American General Corporation

1014 Words Feb 23rd, 2011 5 Pages
American General Corporation

Evaluating the Risk of the American General Corporation we started from looking at company's market standing from potential investors point of view. First we take a look at the companies profile. American General Corporation is a diversified financial services organization, provides retirement services, life insurance, and consumer loans. The company offers retail financial programs through fifteen thousand merchants. American General Corp. operates in 41 states. Puerto Rico, and the United States Virgin Islands.

Well, first we find out that American General Corporation is a blue chip, multibillion dollar company. This tells us right from the beginning that this financial giant is really worth
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The company is very careful with it's investments. AGS decreases its investments into the below investment grade securities ( have credit rating below BBB- ) from 5% at June 31 of 1998 to 4% at December 31 of 1997%. The company invests in below investment securities to enhance the overall yield of the portfolio. Investment income from below investment grade securities was $148 million for the six months ended June 30, 1998. This tells us that this company is not looking for the quick profit, so it does not through its money around passing on opportunities for greater rate of return on equity for stability and safety. For some investors this might seem as an extreme measure, because after all earning money on market is all about risk. But for those who investors who are looking for a stable and secure investment American General Corporation should fit the profile. Then again, getting rid of risky investments moved company's beta closer to market beta ( which considered to be 1 and AGC beta right now is about .95 ) was not such a good idea, because now with there is a more chance for the company to take a deeper dive with recession of overall U.S. economy.

Consumer Finance division's capital varies directly with the amount of total finance receivables. The capital mix of consumer finance debt and equity is based primarily upon maintaining at a level that supports cost-effective funds. From financial research we know that American General Corp. had $ 9.2
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