-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XcekitWA1V3UjpnDBl4kHteONL8tpj5QiGyN+UgfedDdZ29HLnEQBHCjh1gdbI3Y Ftk+hdWJPV5VJwVbZqlp4w== 0000950129-94-000200.txt : 19940324 0000950129-94-000200.hdr.sgml : 19940324 ACCESSION NUMBER: 0000950129-94-000200 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL CORP /TX/ CENTRAL INDEX KEY: 0000005103 STANDARD INDUSTRIAL CLASSIFICATION: 6311 IRS NUMBER: 740483432 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07981 FILM NUMBER: 94517480 BUSINESS ADDRESS: STREET 1: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019 BUSINESS PHONE: 7135221111 10-K 1 AMERICAN GENERAL 10-K 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ................................................. TO ................................................. COMMISSION FILE NUMBER 1-7981 AMERICAN GENERAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS ARTICLES OF INCORPORATION) TEXAS 74-0483432 (State of incorporation) (I.R.S. Employer Identification No.) 2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019-2155 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 522-1111 Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ------------------------------ ----------------------------- New York Stock Exchange Common Stock, Par Value $.50 Pacific Stock Exchange Preferred Share Purchase Rights New York Stock Exchange (One Right is attached to Pacific Stock Exchange each share of Common Stock)
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value based on published prices as of March 1, 1994 of American General's voting stock held by non-affiliates was approximately $5.58 billion. The aggregate market value has been calculated on a basis which excludes shares of Common Stock that may be acquired through the exercise of options. As of March 1, 1994, there were 213,537,814 shares of American General's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE
PART OF THE FORM 10-K DOCUMENT INTO WHICH INCORPORATED - ----------------------------------------------------------------------------------- ------------------------ Portions of American General's 1993 Annual Report to Shareholders Parts I and II Portions of American General's definitive Proxy Statement dated March 22, 1994, for the Annual Meeting of Shareholders to be held April 28, 1994 Part III
1993 FORM 10-K 2 - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS GENERAL American General Corporation ("American General" or "the company") is the parent company of one of the nation's largest consumer financial services organizations. American General's operating subsidiaries are leading providers of retirement annuities, consumer loans, and life insurance. American General was incorporated as a general business corporation in Texas in 1980 and is the successor to American General Insurance Company, an insurance company incorporated in Texas in 1926. Much of the information provided in response to this Item 1 is incorporated from selected portions of American General's 1993 Annual Report to Shareholders. Appropriate references to such incorporated information are specified throughout the text of this Item 1. Portions of American General's 1993 Annual Report to Shareholders are provided as Exhibit 13 to this Form 10-K. NEW ACCOUNTING STANDARDS. During 1993, American General adopted six new Statements of Financial Accounting Standards (SFAS). These accounting standards and their effect on the reported results of the company are described in Note 1.2 incorporated herein by reference from the Notes to Financial Statements in American General's 1993 Annual Report to Shareholders. BUSINESS SEGMENTS. American General's operations are classified into the following three business segments: Retirement Annuities, Consumer Finance, and Life Insurance. The Life Insurance segment is a combination of the Insurance - Special Markets and Insurance - Home Service segments reported in 1992. American General provides financial services in all 50 states, the District of Columbia, Canada, Puerto Rico, and the Virgin Islands. A description of the operations of each business segment is presented in this Item 1 and is supplemented by the business segment financial information incorporated herein by reference from Note 11 of the Notes to Financial Statements, from pages 18-21 of Management's Discussion and Analysis (MD&A) in American General's 1993 Annual Report to Shareholders, and from Schedule V of Item 14 of this Form 10-K. On November 29, 1993, the company announced its intent to offer for sale two life insurance subsidiaries, American - Amicable Life Insurance Company of Texas and Financial Life Assurance Company of Canada, due to their relatively small size and unique markets. EMPLOYEES. As of December 31, 1993, American General and its subsidiaries employed approximately 11,500 full-time salaried employees, of which approximately 200 are employed by the two life insurance companies held for sale. PRINCIPAL PRODUCTS, METHODS OF DISTRIBUTION, AND PRINCIPAL MARKETS Information by business segment regarding principal products, methods of distribution, and principal markets is incorporated herein by reference from the Business Segment Overview on pages 10-11 in American General's 1993 Annual Report to Shareholders. INSURANCE SALES AND IN FORCE. The following table summarizes the face amounts of individual and credit life insurance sales, and individual and credit life insurance in force for the company's insurance subsidiaries for the past three years:
In millions 1993 1992 1991 ----------------------------------------------------------------- Individual life insurance sales: Permanent (non-participating) Interest-sensitive $ 9,941 $ 7,541 $ 6,415 Guaranteed-cost 3,681 4,501 4,285 Term 6,728 5,704 6,195 Permanent (participating) 9 12 6 Credit life insurance sales 2,941 2,371 1,911 - ----------------------------------------------------------------- Total $ 23,300 $ 20,129 $ 18,812 - ----------------------------------------------------------------- Individual life insurance in force (at December 31): Permanent (non-participating) Interest-sensitive $ 44,660 $ 40,916 $ 39,630 Guaranteed-cost 21,218 27,222 25,269 Term 18,288 23,256 23,307 Permanent (participating) 847 926 979 Credit life insurance in force 2,548 2,222 1,956 - ----------------------------------------------------------------- Total* $ 87,561 $ 94,542 $ 91,141 - -----------------------------------------------------------------
* Includes reinsurance assumed before deductions for reinsurance ceded, and excludes group life insurance in force. In addition, 1993 excludes $13.1 billion related to the two life insurance companies held for sale. AMERICAN GENERAL CORPORATION 2 3 - -------------------------------------------------------------------------------- (LOGO) INSURANCE DEPOSITS AND PREMIUMS. The following table lists deposits and premiums and other considerations of the company's insurance and annuity subsidiaries for the past three years:
In millions 1993 1992 1991 ----------------------------------------------------------------- Deposits* $ 3,125 $ 2,739 $ 2,247 - ----------------------------------------------------------------- Direct premiums and other considerations Individual life premiums $ 652 $ 643 $ 636 Insurance charges 319 274 247 Individual health premiums 148 144 142 Other 143 166 156 - ----------------------------------------------------------------- Total direct premiums and other considerations 1,262 1,227 1,181 - ----------------------------------------------------------------- Reinsurance premiums assumed 38 32 29 Reinsurance premiums ceded (48) (46) (42) - ----------------------------------------------------------------- Premiums and other considerations $ 1,252 $ 1,213 $ 1,168 - -----------------------------------------------------------------
* Deposits represent that portion of premiums unrelated to mortality or morbidity risk; more than 68% of the deposits relate to products of the Retirement Annuities segment. INVESTMENTS Information regarding investments is incorporated here- in by reference from pages 21-23 of the MD&A, from Notes 1.2, 1.3, and 2 of the Notes to Financial Statements, and from Schedule I of Item 14 of this Form 10-K. INSURANCE AND ANNUITY RESERVING METHODS Individual life insurance reserves are based on assumptions similar to those used to establish premium rates. Further information regarding reserving methods is incorporated herein by reference from Note 1.11 of the Notes to Financial Statements. REINSURANCE Information regarding reinsurance is incorporated herein by reference from Notes 1.2 and 1.13 of the Notes to Financial Statements and from Schedule VI of Item 14 of this Form 10-K. FACTORS AFFECTING PRICING OF PRODUCTS INSURANCE AND ANNUITY PRODUCTS. Premium rates are based on assumptions, which the company's insurance subsidiaries believe to be realistic, as to future mortality, investment yields, expenses, and lapses. In addition, the pricing of retirement annuity products and interest-sensitive insurance products is affected by competition and the anticipated spread between the yield on invested assets and the rate credited to policyholders. Although a profit margin is included in the price of the products, the actual profitability of the products can be significantly affected by the variation between actual and assumed experience. CONSUMER FINANCE PRODUCTS. Pricing of consumer finance products is influenced by such factors as cost of borrowed funds, competition, and the expense of operations. In addition, pricing is affected by state regulation of interest rates based on contractual terms and amount, charges for individual loans, and insurance premium rates. COMPETITION The business of the company's subsidiaries is highly competitive with other financial institutions with respect to pricing, selection of products, and quality of service. No single competitor nor any small group of competitors dominates any of the markets in which the company's subsidiaries operate. REGULATION INSURANCE. American General's insurance subsidiaries are subject to state regulation in the jurisdictions in which they do business. Information concerning regulatory compliance is incorporated herein by reference from the paragraph "Regulation" on page 21 of the MD&A. Most states also regulate affiliated groups such as American General and its subsidiaries under insurance holding company laws. Additional information regarding these restrictions is incorporated herein by reference from Note 10.2 of the Notes to Financial Statements. Discussion of state guaranty associations is incorporated herein by reference from the paragraph "Guaranty Associations" on pages 20-21 of the MD&A. CONSUMER FINANCE. The company's consumer finance subsidiaries are subject to various types of federal regulation, including the Federal Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, certain Federal Trade Commission rules, and state laws that regulate the consumer loan and retail sales contract businesses. In addition, the company's thrift subsidiary, which engages in the consumer finance business and accepts insured deposits, is subject to regulation by and the reporting requirements of the Federal Deposit Insurance Corporation and is subject to regulatory codes in the states in which it operates. OTHER. Discussion of certain other regulatory factors is incorporated herein by reference from the paragraphs "Taxation," "Statutory Accounting," and "Environmental" on pages 20-21 of the MD&A. 1993 FORM 10-K 3 4 - -------------------------------------------------------------------------------- PART I (Continued) ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding three executive officers of American General who are standing for election as directors of American General is incorporated herein by reference from the caption "Election of Directors" set forth in American General's definitive Proxy Statement dated March 22, 1994. Information as of March 22, 1994 regarding the eleven other executive officers of American General is as follows: Present Principal Position with American General and Name and Age Other Material Positions Held during Last Five Years - ----------------------------------------------------------------------------------------------------------------------------- MICHAEL G. ATNIP (45) Senior Vice President - Special Projects (since January 1994), American General Corporation; with American General during the remainder of last five years in various other capacities including Senior Vice President - Insurance and Administration (1991-93) and Senior Vice President (1989-91), American General Finance, Inc., Evansville, Indiana, a subsidiary of American General Corporation, and Senior Vice President - Corporate Consulting (1988-89), American General Corporation. STEPHEN D. BICKEL (54) President (since 1988), The Variable Annuity Life Insurance Company, Houston, Texas, a subsidiary of American General Corporation. ROBERT S. CAUTHEN JR. (49) President (since September 1993), American General Life Insurance Company, Houston, Texas, a subsidiary of American General Corporation; Senior Vice President and Chief Marketing Officer (1991-September 1993), American General Life Insurance Company. President and Chief Executive Officer (1990-91), First Financial Resources, Valley Forge, Pennsylvania. Agency Vice President - Life Division (1989-90), United States Fidelity & Guaranty Group, Baltimore, Maryland. JAMES S. D'AGOSTINO JR. (47) President (since August 1993), American General Life and Accident Insurance Company, Nashville, Tennessee, a subsidiary of American General Corporation; with American General Corporation during the remainder of last five years in various other capacities including Executive Vice President - Administration (February 1993-August 1993), Senior Vice President - Administration (1991-February 1993), Senior Vice President - Investor Relations (1990-91), and Vice President and Treasurer (1986-90). DANIEL LEITCH III (60) President (since 1991), American General Finance, Inc., Evansville, Indiana, a subsidiary of American General Corporation; with American General during the remainder of last five years in various other capacities including Senior Vice President (1990-91), American General Life and Accident Insurance Company, Nashville, Tennessee, a subsidiary of American General Corporation, and Vice Chairman (1986-90), American General Life Insurance Company, Houston, Texas, a subsidiary of American General Corporation. JON P. NEWTON (52) Senior Vice President and General Counsel (since March 1993), American General Corporation. Partner (1985-March 1993), Clark, Thomas, Winters & Newton (attorneys), Austin, Texas. NICHOLAS R. RASMUSSEN (47) Senior Vice President (since 1983) and Senior Vice President - Corporate Development (since October 1993), American General Corporation; with American General Corporation during the remainder of last five years in various other capacities including Senior Vice President - Group Executive (1990-October 1993) and Senior Vice President - Financial Policy (1988-90). KURT G. SCHREIBER (47) Senior Vice President (since 1984) and Corporate Secretary (since February 1993), American General Corporation; with American General Corporation during the remainder of last five years, General Counsel (1983-93). PETER V. TUTERS (41) Senior Vice President - Investments (since 1992), and Chief Investment Officer (since December 1993), American General Corporation. Vice President (1986-92), Crown Life Insurance Company, Toronto, Ontario, Canada. ROBERT D. WOMACK (51) Senior Vice President - Systems and Consulting (since June 1993), American General Corporation; Senior Vice President - Administration (1992-June 1993), American General Life and Accident Insurance Company, Nashville, Tennessee, a subsidiary of American General Corporation; Senior Vice President - Administration (1991-92) and Vice President and Tax Director (1990-91), American General Corporation. Tax Partner (1987-90), KPMG Peat Marwick, San Francisco, California. AUSTIN P. YOUNG (53) Senior Vice President (since 1987), Chief Financial Officer (since 1988), and Treasurer (1990-91), American General Corporation.
- -------------------------------------------------------------------------------- AMERICAN GENERAL CORPORATION 4 5 - -------------------------------------------------------------------------------- (LOGO) ITEM 2. PROPERTIES American General's corporate headquarters is located in the American General Center, a complex of office buildings on a 45-acre tract near downtown Houston. American General or its subsidiaries either own or lease pursuant to a sale-leaseback arrangement all of the buildings in the complex. In addition, American General or its subsidiaries own all of the underlying land, except for a five-acre parcel that is leased pursuant to a long-term agreement. American General and its subsidiaries occupy approximately 42% of the total office space available in the Center. American General's subsidiaries also own various other properties, including properties held for investment, branch office buildings, and the home office buildings of American-Amicable Life Insurance Company of Texas in Waco and American General Finance, Inc. in Evansville. Portions of certain of these buildings are rented to unaffiliated third parties. The home office building of American General Life and Accident Insurance Company in Nashville was sold to the State of Tennessee for $37.4 million, effective January 3, 1994. ITEM 3. LEGAL PROCEEDINGS Two real estate subsidiaries of the company were defendants in a lawsuit, Avia Development Group et al. v. American General Realty Investment Corp., et al. (filed in the 61st District Court of Harris County, Texas, September 23, 1991), that alleged damages based on lost profits and related claims arising from certain loans and joint venture contracts. On July 16, 1993, a judgment was entered against the subsidiaries jointly for $47.3 million in compensatory damages and against one of the subsidiaries for $189.2 million in punitive damages. On September 17, 1993, the Texas state district court reduced the previously-awarded punitive damages by $60.0 million, resulting in a reduced judgment in the amount of $176.5 million plus post-judgment interest. An appeal on numerous legal grounds has been filed (Case No. 01-93-1027-CV in the First Court of Appeals, Houston, Texas), and a supersedeas bond required for the appeal was posted with the company acting as surety. The company believes, based on advice of legal counsel, that plaintiffs' claims are without merit, and the company is continuing to contest the matter vigorously through the appeals process. In April 1992, the Internal Revenue Service (IRS) issued Notices of Deficiency in the amount of $12.4 million for the 1977-1981 tax years for three of the company's subsidiaries. The basis of the dispute was the tax treatment of a modified coinsurance (MODCO) agreement that the subsidiaries entered into with Union Central Life Insurance Company. During 1992, the company elected to pay the assessment plus associated interest. On November 6, 1992, one of the company's subsidiaries filed a claim for refund of tax and interest, which the IRS disallowed in January 1993. The subsidiary filed a suit for refund in the Court of Federal Claims on June 30, 1993 (Gulf Life Insurance Co. v. United States, C.A. No. 93-404T). The company believes that the IRS's claims are without merit, and the company is continuing to vigorously pursue refund of the amounts paid. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during fourth quarter 1993. 1993 FORM 10-K 5 6 - -------------------------------------------------------------------------------- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS On February 4, 1993, the board of directors declared a two-for-one stock split effected in the form of a 100% common stock dividend, paid March 1, 1993, to shareholders of record on February 16, 1993. The stock distribution, which was reflected as of December 31, 1992, had no impact on total consolidated shareholders' equity or results of operations. The quarterly high and low market prices of American General's common stock, the cash dividends paid on common stock, and restrictions on retained earnings for the payment of dividends are incorporated herein by reference from Notes 12, 7.1, and 10.2, respectively, of the Notes to Financial Statements. The number of record holders of common stock is incorporated herein by reference from Note 7.1 of the Notes to Financial Statements. The common stock of American General is traded in the United States on the New York Stock Exchange and the Pacific Stock Exchange. The common stock is also traded on the London Stock Exchange and the Swiss Stock Exchanges of Basel, Geneva, and Zurich. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data is 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 or incorporated by reference herein.
Years Ended December 31, ------------------------------------------------------------- In millions, except per share data 1993 1992 1991 1990 1989 - -------------------------------------------------------------------------------------------------------------------- Revenues $ 4,829 $ 4,602 $ 4,395 $ 4,434 $ 4,126 Income from continuing operations 250(a) 533 480 562 413 Income from continuing operations per common share 1.15(a) 2.45 2.13 2.35 1.67 Assets 43,982(b) 39,742 36,105 33,808 32,062 Debt Corporate 1,257 1,371 1,391 1,555 1,806 Real Estate 429 616 590 498 398 Consumer Finance 5,843 5,484 5,243 5,096 4,660 Redeemable equity - - - 296 380 Shareholders' equity 5,137(b) 4,616 4,329 4,138 4,090 Regular cash dividends declared per common share 1.10 1.04 1.00 .79(c) .75 - --------------------------------------------------------------------------------------------------------------------
(a) Includes $300 million write-down of goodwill ($1.39 per share) and $30 million charge ($.14 per share) due to 1993 tax law change. Additional information is incorporated herein by reference from Notes 1.7 and 6.2, respectively, of the Notes to Financial Statements. (b) Includes $1.0 billion and $676 million increase in assets and shareholders' equity, respectively, due to adoption of SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. Additional information is incorporated herein by reference from Note 1.2 of the Notes to Financial Statements. (c) Excludes special dividends paid in three quarters of 1990 totaling $.61. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference from "Management's Discussion and Analysis" on pages 18-24, 26, 28, and 30 in American General's 1993 Annual Report to Shareholders and from Note 10.2 of the Notes to Financial Statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data are incorporated herein by reference from pages 25, 27, 29, and 31-44 in American General's 1993 Annual Report to Shareholders. The ratios of earnings to fixed charges are incorporated herein by reference from Exhibit 12 of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. AMERICAN GENERAL CORPORATION 6 7 - -------------------------------------------------------------------------------- (LOGO) PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information appearing under the captions "Election of Directors" and "Securities Reporting" in American General's definitive Proxy Statement dated March 22, 1994, is incorporated herein by reference. Information regarding the eleven executive officers of American General who are not standing for election to the board of directors of American General is included in Part I, Item 1A of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information appearing under the captions "Governance of the Company" and "Compensation of Executive Officers" in American General's definitive Proxy Statement dated March 22, 1994, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information appearing under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in American General's definitive Proxy Statement dated March 22, 1994, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information appearing under the caption "Certain Relationships and Transactions" in American General's definitive Proxy Statement dated March 22, 1994, is incorporated herein by reference. 1993 FORM 10-K 7 8 - -------------------------------------------------------------------------------- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as part of this report.
Page Reference -------------------------------- 1993 Form 10-K Annual Report - ---------------------------------------------------------------------------------------------------------------- 1. Financial Statements Report of Ernst & Young, Independent Auditors - 45 Consolidated Financial Statements Statement of Income - 25 Balance Sheet - 27 Statements of Shareholders' Equity and Stock Activity - 29 Statement of Cash Flows - 31 Notes to Financial Statements - 32-44 2. Financial Statement Schedules Schedule I - Summary of Investments - Other than Investments in Affiliates 11 - Schedule III - Condensed Financial Information of Registrant 12-14 - Schedule V - Supplementary Insurance Information 15 - Schedule VI - Reinsurance 16 - Schedule VIII - Valuation and Qualifying Accounts 17 - Schedule IX - Short-Term Borrowings 18 - - ----------------------------------------------------------------------------------------------------------------
All other financial statement schedules have been omitted because they are inapplicable or the information required therein is included elsewhere in the financial statements or notes thereto or in another schedule filed herewith. AMERICAN GENERAL CORPORATION 8 9 - -------------------------------------------------------------------------------- (LOGO) 3. Exhibits
Filed Herewith(*), Nonapplicable (NA), or Incorporated by Reference from ------------------------------ American General Registration No. Exhibit or Number Exhibit Report - -------------------------------------------------------------------------------------------------------------- 3.1 Restated Articles of Incorporation of American General 4.1 33-33115 Corporation (including Statement of Resolution Establishing Series of Shares of Series A Junior Participating Preferred Stock) 3.2 Amended and Restated Bylaws of American General 3.2* NA Corporation 4 There have not been filed as exhibits to this Form 10-K NA NA certain long-term debt instruments, none of which relates to authorized indebtedness that exceeds 10% of the consolidated assets of the company and its subsidiaries. American General hereby agrees to furnish a copy of any such instrument to the Commission upon request. 10.1 1984 Stock and Incentive Plan for key employees of the 10.5 Form 10-K company and its subsidiaries for 1984 10.2 1984 Stock and Incentive Plan (Amended and Restated 10.2* NA Effective as of February 8, 1994) for key employees of the company and its subsidiaries 10.3 Restoration of Retirement Income Plan for Certain 10.3* NA Employees Participating in the Restated American General Retirement Plan (Restoration of Retirement Income Plan) 10.4 First Amendment to Restoration of Retirement Income 10.4* NA Plan 10.5 Second Amendment to Restoration of Retirement Income 10.5* NA Plan 10.6 American General Supplemental Thrift Plan 10.6* NA 10.7 First Amendment to American General Supplemental Thrift 10.7* NA Plan 10.8 Second Amendment to American General Supplemental 10.8* NA Thrift Plan 10.9 Third Amendment to American General Supplemental Thrift 10.9* NA Plan 10.10 Form of Severance Agreements between the company and 10.10* NA each of the following: Harold S. Hook, James R. Tuerff, Robert M. Devlin, Michael G. Atnip, Jon P. Newton, Nicholas R. Rasmussen, Kurt G. Schreiber, Peter V. Tuters, Robert D. Womack, Austin P. Young, Stephen D. Bickel, Robert S. Cauthen, Jr., James S. D'Agostino, Jr., Peter P. Huff, and Daniel Leitch III.
- -------------------------------------------------------------------------------- (continued on next page) 1993 FORM 10-K 9 10 - -------------------------------------------------------------------------------- PART IV(Continued)
Filed Herewith(*), Nonapplicable (NA), or Incorporated by Reference from ------------------------------ American General Registration No. Exhibit or Number Exhibit Report - -------------------------------------------------------------------------------------------------------------- 10.11 Supplemental Retirement Agreement between the company 10.11* NA and Harold S. Hook 10.12 American General Supplemental Retirement Plan Trust 10.12* NA (relating to Exhibit 10.11 hereto) 10.13 Amendment to Supplemental Retirement Agreement between 10.13* NA the company and Harold S. Hook 10.14 Second Amendment to Supplemental Retirement Agreement 10.14* NA between the company and Harold S. Hook 10.15 Supplemental Retirement Agreement between the company 19.5 Form 10-Q and Michael J. Poulos for Third Quarter 1990 10.16 Deferred Compensation Agreement between the company and 10.16* NA Harold S. Hook 10.17 American General Corporation Retirement Plan for 10.17* NA Directors (as amended and restated) 11 Computation of Earnings Per Share 11* NA 12 Computation of Ratio of Earnings to Fixed Charges 12* NA 13 Portions of American General's 1993 Annual Report to 13* NA Shareholders that are expressly incorporated herein by reference in this Form 10-K. Other sections of the Annual Report furnished for the information of the Commission are not deemed "filed" as part of this Form 10-K. 21 Subsidiaries of American General Corporation 21* NA 23 Consent of Ernst & Young, Independent Auditors 23* NA 24 Powers of attorney for the directors signing this Form 24* NA 10-K
Any Exhibit not included with this Form 10-K will be furnished to any shareholder of record on written request and payment of up to $.25 per page plus postage. Such requests should be directed to American General Corporation, Investor Relations, P.O. Box 3247, Houston, Texas 77253-3247. - -------------------------------------------------------------------------------- (b) Reports on Form 8-K. 1. Current Report on Form 8-K dated November 29, 1993, with respect to the issuance of a news release announcing that the company was electing to retain its principal ordinary life insurance subsidiaries, offering for sale two other ordinary life insurance subsidiaries, and taking a $300 million write-down of acquisition-related goodwill. AMERICAN GENERAL CORPORATION 10 11 - -------------------------------------------------------------------------------- (LOGO) AMERICAN GENERAL CORPORATION SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN AFFILIATES In millions
At December 31, 1993 ------------------------------------------------- Amount Cost Shown in or Consolidated Amortized Fair Balance Type of Investment Cost Value Sheet - ----------------------------------------------------------------------------------------------------------------- Fixed maturity securities: Bonds and notes U.S. government obligations $ 882 $ 919 $ 919 States and political subdivisions 180 202 202 Foreign governments 565 601 601 Mortgage-backed securities Pass-through securities guaranteed by U.S. government and government agencies 313 361 361 CMOs collateralized by U.S. government and government agencies 9,720 10,113 10,113 Other 184 204 204 - ----------------------------------------------------------------------------------------------------------------- Total mortgage-backed securities 10,217 10,678 10,678 - ----------------------------------------------------------------------------------------------------------------- Public utilities 3,558 3,861 3,861 Convertibles and bonds with warrants attached 3 3 3 All other corporate 9,353 10,082 10,082 Redeemable preferred stocks 127 133 133 - ----------------------------------------------------------------------------------------------------------------- Total fixed maturity securities 24,885 26,479 26,479 - ----------------------------------------------------------------------------------------------------------------- Equity securities Common stocks - industrial, miscellaneous, and all other 78 91 91 Perpetual preferred stocks 104 142 142 - ----------------------------------------------------------------------------------------------------------------- Total equity securities 182 233 233 - ----------------------------------------------------------------------------------------------------------------- Mortgage loans on real estate* 3,032 3,032 Investment real estate* Investment properties 717 717 Acquired in satisfaction of debt 55 55 Policy loans 1,156 1,156 Other long-term investments* 137 137 Short-term investments 67 67 - ----------------------------------------------------------------------------------------------------------------- Total investments $ 30,231 $ 31,876 - -----------------------------------------------------------------------------------------------------------------
* Net of applicable allowance for losses. See Schedule VIII of this Form 10-K. 1993 FORM 10-K 11 12 - -------------------------------------------------------------------------------- PART IV(Continued) AMERICAN GENERAL CORPORATION SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF INCOME OF AMERICAN GENERAL CORPORATION (PARENT ONLY)
For the Years Ended December 31, In millions 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------- Revenues Dividends - affiliated $ 679 $ 541 $ 496 Interest income - affiliated 21 21 39 Net realized investment gains 19 17 - Other income Affiliated 24 24 26 Other 5 8 19 - ---------------------------------------------------------------------------------------------------------------- Total revenues 748 611 580 - ---------------------------------------------------------------------------------------------------------------- Expenses Operating costs and expenses Affiliated 8 9 10 Other 51 53 59 Interest expense Affiliated 12 12 12 Other 109 114 128 - ---------------------------------------------------------------------------------------------------------------- Total expenses 180 188 209 - ---------------------------------------------------------------------------------------------------------------- Income before income tax benefit, equity in undistributed net income of subsidiaries, and cumulative effect of accounting changes 568 423 371 - ---------------------------------------------------------------------------------------------------------------- Income tax benefit Excluding tax rate related adjustment 36 40 45 Tax rate related adjustment 1 - - - ---------------------------------------------------------------------------------------------------------------- Total income tax benefit 37 40 45 - ---------------------------------------------------------------------------------------------------------------- Equity in net income (loss) of subsidiaries (net of dividends paid to parent) (355) 70 64 - ---------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting changes 250 533 480 Cumulative effect of accounting changes* Parent company (12) - - Subsidiaries (34) - - - ---------------------------------------------------------------------------------------------------------------- Net income $ 204 $ 533 $ 480 - ----------------------------------------------------------------------------------------------------------------
* Reflects adoption of SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," SFAS 109, "Accounting for Income Taxes," and SFAS 112, "Employers' Accounting for Postemployment Benefits," at January 1, 1993. Additional information is incorporated herein by reference from Note 1.2 of the Notes to Financial Statements. AMERICAN GENERAL CORPORATION 12 13 - -------------------------------------------------------------------------------- (LOGO) AMERICAN GENERAL CORPORATION SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) BALANCE SHEET OF AMERICAN GENERAL CORPORATION (PARENT ONLY)
At December 31, In millions 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------ Assets Investments Subsidiaries, at equity $ 5,661 $ 5,350 $ 5,227 Other 37 65 120 Indebtedness from subsidiaries 780 650 427 Cash - - - Other 83 71 82 - ------------------------------------------------------------------------------------------------------------------ Total assets $ 6,561 $ 6,136 $ 5,856 - ------------------------------------------------------------------------------------------------------------------ Liabilities Short-term debt $ 315 $ 383 $ 336 Long-term debt(a) 1,012 1,061 1,127 Indebtedness to subsidiaries 27 29 32 Federal income taxes (7) (23) (49) Other 77 70 81 - ------------------------------------------------------------------------------------------------------------------ Total liabilities 1,424 1,520 1,527 - ------------------------------------------------------------------------------------------------------------------ Shareholders' equity Common stock 365 368 1,894 Net unrealized gains on securities Fixed maturity securities(b) 676 - - Equity securities 33 88 70 Retained earnings(c) 4,229 4,263 3,959 Cost of treasury stock(d) (166) (103) (1,594) - ------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 5,137 4,616 4,329 - ------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $ 6,561 $ 6,136 $ 5,856 - ------------------------------------------------------------------------------------------------------------------
(a) The principal amount of American General debentures and notes held by subsidiaries was $66 million at December 31, 1993, $69 million at December 31, 1992, and $72 million at December 31, 1991. The five-year schedule of maturities of debt is as follows: 1994, $209 million; 1995, $103 million; 1996, $3 million; 1997, $136 million; and 1998, $71 million. (b) Reflects adoption of SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. Additional information is incorporated herein by reference from Note 1.2 of the Notes to Financial Statements. (c)Amounts include undistributed earnings of subsidiaries of $2.4 billion in 1993 and $2.8 billion in 1992 and 1991. (d)Amounts for 1993, 1992, and 1991 include 699,614 shares at a cost of $8 million held by subsidiaries. 1993 FORM 10-K 13 14 - -------------------------------------------------------------------------------- PART IV (Continued) AMERICAN GENERAL CORPORATION SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) STATEMENT OF CASH FLOWS OF AMERICAN GENERAL CORPORATION (PARENT ONLY)
For the Years Ended December 31, In millions 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------- Operating activities Income before cumulative effect of accounting changes $ 250 $ 533 $ 480 Reconciling adjustments to net cash provided by operating activities Equity in net loss (income) of subsidiaries (net of dividends paid to parent) 355 (70) (64) Other, net (19) 10* 9 - ---------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 586 473 425 - ---------------------------------------------------------------------------------------------------------------- Investing activities Net decrease in other investments 34 72* 115 Net (increase) decrease in indebtedness from subsidiaries (130) (223) 245 Net decrease in indebtedness to subsidiaries (2) (3) (2) Other, net (68) (36) - - ---------------------------------------------------------------------------------------------------------------- Net cash (used for) provided by investing activities (166) (190) 358 - ---------------------------------------------------------------------------------------------------------------- Financing activities Net decrease in short-term debt (216) (18) (150) Long-term debt issuance 100 - - Long-term debt redemptions - - (10) Dividend payments (238) (226) (227) Common share purchases (78) (47) (378) Other, net 12 8 (18) - ---------------------------------------------------------------------------------------------------------------- Net cash (used for) financing activities (420) (283) (783) - ---------------------------------------------------------------------------------------------------------------- Net decrease in cash - - - Cash at beginning of year - - - - ---------------------------------------------------------------------------------------------------------------- Cash at end of year $ - $ - $ - - ----------------------------------------------------------------------------------------------------------------
* Amounts restated to conform with 1993 presentation. AMERICAN GENERAL CORPORATION 14 15 - -------------------------------------------------------------------------------- (LOGO) AMERICAN GENERAL CORPORATION SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION In millions
At December 31, For the Years Ended December 31, ----------------------- ------------------------------------------------------------ Amorti- zation Premiums of Deferred Insurance and Insurance Deferred Policy and Other Net and Policy Other Acquisition Annuity Consider- Investment Annuity Acquisition Operating Segment Costs Liabilities(a) ations Income Benefits Costs Expenses - ---------------------------------------------------------------------------------------------------------------------- 1993 Retirement Annuities $ 113 $ 17,029 $ 30 $ 1,434 $ 1,125 $ 10 $ 95 Consumer Finance 8 353 138 56 80 6 486 Life Insurance 1,515 9,857 1,084 942 1,101 187 314 Other(b) 1 - - 5 5 - 35 - ---------------------------------------------------------------------------------------------------------------------- Consolidated $ 1,637(c) $ 27,239 $ 1,252 $ 2,437 $ 2,311 $ 203 $ 930 - ---------------------------------------------------------------------------------------------------------------------- 1992 Retirement Annuities $ 474 $ 15,012 $ 23 $ 1,328 $ 1,069 $ 5 $ 96 Consumer Finance 6 364 119 55 76 3 454 Life Insurance 1,603 9,360(d) 1,071 948 1,053 163 366 Other(b) - - - (4) - - 34 - ---------------------------------------------------------------------------------------------------------------------- Consolidated $ 2,083 $ 24,736 $ 1,213 $ 2,327 $ 2,198 $ 171 $ 950 - ---------------------------------------------------------------------------------------------------------------------- 1991 Retirement Annuities $ 403 $ 12,974 $ 20 $ 1,185 $ 967 $ 4 $ 82 Consumer Finance 5 347 105 52 63 4 430 Life Insurance 1,511 8,750(d) 1,043 942 1,035 171 359 Other(b) - - - (1) - - 37 - ---------------------------------------------------------------------------------------------------------------------- Consolidated $ 1,919 $ 22,071 $ 1,168 $ 2,178 $ 2,065 $ 179 $ 908 - ----------------------------------------------------------------------------------------------------------------------
(a) Includes unearned premiums, other policy claims and benefits payable, and other policyholder funds, which are not significant relative to insurance and annuity reserves. (b) Represents primarily Corporate operations and intersegment eliminations. (c) Reflects adoption of SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," at December 31, 1993. Additional information is incorporated herein by reference from Note 1.2 of the Notes to Financial Statements. (d) Amounts restated to conform with 1993 presentation. 1993 FORM 10-K 15 16 - -------------------------------------------------------------------------------- PART IV (Continued) AMERICAN GENERAL CORPORATION SCHEDULE VI - REINSURANCE In millions
Percentage of Assumed Amount Ceded to from Assumed Gross Other Other Net to Description Amount Companies Companies Amount Net - ------------------------------------------------------------------------------------------------------------------- 1993 Life insurance in force at year end* $ 91,673 $ 6,133 $ 961 $ 86,501 1.1% Premiums for the year Life insurance and annuities $ 702 $ 47 $ 13 $ 668 1.9% Accident and health insurance 194 - 13 207 6.4 Property-liability insurance 47 1 12 58 20.4 - --------------------------------------------------------------------------------------------------------------- Total premiums $ 943 $ 48 $ 38 $ 933 4.1% - --------------------------------------------------------------------------------------------------------------- 1992 Life insurance in force at year end $ 99,719 $ 10,807 $ 1,460 $ 90,372 1.6% Premiums for the year Life insurance and annuities $ 732 $ 45 $ 16 $ 703 2.3% Accident and health insurance 176 1 14 189 7.4 Property-liability insurance 45 - 2 47 4.3 - --------------------------------------------------------------------------------------------------------------- Total premiums $ 953 $ 46 $ 32 $ 939 3.4% - --------------------------------------------------------------------------------------------------------------- 1991 Life insurance in force at year end $ 95,482 $ 8,995 $ 2,052 $ 88,539 2.3% Premiums for the year Life insurance and annuities $ 722 $ 41 $ 17 $ 698 2.4% Accident and health insurance 171 - 11 182 6.0 Property-liability insurance 41 1 1 41 2.4 - --------------------------------------------------------------------------------------------------------------- Total premiums $ 934 $ 42 $ 29 $ 921 3.1% - ---------------------------------------------------------------------------------------------------------------
* Amounts exclude $14.9 billion, $6.8 billion, $1 million, and $8.1 billion for Gross Amount, Ceded to Other Companies, Assumed from Other Companies, and Net Amount, respectively, related to the two life insurance companies held for sale. AMERICAN GENERAL CORPORATION 16 17 - -------------------------------------------------------------------------------- (LOGO) AMERICAN GENERAL CORPORATION SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS In millions
Additions ---------------------------------- Balance Charged Charged at to to Charged Balance Beginning Costs Realized to at of and Investment Other End of Description Year Expenses Gains Accounts Deductions(a) Year - ------------------------------------------------------------------------------------------------------------------- 1993 Allowance for losses on: Finance receivables $ 162 $ 163 $ - $ - $ 141 $ 184 Below investment grade bonds 26 - 10 - 36 - Mortgage loans on real estate 53 - 84 - 39 98 Investment real estate 129 - 199 - 75 253 Other long-term investments 22 - 33 - 12 43 - ------------------------------------------------------------------------------------------------------------------- Total $ 392 $ 163 $ 326 $ - $ 303 $ 578 - ------------------------------------------------------------------------------------------------------------------- 1992 Allowance for losses on: Finance receivables $ 151 $ 135 $ - $ - $ 124 $ 162 Below investment grade bonds 40 - 8 - 22 26 Mortgage loans on real estate 50 - 34 - 31 53 Investment real estate 62 - 82 - 15 129 Other long-term investments 3 - 19(b) - - 22 - ------------------------------------------------------------------------------------------------------------------- Total $ 306 $ 135 $ 143 $ - $ 192 $ 392 - ------------------------------------------------------------------------------------------------------------------- 1991 Allowance for losses on: Finance receivables $ 149 $ 137 $ - $ - $ 135 $ 151 Below investment grade bonds 43 - 11 - 14 40 Mortgage loans on real estate 31 - 30 - 11 50 Investment real estate 23 - 35 5 1 62 Other long-term investments 7 - 1(b) (5) - 3 - ------------------------------------------------------------------------------------------------------------------- Total $ 253 $ 137 $ 77 $ - $ 161 $ 306 - -------------------------------------------------------------------------------------------------------------------
(a) Deductions generally result from write-offs of uncollectible receivables and bonds, sales of bonds and real estate, mortgage loan payoffs, and foreclosures of real estate. (b) Amounts restated to conform with 1993 presentation. 1993 FORM 10-K 17 18 - -------------------------------------------------------------------------------- PART IV (Continued) AMERICAN GENERAL CORPORATION SCHEDULE IX - SHORT-TERM BORROWINGS In millions
Weighted Average Weighted Maximum Average Rate Average Amount Amount on Amount Interest Outstanding Outstanding Outstanding Category of Aggregate Balance at Rate at at any during the during the Short-Term Borrowings(a) December 31, December 31, Month End Period(b) Period(b) - ----------------------------------------------------------------------------------------------------------------- 1993 Corporate(c) Commercial paper $ 166 3.4% $ 346 $ 207 3.1% Real Estate(d) Commercial paper $ 413 3.3% $ 564 $ 485 3.2% Consumer Finance(e) Commercial paper $ 1,644 3.3% $ 1,744 $ 1,633 3.2% Bank borrowings 171 3.5 171 150 3.4 - ----------------------------------------------------------------------------------------------------------------- 1992 Corporate(c) Commercial paper $ 329 3.7% $ 605 $ 328 3.6% Bank borrowings - - 25 4 3.8 Real Estate(d) Commercial paper $ 567 3.6% $ 591 $ 578 3.6% Consumer Finance(e) Commercial paper $ 1,708 3.5% $ 2,045 $ 1,815 3.8% Bank borrowings 148 3.8 159 77 4.6 - ----------------------------------------------------------------------------------------------------------------- 1991 Corporate(c) Commercial paper $ 288 4.8% $ 447 $ 153 5.1% Bank borrowings - - 28 6 5.5 Real Estate Commercial paper $ 583 4.9% $ 593 $ 496 5.9% Consumer Finance(e) Commercial paper $ 1,990 4.8% $ 2,105 $ 1,881 6.2% Bank borrowings 40 6.6 123 45 7.5 - -----------------------------------------------------------------------------------------------------------------
(a) Commercial paper borrowings are unsecured promissory notes issued with maturities ranging from one day to 270 days. Bank borrowings are typically overnight loans under uncommitted credit lines made available to the company and certain subsidiaries. (b) Method of computation: daily weighted average based on respective time outstanding and the amount of borrowings. (c) Excludes current maturities of long-term debt of $146 million in 1993, $50 million in 1992, and $48 million in 1991. (d) Excludes current maturities of long-term debt of $1 million in 1993 and $2 million in 1992. (e) Excludes investment certificates of thrift subsidiaries. AMERICAN GENERAL CORPORATION 18 19 - -------------------------------------------------------------------------------- (LOGO) 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, on March 23, 1994. AMERICAN GENERAL CORPORATION By: /s/ Pamela J. Penny - ----------------------------------------------------------------- Pamela J. Penny (Vice President and Controller) 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 indicated on March 23, 1994. /s/ Harold S. Hook - ----------------------------------------------------------------- Harold S. Hook (Chairman of the Board, Chief Executive Officer, and Director - Principal Executive Officer) /s/ Austin P. Young - ----------------------------------------------------------------- Austin P. Young (Senior Vice President and Chief Financial Officer - Principal Financial Officer) /s/ Pamela J. Penny - ----------------------------------------------------------------- Pamela J. Penny (Vice President and Controller - Principal Accounting Officer) J. Evans Attwell* - ----------------------------------------------------------------- J. Evans Attwell (Director) Thomas D. Barrow* - ----------------------------------------------------------------- Thomas D. Barrow (Director) Brady F. Carruth* - ----------------------------------------------------------------- Brady F. Carruth (Director) W. Lipscomb Davis, Jr.* - ----------------------------------------------------------------- W. Lipscomb Davis, Jr. (Director) Robert M. Devlin* - ----------------------------------------------------------------- Robert M. Devlin (Director) Larry D. Horner* - ----------------------------------------------------------------- Larry D. Horner (Director) Richard J.V. Johnson* - ----------------------------------------------------------------- Richard J.V. Johnson (Director) Robert E. Smittcamp* - ----------------------------------------------------------------- Robert E. Smittcamp (Director) James R. Tuerff* - ----------------------------------------------------------------- James R. Tuerff (Director) *By: /s/ Kurt G. Schreiber - ----------------------------------------------------------------- Kurt G. Schreiber (Attorney-in-fact) 1993 FORM 10-K 19 20 INDEX TO EXHIBITS
Filed Herewith(*), Nonapplicable (NA), or Incorporated by Reference from ------------------------------ American General Registration No. Exhibit or Number Exhibit Report - -------------------------------------------------------------------------------------------------------------- 3.1 Restated Articles of Incorporation of American General 4.1 33-33115 Corporation (including Statement of Resolution Establishing Series of Shares of Series A Junior Participating Preferred Stock) 3.2 Amended and Restated Bylaws of American General 3.2* NA Corporation 4 There have not been filed as exhibits to this Form 10-K NA NA certain long-term debt instruments, none of which relates to authorized indebtedness that exceeds 10% of the consolidated assets of the company and its subsidiaries. American General hereby agrees to furnish a copy of any such instrument to the Commission upon request. 10.1 1984 Stock and Incentive Plan for key employees of the 10.5 Form 10-K company and its subsidiaries for 1984 10.2 1984 Stock and Incentive Plan (Amended and Restated 10.2* NA Effective as of February 8, 1994) for key employees of the company and its subsidiaries 10.3 Restoration of Retirement Income Plan for Certain 10.3* NA Employees Participating in the Restated American General Retirement Plan (Restoration of Retirement Income Plan) 10.4 First Amendment to Restoration of Retirement Income 10.4* NA Plan 10.5 Second Amendment to Restoration of Retirement Income 10.5* NA Plan 10.6 American General Supplemental Thrift Plan 10.6* NA 10.7 First Amendment to American General Supplemental Thrift 10.7* NA Plan 10.8 Second Amendment to American General Supplemental 10.8* NA Thrift Plan 10.9 Third Amendment to American General Supplemental Thrift 10.9* NA Plan 10.10 Form of Severance Agreements between the company and 10.10* NA each of the following: Harold S. Hook, James R. Tuerff, Robert M. Devlin, Michael G. Atnip, Jon P. Newton, Nicholas R. Rasmussen, Kurt G. Schreiber, Peter V. Tuters, Robert D. Womack, Austin P. Young, Stephen D. Bickel, Robert S. Cauthen, Jr., James S. D'Agostino, Jr., Peter P. Huff, and Daniel Leitch III.
- -------------------------------------------------------------------------------- (continued on next page) 21
Filed Herewith(*), Nonapplicable (NA), or Incorporated by Reference from ------------------------------ American General Registration No. Exhibit or Number Exhibit Report - -------------------------------------------------------------------------------------------------------------- 10.11 Supplemental Retirement Agreement between the company 10.11* NA and Harold S. Hook 10.12 American General Supplemental Retirement Plan Trust 10.12* NA (relating to Exhibit 10.11 hereto) 10.13 Amendment to Supplemental Retirement Agreement between 10.13* NA the company and Harold S. Hook 10.14 Second Amendment to Supplemental Retirement Agreement 10.14* NA between the company and Harold S. Hook 10.15 Supplemental Retirement Agreement between the company 19.5 Form 10-Q and Michael J. Poulos for Third Quarter 1990 10.16 Deferred Compensation Agreement between the company and 10.16* NA Harold S. Hook 10.17 American General Corporation Retirement Plan for 10.17* NA Directors (as amended and restated) 11 Computation of Earnings Per Share 11* NA 12 Computation of Ratio of Earnings to Fixed Charges 12* NA 13 Portions of American General's 1993 Annual Report to 13* NA Shareholders that are expressly incorporated herein by reference in this Form 10-K. Other sections of the Annual Report furnished for the information of the Commission are not deemed "filed" as part of this Form 10-K. 21 Subsidiaries of American General Corporation 21* NA 23 Consent of Ernst & Young, Independent Auditors 23* NA 24 Powers of attorney for the directors signing this Form 24* NA 10-K
Any Exhibit not included with this Form 10-K will be furnished to any shareholder of record on written request and payment of up to $.25 per page plus postage. Such requests should be directed to American General Corporation, Investor Relations, P.O. Box 3247, Houston, Texas 77253-3247. - -------------------------------------------------------------------------------- EX-3.2 2 EXHIBIT 3.2 FOR AMERICAN GENERAL 10K 1 Exhibit 3.2 AMENDED AND RESTATED BYLAWS (AS AMENDED OCTOBER 28, 1993) OF AMERICAN GENERAL CORPORATION HOUSTON, TEXAS {AMERICAN GENERAL LOGO} 2 AMENDED AND RESTATED BYLAWS OF AMERICAN GENERAL CORPORATION ARTICLE I. CAPITAL STOCK SECTION 1. Certificates for Shares. The certificates for shares of the capital stock of the company shall be in such form as shall be approved by the board of directors. The certificates shall be signed by the chairman of the board or president, and also by the secretary, and may be sealed with the seal of the company or a facsimile thereof. Where any such certificate is countersigned by a transfer agent, or registered by a registrar, either of which is other than the company itself or an employee of the company, the signatures of the chairman of the board or president and of the secretary may be facsimiles. The certificates shall be consecutively numbered and shall be entered on the stock records of the company as they are issued, and each shall exhibit the holder's name and the number of shares. SECTION 2. Transfer of Shares. The shares of stock of the company shall be transferable only on the stock records of the company by the registered holders thereof in person or by their duly authorized attorneys or legal representatives, upon surrender of certificates representing such shares duly endorsed or in proper form for transfer, with appropriate evidence of authority to transfer, and cancellation thereof. SECTION 3. Fixing of Record Date; Closing of Transfer Books. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or for any other proper purpose, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty (50) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. In lieu of fixing a record date, the board of directors may provide that the stock transfer books of the company shall be closed for a stated period not to exceed, in any case, fifty (50) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which the notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided herein, such determination shall apply to any adjournment of the Page 1 of 18 3 meeting except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired. SECTION 4. Registered Shareholders. The company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person or entity, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of Texas. SECTION 5. Lost, Destroyed, or Stolen Stock Certificates. No certificate for shares of stock in the company shall be issued in place of any certificate alleged to have been lost, destroyed, or stolen except on production of evidence satisfactory to the board of directors, or such person or persons as it may designate, of such loss, destruction, or theft, and, if the board of directors so requires, upon the furnishing of an indemnity bond in such amount (but not to exceed twice the then-market value of the shares represented by the certificate) and with such terms and such surety or sureties as the board of directors may, in its discretion, require. SECTION 6. Regulations. The board of directors shall have the power and authority to make all such rules and regulations to the extent permitted by law, the articles of incorporation, and these bylaws, as it may deem expedient concerning the issue, transfer, registration, or replacement of certificates for shares of the capital stock of the company. ARTICLE II. SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be held at such hour as shall be designated by the board of directors either (i) on the last business day of April of each year, or (ii) on such other date, not more than thirteen (13) months after the last preceding annual meeting, as the board of directors shall designate, for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. SECTION 2. Special Meetings. A special meeting of shareholders for any purpose or purposes may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request therefor, stating the purpose or purposes of the meeting, delivered to such officer, signed by the holders of at least ten percent (10%) of the issued and outstanding shares entitled to vote at such meeting. Only such business as shall be stated or indicated in the notice of the meeting shall be transacted at any such special meeting of shareholders. SECTION 3. Place. The annual meeting of shareholders may be held at any place as may be designated in the call of the meeting. Meetings of shareholders shall be held at the principal office of the company unless another place is designated for a meeting in the manner provided herein. Page 2 of 18 4 SECTION 4. Notice. Written or printed notice stating the place, day, and hour of each meeting of shareholders, and in case of a special meeting the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the officer calling the meeting, to each shareholder of record entitled to vote at such meeting. SECTION 5. Quorum. Except as may be otherwise provided by law or the articles of incorporation, no meeting of shareholders shall elect directors, or transact other business of the company, unless there shall be present, in person or by proxy, a quorum, which is defined as the holders of a majority of the issued and outstanding shares of capital stock of the company entitled to vote at the meeting, and the act of a majority of the shares represented at any meeting at which a quorum is present shall be the act of the meeting. The shareholders present at any meeting, though less than a quorum, may adjourn the meeting, and any business may be transacted at the adjourned meeting that could have been transacted at the original meeting. No notice of adjournment, other than the announcement at the meeting, need be given. SECTION 6. Proxies. At any meeting of shareholders, a shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxies shall be filed with the secretary of the company before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. Each proxy shall be revocable unless it is expressly provided therein that the proxy shall be irrevocable or unless it is otherwise made irrevocable by law. SECTION 7. Voting of Shares. Each outstanding share of a class of stock entitled to vote upon a matter submitted to a vote at a meeting of shareholders shall be entitled to one vote on such matter. Votes for directors, and upon demand of any shareholder votes upon any question before a meeting, shall be by ballot. SECTION 8. Presiding Officer and Secretary. The chairman of the board, or in his absence the president, shall preside at each meeting of shareholders, and in the absence of both such officers, a vice chairman of the board shall preside. Should none be present, the meeting shall appoint one of the vice presidents, or in the absence of all vice presidents, one of the shareholders, to preside at the meeting. The records of each meeting shall be kept by the secretary, or in his absence an assistant secretary, or in the absence of both, a person appointed by the chairman of the meeting. SECTION 9. List of Shareholders. A complete list of shareholders entitled to vote at each shareholders' meeting, arranged in alphabetical order, with the address of each and number of shares of each class and series of stock held by each, shall be prepared by the secretary and filed at the registered office of the company, and shall be subject to inspection by any shareholder during usual business hours for a period of ten (10) days prior to such meeting. It shall be produced at such meeting and shall at all times during such meeting be subject to inspection by any shareholder. Page 3 of 18 5 SECTION 10. Inspectors of Election. The chairman of each meeting of shareholders shall appoint a committee to act as inspectors of election. Such committee shall report to the meeting the number of shares of each class and series of stock, and of all classes, represented by proxy and shall prepare a list showing the total number of shares of each class and series of stock, and of all classes, represented either in person or by proxy. The inspectors of election shall oversee the vote of the shareholders for the election of directors and for any other matters that are put to a vote of shareholders at the meeting; receive a ballot evidencing votes cast by the proxy committee; judge the qualifications of shareholders voting; collect, count, and report the results of ballots cast by any shareholders voting in person; and perform such other duties as may be required by the chairman of the meeting or the shareholders. ARTICLE III. BOARD OF DIRECTORS SECTION 1. Number, Term of Office, Nomination, Vacancy and Removal. The business affairs and property of the company shall be managed and controlled by the board of directors, and, subject to the restrictions imposed by law, by the articles of incorporation, or by these bylaws, the board of directors may exercise all of the powers of the company. (a) Number. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of the directors of the company shall be fixed from time to time by the board of directors but shall not be fewer than three (3) nor more than twenty-five (25). Within these limits, the number of directors may be increased or decreased (provided that any decrease does not shorten the term of any incumbent director) from time to time by resolution of the board of directors. Directors must be shareholders, but they need not be residents of the State of Texas. (b) Election and Terms. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect additional directors under specified circumstances, directors shall be elected at the annual meeting of the shareholders. Each director shall serve until the next annual meeting and until his successor shall have been elected and qualified, or until his earlier death, resignation, or removal; provided, however, that the term of any director who is also an officer of the company or of any subsidiary of the company shall simultaneously terminate when that director ceases, for whatever reason, to be an officer of the company or of any subsidiary of the company, unless the board of directors, in its discretion and upon resolution adopted by a majority of the remaining directors then in office, waives the applicability hereof. Page 4 of 18 6 (c) Nominations. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect directors under specified circumstances, nominations of persons for election to the board of directors may be made by the board of directors or a committee appointed by the board of directors or by any shareholder entitled to vote for the election of directors generally. However, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors only if written notice of such shareholder's intent to make such nomination or nominations has been given by notice in writing, either by personal delivery or by first class United States mail, postage prepaid, to the Secretary of the company at the principal office of the company not later than sixty (60) days nor more than ninety (90) days prior to any meeting of the shareholders called for the election of directors; provided, however, that in the event that less than seventy (70) days' notice of the date of the meeting is given to shareholders, such written notice shall be delivered or mailed, as prescribed, not later than the close of business on the tenth (10th) day following the day on which notice of the meeting was mailed to shareholders. Each such notice shall set forth: (i) the name and address of the shareholder proposing to make such nomination or nominations; (ii) a representation of the shareholder as to the class and number of shares of the capital stock of the company which are beneficially owned by the shareholder, and the shareholder's intent to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (iv) the name, age, business address and residence address, business experience or other qualifications of the person or persons to be nominated; (v) the principal occupation or employment of such person or persons; (vi) the class and number of shares of the capital stock of the company which are beneficially owned by such person or persons; (vii) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the board of directors; and (viii) the consent of each nominee to serve as a director of the company if so elected. No shareholder nomination shall be effective unless made in accordance with the procedures set forth herein. The person presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that a shareholder nomination was not made in accordance with the bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (d) Vacancies. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect directors under specified circumstances, any vacancies on the board of directors resulting from death, resignation, Page 5 of 18 7 retirement, disqualification, removal from office or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the board of directors. Any director so elected by the board of directors to fill a vacancy shall hold office for the remainder of the full term of the director whose departure from the board created the vacancy. A directorship to be filled by reason of an increase in the number of directors by action of the board of directors (within the limits set forth in paragraph (a) of Section 1 of this article) may be filled by the board of directors for a term of office continuing only until the next election at an annual meeting or at a special meeting of shareholders called for that purpose; provided, however, that the board of directors shall not fill more than two such directorships during the period between two successive annual meetings of shareholders. (e) Removal. Subject to the rights of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office, with or without cause, only by the affirmative vote of the holders of at least seventy-five percent (75%) of the combined voting power of the then outstanding shares of all classes of stock of the company entitled to vote generally in the election of directors, voting together as a single class. SECTION 2. Annual Meeting. Each newly elected board of directors shall hold its first meeting immediately following the annual meeting of shareholders each year, for the purposes of organization, the election of officers of the company, and the transaction of such other business as may properly come before such meeting, and no notice of such meeting shall be necessary. SECTION 3. Regular Meetings. In addition to the annual meeting of the board of directors, four (4) regular meetings shall be held in each year at the time and place designated by the chairman of the board, for the purpose of transacting any business within the powers of the board. Notice of such regular meetings shall be given as provided herein. SECTION 4. Special Meetings. A special meeting of the board of directors shall be held whenever called by the chief executive officer or by the secretary on the written request of any five (5) of the directors, and at such time and place as may be specified in the notice thereof. Such notice, or any waiver pursuant to Article VII, Section 6 hereof, need not state the purpose or purposes of such meeting. SECTION 5. Notice. The secretary shall give notice to each director of each regular and special meeting in person or by mail or by any form of telecommunication, at least twenty-four (24) hours before the meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting has not been lawfully called or convened. Page 6 of 18 8 SECTION 6. Quorum. A majority of the directors in office shall constitute a quorum for the transaction of business, but if at any meeting of the board of directors there is less than a quorum present, a majority of those present or any director solely present may adjourn the meeting from time to time without further notice. The act of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the board of directors, unless the act of a greater number is required by law, the articles of incorporation, or these bylaws. SECTION 7. Order of Business and Officers at Meetings. At meetings of the board of directors, business shall be transacted in such order as the board may determine from time to time. At all meetings of the board of directors, the chairman of the board shall preside, and in the absence of the chairman of the board the president shall preside, and in the absence of both, a vice chairman shall preside. Should all three be absent, a chairman shall be chosen by the board of directors from among the directors present. The secretary of the company shall act as secretary of all meetings of the board of directors, or in the absence of the secretary an assistant secretary shall so act; or in the absence of both, the presiding officer shall appoint any person to act as secretary of the meeting. SECTION 8. Compensation. Directors shall not receive any stated salary for their service as directors, but by resolution of the board of directors an annual retainer may be paid and a fixed sum and expenses of attendance, if any, may be allowed for attendance at any meeting of the board of directors; provided that nothing contained herein shall be construed to preclude any director from serving the company in any other capacity and receiving compensation therefor. SECTION 9. Presumption of Assent. A director of the company who is present at a meeting of the board of directors at which action on any company matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the company immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 10. Retirement. No director of the company shall stand for reelection as a director following his seventieth birthday with the exception of any person who shall serve, or has served, as chief executive officer of the company at any time, who shall not be prevented by this provision from standing for reelection as a director for five years after retirement from the position of chief executive officer, or until the annual meeting following the attainment of age seventy-five, whichever shall first occur. Any director who is also an officer, other than the chief executive officer, of the company or an officer of any subsidiary of the company shall retire as provided in Section 1 of this article. Page 7 of 18 9 ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS SECTION 1. Executive Committee. The board of directors, acting by resolution adopted by a majority of the full board of directors, may elect from among its members an executive committee of not fewer than three (3) nor more than ten (10) members, which committee shall have and may exercise all of the authority of the board of directors in the business and affairs of the company except where action of the full board of directors is specified by law. The chief executive officer shall be a member of the executive committee and shall be chairman of such committee. The executive committee shall meet at such times and places as may be fixed by the committee, or on the call of the chief executive officer, at such times and places as may be designated in the call of such meetings. The executive committee shall maintain a record of its proceedings and shall report to each regular meeting of the board of directors a summary of the actions taken by such committee since the last regular meeting of the board of directors. The executive committee shall function as the company's nominating committee. In its capacity as nominating committee, it has the power and duty to recommend candidates for election to the board of directors, to the committees of the board, and for the chairmanship of each committee except the executive committee. SECTION 2. Audit Committee. The board of directors, acting by resolution adopted by a majority of the full board of directors, may elect from among its members an audit committee of not fewer than three (3) nor more than ten (10) members, none of whom shall be an officer of the company or of any of its subsidiaries during the time of service on such committee. The chairman of the committee shall be elected by a majority of the full board of directors at the time the committee is elected or at such time as it becomes necessary to elect a new chairman because of the chairman's death or resignation. The audit committee shall meet at such times and places as may be fixed by the committee, or on the call of its chairman, at such times and places as may be designated in the call of such meetings. The committee shall also meet promptly upon the request of the company's principal independent auditors. The audit committee shall maintain a record of its proceedings and shall report to the board of directors a summary of its activities not less frequently than twice each fiscal year. The audit committee shall have the following powers and duties: (a) to recommend to the board of directors each year the engagement of a firm of certified public accountants to act as principal independent auditors for the company and its subsidiaries; (b) to review at regular intervals audit arrangements for the company and its subsidiaries and the reports to be rendered; Page 8 of 18 10 (c) to review in advance the plan and scope of the audit of the company and its subsidiaries to be performed for the following year by the principal independent auditors and the related detailed estimate of fees; (d) to review and approve non-audit services and fees of the company's principal independent auditors, giving appropriate consideration to the possible effect on the auditors' independence of each non-audit service provided; (e) to review periodically with the company's principal independent auditors the accounting principles and policies of the company and such matters relating to the internal auditing systems and procedures and the internal accounting controls of the company and its subsidiaries as the committee or the board of directors may determine to be necessary or desirable; (f) to review periodically the coordination between the company's principal independent auditors and the company's internal audit staff, and to review with the company's principal independent auditors, upon completion of their audit, their findings and recommendations and the responses of the company's management to such findings and recommendations; (g) to review the annual financial statements issued by the company to its security holders; (h) to conduct from time to time, or cause to be conducted, such investigations or inquiries relating to accounting or audit matters as the facts presented to the committee warrant and as the committee may deem necessary or appropriate in the interest of the company and its shareholders; (i) to confer with and direct the officers of the company to the extent necessary to exercise the committee's powers and to carry out its duties; (j) to meet with representatives of any independent auditors of the company and/or its internal audit staff in the absence of management, whenever the committee deems such to be appropriate; and (k) to perform such additional duties as may be assigned to the committee by the board of directors. SECTION 3. Personnel Committee. The board of directors, acting by resolution adopted by a majority of the full board of directors, may elect from among its members a personnel committee of not fewer than three (3) nor more than ten (10) members, none of whom shall be an officer of the company or of any of its subsidiaries during the time of service on this committee. The chairman of the committee shall be elected by a majority of the full board of directors at the time the committee is elected or at such time as it becomes necessary to elect a new chairman because of the chairman's death or resignation. The committee shall meet at such times and places as may be fixed by the committee, or on the call of its chairman, at such times and places as may be designated in the call of such Page 9 of 18 11 meetings. The committee shall maintain a record of its proceedings and shall report to each regular meeting of the board of directors a summary of the actions taken by the committee since the last regular meeting of the board of directors. The personnel committee shall have the following powers and duties: (a) to review the relationship of the contribution of key officers and employees to the company's performance and prospects; (b) to review and approve and recommend to the board of directors for approval or ratification the annual salary of any officer of the company or of a subsidiary of the company whose annual salary is or will be of an amount which will place him or her among the twenty-five most highly salaried officers in the group; (c) to review and approve or ratify the annual salary of any officer or employee of the company or of a subsidiary of the company whose annual salary is or will be of an amount which will place him or her among the second twenty-five most highly salaried officers in the group; (d) to review and approve incentive compensation and other employee benefit programs; (e) to review key personnel issues; and (f) to perform such additional duties as may be assigned to the committee by the board of directors. SECTION 4. Other Committees. In addition to the executive, audit, and personnel committees, the board of directors may, by resolution adopted by a majority of the full board of directors, elect from among its own members such other committees as it shall deem to be appropriate, each of which shall have and may exercise that authority of the board of directors which shall have been delegated to it in the resolution creating such committee, except as may be prohibited by law. SECTION 5. Term of Office and Committee Size. The term of office of each member of any committee shall be the period designated by the board of directors, but shall not be longer than one year and until his successor shall be elected, unless such member shall be removed by the board of directors, as provided in this section, or the committee is dissolved by the board of directors. A member of any committee may be removed during the period between annual meetings by action of the majority of the full board of directors at any regular or special meeting. The membership of any committee elected by the board of directors may be increased or decreased during the period between annual meetings, subject to any limitations of this article, by action of the majority of the full board of directors at any regular or special meeting. Page 10 of 18 12 SECTION 6. Quorum. A majority of the members of any committee shall constitute a quorum for the transaction of business. The act of the majority of the members present at a meeting at which a quorum is present shall be the act of the committee. SECTION 7. Responsibility. The designation of any committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed upon it or him by law. SECTION 8. Vacancies. The board of directors may fill all vacancies in any committee. ARTICLE V. OFFICERS SECTION 1. Titles and Term of Office. The board of directors at its annual meeting shall elect officers of the company as follows: a chairman of the board, a president and a secretary. The board of directors may also elect one or more vice chairmen. The board of directors or the executive committee may elect other officers, including one or more executive vice presidents, senior vice presidents, vice presidents, a general counsel, a controller, a general auditor, and other officers and assistant officers as the board of directors or the executive committee deems necessary. Each officer shall hold office for the term for which he is elected and until his successor shall have been duly elected and qualified, or until his death, resignation, or removal in the manner hereinafter provided. One person may hold more than one office except that the president shall not also hold the office of secretary. The chairman of the board, each vice chairman of the board, if any, and the president shall be directors of the company, but no other officer need be a director. SECTION 2. Removal. Any officer who may be elected only by the board of directors may be removed only by the board of directors. Any officer who may be elected by either the board of directors or the executive committee may be removed by either the board of directors or the executive committee. Removal of any officer may occur whenever in the judgment of the board of directors or the executive committee, as the case may be, the best interests of the company will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election of an officer shall not of itself create contract rights. SECTION 3. Vacancies. A vacancy in the office of any officer may be filled for the unexpired portion of the term by the board of directors. SECTION 4. Chief Executive Officer. The board of directors shall designate either the chairman of the board or the president to be the chief executive officer of the company. All other officers of the company shall be subordinate to the chief executive officer and shall report to him as he may direct. The chief executive officer shall have responsibility for the general management and direction of the business of the company and for the execution of all orders and resolutions of the board of directors. In addition to the powers prescribed in Page 11 of 18 13 these bylaws, he shall have all of the powers usually vested in the chief executive officer of a corporation and such other powers as may be prescribed from time to time by the board of directors. He may delegate any of his powers and duties to any other officer with such limitations as he may deem proper. SECTION 5. Chairman of the Board. The chairman of the board shall preside at all meetings of the shareholders and of the board of directors; shall have authority to execute all legal instruments necessary for the transaction of the company's business; may sign certificates for shares of capital stock of the company; and may be designated as chief executive officer, as provided in these bylaws. He shall be a member of all standing committees of the board of directors except those the membership of which is restricted to non-officer directors, and shall have such other responsibilities and powers as may be prescribed in these bylaws or from time to time by the board of directors. If he is not designated as chief executive officer, the chairman of the board shall have such powers and perform such duties as may be delegated to him by the chief executive officer, and shall be vested with all the powers and authorized to perform all the duties of the chief executive officer in his absence or inability to act. SECTION 6. Vice Chairman of the Board. In the absence of the chairman of the board and the president, a vice chairman of the board shall preside at all meetings of the shareholders and the board of directors; shall have authority to execute all legal instruments necessary for the transaction of the company's business; and shall have such other powers and duties as may be delegated to him by the board of directors or the chief executive officer. SECTION 7. President. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders and of the board of directors; shall have authority to execute all legal instruments necessary for the transaction of the company's business; may sign certificates for shares of capital stock of the company; and may be designated as chief executive officer, as provided in these bylaws. He may delegate such of his powers and duties to other officers with such limitations as he may deem proper. The president shall have such other powers and duties as may be prescribed in these bylaws or from time to time by the board of directors. If he is not designated as chief executive officer, the president shall have such powers and perform such duties as may be delegated to him by the chief executive officer, and shall be vested with all the powers and authorized to perform all the duties of the chief executive officer in his absence or inability to act. SECTION 8. Vice President. Each vice president shall have such powers and duties as may be delegated to him by the board of directors or the chief executive officer, or any authorized officers senior to the vice president, and may exercise the powers of the president during his absence or inability to act. Any action taken by a vice president in the performance of the duties of the president shall be conclusive evidence of the absence or inability to act of the president at the time such action was taken. SECTION 9. Secretary. The secretary shall keep the minutes of all meetings of the board of directors, of the shareholders, and of the executive committee; shall issue all notices; may sign with the chairman of the board, a vice chairman of the board, or the president in the name of the company all legal instruments necessary for the transaction of the company's Page 12 of 18 14 business and affix the seal of the company thereto; shall sign with the chairman of the board or president all certificates for shares of the capital stock of the company; and shall have such other powers and duties as may be prescribed by the board of directors or the chief executive officer. SECTION 10. Treasurer. The treasurer shall have responsibility for the safekeeping and custody of all the funds and securities of the company; shall establish and execute programs for the provision of the capital required by the company, including negotiating the procurement of capital and maintaining the required financial arrangements; shall establish and maintain adequate sources for the company's short-term borrowings; shall establish and maintain liaison with investment bankers and financial analysts; shall establish and maintain banking arrangements; and shall have such other powers and duties as may be prescribed by the board of directors or the chief executive officer. SECTION 11. Powers and Duties of Assistant Secretaries. Each assistant secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the secretary, and may exercise the powers of the secretary during that officer's absence or inability to act. Any action taken by an assistant secretary in the performance of the duties of the secretary shall be conclusive evidence of the absence or inability to act of the secretary at the time such action was taken. SECTION 12. Powers and Duties of Assistant Treasurers. Each assistant treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the treasurer, and may exercise the powers of the treasurer during that officer's absence or inability to act. Any action taken by an assistant treasurer in the performance of the duties of the treasurer shall be conclusive evidence of the absence or inability to act of the treasurer at the time such action was taken. ARTICLE VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS SECTION 1. Actions. The company shall indemnify any person who was or is a named defendant or respondent or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative, or investigative (including any action by or in the right of the company), or any appeal of such action, suit or proceeding and any inquiry or investigation that could lead to such an action, suit or proceeding, by reason of the fact that he is or was a director, officer or employee of the company, or is or was serving at the request of the company as a director, officer, partner, venturer, proprietor, trustee, employee, or similar functionary of another foreign or domestic corporation or non-profit corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise (any such person acting in any such capacity being hereinafter referred to as "potential indemnitee"), against judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement, and reasonable expenses (including court costs and attorneys' fees) actually incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he Page 13 of 18 15 reasonably believed, (i) in the case of conduct in his official capacity as a director of the company, to be in the best interests of the company and (ii) in all other cases, to be not opposed to the best interests of the company; and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful; provided, however, that in connection with any action, suit or proceeding in which the person shall have been adjudged to be liable to the company or liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the person's official capacity as a director or officer, (i) indemnification shall be limited to reasonable expenses (including court costs or attorneys' fees) actually incurred in connection with such proceeding, and (ii) indemnification shall be prohibited, if the person is found liable for willful or intentional misconduct in the performance of his duty to the company. The termination of any action, suit or proceeding by judgment, order, settlement, or conviction, or on a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in the best interests of the company; and, with respect to any criminal action or proceeding, shall not create a presumption that the person had reasonable cause to believe that his conduct was unlawful. SECTION 2. Success on Merits or Otherwise. Where a potential indemnitee has been wholly successful, on the merits or otherwise, in defense of any such action, suit or proceeding, he shall be indemnified against reasonable expenses (including court costs and attorneys' fees) actually incurred by him in connection therewith. SECTION 3. Determination that Indemnification is Proper. Any indemnification under Section 1 of this article (unless otherwise ordered by a court of competent jurisdiction) shall be made by the company only as authorized in a specific case upon a determination that the applicable standard of conduct has been met. Such determination shall be made (i) by the board of directors by a majority vote of a quorum consisting of directors who at the time of the vote have not been named as defendants or respondents in such action, suit or proceeding, or (ii) if such a quorum cannot be obtained, by a majority vote of a committee of the board of directors, designated to act in the matter by a majority vote of all directors, consisting solely of two or more directors who at the time of the vote are not named defendants or respondents in such action, suit or proceeding, or (iii) by special legal counsel selected by the board of directors (or a committee thereof) by vote in the manner set forth in subparagraphs (i) and (ii) of this Section 3, or if such a quorum cannot be obtained and such a committee cannot be established, by a majority vote of all directors, or (iv) by the shareholders in a vote that excludes the shares held by any director who is named as a defendant or respondent in such action, suit or proceeding. SECTION 4. Expenses Prior to Final Disposition. Reasonable expenses incurred by a director, officer, or employee of the company or other person entitled to indemnity hereunder, who was, is or is threatened to be made a named defendant or respondent in any such action, suit or proceeding described in Section 1 shall be paid by the company in advance of the final disposition thereof upon receipt of a written affirmation by the director, officer, employee or other person of his good faith belief that he has met the standard of conduct necessary for indemnification under this article and a written undertaking by or on behalf of the director, officer, employee or other person to repay such amount if it is Page 14 of 18 16 ultimately determined that the person has not met such necessary standard of conduct or that indemnification is prohibited by Section 1 of this article. Determinations with respect to payments under this Section 4 shall be made in the manner specified by Section 3 for determining that indemnification is permissible, except as otherwise provided by law. SECTION 5. Nonexclusive Rights-Continuance Beyond Tenure. The indemnification provided by this article shall not be deemed (i) to be exclusive of any other rights consistent with law to which the person indemnified may be entitled under the articles of incorporation of the company, bylaws, any general or specific action of the board of directors, agreement, authorization of shareholders, or otherwise, or as may be permitted or required by law, both as to action in his official capacity as a director and as to action in another capacity while holding such office, or (ii) to be a limitation upon the power of the company to indemnify and to advance expenses, consistent with law. The indemnification provided by this article shall continue as to a person who has ceased to be a director, officer, or employee of the company or other person entitled to indemnity hereunder or to serve in such other capacity in which he was entitled to indemnification hereunder, and shall inure to the benefit of his heirs and legal representatives. SECTION 6. Insurance Authorized. Subject to any restrictions now or hereafter established by applicable law, the company shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, or employee of the company or who is or was serving at the request of the company as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation or non-profit corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such a person, whether or not the company would have the power to indemnify him against that liability under the provisions of this article or the Texas Business Corporation Act. SECTION 7. Definitions. For purposes of this article, references to "the company" include any domestic or foreign predecessor entity of the company in a merger, consolidation, or other transaction in which the liabilities of the predecessor are transferred to the company by operation of law and in any other transaction in which the company assumes the liabilities of the predecessor but does not specifically exclude liabilities that are the subject matter of this article. For purposes of this article, references to "serving at the request of the company" shall include any service as a director, officer or employee of the company which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the company" as referred to in this article. SECTION 8. Expenses as Witness. Notwithstanding any other provision of this article, the company may pay or reimburse expenses incurred by any director, officer, or employee of the company or any other potential indemnitee hereunder in connection with his appearance as a witness or other participation in any action, suit or a proceeding described Page 15 of 18 17 in Section 1 at a time when he is not a named defendant or respondent in such action, suit or proceeding. SECTION 9. Notice to Shareholders. Any indemnification of or advance of expenses to a director in accordance with this article shall be reported in writing to the shareholders of the company with or before the notice or waiver of notice of the next shareholders' meeting or with or before the next submission to shareholders of a consent to action without a meeting and, in any case, within the twelve-month period immediately following the date of the indemnification or advance. ARTICLE VII. MISCELLANEOUS PROVISIONS SECTION 1. Registered Office. Unless the board of directors otherwise determines, the registered office of the company, required by the Texas Business Corporation Act to be maintained in the State of Texas, shall be the principal place of business of the company, but such registered office may be changed from time to time by the board of directors in the manner provided by law and need not be identical to the principal place of business of the company. SECTION 2. Books and Records. Correct and complete books and records of account of the company and the minutes of the proceedings of its shareholders, board of directors, and each committee of its board of directors shall be kept at the registered office of the company. Records of the original issuance of shares issued by the company and of each transfer of those shares that have been presented for registration of transfer shall be kept at the registered office of the company or at the office of its principal transfer agent or registrar. A record of the past and present shareholders of the company, giving the names and addresses of all such shareholders and the number of shares of each class and series of stock held by each, shall also be kept at the registered office of the company or at the office of its principal transfer agent or registrar. Any books, records, and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. Any person who shall have been a holder of record of shares for at least six (6) months immediately preceding his demand, or who shall be the holder of record of at least five percent (5%) of all the outstanding shares of the company, upon written demand stating the purpose thereof, or any director of the company shall have the right to examine, in person or by agent, accountant, or attorney, at any reasonable time or times, for any proper purpose, its relevant books and records of account, minutes, and share transfer records, and to make extracts therefrom. SECTION 3. Action Without Meeting and Telephone Meetings. Any action permitted, or required by law, these bylaws, or the articles of incorporation of the company, to be taken at a meeting of the board of directors or of any committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the board of directors or of such committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote at a meeting. Page 16 of 18 18 Subject to the notice requirements of these bylaws, members of the board of directors or of any committee created by the board of directors may participate in and hold a meeting of such board or committee by means of conference telephone or similar communications equipment, including teleconferencing via a satellite communications system, provided all persons participating in the meeting can hear each other. SECTION 4. Fiscal Year. The fiscal year of the company shall be the calendar year. SECTION 5. Seal. The seal of the company shall be such as from time to time may be approved by the board of directors. SECTION 6. Notice and Waiver of Notice. Whenever any notice is required to be given under the provisions of these bylaws, said notice shall be deemed to be sufficient if given by depositing the same in a post office box in a sealed postpaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the records of the company, and such notice shall be deemed to have been given on the day of such mailing. A waiver of notice, signed by the person or persons entitled to said notice, whether before or after the date and time stated therein, shall be deemed equivalent thereto. SECTION 7. Resignations. Any director or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the chairman of the board, the president, or the secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. SECTION 8. Securities of Other Corporations. The board of directors shall by resolution designate the officers of the company who shall have power and authority to transfer, endorse for transfer, vote, or consent to or take any other action with respect to any securities of another issuer which may be held or owned by the company and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities. SECTION 9. Investments and Loans. Investments and loans of the company shall be made pursuant and subject to the provisions of the law. SECTION 10. Execution of Contracts and Other Instruments. All contractual or obligatory undertakings, including but not limited to deeds, conveyances, transfers, and releases, shall be signed by, (a) the chairman of the board, a vice chairman of the board, the president, or a vice president, or (b) any attorney-in-fact or agent of the company who has been, or at any time in the future may be, appointed by the chairman of the board, a vice chairman of the board, the president, or a vice president, and by the company secretary or an assistant secretary. When necessary, such instruments may have the corporate seal affixed and may be attested by the secretary or an assistant secretary. Checks may be signed by the chairman of the board, a vice chairman of the board, the president, a vice president, the secretary, the treasurer, or any other person who may be authorized by the board of directors or the chief executive officer. Page 17 of 18 19 SECTION 11. Rules and Regulations. Rules and regulations for the conduct of the company's business not in conflict with these bylaws may be adopted by the executive committee by resolution duly recorded in the minutes of the committee; provided, however, that such action may be modified or abrogated by the board of directors. ARTICLE VIII. AMENDMENTS Unless otherwise provided in the Articles of Incorporation, the power to alter, amend, or repeal these bylaws or adopt new bylaws shall be vested in the full board of directors subject, however, to repeal or change by action of the affirmative vote of the holders of at least seventy-five percent (75%) of the then outstanding shares of all classes of stock of the company entitled to vote generally in election of directors, voting together as a single class. CERTIFICATION I HEREBY CERTIFY that the foregoing is a true and full copy of the bylaws of AMERICAN GENERAL CORPORATION as the same are now in effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of AMERICAN GENERAL CORPORATION this ____ day of __________, 19__. _________________________ Secretary Page 18 of 18 EX-10.2 3 EXHIBIT 10.2 FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.2 AMERICAN GENERAL CORPORATION 1984 STOCK AND INCENTIVE PLAN (AMENDED AND RESTATED EFFECTIVE AS OF FEBRUARY 8, 1994) 1. PURPOSE The purpose of the American General Corporation 1984 Stock and Incentive Plan (Amended and Restated as of February 8, 1994) (the "Plan") is to provide a means through which American General Corporation, a Texas corporation, and its subsidiaries (collectively, the "Company") may attract able persons to enter the employ of the Company and to provide a means whereby those key employees upon whom the responsibilities of the successful administration and management of the Company rest, and whose present and potential contributions to the welfare of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company and their desire to remain in its employ. A further purpose of the Plan is to provide such key employees with additional incentive and reward opportunities designed to enhance the profitable growth of the Company. So that the maximum incentive can be provided each employee, the Plan provides for granting Incentive Stock Options, Non-Qualified Options, Restricted Stock Awards, Performance Awards, and Incentive Awards, or any combination of the foregoing, as is best suited to the circumstances of the particular employee. 2. DEFINITIONS The following definitions shall be applicable throughout the Plan: (a) "Award" means, individually or collectively, any Option, Restricted Stock Award, Performance Award or Incentive Award. (b) "Board" means the Board of Directors of American General Corporation. (c) "Code" means the Internal Revenue Code of 1986. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section. (d) "Committee" means not less than three members of the Board who are selected by the Board as provided in Section 4(a). (e) "Common Stock" means the common stock of American General Corporation. (f) "Company" means, collectively, American General Corporation and its subsidiaries. (g) "Fair Market Value" means, as of any specified date, the average of the highest and lowest quoted selling prices of the Common Stock as reported on the Composite Tape for issues listed on the New York Stock Exchange on the specified date, or, if no sales were reported on the Composite Tape on such specified date, the average of the highest and lowest quoted selling prices of the Common Stock on the nearest dates before and after such specified date on which sales of the Common Stock were so reported. (h) "Holder" means an employee of the Company who has been granted an Option, a Restricted Stock Award, a Performance Award or an Incentive Award. (i) "Incentive Award" means an Award granted under Section 10 of the Plan. (j) "Incentive Stock Option" means an Option within the meaning of section 422(b) of the Code. (k) "Option" means an Award under Section 7 of the Plan and includes both Non-Qualified Options and Incentive Stock Options to purchase Common Stock. 2 (l) "Performance Award" means an Award granted under Section 9 of the Plan. (m) "Personal Representative" means the person who upon the death, disability or incompetency of a Holder shall have acquired, by will or by the laws of descent and distribution or by other legal proceedings, the right to exercise an Option or the right to any Restricted Stock Award, Performance Award or Incentive Award theretofore granted or made to such Holder. (n) "Plan" means the American General Corporation 1984 Stock and Incentive Plan (Amended and Restated Effective as of February 8, 1994). (o) "Restricted Stock Award" means an Award granted under Section 8 of the Plan. 3. EFFECTIVE DATE AND DURATION OF THE PLAN The amended and restated Plan shall become effective on February 8, 1994, following adoption by the Board and approval by the shareholders of American General Corporation at the annual meeting of shareholders to be held on April 29, 1993, or any adjournment thereof. No further Awards may be granted under the Plan after ten years from the date the amended and restated Plan becomes effective. The Plan shall remain in effect until all Options granted under the Plan have been exercised or expired by reason of lapse of time, all restrictions imposed upon Restricted Stock Awards have been eliminated and all Performance Awards and Incentive Awards have been satisfied. 4. ADMINISTRATION (a) Composition of Committee. The Committee shall be selected and appointed by the Board to administer the Plan. The members of the Committee shall not include any employee of the Company or any individual who is or was within the 12-month period immediately preceding the date he or she became a member of the Committee eligible for selection to receive any stock option, stock appreciation right, stock option surrender right or other stock allocation under the Plan or under any other plan of the Company. A majority of the Committee shall constitute a quorum. The Committee shall act by majority action at a meeting, except that action permitted to be taken at a meeting may be taken without a meeting if written consent thereto is given by all members of the Committee. (b) Powers. Subject to the express provisions of the Plan, the Committee shall have authority, in its discretion, to determine which employees of the Company shall receive an Award, the time or times when such Award shall be made, whether an Incentive Stock Option or Non-Qualified Option shall be granted, the number of shares to be subject to each Option and Restricted Stock Award, and the value of each Performance Award and Incentive Award. In making such determinations the Committee shall take into account the nature of the services rendered by the respective employees, their present and potential contribution to the Company's success and such other factors as the Committee shall deem relevant. (c) Additional Powers. The Committee shall have such additional powers as are delegated to it by the other provisions of the Plan. Subject to the express provisions of the Plan, this shall include the power to construe the Plan and the respective agreements executed thereunder, to prescribe rules and regulations relating to the Plan, and to determine the terms, restrictions, and provisions of the agreement to each Award, including such terms, restrictions and provisions as shall be requisite in the judgment of the Committee to cause designated Options to qualify as Incentive Stock Options, to ensure that Awards continue to qualify under Rule 16b-3 under the Securities Exchange Act of 1934, and to make all other determinations necessary or advisable for administering the Plan. Without limiting the generality of the foregoing, agreements providing for Awards under the Plan may contain such provisions covering a change of control of the Company, as defined by the Committee in its sole discretion, as the Committee may approve, not inconsistent with the terms of this Plan, including without limitation provisions for the acceleration of, vesting of, or the payment of cash in lieu of, any Award. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in 3 any agreement relating to an Award in the manner and to the extent it shall deem expedient to carry it into effect. The Committee may delegate to other persons the responsibility of performing ministerial acts in furtherance of the Plan's purposes, but only the Committee may act on any aspect of the Plan affecting (i) an officer or director of the Company who is an employee of the Company or (ii) an employee to whom the Committee delegates authority with respect to the Plan. The determinations of the Committee on the matters referred to in this Section 4 shall be conclusive. 5. GRANT OF OPTIONS, RESTRICTED STOCK AWARDS, PERFORMANCE AWARDS, AND INCENTIVE AWARDS; SHARES SUBJECT TO THE PLAN (a) Stock Grant Limit. The Committee may from time to time grant Awards to one or more employees determined by it to be eligible for participation in the Plan in accordance with the provisions of Section 6. Subject to Section 11, the aggregate number of shares of Common Stock that may be issued under the Plan shall not exceed the number of shares originally authorized by shareholders in 1984, 9,000,000 (formerly 4,500,000 prior to the 2-for-1 stock split effected March 1, 1993), less the aggregate number of shares issued or issuable under the Plan prior to its amendment and restatement as of February 8, 1994. In addition to the foregoing limit on the aggregate number of shares that may be issued under all Awards, the aggregate number of Restricted Stock Awards that may be granted during any calendar year shall not exceed one-tenth of one percent (0.1%) of the number of shares of Common Stock outstanding as of December 31 of the prior year. Shares shall be deemed to have been issued under the Plan only to the extent actually issued and delivered pursuant to an Award. To the extent that an Award lapses or the rights of its Holder terminate or the Award is paid in cash, any shares of Common Stock subject to such Award shall again be available to the grant of an Award. (b) Stock Offered. The stock to be offered pursuant to the grant of an Award may be authorized but unissued Common Stock or Common Stock previously issued and outstanding and reacquired by the Company. 6. ELIGIBILITY Awards may be granted only to persons who, at the time of grant, are key employees of the Company. Awards may not be granted to (i) any director who is not an employee of the Company or (ii) any person who immediately after such grant is the owner, directly or indirectly, of more than 10% of the total combined voting power of all classes of stock of the Company. An Award may be granted on more than one occasion to the same person, and such Award may include an Incentive Stock Option, Non-Qualified Option, Restricted Stock Award, Performance Award, Incentive Award or any combination thereof. 7. STOCK OPTIONS (a) Option Period. The term of each Option shall be as specified by the Committee at the date of grant but shall not exceed ten years. (b) Limitations on Exercise of Option. An Option shall be exercisable in whole or in such installments and at such times, commencing not earlier than six months from the date of grant, as determined by the Committee. (c) Stock Option Agreement. Each Option shall be evidenced by an Option agreement in such form and containing such provisions not inconsistent with the provisions of the Plan as the committee from time to time shall approve, including, without limitation, provisions to qualify an Incentive Stock Option under section 422 of the Code. 4 (d) Option Price and Payment. The price at which a share of Common Stock may be purchased upon exercise of an Option shall be determined by the Committee but, subject to adjustment as provided in Section 11, shall not be less than the Fair Market Value of a share of Common Stock at the date such Option is granted. The Option or portion thereof may be exercised by delivery of an irrevocable notice of exercise to the Company. The purchase price of the Option or portion thereof shall be paid in full in the manner prescribed by the Committee. (e) Restrictions on Transfer. An Option shall not be transferable otherwise than by will or the laws of descent and distribution and may be exercisable during the lifetime of the Holder only by such Holder. (f) Shareholder Rights and Privileges. The Holder shall be entitled to all the privileges and rights of a shareholder only with respect to such shares of Common Stock as have been purchased under the Option and for which certificates of stock have been registered in the Holder's name. (g) Individual Dollar Limitations. In the case of Incentive Stock Options, the value of shares of stock for which such options are exercisable for the first time in any one calendar year cannot exceed $100,000 based on the Fair Market Value of the stock at the date of grant according to section 422(d)(1) of the Code (or such other individual limit as may be in effect under the Code on the date of grant). (h) Surrender of Options. The Committee (concurrently with the grant of an Option or subsequent to such grant) may, in its sole discretion, grant to any Option Holder the right, upon written request, to surrender any exercisable Option or portion thereof in exchange for cash, whole shares of Common Stock or a combination thereof, as determined by the Committee, with a value equal to the excess of the Fair Market Value, as of the date of such request, of one share of Common Stock over the Option price for such share multiplied by the number of shares covered by the Option or portion thereof to be surrendered. In the case of any such surrender right which is granted in connection with an Incentive Stock Option, such right shall be exercisable only when the Fair Market Value of the Common Stock exceeds the price specified therefor in the Option or portion thereof to be surrendered. In the event of the exercise of any surrender right granted hereunder, the number of shares reserved for issuance under the Plan shall be reduced only to the extent that shares of Common Stock are actually issued in connection with the exercise of such surrender right. Additional terms and conditions governing any such surrender rights may from time to time be prescribed by the Committee in its sole discretion. 8. RESTRICTED STOCK AWARDS (a) Restriction Period to be Established by the Committee. At the time a Restricted Stock Award is made, the Committee shall establish a period of time (the "Restriction Period") applicable to such Award. Each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee. The Restriction Period applicable to a particular Restricted Stock Award shall not be changed except as permitted by Section 8(b). (b) Other Terms and Conditions. Common Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of the Holder of such Restricted Stock Award. The Holder shall have the right to receive dividends during the Restriction Period, to vote Common Stock subject thereto and to enjoy all other shareholder rights, except that (i) the Holder shall not be entitled to delivery of the stock certificate until the Restriction Period shall have expired, (ii) the Company shall retain custody of the stock during the Restriction Period, (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock during the Restriction Period and (iv) a breach of the terms and conditions established by the Committee pursuant to the Restricted Stock Award, shall cause a forfeiture of the Restricted Stock Award. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms, conditions or restrictions relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the termination of employment (by retirement, disability, death or otherwise) of a Holder prior to expiration of the Restriction Period. 5 (c) Payment for Restricted Stock. A Holder shall not be required to make any payment for Common Stock received pursuant to a Restricted Stock Award, except to the extent otherwise required by law or the Committee. 9. PERFORMANCE AWARDS (a) Performance Period. The Committee shall establish, with respect to and at the time of each Performance Award, a performance period over which the performance of the Holder shall be measured. (b) Performance Awards. Each Performance Award shall have a maximum value established by the Committee at the time of such Award. (c) Performance Measures. A Performance Award shall be awarded to an employee contingent upon future performance of the Company or any subsidiary, division or department thereof by or in which he is employed during the performance period. The Committee shall establish the performance measures applicable to such performance prior to the beginning of the performance period but subject to such later revisions as the Committee shall deem appropriate to reflect significant, unforeseen events or changes. (d) Awards Criteria. In determining the value of Performance Awards, the Committee shall take into account an employee's responsibility level, performance, potential, other Awards and such other considerations as it deems appropriate. (e) Payment. Following the end of the performance period, the Holder of a Performance Award shall be entitled to receive payment of an amount, not exceeding the maximum value of the Performance Award, based on the achievement of the performance measures for such performance period, as determined by the Committee. Payment of a Performance Award may be made in cash, Common Stock or a combination thereof, as determined by the Committee. Payment shall be made in a lump sum or in installments as prescribed by the Committee. Any payment to be made in Common Stock shall be based on the Fair Market Value of the Common Stock on the payment date. (f) Termination of Employment. A Performance Award shall terminate if the Holder does not remain continuously in the employ of the Company at all times during the applicable performance period, except as may be determined by the Committee. 10. INCENTIVE AWARDS (a) Incentive Awards. Incentive Awards are rights to receive shares of Common Stock (or the Fair Market Value thereof), or rights to receive an amount equal to any appreciation or increase in the Fair Market Value of Common Stock over a specified period of time, which vest over a period of time as established by the Committee, without payment of any amounts by the Holder thereof or satisfaction of any performance criteria or objectives. Each Incentive Award shall have a maximum value established by the Committee at the time of such Award. (b) Award Period. The Committee shall establish, with respect to and at the time of each Incentive Award, a period over which the Award shall vest with respect to the Holder. (c) Awards Criteria. In determining the value of Incentive Awards, the Committee shall take into account an employee's responsibility level, performance, potential, other Awards and such other considerations as it deems appropriate. 6 (d) Payment. Following the end of the vesting period for an Incentive Award, the Holder of an Incentive Award shall be entitled to receive payment of an amount, not exceeding the maximum value of the Incentive Award, based on the then vested value of the Award. Payment of an Incentive Award may be made in cash, Common Stock or a combination thereof as determined by the Committee. Payment shall be made in a lump sum or in installments as prescribed by the Committee. Any payment to be made in Common Stock shall be based on the Fair Market Value of the Common Stock on the payment date. Cash dividend equivalents may be paid during or after the vesting period with respect to an Incentive Award, as determined by the Committee. (e) Termination of Employment. An Incentive Award shall terminate if the Holder does not remain continuously in the employ of the Company at all times during the applicable vesting period, except as may be otherwise determined by the Committee. 11. CHANGE IN CAPITAL STRUCTURE Options, Restricted Stock Awards, Performance Awards, Incentive Awards and any agreements evidencing such Awards shall be subject to adjustment by the Committee at its discretion as to the number and price of shares of Common Stock or other consideration subject to such Awards in the event of changes in the outstanding Common Stock by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of the grant of any such Option or Awards. In the event of any such change in the outstanding Common Stock, the aggregate number of shares available under the Plan may be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment to either (i) the number or price of shares of Common Stock subject to Incentive Stock Options or (ii) the aggregate number of shares which may be issued as Incentive Stock Options shall be permitted hereunder to the extent that such adjustment would cause an Incentive Stock Option to fail to constitute an Incentive Stock Option within the meaning of section 422 of the Code. 12. AMENDMENT OF THE PLAN The Board may amend the Plan at any time; provided, however, that it may not, without approval of the shareholders, amend the Plan: (a) to increase the maximum number of shares which may be issued on exercise or surrender of Options or pursuant to Restricted Stock Awards, Performance Awards or Incentive Awards, except as provided in Section 11; (b) to change the minimum Option price; (c) to extend the maximum Option term; (d) to change the class of employees eligible to receive Awards; (e) to extend the maximum period during which Awards may be granted under the Plan; or (f) to materially increase the benefits accruing to employees under the Plan. 7 13. EFFECT OF THE PLAN (a) No Right to an Award. Neither the adoption of the Plan nor any action of the Board or of the Committee shall be deemed to give an employee any right to be granted an Option to purchase Common Stock, a right to a Restricted Stock Award or a right to a Performance Award or Incentive Award or any other rights hereunder except as may be evidenced by an Award or by an Option agreement duly executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein. The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of funds or assets to assure the payment of any Award. (b) No Employment Rights Conferred. Nothing contained in the Plan shall (i) confer upon any employee any right with respect to continuation of employment with the Company or (ii) interfere in any way with the right of the Company to terminate his or her employment at any time. (c) Other Laws; Withholding. The Company shall not be obligated to issue any shares of Common Stock until there has been compliance with such laws and regulations as the Company may deem applicable. No fractional shares of Common Stock shall be delivered. The Company shall have the right to deduct in connection with all Awards any taxes required by law to be withheld and to require any payments required to enable it to satisfy its withholding obligations. EX-10.3 4 EX-10.3 FOR AMERICAN GENERAL 10-K 1 EXHIBIT 10.3 RESTORATION OF RETIREMENT INCOME PLAN FOR CERTAIN EMPLOYEES PARTICIPATING IN THE RESTATED AMERICAN GENERAL RETIREMENT PLAN The RESTORATION OF RETIREMENT INCOME PLAN FOR CERTAIN EMPLOYEES PARTICIPATING IN THE RESTATED AMERICAN GENERAL RETIREMENT PLAN (hereinafter referred to as the "Restoration Plan") is hereby restated effective as of August 1, 1988 by AMERICAN GENERAL CORPORATION and its subsidiaries (hereinafter referred to as the "EMPLOYER," jointly and severally). The Restoration Plan has been established to provide for the payment of certain pension and pension-related benefits to certain employees who are participants in the AMERICAN GENERAL RETIREMENT PLAN (hereinafter referred to as the "Basic Plan"). The Employer intends and desires to recognize the value to the Employer of the past and present services of employees covered by the Restoration Plan and to encourage and assure their continued service to the Employer by making more adequate provision for their future retirement security. All terms used in this Restoration Plan shall have the meanings assigned to them under the provisions of the Basic Plan unless otherwise qualified by the context. 1. Incorporation of the Basic Plan. The Basic Plan, with any amendments thereto, shall be attached hereto as Exhibit I and is hereby incorporated by reference into and shall form a part of this Restoration Plan as fully as if set forth herein verbatim. Any amendment made to the Basic Plan by the Employer shall also be incorporated by reference into and form a part of this Restoration Plan, effective as of the effective date of such amendment. The Basic Plan, whenever referred to in 1 2 this Restoration Plan, shall mean the Basic Plan, as amended, as it exists as of the date any determination is made of benefits payable under this Restoration Plan. 2. Administration. This Restoration Plan shall be administered by the administrative committee (hereinafter referred to as the "Committee") under the Basic Plan which shall administer it in a manner consistent with the administration of the Basic Plan, as from time to time amended and in effect, except that this Restoration Plan shall be administered as an unfunded plan that is not intended to meet the qualification requirements of section 401 of the Internal Revenue Code of 1986, as amended (the "Code"). The Committee shall have full power and authority to interpret, construe and administer this Restoration Plan. No member of the Committee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Restoration Plan unless attributable to his own willful misconduct or lack of good faith. Members of the Committee shall not participate in any action or determination regarding their own benefits hereunder. 3. Eligibility. Employees who are participating in the Basic Plan and whose pension or pension-related benefits under the Basic Plan are limited pursuant to (i) section 415 of the Code, and/or (ii) section 401(a)(17) of the Code shall be eligible for benefits under this Restoration Plan. 2 3 4. Amount of Benefit. The benefit payable to an eligible employee or his beneficiary under this Restoration Plan shall be the Actuarial Equivalent of the excess, if any, of (a) over (b): (a) the benefit that would have been payable to such employee or on his behalf under the Basic Plan if such benefit were determined without regard to the maximum amount of benefit limitations of section 415 of the Code, without regard to the considered compensation limitation of section 401(a)(17) of the Code and as if the definition of Compensation under the Basic Plan as in effect on March 21, 1985 were applicable for the period January 1, 1985 through March 20, 1985; (b) the benefit which is in fact payable to such employee or on his behalf under the Basic Plan, as in effect from time to time. 5. Payment of Benefits. The benefit payable under this Restoration Plan on account of an eligible employee's death shall be paid to the same beneficiary or beneficiaries and in the same form and at the same time or times as the limited benefits are payable to the employee's beneficiary under the Basic Plan. The benefit payable under this Restoration Plan for any reason other than on account of an eligible employee's death shall be payable in the form of a benefit for the life of the employee, beginning at his age sixty-five or, 3 4 if later, his termination of employment with the Employer. Notwithstanding the foregoing, however, the Committee may, in its sole discretion, direct that the benefit payable under this Restoration Plan shall be paid in the same form as, and coincident with, the payment of the limited benefit payments made to the eligible employee or on his behalf to his beneficiary or beneficiaries under the Basic Plan. Notwithstanding the preceding paragraph, during the period May 22, 1990 through November 21, 1991 the benefit payable under this Restoration Plan for any reason shall be payable to the eligible employee (or in the event of the employee's death, to the employee's Eligible Surviving Spouse) in one lump sum payment within sixty days following termination of employment, with the actuarially-equivalent value thereof determined based upon the actuarial factors then used under the Basic Plan for determining lump sum payments. Notwithstanding the foregoing sentence, in the event of termination of the Basic Plan on or after May 22, 1990 and before November 22, 1991 and within twenty-four months following a Change of Control Date, each eligible employee employed by the Employer on such Change of Control Date shall have his benefit under this Restoration Plan paid as provided above as if he terminated employment for a reason other than death on the date of termination of the Basic Plan. Notwithstanding Section 7 and any other provisions of the Restoration Plan to the contrary, the provisions of the preceding sentence may not be amended or changed to reduce or eliminate any benefit right within eighteen months from May 22, 1990; provided, however, that if one or more Changes of Control occur with respect to an Employer or Employers within such 4 5 eighteen-month period, the period shall be extended to the end of twenty-four months following the respective Change of Control Dates of such Employers. 6. Employee's Rights. Except as otherwise specifically provided, an employee's rights under this Restoration Plan, including his rights to vested benefits, shall be the same as his rights under the Basic Plan. Benefits payable under this Restoration Plan shall be a general, unsecured obligation of the Employer to be paid by the Employer from its own funds, and such payments shall not (i) impose any obligation upon the Trust Fund under said Basic Plan; (ii) be paid from the Trust Fund under said Basic Plan; or (iii) have any effect whatsoever upon the Basic Plan or the payment of benefits from the Trust Fund under said Basic Plan. No employee or his beneficiary or beneficiaries shall have any title to or beneficial ownership in any assets which the Employer may earmark to pay benefits hereunder. 7. Amendment and Discontinuance. This Restoration Plan may be amended from time to time, or terminated and discontinued at any time, in each case at the discretion of the Board of Directors of American General Corporation. Notwithstanding the foregoing, no amendment shall be made, nor shall this Restoration Plan be terminated in a manner which would reduce the benefits or rights to benefits of any employee accrued under the Restoration Plan (determined on the basis of each employee's presumed termination of employment as of the date of such amendment or 5 6 termination) prior to the later of the adoption or the effective date of such amendment or termination. 8. Restrictions on Assignment. The interest of an employee or his beneficiary or beneficiaries may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishments, attachment, or other legal or equitable process nor shall they be an asset in bankruptcy. 9. Nature of Agreement. This Restoration Plan is intended to constitute an unfunded "excess benefit plan" within the meaning of sections 3(36) and 4(b)(5) of the Employee Retirement Income Security Act of 1974, as amended, with respect to a part of the Restoration Plan and an unfunded "deferred compensation plan" for a select group of management or highly-compensated employees within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, with respect to the remainder of the Restoration Plan. The adoption of this Restoration Plan and any setting aside of amounts by the Employer with which to discharge its obligations hereunder 6 7 shall not be deemed to create a trust; legal and equitable title to any funds so set aside shall remain in the Employer, and any recipient of benefits hereunder shall have no security or other interest in such funds. Any and all funds so set aside shall remain subject to the claims of the general creditors of the Employer, present and future. This provision shall not require the Employer to set aside any funds, but the Employer may set aside such funds if it chooses to do so. 10. Continued Employment. Nothing contained herein shall be construed as conferring upon any employee the right to continue in the employ of the Employer in any capacity. 11. Binding on Employer, Employees and Their Successors. This Restoration Plan shall be binding upon and inure to the benefit of the Employer, its successors and assigns and the employee and his heirs, executors, administrators and legal representatives. The provisions of this Restoration Plan shall be applicable with respect to each Employer separately, and amounts payable hereunder shall be paid by the Employer of the particular employee. 12. Employment with More Than One Employer. If any employee shall be entitled to benefits under the Basic Plan on account of service with more than one Employer, the obligations under this 7 8 Restoration Plan shall be apportioned among such Employers on the basis of time of service with each, except that an Employer from whose employ such employee was transferred prior to his retirement, death or disability shall be obligated with respect to employment prior to such transfer only to the extent of an amount based on assumed pay increases in accordance with the scale used for computing the actuarial cost under the Basic Plan for the year of the transfer. If obligations are so limited, the remaining obligations shall be borne by the last Employer. 13. Laws Governing. This Restoration Plan shall be construed in accordance with and governed by the laws of the State of Texas. AMERICAN GENERAL CORPORATION ATTEST: /s/ PATRICIA W. NEIGHBORS By: /s/ ROBERT D. WOMACK ____________________________ ___________________________ Patricia W. Neighbors Robert D. Womack 8 EX-10.4 5 EXHIBIT 10.4 FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.4 FIRST AMENDMENT TO THE RESTORATION OF RETIREMENT INCOME PLAN FOR CERTAIN EMPLOYEES PARTICIPATING IN THE RESTATED AMERICAN GENERAL RETIREMENT PLAN WHEREAS, AMERICAN GENERAL CORPORATION and certain of its subsidiaries have heretofore adopted the RESTORATION OF RETIREMENT INCOME PLAN FOR CERTAIN EMPLOYEES PARTICIPATING IN THE RESTATED AMERICAN GENERAL RETIREMENT PLAN (the "Restoration Plan"); and WHEREAS, AMERICAN GENERAL CORPORATION desires to amend the Restoration Plan on behalf of itself and on behalf of each of its subsidiaries that has adopted the Restoration Plan; NOW, THEREFORE, the Restoration Plan shall be amended as follows, effective as of November 22, 1991; 1. Article 3 is deleted and replaced with the following: "3. Eligibility. Employees who are Highly Compensated Participants, excluding Sales Employees, who are participating in the Basic Plan, and whose pension or pension-related benefits under the Basic Plan are limited pursuant to (i) section 415 of the Code, and/or (ii) section 401(a)(17) of the Code, shall be eligible for benefits under this Restoration Plan. In no event shall an employee who is not eligible for any benefits under the Basic Plan be eligible for a benefit under this Restoration Plan." 2. As amended hereby, the Restoration Plan is specifically ratified and reaffirmed. IN WITNESS WHEREOF, AMERICAN GENERAL CORPORATION has executed this First Amendment as of the 22nd day of November, 1991. AMERICAN GENERAL CORPORATION ATTEST: By: JAMES T. PULLIAM ---------------- By: PATRICIA W. NEIGHBORS --------------------- Title: Vice President -------------- Title: Assistant Secretary ------------------- Page 1 of 2 2 STATE OF TEXAS COUNTY OF HARRIS BEFORE ME, the undersigned authority, on this day personally appeared Patricia W. Neighbors, James T. Pulliam of AMERICAN GENERAL CORPORATION, a corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of said corporation for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, THIS 9 day of February, 1994. NICKI Y. EMERSON ______________________ Notary Public in and for the State of Texas My Commission Expires: 7/22/96 ___________ Page 2 of 2 EX-10.5 6 EXHIBIT 10.5 FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.5 SECOND AMENDMENT TO THE RESTORATION OF RETIREMENT INCOME PLAN FOR CERTAIN EMPLOYEES PARTICIPATING IN THE RESTATED AMERICAN GENERAL RETIREMENT PLAN WHEREAS, AMERICAN GENERAL CORPORATION and certain of its subsidiaries have heretofore adopted the RESTORATION OF RETIREMENT INCOME PLAN FOR CERTAIN EMPLOYEES PARTICIPATING IN THE RESTATED AMERICAN GENERAL RETIREMENT PLAN (the "Restoration Plan"); and WHEREAS, AMERICAN GENERAL CORPORATION desires to amend the Restoration Plan on behalf of itself and on behalf of each of its subsidiaries that has adopted the Restoration Plan; NOW, THEREFORE, the Restoration Plan shall be amended as follows, effective as of January 1, 1994; 1. Section 4(a) is hereby deleted and replaced with the following: "(a) the benefit that would have been payable to such employee or on his behalf under the Basic Plan if such benefit were determined without regard to the maximum amount of benefit limitations of section 415 of the Code, without regard to the considered compensation limitations of section 401(a)(17) of the Code, as if the definition of Compensation under the Basic Plan as in effect on March 21, 1985 were applicable for the period January 1, 1985 through March 20, 1985 and as if the definition of Compensation included executive deferred compensation;" 2. As amended hereby, the Restoration Plan is specifically ratified and reaffirmed. IN WITNESS WHEREOF, AMERICAN GENERAL CORPORATION has executed this Second Amendment as of the 1st day of January, 1994. AMERICAN GENERAL CORPORATION ATTEST: By: /s/ PATRICIA W. NEIGHBORS By: /s/ JAMES T. PULLIAM _________________________________ __________________________________ Title: Assistant Secretary Title: Vice President Page 1 of 2 2 STATE OF TEXAS COUNTY OF HARRIS BEFORE ME, the undersigned authority, on this day personally appeared Patricia W. Neighbors, James T. Pulliam of AMERICAN GENERAL CORPORATION, a corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of said corporation for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, THIS 17th day of March, 1994. NICKI Y. EMERSON ----------------------------- Notary Public in and for the State of Texas My Commission Expires: 7/22/96 ------- Page 2 of 2 EX-10.6 7 EX-10.6 TO AMERICAN GENERAL 10-K 1 EXHIBIT 10.6 AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN Restated as of May 1, 1991 2 AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN WHEREAS, AMERICAN GENERAL CORPORATION and certain of its subsidiaries (hereinafter referred to as the "Company," jointly and severally) have heretofore adopted the AMERICAN GENERAL EMPLOYEES' THRIFT AND INCENTIVE PLAN (the "Basic Plan") for the benefit of their employees; and WHEREAS, the Company desires to provide for the payment of certain thrift and thrift-related benefits to certain of its employees who are members of the Basic Plan on and after the effective date hereof so that the total thrift and thrift-related benefits offered employees can be determined without regard to certain limitations in the Basic Plan; WHEREAS, the Company adopted the AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN (the "Supplemental Plan"), effective as of January 1, 1984, and has amended the Supplemental Plan by a First Amendment effective as of January 1, 1985 and January 1, 1987, as stated therein; a Second Amendment, effective as of February 1, 1989; and a Third Amendment, effective as of May 22, 1990; and WHEREAS, the Company desires to amend the Supplemental Plan; NOW, THEREFORE, the Company hereby amends and restates the Supplemental Plan, effective as of May 1, 1991. Page 1 of 11 3 I. Purpose of the Supplemental Plan The Company intends and desires by the adoption and continuation of this Supplemental Plan to recognize the value to the Company of the past and present services of Employees covered by the Supplemental Plan and to encourage and assure their continued service with the Company by making more adequate provision for their future retirement security. This Supplemental Plan is adopted and maintained due to certain benefit limitations which are imposed on the Basic Plan by the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and by the Internal Revenue Code of 1986, as amended (the "Code"). II. Incorporation of the Basic Plan The Basic Plan, with any amendments thereto to the date of restatement of the Supplemental Plan, shall be attached hereto as Exhibit I and is hereby incorporated by reference and shall form a part of this Supplemental Plan as fully as if set forth herein verbatim. Any amendment made to the Basic Plan by the Company shall also be incorporated by reference and form a part of this Supplemental Plan, effective as of the effective date of such amendment. The Basic Plan, whenever referred to in this Supplemental Plan, shall mean the Basic Plan, as amended, as it exists as of the date any determination is made of amounts credited or benefits payable under this Supplemental Plan. All terms used in this Supplemental Plan shall have the meanings assigned to them under the provisions of the Basic Plan unless otherwise qualified by the context. Page 2 of 11 4 III. Administration This Supplemental Plan shall be administered by the Plan Administrator who shall be the Committee charged with administering the American General Corporation 1984 Stock and Incentive Plan, and who shall administer it in a manner consistent with the administration of the Basic Plan, as from time to time amended and in effect, except that this Supplemental Plan shall be administered as an unfunded plan which is not intended to meet the qualification requirements of section 401 of the Code. The Plan Administrator shall have the power and authority to interpret, construe, and administer this Supplemental Plan, and the Plan Administrator's interpretations and construction hereof, and actions hereunder, including the timing, form, amount, or recipient of any payment to be made hereunder, shall be binding and conclusive on all persons for all purposes. The Plan Administrator shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Supplemental Plan unless attributable to his/her own willful misconduct or lack of good faith. Neither the Plan Administrator nor any member of the Committee shall participate in any action or determination regarding his/her own benefits hereunder. IV. Eligibility Employees who are participating in the Basic Plan and whose thrift or thrift-related benefits under the Basic Plan are limited pursuant to section 401(a)(17), section 402(g)(1), or section 415 of the Code, shall be eligible for benefits under this Supplemental Plan. In no event shall an employee who is not eligible for any benefits under the Basic Plan be eligible for a benefit under this Supplemental Plan. Page 3 of 11 5 V. Amount of Benefit The Plan Administrator shall establish a memorandum bookkeeping account (the "Supplemental Plan Account") for each Employee whose allocation of Employer Contributions under the Basic Plan has been limited pursuant to section 401(a)(17), section 402(g)(1), or section 415 of the Code. As of the end of each month, the Plan Administrator shall credit such Employee's Supplemental Plan Account in an amount equal to the excess, if any, of: (a) the amount which would have been allocated to the Employer Contribution Account of such Employee under the Basic Plan as of the end of such month (based upon the Employee's actual basic Employee contribution percentage election as in effect for such month), if the provisions of the Basic Plan were administered without regard to the considered compensation limitation of section 401(a)(17) of the Code, the elective deferral limitation of section 402(g)(1) of the Code, and the maximum amount of contribution limitations of section 415 of the Code, over (b) the amounts that were in fact allocated as of the end of the such month to the Employer Contribution Account of such employee under the Basic Plan. If any portion of the Employee's Employer Contribution Account under the Basic Plan is forfeited for any reason, the Plan Administrator shall debit such Employee's Supplemental Plan Account by an amount equal to the percentage of such Supplemental Plan Account Page 4 of 11 6 which corresponds to the percentage of his Employer Contribution Account under the Basic Plan which was forfeited. Amounts credited to the Employee's Supplemental Plan Account shall be deemed to be invested in shares of the common stock of American General Corporation ("Company Stock") on the date so credited and the value of such Employee's Supplemental Plan Account at any time shall be equal to the fair market value of the total number of shares of Company Stock in which such account is deemed to be invested. The Employee's Supplemental Plan Account shall be appropriately adjusted to reflect transactions affecting Company Stock including, but not limited to, stock splits, dividends declared, recapitalizations, adjustments to common stock account of American General Corporation, or subdivisions or consolidations of shares of Company stock. Benefits payable under this Supplemental Plan to any recipient shall be computed in accordance with the foregoing and with the objective that such recipient should receive under this Supplemental Plan and the Basic Plan that total amount which would have been payable to that recipient solely under the Basic Plan, had section 401(a)(17), section 402(g)(1), and section 415 of the Code not been applicable thereto. This Supplemental Plan is intended to constitute an unfunded "deferred compensation plan" for a select group of management or highly-compensated employees within the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA with respect to a part of the Supplemental Plan and an unfunded "excess benefit plan" within the meaning of sections 3(36) and 4(b)(5) of ERISA with respect to the remainder of the Supplemental Plan. VI. Payment of Benefits The benefit under this Supplemental Plan shall be payable on account of an Employee's termination of employment, retirement, disability, or death, and shall be paid in cash in a lump sum as soon as practicable and no later than 60 days after the earlier of such Page 5 of 11 7 termination of employment, incurrence of disability (as determined by the Plan Administrator), or death. In the event of termination of the Basic Plan within 24 months following a Change of Control Date, each Employee employed by the Company on such Change of Control Date shall have his benefit under this Supplemental Plan paid in a lump sum as soon as practicable and no later than 60 days after such termination. Notwithstanding Article VIII and any other provisions of this Supplemental Plan to the contrary, the provisions of the preceding sentence may not be amended or changed to reduce or eliminate any benefit right after a Change of Control Date. Any benefit payable under this Supplemental Plan shall be payable to the same recipient(s) who are to be paid the limited benefits under the Basic Plan. VII. Employee's Rights Except as otherwise specifically provided, the Employee's rights under this Supplemental Plan shall be the same as his/her rights under the Basic Plan. Benefits payable under this Supplemental Plan shall be a general, unsecured obligation of the Company to be paid by the Company from its own funds, and such payments shall not (i) impose any obligation upon the Trust Fund under said Basic Plan; (ii) be paid from the Trust Fund under said Basic Plan; or (iii) have any effect whatsoever upon the Basic Plan or the payment of benefits from the Trust Fund under said Basic Plan. No Employee or his/her beneficiary or beneficiaries shall have any title to or beneficial ownership in any assets which the Company may earmark to pay benefits hereunder. Page 6 of 11 8 VIII. Amendment and Discontinuance Although it is expected that this Supplemental Plan shall continue indefinitely, American General Corporation, on behalf of itself and on behalf of each of its subsidiaries that has adopted the Supplemental Plan, reserves the right to amend or discontinue it if, in its sole judgment, such a change is deemed necessary or desirable. However, if American General Corporation should, on behalf of itself and on behalf of each of its subsidiaries that has adopted the Supplemental Plan, amend or discontinue this Supplemental Plan, the Company shall be liable for any benefits accrued under this Supplemental Plan (determined on the basis of each Employee's presumed termination of employment as of the date of such amendment or discontinuance) as of the date of such action. IX. Restriction on Assignment The interest of the Employee or his beneficiary or beneficiaries may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process nor shall they be an asset in bankruptcy, except that no amount shall be payable hereunder until and unless any and all amounts representing debts or other obligations owed to the Company or any affiliate of the Company by the Employee with respect to whom such amount would otherwise be payable shall have been fully paid and satisfied. Page 7 of 11 9 X. Nature of Agreement The adoption of this Supplemental Plan and any setting aside of amounts by the Company with which to discharge its obligations hereunder shall not be deemed to create a trust; legal and equitable title to any funds so set aside shall remain in the Company, and any recipient of benefits hereunder shall have no security or other interest in such funds. Any and all funds so set aside shall remain subject to the claims of the general creditors of the Company, present and future, and no payment shall be made under this Supplemental Plan unless the Company is then solvent. This provision shall not require the Company to set aside any funds, but the Company may set aside such funds if it chooses to do so. XI. Continued Employment Nothing contained herein shall be construed as conferring upon any Employee the right to continue in the employ of the Company in any capacity. Page 8 of 11 10 XII. Binding on Company, Employees, and Their Successors This Supplemental Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Employee and his heirs, executors, administrators, and legal representatives. The provisions of this Supplemental Plan shall be applicable with respect to each Company separately, and amounts payable hereunder shall be paid by the Company which employs the particular Employee. XIII. Employment with More than One Company If any Employee shall be entitled to benefits under the Basic Plan on account of service with more than one Company, the obligations under this Supplemental Plan shall be apportioned among such Company on the basis of Service with each. Page 9 of 11 11 XIV. Laws Governing This Supplemental Plan shall be construed in accordance with and governed by the laws of the State of Texas. EXECUTED this 30th day of April, 1991. ATTEST: AMERICAN GENERAL CORPORATION /s/ PATRICIA W. NEIGHBORS /s/ WAYNE D. BAKER ______________________________ _____________________________ Patricia W. Neighbors Wayne D. Baker Page 10 of 11 12 STATE OF TEXAS COUNTY OF HARRIS BEFORE ME, the undersigned authority, on this day personally appeared Wayne D. Baker, Senior Vice President of AMERICAN GENERAL CORPORATION, a corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of said corporation for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 30th day of April 1991. /s/ PAM TUDOR _________________________________ Pam Tudor Notary Public in and for the State of Texas My Commission Expires 1-15-92 Page 11 of 11 EX-10.7 8 EX-10.7 TO AMERICAN GENERAL 10-K 1 EXHIBIT 10.7 FIRST AMENDMENT TO THE AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN WHEREAS, AMERICAN GENERAL CORPORATION and certain of its subsidiaries have heretofore adopted the AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN (the "Supplemental Plan"); and WHEREAS, AMERICAN GENERAL CORPORATION desires to amend the Supplemental Plan on behalf of itself and on behalf of each of its subsidiaries that has adopted the Supplemental Plan; NOW, THEREFORE, the Supplemental Plan shall be amended as follows, effective as of November 22, 1991; 1. Article VI is deleted and replaced with the following: "VI Payment of Benefits The benefit payable under this Supplemental Plan on account of an Employee's termination of employment, retirement, disability or death shall be paid to the same recipients in cash at the time or times as the limited benefits are payable to the employee or his beneficiary under the Basic Plan." 2. As amended hereby, the supplemental Plan is specifically ratified and reaffirmed. IN WITNESS WHEREOF, AMERICAN GENERAL CORPORATION has executed this Third Amendment as of the 22nd day of November, 1991. AMERICAN GENERAL CORPORATION ATTEST: By: /s/ PATRICIA W. NEIGHBORS BY: /s/ ROBERT D. WOMACK _____________________________ ____________________________ Patricia W. Neighbors Robert D. Womack Title: Assistant Secretary Title: Senior Vice President 2 STATE OF TEXAS COUNTY OF HARRIS BEFORE ME, the undersigned authority, on this day personally appeared Robert D. Womack, Senior Vice President of AMERICAN GENERAL CORPORATION, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of said corporation for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 6th day of November, 1991. {SEAL} /s/ PAM TUDOR __________________________ Pam Tudor Notary Public in and for the State of Texas My commission expires: 1-15-92 EX-10.8 9 EXHIBIT 10.8 FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.8 SECOND AMENDMENT TO THE AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN WHEREAS, AMERICAN GENERAL CORPORATION and certain of its subsidiaries have heretofore adopted the AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN (the "Supplemental Plan"); and WHEREAS, AMERICAN GENERAL CORPORATION desires to amend the Supplemental Plan on behalf of itself and on behalf of each of its subsidiaries that has adopted the Supplemental Plan; NOW, THEREFORE, the Supplemental Plan shall be amended as follows, effective as of January 1, 1993; 1. Article IV is deleted and replaced with the following: "IV. Eligibility Employees who are Highly Compensated Participants, who are participating in the Basic Plan, and whose thrift or thrift-related benefits under the Basic Plan are limited pursuant to section 401(a)(17), section 402(g)(1), or section 415 of the Code, shall be eligible for benefits under this Supplemental Plan. In no event shall an employee who is not eligible for any benefits under the Basic Plan be eligible for a benefit under this Supplemental Plan." 2. Article V is deleted and replaced with the following: "V. Amount of Benefit The Plan Administrator shall establish a memorandum bookkeeping account (the "Supplemental Plan Account") for each Employee whose allocation of Employer Contributions under the Basic Plan has been limited pursuant to section 401(a)(17), section 402(g)(1), or section 415 of the Code. As of the end of each month, the Plan Administrator shall credit such Employee's Supplemental Plan Account in an amount equal to the excess, if any, of: (a) the amount which would have been allocated to the Employer Contribution Account of such Employee under the Basic Plan as of the end of such month (based upon the Employee's actual basic Employee contribution percentage election as in effect for such month), if the provisions of the Basic Plan were administered without regard to the considered compensation limitation of section 401(a)(17) of the Code, the elective deferral limitation of section 402(g)(1) of the Code, and the maximum amount of contribution limitations of section 415 of the Code, over (b) the amounts that were in fact allocated as of the end of the such month to the Employer Contribution Account of such employee under the Basic Plan. If any portion of the Employee's Employer Contribution Account under the Basic Plan is forfeited for any reason (other than pursuant to Section 4.10 of the Basic Plan, relating to excess contributions), the Plan Administrator shall debit such Employee's Supplemental Plan Account by an amount equal to the Page 1 of 3 2 percentage of such Supplemental Plan Account which corresponds to the percentage of his Employer Contribution Account under the Basic Plan which was forfeited. Amounts credited to the Employee's Supplemental Plan Account shall be deemed to be invested in shares of the common stock of American General Corporation ("Company Stock") on the date so credited and the value of such Employee's Supplemental Plan Account at any time shall be equal to the fair market value of the total number of shares of Company Stock in which such account is deemed to be invested. The Employee's Supplemental Plan Account shall be appropriately adjusted to reflect transactions affecting Company Stock including, but not limited to, stock splits, dividends declared, recapitalizations, adjustments to common stock account of American General Corporation, or subdivisions or consolidations of shares of Company stock. Benefits payable under this Supplemental Plan to any recipient shall be computed in accordance with the foregoing and with the objective that such recipient should receive under this Supplemental Plan and the Basic Plan that total amount which would have been payable to that recipient solely under the Basic Plan, had section 401(a)(17), section 402(g)(1), and section 415 of the Code not been applicable thereto." 3. Article X is deleted and replaced with the following: "X. Nature of Agreement This Supplemental Plan is intended to constitute an unfunded "deferred compensation plan" for a select group of management or highly- compensated employees within the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA with respect to a part of the Supplemental Plan and an unfunded "excess benefit plan" within the meaning of sections 3(36) and 4(b)(5) of ERISA with respect to the remainder of the Supplemental Plan. The adoption of this Supplemental Plan and any setting aside of amounts by the Company with which to discharge its obligations hereunder shall not be deemed to create a trust; legal and equitable title to any funds so set aside shall remain in the Company, and any recipient of benefits hereunder shall have no security or other interest in such funds. Any and all funds so set aside shall remain subject to the claims of the general creditors of the Company, present and future, and no payment shall be made under this Supplemental Plan unless the Company is then solvent. This provision shall not require the Company to set aside any funds, but the Company may set aside such funds if it chooses to do so." 4. As amended hereby, the Supplemental Plan is specifically ratified and reaffirmed. IN WITNESS WHEREOF, AMERICAN GENERAL CORPORATION has executed this Second Amendment as of the 1st day of January, 1993. AMERICAN GENERAL CORPORATION ATTEST: By: JAMES T. PULLIAM By: PATRICIA W. NEIGHBORS _________________ _____________________ Title: Vice President Title: Assistant Secretary ________________ ___________________ Page 2 of 3 3 STATE OF TEXAS COUNTY OF HARRIS BEFORE ME, the undersigned authority, on this day personally appeared Patricia W. Neighbors , James T. Pulliam of AMERICAN GENERAL CORPORATION, a corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of said corporation for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, THIS 9 day of February , 1994. NICKI Y. EMERSON ---------------- Notary Public in and for the State of Texas My Commission Expires: 7/22/96 ------- Page 3 of 3 EX-10.9 10 EXHIBIT 10.9 FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.9 THIRD AMENDMENT TO THE AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN WHEREAS, AMERICAN GENERAL CORPORATION and certain of its subsidiaries have heretofore adopted the AMERICAN GENERAL SUPPLEMENTAL THRIFT PLAN (the "Supplemental Plan"); and WHEREAS, AMERICAN GENERAL CORPORATION desires to amend the Supplemental Plan on behalf of itself and on behalf of each of its subsidiaries that has adopted the Supplemental Plan; NOW, THEREFORE, the Supplemental Plan shall be amended as follows, effective as of January 1, 1994; 1. Section V. (a) is hereby deleted and replaced with the following: "(a) the amount which would have been allocated to the Employer Contribution Account of such Employee under the Basic Plan as of the end of such month (based upon the Employee's actual basic Employee contribution percentage election as in effect for such month), if the provisions of the Basic Plan were administered without regard to the considered compensation limitation of section 401(a)(17) of the Code, the elective deferral limitation of section 402(g)(1) of the Code, the maximum amount of contribution limitations of section 415 of the Code, and as if the definition of Base Pay included any compensation which would have been included in Base Pay had it not been deferred under a deferred compensation agreement." 2. As amended hereby, the Supplemental Plan is specifically ratified and reaffirmed. IN WITNESS WHEREOF, AMERICAN GENERAL CORPORATION has executed this Third Amendment as of the 1st day of January, 1994. AMERICAN GENERAL CORPORATION ATTEST: By: JAMES T. PULLIAM By: PATRICIA W. NEIGHBORS ________________________________ __________________________________ Title: Vice President Title: Assistant Secretary _______________________________ __________________________________ Page 1 of 2 2 EXHIBIT 10.9 STATE OF TEXAS COUNTY OF HARRIS BEFORE ME, the undersigned authority, on this day personally appeared James T. Pulliam, Patricia W. Neighbors of AMERICAN GENERAL CORPORATION, a corporation, known to me to be the person and officer whose name is subscribe to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of said corporation for the purposes and consideration therein expressed, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, THIS 17th day of March, 1994. NICKI Y. EMERSON ___________________________________ Notary Public in and for the State of Texas 7/22/96 My Commission Expires:_____________ Page 2 of 2 EX-10.10 11 EXHIBIT 10.10FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.10 SEVERANCE AGREEMENT This Severance Agreement ("Agreement") is made and effective as of the day of , 19 , by and between American General Corporation, a Texas corporation having its principal place of business in Houston, Texas (the "Company"), and , an individual currently residing in , ("Employee"). All terms defined in paragraph 2 shall throughout this Agreement have the meanings given therein. 1. Payment of Severance Amount. If Employee's employment by the Company or any subsidiary thereof or successor thereto shall be subject to a Voluntary Termination or an Involuntary Termination within the Covered Period, then the Company shall pay Employee an amount equal to the applicable Severance Amount, payable within 15 days after the Termination Date. If any payment provided for in this paragraph 1 is not made when due, the Company shall pay Employee interest on the amount payable calculated at the prime or base rate of interest announced by Texas Commerce Bank, Houston, Texas (or any successor thereto) from time to time plus two percent (2%) from the date that payment to him should have been made. 2. Definitions. (a) An "Affiliate" shall mean any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, the Company. (b) "Base Annual Salary" shall, as determined on the Termination Date, be equal to the greater of: (i) Employee's annual salary excluding bonuses and special incentive payments on the date of the earliest Change of Control to occur during the Covered Period or (ii) Employee's annual salary excluding bonuses and special incentive payments on the Termination Date. (c) "Change in Duties" shall mean any one or more of the following: (i) a significant change in the nature or scope of the Employee's authorities or duties from those applicable to him immediately prior to the date on which a Change of Control occurs; (ii) a reduction in the Employee's Base Annual Salary from that provided to him immediately prior to the date on which a Change of Control occurs; (iii) a diminution in the Employee's eligibility to participate in bonus, stock option, incentive award and other compensation plans which provide opportunities to receive compensation, from the greater of: -- the opportunities provided by the Company (including its subsidiaries) for executives with comparable duties; or Page 1 of 7 2 Severance Agreement, Date , Name -- the opportunities under any such plans under which he was participating immediately prior to the date on which a Change of Control occurs; (iv) a diminution in employee benefits (including but not limited to medical, dental, life insurance and long-term disability plans) and perquisites applicable to Employee, from the greater of: -- the employee benefits and perquisites provided by the Company (including its subsidiaries) to executives with comparable duties; or -- the employee benefits and perquisites to which he was entitled immediately prior to the date on which a Change of Control occurs; (v) a change in the location of Employee's principal place of employment by the Company (including its subsidiaries) by more than ten miles from the location where he was principally employed immediately prior to the date on which a Change of Control occurs; or (vi) a reasonable determination by the Board of Directors of the Company that, as a result of a Change of Control and a change in circumstances thereafter significantly affecting his position, he is unable to exercise the authorities, powers, functions or duties attached to his position immediately prior to the date on which a Change of Control occurs. (d) A "Change of Control" shall mean the occurrence of any one or more of the following events: (i) the company shall (A) merge or consolidate with or into another corporation or entity or enter into a share exchange between shareholders of the Company and another corporation or entity pursuant to Article 5.02 of the Texas Business Corporation Act and as a result of such merger, consolidation or share exchange less than seventy percent (70%) of the outstanding voting securities of the surviving or resulting corporation or entity shall then be owned in the aggregate by the former shareholders of the Company, other than (x) affiliates (within the meaning of the Securitie Exchange Act of 1934, as amended (the "Exchange Act")) of the Company or (y) any party to such merger, consolidation or share exchange or (B) sell, lease, exchange or otherwise dispose of all or substantially all of the Company's property and assets in one transaction or a series of related transactions to one or more corporations or entities that are not subsidiaries of the Company; (ii) the shareholder of the Company adopt a plan of liquidation; (iii) any corporation, person or group (within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) (other than the Employee, the Company, any of the Company's subsidiaries, any employee benefit plan of the Company and/or one or more of its subsidiaries or any person or entity organized, appointed or established pursuant to the terms of any such employee benefit plan) becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of voting securities of the Company representing thirty percent (30%) or more of the total number of votes eligible to be cast at any election of directors of the Company; or Page 2 of 7 3 Severance Agreement, Date , Name (iv) as a result of, or in connection with, any tender offer or exchange offer, share exchange, merger, consolidation or other business combination, sale, lease, exchange or other disposition of all or substantially all of the Company's assets, a contested election, or any combination of the foregoing transactions, the persons who were directors of the Company on May 1, 1990 (the "Incumbent Board") shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company, provided that any person becoming a director subsequent to May 1, 1990 whose election, or nomination for election by the Company's shareholders was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of a proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) shall be, for purposes herein, considered as though such person were a member of the Incumbent Board. Notwithstanding the foregoing, no "Change of Control" shall be deemed to have occurred with respect to Employee if he or she, after giving effect to a reorganization, recapitalization, spin-off, or other transaction, however structured, is employed by a corporation (or other entity)(the "Continuing Corporation"), (x) at least seventy percent (70%) of the outstanding voting securities of the ultimate parent entity of which (or of the Continuing Corporation, if there is no such ultimate parent entity) are beneficially owned in the aggregate, directly or indirectly through one or more inter- mediaries, by the former shareholders of the Company, other than affiliates (within the meaning of the Exchange Act) of the Company, and (y) at least a majority of the directors of the ultimate parent entity of which (or of the Continuing Corporation, if there is no such ultimate parent entity) are members of the Incumbent Board (determined as provided in Subparagraph (iv)); provided, however, that this exception shall apply only if the ultimate parent entity of the Continuing Corporation (if there is such ultimate parent entity) and the Continuing Corporation shall have adopted the Plan or a plan substantially similar to the Plan (the "Substitute Plan") and an agreement substantially similar to the Agreement (the "Substitute Agreement") on or prior to the effective date of such reorganization, recapitalization, spin-off, or other transaction, however structured, with such ultimate parent entity (or the Continuing Corporation, if there is no such ultimate parent entity) to be substituted for the Company for all purposes under the Substitute Plan and under the Substitute Agreement as applicable. Moreover, for purposes of the Substitute Agreement, upon the creation of the Continuing Corporation, no subsequent Change of Control of the Company shall be deemed to be a Change of Control of the Continuing Corporation unless its ultimate parent entity shall be the Company. The "ultimate parent entity" of any corporation or other entity is that entity (i) which either alone or through one or more majority owned subsidiaries, beneficially owns (within the meaning of the Exchange Act) fifty percent (50%) or more of the outstanding voting securities of such corporation or other entity (based upon voting power in an election of directors), and (ii) as to which there is no corporation or other entity which beneficially owns (within the meaning of the Exchange Act) fifty percent (50%) or more of its outstanding voting securities (based upon voting power in an election of directors). The occurrence of the above events shall be the date of, but immediately prior to the time of, consummation of a merger, consolidation, share exchange or sale, lease, exchange or disposition of property and assets referred to in Page 3 of 7 4 Severance Agreement, Date , Name Subparagraph 2(d)(i), the date of any shareholder adoption of a plan of liquidation referred to in Subparagraph 2(d)(ii), the date on which the event described in Subparagraph 2(d)(iii) occurs, or the date of the change in constituency of the Board of Directors of the Company, as described in Subparagraph 2(d)(iv), as the case may be. (e) "Covered Period" for the Employee shall mean a period of time following the occurrence of a Change of Control equal to the lesser of (i) Employee's period of employment with the Company, any subsidiary, or any predecessor of either thereof prior to that Change of Control, or (ii) three years following the occurrence of the Change of Control. (f) "Involuntary Termination" shall mean any termination which: (i) does not result from a resignation by employee (other than a resignation pursuant to clause (ii) of this subparagraph (f)); or (ii) results from a resignation following any Change in Duties (as defined above); provided, however, the term "Involuntary Termination" shall not include: (x) a Termination for Cause (as defined below), or (y) any termination as a result of death, disability, or normal retirement pursuant to a retirement plan to which Employee was subject prior to any Change of Control. (g) "Severance Amount" is equal to: (i) in the case of an Involuntary Termination, 2.99 times Employee's Base Annual Salary, and (ii) in the case of a Voluntary Termination, two times Employee's Base Annual Salary. (h) "Termination for Cause" shall mean only a termination as a result of fraud, misappropriation of or intentional material damage to the property or business of the Company (including its subsidiaries), or commission of a felony by Employee. (i) "Voluntary Termination" shall mean any termination which is not: (i) an Involuntary Termination, (ii) a Termination for Cause, or (iii) the result of death, disability, or normal retirement pursuant to a retirement plan to which Employee was subject prior to any Change of Control. (j) "Voting Securities" shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency. 3. Adjustments for Certain Taxes. To the extent that any payment made to Employee under this Agreement and any benefit or payment received by Employee under any other plan, program or arrangement sponsored or maintained by the Page 4 of 7 5 Severance Agreement, Date , Name Company or its affiliates is subject to federal income, excise or other tax at a rate above the rate ordinarily applicable to wages and salaries paid in the ordinary course of business ("Penalty Tax"), whether as a result of the provisions of sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), any similar or analogous provisions of any statute adopted subsequent to the date hereof, or otherwise, then the Severance Amount shall be increased by an amount (the "Additional Amount") such that the net amount received by Employee, after paying any applicable Penalty Tax and any federal or state income tax on such Additional Amount, shall be equal to the amount that Employee would have received if such Penalty Tax were not applicable to payments made to Employee under this Agreement and to benefits or payments received by Employee under any other plan, program or arrangement sponsored or maintained by the Company or its affiliates. 4. Medical and Dental Benefits. If Employee's employment by the Company or any subsidiary thereof or successor thereto shall be subject to a Voluntary Termination or an Involuntary Termination within the Covered Period, then to the extent that Employee or any of Employee's dependents may be covered under the terms of any medical and dental plans of the Company (or any subsidiary thereof or successor thereto) for active employees immediately prior to such termination, the Company will provide Employee and those dependents with equivalent coverages for a period of thirty (30) months from the date of such termination; provided, however, that such coverages shall terminate if and to the extent that Employee becomes eligible for similar coverages from a subsequent employer (and any such eligibility shall be reported to the Company by Employee). Such coverages may be procured directly by the Company (or any subsidiary thereof, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Employee and Employee's dependents comply with all of the conditions of the aforementioned plans. In consideration for these benefits, Employee must make contributions equal to those required from time to time from employees for equivalent coverages under the aforementioned plans. 5. Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company to: American General Corporation 2929 Allen Parkway Houston, Texas 77019 Attention: General Counsel If to Employee to: Name Company Address City, State Zip or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 6. Applicable Law. This contract is entered into under, and shall be governed for all purposes by, the laws of the State of Texas. Page 5 of 7 6 Severance Agreement, Date , Name 7. Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect. 8. Withholding of Taxes. Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law or governmental regulation or ruling. 9. No Employment Agreement. Nothing in this Agreement shall give Employee any rights (or impose any obligations) to continued employment by the Company or any subsidiary thereof or successor thereto, nor shall it give the Company any rights (or impose any obligations) with respect to continued performance of duties by Employee for the Company or any subsidiary thereof or successor thereto. 10. No Assignment; Successors. (a) Employee's right to receive payments or benefits hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this paragraph 10 the Company shall have no liability to pay any amount so attempted to be assigned or transferred. This Agreement shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. (b) This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns (including, without limitation, any company into or with which the Company may merge or consolidate). The Company agrees that it will not effect the sale or other disposition of all or substantially all of its assets unless either (i) the person or entity acquiring such assets or a substantial portion thereof shall expressly assume by an instrument in writing all duties and obligations of the Company hereunder or (ii) the Company shall provide, through the establishment of a separate reserve therefor, for the payment in full of all amounts which are or may reasonably be expected to become payable to Employee hereunder. 11. Term. This Agreement shall be effective as of the date first above written and shall remain in effect until ____________; provided, however, that in the event of a Change of Control during the term hereof, this Agreement shall remain in effect for the Covered Period, as defined in paragraph 2 hereof. 12. Extension. The Compensation Committee of the Company may, at any time prior to the expiration hereof, extend the term hereof for a period of up to two years from the date on which such extension is approved, without any further action on the part of Employee or the Company. 13. Indemnification. If Employee shall obtain any money judgment or otherwise prevail with respect to any litigation brought by Employee or the Company to enforce or interpret any provision contained herein, the Company, to the fullest extent permitted by applicable law, hereby indemnifies Employee for his reasonable attorneys' fees and disbursements incurred in such litigation and hereby agrees (a) to pay in full all such fees and disbursements and (b) to pay prejudgment interest on any money judgment obtained by Employee calculated at the Page 6 of 7 7 Severance Agreement, Date , Name prime or base rate of interest announced by Texas Commerce Bank, Houston, Texas (or any successor thereto) from time to time plus two percent (2%) from the earliest date that payment to him should have been made under this Agreement. 14. No Mitigation. Employee shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and, except as provided in paragraph 4 hereof, the obtaining of any such other employment shall in no event effect any reduction of the Company's obligation to make (or cause to be made) the payments and arrangements required to be made under this Agreement. Further, except as provided in paragraph 4 hereof, the Company's obligation to make the payments and arrangements required to be made under this Agreement shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other rights which the Company may have against Employee. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year first written. AMERICAN GENERAL CORPORATION by order of the Personnel Committee of the Board of Directors By:____________________________ Employee ____________________________ (Employee Name) Page 7 of 7 EX-10.11 12 EX-10.11 TO AMERICAN GENERAL 10-K 1 EXHIBIT 10.11 SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT, made as of the 12th day of April, 1989, by and between AMERICAN GENERAL CORPORATION, a Texas corporation with principal executive offices in Houston, Texas ("Company") and HAROLD S. HOOK, of Houston, Harris County, Texas ("Hook"); W I T N E S S E T H: WHEREAS, Hook has been employed by the Company for a long and valuable career of executive service to the Company, including over ten years as chief executive officer of the Company; and WHEREAS, the Company desires to reward such past service and to encourage and reward the continued employment of Hook with the Company until his retirement and to promote his devotion to his duties on behalf of the Company without uncertainty or concern as to the retirement income security of him and his spouse; and WHEREAS, the Company desires to promote and enable timely retirement and orderly succession with respect to the office of chief executive officer of the Company; and WHEREAS, the Company desires to facilitate the foregoing by providing for Hook a separate contractual supplement to the basic Company retirement program; NOW, THEREFORE, the Company and Hook hereby agree as follows: 1. Retirement Benefit. Subject to the terms and conditions of this Agreement, the Company shall pay to Hook as a supplemental retirement benefit a monthly amount equal to (a) minus (b), where (a) equals 55% of Hook's Average Monthly Compensation, within the meaning of that term as used in the Restated American General Retirement Plan ("Basic Plan") as in effect on the date of this Agreement but without any limitation on the maximum dollar amount of compensation considered in determining Average Monthly Compensation under the Basic Plan; and (b) equals the aggregate monthly retirement benefit (expressed in the form of a joint and two-thirds survivor annuity for Hook and his spouse at the relevant date) to which Hook is actually entitled under the Basic Plan, any other qualified defined benefit pension plan maintained by the Company or its affiliates and any nonqualified supplemental retirement plan maintained by the Company or its affiliates (including, but not limited to, the Restoration of Retirement Income Plan for Certain 2 Employees Participating in the Restated American General Retirement Plan). This amount (b) shall not include amounts payable under any defined contribution plan of the Company or its affiliates (including, but not limited to, the American General Thrift and Incentive Plan and Supplemental Thrift Plan). 2. Retirement Date. The benefit amount determined in Paragraph 1 shall be payable upon Hook's retirement or other termination of employment with the Company at or after his attainment of age 62. If his retirement or other termination of employment occurs upon his attainment of age 60, the figure "50%" shall be substituted for the figure "55%" in Paragraph 1(a) in determining the benefit amount payable. If his retirement or other termination of employment with the Company occurs after his attainment of age 60 but prior to his attainment of age 62, the figure to be substituted for the figure "55%" in Paragraph 1(a) in determining the benefit amount payable shall be equal to 55% minus an amount equal to a Reduction Factor times 5%. The Reduction Factor shall be a fraction, the numerator of which is the number of full months by which Hook's retirement or other termination of employment with the Company precedes his attainment of age 62 and the denominator of which is 24. Except as otherwise provided in this Agreement, no supplemental retirement benefit shall be payable to or on behalf of Hook under this Agreement if his retirement or other termination of employment with the Company occurs prior to his attainment of age 60. 3. Time and Form of Payment. The supplemental retirement benefit provided under this Agreement shall be payable monthly, beginning on the first day of the month following Hook's retirement or other termination of employment with the Company. The normal form of such benefit shall be an annuity payable to Hook for his lifetime and upon his death continuing to his surviving spouse, if any, for her lifetime in an amount equal to two-thirds of the amount payable during Hook's life. Hook may, prior to his retirement or other termination of employment with the Company, elect to have such supplemental retirement benefit paid in any other actuarially-equivalent form available under the Basic Plan and, in such case, the benefit amount payable shall be determined by using the actuarial factors then used under the qualified defined benefit plan of the Company; provided, however, that Hook may not elect any form of payment for such supplemental retirement benefit that would increase the amount payable during his lifetime under this Agreement. 4. Death Benefit. If Hook dies after the commencement of the supplemental retirement benefit provided under this Agreement, -2- 3 the death benefit provided hereunder shall be that provided, if any, under the form of benefit then being paid. If Hook dies after his attainment of age 60 while employed by the Company and prior to commencement of the supplemental retirement benefit provided under this Agreement, his surviving spouse, if any, shall receive for her lifetime a death benefit equal to the two-thirds survivor annuity she would have received hereunder had Hook retired on the day before his death with the normal form of benefit in effect, beginning immediately. 5. Disability Benefit. Notwithstanding anything to the contrary in this Agreement, any payments paid to Hook under any long term disability plan of the Company (to the extent such payments are attributable to Company contributions to the cost of such payments) shall reduce, dollar-for-dollar, the supplemental retirement benefits otherwise payable hereunder for the period for which such long term disability payments are made. 6. Termination after Change of Control. Notwithstanding the last sentence of Paragraph 2, if Hook's employment with the Company terminates for any reason prior to his attainment of age 60 but after a Change of Control occurs, Hook will be considered to have remained in the employment of the Company until his attainment of age 60. In such case, upon his attainment of age 60, he will be deemed to have thereupon retired, and the supplemental retirement benefit provided under this Agreement will become payable. For purposes of this Paragraph 7, "Change of Control" shall have the meaning set forth in the Severance Agreement between Hook and the Company dated as of March 19, 1986, as amended. 7. Independence of Benefit. The supplemental retirement benefit provided under this Agreement shall be in addition to any other amounts payable to or on behalf of Hook by the Company or under Company benefit plans or agreements (subject to the offsets specifically contained in this Agreement). 8. Administration. This Agreement shall be interpreted and administered by the Compensation Committee of the Board of Directors of the Company. 9. Affiliates. For purposes of this Agreement, the term "affiliates" shall mean any parent or subsidiary corporation (within the meaning of such terms as defined in section 425 of the Internal Revenue Code of 1986, as amended) of the Company. 10. Employment. Hook shall be considered to be in the employment of the Company as long as he remains an employee of the Company or any of its affiliates. Nothing in this Agreement shall -3- 4 confer on Hook the right to continued employment by the Company or its affiliates or affect in any way the right of the Company or its affiliates to terminate his employment at any time. 11. Nonassignable. No right, title, interest or benefit hereunder shall ever be liable for or charged with any of the torts or obligations of Hook or any person claiming under him or be subject to seizure by any creditor of Hook or any person claiming under him. Neither Hook nor any person claiming under him shall have the power to anticipate, dispose of, assign or pledge any right, title, interest or benefit hereunder in any manner until the same shall have been actually distributed free and clear of the terms of this Agreement. 12. Nature of Agreement. Nothing in this Agreement shall be deemed to create a trust. Hook shall have no security or other interest in any funds set aside by the Company to provide amounts payable pursuant to this Agreement. Any funds so set aside by the Company shall remain subject to the claims of general creditors of the Company, present and future. No payment shall be made under this Agreement unless the Company is then solvent. This Agreement shall constitute an unfunded, unsecured obligation of the Company to make payments in accordance with this Agreement. 13. Binding Nature. This Agreement shall be binding upon the Company and any successor to the Company by merger, consolidation or other reorganization or acquisition. 14. Amendment or Termination. This Agreement may not be amended or terminated without the written consent of Hook and the Company. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. AMERICAN GENERAL CORPORATION By /s/ MICHAEL J. POULOS ___________________________ Michael J. Poulos /s/ HAROLD S. HOOK ___________________________ Harold S. Hook -4- EX-10.12 13 EX-10.12 TO AMERICAN GENERAL 10-K 1 EXHIBIT 10.12 AMERICAN GENERAL SUPPLEMENTAL RETIREMENT TRUST This Trust Agreement is entered into this 31st day of August, 1989, by and between AMERICAN GENERAL CORPORATION, a Texas corporation (hereinafter referred to as the "Company"), and FIDUCIARY TRUST COMPANY INTERNATIONAL (hereinafter referred to as the "Trustee"). ARTICLE I PRELIMINARY RECITALS 1.1 Supplemental Retirement Agreement. The Company has heretofore entered into a Supplemental Retirement Agreement (the "Retirement Agreement") with its Chief Executive Officer, Harold S. Hook ("Hook"), under which the Company has agreed to provide certain supplemental retirement benefits (the "Benefits") to Hook and, in the event of his death, to his spouse ("Surviving Spouse"), according to the terms and conditions of such Retirement Agreement. 1.2 Establishment of Trust. In order to provide a source of payment for its obligations under the Retirement Agreement, the Company has entered into this Trust Agreement to create a trust (hereinafter referred to as the "Trust") and has delivered certain property to the Trustee, the receipt of which is hereby acknowledged by the Trustee. The Trustee agrees to hold such property and all other property, real or personal, which may be contributed and made subject to the provisions of the Trust Agreement as well as the proceeds, investments, and reinvestments thereof, in trust for the uses and purposes and subject to the provisions hereinafter set forth. 1.3 Grantor Trust. It is intended that the Company shall be treated as the owner of the assets of the Trust pursuant to Sections 671-679 of the Internal Revenue Code of 1986, as amended, and the terms of the Trust Agreement shall be so construed. 1.4 Company Deduction. It is intended that distributions from the Trust to Hook or his Surviving Spouse shall be deductible by Company to the same extent, at the same time, and in the same manner as if made directly by the Company. 2 ARTICLE II DEFINITIONS 2.1 Definitions. Unless the context of the Trust Agreement otherwise requires or unless otherwise defined herein, the terms defined in the Retirement Agreement shall have the same meaning when used herein as the meaning given to those terms in the Retirement Agreement. (a) The term "Change in Control" shall mean the occurrence of any of the following events: (1) any "person," including a "group" as determined in accordance with Section 13(d)(3) of the Exchange Act, is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (2) as a result of, or in connection with, any tender offer or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company; (3) the Company is merged or consolidated with another corporation and as a result of such merger or consolidation less than 70% of the outstanding voting securities of the surviving or resulting corporation shall then be owned in the aggregate by the former stockholders of the Company, other than (i) affiliates within the meaning of the Exchange Act, or (ii) any party to such merger or consolidation; (4) a tender offer or exchange offer is made and consummated for the ownership of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding voting securities; or (5) the Company transfers substantially all of its assets to another corporation which is not a wholly-owned subsidiary of the Company. -2- 3 (b) The term "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (c) The term "Consultant" shall mean the independent consulting firm employed by the Company to make the computations required by this Trust Agreement. (d) The term "Exchange Act" shall mean the Securities Exchange Act of 1934. (e) The term "Insolvency" shall mean the condition of the Company in the event that it either is unable to pay its debts as they mature or is subject to a pending proceeding as a debtor under the Bankruptcy Code. (f) The term "Potential Change in Control" shall mean the occurrence of any of the following events: (1) when a third person, including a "group" as determined in accordance with section 13(d)(3) of the Exchange Act, becomes the beneficial owner of shares of the Company having 20% or more of the total number of votes that may be cast for the election of directors of the Company; or (2) when any person publicly announces an intention to take actions which, if consummated, would result in a Change of Control. (h) The term "Required Funding Amount" shall mean the amount determined pursuant to the provisions of Section 4.2 to fund the obligation of the Company with respect to the Benefits to be provided under the Retirement Agreement. (i) The term "Trust Fund" shall mean all money or other property delivered to the Trustee by the Company, all investments or reinvestments made therewith or proceeds thereof and all earnings and profits thereon, less all payments and charges as authorized herein. (j) The term "Valuation Date" shall mean the last business day of each calendar year. 2.2 Construction. Where necessary or appropriate to the meaning hereof, the singular shall be deemed to include the plural, the masculine to include the feminine, and the feminine to include the masculine. -3- 4 ARTICLE III RIGHTS AND DUTIES OF COMPANY AND RIGHTS OF ITS GENERAL CREDITORS 3.1 Trust Irrevocable. The Trust shall be irrevocable and shall be held for the exclusive purpose of providing Benefits to Hook and his Surviving Spouse and defraying expenses of the Trust in accordance with the provisions of this Trust Agreement. Except as provided in Section 3.2 and Articles IV, XI and XII, no part of the income or corpus of the Trust Fund shall be recoverable by or for the Company. 3.2 Rights of General Creditors of Company. Notwithstanding any provision of the Trust Agreement or the Retirement Agreement to the contrary, the Trust Fund shall be subject at all times to the claims of general creditors of the Company, so long as the Trust Fund is in the possession of the Trustee. No general creditor of the Company shall have any right to recover, or any title or interest in, the Trust Fund after it has been distributed by the Trustee to Hook or his Surviving Spouse, even if prior to such payment the Trustee had knowledge or notice that such general creditor has made or intends to make claim to the Trust Fund. Notwithstanding any such knowledge or notice, the Trustee shall continue to make distributions to Hook or his Surviving Spouse (except as provided in Article XII) unless and until such time as a general creditor of the Company brings legal action against the Trustee and serves it with process claiming the Trust Fund to satisfy its claim against the Company. 3.3 Duty of Company to Notify Trustee of Insolvency. The Board of Directors, the Chief Executive Officer and the President of the Company (or their representatives) shall have the duty to notify and inform the Trustee of the Company's Insolvency. Such notification shall be in writing and shall be delivered within five business days of the Board of Directors, the Chief Executive Officer or the President having actual knowledge of such Insolvency. ARTICLE IV CONTRIBUTIONS 4.1 Contributions. (a) The Company shall make contributions to the Trust from time to time as it shall determine in its sole discretion. -4- 5 (b) Notwithstanding paragraph (a) above, if the value of the Trust Fund is less than the Required Funding Amount upon the occurrence of a Potential Change in Control or a Change in Control, within the five-day period following the Potential Change in Control or Change in Control, whichever is applicable, the Company shall be required to make and shall make a contribution ("Special Contribution") to the Trust equal to the amount by which the Required Funding Amount exceeds the value of the Trust Fund. If the Company fails to make the Special Contribution upon the occurrence of such event, the Trustee is empowered to bring suit against the Company to require specific performance of its obligation to make the Special Contribution. If the Trustee fails to bring suit within a reasonable period, Hook or his Surviving Spouse may bring suit against the Company for such specific performance. (c) As of each Valuation Date, the Trustee shall determine if the value of the Trust Fund is less than or exceeds the Required Funding Amount. If, as of any Valuation Date after a Potential Change in Control or Change in Control, the Required Funding Amount exceeds the value of the Trust Fund, the Company shall contribute to the Trust the amount by which the Required Funding Amount exceeds the value of the Trust Fund. If, as of any Valuation Date, the value of the Trust Fund exceeds the Required Funding Amount, at the request of the Company, the Trustee shall distribute to the Company the amount by which the value of the Trust Fund exceeds the Required Funding Amount. 4.2 Determination of Required Funding Amount. As of any Potential Change in Control, Change in Control, or applicable Valuation Date, the Required Funding amount shall be the sum of the amount determined as necessary to satisfy the Company's obligation to pay Benefits under the Retirement Agreement and the amount deemed to be appropriate by the Trustee, after consultation with the Company, to pay for the expenses and compensation of the Trustee in connection with the administration of the Trust. The Required Funding Amount shall be recalculated as of each Valuation Date and appropriately adjusted in accordance with the provisions of Section 4.1. The Consultant shall determine the Required Funding Amount, and any recalculation of such amount, and shall notify and inform the Trustee of such amount. -5- 6 ARTICLE V INVESTMENT, ADMINISTRATION AND DISBURSEMENT OF TRUST FUND 5.1 Investment of Trust Fund. The Trustee shall have, with respect to the Trust Fund, power in its discretion: To invest and reinvest in any property, real, personal or mixed, wherever situate, foreign or domestic, including, without limitation, common and preferred stocks, bonds, notes and debentures (including convertible stocks and securities but not including any stock or securities of the Company, the Trustee or their affiliates or any debt instruments of the Company or its affiliates); leaseholds; mortgages (including, without limitation, any collective or part interest in any bond and mortgage or note and mortgage); certificates of deposit; insurance contracts; and oil, mineral or gas properties, royalties, interests or rights (including equipment pertaining thereto). In addition, the Trustee shall have the power in its discretion to use Trust Fund assets to purchase, and pay all premiums and other charges upon, individual or group annuity contracts, the rates of return and maturity dates of which may reasonably be expected to yield assets of the Trust Fund sufficient to pay the benefits under the Retirement Agreement. 5.2 Valuation of Trust Fund. As soon as practicable after each Valuation Date (and after each such other date as the Company and Trustee may agree), the Trustee shall report to the Company the assets held in the Trust Fund as of such day and shall determine and include in such report the fair market value as of such day of each such asset. In determining such fair market values, the Trustee shall use such market quotations and other information as are available to it and may in its discretion be appropriate. The report of any such valuation shall not constitute a representation by the Trustee that the amounts reported as fair market values would actually be realized upon the liquidation of the Trust Fund. The Trustee shall not be accountable to the Company or to any other person on the basis of any such valuation, but its accountability shall be in accordance with the provisions of Article VI hereof. 5.3 Additional Investment Powers of Trustee. Subject to the provisions of Sections 5.1, 5.6 and 11.2 hereof, the Trustee shall have, with respect to the Trust Fund, the power in its discretion: (a) To retain any property at any time received by it; (b) To sell, exchange, convey, transfer, or dispose of, and to grant options for the purchase or exchange with respect to, any -6- 7 property at any time held by it, by public or private sale for cash or on credit or partly for cash and partly upon credit; (c) To participate in any plan of reorganization, consolidation, merger, combination, liquidation, or other similar plan or oppose any such plan or any action thereunder, or any contract, purchase, sale, or other action by any person or corporation; (d) To deposit any property with any protective, reorganization or similar committee, to delegate discretionary power to any such committee and to pay and agree to pay part of the expenses and compensation of any such committee and any assessments levied with respect to any property so deposited; (e) To exercise all conversion and subscription rights pertaining to any property; (f) To extend the time of payment of any obligation held in the Trust Fund; (g) To enter into stand-by agreements for future investment, either with or without a stand-by fee; and (h) To invest and reinvest all or any specified portion of the Trust Fund through the medium of any common, collective or commingled trust fund which has been or may hereafter be established and maintained by the Trustee. 5.4. Administrative Powers of Trustee. The Trustee shall have the power in its discretion: (a) To exercise all voting rights with respect to the shares of stock held in the Trust Fund and to grant proxies, discretionary or otherwise; (b) To cause any shares of stock to be registered and held in the name of one or more of its nominees, or one or more nominees of any system for the central handling of securities, without increase or decrease of liability; (c) To collect and receive any and all money and other property due to the Trust Fund and to give full discharge therefor; (d) Subject to the provisions of Section 5.6 hereof, to settle, compromise or submit to arbitration any claims, debts, or damages due or owing to or from the Trust; to commence or defend suits or legal proceedings to protect any interest of the Trust; -7- 8 and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; (e) To organize under the laws of any state a corporation for the purpose of acquiring and holding title to any property which it is authorized to acquire under this Trust Agreement and to exercise with respect thereto any or all of the powers set forth in this Trust Agreement; (f) To determine how all receipts and disbursements shall be credited, charged, or apportioned as between income and principal; (g) To engage such independent third parties as the Trustee may deem necessary in carrying out its duties hereunder; and (h) Generally to do all acts, whether or not expressly authorized, which the Trustee may deem necessary or desirable for the protection of the Trust Fund. 5.5 Dealings with Trustee. Persons dealing with the Trustee shall be under no obligation to see to the proper application of any money paid or property delivered to the Trustee or to inquire into the Trustee's authority as to any transaction. 5.6 Distributions from Trust Fund. (a) Except as set forth in this Section 5.6 and in Section 4.1, Section 11.2 and Article XII, distributions from the Trust Fund shall be made by the Trustee to Hook or his Surviving Spouse at the times and in the amounts set forth in the Retirement Agreement as directed by the Company and, to the maximum extent permitted by applicable law, the Trustee shall be fully protected in so doing. Any amounts so paid shall be reduced by the amount of income tax withholding required by law. The Company shall inform the Trustee of the amounts to be so withheld and the Trustee shall pay such amounts to the Company for payment to the appropriate governmental authorities. If the Company fails to timely inform the Trustee of the amounts to be withheld, the Trustee shall make such determination and shall pay such withholding amounts directly to the appropriate governmental authorities. Notwithstanding the provisions of this Trust Agreement, the Company shall be obligated to pay the Benefits. To the extent the Trust Fund is not sufficient to pay any Benefit when due, the Company shall pay such Benefit directly. Nothing in this Trust Agreement shall relieve the Company of its liabilities to pay Benefits except to the extent such liabilities are met by application of Trust Fund assets. -8- 9 (b) If Hook or his Surviving Spouse believes that he or she is entitled to a Benefit, he or she may apply in writing directly to the Trustee for payment of such Benefits. Such application shall advise the Trustee of the circumstances which entitle Hook or his Surviving Spouse to payment of such Benefits. The Trustee shall, in such case, reach its own independent determination as to Hook's or his Surviving Spouse's entitlement to Benefits, even though the Trustee may be informed from another source (including the Company) that payments are not due under the Retirement Agreement. If the Trustee so desires, it may, in its sole discretion, make such additional inquiries and take such additional measures as it deems necessary in order to enable it to determine whether Benefits are due and payable, including, but not limited to, interviewing appropriate persons, requesting affidavits, soliciting oral or written testimony under oath, or holding a hearing or other proceeding. The Trustee shall determine whether Benefits are payable as promptly as possible. (c) The Trustee shall not itself commence any legal action, whether in the nature of an interpleader action, request for declaratory judgment or otherwise, requesting the court to make the determination of Hook's or his Surviving Spouse's entitlement to a Benefit. (d) Notwithstanding any other provision of this Trust Agreement, if any amounts held in the Trust are found in a "determination" (within the meaning of Section 1313(a) of the Code) to have been includible in gross income of Hook or his Surviving Spouse prior to payment of such amounts from the Trust, the Trustee shall, as soon as practicable, pay such amounts to Hook or his Surviving Spouse (but not in excess of the present value of his or her accrued Benefit at the time of such payment); provided, however, that such payment shall be made only if and after the Trustee receives the acknowledgment and agreement of Hook or his Surviving Spouse that such payment constitutes satisfaction and payment of all or the applicable portion of the obligations payable to Hook or his Surviving Spouse by the Company under the Retirement Agreement. For purposes of this Section 5.6(d), the Trustee shall be entitled to rely on a copy of the determination described in the preceding sentence and an affidavit by Hook or his Surviving Spouse that such determination has occurred. -9- 10 ARTICLE VI SETTLEMENT OF ACCOUNTS The Trustee shall keep full accounts of all of its receipts and disbursements. Its books and records with respect to the Trust Fund shall be open to inspection by the Company, Hook or his Surviving Spouse or their representatives at all times during business hours of the Trustee. Within sixty days after the close of each calendar year, or any termination of the duties of the Trustee, the Trustee shall mail to the Company and Hook or his Surviving Spouse an account of its acts and transactions as Trustee hereunder. If within sixty days after the mailing of the account or any amended account neither the Company nor Hook or his Surviving Spouse has filed with the Trustee notice of any objection to any act or transaction of the Trustee, the account or amended account shall become an account stated. If any objection has been filed, and if the party who filed such objection is satisfied that it should be withdrawn or if the account is adjusted to the objecting party's satisfaction, the objecting party shall in a writing filed with the Trustee signify its approval of the account and it shall become an account stated. When an account becomes an account stated, such account shall be finally settled, and the Trustee shall be completely discharged and released, as if such account had been settled and allowed by a judgment or decree of a court of competent jurisdiction in an action or proceeding in which the Trustee, the Company, and all persons having or claiming to have any interest in the Trust Fund were parties. The Trustee, the Company and Hook or his Surviving Spouse shall have the right to apply at any time to a court of competent jurisdiction for judicial settlement of any account of the Trustee not previously settled as hereinabove provided. In any such action or proceeding it shall be necessary to join as parties the Trustee, the Company and Hook or his Surviving Spouse and any judgment or decree entered therein shall be conclusive upon all such persons. ARTICLE VII TAXES, EXPENSES AND COMPENSATION OF TRUSTEE 7.1 Taxes. The Company agrees that all income, deductions, and credits of the Trust Fund belong to it as owner for income tax purposes and will be included on the Company's income tax returns. The Company shall from time to time pay taxes (references in this Trust Agreement to the payment of taxes shall include interest and applicable penalties) of any and all kinds whatsoever which at any time are lawfully levied or assessed upon or become payable in -10- 11 respect of the Trust Fund, the income, or any property forming a part thereof, or any security transaction pertaining thereto. To the extent that any taxes levied or assessed upon the Trust Fund are not paid by the Company or contested by the Company pursuant to the last sentence of this Section 7.1, the Trustee shall pay such taxes out of the Trust Fund and the Company shall upon demand by the Trustee deposit into the Trust Fund an amount equal to the amount paid from the Trust Fund to satisfy such tax liability. If requested by the Company, the Trustee shall, at Company expense, contest the validity of such taxes in any manner deemed appropriate by the Company or its counsel, but only if it has received an indemnity bond or other security satisfactory to it to pay any expenses of such contest. Alternatively, the Company may itself contest the validity of any such taxes, but any such contest shall not affect the Company's obligation to reimburse the Trust Fund for taxes paid from the Trust Fund. 7.2 Expenses and Compensation. The Trustee shall be paid compensation by the Company in accordance with the Trustee's regular schedule of fees for trust services and applicable investment management services, as in effect from time to time, unless the Company and the Trustee otherwise agree. The Trustee shall be reimbursed by the Company for its reasonable expenses of management and administration of the Trust, including reasonable compensation of counsel and any agent engaged by the Trustee to assist it in such management and administration. In the event that the Company shall fail or refuse to make such reimbursement upon demand, the Trustee may satisfy such obligations out of the assets of the Trust Fund; in that event, the Company shall immediately upon demand by the Trustee deposit into the Trust Fund a sum equal to the amount paid by the Trust Fund for such fees and expenses. ARTICLE VIII FOR PROTECTION OF TRUSTEE 8.1 Communications with the Company and Hook. (a) The Company shall certify to the Trustee the name or names of any person or persons authorized to act for the Company. Such certification shall be signed by the Chief Executive Officer (but not including Hook), the President, a Vice Chairman or a Vice President and the Secretary or an Assistant Secretary of the Company. Until the Company notifies the Trustee, in a similarly signed notice, that any such person is no longer authorized to act for the Company, the Trustee may continue to rely upon the authority of such person. -11- 12 (b) The Trustee may rely upon any certificate, notice or direction of the Company which the Trustee reasonably believes to have been signed by a duly authorized officer or agent of the Company. (c) Communications to the Trustee shall be sent in writing to the Trustee's principal office or to such other address as the Trustee may specify. No communication shall be binding upon the Trust Fund or the Trustee until it is received by the Trustee and unless it is in writing and signed by an authorized person. (d) Communications to the Company shall be sent in writing to the Company's principal office or to such other address as the Company may specify in writing to the Trustee. Communications to Hook or his Surviving Spouse shall be sent in writing to the address such person specifies in writing to the Trustee. No communication shall be binding upon the Company or Hook or his Surviving Spouse until it is received by such person. 8.2 Advice of Counsel. The Trustee may consult with any legal counsel with respect to the construction of this Trust Agreement, its duties hereunder, or any act which it proposes to take or omit, and shall not be liable for any action taken or omitted in good faith pursuant to such advice. Expenses of such counsel shall be deemed to be expenses of management and administration of the Trust within the meaning of Section 7.2 hereof. 8.3 Fiduciary Responsibility. (a) The Trustee shall discharge its duties under this Trust Agreement in effectuating the Retirement Agreement in a manner consistent with the objectives of this Trust Agreement and the Retirement Agreement. The Trustee shall not be liable for any loss sustained by the Trust Fund by reason of the purchase, retention, sale, or exchange of any investment in good faith and in accordance with the provisions of this Trust Agreement. The Trustee shall have no responsibility or liability for any failure of the Company to make contributions to the Trust Fund or for any insufficiency of assets in the Trust Fund to pay Benefits when due. The Trustee shall not be liable hereunder for any act taken or omitted to be taken in good faith, except for its own gross negligence or willful misconduct. (b) The Trustee's duties and obligations shall be limited to those expressly imposed upon it by this Trust Agreement, notwith- -12- 13 standing the incorporation by reference of the Retirement Agreement. (c) The Company at any time may employ as agent (to perform any act, keep any records or accounts, or make any computations required of the Company by this Trust Agreement or the Plans) the corporation or association serving as Trustee hereunder. Nothing done by said corporation or association as such agent shall affect its responsibilities or liability as Trustee hereunder. ARTICLE IX INDEMNITY OF TRUSTEE The Company hereby indemnifies and holds the Trustee harmless from and against any and all losses, damages, costs, expenses or liabilities (herein, "Liabilities"), including reasonable attorneys' fees and other costs of litigation, to which the Trustee may become subject pursuant to, arising out of, occasioned by, incurred in connection with, or in any way associated with this Trust Agreement, except for any act or omission constituting gross negligence or willful misconduct of the Trustee. If one or more Liabilities shall arise, or if the Company fails to indemnify the Trustee as provided herein, or both, then the Trustee may engage counsel of its choice, but at the Company's expense, either to conduct the defense against such Liabilities or to conduct such actions as may be necessary to obtain the indemnity provided for herein, or to take both such actions. The Trustee shall notify the Company within fifteen days after the Trustee has so engaged counsel of the name and address of such counsel. If the Trustee shall be entitled to indemnification by the Company pursuant to this Article IX and the Company shall not provide such indemnification upon demand, the Trustee shall apply assets of the Trust Fund in full satisfaction of the obligations for indemnity by the Company, and any legal proceeding by the Trustee against the Company for such indemnification shall be on behalf of the Trust. ARTICLE X RESIGNATION AND REMOVAL OF TRUSTEE 10.1 Resignation of Trustee. The Trustee may resign upon thirty days' prior written notice to the Company and Hook or his Surviving Spouse except that any such resignation shall not be effective until (i) the Company has appointed in writing a successor trustee, which must be a bank or trust company, (ii) such -13- 14 successor Trustee has been approved by Hook or his Surviving Spouse, and (iii) such successor has accepted the appointment in writing. The Company shall make a good faith effort, following receipt of notice of resignation from the Trustee, to find and appoint a successor Trustee who will adhere to the obligations imposed on such successor under the terms of this Trust Agreement. If a successor Trustee has not been appointed and received the consent of Hook or his Surviving Spouse within ninety days of the Trustee's resignation, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee. 10.2 Removal of Trustee. The Company may remove the Trustee upon thirty days' prior written notice to the Trustee and Hook or his Surviving Spouse except that any such removal shall not be effective until (i) such removal has been approved by Hook or his Surviving Spouse, (ii) the Company appoints a successor trustee, which must be a bank or trust company approved by Hook or his Surviving Spouse, and (iii) such successor accepts its appointment in writing. 10.3 Successor Trustee. All of the provisions set forth herein with respect to the Trustee shall relate to each successor with the same force and effect as if such successor had been originally named as the Trustee hereunder. 10.4 Transfer of Trust Fund to Successor. Upon the resignation or removal of the Trustee and appointment of a successor, the Trustee shall transfer and deliver the Trust Fund to such successor. Following the effective date of the appointment of the successor, the Trustee's responsibility hereunder shall be limited to managing the assets in its possession and transferring such assets to the successor, and settling its final account. Neither the Trustee nor the successor shall be liable for the acts of the other. ARTICLE XI DURATION AND TERMINATION OF TRUST AND AMENDMENT 11.1 Duration and Termination. The Trust is hereby declared to be irrevocable and shall continue until (i) all payments required hereunder have been made or (ii) until the Trust Fund contains no assets and retains no claims to recover assets from the Company or any other person or entity, whichever shall first occur. 11.2 Distribution upon Termination. If this Trust terminates under the provisions of Section 11.1, the Trustee shall liquidate -14- 15 the Trust Fund and, after its final account has been settled as provided in Article VI, shall distribute to the Company the net balance of any assets of the Trust remaining after all Benefits and expenses have been paid. Upon making such distribution, the Trustee shall be relieved from all further liability. The powers of the Trustee hereunder shall continue so long as any assets of the Trust Fund remain in its hands. 11.3 Amendment. The Company may from time to time amend, in whole or in part, any or all of the provisions of this Trust Agreement, provided, however, that (i) such amendment must be approved by Hook or his Surviving Spouse, (ii) no amendment will be made to this Trust Agreement or the Retirement Agreement which shall cause this Trust Agreement, the Retirement Agreement, or the assets of the Trust Fund to be governed by or subject to Part 2, 3 or 4 of Title I of ERISA, (iii) no such amendment shall adversely affect any accrued Benefits or the amount of assets of the Trust Fund available to pay such Benefits, (iv) no such amendment shall purport to alter the irrevocable character of the Trust established under this Trust Agreement, and (v) no such amendment shall increase the duties or responsibilities of the Trustee unless the Trustee consents thereto in writing. ARTICLE XII CLAIMS OF COMPANY'S CREDITORS 12.1 Trustee's Responsibilities if Company may be Insolvent. (a) If at any time the Company or a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall within thirty days request a determination as to the Company's Insolvency from the firm of certified public accountants which issued the most recent audited financial statement for the Company (the "Accountants"), and, pending such determination, the Trustee shall discontinue payments of Benefits under the Retirement Agreement and this Trust Agreement and shall hold the Trust Fund for the benefit of bankruptcy creditors. If the Accountants do not make a determination as to the Company's Insolvency within ninety days of a request from the Trustee, the Trustee shall select a firm of certified public accountants to make such determination and any reference to the "Accountants" herein shall refer to such firm. The Accountants' fees for making a determination of Insolvency hereunder shall be paid by the Trustee from the Trust Fund. The Trustee shall resume payments of Benefits under the Retirement Agreement -15- 16 and this Trust Agreement in accordance with Section 5.6 hereof only after the Accountants have notified the Trustee of their determination that the Company is not Insolvent (or is no longer Insolvent, if the Accountants initially determined such corporation to be Insolvent) or upon receipt of an order of a court of competent jurisdiction requiring such payments. American General Corporation, by its Board of Directors, Chief Executive Officer and President shall be obligated to give the Trustee prompt notice in writing in the event that the Company becomes Insolvent. In determining whether the Company is Insolvent, the Accountants may rely conclusively upon, and shall be protected in relying upon, court records showing that the Company is Insolvent, or a current report or statement from a nationally recognized credit reporting agency showing that the Company is Insolvent. For purposes of this Trust Agreement, knowledge and information concerning the Company which is not in the possession of employees of the Trustee's Corporate Trust Department shall not be imputed to the Trustee. The Trustee shall have no duty or obligation to request a determination as to the Company's Insolvency unless and until it receives a writing that the Company is Insolvent as described in the first sentence of this Section 12.1. (b) If the Trustee is notified by the Accountants that the Accountants have determined that the Company is Insolvent, the Trustee shall hold the Trust Fund for the benefit of the Company's bankruptcy creditors, and shall disburse the Trust Fund to satisfy such claims as a court of competent jurisdiction shall direct. (c) If the Trustee discontinues payment of Benefits pursuant to Section 12.1(a) and subsequently resumes such payments, the first payment to Hook or his Surviving Spouse following such discontinuance shall include an aggregate amount equal to the difference between the payments which would have been made to Hook or his Surviving Spouse under this Trust Agreement but for this Section 12.1 and the aggregate payments actually made to Hook or his Surviving Spouse by the Company pursuant to the Retirement Agreement during any such period of discontinuance, plus interest on such amount at a rate equivalent to the net rate of return earned by the Trust Fund during the period of such discontinuance. -16- 17 ARTICLE XIII MISCELLANEOUS 13.1 LAWS OF TEXAS TO GOVERN. THIS TRUST AGREEMENT AND THE TRUST HEREBY CREATED SHALL BE CONSTRUED AND REGULATED BY THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW. 13.2 Titles and Headings not to Control. The titles to Articles and headings of Sections in this Trust Agreement are placed herein for convenience of reference only and in case of any conflict the text of this Trust Agreement, rather than such titles or headings, shall control. 13.3 Successors and Assigns. This Trust Agreement may not be assigned by either party without the prior written consent of the other, and any purported assignment without such prior written consent shall be null and void. This Trust Agreement shall be binding upon the successors and permitted assigns of each party hereto. 13.4 Non-Alienation. No interest in or right to receive benefits from the Trust (i) may be assigned, sold, anticipated, alienated, or otherwise transferred by Hook or his Surviving Spouse or (ii) shall be subject to execution, attachment or garnishment. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed by their duly authorized officers as of the day and year first above written. AMERICAN GENERAL CORPORATION By /s/ HENRY S. ROMAINE __________________________________ Henry S. Romaine Vice Chairman and Chief Investment Officer FIDUCIARY TRUST COMPANY INTERNATIONAL, TRUSTEE By /s/ ROBERT F. PHELPS __________________________________ Robert F. Phelps Vice President and Trust Counsel -17- EX-10.13 14 EX-10.13 TO AMERICAN GENERAL 10-K 1 EXHIBIT 10.13 AMENDMENT TO SUPPLEMENTAL RETIREMENT AGREEMENT WHEREAS, AMERICAN GENERAL CORPORATION (the "Company") and HAROLD S. HOOK ("Hook") have heretofore entered into a SUPPLEMENTAL RETIREMENT AGREEMENT dated as of April 12, 1989 (the "Agreement"); and WHEREAS, the Company and Hook desire to amend the Agreement in certain respects; NOW, THEREFORE, the Agreement shall be amended as follows, effective as of August 22, 1990: 1. Paragraphs 1 through 7 of the Agreement shall be deleted and the following shall be substituted therefor: "1. Lump Sum Benefit. Subject to the terms and conditions of this Agreement, the Company shall pay to Hook a supplemental lump sum retirement benefit expressed in the form of a monthly annuity commencing as of September 1, 1990 payable to Hook for his lifetime and upon his death continuing to his surviving spouse, if any, for her lifetime in an amount equal to two-thirds of the amount payable during Hook's life, with each monthly payment during Hook's life equal to (a) minus (b), where: (a) equals 50% of Hook's Average Monthly Compensation, within the meaning of that term as used in the Restated American General Retirement Plan ('Basic Plan') as in effect on April 12, 1989 but without any limitation on the maximum dollar amount of compensation considered in determining Average Monthly Compensation under the Basic Plan, as if he terminated employment with the Company as of August 24, 1990; and (b) equals the aggregate monthly retirement benefit (expressed in the form of a joint and two-thirds survivor annuity for Hook and his spouse at September 1, 1990) to which Hook would be entitled under the Basic Plan, any other qualified defined benefit pension plan maintained by the Company or its affiliates and any nonqualified supplemental retirement plan 2 maintained by the Company or its affiliates (including, but not limited to, the Restoration of Retirement Income Plan for Certain Employees Participating in the Restated American General Retirement Plan), as if he terminated employment with the Company as of August 24, 1990. This amount (b) shall not include amounts payable under any defined contribution plan of the Company or its affiliates (including, but not limited to, the American General Employee's Thrift and Incentive Plan and the American General Supplemental Thrift Plan). The supplemental lump sum retirement benefit provided under this Paragraph 1 shall be payable in one lump sum payment on August 31, 1990, with the actuarially-equivalent value thereof determined based upon the actuarial factors then used under the Basic Plan (or other qualified defined benefit plan of the Company) for determining lump sum payments. 2. Monthly Benefit. Subject to the terms and conditions of this Agreement, in addition to the supplemental lump sum retirement benefit provided in Paragraph 1 above, the Company shall pay to Hook a supplemental monthly retirement benefit expressed in the form of a monthly annuity, commencing as of the first day of the month coinciding with or next following Hook's retirement or other termination of employment with the Company, payable to Hook for his lifetime and upon his death continuing to his surviving spouse, if any, for her lifetime in an amount equal to two-thirds of the amount payable during Hook's life, with each monthly payment during Hook's life equal to the excess, if any, of (a) minus (b), where: (a) equals 55% of Hook's Average Monthly Compensation, within the meaning of that term as used in the Restated American General Retirement Plan ('Basic Plan') as in effect on April 12, 1989 but without any limitation on the maximum dollar amount of compensation considered in determining Average Monthly Compensation under the Basic Plan; and (b) equals the sum of (1) the monthly retirement benefit (expressed in the form of a joint and two-thirds survivor annuity for Hook and his spouse at the relevant date) which could be provided by the actuarially-equivalent value of the supplemental lump sum retirement benefit provided in Paragraph 1 above, and (2) the aggregate monthly retirement benefit (expressed in the form of a joint and two- thirds survivor annuity for Hook and his spouse at the relevant date) to which Hook is actually entitled under the Basic Plan, any other qualified defined benefit pension plan maintained by the -2- 3 Company or its affiliates and any nonqualified supplemental retirement plan maintained by the Company or its affiliates (including, but not limited to, the Restoration of Retirement Income Plan for Certain Employees Participating in the Restated American General Retirement Plan). This amount (b) shall not include amounts payable under any defined contribution plan of the Company or its affiliates (including, but not limited to, the American General Employee's Thrift and Incentive Plan and the American General Supplemental Thrift Plan). Actuarial-equivalent values for determining this amount (b) shall be based upon the actuarial factors under the Basic Plan (or other qualified defined benefit plan of the Company) at the relevant date. Notwithstanding the foregoing, the supplemental monthly retirement benefit provided above shall be payable upon Hook's retirement or other termination of employment with the Company at or after his attainment of age 62. If his retirement or other termination of employment with the Company occurs upon his attainment of age 60, the figure '50%' shall be substituted for the figure '55%' in (a) above in determining the benefit amount payable. If his retirement or other termination of employment with the Company occurs after his attainment of age 60 but prior to his attainment of age 62, the figure to be substituted for the figure '55%' in (a) above in determining the benefit amount payable shall be equal to 55% minus an amount equal to a Reduction Factor times 5%. The Reduction Factor shall be a fraction, the numerator of which is the number of full months by which Hook's retirement or other termination of employment with the Company precedes his attainment of age 62 and the denominator of which is 24. No supplemental monthly retirement benefit pursuant to this Paragraph 2 shall be payable to or on behalf of Hook under this Agreement if his retirement or other termination of employment with the Company occurs prior to his attainment of age 60; provided, however, if Hook's employment with the Company terminates for any reason prior to his attainment of age 60 but after a Change of Control occurs, Hook will be considered to have remained in the employment of the Company until his attainment of age 60. In such case, upon his attainment of age 60, he will be deemed to have thereupon retired, and the supplemental monthly retirement benefit provided by this Paragraph 2 will become payable. For purposes of this Paragraph 2, 'Change of Control' shall have the meaning set forth in the Severance Agreement between Hook and the Company dated as of March 16, 1990, as amended. The supplemental monthly retirement benefit provided under this Paragraph 2 shall be payable monthly, beginning on the first day of the month coinciding with or next following Hook's retirement or other termination of employment with the Company. The normal form of such benefit shall be an annuity payable to Hook for his lifetime and upon his death continuing to his surviving spouse, if any, for her lifetime in an amount equal to two-thirds of the amount payable during Hook's life. -3- 4 Hook may, prior to his retirement or other termination of employment with the Company, elect to have such supplemental monthly retirement benefit paid in any other actuarially-equivalent form available under the Basic Plan and, in such case, the benefit amount payable shall be determined by using the actuarial factors then used under the Basic Plan (or other qualified defined benefit plan of the Company); provided, however, that Hook may not elect any form of payment for such supplemental monthly retirement benefit that would increase the amount payable during his lifetime under this Agreement. Notwithstanding the foregoing, any payments paid to Hook under any long-term disability plan of the Company (to the extent such payments are attributable to Company contributions to the cost of such payments) shall reduce, dollar-for-dollar, the supplemental monthly retirement benefits otherwise payable pursuant to this Paragraph 2 for the period for which such long-term disability payments are made. 3. Death Benefit. If Hook dies after the effective date of this Amendment but prior to the time of the lump sum payment as provided in Paragraph 1, Hook's surviving spouse (or Hook's estate, if there is no surviving spouse) shall receive the lump sum payment provided in Paragraph 1. If Hook dies after his attainment of age 60 and while employed by the Company, his surviving spouse, if any, shall receive a death benefit expressed in the form of a single life annuity equal to the two-thirds survivor annuity for the life of his surviving spouse as described in Paragraph 2 assuming Hook had retired on the day before his death with the joint and two-thirds survivor annuity form of benefit in effect, beginning immediately. This death benefit shall be payable as a monthly annuity for the lifetime of Hook's surviving spouse beginning on the first day of the month coinciding with or next following Hook's death. 4. Independence of Benefits. The benefits provided under this Agreement shall be in addition to any other amounts payable to or on behalf of Hook by the Company or under Company benefit plans or agreements (subject to the offsets specifically contained in this Agreement)." 2. Paragraphs 8, 9, 10, 11, 12, 13, 14 and 15 of the Agreement shall be renumbered as Paragraphs 5, 6, 7, 8, 9, 10, 11 and 12, correspondingly. 3. As amended hereby, the Agreement is specifically ratified and reaffirmed. IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Agreement on this 30th day of August 1990, effective as of August 22, 1990. AMERICAN GENERAL CORPORATION -4- 5 BY: /s/ MICHAEL J. POULOS ________________________ /s/ KURT G. SCHREIBER ________________________ /s/ OTTO B GERLACH ________________________ /s/ HAROLD S. HOOK ________________________ Harold S. Hook -5- EX-10.14 15 EXHIBIT 10.14FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.14 SECOND AMENDMENT TO SUPPLEMENTAL RETIREMENT AGREEMENT WHEREAS, AMERICAN GENERAL CORPORATION (the "Company") and HAROLD S. HOOK ("Hook") have heretofore entered into a SUPPLEMENTAL RETIREMENT AGREEMENT dated as of April 12, 1989 (the "Supplemental Retirement Agreement"); WHEREAS, the Supplemental Retirement Agreement was amended effective August 22, 1990; and WHEREAS, the Company and Hook desire to amend the Supplemental Retirement Agreement in certain respects; NOW, THEREFORE, the Supplemental Retirement Agreement shall be amended as follows, effective as of January 1, 1994; 1. Paragraph 2(a) of the Supplemental Retirement Agreement shall be deleted and the following substituted therefor: "(a) equals 55% of Hook's Average Monthly Compensation, within the meaning of that term as used in the Restated American General Retirement Plan ("Basic Plan") as in effect on April 12, 1989 but without any limitation on the maximum dollar amount of compensation considered in determining Average Monthly Compensation under the Basic Plan and including executive deferred compensation within the definition of Compensation; and" 2. As amended hereby, the Supplemental Retirement Agreement is specifically ratified and reaffirmed. IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Supplemental Retirement Agreement on this 17th day of March, 1994, effective as of January 1, 1994. AMERICAN GENERAL CORPORATION By: _______________________________________________ James T. Pulliam, Vice President _______________________________________________ HAROLD S. HOOK EX-10.16 16 EXHIBIT 10.16FOR AMERICAN GENERAL 10K 1 EXHIBIT 10.16 DEFERRED COMPENSATION PLAN I. INTRODUCTION American General Corporation (hereinafter referred to as "AGC") hereby establishes a Deferred Compensation Plan (hereinafter referred to as the "Plan") for Harold S. Hook (hereinafter referred to as "Participant"). II. DEFINITIONS 2.01 "Cash Bonus" means the annual cash bonus awarded by a Committee consisting of members of the Personnel Committee of the AGC Board of Directors in their complete discretion to chosen members of the highest-paid group of salaried employees. 2.02 "Deferred Compensation" means the amount of Cash Bonus defined in Section 2.01 and the Normal Compensation defined in Section 2.04 which Participant and AGC mutually agree to defer. 2.03 "Election" means Participant's election to defer his Cash Bonus and Normal Compensation as evidenced by a Notice of Election to Defer Income whose form will be substantially similar to Exhibit I attached to this Plan. Such election shall fix the amount of Deferred Compensation, establish the time when the payment of benefits shall commence, specify the option under which benefits will be paid, and incorporate the terms, conditions, and provisions of this Plan by reference. An executed Election form will continue in force for subsequent calendar years unless Participant enters into a new Election in the event of his disability or he receives an emergency withdrawal. 2.04 "Normal Compensation" means the amount of compensation which would be payable to Participant if no Election were in effect to defer compensation under this Plan. 2.05 "Separation from Service" means severance of Participant's relationship with AGC as an employee. Participant shall be deemed to have severed his employment or contractual relationship with AGC for purposes of this Plan when, in accordance with the established practices of AGC, the employment or contractual relationship is considered to have terminated. III. ADMINISTRATION This Plan will be administered by a Committee of one or more persons appointed by AGC. The Committee will act as the agent of AGC in all matters concerning the administration of this Plan. IV. DEFERRAL ELECTION 4.01 Participant may elect to defer all or any part of his Cash Bonus, as defined in Section 2.01 of this Plan, and Normal Compensation, as defined in Section 2.04 of this Plan, by completing an Election as provided below. If no Election is made, all compensation will be paid on a regular basis. 4.02 The Election to defer Normal Compensation must be made within 30 days prior to the beginning of the calendar year in which the compensation is to be deferred and must defer compensation not yet earned. -1- 2 4.03 Participant may not amend or modify the Plan to change the amount of Deferred Compensation, the payment option selected, or the time when the payment of benefits should commence, except in the case of Participant's becoming disabled as discussed in Section 5.04. However, Participant may make an Election to defer his Cash Bonus and Normal Compensation each calendar year. 4.04 If Participant makes a withdrawal pursuant to Section 5.05, Participant may again defer his Cash Bonus and Normal Compensation by executing a new Election prior to the beginning of the calendar year in which it is effective. The effective date of the new Election will be subject to the provisions of Section 5.05. V. BENEFITS PAYMENT OPTION 5.01 The benefit payable under this Plan shall be payable to Participant in one lump sum payment in an amount equal to the total of the deferred compensation plus interest at the rate in effect from time to time under the Cash Fund of the American General Employees' Thrift and Incentive Plan. Interest on the benefit shall be credited at the end of each calendar quarter on the basis of the time during such quarter the various portions of such amounts were credited as payable under this Plan, and such interest shall be compounded quarterly at the end of each calendar quarter. SEPARATION FROM SERVICE 5.02 Participant will be entitled to his lump sum payment on the first business day of the calendar year following the date of Participant's Separation from Service. DEATH BENEFITS 5.03 Should Participant die before he has begun to receive the benefits provided in Section 5.01, AGC shall cause to be paid to Participant's spouse within thirty (30) days of receipt of satisfactory proof of death, a lump sum benefit in an amount equal to the then value of Participant's account. If Participant's spouse does not survive Participant for a period of fifteen (15) days, then AGC shall cause such death benefit to be paid to Participant's estate. DISABILITY BENEFITS 5.04 Should Participant become disabled before the commencement date of the benefits, Participant may elect to receive his lump sum payment on the first day of the month following the determination of disability. The Plan shall consider Participant disabled on the date the committee appointed by AGC to administer this Plan determines Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or mental impairment or be of long-continued and indefinite duration. The disability of Participant shall be determined by the committee in accordance with uniform principles consistently applied, upon the basis of such evidence as the committee deems necessary and desirable. An election to receive disability benefits must be made within a reasonable time after the determination of disability. -2- 3 UNFORESEEABLE EMERGENCY WITHDRAWALS 5.05 In the event of an unforeseeable emergency prior to the commencement of the benefits provided in Section 5.01, Participant may apply to the committee to receive that part of his account which is reasonably needed to satisfy the emergency needs. If such application for emergency withdrawal is approved by AGC, AGC shall pay Participant such value as AGC deems necessary to meet the emergency needs. An unforeseeable emergency involves only circumstances of sudden and unexpected emergencies which would cause great hardship to Participant if early withdrawal were not permitted. The emergency must be beyond Participant's control and payment may not be made to the extent that such hardship may be relieved by other financial resources available to Participant, including insurance reimbursement, cessation of deferrals under the Plan, or liquidation of other assets. If Participant is granted an unforeseeable emergency hardship withdrawal, he shall be required to cease deferring compensation under this Plan. The period of cessation shall commence as of the date of the request and shall expire as of the last day of the calendar year next following the calendar year containing the date of the request. Participant can execute a new Election and resume making deferrals of his Cash Bonus and Normal Compensation effective as of the first day of the first calendar year following the end of the period of cessation. VI. RELATIONSHIP TO OTHER PLANS This Plan serves in addition to any other retirement, pension, or benefit plan or system presently in existence of hereinafter established. VII. ANTI-ALIENATION Participant's rights, interests, and benefits hereunder cannot be assigned, transferred, pledged, sold, conveyed or encumbered in any way by Participant or his estate, and are not subject to execution, attachment, or similar process. Any attempted sale, conveyance, transfer, assignment, pledge or encumbrance of the rights, interests, or benefits provided pursuant to the terms of this Plan contrary to the terms of the foregoing sentence, or the levy of any attachment or similar process thereupon, shall be null and void and without effect. VIII. AMENDMENT OR TERMINATION OF PLAN AGC may at any time amend or terminate this Plan, provided that such amendment or termination shall not affect the rights of Participant with respect to any compensation deferred before the date of the termination of this Plan. Participant will thereafter receive his Cash Bonus and Normal Compensation and benefits shall be paid as provided in Article V. IX. APPLICABLE LAW This Agreement shall be construed under the laws of the State of Texas. -3- 4 IN WITNESS WHEREOF, the parties have signed this Deferred Compensation Agreement, this 29th day of December, 1993. WITNESS: AMERICAN GENERAL CORPORATION PATRICIA NEIGHBORS By: JAMES R. TUERFF - ------------------ --------------- WITNESS: KURT G. SCHREIBER HAROLD S. HOOK - ----------------- -------------- Harold S. Hook -4- 5 EXHIBIT I NOTICE OF ELECTION TO DEFER INCOME December 29, 1993 American General Corporation 2929 Allen Parkway Houston, Texas 77019 Gentlemen: 1. Deferral of Income. Pursuant to Article 4 of my Deferred Compensation Plan with American General Corporation, I hereby elect to have 80 % of the amount payable to me as my Normal Compensation for services rendered during the 1994 calendar year and 100 % of my Cash Bonus deferred and paid to me on my "Deferral Date." 2. Deferral Date. For purposes of the Deferred Compensation Plan, the Deferral Date, which is the date the payments commence, shall be the first business day of the calendar year following the date of my Separation from Service. 3. Manner of Deferred Payment. Deferred payments are to be made in a lump sum payment payable on the first business day of the calendar year following the date of my Separation from Service. 4. Terms of Election. I understand that this election is subject to the terms and conditions of the Deferred Compensation Plan. I further understand that upon my disability, this election may be revoked or modified by filing with the Committee a notice of revocation or a new election. Dated: December 29, 1993 HAROLD S. HOOK -------------- Harold S. Hook Received this 29 day of December, 1993 KURT G. SCHREIBER - ----------------- EX-10.17 17 EX-10.17 TO AMERICAN GENERAL 10-K 1 EXHIBIT 10.17 AMERICAN GENERAL CORPORATION RETIREMENT PLAN FOR DIRECTORS 1. TABLE OF CONTENTS PARA. NO. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Payments of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Years of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Disability Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Benefit Not Assignable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Effective Date, Amendment, and Termination of Plan . . . . . . . . . . . . . . . . . . . . . . . 8 Administration of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. PURPOSE. This plan shall be known as the American General Corporation Retirement Plan for Directors (The "Plan"). The Plan shall be maintained by American General Corporation, a Texas corporation (the "Company") solely for the purpose of providing retirement benefits to persons who have served as directors of the Company and who, since July 1, 1965, have not been officers or employees of the Company or of any subsidiary of which the Company owns directly or indirectly more than 50% of the outstanding capital stock ("Directors"). 3. PAYMENT OF BENEFITS. The benefits payable under the Plan will be paid from the Company's general revenues as payments become due under the Plan, will not be funded in advance through an arrangement constituting a qualified trust under the Internal Revenue Code or through insurance annuity contracts, and will not be subject to the jurisdiction of nor be guaranteed by the Pension Benefit Guaranty Corporation. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of benefits under the Plan. 4. YEARS OF SERVICE. Service as a Director of the Company from one Annual Meeting of Shareholders to the next subsequent Annual Meeting of Shareholders shall constitute one "Year of Service" under the Plan. In the case of service as a Director for part of a Year of Service, service for at least six months - -- or attendance at two or more board meetings if the period is less than six months -- shall count as one full Year of Service. All Years of Service shall be counted for Directors who serve as such, both before and after the effective date of the Plan. 5. RETIREMENT BENEFITS. A Director who retires from the Board of Directors of the Company at age 65 or older with at least six (6) Years of Service as a Director shall have a vested right to receive an annual benefit equal to the amount of the annual retainer that is payable to Company directors for the Year of Service in which the Director's retirement occurs. A Director will be entitled to receive the annual benefit for a period of years equal to his or her full Years of Service or until death, whichever is earlier. The annual benefit will commence in May after the Annual Meeting of Shareholders next following the Director's 70th Birthday. During any year in which the Company is not a publicly held corporation, the Annual Meeting of Shareholders shall be deemed to have occurred on the last business day of April. The annual benefit shall be payable on a quarterly basis starting with the month of May in which the benefit commences, until the benefit period ends or death occurs, whichever is earlier. Page 1 of 4 2 Directors who have retired prior to the effective date of this Plan and meet the qualification requirements will commence receiving an annual benefit of $20,000 on the later of (i) November 15, 1989 or (ii) the month of May after the Annual Meeting of Shareholders next following the Director's 72nd birthday. Notwithstanding the foregoing, a Director who ceases to serve as a Director after May 22, 1990 and within 24 months of the occurrence of a "Change of Control" shall, for purposes of meeting the eligibility requirements for the retirement benefits provided hereunder, but not for purposes of determining the time of commencement of such benefits, be deemed to have satisfied the age 65 requirement as of the date he ceases to so serve. For this purpose, a "Change of Control" shall mean the occurrence of any one or more of the following events: (i) the Company shall (i) merge or consolidate with or into another corporation or entity or enter into a share exchange between shareholders of the Company and another corporation or entity pursuant to Article 5.02 of the Texas Business Corporation Act and as a result of such merger, consolidation or share exchange less than seventy percent (70%) of the outstanding voting securities of the surviving or resulting corporation or entity shall then be owned in the aggregate by the former shareholders of the Company, other that (x) affiliates (within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of the Company or (y) any party to such merger, consolidation or share exchange or (ii) sell, lease, exchange or otherwise dispose of all or substantially all of the Company's property and assets in one transaction or a series of related transactions to one or more other corporations or entities that are not subsidiaries of the Company; (ii) the shareholders of the Company adopt a plan of liquidation; (iii) any corporation, person or group (within the meaning of Sections 13(d) or 14 (d)(2) of the Exchange Act) (other than a participant in this Plan, the Company, any of the Company's subsidiaries, any employee benefit plan of the Company and/or one or more of its subsidiaries or any person or entity organized, appointed or established pursuant to the terms of any such employee benefit plan) becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of voting securities of the Company representing thirty percent (30%) or more of the total number of votes eligible to be cast at any election of Directors; or (iv) as a result of, or in connection with, any tender offer or exchange offer, share exchange, merger, consolidation or other business combination, sale, lease, exchange or other disposition of all or substantially all of the Company's assets, a contested election, or any combination of the foregoing transactions, the persons who were Directors on May 1, 1990 (the "Incumbent Board") shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company, provided that any person becoming a Director subsequent to May 1, 1990 whose election, or nomination for election by the Company's shareholders was approved by a vote of at least three-quarters of the Directors comprising the Incumbent Board (either by a specific vote or by approval of a proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be, for purposes of the Plan, considered as though such person were a member of the Incumbent Board. Notwithstanding the foregoing, no "Change of Control" shall be deemed to have occurred with respect to a Director who, after giving effect to a reorganization, recapitalization, spin-off, or other transaction, however structured, is a director of a corporation (or other entity) (the "Continuing Corporation"), (x) at least 70% of the outstanding voting securities of the ultimate parent entity of which (or of the Continuing Corporation, if there is no such ultimate parent entity) are beneficially owned in the aggregate, directly or indirectly through one or more intermediaries, by the former shareholders of the Company, other than affiliates (within the meaning of the Exchange Act) of the Company, and (y) at least a majority of the directors of the ultimate Page 2 of 4 3 parent entity of which (or of the Continuing Corporation, if there is no such ultimate parent entity) are members of the Incumbent Board (determined as provided in item (iv) above; provided, however, that this exception shall apply only if the ultimate parent entity of the Continuing Corporation (if there is such ultimate parent entity) or the Continuing Corporation (if there is no such ultimate parent entity) shall have adopted a plan substantially similar to the Plan (the "Substitute Plan") on or prior to the effective date of such reorganization, recapitalization, spin-off, or other transaction, however structured, with such ultimate parent entity (or the Continuing Corporation, if there is no such ultimate parent entity) to be substituted for the Company for all purposes under the Substitute Plan. The "ultimate parent entity" of any corporation or other entity is the entity (i) which either alone or through one or more majority owned subsidiaries, beneficially owns (within the meaning of the Exchange Act) 50% or more of the outstanding voting securities of such corporation or other entity (based upon voting power in an election of directors), and (ii) as to which there is no corporation or other entity which beneficially owns (within the meaning of the Exchange Act) 50% or more of its outstanding voting securities (based upon voting power in an election of directors). The occurrence of the above events shall be the date of, but immediately prior to the time of, consummation of a merger, consolidation, share exchange or sale, lease, exchange or disposition of property and assets referred to in item (i) above, the date of any shareholder adoption of a plan of liquidation referred to in item (ii) above, the date on which the event described in item (iii) above occurs, or the date of the change in constituency of the Board of Directors of the Company, as described in item (iv) above. 6. DISABILITY BENEFITS. If a Director who has six or more Years of Service resigns as a director or refrains from seeking reelection as a director because of an inability to perform, to a material and substantial extent, the duties of a director of the Company as the result of sickness or bodily injury, such Director will be entitled to receive an annual benefit for a period of years equal to his or her number of full Years of Service or until death, whichever is earlier. The annual Benefit will be equal to the amount of annual retainer that is payable to Company Directors for the Year of Service in which the Director's disability occurs. The annual benefit shall be payable to the Director on a quarterly basis starting in the month of May, August, November or February first following the date he or she ceases to be a Director. Benefits will continue on a quarterly basis until the end of the benefit period or the date of death, whichever is sooner. 7. BENEFIT NOT ASSIGNABLE. A Director's rights under the Plan shall not be subject to assignment encumbrance, garnishment, attachment, or charge, whether voluntary or involuntary. 8. EFFECTIVE DATE, AMENDMENT, AND TERMINATION OF PLAN. The Plan shall be effective as of October 26, 1989. The Company reserves the right to amend or terminate the Plan at any time by action of its Board of Directors, provided that any such action shall not, without a Director's consent, adversely affect any Director's right to a benefit which accrued pursuant to the provisions of the Plan prior to such action. 9. ADMINISTRATION OF PLAN. The Plan shall be administered by an Administrator who shall be a person or committee appointed by the Chairman of the Board. All decisions that are made by the Administrator with respect to interpretation of the terms of the Plan, with respect to the amount of benefits payable under the Plan, and with respect to any questions or disputes arising under the Plan shall be final and binding on the Company and the directors and their heirs or beneficiaries. 10. CONSTRUCTION. The Plan shall be governed by, and interpreted and enforced in accordance with, the laws of the State of Texas and of the United States of America. Page 3 of 4 4 IN WITNESS WHEREOF, the Company has adopted this Plan as evidenced by the signatures affixed hereto of its duly authorized officers, as of October 28, 1993. AMERICAN GENERAL CORPORATION By: /s/ JAMES R. TUERFF --------------------------------- James R. Tuerff President ATTEST: /s/ KURT G. SCHREIBER --------------------------- Kurt G. Schreiber Corporate Secretary Page 4 of 4 EX-11 18 EX-11 TO 10-K 1 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE
For the Years Ended December 31, In millions, except share data 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------- Net income available to common stock Income before cumulative effect of accounting changes $ 250* $ 533 $ 480 Cumulative effect of accounting changes (46) - - Less dividends on preferred stock - - (1) - --------------------------------------------------------------------------------------------------------------- Net income available to common stock $ 204 $ 533 $ 479 - --------------------------------------------------------------------------------------------------------------- Average shares outstanding Common shares 216,117,181 217,042,022 224,741,640 Assumed exercise of stock options 461,655 608,334 465,994 Assumed conversion of debentures - 54,264 154,312 - --------------------------------------------------------------------------------------------------------------- Total 216,578,836 217,704,620 225,361,946 - --------------------------------------------------------------------------------------------------------------- Earnings per share Income before cumulative effect of accounting changes $ 1.15* $ 2.45 $ 2.13 Cumulative effect of accounting changes (.21) - - - --------------------------------------------------------------------------------------------------------------- Net income per share $ .94 $ 2.45 $ 2.13 - ---------------------------------------------------------------------------------------------------------------
* Includes $300 million write-down of goodwill ($1.39 per share) and $30 million charge ($.14 per share) due to 1993 tax law change. Additional information is incorporated herein by reference from Notes 1.7 and 6.2, respectively, of the Notes to Financial Statements. EX-12 19 EX-12 TO 10-K 1 EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Years Ended December 31, In millions, except ratios 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------- Consolidated operations: Income before income tax expense and cumulative effect of accounting changes $ 602* $ 775 $ 678 Fixed charges deducted from income Interest expense Consolidated 483 508 565 Relating to real estate operations 5 8 3 Implicit interest in rents 15 13 13 - ----------------------------------------------------------------------------------------------------------- Total fixed charges deducted from income 503 529 581 - ----------------------------------------------------------------------------------------------------------- Earnings available for fixed charges $ 1,105* $ 1,304 $ 1,259 - ----------------------------------------------------------------------------------------------------------- Fixed charges per above $ 503 $ 529 $ 581 Capitalized interest relating to real estate operations 15 21 31 - ----------------------------------------------------------------------------------------------------------- Total fixed charges $ 518 $ 550 $ 612 - ----------------------------------------------------------------------------------------------------------- Ratio of earnings to fixed charges 2.1 2.4 2.1 - ----------------------------------------------------------------------------------------------------------- Consolidated operations, corporate fixed charges only: Income before income tax expense and cumulative effect of accounting changes $ 602* $ 775 $ 678 Corporate fixed charges deducted from income - corporate interest expense 121 126 140 - ----------------------------------------------------------------------------------------------------------- Earnings available for fixed charges $ 723* $ 901 $ 818 - ----------------------------------------------------------------------------------------------------------- Ratio of earnings to corporate fixed charges 6.0 7.2 5.8 - ----------------------------------------------------------------------------------------------------------- American General Finance, Inc.: Income before income tax expense and cumulative effect of accounting changes $ 337 $ 250 $ 208 Fixed charges deducted from income Interest expense 380 398 440 Implicit interest in rents 10 9 9 - ----------------------------------------------------------------------------------------------------------- Total fixed charges deducted from income 390 407 449 - ----------------------------------------------------------------------------------------------------------- Earnings available for fixed charges $ 727 $ 657 $ 657 - ----------------------------------------------------------------------------------------------------------- Ratio of earnings to fixed charges 1.9 1.6 1.5 - -----------------------------------------------------------------------------------------------------------
* Includes $300 million write-down of goodwill. Additional information is incorporated herein by reference from Note 1.7 of the Notes to Financial Statements. EX-13 20 EXHIBIT 13 FOR AMERICAN GENERAL 10K 1 Exhibit 13 ______________________________________________________________________________ BUSINESS SEGMENT OVERVIEW 1993 HIGHLIGHTS ______________________________________________________________________________ RETIREMENT ANNUITIES The Variable Annuity Life Insurance Company -- Operating earnings up 25% to (VALIC) is a leading provider of tax- a record $162 million deferred retirement plans for teachers and -- 10th consecutive year of other employees of not-for-profit double-digit earnings increases organizations. -- Assets grow 18% to $21 billion (See pages 12 and 18) -- Participants increase 11% to 761,000 ______________________________________________________________________________ CONSUMER FINANCE -- Operating earnings up 28% to American General Finance offers a wide a record $206 million range of consumer loans and other credit- -- 13th consecutive year of record related products and services. earnings (See pages 14 and 19) -- Receivables grow to $6.6 billion -- Customer accounts increase 17% to more than two million ______________________________________________________________________________ LIFE INSURANCE -- Operating earnings total American General's life insurance $291 million companies emphasize the sale and service -- Life and annuity sales up 16% of both traditional and interest-sensitive and 21%, respectively life insurance and annuities. -- $88 billion of insurance in (See pages 16 and 19) force -- Life insurance for more than three million households ______________________________________________________________________________ OPERATING EARNINGS - -- Retirement Annuities - -- Consumer Finance {PIE CHART} - -- Life Insurance _____________________________________________________________________________ 10 AMERICAN GENERAL CORPORATION 2 _______________________________________________________________________________ {AMERICAN GENERAL LOGO} PRODUCTS AND SERVICES - ---------------------------------------- RETIREMENT ANNUITIES -- Tax-deferred retirement plans _ Pension and thrift programs _ Deferred compensation plans _ IRAs -- Annuities _ Fixed _ Variable -- Retirement counseling services - ---------------------------------------- CONSUMER FINANCE -- Consumer loans -- Home equity loans -- Retail financing -- Credit-related insurance -- VISA_ and MasterCard_ -- Private label credit cards - ---------------------------------------- LIFE INSURANCE -- Traditional life insurance _ Whole life _ Term life -- Interest-sensitive life insurance _ Universal life _ Excess-interest whole life -- Annuities _ Fixed _ Variable - ---------------------------------------- DISTRIBUTION SYSTEMS - ---------------------------------------- RETIREMENT ANNUITIES -- 740 retirement plan specialists -- 32 branch offices -- 19 regional offices - ---------------------------------------- CONSUMER FINANCE -- 6,500 consumer loan specialists -- 1,200 branch offices -- 17,000 retail merchants - ---------------------------------------- LIFE INSURANCE -- 5,500 employee-agents -- 221 district offices -- 8,500 general agents and agents -- 520 master general agents - ---------------------------------------- PRIMARY MARKETS - ---------------------------------------- RETIREMENT ANNUITIES -- Employees of: _ Primary/secondary schools _ Colleges and universities _ Hospitals _ State and local governments -- All states and the District of Columbia - ---------------------------------------- CONSUMER FINANCE -- Individual consumers -- Retail merchants -- 40 states, Puerto Rico, and the Virgin Islands - ---------------------------------------- LIFE INSURANCE -- Individual consumers -- Business owners -- Employer-sponsored programs -- Customers of banks and credit unions -- All states and the District of Columbia - ---------------------------------------- REVENUES ASSETS EQUITY {PIE CHART} {PIE CHART} {PIE CHART} _______________________________________________________________________________ 1993 ANNUAL REPORT 11 3 _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS BUSINESS SEGMENTS MANAGEMENT'S DISCUSSION AND ANALYSIS APPEARS ON PAGES 18-24, 26, 28, AND 30, AND SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES BEGINNING ON PAGE 25. American General reports the results of its business operations in three segments: Retirement Annuities, Consumer Finance, and Life Insurance. To facilitate meaningful period-to-period comparisons, operating earnings of each segment include earnings from its business operations and earnings on that amount of equity considered necessary to support its business, and exclude net realized investment gains, non-recurring items, and the effect of accounting changes. SEGMENT OPERATING EARNINGS
In millions 1993 1992 1991 _______________________________________________________________________________ Retirement Annuities $162 $130 $110 Consumer Finance 206 161 136 Life Insurance 291 323 326 _______________________________________________________________________________ Segment operating earnings 659 614 572 Non-recurring items (329) _ _ _______________________________________________________________________________ Total segment earnings $330 $614 $572 _______________________________________________________________________________
Non-recurring items include a $300 million write-down of acquisition-related goodwill in the Life Insurance segment (see Note 1.7) and a $29 million charge due to a 1993 tax law change (see Note 6.2). RETIREMENT ANNUITIES The Variable Annuity Life Insurance Company (VALIC), American General's retirement annuity company, specializes in providing tax-deferred retirement plans for teachers and other employees of not-for-profit organizations. RETIREMENT ANNUITIES Assets Operating Earnings $ in billions $ in millions {BAR CHART} {BAR CHART} RESULTS. Profitability of the retirement annuity business is a function of three elements: assets, net interest margin, and operating expenses. RETIREMENT ANNUITIES
In millions 1993 1992 1991 _______________________________________________________________________________ Assets $20,896 $17,673 $15,056 Deposits received 2,132 1,901 1,645 Revenues 1,470 1,358 1,212 Operating earnings 162 130 110 _______________________________________________________________________________
Revenues, which consist principally of investment income, increased as a result of the 15% growth in total assets in 1993 (excluding the fair value adjustment discussed in Note 1.2) and the 17% growth in 1992. With lower prevailing interest rates, more of VALIC's participants are electing equity investments offered by VALIC's variable accounts. Variable account premium deposits grew 60% in 1993 to $432 million, compared to a growth of 45% in 1992. Average investment yields on fixed accounts declined 59 basis points in 1993 and 41 basis points in 1992. As a result of management's ability to make corresponding reductions in the rates credited to policyholders, the net interest margin increased 7 basis points in 1993 and remained stable in 1992. During these years, the ratio of operating expenses to total assets also declined slightly. A large part of this segment's business is tax-qualified retirement annuities, which generally experience lower withdrawal rates than non-qualified annuities. The rate of policyholder surrenders has remained low at 3.9% of average reserves in 1993 and 3.8% in 1992, an improvement from 4.6% in 1991. Operating earnings for 1993, 1992, and 1991 were reduced by aftertax charges of $5 million, $8 million, and $7 million, respectively, for actual and anticipated assessments by state insurance guaranty associations. OUTLOOK. Despite increased competition, especially from equity mutual funds, this segment's leading market position, exclusive distribution system, and strong claims-paying ability ratings should result in continued strong asset growth. By managing interest-crediting rates to reflect changing investment yields, the company expects to maintain a stable net interest margin. As a result, earnings in this segment should continue to increase. 18 AMERICAN GENERAL CORPORATION 4 ______________________________________________________________________________ {AMERICAN GENERAL LOGO} CONSUMER FINANCE American General Finance and its subsidiaries offer a wide range of consumer loans and other credit-related products and services through a national network of 1,200 branch offices. RESULTS. Principal influences on this segment's results include the cost of borrowed funds, credit loss experience, operating expenses, and the aggregate amount and mix of finance receivables. CONSUMER FINANCE
In millions 1993 1992 1991 _____________________________________________________________________________ Assets $7,641 $7,192 $6,875 Loan volume 5,408 4,362 3,655 Revenues 1,282 1,178 1,147 Operating earnings 206 161 136 _____________________________________________________________________________
Due to the decline in interest rates over the past two years, the average cost of borrowing for this segment declined by 82 basis points in 1993 and 87 basis points in 1992. By changing the mix of receivables to emphasize direct consumer loans rather than home equity loans, management has been able to increase the average yield on finance receivables by 18 and 19 basis points during 1993 and 1992, respectively. During 1993, internally generated business development produced a 6% increase in total finance receivables to $6.6 billion. The 4% increase in 1992 principally reflected growth through acquisitions of blocks of receivables during the year. As expected, credit quality was off slightly in 1993 due to the shift in receivables mix. Delinquencies increased from 2.2% in 1992 to 2.5% in 1993, while charge offs remained flat at 2.2%. Operating expenses increased 8% in 1993 and 5% in 1992 reflecting higher costs of branches acquired in 1992, a major branch office automation program in 1993, and increased provision for credit losses in 1993, partially offset by increased deferrals of loan origination costs. OUTLOOK. Based on the expectation of continued gradual improvement in the economy, the company expects stable cost of borrowed funds and credit loss experience in 1994. Management also expects to maintain the yield on the finance receivables portfolio while increasing its size. As a result, earnings in this segment should continue to increase. LIFE INSURANCE The Life Insurance segment includes American General Life and Accident (AGLA), which emphasizes the sale and service of traditional life insurance products in the home by employee-agents, and American General Life, which provides life insurance and annuity products for business, estate planning, and capital accumulation needs. RESULTS. Principal factors in the declining earnings of this segment over the past three years have been lower interest rates and increased income taxes. In addition, crediting practices on interest-sensitive products, sales, persistency, mortality, and operating expenses affect operating earnings. LIFE INSURANCE
In millions 1993 1992 1991 _____________________________________________________________________________ Assets $14,192 $13,328 $12,632 Deposits received 993 838 602 Revenues 2,054 2,045 2,021 Operating earnings 291 323 326 _____________________________________________________________________________
Life sales, as measured by new annualized premiums, increased 16% to $260 million in 1993, compared to a 13% increase in 1992. Annuity sales increased 21% to $451 million in 1993, compared to an increase of 126% in 1992. Improved sales reflect favorable agent recruiting and retention, and the "flight to quality" resulting from the AAA claims-paying ratings of companies in this segment. Continued attention to expense management improved expense ratios in 1993.
CONSUMER FINANCE LIFE INSURANCE Assets Operating Earnings Assets Operating Earnings $ in billions $ in millions $ in billions $ in millions {BAR CHART} {BAR CHART} {BAR CHART} {BAR CHART}
1993 ANNUAL REPORT 19 5 _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS BUSINESS SEGMENTS (CONTINUED) However, the positive impact on earnings of higher sales and favorable operating expense trends was more than offset by a decline in investment yields, from 9.9% in 1992 to 9.3% in 1993. American General Life has been able to manage interest crediting rates on interest-sensitive and annuity products to partially offset declining yields. However, AGLA's margins have declined because of fixed crediting rates on the majority of its insurance in force. Changes in mortality and persistency did not materially affect operating results for 1993. In addition, operating earnings were adversely affected by an increase in the effective income tax rate to 36% in 1993 from 30% in 1992. Earnings for 1992 and 1991 were positively affected by tax benefits of $29 million and $33 million, respectively. Operating earnings for 1991 also included a $6 million aftertax gain on the restructuring of a group life contract and $4 million from a subsidiary sold that year. Operating earnings for 1993 exclude non-recurring items: a $21 million charge to reflect the one-time effect of the increase in the federal income tax rate from 34% to 35% (see Note 6.2) and a $300 million non-cash write-down of acquisition-related goodwill (see Note 1.7). The write-down of goodwill resulted from a strategic review of certain life insurance subsidiaries completed in 1993. This review, which included a comprehensive analysis by management and outside advisers, indicated the book value of these subsidiaries exceeded their fair value by $300 million. This review also resulted in the decision to sell two life insurance subsidiaries. OUTLOOK. The expected continued decline of investment yields in 1994 will be partially offset by the effect of continued sales increases, particularly of annuity and other interest-sensitive products, and operating expense reductions. ECONOMIC FACTORS AFFECTING BUSINESS SEGMENTS INTEREST RATES. The pricing and profit margins of the products and services offered by American General's operating subsidiaries are sensitive to interest rates. Fluctuations in interest rates also affect the value and duration of the assets and liabilities supporting these products and services. American General may respond to fluctuations in interest rates by adjusting interest-crediting rates, repricing products, and/or changing investment strategy. American General's investment portfolio includes $10.7 billion of mortgage-backed securities (MBSs), primarily collateralized mortgage obligations, which are subject to prepayment at any time without penalty. MBSs having an amortized cost less than par produce additional income in the year of prepayment due to the unamortized discount. As a result of the current interest rate environment, approximately $2.7 billion of higher coupon MBSs were repaid in 1993, and the proceeds were reinvested at lower current yields. Repayment of a somewhat lower amount is expected in 1994. TAXATION. Tax laws affect not only the way American General is taxed but also the design of many of its products. Changes in tax laws or regulations could adversely affect operating results. The Revenue Reconciliation Act of 1993 increased the federal corporate tax rate by 1% and caused an increase in current taxes and a one-time increase in deferred income taxes, which together decreased net income by $30 million in 1993 (see Note 6.2). STATUTORY ACCOUNTING. Statutory accounting is the basis for determining the adequacy of capital and dividend-paying capacity of insurance companies. State insurance laws prescribe statutory accounting practices for calculating net income and equity (capital and surplus) that differ from generally accepted accounting principles (GAAP). A reconciliation of those differences for subsidiaries in the Life Insurance and Retirement Annuities segments was as follows:
In millions 1993 1992 1991 ______________________________________________________________________________ Statutory net income $ 443 $ 392 $ 460 GAAP income before accounting changes $ 127(a) $ 453 $ 435 ______________________________________________________________________________ Statutory equity $ 1,718 $1,717 $1,791 Investment valuation differences 1,862(b) 259 185 Deferred policy acquisition costs 1,758 2,077 1,914 Deferred income taxes (1,117) (634) (635) Adjustments to policy reserves 679 602 644 Equity allocated to corporate (536) (492) (678) Acquisition-related goodwill 319 626 647 Other, net (136) (24) (86) ______________________________________________________________________________ Total GAAP equity $4,547 $4,131 $3,782 ______________________________________________________________________________
(a) Includes $300 million goodwill write-down and $26 million tax charge. (b) Includes $1.5 billion due to adoption of SFAS 115. GUARANTY ASSOCIATIONS. All 50 states have laws requiring solvent life insurance companies to pay assessments to protect the interests of policyholders of insolvent life insurance and annuity companies. A portion of these assessments can be recovered against the payment of future premium taxes; however, changes in state laws could decrease the amount available for offset. 20 AMERICAN GENERAL CORPORATION 6 _______________________________________________________________________________ {AMERICAN GENERAL LOGO} The amounts assessed American General's life insurance and annuity subsidiaries under such laws were $14 million each for 1993 and 1992, and $4 million for 1991. The assessments for 1993 and 1992 were offset by $5 million considered recoverable against future premium taxes. At year-end 1993, the accrued liability for anticipated unrecoverable assessments was $19 million, compared to $17 million for 1992 and $10 million for 1991. REGULATION. Concerns about asset quality and capital adequacy of the insurance industry have resulted in increased scrutiny by insurance regulators. On January 1, 1994, the National Association of Insurance Commissioners (NAIC) adopted a Risk-based Capital (RBC) formula that can be used to evaluate the adequacy of life insurance companies' statutory capital and surplus. The RBC formula specifies various weighting factors that are applied to financial balances or levels of activity of each company, based on the perceived degree of risk. Calculations at December 31, 1993, using the RBC formula, indicate that the Life Insurance and Retirement Annuities subsidiaries' "Total Adjusted Capital" ranges from 2.4 to 5.9 times (or a weighted average of 3.0 times) the RBC standard, or "Company Action Level." The NAIC recently withdrew proposed regulations that would further restrict the payment of dividends by insurance subsidiaries to their parent companies. The NAIC has indicated that it intends to continue work on a new model law that will set forth the types of investments insurance companies may lawfully make. American General is not aware of any regulations or pending regulatory actions that would have a material effect on the company's liquidity, capital resources, or operations. AIDS. AIDS-related claims of American General's life insurance companies represented 2% of claims paid during the last three years, comparable to the industry average. ENVIRONMENTAL. American General's principal exposure to environmental regulation arises from its ownership of investment real estate. Probable costs related to environmental cleanup are estimated to be $5 million and appropriate liabilities have been recorded to reflect these costs. _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS INVESTMENTS At year-end 1993, American General's $44 billion of assets included $32 billion of investments, principally supporting insurance and annuity liabilities. INVESTED ASSETS
In millions 1993 % 1992 1991 ________________________________________________________________________ Fixed maturity securities* $26,479 83% $21,308 $17,913 Mortgage loans 3,032 10 3,703 4,247 Policy loans 1,156 4 1,081 1,039 Investment real estate 772 2 1,066 1,044 Equity securities 233 1 390 438 Other 204 _ 266 344 ________________________________________________________________________ Total invested assets $31,876 100% $27,814 $25,025 ________________________________________________________________________
*1993 reflects adoption of SFAS 115 (see Note 1.2). INVESTMENT STRATEGY The objective of American General's investment strategy is to meet long-term obligations to insurance policyholders, customer expectations for competitive products, and shareholder expectations for competitive returns. In pursuing this objective, American General continually reviews the investment portfolio to identify opportunities to maximize total aftertax return on invested assets subject to the constraints of safety, liquidity, diversification, and regulation. The investment portfolios of each insurance and annuity subsidiary are designed and managed centrally to produce risk/return profiles and durations that reflect the reserve liability profiles and competitive needs of each subsidiary's insurance products. As a result, assets and liabilities are managed to reduce the risk of loss arising from changes in interest rates by seeking to match cash flows of the assets with the cash flows of liabilities they support. FIXED MATURITY SECURITIES At year-end 1993, fixed maturity securities included $13.9 billion of corporate bonds, $10.7 billion of mortgage-backed securities, $1.7 billion of bonds issued by governmental agencies, and $133 million of preferred stocks with mandatory redemption provisions. On adoption of Statement of Financial Accounting Standards (SFAS) 115 (see Note 1.2) at December 31, 1993, all debt and equity securities were classified as available-for- 1993 ANNUAL REPORT 21 7 _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS INVESTMENTS (CONTINUED) sale and reported at fair value. Before adoption of SFAS 115, unrealized gains on fixed maturity securities, equal to the excess of fair value over amortized cost, were not recorded on the balance sheet. The unrealized gains on fixed maturities at December 31, 1993 were $1.6 billion. This compares to $1.2 billion and $1.3 billion at year-end 1992 and 1991, respectively. RATINGS OF FIXED MATURITY SECURITIES
Average In millions Fair Value % Rating _________________________________________________________________ Investment grade $15,044 57% A Mortgage-backed 10,678 40 AAA Below investment grade 757 3 BB- _________________________________________________________________ Total fixed maturity securities $26,479 100% AA- _________________________________________________________________
The average credit rating of the fixed maturity securities was AA- at year-end 1993, 1992, and 1991. Below investment grade bonds, defined as bonds which have a credit rating below BBB-, accounted for 2.3% of invested assets at year-end 1993, down from 2.5% at year-end 1992 and 3.0% at year-end 1991. These percentages compare to the life insurance industry average of 4.4% as of December 31, 1992, the last date for which information is available. Net income from below investment grade bonds, including realized investment gains and losses and write-downs, was $49 million in 1993, compared to $40 million in 1992 and $50 million in 1991. Bonds are deemed to be non-performing when the payment of interest is sufficiently uncertain as to preclude the accrual of interest. Non-performing bonds, net of an allowance for losses in 1992 and 1991, were 0.2% of total fixed maturity securities at year-end 1993, compared to 0.5% and 0.6% at year-end 1992 and 1991, respectively. NON-PERFORMING BONDS
In millions 1993 1992 1991 _____________________________________________________ Non-performing bonds $46 $126 $147 Allowance for losses - (26) (40) _____________________________________________________ Net non-performing bonds $46 $100 $107 _____________________________________________________
MORTGAGE LOANS Mortgage loans on real estate represented 10% of invested assets at December 31, 1993, down from 13% in 1992 and 17% in 1991. In 1993, new mortgage loans were 1% of new investments, compared to 1% in 1992 and 5% in 1991. These declines reflect prepayment of loans as a result of declining interest rates and the company's reduced emphasis on mortgage lending. MORTGAGE LOANS
In millions 1993 1992 1991 _______________________________________________________________ Commercial $2,997 $3,453 $3,682 Residential 133 303 615 Allowance for losses (98) (53) (50) _______________________________________________________________ Total mortgage loans $3,032 $3,703 $4,247 _______________________________________________________________ Delinquent (60+ days) 2.2% 3.1% 2.6% Restructured commercial loans 2.2 1.6 1.6 _______________________________________________________________ Total non-performing 4.4% 4.7% 4.2% _______________________________________________________________ Foreclosures during the year $45 $69 $59 _______________________________________________________________
An allowance for losses has been established for all non-performing loans and loans about which there is a concern based on management's assessment of risk factors such as potential non-payment or non-monetary default. The allowance is based on a loan-specific review and a formula that reflects past results and current trends. At year-end 1993, the allowance for losses on mortgage loans was $98 million or 3.1% of total mortgage loans, compared to $53 million or 1.4% and $50 million or 1.2%, at year-end 1992 and 1991, respectively. The increase in the allowance is due principally to a $20 million reserve for California and other properties affected by adverse economic conditions and an increase in the amount of loans on the company's watch list. At year-end 1993, $467 million of performing commercial mortgage loans were on the company's watch list. This amount is up from $188 million at year-end 1992 and $155 million at year-end 1991. The increase in the watch list amount is due primarily to a more active portfolio review and a tightening of standards for the placement of loans on the watch list. While this increase may be predictive of higher non-performing loans in the future, American General does not anticipate a significant effect on operations, liquidity, or capital from these loans. Non-performing mortgage loans include loans delinquent 60 days or more and commercial loans that have been restructured. Non-performing mortgage loans totaled $137 million at year-end 1993, compared to $179 million and $184 million at year-end 1992 and 1991, respectively. At year-end 1993, the average yield on restructured commercial mortgage loans was 8.2%. 22 AMERICAN GENERAL CORPORATION 8 _______________________________________________________________________________ {AMERICAN GENERAL LOGO} At year-end 1993, 4.4% of the commercial mortgage loan portfolio was non-performing, down from 5.0% and 4.7% at year-end 1992 and 1991, respectively. This portfolio continues to outperform the life insurance industry averages for non-performing commercial mortgage loans, which were 14.6% at September 30, 1993, 14.1% at year-end 1992, and 11.0% at year-end 1991. During 1993, the company foreclosed on $45 million of mortgage loans and recognized write-downs of $15 million upon acquisition of the related properties, most of which had previously been included in the allowance for losses. POLICY LOANS Policy loans represented 3.6% of invested assets at year-end 1993, down from 3.9% at year-end 1992 and 4.2% at year-end 1991. Policy loan interest rates, which are contractually established, averaged 6.3% during 1993. INVESTMENT REAL ESTATE At year-end 1993, investment real estate totaled 2.4% of invested assets, compared to 3.8% in 1992 and 4.2% in 1991. INVESTMENT REAL ESTATE
In millions 1993 1992 1991 __________________________________________________________________________ Land development projects $642 $ 653 $ 613 Income-producing real estate 189 282 230 American General Center, Houston 125 130 130 Foreclosed real estate 69 130 133 Allowance for losses (253) (129) (62) ___________________________________________________________________________ Total investment real estate $772 $1,066 $1,044 ___________________________________________________________________________
The 1993 decreases in income-producing and foreclosed real estate were due to sales. The 1992 increases reflected additional investments in existing master-planned land development projects, as well as the assumption of control of certain income-producing joint ventures. The increase in the allowance for losses over the past two years primarily reflects declines in the net realizable value of certain real estate investments. While the value of any property may fluctuate with local market conditions, the net realizable value of the investment real estate portfolio, calculated in accordance with current GAAP, is at least equal to the value reflected in the financial statements. The adoption of a proposed SFAS, which would change the carrying value of land development projects from net realizable value to fair value, would require additional allowances for losses in the period of adoption, but American General does not anticipate a significant effect on liquidity, capital, or ongoing operations. Pretax net losses on real estate investments, including sales and reserve increases, totaled $170 million, $74 million, and $14 million in 1993, 1992, and 1991, respectively. No new real estate investments are planned, except for commitments on existing land development projects and possible foreclosures. All foreclosed real estate is considered held for sale. EQUITY SECURITIES Equity securities included $91 million of common stock and $142 million of perpetual preferred stock at year-end 1993. All equity securities were classified as available-for-sale and reported at fair value at December 31, 1993 in accordance with SFAS 115. Pretax realized gains from equity securities totaled $121 million, $55 million, and $29 million in 1993, 1992, and 1991, respectively. INVESTMENTS Invested Assets Investment Yield $ in billions Percent [BAR CHART] [BAR CHART] Net Non-Performing Fair Value of Bonds Percent of invested assets Percent of amortized cost [BAR CHART] [BAR CHART]
1993 ANNUAL REPORT 23 9 _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS STATEMENT OF INCOME REVENUES PREMIUMS AND OTHER CONSIDERATIONS. Premiums and other considerations, which consist of premiums on traditional life insurance products and mortality, expense, and surrender charges on interest-sensitive products, increased 3% in 1993 compared to 4% in 1992. Revenues exclude policyholder deposits on annuity and other interest-sensitive products. The company has focused increasingly on annuity and interest-sensitive products, which generated deposits of $3.1 billion, $2.7 billion, and $2.2 billion for the years 1993, 1992, and 1991, respectively. NET INVESTMENT INCOME. During the past three years, the rate of growth in net investment income has lagged the rate of growth in invested assets. This lag is the result of declining average portfolio yields, which reflect increased repayments of higher yielding investments and lower new investment rates. FINANCE CHARGES. The increase in finance charges during 1993 and 1992 of 9% and 2%, respectively, resulted from continued growth in finance receivables and an increased average yield on receivables. REALIZED INVESTMENT GAINS. Realized investment gains and losses may vary significantly from year to year since the decision to sell investments is determined principally by considerations of investment timing and tax consequences. Realized investment gains can also result from early redemption of fixed maturity securities and perpetual preferred stocks at the election of the issuer (calls) and changes in write-downs and reserves.
REALIZED INVESTMENT GAINS In millions 1993 1992 1991 ______________________________________________________________________________ Calls of fixed maturity securities $ 129 $ 102 $ 15 Sales/calls of equity securities 123 61 31 Other 54 10 52 Write-downs/reserve changes* (298) (155) (90) ______________________________________________________________________________ Total realized investment gains $ 8 $ 18 $ 8 ______________________________________________________________________________
*Primarily related to investment real estate. BENEFITS AND EXPENSES INSURANCE AND ANNUITY BENEFITS. The 5% increase in 1993 and 6% increase in 1992 in insurance and annuity benefits were primarily the result of an increase in interest credited to policyholder accounts due to growth in the Retirement Annuities segment. OPERATING COSTS AND EXPENSES. Operating costs and expenses increased 1% in 1993 and 3% in 1992. Excluding certain reclassifications, operating expenses increased 6% in 1993, primarily due to growth in salary expenses and a higher provision for credit losses in the Consumer Finance segment. The 1992 expenses reflected higher salary and employee benefit costs. State income taxes were $19 million in 1993, $21 million in 1992, and $16 million in 1991. State income taxes were reported in income tax expense in 1993 in accordance with SFAS 109. WRITE-DOWN OF ACQUISITION-RELATED GOODWILL. A $300 million non-cash write-down of acquisition-related goodwill was taken in 1993 to bring certain life insurance subsidiaries to fair value (see Note 1.7). INTEREST EXPENSE. Interest expense on corporate debt declined 6% in 1993 and 13% in 1992, primarily due to lower average corporate debt outstanding, combined with lower short-term interest rates. Interest expense on consumer finance debt declined 4% in 1993 and 9% in 1992, primarily due to lower borrowing rates, partially offset by the effect of higher average consumer finance debt outstanding. INCOME TAX EXPENSE Total income tax expense increased 45% in 1993, resulting in an effective tax rate of 58% (40% excluding the effect of the write-down of acquisition- related goodwill) compared to 31% for 1992 and 29% for 1991 (see Note 6.4). The 1993 increase in total income tax expense is due to a 16% increase in taxable income, the 1% tax rate increase (see Note 6.2), reclassification of state taxes, and the effect of the non-recurring $29 million of tax benefits in 1992. EARNINGS Operating earnings, which exclude net realized investment gains, non- recurring items, and the cumulative effect of accounting changes, increased 10% to $574 million, or $2.65 per share, in 1993, compared to a 9% increase to $524 million, or $2.41 per share, in 1992. Non-recurring items in 1993 include the $300 million write-down of goodwill and a $30 million tax rate related adjustment. EARNINGS PER SHARE Share purchases in 1993 under the company's ongoing buyback program had no significant impact on 1993 earnings per share, while purchases in 1992 and 1991 increased earnings per share in these years by $.01 and $.05, respectively. 24 AMERICAN GENERAL CORPORATION 10 _______________________________________________________________________________ CONSOLIDATED STATEMENT OF INCOME AMERICAN GENERAL CORPORATION {AMERICAN GENERAL LOGO} For the Years Ended December 31, In millions, except per share data
1993 1992 1991 _______________________________________________________________________________ REVENUES Premiums and other considerations $1,252 $1,213 $1,168 Net investment income 2,437 2,327 2,178 Finance charges 1,083 994 977 Realized investment gains 8 18 8 Other 49 50 64 _______________________________________________________________________________ Total revenues 4,829 4,602 4,395 _______________________________________________________________________________ BENEFITS Insurance and annuity benefits 2,311 2,198 2,065 AND EXPENSES Operating costs and expenses 1,133 1,121 1,087 Write-down of acquisition-related goodwill 300 - - Interest expense Corporate 108 116 132 Consumer Finance 375 392 433 _______________________________________________________________________________ Total benefits and expenses 4,227 3,827 3,717 _______________________________________________________________________________ EARNINGS Income before income tax expense and cumulative effect of accounting changes 602 775 678 _______________________________________________________________________________ Income tax expense Excluding tax rate related adjustment 322 242 198 Tax rate related adjustment 30 - - _______________________________________________________________________________ Total income tax expense 352 242 198 _______________________________________________________________________________ Income before cumulative effect of accounting changes 250 533 480 Cumulative effect of accounting changes (46) - - _______________________________________________________________________________ Net income $204 $533 $480 _______________________________________________________________________________ SHARE DATA Income before cumulative effect of accounting changes $1.15 $2.45 $2.13 Cumulative effect of accounting changes (.21) - - _______________________________________________________________________________ Net income per share $.94 $2.45 $2.13 _______________________________________________________________________________
See Notes to Financial Statements. 1993 ANNUAL REPORT 25 11 _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS BALANCE SHEET ASSETS INVESTMENTS. Management's Discussion and Analysis of Investments is on pages 21-23. At December 31, 1993, upon adoption of SFAS 115, the company classified all fixed maturity securities as available-for-sale and recorded a $1.6 billion adjustment to increase carrying value from amortized cost to fair value (see Note 1.2). FINANCE RECEIVABLES. Finance receivables are well diversified throughout 40 states, Puerto Rico, and the Virgin Islands. QUALITY OF FINANCE RECEIVABLES
As a percent of finance receivables 1993 1992 1991 ______________________________________________________________________________ Delinquencies (60+ days) 2.5% 2.2% 2.6% Charge offs 2.2 2.2 2.3 Allowance for credit losses 2.8 2.6 2.5 _____________________________________________________________________________
As expected, credit quality was off slightly in 1993, due to the shift in the receivables mix described on page 19. While finance receivables have some exposure to economic downturns, management believes that in the present environment the allowance for credit losses is adequate. INTANGIBLE ASSETS. The two largest intangible assets are deferred policy acquisition costs (DPAC) (see Note 1.6) and acquisition-related goodwill (see Note 1.7). At December 31, 1993, the company recorded a $550 million reduction in DPAC to reflect the effect of unrealized gains on fixed maturity securities under SFAS 115 (see Note 1.2). During 1993, the company recorded a $300 million non-cash write-down of acquisition-related goodwill to bring the value of certain life insurance subsidiaries to fair value. NET ASSETS OF LIFE INSURANCE COMPANIES HELD FOR SALE. On November 29, 1993, the company announced its intent to offer two life insurance subsidiaries for sale. The assets and liabilities of these subsidiaries were reclassified as net assets held for sale at December 31, 1993. SEPARATE ACCOUNT ASSETS AND LIABILITIES. Separate Accounts represent assets held under insurance and annuity contracts in which the policyholder bears the investment risk. Consequently, the insurer's liability for these accounts equals the value of the account assets. The 1993 and 1992 increases of 49% and 23%, respectively, reflect the rise in the equity markets and new sales in the Retirement Annuities segment. LIABILITIES INSURANCE AND ANNUITY LIABILITIES. Life insurance companies collect premiums and deposits from policyholders in exchange for long-term promises to pay future benefits. Insurance and annuity liabilities of $27 billion at year- end 1993 represent a quantification of these long-term obligations. INSURANCE AND ANNUITY LIABILITIES
In millions 1993 1992 1991 ______________________________________________________________________________ Retirement annuities $17,029 $15,012 $12,974 Traditional life 4,199 4,430 4,445 Interest-sensitive life 2,664 2,258 2,035 Other annuities 2,765 2,383 1,993 Other 582 653 624 ______________________________________________________________________________ Total insurance and annuity liabilities $27,239 $24,736 $22,071 ______________________________________________________________________________
CORPORATE DEBT. Corporate debt is used primarily for acquisitions and the buyback of common stock. Higher dividends from subsidiaries in 1993 were used to reduce debt. REAL ESTATE DEBT. Capital contributions from the parent company in 1993 were used to reduce debt. The 1992 increase resulted from the assumption of control of certain real estate joint ventures. CONSUMER FINANCE DEBT. Consumer finance debt, which is not guaranteed by the parent company, was increased in 1993 and 1992 to support higher levels of receivables. SHAREHOLDERS' EQUITY NET UNREALIZED GAINS. Historically, the amount reported as net unrealized gains related only to equity securities, which were carried at fair value. With the adoption of SFAS 115 at December 31, 1993, shareholders' equity increased $676 million due to the recording of net unrealized gains on fixed maturity securities classified as available-for-sale (see Note 1.2). Due to the requirements of SFAS 115, shareholders' equity will be subject to further volatility, resulting from the effect of interest rate changes on the fair value of fixed maturity securities. STOCK SPLIT. The 1992 changes in common stock and cost of treasury stock principally result from the issuance of treasury shares in connection with a two-for-one stock split (see Note 7.2). 26 AMERICAN GENERAL CORPORATION 12 _______________________________________________________________________________ CONSOLIDATED BALANCE SHEET AMERICAN GENERAL CORPORATION {AMERICAN GENERAL LOGO} At December 31, In millions
1993 1992 1991 _____________________________________________________________________________________________________ ASSETS Investments Fixed maturity securities Fair value (amortized cost: $24,885) $26,479 $ - $ - Amortized cost (fair value: $22,509; $19,195) - 21,308 17,913 Mortgage loans on real estate 3,032 3,703 4,247 Equity securities (cost: $182; $273; $349) 233 390 438 Policy loans 1,156 1,081 1,039 Investment real estate 772 1,066 1,044 Other long-term investments 137 231 302 Short-term investments 67 35 42 _____________________________________________________________________________________ Total investments 31,876 27,814 25,025 _____________________________________________________________________________________ Cash 6 17 39 Finance receivables, net 6,390 6,038 5,794 Deferred policy acquisition costs 1,637 2,083 1,919 Acquisition-related goodwill 618 937 952 Other assets 1,205 1,446 1,233 Net assets of life insurance companies held for sale 153 - - Assets held in Separate Accounts 2,097 1,407 1,143 _____________________________________________________________________________________ Total assets $43,982 $39,742 $36,105 _____________________________________________________________________________________________________ LIABILITIES Insurance and annuity liabilities $27,239 $24,736 $22,071 Debt (short-term amount) Corporate ($312; $379; $336) 1,257 1,371 1,391 Real Estate ($414; $569; $583) 429 616 590 Consumer Finance ($1,824; $1,930; $2,474) 5,843 5,484 5,243 Income tax liabilities 1,241 756 672 Other liabilities 739 756 666 Liabilities related to Separate Accounts 2,097 1,407 1,143 _____________________________________________________________________________________ Total liabilities 38,845 35,126 31,776 _____________________________________________________________________________________________________ SHAREHOLDERS' Common stock 365 368 1,894 EQUITY Net unrealized gains on securities 709 88 70 Retained earnings 4,229 4,263 3,959 Cost of treasury stock (166) (103) (1,594) _____________________________________________________________________________________ Total shareholders' equity 5,137 4,616 4,329 _____________________________________________________________________________________ Total liabilities and shareholders' equity $ 43,982 $39,742 $36,105 _____________________________________________________________________________________________________
See Notes to Financial Statements. 1993 ANNUAL REPORT 27 13 _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS CAPITAL REQUIREMENTS The overall financial strength of American General and its subsidiaries is based on consolidated shareholders' equity of $5.1 billion and is confirmed by strong ratings for both debt-paying and claims-paying ability. For analysis of capital requirements, the parent company and the business segments are discussed separately. PARENT COMPANY Total capital of the parent company is referred to as "corporate capital." Since the parent company is a holding company, the level of corporate capital is determined primarily by the required equity of its business segments, while the mix of corporate capital between debt and equity is influenced by overall corporate strategy and structure. At year-end 1993, corporate capital, consisting of $5.1 billion of shareholders' equity and $1.3 billion of corporate debt, totaled $6.4 billion, compared to $6.0 billion at year-end 1992. The 1993 increase in corporate capital reflects unrealized gains on fixed maturity securities of $676 million due to the adoption of SFAS 115 (see Note 1.2) and net income of $204 million, offset by a $114 million decrease in corporate debt, $238 million of dividends paid to shareholders, and $78 million of share repurchases. At year-end 1993, the ratio of corporate debt to corporate capital was 20%, compared to 23% at year-end 1992. Excluding the effect of the SFAS 115 adjustment, the 1993 ratio was 22%. Management has no present intention to significantly change this ratio, which is consistent with target corporate debt ratings. CORPORATE DEBT RATINGS
Commercial Paper Long-term Debt _______________________________________________________________________________ Standard & Poor's A-1+ (Highest) AA (Very Strong) Duff & Phelps Duff 1+ (Highest) AA (Very Strong) Moody's P-1 (Highest) A1 (Strong) _______________________________________________________________________________
CONSUMER FINANCE SEGMENT The capital of American General's Consumer Finance segment varies directly with the amount of finance receivables outstanding. The capital mix of consumer finance debt and equity is based primarily upon maintaining leverage at a level that supports cost-effective funding. At year-end 1993, consumer finance capital was $6.9 billion, compared to $6.6 billion a year earlier, due to a $374 million increase in finance receivables. The 1993 amount included $5.8 billion of consumer finance debt, which is not guaranteed by the parent company, and $1.1 billion of equity. The ratio of debt to tangible net worth (equity less goodwill and the fair value adjustment discussed in Note 1.2), which is a key measure of financial risk in the consumer finance industry, was 7.5 to 1 for the Consumer Finance segment at year-end 1993 and 1992. Management expects to maintain the current level of debt to tangible net worth. CONSUMER FINANCE DEBT RATINGS
Commercial Paper Long-term Debt _______________________________________________________________________________ Standard & Poor's A-1+ (Highest) A+ (Strong) Duff & Phelps Duff 1+ (Highest) -- Moody's P-1 (Highest) A1 (Strong) _______________________________________________________________________________
LIFE INSURANCE AND RETIREMENT ANNUITIES SEGMENTS The amount of capital required to support the business of American General's Life Insurance and Retirement Annuities segments is a function of three factors: the mortality risk of the life insurance in force; the quality of the assets invested to support insurance and annuity reserve liabilities; and the interest-rate risk resulting from potential mismatching of asset and liability durations. Total capital, or equity, for American General's Life Insurance and Retirement Annuities segments was $4.5 billion at year-end 1993, while insurance and annuity reserves were $27 billion and life insurance in force was $88 billion. The NAIC adopted risk-based capital requirements, which establish minimum capital levels for life insurers, effective January 1, 1994. Rating agencies are expected to use the NAIC approach as one of the factors in determining claims-paying ability ratings. Management believes that the capital of these subsidiaries is more than sufficient to maintain their claims-paying ability ratings. CLAIMS-PAYING ABILITY RATINGS
American American General Life VALIC General Life and Accident _______________________________________________________________________________ A.M. Best A++ A++ A++ Standard & Poor's AAA AAA AAA Duff & Phelps AAA AAA -- Moody's Aa2 -- -- _______________________________________________________________________________
28 AMERICAN GENERAL CORPORATION 14 ______________________________________________________________________________ CONSOLIDATED STATEMENT OF SHAREHOLDERS'S EQUITY AMERICAN GENERAL CORPORATION {AMERICAN GENERAL LOGO} For the Years Ended December 31, In millions
1993 1992 1991 ______________________________________________________________________________ COMMON Balance at beginning of year $ 368 $ 1,894 $ 1,893 STOCK Treasury shares issued and other (3) 7 1 Treasury shares issued for two-for-one stock split -- (1,533) -- __________________________________________________________________ Balance at end of year 365 368 1,894 ______________________________________________________________________________ NET Balance at beginning of year 88 70 37 UNREALIZED Change during year -- equity GAINS ON securities (55) 18 33 SECURITIES Effect of accounting change -- fixed maturity securities 676 -- -- __________________________________________________________________ Balance at end of year 709 88 70 ______________________________________________________________________________ RETAINED Balance at beginning of year 4,263 3,959 3,708 EARNINGS Net income 204 533 480 Dividends paid (238) (226) (227) Other -- (3) (2) __________________________________________________________________ Balance at end of year 4,229 4,263 3,959 ______________________________________________________________________________ COST OF Balance at beginning of year (103) (1,594) (1,500) TREASURY Purchases on the open market (78) (47) (92) STOCK Other, net 15 5 (2) Treasury shares issued for two-for-one stock split -- 1,533 -- __________________________________________________________________ Balance at end of year (166) (103) (1,594) ______________________________________________________________________________ SHARE- HOLDERS' Total shareholders' equity at EQUITY end of year $5,137 $ 4,616 $ 4,329 __________________________________________________________________
See Notes to Financial Statements ______________________________________________________________________________ CONSOLIDATED STATEMENT OF STOCK ACTIVITY AMERICAN GENERAL CORPORATION For the Years Ended December 31, In thousands of shares
1993 1992 1991 ______________________________________________________________________________ COMMON Balance at beginning of year 220,122 169,753 169,753 SHARES Conversion of convertible ISSUED securities -- 59 -- Two-for-one stock split -- 50,310 -- __________________________________________________________________ Balance at end of year 220,122 220,122 169,753 ______________________________________________________________________________ TREASURY Balance at beginning of year (3,865) (60,922) (58,478) SHARES Purchases on the open market (2,655) (996) (2,558) Two-for-one stock split -- 57,818 -- Issuance under employee benefit plans 556 235 114 __________________________________________________________________ Balance at end of year (5,964) (3,865) (60,922) ______________________________________________________________________________ OUTSTANDING Outstanding at end of year 214,158 216,257 108,831 SHARES __________________________________________________________________ Restated for two-for-one stock split 217,662 __________________________________________________________________
See Notes to Financial Statements. 1993 ANNUAL REPORT 29 15 _______________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS CASH FLOWS American General's cash flow activity in 1993 included cash flow from operations of $1.3 billion, a net increase in policyholder deposits of $2.2 billion, and net proceeds of $354 million from issuance of consumer finance debt. The major uses of this cash in 1993 were as follows: - -- $2.6 billion of net new investments to support increased insurance and annuity liabilities; - -- $523 million to fund increased finance receivables; - -- $270 million to reduce corporate and real estate debt; - -- $238 million to pay dividends to shareholders; and - -- $78 million to buy back common stock. PARENT COMPANY Operating cash flow for the parent company includes dividends from the business segments, partially offset by interest and other expenses not allocated to the segments. During 1993, operating cash flow of the parent company of $586 million was used to pay dividends to shareholders, to buy back common stock, and to reduce debt. LIFE INSURANCE AND RETIREMENT ANNUITIES SEGMENTS In 1993, the Life Insurance and Retirement Annuities segments generated $3.0 billion of cash, composed of $.8 billion from operations and $2.2 billion from the net increase in policyholder account deposits. This compares to total cash generated of $2.9 billion in 1992 and $2.4 billion in 1991. The increases resulted principally from the earnings and asset growth in the Retirement Annuities segment. The major uses of cash were the net purchase of investments necessary to support increases in insurance and annuity liabilities, and dividends paid to the parent company. The Life Insurance segment paid dividends to the parent company of $506 million in 1993, compared to $408 million in 1992 and $316 million in 1991. The Life Insurance segment is expected to continue to pay dividends to the parent company, while the Retirement Annuities segment is expected to use most of its internally generated cash to support its further growth. CONSUMER FINANCE SEGMENT Operating cash flow for the Consumer Finance segment includes net income adjusted for non-cash expenses such as the amortization of intangible assets and the provision for credit losses. In 1993, operating cash flow totaled $479 million, an increase from $365 million and $353 million in 1992 and 1991, respectively. The 1993 operating cash flow, coupled with net proceeds from increased debt, generated total cash flow of $833 million, compared to $602 million in 1992 and $497 million in 1991. This cash was used to fund the net increase in receivables and to pay dividends to the parent company. Dividends paid to the parent company totaled $163 million in 1993, compared to $137 million in 1992 and $150 million in 1991. Dividend levels are adjusted to maintain consumer finance leverage (ratio of debt to tangible net worth) at 7.5 to 1. Operating cash flow and access to money and capital markets, resulting from strong debt and commercial paper ratings, are expected to satisfy 1994 cash requirements, including long-term debt maturities. INVESTMENT CALLS, MATURITIES, AND SALES The source of cash flow from investment calls, maturities, and sales was as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Fixed maturities Repayments of mortgage- backed securities $2,650 $ 952 $ 265 Calls 2,098 2,790 736 Sales 842 240 368 Maturities 191 257 198 Mortgage loans 610 574 371 Equity securities 283 239 102 Other 293 137 91 _______________________________________________________________________________ Total $6,967 $5,189 $2,131 _______________________________________________________________________________
LIQUIDITY American General believes that its overall sources of liquidity will continue to be sufficient to satisfy its foreseeable financial obligations. American General and its subsidiaries maintain committed credit facilities of $2.5 billion with 45 domestic and foreign banks. While the principal purpose of these facilities is to support the issuance of commercial paper, they also provide an additional source of cash to American General and its subsidiaries. 30 AMERICAN GENERAL CORPORATION 16 ______________________________________________________________________________ CONSOLIDATED STATEMENT OF CASH FLOWS AMERICAN GENERAL CORPORATION {AMERICAN GENERAL LOGO} For the Years Ended December 31, In millions
1993 1992 1991 ________________________________________________________________________________ OPERATING Income before cumulative effect ACTIVITIES of accounting changes $ 250 $ 533 $ 480 Reconciling adjustments to net cash provided by operating activities Insurance and annuity liabilities 671 708 691 Deferred policy acquisition costs (192) (164) (96) Provision for finance receivable credit losses 163 135 137 Realized investment gains (306) (173) (98) Investment write-downs and reserves 298 155 90 Write-down of acquisition-related goodwill 300 -- -- Other, net 134 (141) 2 ___________________________________________________________________ Net cash provided by operating activities 1,318 1,053 1,206 ________________________________________________________________________________ INVESTING Investment purchases (9,523) (7,747) (4,335) ACTIVITIES Investment calls, maturities, and sales 6,967 5,189 2,131 Finance receivable originations or acquisitions (4,320) (3,687) (3,155) Finance receivable principal payments received 3,797 3,302 2,909 Other, net (207) (23) 299 ___________________________________________________________________ Net cash used for investing activities (3,286) (2,966) (2,151) ________________________________________________________________________________ FINANCING Retirement Annuities and Life ACTIVITIES Insurance Policyholder account deposits 3,125 2,739 2,247 Policyholder account withdrawals (918) (784) (803) ___________________________________________________________________ Total Retirement Annuities and Life Insurance 2,207 1,955 1,444 ___________________________________________________________________ Consumer Finance Net decrease in short-term debt (106) (529) (433) Long-term debt issuances 1,005 1,034 1,009 Long-term debt and preferred stock redemptions (545) (268) (432) ___________________________________________________________________ Total Consumer Finance 354 237 144 ___________________________________________________________________ Corporate Net increase (decrease) in short-term debt Corporate (214) (18) (150) Real Estate (156) (17) 95 Net long-term debt issuance (redemptions) 100 (2) (16) Dividend payments (238) (226) (227) Common share purchases (78) (47) (378) Other, net (18) 9 (19) ___________________________________________________________________ Total Corporate (604) (301) (695) ___________________________________________________________________ Net cash provided by financing activities 1,957 1,891 893 ________________________________________________________________________________ NET CHANGE Net decrease in cash (11) (22) (52) IN CASH Cash at beginning of year 17 39 91 ___________________________________________________________________ Cash at end of year $ 6 $ 17 $ 39 ___________________________________________________________________
See Notes to Financial Statements. 1993 ANNUAL REPORT 31 17 _____________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES 1.1 PREPARATION OF FINANCIAL STATEMENTS The consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The consolidated financial statements include the accounts of American General Corporation ("American General" or "the company") and its subsidiaries. All material intercompany transactions have been eliminated in consolidation. To conform with the 1993 presentation, certain items in the prior years' financial statements have been reclassified. 1.2 NEW ACCOUNTING PRINCIPLES During 1993, American General adopted six new Statements of Financial Accounting Standards (SFAS) issued by the Financial Accounting Standards Board. POSTRETIREMENT BENEFITS. SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," was adopted through a cumulative adjustment, effective January 1, 1993, resulting in a one-time reduction of net income of $45 million ($68 million pretax) or $.21 per share. This standard requires accrual of a liability for postretirement benefits other than pensions. Other than the cumulative effect, adoption did not have a material impact on 1993 net income and is not expected to have a material impact in the future. INCOME TAXES. SFAS 109, "Accounting for Income Taxes," was adopted through a cumulative adjustment, effective January 1, 1993, resulting in a one-time increase of net income of $8 million or $.04 per share. This standard changes the way income tax expense is determined for financial reporting purposes. The adoption reduced certain tax-related benefits in the Life Insurance segment, which reduced 1993 net income by $11 million and is expected to reduce net income by approximately $9 million in 1994 and $6 million in 1995. POSTEMPLOYMENT BENEFITS. SFAS 112, "Employers' Accounting for Postemployment Benefits," was adopted through a cumulative adjustment, effective January 1, 1993, resulting in a one-time reduction of net income of $9 million ($14 million pretax) or $.04 per share. This standard requires the accrual of benefits provided to employees after employment but before retirement. Other than the cumulative effect, adoption did not have a material impact on 1993 net income and is not expected to have a material impact in the future. REINSURANCE. SFAS 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," was adopted 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. LOAN IMPAIRMENTS. SFAS 114, "Accounting by Creditors for Impairment of a Loan," was adopted 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 did not have a material impact on 1993 net income and is not expected to have a material impact in the future. FAIR VALUE. SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," was adopted at December 31, 1993. This statement requires that debt and equity securities be carried at fair value unless the company has the positive intent and ability to hold these investments to maturity. Debt and equity securities must be classified into one of three categories: 1) held-to-maturity, 2) available-for-sale, or 3) trading securities. Upon adoption, the company classified all debt and equity securities as available-for-sale and, accordingly, recorded them at fair value. Related balance sheet accounts were adjusted as if the unrealized gains had been realized at the balance sheet date, and the net unrealized gains on securities were credited directly to shareholders' equity, as follows:
In millions 1993 __________________________________________________________________ Fair value adjustment to fixed maturity securities $1,594 Less: Decrease in deferred policy acquisition costs (550) Increase in insurance and annuity liabilities (4) Increase in deferred federal income taxes (364) __________________________________________________________________ Net unrealized gains on securities $ 676 __________________________________________________________________
1.3 INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES. Prior to December 31, 1993, the company reported fixed maturity securities in accordance with the then-existing accounting standards. Fixed maturity securities were considered held for investment purposes and were carried at amortized cost, adjusted for declines considered other than temporary and for possible uncollectible amounts. 32 AMERICAN GENERAL CORPORATION 18 _______________________________________________________________________________ {AMERICAN GENERAL LOGO} Effective with the adoption of SFAS 115, management determines the appropriate classification of fixed maturity and equity securities at the time of purchase and re-evaluates such designation at each balance sheet date. All fixed maturity and equity securities currently are classified as available- for-sale and recorded at fair value. After adjusting related balance sheet accounts as if the unrealized gains had been realized, the net adjustment is recorded in net unrealized gains on securities within shareholders' equity. If the fair value of a security classified as available-for-sale declines below its cost and this decline is considered to be other than temporary, the security is reduced to its net realizable value, and the reduction is recorded as a realized loss. LOANS. Mortgage, policy, and other loans are reported at cost and adjusted periodically for any differences between face value and cost, and for possible uncollectible amounts. INVESTMENT INCOME. Interest on fixed maturity securities, loans, and notes is recorded as income when earned and is adjusted for any amortization of premium or discount. Dividends are recorded as income on ex-dividend dates. REALIZED INVESTMENT GAINS OR LOSSES. Realized gains or losses are recognized using the specific identification method and include declines in fair value of investments below cost that are considered other than temporary. 1.4 FINANCE RECEIVABLES FINANCE CHARGES. Finance charges on discounted receivables and interest on interest-bearing receivables are recognized as income using the interest method. The accrual of income is suspended when contractual payments are not received for four consecutive months for loans and retail sales contracts, and for six months for credit cards. Extension fees and late charges are recognized as income when received. Non-refundable points and fees on loans and retail sales contracts are recognized using the interest method over the lesser of the contractual term or the expected life based upon prepayment experience. If a loan is prepaid before all fees are recognized, any remaining fees are recognized as income at the date of prepayment. LOSSES ON FINANCE RECEIVABLES. The company's policy is to charge off consumer loan accounts (except where secured by real estate) and credit card accounts for which minimal or no collections were made in the prior six-month period. Retail sales contracts are charged off when four monthly installments are past due. For loans secured by real estate, foreclosure proceedings are instituted when four monthly installments are past due. The allowance for losses on finance receivables is based on experience with charge offs, delinquency, and liquidation and is maintained at an amount considered adequate to absorb losses in the portfolio based on current conditions and economic trends. 1.5 LOAN ORIGINATION FEES AND COSTS Fees charged to a borrower and costs incurred in originating a consumer or mortgage loan are deferred and amortized over the lesser of the contractual term or the estimated life of the loan. The deferred amounts are included in the carrying value of the related loans. 1.6 DEFERRED POLICY ACQUISITION COSTS (DPAC) The costs of writing an insurance policy, including agents' commissions and underwriting and marketing expenses, are deferred, capitalized, and included in the DPAC asset. The cost assigned to certain acquired subsidiaries' insurance contracts in force at the acquisition date, referred to as the present value of future profits (PVFP), also is included in DPAC. DPAC associated with interest-sensitive life and insurance investment contracts is charged to expense in relation to the estimated gross profits of those contracts; under SFAS 115, it is adjusted for the impact on estimated gross profits of net unrealized gains on securities. DPAC associated with all other life and health contracts is charged to expense over the premium-paying period or as the premiums are earned over the life of the contract. PVFP is charged to expense using the same assumptions used to amortize DPAC. Interest is accreted on the unamortized balance of PVFP at rates of 7.2% to 8.5%. The DPAC carrying value is regularly reviewed; its reported value and remaining life are considered appropriate. 1.7 ACQUISITION-RELATED GOODWILL Acquisition-related goodwill is charged to expense in equal amounts, generally over 20 or 40 years. The carrying value of goodwill is regularly reviewed for indicators of impairment in value. In 1993, the company recorded a one-time, non-cash charge of $300 million to reduce acquisition-related goodwill. The principal source of this goodwill was the $1.2 billion 1993 ANNUAL REPORT 33 19 _______________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS (CONTINUED) acquisition of the Gulf United insurance operations in 1984. The write-down was the result of a strategic review completed in 1993 of certain life insurance operations by management and outside advisors, which indicated the book value of these subsidiaries exceeded fair value. After this charge, the reported value and remaining life of acquisition-related goodwill are considered appropriate. 1.8 NET ASSETS OF LIFE INSURANCE COMPANIES HELD FOR SALE On November 29, 1993, the company announced its intent to offer for sale American-Amicable Life and Financial Life of Canada. At December 31, 1993, the assets and liabilities of these companies were reported as net assets of life insurance companies held for sale. 1.9 SEPARATE ACCOUNTS Separate Accounts are assets and liabilities associated with certain contracts, principally annuities. The investment risk lies solely with the holder of the contract rather than the company. Investment income and realized investment gains allocable to Separate Accounts are excluded from the consolidated statement of income. 1.10 INSURANCE INVESTMENT CONTRACTS Insurance investment contracts do not subject the company to significant risks arising from policyholder mortality or morbidity. The majority of the company's annuity products are considered insurance investment contracts. The carrying amount and fair value of liabilities for insurance investment contracts at December 31 were as follows:
Carrying Amount Fair Value ________________________ _______________ In millions 1993 1992 1991 1993 1992 _______________________________________________________________________________ Investment contracts $19,216 $16,906 $14,509 $18,880 $15,922 _______________________________________________________________________________
Fair value was estimated using cash flows discounted at market interest rates. Assumptions regarding future economic activity have been made in estimating fair value. Care should be exercised in drawing conclusions based on the estimated fair value of insurance investment contracts, since the liabilities are scheduled to mature over a number of years. 1.11 POLICY RESERVES SHORT-DURATION CONTRACTS. Short-duration contracts, which provide insurance for a period of one year or less, include certain term life and most property insurance contracts. Reserves to cover all estimated claims under these contracts are considered adequate. However, final claim payments may differ from these reserves. Any adjustments to the reserves are reflected in net income in the current year. LONG-DURATION CONTRACTS. Long-duration contracts, which generally require performance over a period of more than one year, include traditional whole life, endowment, guaranteed renewable term life, guaranteed renewable health, interest-sensitive life, limited payment, and insurance investment contracts. The contract provisions generally cannot be changed or cancelled by the company during the contract period. For interest-sensitive life and insurance investment contracts, reserves equal the sum of the policy account balance and deferred revenue charges. In establishing reserves for other types of long-duration contracts, an estimate is made of the cost of future policy benefits to be paid as a result of present and future claims due to death, disability, surrender of a policy, or payment of an endowment. Reserves are determined using the net level premium method. Interest assumptions used to compute reserves ranged from 2.0% to 13.5% at December 31, 1993. 1.12 PREMIUM RECOGNITION SHORT-DURATION CONTRACTS. When a short-duration contract is written, the premiums are recognized evenly over the life of the contract in proportion to the amount and term of the insurance protection provided. LONG-DURATION CONTRACTS. Most receipts for annuities and interest-sensitive life insurance polices are classified as deposits instead of revenues. Revenues for these contracts consist of the mortality, expense, and surrender charges assessed against the account balance. Policy charges that are designed to compensate the company for future services are deferred and recognized in income over the period benefitted, using the same assumptions used to amortize DPAC (see Note 1.6). For limited-payment contracts, net premiums are recorded as revenue, and the difference between the gross premium received and the net premium is deferred and recognized in income in a constant relationship to insurance in force. For all other long-during contracts, premiums are recognized when due. 34 AMERICAN GENERAL CORPORATION 20 _______________________________________________________________________________ {AMERICAN GENERAL LOGO} 1.13 REINSURANCE The company's insurance subsidiaries are routinely involved in reinsurance transactions. Ceded reinsurance becomes a liability of the reinsurer that assumes the risk. The company's insurance subsidiaries diversify their risk of exposure to reinsurance loss by using several reinsurers and entering into reinsurance transactions with strong life reinsurers. The maximum retention on one life (in the case of individual life insurance) is $1.5 million. If the reinsurer could not meet its obligations, American General's insurance subsidiaries would reassume the liability. The likelihood of a material reinsurance liability being reassumed by the company's insurance subsidiaries is considered to be remote. Amounts paid or deemed to have been paid for ceded reinsurance contracts are recorded as reinsurance receivables. The cost of reinsurance related to long-duration contracts is recognized over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. Reinsurance premiums included in premiums and other considerations were as follows:
In millions 1993 1992 1991 ________________________________________________________________________________ Direct premiums and other considerations $1,262 $1,227 $1,181 Reinsurance assumed 38 32 29 Reinsurance ceded (48) (46) (42) ________________________________________________________________________________ Premiums and other considerations $1,252 $1,213 $1,168 ________________________________________________________________________________
Reinsurance recoveries on ceded reinsurance contracts during 1993 were $52 million. The amount of reinsurance recoverable on paid and unpaid losses was not material at December 31, 1993. 1.14 INTEREST CAPITALIZED OR PAID Essentially all interest incurred on real estate investment properties under development is capitalized until the property is substantially complete and ready for its intended use. Interest capitalized was $15 million, $21 million, and $31 million in 1993, 1992, and 1991, respectively. Interest paid, excluding interest capitalized, was as follows:
In millions 1993 1992 1991 ________________________________________________________________________________ Corporate and real estate $ 142 $ 121 $ 158 Consumer Finance 379 386 397 ________________________________________________________________________________
1.15 EARNINGS PER SHARE Earnings per share are computed by dividing earnings by average outstanding common shares. Common shares include common share equivalents from the assumed exercise of stock options. The average common shares used to compute earnings per share were 216,578,836 in 1993; 217,704,620 in 1992; and 225,361,946 in 1991. 2. INVESTMENTS 2.1 INVESTMENT INCOME Income by type of investment was as follows:
In millions 1993 1992 1991 ________________________________________________________________________________ Fixed maturity securities $2,005 $1,836 $1,628 Mortgage loans on real estate 357 412 468 Other investments 195 209 199 ________________________________________________________________________________ Gross investment income 2,557 2,457 2,295 Investment expense* 120 130 117 ________________________________________________________________________________ Net investment income $2,437 $2,327 $2,178 ________________________________________________________________________________
*Primarily related to investment real estate. The carrying value of investments that produced no investment income during 1993 totaled $319 million or 1% of total invested assets. The ultimate disposition of these assets is not expected to have a material effect on American General's consolidated financial position. 2.2 NET REALIZED INVESTMENT GAINS Net realized investment gains were as follows:
In millions 1993 1992 1991 ________________________________________________________________________________ Fixed maturity securities Gross gains $ 201 $ 128 $ 44 Gross losses (59) (37) (14) ________________________________________________________________________________ Total fixed maturity securities 142 91 30 Mortgage loans on real estate (69) (34) (27) Equity securities 121 55 29 Investment real estate (170) (74) (14) Other investments (16) (20) (10) ________________________________________________________________________________ Realized gains before taxes 8 18 8 Income tax expense 2 9 7 ________________________________________________________________________________ Net realized investment gains $ 6 $ 9 $ 1 ________________________________________________________________________________
1993 ANNUAL REPORT 35 21 _______________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2.3 FIXED MATURITY AND EQUITY SECURITIES As of December 31, 1993, all fixed maturity and equity securities were classified as available-for-sale and reported at fair value (see Note 1.2). Previously, fixed maturity securities were classified as held-to-maturity and reported at amortized cost. Fair value and amortized cost information as of December 31 were as follows:
Amortized Cost Gross Unrealized Gains _________________________ ______________________ In millions 1993 1992 1991 1993 1992 1991 ________________________________________________________________________________ Fixed maturity securities: Corporate bonds Investment grade $12,207 $10,767 $9,303 $1,021 $ 680 $ 675 Below investment grade 707 704 756 42 21 19 Mortgage-backed 10,217 8,712 6,893 536 481 533 U.S. government 882 292 329 49 28 30 Foreign governments 565 557 407 37 36 42 States/political subdivisions 180 156 151 22 24 23 Redeemable preferred stocks 127 120 74 6 5 7 ________________________________________________________________________________ Total fixed maturity securities $24,885 $21,308 $17,913 $1,713 $1,275 $1,329 ________________________________________________________________________________ Equity securities $ 182 $ 273 $ 349 $ 53 $ 119 $ 96 ________________________________________________________________________________
Gross Unrealized Losses Fair Value _________________________ ______________________ In millions 1993 1992 1991 1993 1992 1991 ________________________________________________________________________________ Fixed maturity securities: Corporate bonds Investment grade $ (25) $ (41) $ (7) $13,203 $11,406 $9,971 Below investment grade (6) (12) (34) 743 713 741 Mortgage-backed (75) (18) (4) 10,678 9,175 7,422 U.S. government (12) -- -- 919 320 359 Foreign governments (1) (1) (1) 601 592 448 States/political subdivisions -- -- -- 202 180 174 Redeemable preferred stocks -- (2) (1) 133 123 80 ________________________________________________________________________________ Total fixed maturity securities $ (119) $ (74) $ (47) $26,479 $22,509 $19,195 ________________________________________________________________________________ Equity securities $ (2) $ (2) $ (7) $ 233 $ 390 $ 438 ________________________________________________________________________________
Fair values of fixed maturity and equity securities were 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 investments. The reporting of fixed maturity securities at fair value without a corresponding revaluation of related policyholder liabilities can be misinterpreted, and care should be exercised in drawing conclusions from such data. Net unrealized gains on securities included in shareholders' equity at December 31 were as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Gross unrealized gains $1,766 $119 $ 96 Gross unrealized losses (121) (2) (7) DPAC and other fair value adjustments (554) -- -- Deferred federal income taxes (382) (29) (19) _______________________________________________________________________________ Net unrealized gains on securities $ 709 $ 88 $ 70 _______________________________________________________________________________
The contractual maturities of fixed maturity securities at December 31, 1993 were as follows:
Amortized Fair In millions Cost Value ________________________________________________________________________________ Fixed maturity securities, excluding mortgage-backed securities Due in one year or less $ 257 $ 263 Due after one year through five years 2,012 2,152 Due after five years through ten years 7,351 7,898 Due after ten years 5,048 5,488 Mortgage-backed securities 10,217 10,678 _______________________________________________________________________________ Total fixed maturity securities $24,885 $26,479 _______________________________________________________________________________
Actual maturities may differ from contractual maturities since borrowers may have the right to call or prepay obligations. Corporate requirements and investment strategies may result in the sale of investments before maturity. 2.4 MORTGAGE LOANS ON REAL ESTATE Diversification of the geographic location and type of property collateralizing mortgage loans reduces the concentration of credit risk. For new loans, the company requires loan-to-value ratios of 75% or less, based on management's credit assessment of the borrower. 36 AMERICAN GENERAL CORPORATION 22 _______________________________________________________________________________ {AMERICAN GENERAL LOGO} At December 31, the mortgage loan portfolio was distributed as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Geographic distribution Atlantic $1,181 $1,348 $1,491 Central 1,009 1,342 1,648 Pacific and Mountain 940 1,066 1,158 Allowance for losses (98) (53) (50) _______________________________________________________________________________ Total $3,032 $3,703 $4,247 _______________________________________________________________________________ Property type Retail $1,038 $1,229 $1,322 Office 994 1,056 1,125 Industrial 531 606 649 Apartments 334 437 449 Residential and other 233 428 752 Allowance for losses (98) (53) (50) _______________________________________________________________________________ Total $3,032 $3,703 $4,247 _______________________________________________________________________________ Fair value $3,145 $3,821 _______________________________________________________________________________ % Non-performing 4.4% 4.7% 4.2% _______________________________________________________________________________
Fair value of mortgage loans was estimated primarily using discounted cash flows, based on contractual maturities and discount rates that were based on U.S. Treasury rates for similar maturity ranges, adjusted for risk, based on property type. Care should be exercised in drawing conclusions based on fair value, since the company usually holds mortgage loans until maturity. 2.5 ALLOWANCE FOR MORTGAGE LOAN LOSSES The allowance for mortgage loan losses was as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Balance at January 1, $ 53 $ 50 $ 31 Net additions(a) 84 34 30 Deductions(b) (39) (31) (11) _______________________________________________________________________________ Balance at December 31, $ 98 $ 53 $ 50 _______________________________________________________________________________
(a) Charged to realized investment gains. (b) Resulting from foreclosures and payoffs. A mortgage loan is considered impaired when the company determines that it probably will not collect all amounts due under the contractual terms. At December 31, 1993, impaired mortgage loans, valued at the fair value of the underlying collateral, totaled $110 million, which is net of an allowance of $27 million. 2.6 POLICY LOANS The fair value of policy loans was $1.2 billion and $1.1 billion at December 31, 1993 and 1992, respectively. The fair value was estimated using discounted cash flows and actuarially determined assumptions, incorporating market rates. 2.7 ALLOWANCE FOR INVESTMENT REAL ESTATE LOSSES The allowance for investment real estate losses was as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Balance at January 1, $129 $ 62 $ 23 Net additions(a) 199 82 40 Deductions(b) (75) (15) (1) _______________________________________________________________________________ Balance at December 31, $253 $129 $ 62 _______________________________________________________________________________
(a) Charged to realized investment gains. (b) Resulting from sales. 3. FINANCE RECEIVABLES 3.1 DETAIL OF FINANCE RECEIVABLES Finance receivables net of unearned finance charges at December 31 were as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Consumer loans Real estate $2,642 $2,782 $2,953 Other 2,318 2,054 1,817 _______________________________________________________________________________ Total consumer loans 4,960 4,836 4,770 Retail sales contracts 923 872 791 Credit cards 691 492 384 _______________________________________________________________________________ Total 6,574 6,200 5,945 Allowance for losses (184) (162) (151) _______________________________________________________________________________ Finance receivables, net $6,390 $6,038 $5,794 _______________________________________________________________________________
Fair value, which was estimated using discounted cash flows computed by category of receivable, approximated the net carrying amount at December 31, 1993 and 1992. Cash flows were based on contractual payment terms adjusted for delinquencies and losses, discounted at the weighted-average rates currently being offered for similar loans. Care should be exercised in drawing conclusions based on fair value, since the estimate does not reflect the value of the underlying customer relationships or the related distribution system. 1993 ANNUAL REPORT 37 23 ______________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS (CONTINUED) At December 31, 1993, 91% of the outstanding consumer loans and retail sales contracts were secured by real estate or other property. 3.2 DISTRIBUTION 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 at December 31 were as follows:
In millions 1993 1992 1991 ______________________________________________________________________________ California $ 751 $ 838 $ 969 North Carolina 582 512 407 Florida 503 504 546 Illinois 409 387 340 Indiana 365 361 345 Virginia 353 325 297 Ohio 341 284 262 Other 3,270 2,989 2,779 ______________________________________________________________________________ Total $6,574 $6,200 $5,945 ______________________________________________________________________________
3.3 CONTRACTUAL MATURITIES AND COLLECTIONS Contractual maturities of consumer loans and retail sales contracts, net of unearned finance charges, at December 31, 1993 were as follows:
After In millions 1994 1995 1996 1997 1998 1998 ______________________________________________________________________________ Maturities $2,080 $1,219 $758 $376 $225 $1,225 ______________________________________________________________________________
Contractual maturities should not be considered a forecast of future cash collections. A substantial portion of consumer loans and retail sales contracts may be renewed, converted, or paid in full prior to maturity. Cash collections of principal and such collections as a percentage of average net finance receivable balances were as follows:
In millions 1993 1992 1991 ______________________________________________________________________________ Consumer loans Cash collections $2,101 $1,881 $1,653 Percent of average balances 43% 40% 36% Retail sales contracts Cash collections $1,123 $ 882 $ 787 Percent of average balances 125% 113% 102% Credit cards Cash collections $ 573 $ 539 $ 469 Percent of average balances 104% 128% 132% _______________________________________________________________________________
3.4 ALLOWANCE FOR FINANCE RECEIVABLES The allowance for finance receivables was as follows:
In millions 1993 1992 1991 ______________________________________________________________________________ Balance at January 1, $ 162 $ 151 $ 149 Provision for credit losses* 163 135 137 Charge offs, net of recoveries (141) (124) (135) ______________________________________________________________________________ Balance at December 31, $ 184 $ 162 $ 151 ______________________________________________________________________________
*Reported as operating costs and expenses. 4. DEFERRED POLICY ACQUISITION COSTS (DPAC) The balance of DPAC at December 31, and the components of the change reported as operating costs and expenses for the years then ended, were as follows:
In millions 1993 1992 1991 ______________________________________________________________________________ Balance at January 1, $2,083 $1,919 $1,823 Capitalization 395 335 275 Amortization Policy origination costs (182) (149) (155) PVFP, net (21) (22) (24) Reclassification to net assets of life insurance companies held for sale (130) -- -- Cumulative effect of accounting changes Fair value (SFAS 115) (550) -- -- Income taxes (SFAS 109) 42 -- -- _______________________________________________________________________________ Balance at December 31, $1,637 $2,083 $1,919 _______________________________________________________________________________
The unamortized balance of PVFP included in DPAC at December 31, 1993, 1992, and 1991 was $189 million, $210 million, and $232 million, respectively. PVFP amortization, net of accretion, expected to be recorded in each of the next five years is $18 million, $17 million, $15 million, $14 million, and $12 million. 38 AMERICAN GENERAL CORPORATION 24 ______________________________________________________________________________ {AMERICAN GENERAL LOGO} 5. DEBT 5.1 DEBT OUTSTANDING Long-term debt at December 31 was as follows:
In millions 1993 1992 1991 ______________________________________________________________________________ Corporate Senior, 6.3 - 10%, through 2018 $ 945 $ 992 $1,055 Fair value - Corporate $1,083 $1,088 ______________________________________________________________________________ Real Estate Senior, 5.2 - 12.8%, through 1997 $ 15 $ 47 $ 7 ______________________________________________________________________________ Consumer Finance Senior, 3.8 - 13%, through 2009 $3,547 $3,155 $2,445 Senior subordinated, 3.2 - 12.8%, through 1995 472 399 324 ______________________________________________________________________________ Total Consumer Finance $4,019 $3,554 $2,769 Fair value - Consumer Finance $4,264 $3,722 ______________________________________________________________________________
The fair value of long-term debt was estimated using discounted cash flows based on current borrowing rates. The fair value of short-term debt approximated the carrying amount at December 31, 1993 and 1992. 5.2 LONG-TERM DEBT MATURITIES Maturities of long-term debt and sinking fund requirements for each of the next five years are as follows:
In millions 1994 1995 1996 1997 1998 ______________________________________________________________________________ Corporate $209 $100 $ -- $133 $ 67 Real Estate 15 -- -- -- -- Consumer Finance 665 939 563 352 243 ______________________________________________________________________________
Current maturities of long-term debt expected to be refinanced with short-term debt are included in short-term debt. Certain other debt issues of the Consumer Finance segment that are scheduled to mature after 1998 are redeemable prior to maturity at par, at the option of the holders. If these issues were so redeemed, the amounts above would increase $150 million in 1994 and 1996. 5.3 CREDIT AGREEMENTS During 1993, American General and certain subsidiaries used commercial paper to meet short-term funding requirements. Unsecured bank credit facilities are used to support commercial paper borrowings. At December 31, 1993, American General and its consumer finance subsidiaries maintained unsecured committed credit facilities of $2.5 billion with a total of 45 domestic and foreign banks. Interest rates are based on a money market index, and annual commitment fees range from 0.075% to 0.1875%. Borrowings under these facilities were $43 million at December 31, 1993. 5.4 INTEREST CONVERSION AGREEMENTS Certain subsidiaries use off-balance-sheet interest rate swaps and options on swaps, referred to as interest conversion agreements, as a means of managing their interest rate exposure. The interest conversion agreements involve credit risk due to possible non-performance by the counterparties. Notional amounts, shown below, 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. 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. The following table identifies agreements outstanding at December 31:
In millions 1993 1992 1991 ______________________________________________________________________________ Swaps - obligation to pay fixed rate Underlying notional amount $ 290 $ 415 $ 765 Weighted-average rate 8.75% 8.83% 8.87% Fair value $ (29) $ (20) Options sold on swaps - to pay fixed rate Underlying notional amount $ 200 $ 250 $ 350 Weighted-average rate 9.29% 9.24% 9.09% Fair value $ (33) $ (21) ______________________________________________________________________________
Fair values of the agreements were based on estimates obtained from the individual counterparties. Fair values may fluctuate based on expectations of future interest rates. The company does not anticipate non-performance by the counterparties; however, non-performance would not have a material impact on net income. 6. INCOME TAXES 6.1 ACCOUNTING CHANGE Beginning in 1993, income taxes have been provided in accordance with SFAS 109 (see Note 1.2). Under this method, deferred tax assets and liabilities are calculated using the differences between the financial reporting basis 1993 ANNUAL REPORT 39 25 _______________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 tax liabilities were not adjusted for tax rate changes. Under SFAS 109, state income taxes, previously reported in operating costs and expenses, are now included in income tax expense. As a result of this accounting change, 1993 income tax disclosures are not comparable to prior years. 6.2 TAX RATE RELATED ADJUSTMENT During third quarter 1993, the federal corporate tax rate increased from 34% to 35%, retroactive to January 1, 1993. The additional 1% tax on first and second quarter 1993 income was $4 million, and the effect of the 1% increase on existing deferred tax liabilities was $26 million. This charge of $30 million was included in income tax expense in the third quarter. 6.3 TAX LIABILITIES Income tax liabilities at December 31 were as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Current tax liabilities $ 76 $ 39 $ 23 _______________________________________________________________________________ Deferred, applicable to: Income 783 688 630 Net unrealized gains on securities 382 29 19 _______________________________________________________________________________ Deferred tax liabilities 1,165 717 649 _______________________________________________________________________________ Income tax liabilities $1,241 $756 $672 _______________________________________________________________________________
Components of deferred tax liabilities at December 31, 1993 were as follows:
In millions 1993 _______________________________________________________________________________ Deferred tax liabilities, applicable to: Basis differential of investments $ 589 Deferred policy acquisition costs 480 Other 380 Less deferred tax assets* (284) _______________________________________________________________________________ Deferred tax liabilities $1,165 _______________________________________________________________________________
* No valuation allowance is considered necessary. A portion of life insurance income earned prior to 1984 is not taxable unless it exceeds certain statutory limitations or is distributed as dividends. Such income, accumulated in policyholders' surplus accounts, totaled $361 million at December 31, 1993. At current corporate rates, the maximum amount of tax on such income is approximately $126 million. Deferred income taxes on these accumulations are not required because no distributions are expected. 6.4 TAX EXPENSE Components of income tax expense were as follows:
In millions 1993 1992 1991 _______________________________________________________________________________ Current Federal $354 $205 $157 State 18 -- -- _______________________________________________________________________________ Total current 372 205 157 _______________________________________________________________________________ Deferred, applicable to: Basis differential of investments (27) 19 Deferred policy acquisition costs 30 6 Insurance and annuity liabilities (6) (17) Interest on tax assessments 34 -- Operating loss carryovers 20 45 Other, net (14) (12) _______________________________________________________________________________ Total deferred (20) 37 41 _______________________________________________________________________________ Income tax expense $352 $242 $198 _______________________________________________________________________________
A reconciliation between the federal income tax rate and the effective tax rate follows:
1993 1992 1991 _______________________________________________________________________________ Federal income tax rate 35% 34% 34% Tax rate change 4 -- -- Amortization resulting from acquisitions Acquisition-related goodwill 1 1 2 Value of insurance contracts -- (1) (2) Tax-exempt investment income (2) (1) (2) State taxes, net 2 -- -- Write-down of goodwill 18 -- -- Other, net -- (2) (3) _______________________________________________________________________________ Effective tax rate 58%* 31% 29% _______________________________________________________________________________
* Excludes tax effect of accounting changes. 6.5 TAXES PAID Federal income taxes paid in 1993, 1992, and 1991 were $260 million, $265 million, and $180 million, respectively. State income taxes paid in 1993 were $15 million. 40 AMERICAN GENERAL CORPORATION 26 ________________________________________________________________________________ {AMERICAN GENERAL LOGO} 6.6 TAX RETURN EXAMINATIONS The company and its subsidiaries file a consolidated federal income tax return. The Internal Revenue Service (IRS) has completed examinations of the company's returns through 1985 and has commenced examination of the company's tax returns for 1986 through 1988. As a result of disputes over the treatment of some items for the years 1977 through 1985, the IRS issued tax assessments of $83 million and also proposed tax deficiencies of approximately $130 million. During 1993, the company finalized settlements regarding $71 million of the assessed deficiencies and $114 million of the proposed deficiencies. The settlements finalized were within the amounts previously provided in the consolidated financial statements and, therefore, had no impact on 1993 net income. The IRS is continuing to dispute the company's tax treatment of some items for the years 1977 through 1985. Some of these issues will require litigation to resolve, and any amounts ultimately settled with the IRS would also include interest. Although the final outcome is uncertain, the company believes that the ultimate liability, including interest, resulting from these issues will not exceed amounts currently provided in the consolidated financial statements. 7. CAPITAL STOCK 7.1 CLASSES OF CAPITAL STOCK American General has two classes of capital stock. Preferred stock ($1.50 par value, 60 million shares authorized) may be issued in series with such dividend, liquidation, redemption, conversion, voting, and other rights as the board of directors may determine. Common stock ($.50 par value, 300 million shares authorized) was owned by 29,602 shareholders of record at February 11, 1994. At December 31, 1993, approximately 1.6 million shares of common stock were reserved for issuance, primarily for the exercise of stock options. Dividends paid per common share were $1.10, $1.04, and $1.00 in 1993, 1992, and 1991, respectively. 7.2 STOCK SPLIT On February 4, 1993, the board of directors declared a two-for-one stock split effected in the form of a 100% common stock dividend, paid March 1, 1993, to shareholders of record on February 16, 1993. The stock distribution, which was reflected as of December 31, 1992, had no impact on total consolidated shareholders' equity or results of operations. 7.3 PREFERRED SHARE PURCHASE RIGHTS One preferred share purchase right is attached to each share of common stock. These rights are not currently exercisable and will become exercisable only upon the occurrence of certain events related to a change in control of the company. When exercisable, each right will entitle the holder to purchase 1/100 of a share of American General's Series A Junior Participating Preferred Stock. All rights expire August 7, 1999, unless extended or redeemed. 8. STOCK AND INCENTIVE PLANS The company's stock and incentive plans provide for the award of stock options, restricted stock awards, performance awards, and incentive awards to key employees. Options for the purchase of shares of American General common stock are exercisable at prices not less than the market value of the stock on the date of grant. Such options may not be exercised within six months of, nor after 10 years from, the date of grant. Shares available and stock option activity were as follows:
Shares Shares Issuable under Available Outstanding Options for Issue _____________________________________ during 1993 1993 1992 1991 ________________________________________________________________________________ Balance at January 1, 6,444,192 1,654,854 1,870,514 1,917,756 Stock options Granted (516,305) 516,305 451,018 401,192 Exercised (531,637) (501,198) (133,786) Forfeited 75,542 (75,542) (165,480) (314,648) Restricted stock issued (89,000) Performance shares issued (28,932) ________________________________________________________________________________ Balance at December 31, 5,885,497 1,563,980 1,654,854 1,870,514 ________________________________________________________________________________
The average price of options exercised was $17.70 in 1993, $15.82 in 1992, and $13.10 in 1991. At December 31, 1993, there were 1,170,315 options exercisable, and the exercise price of all options outstanding ranged from $14.00 to $34.88, for an average price of $23.07 per share. The options expire on various dates between 1995 and 2003. 1993 ANNUAL REPORT 41 27 ________________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS (CONTINUED) 9. BENEFIT PLANS 9.1 PENSION PLANS American General and its subsidiaries have non-contributory defined benefit pension plans covering most employees. Pension benefits are based on the participant's average monthly compensation and length of credited service. The company's funding policy is to contribute annually no more than the maximum amount deductible for federal income tax purposes. The company uses the projected unit credit method to compute pension expense. More than 96% of the plans' assets were invested in readily marketable stocks and bonds at the plans' most recent balance sheet date. The pension plans have purchased annuity contracts from American General subsidiaries that provide benefits for certain retirees. During 1993, 1992, and 1991, these annuity contracts provided approximately $37 million annually for retiree benefits. The components of pension expense were as follows:
In millions 1993 1992 1991 ________________________________________________________________________________ Service cost (benefits earned) $ 12 $ 10 $ 10 Interest cost on projected benefit obligation 19 18 19 Actual return on plan assets (65) (43) (95) Net amortization and deferral 15 (7) 43 ________________________________________________________________________________ Total pension expense (income) $(19) $(22) $(23) ________________________________________________________________________________ Assumptions: Weighted-average discount rate on benefit obligation 7.25% 8.00% 8.50% Rate of increase in compensation levels 4.00 5.00 5.00 Expected long-term rate of return on plan assets 10.00 10.00 10.00 ________________________________________________________________________________
The funded status of the plans and the prepaid pension expense included in other assets at December 31 were as follows:
In millions 1993 1992 1991 ________________________________________________________________________________ Actuarial present value of benefit obligation Vested $248 $203 $191 Non-vested 5 4 3 ________________________________________________________________________________ Accumulated benefit obligation 253 207 194 Effect of increase in compensation levels 36 26 31 ________________________________________________________________________________ Projected benefit obligation 289 233 225 Plan assets at fair value 531 482 482 ________________________________________________________________________________ Plan assets at fair value in excess of projected benefit obligation 242 249 257 Unrecognized net gain (80) (98) (118) Unrecognized prior service cost 11 13 16 Unrecognized net asset at January 1, net of amortization (27) (39) (51) ________________________________________________________________________________ Prepaid pension expense $146 $125 $104 ________________________________________________________________________________
9.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS American General and its subsidiaries have life, medical, and dental plans for certain retired employees and agents. 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. The life plans are fully insured; the retiree medical and dental plans are unfunded and self-insured. 42 AMERICAN GENERAL CORPORATION 28 ______________________________________________________________________________ {AMERICAN GENERAL LOGO} The plans' combined funded status and the accrued postretirement benefit cost included in other liabilities at December 31, 1993 were as follows:
In millions 1993 ______________________________________________________________________________ Actuarial present value of benefit obligation Retirees $ 39 Fully eligible active plan participants 11 Other active plan participants 12 ______________________________________________________________________________ Accumulated postretirement benefit obligation 62 ______________________________________________________________________________ Unrecognized net gain (3) ______________________________________________________________________________ Accrued postretirement benefit cost $ 59 ______________________________________________________________________________ Discount rate on postretirement benefit obligation 7.25% ______________________________________________________________________________
Postretirement benefit expense for 1993 was as follows:
In millions 1993 ______________________________________________________________________________ Service cost (benefits earned) $ 1 Interest cost on accumulated postretirement benefit obligation 4 ______________________________________________________________________________ Postretirement benefit expense $ 5 ______________________________________________________________________________
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% in 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 a $.7 million increase in the accumulated postretirement benefit obligation and a $.1 million increase in postretirement benefit expense. 10. RESTRICTIONS AND CONTINGENCIES 10.1 LEGAL PROCEEDINGS Two real estate subsidiaries of the company were defendants in a lawsuit that alleged damages based on lost profits and related claims arising from certain loans and joint venture contracts. On July 16, 1993, a judgment was entered against the subsidiaries jointly for $47.3 million in compensatory damages and against one of the subsidiaries for $189.2 million in punitive damages. On September 17, 1993, a Texas state district court reduced the previously-awarded punitive damages by $60.0 million, resulting in a reduced judgment in the amount of $176.5 million plus post-judgment interest. An appeal on numerous legal grounds has been filed. The company believes, based on advice of legal counsel, that plaintiffs' claims are without merit, and the company is continuing to contest the matter vigorously through the appeals process. No provision has been made in the consolidated financial statements related to this contingency. In April 1992, the IRS issued Notices of Deficiency in the amount of $12.4 million for the 1977-1981 tax years of certain insurance subsidiaries (see Note 6.6). The basis of the dispute was the tax treatment of modified coinsurance agreements. During 1992, the company elected to pay the assessment plus associated interest. A claim for refund of tax and interest was disallowed by the IRS in January 1993. On June 30, 1993, a suit for refund was filed in the Court of Federal Claims. The company believes that the IRS's claims are without merit, and is continuing to vigorously pursue refund of the amounts paid. No provision has been made in the consolidated financial statements related to this contingency. American General and certain of its subsidiaries are defendants in various other lawsuits. American General and its subsidiaries believe they have valid defenses in these pending lawsuits and are defending these cases vigorously. The company also believes that the total amounts that would ultimately be paid, if any, arising from these lawsuits would have no material effect on the consolidated financial statements. 10.2 REGULATION American General's insurance subsidiaries are restricted by state insurance 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. Certain non-insurance subsidiaries are similarly restricted in the payment of dividends by long-term debt agreements. The amount of dividends available to the parent company from subsidiaries during 1994 not limited by such restrictions is $571 million. See pages 20 and 21 of Management's Discussion and Analysis for a discussion of state guaranty associations, regulation, and environmental costs, and Note 6.6 concerning tax return examinations. 1993 ANNUAL REPORT 43 29 _______________________________________________________________________________ NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. BUSINESS SEGMENT INFORMATION American General reports the results of its business operations in three segments: Retirement Annuities, Consumer Finance, and Life Insurance. The Life Insurance segment is a combination of the Insurance -- Special Markets and Insurance -- Home Service segments reported in 1992. Results of each segment include earnings from its business operations and earnings on that amount of equity considered necessary to support its business. Business segment information was as follows:
Revenues _____________________________________________ In millions 1993 1992 1991 _______________________________________________________________________________ Retirement Annuities $ 1,470 $ 1,358 $ 1,212 Consumer Finance 1,282 1,178 1,147 Life Insurance 2,054 2,045 2,021 _______________________________________________________________________________ Total business segments 4,806 4,581 4,380 _______________________________________________________________________________ Corporate 73 75 74 Intersegment eliminations (50) (54) (59) _______________________________________________________________________________ Consolidated $ 4,829 $ 4,602 $ 4,395 _______________________________________________________________________________
Income before Taxes _____________________________________________ In millions 1993 1992 1991 _______________________________________________________________________________ Retirement Annuities $ 240 $ 188 $ 159 Consumer Finance 330 248 210 Life Insurance 152(a) 463 452 _______________________________________________________________________________ Total business segments 722 899 821 _______________________________________________________________________________ Corporate (121)(b) (126)(b) (144)(b) Intersegment eliminations 1 2 1 _______________________________________________________________________________ Consolidated $ 602 $ 775 $ 678 _______________________________________________________________________________
Assets ___________________________________________ In millions 1993 1992 1991 _______________________________________________________________________________ Retirement Annuities $20,896 $17,673 $15,056 Consumer Finance 7,641 7,192 6,875 Life Insurance 14,192 13,328 12,632 _______________________________________________________________________________ Total business segments 42,729 38,193 34,563 _______________________________________________________________________________ Corporate 1,506 1,859 1,864 Intersegment eliminations (253) (310) (322) _______________________________________________________________________________ Consolidated $43,982 $39,742 $36,105 _______________________________________________________________________________
(a) Includes $300 million write-down of goodwill. (b) Primarily interest on corporate debt. 12. QUARTERLY DATA (UNAUDITED)
1993 _____________________________________________ In millions, except per share data 4th 3rd 2nd 1st ______________________________________________________________________________ Revenues $1,215 $1,222 $1,205 $1,187 Net realized investment gains (losses) 1 1 3 1 Net income (loss) (164)(a) 119(b) 151 98(c) Net income (loss) per share (.76)(a) .55(b) .70 .45(c) ______________________________________________________________________________ Per common share Dividends paid $ .275 $ .275 $ .275 $ .275 Market price High 34.75 36.50 33.25 32.88 Low 26.25 30.13 27.75 27.31 Close 28.63 32.75 31.63 31.25 ______________________________________________________________________________
1992 _____________________________________________ In millions, except per share data 4th 3rd 2nd 1st ______________________________________________________________________________ Revenues $1,192 $1,159 $1,123 $1,128 Net realized investment gains (losses) 4 2 (1) 4 Net income (loss) 134 138 127 134 Net income (loss) per share .62 .63 .59 .61 ______________________________________________________________________________ Per common share Dividends paid $ .26 $ .26 $ .26 $ .26 Market price High 29.38 25.19 24.63 22.38 Low 23.63 23.69 20.50 20.13 Close 28.50 24.63 24.50 21.06 ______________________________________________________________________________
1991 _____________________________________________ In millions, except per share data 4th 3rd 2nd 1st ______________________________________________________________________________ Revenues $1,121 $1,088 $1,110 $1,076 Net realized investment gains (losses) 2 (2) 1 -- Net income (loss) 119 116 126 119 Net income (loss) per share .55 .53 .55 .50 ______________________________________________________________________________ Per common share Dividends paid $ .25 $ .25 $ .25 $ .25 Market price High 22.50 20.25 20.56 19.56 Low 19.50 18.88 18.19 14.00 Close 22.25 20.19 18.94 19.25 ______________________________________________________________________________
(a) Includes write-down of goodwill of $300 million or $1.39 per share. (b) Includes tax rate related charge of $30 million or $.14 per share. (c) Includes net cumulative charge of $46 million or $.21 per share 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. 44 AMERICAN GENERAL CORPORATION 30 ________________________________________________________________________________ {AMERICAN GENERAL LOGO} REPORT OF MANAGEMENT MANAGEMENT RESPONSIBILITY Management is responsible for the information in this report. The consolidated financial statements were prepared in conformity with generally accepted accounting principles. Informed estimates and judgments were used for transactions not yet complete or for which ultimate effects cannot be precisely determined. INTERNAL CONTROLS American General's system of internal controls is designed to provide reasonable assurance that assets are safeguarded, that transactions are properly recorded and executed, and that established policies and procedures are followed. The system includes: a documented organizational structure and division of responsibility; established policies and procedures that are communicated throughout the company, including a policy on business conduct to foster a strong ethical climate; and the careful selection, training, and development of employees. Internal auditors monitor the operation of the internal control system and report findings and recommendations to management and the audit committee of the board. Corrective actions are taken to address control deficiencies and other opportunities for improving the system. INDEPENDENT AUDITORS American General engaged Ernst & Young as principal independent auditors to perform an audit of the consolidated financial statements of the company. Ernst & Young was given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors, and committees of the board. Management believes that all representations made to Ernst & Young during their audit were valid and appropriate. AUDIT COMMITTEE OF THE BOARD The audit committee is composed of four members of the board of directors who are not employees of the company. It meets regularly with members of management, internal auditors, and the independent auditors to discuss the adequacy of American General's internal controls, quality of financial reporting, results of the auditing activities, and accounting policies. The independent auditors and internal auditors have full and free access to the audit committee. AUSTIN P. YOUNG Senior Vice President and Chief Financial Officer HAROLD S. HOOK Chairman and Chief Executive Officer ________________________________________________________________________________ REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS AMERICAN GENERAL CORPORATION We have audited the accompanying consolidated balance sheets of American General Corporation and subsidiaries as of December 31, 1993, 1992, and 1991, and the related consolidated statements of income, shareholders' equity, stock activity, 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 financial statements referred to above (pages 25, 27, 29, 31-44) present fairly, in all material respects, the consolidated financial position of American General Corporation and subsidiaries as of December 31, 1993, 1992, and 1991, 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 1.2 to the 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 Houston, Texas February 15, 1994 1993 ANNUAL REPORT 45 EX-21 21 EX-21 TO 10-K 1 EXHIBIT 21 SUBSIDIARIES OF AMERICAN GENERAL CORPORATION The following list includes certain of American General Corporation's active subsidiaries at March 1, 1994. Subsidiaries of subsidiaries are indicated by indentations. Under Securities and Exchange Commission rules, certain subsidiaries have been omitted.
Jurisdiction Name of Incorporation - ------------------------------------------------------------------------------------------------------------------ AGC Life Insurance Company................................................................ Missouri American General Life and Accident Insurance Company.................................... Tennessee Gulf Life Insurance Company.......................................................... Tennessee American General Life Insurance Company................................................. Texas American-Amicable Life Insurance Company of Texas.................................... Texas Alico Management Company........................................................... Texas Pioneer American Insurance Company................................................. Texas Pioneer Security Life Insurance Company............................................ Texas American General Life Insurance Company of New York.................................. New York The Winchester Agency, Ltd......................................................... New York American General Securities Incorporated............................................. Texas American General Insurance Agency, Inc. ........................................... Missouri American General Insurance Agency of Hawaii, Inc................................... Hawaii American General Insurance Agency of Massachusetts, Inc............................ Massachusetts The Variable Annuity Life Insurance Company.......................................... Texas The Variable Annuity Marketing Company............................................. Texas American General Finance, Inc............................................................. Indiana AGF Investment Corp..................................................................... Indiana American General Finance Corporation(a)................................................. Indiana American General Finance Group, Inc.................................................. Delaware American General Financial Services, Inc.(b)....................................... Delaware The National Life and Accident Insurance Company................................ Texas CommoLoCo, Inc................................................................ Puerto Rico Merit Life Insurance Co.............................................................. Indiana Yosemite Insurance Company........................................................... California American General Financial Center....................................................... Utah American General Investment Corporation................................................... Delaware American General Mortgage Company....................................................... Texas American General Realty Investment Corporation(c)....................................... Texas American General Land Holding Company(d)............................................. Delaware American Athletic Club, Inc.......................................................... Texas Cinco Ranch Development Corporation..................................................... Texas Pebble Creek Development Corporation.................................................... Florida American General Land Development, Inc.................................................... Delaware American General Property Insurance Company............................................... Tennessee Financial Life Assurance Company of Canada................................................ Canada Knickerbocker Corporation................................................................. Texas Lincoln American Corporation.............................................................. Delaware
- -------------------------------------------------------------------------------- (a) American General Finance Corporation is the parent of 52 additional wholly-owned consolidated subsidiaries incorporated in 25 states for the purpose of conducting its consumer finance operations. (b) American General Financial Services, Inc. is the parent of nine additional wholly-owned consolidated subsidiaries incorporated in six states and Puerto Rico for the purpose of conducting its consumer finance operations. (c) American General Realty Investment Corporation is the parent of five additional wholly-owned consolidated subsidiaries incorporated in four states for the purpose of conducting its real estate operations. (d) American General Land Holding Company is the parent of eight wholly-owned consolidated subsidiaries incorporated in four states for the purpose of conducting its real estate operations. EX-23 22 EXHIBIT 23 FOR AMERICAN GENERAL 10K 1 - -------------------------------------------------------------------------------- AMERICAN GENERAL CORPORATION EXHIBIT 23 CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of American General Corporation of our report dated February 15, 1994, included in the 1993 Annual Report to Shareholders of American General Corporation. Our audits also included the financial statement schedules of American General Corporation listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in Registration Statement on Number Form -------------------------------------------------------------------------- 33-39200.................................................... S-8 33-39201.................................................... S-8 33-39202.................................................... S-8 2-98021.................................................... S-8 33-51973.................................................... S-8 33-19075.................................................... S-3 33-30693.................................................... S-3 33-33115.................................................... S-3 33-51045.................................................... S-3 -------------------------------------------------------------------------- of our report dated February 15, 1994, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedules included in this Annual Report (Form 10-K) of American General Corporation. ERNST & YOUNG Houston, Texas March 23, 1994 1993 FORM 10-K EX-24 23 EXHIBIT 24 FOR AMERICAN GENERAL 10K 1 EXHIBIT 24 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. J. EVANS ATTWELL ---------------- 2 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. THOMAS D. BARROW ---------------- 3 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. BRADY F. CARRUTH ---------------- 4 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. W. LIPSCOMB DAVIS, JR. ---------------------- 5 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. ROBERT M. DEVLIN ________________ 6 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. LARRY D. HORNER _______________ 7 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. RICHARD J. V. JOHNSON _____________________ 8 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. ROBERT E. SMITTCAMP ___________________ 9 American General Corporation: Board of Directors Date: February 3, 1994 Subject: Form 10-K; Limited Power of Attorney for Purpose. The purpose of this limited power of attorney is to authorize certain officers of the company to execute, on behalf of the undersigned person, the company's 1993 Form 10-K, together with any required amendments, exhibits or other related documents and to file the Form 10-K with the SEC. LIMITED POWER OF ATTORNEY WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (company), will file with the Securities and Exchange Commission (Commission) under Section 13 of the Securities Exchange Act of 1934, as amended (Act), its annual report on Form 10-K for the fiscal year ended December 31, 1993 (Form 10-K), with such amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents related thereto; NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the company does hereby appoint AUSTIN P. YOUNG, JON P. NEWTON, and KURT G. SCHREIBER, and each of them, severally, his true and lawful attorney or attorneys-in-fact with or without the others and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director or officer or both, as the case may be, of the company, the Form 10-K and any and all amendments thereto as said attorneys-in-fact or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys-in-fact shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable in connection with the Form 10-K, as fully and for all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys-in-fact and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this third day of February, 1994. JAMES R. TUERFF _______________ -----END PRIVACY-ENHANCED MESSAGE-----