American General Insurance Co. yesterday said it submitted a formal tender offer and proposed merger agreement to Richmond Corp.'s board of directors.

American General said the revised proposal contains two alternatives. One contemplates the issuance of one share of a new $2.40 convertible preferred stock of American General for each outstanding share of Richmond's common. Each share of the new preferred would be convertible into 0.8 of a share of American General common. The other alternative also contemplates a new issue of preferred, but with a higher $2.50-per-share annual dividend and a lower conversion rate of 0.7 of a share of American General common.

Under either alternative, the new American General preferred would have a "stated value" of $30 a share and would be non-callable for five years. A mandatory sinking fund, at $30 a share plus any accrued dividends, would retire 2 1/2 per cent of the issue each year beginning the sixth year.

Continental Group, Inc., also has been trying to buy Richmond. Continental Group made its proposal to acquire Richmond last August for securities then valued at $317 million. Richmond signed a merger agreement with Continental Group last week after its board voted 9 to 4 to accept the merger proposal. It isn't clear how the American General Insurance formal offer will affect the status of Richmond's agreement with Continental Group.

American General, which already owns 9.7 per cent of Richmond's outstanding shares, proposed an offer last week to issue one share of a $2.25 new issue convertible preferred for each share of Richmond common which would have been convertible into 0.85 share of American General common.