American General Corporation Essay

This essay has a total of 1021 words and 5 pages.

American General Corporation



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 looking at as a potential candidates to be added in our stock portfolio.

Considering that this is a financial company dealing with investments, pension funds and
life insurance we have to be very careful because these industries are most sensible to
overall economy changes, and we know that at this point US economy is going through the
period when recession is most expected. To get a better understanding of how this might
affect companies risk we have to know how diversified companies investments are. For that
we have to evaluate companies performance compare to market performance. ( for this
purpose we use chart on returns for American General Corporation to S&P 500 ). As we can
see from the chart behavior of the company is almost identical to the behavior of the
market, this observation becomes more obvious when we take a look at company's beta which
is .95. Well this is not such a great sign because as I already mentioned recession is
expected., and as we know with recession overall market returns go down this is knowing
the relationship between market and AGC we can predict that American General Corp.
performance will decrease as well. The question is how deep will the market fall, and how
long the recession would last, of course, if the recession will occur.

There were no recent revelation, as far as, companies financial structure is concern,
well, may be the only exception is a slight change in companies management structure
which so far did not make any significant impact on companies market value, so the
only major aspect in evaluating of how risky the company is how correlated it is with the
market. Of course there are other things to be considered.

There are couple of good signs that should lower the risk of AGC. For instance, the
decrease in the charge off and delinquency ratios compared to prior periods reflect the
positive impact of the company's credit quality improvement program, which included an
increase in thee proportion of real estate secured loans and higher underwriting
standards. The decrease in the allowance reflects the improvement in charge-off
experience, partially offset by an increase in the allowance to support the growth in
receivables. Also, company's operating expenses as a percentage of average finance
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