United Companies Announces Outlook for Year-End 1994

Business Wire, Dec 19, 1994

BATON ROUGE, La.--(BUSINESS WIRE)--Dec. 19, 1994--United Companies Financial Corp. (NASDAQ/NMS:UCFC)(UCFC) said Monday that it will complete year-end 1994 by reporting all-time annual records for earnings, revenues, sales and production.

"By nearly any measure, from profitability to production, 1994 has already been the best year in the 48-year history of United Companies," said J. Terrell Brown, president and chief executive officer.

United Companies said today it believes that net income for year-end 1994 will be more than four times the previous company record of $11.6 million earned in 1993. The company has already reported $43.7 million in net income through the third quarter ended September 30 of this year.

However, the six rate increases implemented by the Federal Reserve Board in 1994 has resulted in an extraordinary rise in the U.S. Treasury yields upon which UCFC's loans are priced for sale. This has compressed the "spread" between the coupon rates at which UCFC's loans are made to consumers and the pass-through rates those loans are sold to investors as asset-backed securities. In spite of the rapid rise in bond rates -- and anticipated losses in its title insurance division -- United Companies said that while it will be significantly profitable in the fourth quarter of 1994, it does not believe it will meet consensus analysts' estimates for fourth quarter earnings.

Despite the most dramatic rise in rates in more than 15 years, production of the company's primary product (non-conventional, first mortgage loans to B/C-credit borrowers) already eclipsed the prior annual record of $540 million in August of this year, and is now approaching $900 million for the year. Further, UCFC has also topped its annual mark for annuity sales in its insurance division.

"By increasing production despite a rising rate environment, and by expanding our lending franchise from 23 states to 39 states coast-to-coast, UCFC demonstrated that this type of home-equity loan is less sensitive to rising rates, and once again differentiated itself from conventional mortgage lending," he said.

"Looking ahead, we believe United Companies is well positioned to enhance its national franchise and its leadership position in the non-conventional financial services industry, and will continue to provide an outstanding return to our shareholders," said Brown.

United Companies, founded in 1946, is a $2 billion diversified financial services group active nationwide in the lending and insurance industries. It is listed on the NASDAQ Stock Market as "UCFC".

CONTACT: United Companies Financial Corp.

              Louis J. Resweber, 504/924-6007, ext. 2385
                            or 800/234-UCFC