investment is recorded as a gain or loss (using the specific identification method) and is included in other revenues.
If the fair value of an investment declines below its cost or amortized cost and this decline is considered to be other than temporary, the investment is reduced to its fair value, and the reduction is recorded as a realized loss.
Insurance Operations
The Company's insurance subsidiaries are engaged in writing credit life and credit accident and health insurance, ordinary life insurance, and property and casualty insurance. Premiums on credit life insurance are recognized as revenue using the sum-of-the-digits or actuarial methods, except in the case of level-term contracts, which are recognized as revenue using the straight-line method over the lives of the policies. Premiums on credit accident and health insurance are recognized as revenue using an average of the sum-of-the-digits and the straight-line methods. Ordinary life insurance premiums are reported as earned when collected but not before their due dates. Premiums on property and casualty insurance are recognized as revenue using the straight-line method over the terms of the policies or appropriate shorter periods.
Notes to Consolidated Financial Statements, Continued
Policy reserves for credit life and credit accident and health insurance are equal to related unearned premiums, and claim reserves are based on company experience. Liabilities for future life insurance policy benefits associated with ordinary life contracts are accrued when premium revenue is recognized and are computed on the basis of assumptions as to investment yields, mortality, and withdrawals. Annuity reserves are computed on the basis of assumptions as to investment yields and mortality. Reserves for losses and loss adjustment expenses of the property and casualty insurance company are based upon estimates of claims reported plus estimates of incurred but not reported claims. Ordinary life, group annuity, and accident and health insurance reserves assumed under coinsurance agreements are established on the bases of various tabular and unearned premium methods.
Insurance acquisition costs, principally commissions, reinsurance fees, and premium taxes, are deferred and charged to expense over the terms of the related policies or reinsurance agreements.
The Company's insurance subsidiaries enter into reinsurance agreements among themselves and other insurers, including insurance subsidiaries of American General. The life reserves attributable to this business with the subsidiaries of American General were $62.6 million and $63.4 million at December 31, 1993 and 1992, respectively. In 1993, the Company's insurance subsidiaries assumed from and ceded to other insurers $42.5 million and $3.7 million of reinsurance premiums, respectively. Liabilities for unpaid claims and claim adjustment expenses and receivables for reinsurance credits are included in the balance sheet at their respective gross amounts. The Company's insurance subsidiaries remain liable to the extent reinsurers do not meet their obligations.
Statutory accounting practices differ from generally accepted accounting principles, primarily in the following respects: credit life insurance reserves are maintained on the basis of mortality tables; ordinary life and group annuity insurance reserves are based on statutory requirements; insurance acquisition costs are expensed when incurred rather than expensed over the related contract period; deferred income taxes are not recorded on temporary differences in the recognition of revenue and expense for tax versus statutory reporting purposes; certain intangible assets resulting from a purchase and the related amortization are not reflected in statutory financial statements; and a security valuation reserve is required for Merit Life Insurance Co. (Merit), which is a wholly-owned subsidiary of the Company. The following compares net income and shareholder's equity determined under statutory accounting practices with those determined under generally accepted accounting principles:
Net Income Shareholder's Equity Years Ended December 31, December 31, 1993 1992 1991 1993 1992 (dollars in thousands) Statutory accounting practices $31,080 $32,128 $22,837 $245,145 $221,233
Generally accepted accounting principles 39,363 38,164 34,991 386,821 317,636
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1991, an indirect insurance subsidiary of American General was purchased by a subsidiary of AGFC. Total assets at the time of purchase were $12.3 million. The cash paid for the affiliate as shown in the Consolidated Statements of Cash Flows was $1.0 million.
Fair Value of Financial Instruments
Fair values are based on estimates using discounted cash flows when quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The fair value amounts presented can be misinterpreted, and care should be exercised in drawing conclusions from such data.
Cash and Cash Equivalents. The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents approximate those assets' fair values.
Marketable Securities. Fair values for investment securities are based on quoted market prices, where available. For investments not actively traded, fair values were estimated using values obtained from independent pricing services or, in the case of private placements, by discounting expected future cash flows using a current market rate applicable to yield, credit quality, and maturity of the investment.
Finance Receivables. The fair values for fixed-rate finance receivables are estimated using discounted cash flow analysis, using interest rates currently being offered for finance receivables with similar terms to borrowers of similar credit quality. For variable-rate finance receivables that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.
Interest Conversion Agreements. Fair values for the Company's interest conversion agreements are based on estimates, obtained from the individual counterparties, of the cost or benefit of terminating the agreements.
Unused Customer Credit Lines. The unused credit lines available to the Company's customers are considered to have no fair value. The interest rates charged on these facilities are either variable and reprice frequently or can be changed at the Company's discretion. Furthermore, these amounts, in part or in total, may be cancelled at the discretion of the Company.
Credit Facilities. The Company's committed credit facilities are substantially short-term, and therefore no fair value is determined.
Long-term Debt. The fair values of the Company's long-term borrowings are estimated using discounted cash flows based on current borrowing rates.
Notes to Consolidated Financial Statements, Continued
Short-term Notes Payable. The carrying value of short-term notes payable approximates the fair value.
Note 2. New Accounting Standards
During 1993, the Company adopted six new Statements of Financial Accounting Standards (SFAS) issued by the Financial Accounting Standards Board.
The Company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," through a cumulative adjustment, effective January 1, 1993, resulting in a one-time reduction of net income of $2.9 million ($4.4 million pretax). This standard requires accrual of a liability for postretirement benefits other than pensions. Other than the cumulative effect, adoption of SFAS 106 did not have a material impact on 1993 net income and is not expected to have a material impact in the future.
The Company adopted SFAS 109, "Accounting for Income Taxes," through a cumulative adjustment, effective January 1, 1993, resulting in a one-time reduction of net income of $8.5 million. This standard changes the way income tax expense is determined for financial reporting purposes. Other than the cumulative effect, adoption of SFAS 109 did not have a material impact on 1993 net income and is not expected to have a material impact in the future.
The Company adopted SFAS 112, "Employers' Accounting for Postemployment Benefits," through a cumulative adjustment, effective January 1, 1993, resulting in a one-time reduction of net income of $1.2 million ($1.8 million pretax). This standard requires the accrual of a liability for benefits provided to employees after employment but before retirement. Other than the cumulative effect, adoption of SFAS 112 did not have a material impact on 1993 net income and is not expected to have a material impact in the future.
The Company adopted SFAS 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," effective January 1, 1993. This standard, which does not have a material impact on the consolidated financial statements, requires that reinsurance receivables and prepaid reinsurance premiums be reported as assets, rather than netted against the related insurance liabilities.
The Company adopted SFAS 114, "Accounting by Creditors for Impairment of a Loan," effective January 1, 1993. This standard requires that certain impaired loans be reported at the present value of expected future cash flows, the loan's observable market price, or the fair value of underlying collateral. The adoption of SFAS 114 did not have a material impact on 1993 net income and is not expected to have a material impact in the future.
The Company adopted SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. This statement requires that debt and equity securities be carried at fair value unless the Company
Notes to Consolidated Financial Statements, Continued
has the positive intent and ability to hold these investments to maturity. Marketable securities must be classified into one of three categories: 1) held-to-maturity, 2) available-for-sale, or 3) trading securities. Upon adoption of SFAS 115, the Company classified all marketable securities as available-for-sale and, accordingly, recorded them at fair value. The corresponding unrealized gain, net of deferred taxes, was credited directly to shareholder's equity. The adjustment increased marketable securities by $51.4 million, deferred income taxes by $18.0 million, and shareholder's equity by $33.4 million.
Note 3. Acquisition
Subsidiaries of AGFC purchased finance receivables and other assets from subsidiaries of AGFI in 1993, 1992, and 1991. The cash paid for the finance receivables and other assets as shown in the Consolidated Statements of Cash Flows consisted of the following:
1993 1992 1991 (dollars in thousands)
Finance receivables, net $62,326 $308,327 $303,854 Other assets (liabilities) 559 (13,935) 9,101
Cash paid $62,885 $294,392 $312,955
Note 4. Marketable Securities
At December 31, 1993, all marketable securities were classified as available-for-sale and reported at fair value due to the adoption of SFAS 115 (see Note 2.). Previously, fixed-maturity marketable securities were classified as held-to-maturity and reported at amortized cost. Marketable securities were as follows at December 31:
Fair Value Amortized Cost 1993 1992 1993 1992 Fixed-maturity marketable (dollars in thousands) securities: Bonds: Corporate securities $313,174 $307,156 $290,153 $289,186 Mortgage-backed securities 234,062 183,988 223,868 176,627 States and political subdivisions 102,073 70,001 94,175 64,199 Other 40,766 51,328 30,736 44,247 Redeemable preferred stocks 7,486 8,877 7,180 8,913
Total 697,561 621,350 646,112 583,172
Non-redeemable preferred stocks 1,771 2,339 1,313 2,339
Total marketable securities $699,332 $623,689 $647,425 $585,511
Notes to Consolidated Financial Statements, Continued
At December 31, the gross unrealized gains and losses were as follows:
Gross Gross Unrealized Gains Unrealized Losses 1993 1992 1993 1992 (dollars in thousands) Fixed-maturity marketable securities: Bonds: Corporate securities $23,836 $19,597 $ 815 $ 1,627 Mortgage-backed securities 11,681 7,916 1,487 555 State and political subdivisions 8,031 5,865 133 63 Other 10,032 7,141 2 60 Redeemable preferred stocks 315 111 9 147
Total 53,895 40,630 2,446 2,452
Non-redeemable preferred stocks 458 - - -
Total marketable securities $54,353 $40,630 $ 2,446 $ 2,452
During the years ended December 31, 1993, 1992, and 1991, marketable securities with a fair value of $141.4 million, $127.9 million, and $61.7 million, respectively, were sold or redeemed. The gross realized gains on such sales or redemptions totaled $7.4 million, $3.1 million, and $.9 million, respectively. The gross realized losses totaled $.1 million, $.5 million and $2.8 million, respectively.
The contractual maturities of fixed-maturity securities at December 31, 1993 were as follows: Fair Amortized Value Cost (dollars in thousands) Fixed maturities, excluding mortgage-backed securities: Due in 1 year or less $ 11,298 $ 11,146 Due after 1 year through 5 years 75,114 69,284 Due after 5 years through 10 years 232,315 215,813 Due after 10 years 144,772 126,001
463,499 422,244 Mortgage-backed securities 234,062 223,868
Total $697,561 $646,112
Actual maturities may differ from contractual maturities since borrowers may have the right to call or prepay obligations. Company requirements and investment strategies may result in the sale of investments before maturity.
Notes to Consolidated Financial Statements, Continued
Certain of the bonds were on deposit with regulatory authorities. The carrying value of such bonds was $18.6 million and $21.2 million at December 31, 1993 and 1992, respectively.
Note 5. Finance Receivables
Loans collateralized by security interests in real estate generally have maximum original terms of 180 months. Loans collateralized by consumer goods, automobiles or other chattel security, and loans that are unsecured, generally have maximum original terms of 60 months. Retail sales contracts are collateralized principally by consumer goods and automobiles, and generally have maximum original terms of 60 months. Of the loans and retail sales contracts outstanding at December 31, 1993, 91% were secured by the real or personal property of the borrower. At December 31, 1993, mortgage loans (generally second mortgages) accounted for 11% of the total number of loans outstanding and 53% of the aggregate dollar amount of loans outstanding.
Contractual maturities of loans and retail sales contracts were as follows:
December 31, 1993 Net Receivables Percent of Amount Net Receivables (dollars in thousands)
1994 $2,076,750 35.4% 1995 1,216,653 20.7 1996 756,292 12.9 1997 374,697 6.4 1998 223,796 3.8 Thereafter 1,223,460 20.8 Total $5,871,648 100.0%
Experience of the Company has shown that a substantial portion of loans and retail sales contracts will be renewed, converted, or paid in full prior to maturity. Accordingly, the preceding information as to contractual maturities should not be considered as a forecast of future cash collections. Principal cash collections and such collections as a percentage of average net finance receivables were as follows:
1993 1992 (dollars in thousands) Loans: Principal cash collections $2,067,597 $1,846,280 Percent of average net finance receivables 42.3% 40.0%
Retail sales contracts: Principal cash collections $1,110,457 $ 853,707 Percent of average net finance receivables 124.9% 113.5%
Notes to Consolidated Financial Statements, Continued
Unused credit limits on revolving lines of credit extended by the Company to its customers were $188.3 million and $126.3 million at December 31, 1993 and 1992, respectively. These amounts, in part or in total, can be cancelled at the discretion of the Company, and are not indicative of the amount expected to be funded.
Geographic diversification of finance receivables reduces the concentration of credit risk associated with a recession in any one region. The largest concentrations of finance receivables, net of unearned finance charges, are as follows:
December 31, 1993 December 31, 1992 Location Amount Percent Amount Percent (dollars in thousands) (dollars in thousands)
California $ 640,849 11% $ 738,887 13% N. Carolina 559,271 10 497,490 9 Florida 459,257 8 474,399 8 Illinois 372,576 6 359,134 6 Indiana 345,682 6 258,406 5 Virginia 331,606 6 308,168 6 Ohio 318,766 5 266,442 5 Georgia 236,727 4 231,979 4 Other 2,606,914 44 2,472,173 44 $5,871,648 100% $5,607,078 100%
The fair values determined for finance receivables at December 31, 1993 and 1992 approximate the carrying amounts reported in the Consolidated Balance Sheets net of the allowance for finance receivable losses. Care should be exercised in drawing conclusions based on the estimated fair values at the end of the year, since such fair value estimates are based only on the value of the finance receivables and do not reflect the value of the underlying customer relationships or the related distribution system.
Note 6. Allowance for Finance Receivable Losses
The changes in the allowance for finance receivable losses are detailed below: 1993 1992 1991 (dollars in thousands)
Balance at beginning of year $133,211 $115,624 $105,639 Provision for finance receivable losses 133,577 107,608 96,732 Allowance related to net acquired receivables and other 1,536 12,579 6,984 Charge-offs: Finance receivables charged off (141,732) (129,016) (114,871) Recoveries 26,104 26,416 21,140 Net charge-offs (115,628) (102,600) (93,731) Balance at end of year $152,696 $133,211 $115,624
Notes to Consolidated Financial Statements, Continued
Note 7. Notes Receivable from Parent and Affiliates
Notes receivable from AGFI and affiliates outstanding at December 31, are summarized as follows:
1993 1992 (dollars in thousands)
Affiliates $ 12,129 $ 20,829 Parent 573,256 378,671
Total $585,385 $399,500
Interest revenue on notes receivable from parent and affiliates for the years ended December 31, 1993, 1992, and 1991, was $32.2 million, $26.9 million, and $25.1 million, respectively.
Note 8. Costs In Excess of Net Assets Acquired
Goodwill, resulting from the excess of the purchase price paid over the value of separately identified tangible and intangible assets acquired, amounted to $299.2 million and $310.2 million at December 31, 1993 and 1992, respectively, and is being amortized on a straight-line basis over periods of twenty or forty years. Accumulated amortization amounted to $46.7 million and $37.7 million at December 31, 1993 and 1992, repectively.
Included in other assets is a customer base valuation of $23.2 million and $24.8 million at December 31, 1993 and 1992, respectively, which is being amortized to operating expenses on a straight-line basis over a twenty-five year period.
Note 9. Short-term Notes Payable and Credit Facilities
AGFC issues commercial paper with terms ranging from 1 to 270 days. Information concerning short-term notes payable for commercial paper and to banks was as follows: 1993 1992 1991 (dollars in thousands)
Maximum borrowings at any month end $1,746,426 $2,086,961 $2,143,947 Average borrowings $1,633,062 $1,844,727 $1,904,246 Weighted average interest rate (total interest expense divided by average borrowings) 3.2% 3.9% 6.3% Weighted average interest rate, giving effect to commitment fees and interest conversion agreements 4.2% 5.7% 7.5% Weighted average interest rate, at December 31, 3.3% 3.5% 4.9%
Notes to Consolidated Financial Statements, Continued
Credit facilities are maintained to support the issuance of commercial paper and as an additional source of funds for operating requirements. At December 31, 1993 and 1992, the Company had a committed credit facility of $345.0 million and was an eligible borrower under a $2.1 billion committed credit facility and $2.6 billion of committed credit facilities, respectively, extended to American General and certain of its subsidiaries. The annual commitment fees for all committed facilities range from .075% to .10%. At December 31, 1993 and 1992, the Company also had $341.0 million and $286.0 million, respectively, of uncommitted credit facilities and was an eligible borrower under $240.0 million and $220.0 million, respectively, of uncommitted credit facilities extended to American General and certain of its subsidiaries. Available borrowings under all facilities are reduced by any amounts outstanding thereunder. At December 31, 1993 and 1992, Company short-term borrowings outstanding under all credit facilities were $3.5 million and $8.3 million, respectively, and Company long-term borrowings outstanding under all credit facilities were $147.0 million and $117.2 million, respectively, with remaining availability to the Company of $2.4 billion and $2.9 billion, respectively, in committed facilities and $430.5 million and $380.5 million, respectively, in uncommitted facilities.
Interest conversion agreements in which the Company contracted to pay interest at fixed rates and receive interest at floating rates were $290.0 million, $415.0 million, and $765.0 million in notional amounts at December 31, 1993, 1992, and 1991, respectively. The fair value of these agreements was $29.4 million and $19.9 million at December 31, 1993 and 1992, respectively, which would have been the cost to the Company of termination of the agreements. The weighted average interest rate was 8.75%, 8.83%, and 8.87% at December 31, 1993, 1992, and 1991, respectively. These agreements mature at various dates and have various fixed rates as shown in the table below: Weighted Average Notional Interest Maturity Amount Rate (dollars in thousands)
1994 $100,000 8.71% 1996 50,000 8.38 1998 90,000 9.06 2000 50,000 8.64
$290,000 8.75%
Options on interest conversion agreements at December 31, 1993, 1992, and 1991, in aggregate notional amounts were $200.0 million, $250.0 million, and $350.0 million, respectively. The fair value of these agreements was $33.3 million and $20.7 million at December 31, 1993 and 1992, respectively, which would have been the cost to the Company of termination of the agreements. The option agreements at December 31, 1993, if exercised by the counterparty,
Notes to Consolidated Financial Statements, Continued
will commit the Company to pay interest at fixed rates. The related option fees received are being amortized as a reduction of interest expense over the aggregate of the option period and interest conversion period.
Interest conversion agreements involve credit risk due to possible non- performance by the counterparties. The Company manages the credit risk of counterparty defaults in these transactions by limiting the total amount of arrangements outstanding, both by individual counterparty and in the aggregate, by monitoring the size and maturity structure of the off-balance-sheet portfolio, and by applying uniform credit standards. The Company does not anticipate non-performance by the counterparties, and any such non-performance would not have a material impact on net income. Notional amounts represent amounts on which interest payments to be exchanged are calculated. The credit risk to the Company is limited to the interest differential based on the interest rates contained in the agreements.
Note 10. Short-term Notes Payable - Parent
Borrowings from AGFI are primarily to provide operating funds for lending activities. Borrowings from American General are primarily to provide overnight operating liquidity when American General is in a surplus cash position. All such borrowings are made on a due on demand basis at short-term rates based on American General's or AGFC's commercial paper rates or bank prime rates. At December 31, 1993, 1992 and 1991, AGFC had no borrowings outstanding with AGFI or American General. Information concerning such borrowings was as follows:
1993 1992 1991 (dollars in thousands)
Maximum borrowings at any month end $50,000 $129,400 $75,000 Average borrowings $14,488 $ 27,275 $17,105 Weighted average interest rate (total interest expense divided by average borrowings) 7.0% 7.1% 8.3%
The information above excludes $2.3 million in borrowings from American General by the Company's insurance subsidiaries at December 31, 1992, which are not material. At December 31, 1993 and 1991, the Company's insurance subsidiaries had no borrowings outstanding from American General.
Note 11. Income Taxes
AGFC and all of its subsidiaries file a consolidated federal income tax return with American General and its subsidiaries. AGFC and its subsidiaries provide for federal income taxes as if filing a separate tax return, and pay such amounts to American General in accordance with a tax sharing agreement.
Notes to Consolidated Financial Statements, Continued
Beginning in 1993, income taxes have been provided in accordance with SFAS 109 (see Note 2.). Under this method, deferred tax assets and liabilities are calculated using the differences between the financial reporting basis and the tax basis of assets and liabilities, using the enacted tax rate. The effect of a tax rate change is recognized in income in the period of enactment. Before 1993, the Company recognized deferred taxes on timing differences between financial reporting income and taxable income. Deferred taxes were not adjusted for tax rate changes.
As a result of this accounting change, 1993 income tax disclosures are not comparable to prior years.
Provision for income taxes is summarized as follows:
Years Ended December 31, 1993 1992 1991 (dollars in thousands) Federal Current $119,758 $85,664 $68,651 Deferred (6,135) 1,059 4,793
Total federal 113,623 86,723 73,444 State 11,261 12,469 9,014
Total $124,884 $99,192 $82,458
Provision for deferred federal income taxes is summarized as follows:
Years Ended December 31, 1992 1991 (dollars in thousands)
Finance receivable losses $(3,504) $ 2,656 Other, net 4,563 2,137
Total $ 1,059 $ 4,793
The U.S. statutory federal income tax rate differs from the effective income tax rate as follows: Years Ended December 31, 1993 1992 1991
Statutory federal income tax rate 35.0% 34.0% 34.0% State income taxes 2.2 3.2 2.7 Amortization of goodwill 1.2 1.1 1.3 Nontaxable investment income (.6) (.7) (.8) Other, net .4 .6 .6
Effective income tax rate 38.2% 38.2% 37.8%
Notes to Consolidated Financial Statements, Continued
The net deferred tax liability of $36.5 million is net of deferred tax assets totalling $70.0 million. The most significant deferred tax assets relate to the provision for finance receivable losses and insurance premiums recorded for financial reporting purposes. No valuation allowance on deferred tax assets is considered necessary at December 31, 1993.
On August 10, 1993, the Revenue Reconciliation Act of 1993 was enacted, which increased the corporate tax rate from 34% to 35%, retroactive to January 1, 1993. The additional 1% tax on earnings for first and second quarter 1993 was $1.5 million, and the effect of the 1% increase in the tax rate used to value existing deferred tax liabilities, as required by SFAS 109, was $.9 million. In accordance with SFAS 109, this total one-time charge of $2.4 million was included in provision for income taxes for the quarter ended September 30, 1993.
Note 12. Long-term Debt
Long-term debt outstanding at December 31, is summarized as follows:
Senior Maturity Senior Subordinated Total (dollars in thousands)
1994 $ 457,120 $196,974 $ 654,094 1995 651,641 274,579 926,220 1996 556,384 - 556,384 1997 341,130 - 341,130 1998 232,302 - 232,302 1999-2003 957,931 - 957,931 2004-2009 297,711 - 297,711
Total $3,494,219 $471,553 $3,965,772
Certain debt issues of the Company are redeemable prior to maturity at par, at the option of the holders. If these issues were so redeemed, the senior amounts above would increase $150.0 million in 1994 and 1996 and would decrease $150.0 million in 1999 and 2009.
Carrying Value Fair Value Type of Debt 1993 1992 1993 1992 (dollars in thousands)
Senior $3,494,219 $3,109,224 $3,721,719 $3,251,489 Senior subordinated 471,553 449,177 486,806 478,470
Total $3,965,772 $3,558,401 $4,208,525 $3,729,959
The senior subordinated debt at December 31, 1992 included $50 million held by certain subsidiaries of American General.
Notes to Consolidated Financial Statements, Continued
The weighted average interest rates on long-term debt outstanding by type were as follows: Years Ended December 31, December 31, 1993 1992 1993 1992
Senior 7.7% 8.4% 7.4% 8.1% Senior subordinated 8.7 9.4 7.1 9.0 Total 7.9 8.7 7.3 8.2
The agreements under which certain of the Company's long-term debt was issued contain provisions for optional prepayments after a specified period of time. Certain debt agreements also contain restrictions on consolidated retained earnings for certain purposes (see Note 14.).
Note 13. Capital Stock
AGFC has two classes of capital stock: special shares (without par value, 25 million shares authorized) which may be issued in series with such dividend, liquidation, redemption, conversion, voting and other rights as the board of directors may determine prior to issuance; and common shares ($.50 par value, 25 million shares authorized). Issued shares were as follows:
Special Shares - As of December 31, 1993 and 1992, there were no shares issued and outstanding. All 40,000 shares of 9% Preferred Stock were redeemed by the Company on December 31, 1992 at $100 per share plus unpaid accrued dividends.
Common Shares - Issued and outstanding 10,160,012 shares at December 31, 1993 and 1992.
Note 14. Consolidated Retained Earnings
AGFC's insurance subsidiaries are restricted by state laws as to the amounts they may pay as dividends without prior notice to, or in some cases prior approval from, their respective state insurance departments. The maximum amount of dividends which can be paid by the Company's insurance subsidiaries in 1994 without prior approval is $29.6 million. AGFC's insurance subsidiaries had statutory capital and surplus of $245.2 million at December 31, 1993. The amount of dividends which may be paid by AGFC is limited by provisions of certain of its debt agreements. Under the most restrictive provisions of such agreements, $38.9 million of the consolidated retained earnings of AGFC at December 31, 1993, was free from such restrictions.
At December 31, 1993, Merit had $52.7 million of accumulated earnings for which no federal income tax provisions have been required. Federal income taxes will become payable only to the extent such earnings are distributed as dividends or exceed limits prescribed by tax laws. No distributions are presently contemplated from these earnings. If such earnings were to
Notes to Consolidated Financial Statements, Continued
become taxable at December 31, 1993, the federal income tax would approximate $18.4 million.
Note 15. Benefit Plans
Retirement Income Plans
The Company participates in the American General Retirement Plans (AGRP), which are noncontributory defined benefit pension plans covering most employees. Pension benefits are based on the participant's average monthly compensation and length of credited service. American General's funding policy is to contribute annually no more than the maximum amount that can be deducted for federal income tax purposes. American General uses the projected unit credit method to compute pension expense.
The plans' assets include primarily readily marketable stocks and bonds.
The pension plans purchased annuity contracts from several of American General's life insurance subsidiaries that provide benefits to certain retirees. These annuity contracts provided $2 million for benefits to the Company's retirees for the years ended December 31, 1993 and 1992.
Pension plan activity allocated to the Company for 1993, 1992 and 1991 reduced operating expenses by $21 thousand, $1.4 million and $1.4 million, respectively.
Because net plan assets are not calculated separately for the Company, the remainder of the information presented herein is for AGFI.
AGFI's participation in the AGRP is accounted for as if AGFI had its own plan. The following table sets forth AGFI's portion of the plans' funded status: Years Ended December 31, 1993 1992 1991 Actuarial present value of benefit (dollars in thousands) obligation: Accumulated benefit obligation $35,868 $22,400 $39,249 Vested benefits (included in accumulated benefit obligation) $35,639 $21,985 $38,810
Projected benefit obligation $43,212 $29,278 $42,686 Plan assets at fair value 49,767 44,678 63,090 Plan assets in excess of projected benefit obligation 6,555 15,400 20,404 Unrecognized prior service cost (659) (821) (984) Unrecognized net loss (gain) 3,485 (4,320) (9,295) Unrecognized net asset at January 1, net of amortization (2,747) (3,925) (5,118)
Prepaid pension expense $ 6,634 $ 6,334 $ 5,007
Notes to Consolidated Financial Statements, Continued
Net pension expense included the following components for the years ended December 31: 1993 1992 1991 (dollars in thousands)
Service cost $ 2,375 $ 1,881 $ 1,349 Interest on projected benefit obligation 2,791 3,687 3,373 Actual return on plan assets (6,112) (5,000) (8,926) Amortization of prior service costs (157) (163) (157) Amortization of unrecognized net asset existing at date of initial application (1,190) (1,193) (562) Deferral of net asset (loss) gain 2,224 (631) 3,093
Total pension expense (income) $ (69) $(1,419) $(1,830)
Additional assumptions concerning the determination of net pension costs is as follows: 1993 1992 1991
Weighted average discount rate 7.25% 8.00% 8.50% Expected long-term rate of return on plan assets 10.00 10.00 10.00 Rate of increase in compensation levels 4.00 5.00 5.00
Postretirement Benefits Other Than Pensions
The Company participates in American General's life, medical and dental plans for certain retired employees. Most plans are contributory, with retiree contributions adjusted annually to limit employer contributions to predetermined amounts. For individuals retiring after December 31, 1992, the cost of the supplemental major medical plan is borne entirely by retirees. American General and its subsidiaries have reserved the right to change or eliminate these benefits at any time.
American General's retiree medical and dental plans are unfunded and self- insured. The life plans are fully insured.
Postretirement benefits other than pension plan activity incurred by the Company for 1993 was $.6 million.
Because plan information is not calculated separately for the Company, the remainder of the information presented herein is for AGFI.
Notes to Consolidated Financial Statements, Continued
AGFI's participation in the plans is accounted for as if AGFI had its own plans. The following table sets forth AGFI's portion of the plans' combined funded status and the accrued postretirement benefit cost included in other liabilities in AGFI's Consolidated Balance Sheet at December 31, 1993:
Accumulated postretirement benefit obligation (dollars in thousands):
Retirees $2,223 Fully eligible active plan participants 1,804 Other active plan participants 2,341
Accumulated postretirement benefit obligation 6,368 Unrecognized net gain (226)
Accrued postretirement benefit cost $6,142
Postretirement benefit expense for the year ended December 31, 1993 included the following components (dollars in thousands):
Service cost-benefits attributed to service during the period $ 184 Interest cost on accumulated postretirement benefit obligation 403
Postretirement benefit expense $ 587
For measurement purposes, a 13.5% annual rate of increase in the per capita cost of covered health care benefits was assumed in 1994; the rate was assumed to decrease gradually to 6% for 2009 and remain at that level. A 1% increase in the assumed annual rate of increase in per capita cost of health care benefits results in an immaterial increase in the accumulated postretirement benefit obligation and postretirement benefit expense. The discount rate used in determining the accumulated postretirement benefit obligation was 7.25%.
Note 16. Lease Commitments, Rent Expense and Contingent Liabilities
The approximate annual rental commitments for leased office space, automobiles and data processing and related equipment accounted for as operating leases, excluding leases on a month-to-month basis and those with a remaining term of one year or less, are as follows: 1994, $24.5 million; 1995, $16.8 million; 1996, $12.3 million; 1997, $8.0 million; 1998, $4.1 million; and subsequent to 1998, $18.3 million.
Notes to Consolidated Financial Statements, Continued
Taxes, insurance and maintenance expenses are obligations of the Company under certain leases. It is expected that, in the normal course of business, leases that expire will be renewed or replaced by leases on other properties; therefore, it is believed that future minimum annual rental commitments will not be less than the amount of rental expense incurred in 1993. Rental expense incurred for the years ended December 31, 1993, 1992, and 1991, was $32.7 million, $25.9 million, and $22.1 million, respectively.
The Company is a defendant in various lawsuits arising in the normal course of business. The Company believes it has valid defenses in these lawsuits and is defending the cases vigorously. The Company also believes that the total amounts that would ultimately have to be paid, if any, arising from these lawsuits would have no material effect on its consolidated financial position.
Note 17. Interim Financial Information (Unaudited)
Unaudited interim information for 1993 and 1992 is summarized below:
Income Before Provision for Income Taxes and Cumulative Effect of Total Revenues Accounting Changes Three Months Ended 1993 1992 1993 1992 (dollars in thousands)
March 31 $ 292,378 $ 263,764 $ 74,059 $ 61,060 June 30 304,005 268,726 87,616 60,904 September 30 309,136 275,723 84,425 67,763 December 31 307,398 284,645 81,003 69,636
Total $1,212,917 $1,092,858 $327,103 $259,363
Net Income Three Months Ended 1993 1992 (dollars in thousands)
March 31 $ 33,733(a) $ 37,843 June 30 55,035 37,667 September 30 50,116(b) 41,887 December 31 50,744 42,774
Total $189,628 $160,171
(a) Includes cumulative charge of $12.6 million due to adoption of accounting changes: SFAS 106, SFAS 109, and SFAS 112. Amounts previously reported in the 1993 first quarter Form 10-Q have been restated above for SFAS 112.
(b) Includes corporate tax rate increase enacted in the third quarter, retroactive to January 1, 1993 (see Note 11.).
PART IV
Item 14.








Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2) The following consolidated financial statements of American General Finance Corporation and subsidiaries are included in Item 8:
Consolidated Balance Sheets, December 31, 1993 and 1992
Consolidated Statements of Income, years ended December 31, 1993, 1992, and 1991
Consolidated Statements of Shareholder's Equity, years ended December 31, 1993, 1992, and 1991
Consolidated Statements of Cash Flows, years ended December 31, 1993, 1992, and 1991
Notes to Consolidated Financial Statements
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted, because they are inapplicable, or the information required therein is included in the consolidated financial statements or notes.
(3) Exhibits:
Exhibits are listed in the Exhibit Index beginning on page 51 herein.
(b) Reports on Form 8-K
Current Report on Form 8-K dated February 1, 1994, with respect to the issuance of an Earnings Release announcing certain unaudited financial results of the Company for the year ended December 31, 1993.
(c) Exhibits
The exhibits required to be included in this portion of Item 14. are submitted as a separate section of this report.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN GENERAL FINANCE CORPORATION (Registrant)
By /s/ Philip M. Hanley (Philip M. Hanley) Date: March 23, 1994 Senior Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Daniel Leitch III President and Chief Executive March 23, 1994 (Daniel Leitch III) Officer and Director (Principal Executive Officer)
/s/ Philip M. Hanley Senior Vice President and Chief March 23, 1994 (Philip M. Hanley) Financial Officer and Director (Principal Financial Officer)
/s/ George W. Schmidt Controller and Assistant March 23, 1994 (George W. Schmidt) Secretary (Principal Accounting Officer)
/s/ Wayne D. Baker Director March 23, 1994 (Wayne D. Baker)
/s/ Bennie D. Hendrix Director March 23, 1994 (Bennie D. Hendrix)
/s/ James R. Jerwers Director March 23, 1994 (James R. Jerwers)
/s/ Larry R. Klaholz Director March 23, 1994 (Larry R. Klaholz)
/s/ David C. Seeley Director March 23, 1994 (David C. Seeley)
/s/ James R. Tuerff Director March 23, 1994 (James R. Tuerff)
/s/ Peter V. Tuters Director March 23, 1994 (Peter V. Tuters)
Exhibit Index
Exhibits Page
(3) a. Restated Articles of Incorporation of American General Finance Corporation (formerly Credithrift Financial Corporation) dated July 22, 1988 and amendments thereto dated August 25, 1988 and March 20, 1989. Incorporated by reference to Exhibit (3)a filed as a part of the Company's Annual Report on Form 10-K for the year ended December 31, 1988 (File No. 1-6155).
b. By-laws of American General Finance Corporation. Incorporated by reference to Exhibit (3)b filed as a part of the Company's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 1-6155).
(4) a. The following instruments are filed pursuant to Item 601(b)(4)(ii) of Regulation S-K, which requires with certain exceptions that all instruments be filed which define the rights of holders of long- term debt of the registrant and its consolidated subsidiaries. In the aggregate, the issuances of debt under each Indenture referred to under items (1), (2) and (3) below exceed 10% of the total assets of the Company on a consolidated basis.
(1) Indenture dated as of January 1, 1988 from American General Finance Corporation (formerly Credithrift Financial Corporation) to Continental Bank, N.A. (formerly Continental Illinois National Bank and Trust Company of Chicago). Incorporated by reference to Exhibit 4(c) filed as a part of the Company's Annual Report on Form 10-K for the year ended December 31, 1987 (File No. 1-6155).
(a) Resolutions and form of note for senior note, 8 3/8% due January 15, 1995. Incorporated by reference to Exhibits 4(a)(1) and 4(a)(2) filed as a part of the Company's Current Report on Form 8-K dated January 21, 1988 (File No. 1-6155).
(b) Resolutions and forms of notes for (senior) Medium-Term Notes, Series A. Incorporated by reference to Exhibits 4(a), 4(b), 4(c), 4(d), and 4(e) filed as a part of the Company's Current Report on Form 8-K dated July 12, 1988 (File No. 1-6155).
(c) Resolutions and form of note for senior note, 8 1/2% due June 15, 1999. Incorporated by reference to Exhibits 4(a)(1) and 4(a)(2) filed as a part of the Company's Current Report on Form 8-K dated June 12, 1989 (File No. 1-6155).
(d) Consent and form of note for senior note, 8 1/8% due August 15, 2009. Incorporated by reference to Exhibits 4(a)(1) and 4(a)(2) filed as a part of the Company's Current Report on Form 8-K dated August 3, 1989 (File No. 1-6155).
Exhibit Index, Continued
Exhibits Page
(e) Resolutions and form of note for senior note, 8.45% due October 15, 2009. Incorporated by reference to Exhibits 4(a)(1) and 4(a)(2) filed as a part of the Company's Current Report on Form 8-K dated October 24, 1989 (File No. 1-6155).
(f) Resolutions and form of note for senior note, 9 1/4% due July 1, 1994. Incorporated by reference to Exhibits 4(a)(1) and 4(a)(2) filed as a part of the Company's Current Report on Form 8-K dated June 28, 1990 (File No. 1-6155).
(2) Indenture dated as of December 1, 1985 from American General Finance Corporation (formerly Credithrift Financial Corporation) to The Chase Manhattan Bank (National Association). Incorporated by reference to Exhibit 4(a) filed as a part of the Company's Current Report on Form 8-K dated February 4, 1986 (File No. 1-6155).
(a) Resolutions and form of note for senior note, 7 3/4% due January 15, 1997. Incorporated by reference to Exhibit 4 filed as a part of the Company's Current Report on Form 8-K dated January 22, 1987 (File No. 1-6155).
(b) Resolutions and form of note for (senior) Medium-Term Notes, Series B. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated September 10, 1990 (File No. 1- 6155).
(c) Resolutions and form of note for senior note, 8 7/8% due March 15, 1996. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated March 7, 1991 (File No. 1-6155).
(d) Resolutions for (senior) Medium-Term Notes, Series B. Incorporated by reference to Exhibit 4 filed as a part of the Company's Current Report on Form 8-K dated March 18, 1991 (File No. 1-6155).
(e) Resolutions and form of note for senior note, 8.10% due August 15, 1995. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated July 31, 1991 (File No. 1-6155).
Exhibit Index, Continued
Exhibits Page
(f) Resolutions and form of note for senior note, 8 1/2% due August 15, 1998. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated August 6, 1991 (File No. 1- 6155).
(g) Resolutions for (senior) Medium-Term Notes, Series B. Incorporated by reference to Exhibit 4 filed as a part of the Company's Current Report on Form 8-K dated November 20, 1991 (File No. 1-6155).
(3) Senior Indenture dated as of November 1, 1991 from American General Finance Corporation to Morgan Guaranty Trust Company of New York. Incorporated by reference to Exhibit 4(a) filed as part of the Company's Current Report on Form 8-K dated November 6, 1991 (File No. 1-6155).
(a) Resolutions and form of note for senior note, 7 3/8% due November 15, 1996. Incorporated by reference to Exhibits 4(c) and 4(d) filed as part of the Company's Current Report on Form 8-K dated November 6, 1991 (File No. 1- 6155).
(b) Resolutions and form of note for senior note, 7.15% due May 15, 1997. Incorporated by reference to Exhibits 4(a) and 4(b) filed as part of the Company's Current Report on Form 8-K dated May 13, 1992 (File No. 1-6155).
(c) Resolutions and form of note for senior note, 7.45% due July 1, 2002. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated July 2, 1992 (File No. 1-6155).
(d) Resolutions and form of note for senior note, 5% due September 1, 1995. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated August 20, 1992 (File No. 1- 6155).
(e) Resolutions and form of note for senior note, 7 1/8% due December 1, 1999. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated December 1, 1992 (File No. 1- 6155).
Exhibit Index, Continued
Exhibits Page
(f) Resolutions and forms of notes for (senior) Medium-Term Notes, Series C. Incorporated by reference to Exhibits 4(a), 4(b) and 4(c) filed as a part of the Company's Current Report on Form 8-K dated December 10, 1992 (File No. 1-6155).
(g) Resolutions and form of note for senior note, 6 7/8% due January 15, 2000. Incorporated by reference to Exhibits 4(a) and 4(b) filed as a part of the Company's Current Report on Form 8-K dated January 11, 1993 (File No. 1- 6155).
b. In accordance with Item 601(b)(4)(iii) of Regulation S-K, certain other instruments defining the rights of holders of long-term debt of the Company and its subsidiaries have not been filed as exhibits to this Annual Report on Form 10-K because the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of the Company on a consolidated basis. The Company hereby agrees to furnish a copy of each such instrument to the Securities and Exchange Commission upon request therefor.
(12) Computation of ratio of earnings to fixed charges. 55
(23) Consent of Ernst & Young 56