UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
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 1-7422
AMERICAN GENERAL FINANCE, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1313922
(State of Incorporation) (I.R.S. Employer
Identification No.)
601 N.W. Second Street, Evansville, IN 47708
(Address of principal executive offices) (Zip Code)
(812) 424-8031
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes No X
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q
with the reduced disclosure format.
At November 3, 2004, there were 2,000,000 shares of the registrant's
common stock, $.50 par value, outstanding.
2
TABLE OF CONTENTS
Item Page
Part I - Financial Information
1. Financial Statements . . . . . . . . . . . . . . . . . . . . . 3
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . 13
4. Controls and Procedures . . . . . . . . . . . . . . . . . . . 28
Part II - Other Information
1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 29
6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
AVAILABLE INFORMATION
American General Finance, Inc. (AGFI) files annual, quarterly, and
current reports and other information with the Securities and Exchange
Commission (the SEC). The SEC maintains a website that contains
annual, quarterly, and current reports and other information that
issuers (including AGFI) file electronically with the SEC. The SEC's
website is www.sec.gov.
The following reports are available free of charge on our Internet
website www.agfinance.com as soon as reasonably practicable after they
are filed with or furnished to the SEC:
* our 2004 Current Reports on Form 8-K, if any;
* our 2004 Quarterly Reports on Form 10-Q; and
* our Annual Report on Form 10-K for the year ended December 31,
2003.
The information on our website is not incorporated by reference into
this report. The website addresses listed above are provided for the
information of the reader and are not intended to be active links.
3
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in thousands)
Revenues
Finance charges $507,232 $445,241 $1,454,391 $1,327,011
Insurance 43,989 46,307 133,369 134,687
Other:
Service fee income from
a non-subsidiary
affiliate 62,113 12,406 138,446 13,465
Miscellaneous 23,069 49,336 80,113 152,470
Total revenues 636,403 553,290 1,806,319 1,627,633
Expenses
Interest expense 167,518 132,263 452,079 412,104
Operating expenses:
Salaries and benefits 120,509 103,187 366,744 303,893
Other operating expenses 75,909 66,332 218,428 200,126
Provision for finance
receivable losses 69,126 82,362 193,646 229,783
Insurance losses and loss
adjustment expenses 21,267 17,438 60,394 52,987
Total expenses 454,329 401,582 1,291,291 1,198,893
Income before provision for
income taxes 182,074 151,708 515,028 428,740
Provision for Income Taxes 67,151 56,969 188,217 156,069
Net Income $114,923 $ 94,739 $ 326,811 $ 272,671
See Notes to Condensed Consolidated Financial Statements.
4
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2004 2003
(dollars in thousands)
Assets
Net finance receivables:
Real estate loans $14,516,188 $11,038,140
Non-real estate loans 2,983,683 2,932,120
Retail sales finance 1,305,643 1,337,701
Net finance receivables 18,805,514 15,307,961
Allowance for finance receivable losses (456,031) (466,031)
Net finance receivables, less allowance
for finance receivable losses 18,349,483 14,841,930
Investment securities 1,362,242 1,307,472
Cash and cash equivalents 202,220 145,462
Other assets 690,821 711,300
Total assets $20,604,766 $17,006,164
Liabilities and Shareholder's Equity
Long-term debt $13,716,494 $10,862,218
Short-term debt 3,767,520 3,467,096
Insurance claims and policyholder
liabilities 427,476 438,362
Other liabilities 409,692 376,739
Accrued taxes 78,122 37,952
Total liabilities 18,399,304 15,182,367
Shareholder's equity:
Common stock 1,000 1,000
Additional paid-in capital 981,305 920,276
Accumulated other comprehensive
income (loss) 32,878 (14,947)
Retained earnings 1,190,279 917,468
Total shareholder's equity 2,205,462 1,823,797
Total liabilities and shareholder's equity $20,604,766 $17,006,164
See Notes to Condensed Consolidated Financial Statements.
5
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2004 2003
(dollars in thousands)
Cash Flows from Operating Activities
Net income $ 326,811 $ 272,671
Reconciling adjustments:
Provision for finance receivable losses 193,646 229,783
Depreciation and amortization 133,018 144,096
Deferral of finance receivable origination
costs (59,824) (50,213)
Deferred income tax charge 2,097 72
Origination of real estate loans held for sale (96,565) (1,751,151)
Sales and principal collections of real estate
loans held for sale 106,451 1,784,238
Change in other assets and other liabilities 151,748 94,276
Change in insurance claims and policyholder
liabilities (10,886) (28,651)
Change in taxes receivable and payable 3,512 (2,286)
Other, net (11,792) 9,899
Net cash provided by operating activities 738,216 702,734
Cash Flows from Investing Activities
Finance receivables originated or purchased (9,224,377) (6,401,514)
Principal collections on finance receivables 5,520,859 5,344,721
Acquisition of Wilmington Finance, Inc. - (93,189)
Investment securities purchased (441,804) (373,595)
Investment securities called and sold 375,079 305,845
Investment securities matured 14,200 18,375
Change in premiums on finance receivables
purchased and deferred charges (17,446) 617
Other, net (10,716) (12,041)
Net cash used for investing activities (3,784,205) (1,210,781)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 4,298,456 1,726,899
Repayment of long-term debt (1,502,133) (1,222,080)
Change in short-term debt 300,424 252,031
Capital contribution from parent 60,000 -
Dividends paid (54,000) (167,219)
Net cash provided by financing activities 3,102,747 589,631
Increase in cash and cash equivalents 56,758 81,584
Cash and cash equivalents at beginning of period 145,462 153,660
Cash and cash equivalents at end of period $ 202,220 $ 235,244
See Notes to Condensed Consolidated Financial Statements.
6
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in thousands)
Net income $114,923 $ 94,739 $326,811 $272,671
Other comprehensive gain:
Changes in net unrealized
gains (losses):
Investment securities 38,106 (18,897) 821 12,031
Interest rate swaps 11,582 8,092 27,358 (13,517)
Income tax effect:
Investment securities (13,338) 6,614 (288) (4,200)
Interest rate swaps (4,055) (2,831) (9,576) 4,731
Changes in net unrealized
gains (losses), net of tax 32,295 (7,022) 18,315 (955)
Reclassification adjustments
for realized (gains) losses
included in net income:
Investment securities (485) 2,022 (322) 4,320
Interest rate swaps 14,908 15,735 45,721 57,853
Income tax effect:
Investment securities 170 (708) 113 (1,512)
Interest rate swaps (5,217) (5,508) (16,002) (20,249)
Realized losses included
in net income, net of tax 9,376 11,541 29,510 40,412
Other comprehensive gain,
net of tax 41,671 4,519 47,825 39,457
Comprehensive income $156,594 $ 99,258 $374,636 $312,128
See Notes to Condensed Consolidated Financial Statements.
7
AMERICAN GENERAL FINANCE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2004
Note 1. Basis of Presentation
American General Finance, Inc. will be referred to as "AGFI" or
collectively with its subsidiaries, whether directly or indirectly
owned, as the "Company" or "we". We prepared our condensed
consolidated financial statements using accounting principles
generally accepted in the United States for interim periods. The
statements include the accounts of AGFI and its subsidiaries, all of
which are wholly owned. We eliminated all intercompany items. AGFI
is an indirect wholly owned subsidiary of American International
Group, Inc. (AIG).
We made all adjustments, consisting only of normal recurring
adjustments, that we considered necessary for a fair presentation of
the Company's condensed consolidated financial statements. These
statements should be read in conjunction with the consolidated
financial statements and related notes included in our Annual Report
on Form 10-K for the year ended December 31, 2003. To conform to the
2004 presentation, we reclassified certain items in the prior period.
Note 2. Acquisition
Effective January 1, 2003, we acquired 100% of the common stock of
Wilmington Finance, Inc. (WFI), a majority owned subsidiary of WSFS
Financial Corporation, in a purchase business combination. The
purchase price was $120.8 million, consisting of $25.8 million for net
assets and $95.0 million for intangibles. The majority of the
tangible assets acquired were real estate loans held for sale. We
included the results of WFI's operations in our financial statements
beginning January 1, 2003, the effective date of the acquisition. We
finalized an independent valuation of the intangibles in second
quarter 2003 and recorded $54.2 million as goodwill and $40.8 million
as other intangibles. Goodwill and other intangibles are both
included in other assets. Other intangibles primarily consisted of
broker relationships and non-compete agreements and had an initial
weighted-average amortization period of 9 years. WFI originates non-
conforming residential real estate loans, primarily through broker
relationships and, to a lesser extent, directly to consumers, and
sells its originated loans to investors with servicing released to the
purchaser. Effective July 1, 2003, WFI and AIG Federal Savings Bank,
a non-subsidiary affiliate, entered into an agreement whereby for a
fee, WFI provides marketing, certain origination processing services,
loan servicing, and related services for the affiliate's origination
and sale of non-conforming residential real estate loans. These WFI
service activities have supplanted most of WFI's origination and sales
activity and are anticipated to do so going forward. WFI provides the
Company with other sources of revenue through its servicing fees and
net gain on sales of real estate loans held for sale. We report any
real estate loans we purchase from AIG Federal Savings Bank that were
generated using WFI's services as originations, rather than as
portfolio acquisitions, because AGFI and AIG Federal Savings Bank
share a common parent.
8
Note 3. Accounting Change
In December 2003, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position No. 03-3 (SOP 03-3) "Accounting for
Certain Loans or Debt Securities Acquired in a Transfer". SOP 03-3
addresses accounting for differences between contractual cash flows
and cash flows expected to be collected from an investor's initial
investment in loans acquired in a transfer if those differences are
attributable, at least in part, to credit quality. SOP 03-3 limits
the yield that may be accreted (accretable yield) to the excess of the
investor's estimate of undiscounted expected principal, interest, and
other cash flows (cash flows expected at acquisition to be collected)
over the investor's initial investment in the loan. SOP 03-3 requires
that the excess of contractual cash flows over cash flows expected to
be collected (nonaccretable difference) not be recognized as an
adjustment of yield, loss accrual, or valuation allowance. Subsequent
increases in cash flows expected to be collected generally should be
recognized prospectively through adjustment of the loan's yield over
its remaining life. Decreases in cash flows expected to be collected
should be recognized as impairment. SOP 03-3 is effective for loans
acquired in fiscal years beginning after December 15, 2004. In
addition, SOP 03-3 should be applied prospectively for fiscal years
beginning after December 15, 2004 for decreases in cash flows expected
to be collected on loans acquired in fiscal years beginning on or
before December 15, 2004. The AcSEC has encouraged early adoption of
SOP 03-3 by affected companies. We are currently in the process of
determining our date of adoption and the effect it will have on our
results of operations and financial position in future periods.
9
Note 4. Finance Receivables
Components of net finance receivables by type were as follows:
September 30, 2004
Real Non-real Retail
Estate Estate Sales
Loans Loans Finance Total
(dollars in thousands)
Gross receivables $14,450,621 $3,292,320 $1,433,705 $19,176,646
Unearned finance charges
and points and fees (133,195) (376,474) (141,417) (651,086)
Accrued finance charges 95,140 37,559 13,591 146,290
Deferred origination costs 28,316 27,817 - 56,133
Premiums, net of discounts 75,306 2,461 (236) 77,531
Total $14,516,188 $2,983,683 $1,305,643 $18,805,514
December 31, 2003
Real Non-real Retail
Estate Estate Sales
Loans Loans Finance Total
(dollars in thousands)
Gross receivables $10,980,168 $3,244,772 $1,480,724 $15,705,664
Unearned finance charges
and points and fees (137,473) (388,009) (154,494) (679,976)
Accrued finance charges 83,356 40,590 11,911 135,857
Deferred origination costs 20,149 28,917 - 49,066
Premiums, net of discounts 91,940 5,850 (440) 97,350
Total $11,038,140 $2,932,120 $1,337,701 $15,307,961
Note 5. Allowance for Finance Receivable Losses
Changes in the allowance for finance receivable losses were as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in thousands)
Balance at beginning of period $456,031 $462,031 $466,031 $463,031
Provision for finance
receivable losses 69,126 82,362 193,646 229,783
Charge-offs (80,748) (88,395) (238,754) (257,013)
Recoveries 11,622 10,033 35,108 30,230
Balance at end of period $456,031 $466,031 $456,031 $466,031
10
Note 6. Derivative Financial Instruments
Our principal borrowing subsidiary is American General Finance
Corporation (AGFC), a wholly owned subsidiary of AGFI. AGFC uses
derivative financial instruments in managing the cost of its debt and
is neither a dealer nor a trader in derivative financial instruments.
AGFC's derivative financial instruments consist of interest rate,
foreign currency, and equity-indexed swap agreements.
Our interest rate and foreign currency swap agreements are designated
and qualify as cash flow hedges or fair value hedges. While our
equity-indexed swap agreements mitigate economic exposure of related
equity-indexed debt, these swap agreements do not qualify as cash flow
or fair value hedges under GAAP. At September 30, 2004, equity-
indexed debt was immaterial.
AGFC uses interest rate, foreign currency, and equity-indexed swap
agreements in conjunction with specific debt issuances in order to
achieve net U.S. dollar, fixed or floating interest exposure at costs
not materially different from costs we would have incurred by issuing
debt for the same net exposure without using derivatives.
Accordingly, AGFC's swap agreements did not have a material effect on
the Company's net income during the nine months ended September 30,
2004 or 2003.
Note 7. Accumulated Other Comprehensive Income (Loss)
Components of accumulated other comprehensive income (loss) were as
follows:
September 30, December 31,
2004 2003
(dollars in thousands)
Net unrealized gains on investment
securities $40,963 $ 40,639
Net unrealized losses on interest
rate swaps (8,085) (55,586)
Total $32,878 $(14,947)
Note 8. Segment Information
We have two business segments: consumer finance and insurance. Our
segments are defined by the type of financial service product offered.
The consumer finance segment originates real estate loans secured by
first or second mortgages on residential real estate, originates
secured and unsecured non-real estate loans, extends lines of credit,
and purchases retail sales contracts from, and provides revolving
retail services for, retail merchants. We also purchase, from AIG
Federal Savings Bank, a non-subsidiary affiliate, private label
receivables under a participation agreement and real estate loans
under purchase agreements. To supplement our lending and retail sales
financing activities, we purchase portfolios of real estate loans,
non-real estate loans, and retail sales finance receivables. We also
provide for a fee, marketing, certain origination processing services,
and loan servicing for AIG Federal Savings Bank and originate real
estate loans through brokers for sale to investors. We offer credit
and non-credit insurance and ancillary products to our eligible
11
consumer finance customers. The insurance segment writes and
reinsures credit and non-credit insurance through products that are
offered principally by the consumer finance segment.
The following tables display information about the Company's segments
as well as a reconciliation of total segment pretax income to the
condensed consolidated financial statement amounts.
For the three months ended September 30, 2004:
Consumer Total
Finance Insurance Segments
(dollars in thousands)
Revenues:
External:
Finance charges $ 529,326 $ - $ 529,326
Insurance 187 43,802 43,989
Other 57,158 22,921 80,079
Intercompany 20,398 (17,486) 2,912
Pretax income 168,824 20,352 189,176
For the three months ended September 30, 2003:
Consumer Total
Finance Insurance Segments
(dollars in thousands)
Revenues:
External:
Finance charges $ 466,083 $ - $ 466,083
Insurance 248 46,059 46,307
Other 32,071 21,245 53,316
Intercompany 23,502 (18,177) 5,325
Pretax income 134,152 24,608 158,760
For the nine months ended September 30, 2004:
Consumer Total
Finance Insurance Segments
(dollars in thousands)
Revenues:
External:
Finance charges $1,525,510 $ - $1,525,510
Insurance 578 132,791 133,369
Other 133,150 72,620 205,770
Intercompany 61,408 (53,223) 8,185
Pretax income 478,592 67,915 546,507
For the nine months ended September 30, 2003:
Consumer Total
Finance Insurance Segments
(dollars in thousands)
Revenues:
External:
Finance charges $1,398,780 $ - $1,398,780
Insurance 693 133,994 134,687
Other 83,310 64,171 147,481
Intercompany 67,838 (53,058) 14,780
Pretax income 405,342 66,984 472,326
12
Reconciliations of total segment pretax income to the condensed
consolidated financial statement amounts were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in thousands)
Pretax income:
Segments $189,176 $158,760 $546,507 $472,326
Corporate (8,827) (5,680) (33,362) (35,478)
Adjustments 1,725 (1,372) 1,883 (8,108)
Consolidated pretax
income $182,074 $151,708 $515,028 $428,740
Adjustments for pretax income include realized gains (losses) and
certain other investment revenue. Adjustments for pretax income in
2003 also included pension expense.
Note 9. Legal Contingencies
AGFI and certain of its subsidiaries are parties to various lawsuits
and proceedings, including certain purported class action claims,
arising in the ordinary course of business. In addition, many of
these proceedings are pending in jurisdictions that permit damage
awards disproportionate to the actual economic damages alleged to have
been incurred. Based upon information presently available, we believe
that the total amounts, if any, that will ultimately be paid arising
from these lawsuits and proceedings will not have a material adverse
effect on our consolidated results of operations or financial
position. However, the continued occurrences of large damage awards
in general in the United States, including large punitive damage
awards that bear little or no relation to actual economic damages
incurred by plaintiffs in some jurisdictions, create the potential for
an unpredictable judgment in any given suit.
13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
REPORT OF MANAGEMENT'S RESPONSIBILITY
The Company's management is responsible for the integrity and fair
presentation of our condensed consolidated financial statements and
all other financial information presented in this report. We prepared
our condensed consolidated financial statements using accounting
principles generally accepted in the United States (GAAP) for interim
periods. We made estimates and assumptions that affect amounts
recorded in the financial statements and disclosures of contingent
assets and liabilities.
The Company's management is responsible for establishing and
maintaining an internal control structure and procedures for financial
reporting. These systems are designed to provide reasonable assurance
that assets are safeguarded from loss or unauthorized use, that
transactions are recorded according to GAAP under management's
direction and that financial records are reliable to prepare financial
statements. We support the internal control structure with careful
selection, training and development of qualified personnel. The
Company's employees are subject to AIG's Code of Conduct designed to
assure that all employees perform their duties with honesty and
integrity. In second quarter 2004, AIG adopted the AIG Director,
Executive Officer, and Senior Financial Officer Code of Business
Conduct and Ethics, which covers such directors and officers of AIG
and its subsidiaries. We do not allow loans to executive officers.
The aforementioned systems include a documented organizational
structure and policies and procedures that we communicate throughout
the Company. Our internal auditors report directly to AIG to
strengthen independence. They continually monitor the operation of
our internal controls and report their findings to the Company's
management, AIG's management, and AIG's internal audit department. We
take prompt action to correct control deficiencies and address
opportunities to improve the systems. The Company's management
assesses any changes to our internal control structure quarterly.
Based on these assessments, management has concluded that the internal
control structure and the procedures for financial reporting have
functioned effectively and that the condensed consolidated financial
statements fairly present our consolidated financial position and the
results of our operations for the periods presented.
14
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and our other publicly available
documents may include, and the Company's officers and representatives
may from time to time make, statements which may constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are not historical
facts but instead represent only our belief regarding future events,
many of which are inherently uncertain and outside of our control.
These statements may address, among other things, the Company's
strategy for growth, product development, regulatory approvals, market
position, financial results and reserves. The Company's actual
results and financial condition may differ, possibly materially, from
the anticipated results and financial condition indicated in these
forward-looking statements. The important factors, many of which are
outside of our control, which could cause the Company's actual results
to differ, possibly materially, include, but are not limited to, the
following:
* changes in general economic conditions, including the interest
rate environment in which we conduct business and the
financial markets through which we access capital and invest
cash flows from the insurance business segment;
* changes in the competitive environment in which we operate,
including the demand for our products, customer responsiveness
to our distribution channels and the formation of business
combinations among our competitors;
* the effectiveness of our credit risk scoring models in
assessing the risk of customer unwillingness or inability to
repay;
* shifts in collateral values, contractual delinquencies, and
credit losses;
* levels of unemployment and personal bankruptcies;
* our ability to access capital markets and maintain our credit
rating position;
* changes in laws or regulations that affect our ability to
conduct business or the manner in which we conduct business,
such as licensing requirements, pricing limitations or
restrictions on the method of offering products;
* the costs and effects of any litigation or governmental
inquiries or investigations that are determined adversely to
the Company;
* changes in accounting standards or tax policies and practices
and the application of such new policies and practices to the
manner in which we conduct business;
* our ability to integrate the operations of our acquisitions
into our businesses;
* changes in our ability to attract and retain employees or key
executives to support our businesses; and
* natural or accidental events such as fires or floods affecting
our branches or other operating facilities.
Readers are also directed to other risks and uncertainties discussed
in other documents we file with the SEC. We are under no obligation
to (and expressly disclaim any such obligation to) update or alter any
forward-looking statement, whether written or oral, that may be made
from time to time, whether as a result of new information, future
events or otherwise.
15
CRITICAL ACCOUNTING POLICIES
Our Credit Strategy and Policy Committee evaluates our finance
receivable portfolio monthly. The Credit Strategy and Policy
Committee exercises its judgment, based on quantitative analyses,
qualitative factors, and each committee member's experience in the
consumer finance industry, when determining the amount of the
allowance for finance receivable losses. If its review concludes that
an adjustment is necessary, we charge or credit this adjustment to
expense through the provision for finance receivable losses. We
consider this estimate to be a critical accounting estimate that
affects the net income of the Company in total and the pretax
operating income of our consumer finance business segment. We
document the adequacy of the allowance for finance receivable losses,
the analysis of the trends in credit quality, and the current economic
conditions considered by the Credit Strategy and Policy Committee to
support its conclusions. See Provision for Finance Receivable Losses
for further information on the allowance for finance receivable
losses.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any material off-balance sheet arrangements as defined
by SEC rules.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our sources of funds include operations, issuances of long-term debt,
short-term borrowings in the commercial paper market, borrowings from
banks under credit facilities, and securitizations. AGFI has also
received capital contributions from its parent to support finance
receivable growth and maintain targeted leverage.
To further diversify its funding sources, AGFC completed its first
foreign currency denominated debt issuances during 2004 as follows:
* In second quarter 2004, AGFC completed two concurrent issues
which totaled 1.0 billion Euros ($1.2 billion) in principal
amount sold to European investors.
* In third quarter 2004, AGFC issued 350 million pounds Sterling
($622 million) in principal amount sold to United Kingdom
investors.
In each case, we executed financial derivative transactions with a
non-subsidiary affiliate to effectively convert the related foreign
currency exposure into U.S. dollars.
16
Principal sources and uses of cash were as follows:
Nine Months Ended
September 30,
2004 2003
(dollars in millions)
Principal sources of cash:
Net issuances of debt $3,096.7 $ 756.9
Operations 738.2 702.7
Capital contribution 60.0 -
Total $3,894.9 $1,459.6
Principal uses of cash:
Net originations and purchases
of finance receivables $3,703.5 $1,056.8
Dividends paid 54.0 167.2
Total $3,757.5 $1,224.0
Net originations and purchases of finance receivables and net
issuances of debt increased for the nine months ended September 30,
2004 when compared to the same period in 2003 primarily due to
increases in WFI-related real estate loan production.
We believe that our overall sources of liquidity will continue to be
sufficient to satisfy our foreseeable operational requirements and
financial obligations. The principal factors that could decrease our
sources of liquidity are delinquent payments from our customers and an
inability to access capital markets. The principal factors that could
increase our cash needs are significant increases in net originations
and purchases of finance receivables. We intend to mitigate liquidity
risk by continuing to operate the Company utilizing the following
existing strategies:
* maintain a finance receivable portfolio comprised mostly of
real estate loans, which generally represent a lower risk of
customer non-payment;
* originate and monitor finance receivables with our proprietary
credit risk management system;
* maintain an investment securities portfolio of predominantly
investment grade, liquid securities; and
* maintain a capital structure appropriate to our asset base.
Management believes that consistent execution of our business
strategies should result in continued profitability, strong credit
ratings, and investor confidence. These results should allow
continued access to capital markets for issuances of our commercial
paper and long-term debt in a cost efficient manner. To access the
domestic capital markets, we had $6.6 billion of long-term debt
securities registered under the Securities Act of 1933 that had not
been issued as of September 30, 2004. Additionally, we believe that
we have access to international capital markets, as demonstrated by
the Euro and Sterling offerings described above. We also maintain
committed bank credit facilities and have the ability to securitize a
portion of our finance receivables to provide additional sources of
liquidity for needs potentially not met through other funding sources.
17
Capital Resources
September 30,
2004 2003
Amount Percent Amount Percent
(dollars in millions)
Long-term debt $13,716.5 70% $10,082.8 65%
Short-term debt 3,767.5 19 3,627.7 24
Total debt 17,484.0 89 13,710.5 89
Equity 2,205.5 11 1,731.7 11
Total capital $19,689.5 100% $15,442.2 100%
Net finance receivables $18,805.5 $14,624.3
Debt to equity ratio 7.93x 7.92x
Debt to tangible equity ratio 8.98x 8.87x
Debt to tangible equity is a standard measure of financial risk in the
consumer finance industry. Reconciliations of equity to tangible
equity were as follows:
September 30,
2004 2003
(dollars in millions)
Equity $2,205.5 $1,731.7
Goodwill (224.7) (216.0)
Accumulated other comprehensive
(income) loss (32.9) 29.5
Tangible equity $1,947.9 $1,545.2
Our capital varies primarily with the level of net finance
receivables. The capital mix of debt and equity is based primarily
upon maintaining leverage that supports cost-effective funding. AGFI
has historically paid dividends to (or received capital contributions
from) its parent to manage our leverage of debt to tangible equity to
a targeted amount. During second quarter 2004, AGFI received a $60.0
million capital contribution to maintain its leverage due to the
significant finance receivable growth during the quarter. AGFI's
ability to pay dividends is substantially dependent on the receipt of
dividends or other funds from its subsidiaries, primarily AGFC.
Certain AGFC financing agreements effectively limit the amount of
dividends AGFC may pay. These agreements have not prevented AGFI from
managing its capital to currently targeted leverage of 9.0 to 1.
We issue a combination of fixed-rate debt, principally long-term, and
floating-rate debt, both long-term and short-term. AGFC obtains most
of our fixed-rate funding through public issuances of long-term debt
with maturities generally ranging from three to ten years. AGFC and
AGFI obtain floating-rate funding through sales and refinancing of
commercial paper and through issuances of long-term, floating-rate
debt. Commercial paper, with maturities ranging from 1 to 270 days,
is sold to banks, insurance companies, corporations, and other
accredited investors. At September 30, 2004, short-term debt included
$3.3 billion of commercial paper. AGFC also sells extendible
commercial notes with initial maturities of up to 90 days, which may
be extended by AGFC to 390 days. At September 30, 2004, short-term
debt included $428.3 million of extendible commercial notes.
18
Liquidity Facilities
We maintain credit facilities to support the issuance of commercial
paper and to provide an additional source of funds for operating
requirements. At September 30, 2004, AGFC had committed credit
facilities totaling $3.3 billion, including a facility under which
AGFI is an eligible borrower for up to $400 million. The annual
commitment fees for the facilities are based upon AGFC's long-term
credit ratings and averaged 0.07% at September 30, 2004.
At September 30, 2004, AGFI and certain of its subsidiaries also had
uncommitted credit facilities totaling $170.0 million which could be
increased depending upon lender ability to participate its loans under
the facilities.
Outstanding borrowings under all facilities totaled $60.0 million at
September 30, 2004 and September 30, 2003. AGFC does not guarantee
any borrowings of AGFI.
ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION
Net Income
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Net income $114.9 $ 94.7 $326.8 $272.7
Amount change $ 20.2 $ 11.5 $ 54.1 $ 33.9
Percent change 21% 14% 20% 14%
Return on average
assets 2.27% 2.34% 2.31% 2.28%
Return on average
equity 21.48% 21.86% 21.81% 21.47%
Ratio of earnings to
fixed charges 2.06x 2.11x 2.11x 2.01x
See Note 8. of the Notes to Condensed Consolidated Financial
Statements for information on the results of the Company's business
segments.
19
Factors that specifically affected the Company's operating results
were as follows:
Finance Charges
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Finance charges $ 507.2 $ 445.2 $ 1,454.4 $ 1,327.0
Amount change $ 62.0 $ 17.7 $ 127.4 $ 52.8
Percent change 14% 4% 10% 4%
Average net receivables $18,420.2 $14,257.5 $17,099.1 $14,006.5
Yield 10.96% 12.41% 11.36% 12.66%
Finance charges increased due to the following:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Increase in average
net receivables $117.4 $ 56.9 $ 259.2 $ 177.6
Decrease in yield (55.4) (39.2) (136.2) (124.8)
Increase in number of
days - - 4.4 -
Total $ 62.0 $ 17.7 $ 127.4 $ 52.8
Average net receivables by type and changes in average net receivables
when compared to the same periods for the previous year were as
follows:
Three Months Ended September 30,
2004 2003
Amount Change Amount Change
(dollars in millions)
Real estate loans $14,149.2 $4,061.8 $10,087.4 $1,942.7
Non-real estate loans 2,985.5 112.3 2,873.2 31.3
Retail sales finance 1,285.5 (11.4) 1,296.9 (41.0)
Total $18,420.2 $4,162.7 $14,257.5 $1,933.0
Percent change 29% 16%
20
Nine Months Ended September 30,
2004 2003
Amount Change Amount Change
(dollars in millions)
Real estate loans $12,863.6 $3,053.8 $ 9,809.8 $1,941.5
Non-real estate loans 2,952.0 72.5 2,879.5 42.1
Retail sales finance 1,283.5 (33.7) 1,317.2 (49.9)
Total $17,099.1 $3,092.6 $14,006.5 $1,933.7
Percent change 22% 16%
The historically low interest rate environment contributed to the
increase in originations of our real estate loans. Real estate loan
production arising from WFI origination services also increased real
estate loan originations by $4.1 billion during the last twelve
months.
Yield by type and changes in yield in basis points (bp) when compared
to the same periods for the previous year were as follows:
Three Months Ended September 30,
2004 2003
Yield Change Yield Change
Real estate loans 8.50% (114) bp 9.64% (137) bp
Non-real estate loans 21.08 (17) 21.25 (14)
Retail sales finance 14.56 18 14.38 (17)
Total 10.96 (145) 12.41 (138)
Nine Months Ended September 30,
2004 2003
Yield Change Yield Change
Real estate loans 8.77% (107) bp 9.84% (141) bp
Non-real estate loans 21.26 (11) 21.37 (33)
Retail sales finance 14.52 (11) 14.63 (12)
Total 11.36 (130) 12.66 (144)
Yield decreased for the three and nine months ended September 30, 2004
when compared to the same periods in 2003 primarily due to a lower
real estate loan yield resulting from the low interest rate
environment and a higher proportion of average net receivables that
are real estate loans.
21
Insurance Revenues
Insurance revenues were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Earned premiums $ 43.7 $ 45.3 $132.6 $132.5
Commissions 0.3 1.0 0.8 2.2
Total $ 44.0 $ 46.3 $133.4 $134.7
Amount change $ (2.3) $ (1.5) $ (1.3) $(6.7)
Percent change (5)% (3)% (1)% (5)%
Earned premiums decreased for the three months ended September 30,
2004 when compared to the same period in 2003 primarily due to lower
credit life and credit accident and health premium volume in prior
years.
Other Revenues
Other revenues were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Service fee income from a
non-subsidiary affiliate $62.1 $12.4 $138.4 $ 13.5
Miscellaneous:
Investment revenue 23.9 19.9 72.2 60.9
Writedowns on real estate
owned (2.6) (2.0) (7.4) (6.1)
Net (loss) gain on sales
of real estate loans
held for sale (1.5) 21.4 6.5 74.3
Net recovery on sales of
real estate owned 0.9 0.6 2.0 2.1
Net interest income on
real estate loans held
for sale 0.2 4.4 0.7 13.6
Other 2.2 5.0 6.2 7.6
Total $85.2 $61.7 $218.6 $165.9
Amount change $23.5 $41.8 $ 52.7 $ 99.8
Percent change 38% 210% 32% 151%
Other revenues increased for the three and nine months ended September
30, 2004 when compared to the same periods in 2003 primarily due to
higher service fee income from a non-subsidiary affiliate and
investment revenue, partially offset by lower revenue on real estate
loans held for sale. Effective July 1, 2003, WFI and AIG Federal
Savings Bank, a non-subsidiary affiliate, entered into an agreement
whereby for a fee, WFI provides marketing, certain origination
processing services, loan servicing, and related services for the
22
affiliate's origination and sale of non-conforming residential real
estate loans. These WFI service activities have supplanted most of
WFI's origination and sales activity.
Investment revenue was affected by the following:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Average invested assets $1,370.3 $1,306.2 $1,352.8 $1,298.6
Adjusted portfolio yield 6.60% 6.36% 6.86% 6.34%
Net realized gains
(losses) on
investments $ 0.5 $ (2.0) $ 0.3 $ (4.3)
Interest Expense
The impact of using interest rate swap agreements to fix floating-rate
debt or float fixed-rate debt is included in interest expense and the
related borrowing statistics below.
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Interest expense $ 167.5 $ 132.3 $ 452.1 $ 412.1
Amount change $ 35.2 $ (3.6) $ 40.0 $ 0.4
Percent change 27% (3)% 10% -%
Average borrowings $16,992.7 $13,384.2 $15,787.8 $13,219.8
Borrowing cost 3.94% 3.94% 3.81% 4.15%
Interest expense increased (decreased) due to the following:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Increase in average
borrowings $ 36.3 $ 24.2 $ 79.9 $ 76.7
Decrease in borrowing
cost (1.1) (27.8) (39.9) (76.3)
Total $ 35.2 $ (3.6) $ 40.0 $ 0.4
23
Average borrowings by type and changes in average borrowings when
compared to the same periods for the previous year were as follows:
Three Months Ended September 30,
2004 2003
Amount Change Amount Change
(dollars in millions)
Long-term debt $12,996.6 $3,331.9 $ 9,664.7 $2,557.9
Short-term debt 3,996.1 276.6 3,719.5 (532.0)
Total $16,992.7 $3,608.5 $13,384.2 $2,025.9
Percent change 27% 18%
Nine Months Ended September 30,
2004 2003
Amount Change Amount Change
(dollars in millions)
Long-term debt $11,802.9 $2,373.0 $ 9,429.9 $2,580.9
Short-term debt 3,984.9 195.0 3,789.9 (507.1)
Total $15,787.8 $2,568.0 $13,219.8 $2,073.8
Percent change 19% 19%
AGFC issued $5.5 billion of long-term debt during the last twelve
months. The proceeds of these long-term debt issuances were used to
support finance receivable growth and to refinance maturing debt.
Borrowing cost by type and changes in borrowing cost in basis points
when compared to the same periods for the previous year were as
follows:
Three Months Ended September 30,
2004 2003
Rate Change Rate Change
Long-term debt 4.30% (16) bp 4.46% (141) bp
Short-term debt 2.72 15 2.57 (40)
Total 3.94 - 3.94 (84)
Nine Months Ended September 30,
2004 2003
Rate Change Rate Change
Long-term debt 4.24% (51) bp 4.75% (135) bp
Short-term debt 2.56 (11) 2.67 (39)
Total 3.81 (34) 4.15 (78)
Federal Reserve actions from 2001 through June 2003 created the lowest
interest rate environment since the 1950s and resulted in lower long-
term debt rates as new issuances were at substantially lower rates
than long-term debt being refinanced. During 2004, the Federal
Reserve raised the federal funds rate 75 basis points in three actions
beginning in June 2004.
24
Operating Expenses
Operating expenses were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Salaries and benefits $120.5 $103.2 $366.7 $303.9
Other 75.9 66.3 218.5 200.1
Total $196.4 $169.5 $585.2 $504.0
Amount change $ 26.9 $ 30.1 $ 81.2 $ 81.1
Percent change 16% 22% 16% 19%
Operating expenses as a
percentage of average
net receivables 4.27% 4.76% 4.56% 4.80%
Operating expenses increased for the three and nine months ended
September 30, 2004 when compared to the same periods in 2003 primarily
due to growth in WFI operations and higher salaries and benefits and
advertising expenses. The increase in salaries and benefits reflected
approximately 470 WFI employees hired during the last twelve months.
The decrease in operating expenses as a percentage of average net
receivables for the three and nine months ended September 30, 2004
when compared to the same periods in 2003 reflected continued emphasis
on controlling operating expenses and higher average net receivables,
partially offset by growth in WFI operations. Approximately $36.5
million of the Company's operating expenses for the three months ended
September 30, 2004 and $102.1 million of such expenses for the nine
months ended September 30, 2004 were directly related to WFI
operations, compared to $20.0 million for the three months ended
September 30, 2003 and $55.2 million for the nine months ended
September 30, 2003.
Provision for Finance Receivable Losses
At or for the
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Provision for finance
receivable losses $ 69.1 $82.4 $193.6 $229.8
Amount change $(13.3) $11.0 $(36.2) $ 14.5
Percent change (16)% 15% (16)% 7%
Net charge-offs $ 69.1 $78.4 $203.6 $226.8
Charge-off ratio 1.51% 2.21% 1.61% 2.17%
Charge-off coverage 1.65x 1.49x 1.68x 1.54x
60 day+ delinquency $468.5 $545.6
Delinquency ratio 2.44% 3.64%
Allowance for finance
receivable losses $456.0 $466.0
Allowance ratio 2.42% 3.19%
25
Net charge-offs by type and changes in net charge-offs when compared
to the same periods for the previous year were as follows:
Three Months Ended September 30,
2004 2003
Amount Change Amount Change
(dollars in millions)
Real estate loans $17.8 $ 0.5 $17.3 $ 4.6
Non-real estate loans 42.6 (8.0) 50.6 3.2
Retail sales finance 8.7 (1.8) 10.5 (0.8)
Total $69.1 $(9.3) $78.4 $ 7.0
Nine Months Ended September 30,
2004 2003
Amount Change Amount Change
(dollars in millions)
Real estate loans $ 46.9 $ 1.9 $ 45.0 $ 7.2
Non-real estate loans 128.3 (19.8) 148.1 4.1
Retail sales finance 28.4 (5.3) 33.7 0.2
Total $203.6 $(23.2) $226.8 $11.5
The decrease in net charge-offs for the three and nine months ended
September 30, 2004 when compared to the same periods in 2003 reflected
lower non-real estate loan and retail sales finance net charge-offs
primarily due to the improving economy. Real estate loan net charge-
offs increased for the three and nine months ended September 30, 2004
when compared to the same periods in 2003 primarily due to higher real
estate loan average net receivables.
Charge-off ratios by type and changes in charge-off ratios in basis
points when compared to the same periods for the previous year were as
follows:
Three Months Ended September 30,
2004 2003
Ratio Change Ratio Change
Real estate loans 0.51% (18) bp 0.69% 5 bp
Non-real estate loans 5.71 (133) 7.04 34
Retail sales finance 2.74 (48) 3.22 (18)
Total 1.51 (70) 2.21 (14)
Nine Months Ended September 30,
2004 2003
Ratio Change Ratio Change
Real estate loans 0.49% (12) bp 0.61% (4) bp
Non-real estate loans 5.80 (105) 6.85 9
Retail sales finance 2.95 (45) 3.40 14
Total 1.61 (56) 2.17 (22)
26
The improvement in the charge-off ratios for the three and nine months
ended September 30, 2004 when compared to the same periods in 2003 was
primarily due to the improving economy and a higher proportion of
average net receivables that were real estate loans.
Delinquency by type and changes in delinquency when compared to the
same period for the previous year were as follows:
September 30,
2004 2003
Amount Change Amount Change
(dollars in millions)
Real estate loans $280.2 $(52.2) $332.4 $44.4
Non-real estate loans 154.6 (17.8) 172.4 (2.7)
Retail sales finance 33.7 (7.1) 40.8 (0.4)
Total $468.5 $(77.1) $545.6 $41.3
Delinquency at September 30, 2004 was favorably impacted by the
improving economy.
Delinquency ratios by type and changes in delinquency ratios in basis
points when compared to the same period for the previous year were as
follows:
September 30,
2004 2003
Ratio Change Ratio Change
Real estate loans 1.94% (126) bp 3.20% (6) bp
Non-real estate loans 4.70 (74) 5.44 -
Retail sales finance 2.35 (48) 2.83 14
Total 2.44 (120) 3.64 (7)
The delinquency ratio at September 30, 2004 decreased when compared to
September 30, 2003 primarily due to the improving economy and a higher
proportion of net finance receivables that were real estate loans.
Our Credit Strategy and Policy Committee evaluates our finance
receivable portfolio monthly to determine the appropriate level of the
allowance for finance receivable losses. We believe the amount of the
allowance for finance receivable losses is the most significant
estimate we make. In our opinion, the allowance is adequate to absorb
losses inherent in our existing portfolio. The decrease in the
allowance for finance receivable losses at September 30, 2004 when
compared to September 30, 2003 was due to net decreases to the
allowance for finance receivable losses through the provision for
finance receivable losses during the period totaling $10.0 million.
These decreases were in response to our lower levels of delinquency.
The allowance as a percentage of net finance receivables at September
30, 2004 decreased primarily due to improved net charge-off and
delinquency statistics caused by the improving economy and a higher
proportion of net finance receivables that were real estate loans.
Charge-off coverage, which compares the allowance for finance
receivable losses to net charge-offs (annualized), improved for the
three and nine months ended September 30, 2004 when compared to the
same periods in 2003 due to lower net charge-offs.
27
Insurance Losses and Loss Adjustment Expenses
Insurance losses and loss adjustment expenses were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Claims incurred $22.3 $18.2 $63.8 $60.3
Change in benefit
reserves (1.0) (0.8) (3.4) (7.3)
Total $21.3 $17.4 $60.4 $53.0
Amount change $ 3.9 $(1.8) $ 7.4 $(8.0)
Percent change 22% (9)% 14% (13)%
Claims incurred increased for the three and nine months ended
September 30, 2004 when compared to the same periods in 2003 primarily
due to property losses in Florida associated with the recent
hurricanes. The change in benefit reserves for the nine months ended
September 30, 2003 reflected the release of benefit reserves resulting
from the termination of a reinsurance agreement. In April 2003, we
terminated a reinsurance agreement with a non-subsidiary affiliate and
reversed $3.6 million of annuity reserve expense and annuity premiums
that we previously recorded.
Provision for Income Taxes
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(dollars in millions)
Provision for income
taxes $ 67.2 $ 57.0 $188.2 $156.1
Amount change $ 10.2 $ 11.0 $ 32.1 $ 24.1
Percent change 18% 24% 21% 18%
Pretax income $182.1 $151.7 $515.0 $428.7
Effective income
tax rate 36.88% 37.55% 36.55% 36.40%
Provision for income taxes increased for the three and nine months
ended September 30, 2004 when compared to the same periods in 2003
primarily due to higher pretax income.
Asset/Liability Management
In an effort to reduce the risk associated with unfavorable changes in
interest rates not met by favorable changes in finance charge yields
of our finance receivables, we monitor the anticipated cash flows of
our assets and liabilities, principally our finance receivables and
debt. We fund finance receivables with a combination of fixed-rate
and floating-rate debt and equity. Management determines the mix of
fixed-rate and floating-rate debt based, in part, on the nature of the
finance receivables being supported.
28
The primary means by which we obtain fixed-rate debt is by issuing
fixed-rate, long-term debt. To supplement fixed-rate debt issuances,
AGFC also alters the nature of certain floating-rate funding by using
interest rate swap agreements to create synthetic fixed-rate, long-
term debt, thereby limiting our exposure to market interest rate
increases. Additionally, AGFC has swapped fixed-rate, long-term debt
to floating-rate, long-term debt. Including the impact of interest
rate swap agreements that effectively fix floating-rate debt or float
fixed-rate debt, our floating-rate debt represented 37% of our
borrowings at September 30, 2004 compared to 41% at September 30,
2003. Adjustable-rate net finance receivables represented 21% of our
net finance receivables at September 30, 2004 compared to 25% at
September 30, 2003.
Item 4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures
The conclusions of our principal executive officer and principal
financial officer about the effectiveness of the Company's
disclosure controls and procedures based on their evaluation of
these controls and procedures as of September 30, 2004 are as
follows:
The Company's disclosure controls and procedures are designed to
ensure that information required to be disclosed by the Company
is recorded, processed, summarized and reported within required
timeframes. The Company's disclosure controls and procedures
include controls and procedures designed to ensure that
information required to be disclosed is accumulated and
communicated to the Company's management, including its principal
executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure.
The Company's management, including its principal executive
officer and principal financial officer, evaluates the
effectiveness of our disclosure controls and procedures as of the
end of each quarter. Based on an evaluation of the disclosure
controls and procedures as of September 30, 2004, the Company's
principal executive officer and principal financial officer have
concluded that the disclosure controls and procedures have
functioned effectively and that the condensed consolidated
financial statements fairly present our consolidated financial
position and the results of our operations for the periods
presented.
(b) Changes in internal control over financial reporting
There was no change in the Company's internal control over
financial reporting during the three months ended September 30,
2004, that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting.
29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 9. of the Notes to Condensed Consolidated Financial
Statements in Part I of this Form 10-Q.
Item 6. Exhibits.
Exhibits are listed in the Exhibit Index beginning on page 31 herein.
30
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMERICAN GENERAL FINANCE, INC.
(Registrant)
Date: November 3, 2004 By /s/ Donald R. Breivogel, Jr.
Donald R. Breivogel, Jr.
Senior Vice President and Chief
Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
31
Exhibit Index
Exhibit
(12) Computation of Ratio of Earnings to Fixed Charges
(31.1) Rule 13a-14(a)/15d-14(a) Certifications
(31.2) Rule 13a-14(a)/15d-14(a) Certifications
(32) Section 1350 Certifications