American General Reports 16% Increase in Full-Year and Fourth Quarter 1998 Operating Earnings Per Share

Business Wire, Jan 27, 1999

HOUSTON--(BUSINESS WIRE)--Jan. 27, 1999--American General (NYSE:AGC) today reported a 16% increase in 1998 operating earnings per share to $4.05 compared to $3.49 in 1997. Operating earnings for the year increased 21% to $1.05 billion compared to $868 million in 1997. Net income, which includes net realized gains and other non-recurring items, was $764 million in 1998 compared to $542 million in 1997. Net income for 1998 includes a $288 million aftertax charge associated with previously reported market conduct litigation settlements and Year 2000 readiness costs. Net income for 1997 includes a $353 million aftertax charge primarily associated with the USLIFE acquisition.

Operating earnings per share for the quarter increased 16% to $1.02 compared to $.88 in the 1997 fourth quarter. Operating earnings in the fourth quarter increased 21% to $264 million compared to $219 million in the 1997 period.

Following is a comparative table of full-year and fourth quarter operating earnings for 1998 and 1997: -0-

                        Year Ended Dec. 31,  Quarter Ended Dec. 31,
                        -------------------  ---------------------
Operating Earnings      1998   1997 Change     1998  1997 Change
------------------      ----   ---- ------     ----  ---- ------
 In Millions           $1,048 $ 868    21%    $ 264  $219    21%
 Per Share (diluted)   $ 4.05 $3.49    16%    $1.02  $.88    16%

Commenting on the results, Robert M. Devlin, chairman, president and chief executive officer, said, "Entering 1998, we established clear operating and financial objectives to challenge this organization to achieve top tier performance. I am pleased to report that American General succeeded on all fronts.

"We established a growth objective for operating earnings per share of 12-14% and a profitability objective for return on equity of 15%, which would place American General among the leading industry performers. We finished the year with 16% earnings per share growth and a return on equity of 15.4%. Our financial objectives included attaining the milestones of $1 billion in operating earnings and $100 billion in assets. For 1998, our operating earnings totaled $1.05 billion and our assets grew to $105 billion. Also, American General produced a total return to our shareholders of 47.4% in 1998, substantially above returns for both the broad market as well as the financial sector.

"We successfully integrated into our operations all of the acquired businesses following the most active period of corporate development in our company's history. We have developed a platform that will facilitate the consolidation of future acquisitions, while positioning American General as one of the best and most efficient providers of high-quality service to our customers and sales force. We also have expanded our product portfolios and distribution channels to capitalize on the growth segments of our markets. Most importantly, we are establishing American General as a market-responsive company with excellent opportunities for continued growth.

"American General's achievements in 1998 demonstrated that the company is one of the nation's premier providers of financial services. As much as we accomplished in 1998 -- it is only the beginning. We have instilled a new sense of enthusiasm and purpose within American General and positioned the company for a sustained level of outstanding performance well into the future."

Additional Financial Highlights

------------------------------- -- Revenues and deposits increased to $18.5 billion, up 32% from

1997;

-- Assets increased $24.5 billion to $105 billion, up 30% from a

year ago;

-- Operating return on shareholders' equity was 15.4%, up from 13.6%

in 1997; and

-- Common stock price per share increased 44.3% in 1998 to $78.00.

Key Corporate Activities

------------------------

Western National Acquisition.

----------------------------

On February 25, 1998, American General completed the acquisition of the remaining 54% of Western National Corporation for $1.2 billion. Western National was renamed American General Annuity and has been integrated into the retirement services division. American General Annuity, with assets of $15 billion, is the nation's leading provider of fixed annuities sold through financial institutions.

Acquisition of Annuity Business.

-------------------------------

On May 21, 1998, the company completed the purchase of a block of tax-sheltered annuities for $58 million. The transaction included $2.3 billion of annuity reserves that are included in the retirement services division.

National Advertising Campaign Launched.

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American General launched its first nationally coordinated advertising and branding campaign during 1998. The campaign positions the company as a dynamic leader, focused on achieving a major strategic goal: to become the nation's premier provider of lifetime financial solutions. The campaign includes cable and network television and print ads in many of the nation's leading financial and business publications.