- Second quarter 2014 after-tax operating
income attributable to AIG of $1.8 billion, $1.25 per diluted
share
- Second quarter 2014 insurance pre-tax
operating income of $2.7 billion
- Completed the sale of ILFC to AerCap
Holdings N.V.; total consideration of approximately $7.6
billion
- Additional share repurchase
authorization of $2.0 billion, with approximately $1.1 billion of
shares repurchased during the second quarter of 2014
- $1.6 billion of cash dividends and loan
repayments to AIG Parent from insurance subsidiaries in the second
quarter of 2014
American International Group, Inc. (NYSE:AIG) today reported net
income attributable to AIG of $3.1 billion for the quarter ended
June 30, 2014, compared to $2.7 billion for the second quarter of
2013. After-tax operating income attributable to AIG was $1.8
billion for the second quarter of 2014, compared to $1.7 billion
for the prior-year quarter.
Diluted earnings per share attributable to AIG were $2.10 for
the second quarter of 2014, compared to $1.84 for the second
quarter of 2013. Net income for the second quarter of 2014 included
a $1.4 billion after-tax gain on the sale of ILFC, or $0.96 per
diluted share. After-tax operating income per diluted share
attributable to AIG was $1.25 for the second quarter of 2014,
compared to $1.12 in the prior-year quarter.
“AIG’s results in the second quarter were solid. Overall, our
businesses demonstrated our continued discipline and resilience,
underscoring our focus on improving the results of our core
insurance businesses,” said AIG President and Chief Executive
Officer Robert H. Benmosche. “In many ways, this quarter, my last
as President and CEO of AIG, was punctuated by two significant
milestones: the completion of our sale of ILFC to AerCap, which
marks the last disposition of AIG’s non-core businesses, and the
appointment of Peter Hancock to succeed me as AIG’s next President
and Chief Executive Officer.
“We are pleased with the strong performance across all of our
Property Casualty, Life and Retirement and Mortgage Guaranty
businesses. Our operating results demonstrate our continued
progress, and it was another very active quarter for capital
management activities,” continued Mr. Benmosche.
“As we look towards the future, I have every confidence that
Peter will lead AIG to even more sustainable prosperity in the days
and years ahead. Under Peter’s leadership, I have no doubt that we
will continue advancing our core strategies and priorities with
integrity and a profound sense of the responsibility that AIG
exceed the expectations – financial, regulatory, and community – of
all of our stakeholders,” Mr. Benmosche concluded.
Capital and Liquidity
- AIG shareholders’ equity totaled $108.2
billion at June 30, 2014
- Book value per share of $75.71 grew 15
percent from June 30, 2013; book value per share excluding
accumulated other comprehensive income (AOCI) of $67.65 grew 10
percent over the same period
- Repurchased 18.1 million shares of AIG
Common Stock for an aggregate purchase price of approximately $1.1
billion in the second quarter of 2014, including initial delivery
of approximately 3.8 million shares pursuant to a $300 million
accelerated share repurchase agreement which settled in July 2014
with the delivery to AIG of approximately 1.7 million additional
shares; approximately $1.5 billion remains available under
repurchase authorization
- Tax sharing payments to AIG Parent from
insurance businesses amounted to $510 million in the second quarter
of 2014 and $781 million year-to-date; subject to reimbursement in
future periods
- During the second quarter of 2014, AIG
reduced Direct Investment book (DIB) debt through a redemption of
$750 million aggregate principal amount of its 3.000% Notes due
2015 using cash allocated to the DIB
- In July 2014, AIG further reduced DIB
debt by approximately $2.0 billion through a redemption of $790
million aggregate principal amount of its 4.875% Notes due 2016 and
a redemption of $1.25 billion aggregate principal amount of its
3.800% Notes due 2017, in each case, using cash allocated to the
DIB
- In July 2014, AIG repurchased, in
tender offers, certain high coupon hybrid and senior notes issued
or guaranteed by AIG Parent, for an aggregate purchase price of
$2.5 billion, and also issued $1 billion of 2.300 % Notes due 2019
and $1.5 billion of 4.500% Notes due 2044
- AIG Parent liquidity sources were $18.5
billion at June 30, 2014, including $14.1 billion of cash,
short-term investments, and unencumbered fixed maturity securities,
up from $15.6 billion at March 31, 2014
AFTER-TAX OPERATING INCOME
Three Months Ended June 30, ($ in
millions)
2014 2013 Pre-tax operating
income (loss) Insurance Operations AIG Property Casualty
$ 1,355 $ 1,086 AIG Life and Retirement
1,180
1,151 Mortgage Guaranty
210 73
Total Insurance Operations
2,745
2,310 Other Operations (excluding Mortgage Guaranty)
Direct Investment book
313 591 Global Capital Markets
245 175 Equity in pre-tax operating earnings of AerCap
53 - Interest expense
(327) (353) Corporate expenses,
net
(282) (253) Other, net
(13)
(35) Total Other Operations (excluding Mortgage
Guaranty)
(11) 125 Consolidations, eliminations and other
adjustments
10 33 Pre-tax
operating income
2,744 2,468
Income tax expense
(918) (786) Noncontrolling
interests excluding net realized capital (gains) losses
7 (27)
After-tax operating
income attributable to AIG $ 1,833
$ 1,655
After-tax operating income attributable to AIG
per diluted common share $ 1.25 $ 1.12
Effective tax rate on After-tax operating income attributable to
AIG 33.4 % 31.8 %
All operating segment comparisons that follow are to the second
quarter of 2013 unless otherwise noted.
AIG PROPERTY CASUALTY
Three Months Ended June 30, ($ in millions)
2014 2013 Change Net
premiums written
$ 9,213 $ 9,263 (1)
% Net premiums earned
8,531 8,347 2 Underwriting
income (loss)
101 (223) NM Net investment income
1,254 1,309 (4)
Pre-tax operating income
$ 1,355 $
1,086 25 % Underwriting ratios: Loss ratio
64.6 68.0 (3.4) pts Acquisition ratio
19.4 20.0 (0.6)
General operating expense ratio
14.8
14.6 0.2 Combined ratio
98.8 102.6 (3.8) Accident
year loss ratio, as adjusted
62.7 61.9 0.8 Accident year
combined ratio, as adjusted
96.9 96.5 0.4 Severe losses
2.3 0.5 1.8 pts
AIG Property Casualty’s pre-tax operating income increased to
$1.4 billion as improved underwriting results were partially offset
by a decline in net investment income driven by lower returns on
alternative investments and lower income on investments accounted
for under the fair value option. As part of AIG’s continued focus
on capital management, AIG Property Casualty distributed $701
million in cash dividends to AIG Parent during the second quarter
of 2014.
The second quarter 2014 combined ratio was 98.8, a 3.8 point
decrease from the prior-year quarter. Catastrophe losses were $139
million, compared to $316 million in the second quarter of 2013.
Including premium adjustments, net prior year favorable loss
reserve development was $14 million, compared to net prior year
adverse loss reserve development of $154 million for the second
quarter of 2013. The lower catastrophe losses and net favorable
loss reserve development were partially offset by an increase in
Commercial Insurance severe losses of $193 million, compared to $38
million in the prior-year quarter. The second quarter 2014 accident
year loss ratio, as adjusted, was 62.7, an increase of 0.8 points
from higher severe losses in Commercial Insurance, partially offset
by improvements in accident year losses in Consumer Insurance. The
second quarter accident year combined ratio, as adjusted, was
slightly higher than the prior-year quarter, primarily due to the
impact of these severe losses.
Excluding the effects of foreign exchange, second quarter 2014
net premiums written increased slightly from the same period in the
prior year, reflecting a four percent increase in Consumer
Insurance due to growth through multiple products and distribution
channels. This increase was partially offset by a one percent
decrease in Commercial Insurance from lower retention of renewal
business and decreases in new business due to increased
competition.
COMMERCIAL INSURANCE UNDERWRITING RESULTS
Three Months Ended June 30, ($ in millions)
2014 2013 Change Net
premiums written
$ 5,816 $ 5,876 (1)
% Net premiums earned
5,265 5,073 4 Underwriting
income (loss)
$ 239 $ (88) NM
% Underwriting ratios: Loss ratio
67.7 72.6 (4.9) pts
Acquisition ratio
15.4 16.3 (0.9) General operating expense
ratio
12.3 12.8 (0.5)
Combined ratio
95.4
101.7 (6.3) Accident year loss ratio,
as adjusted
66.4 62.2 4.2 Accident year combined ratio, as
adjusted
94.1 91.3 2.8
pts
The Commercial Insurance combined ratio decreased 6.3 points to
95.4, primarily due to net favorable prior year loss reserve
development and lower catastrophe losses. Including premium
adjustments, net prior year favorable loss reserve development was
$63 million, compared to net prior year adverse development of $187
million for the second quarter of 2013. Second quarter 2014
catastrophe losses were $121 million, compared to $307 million in
the prior-year quarter. The second quarter 2014 accident year loss
ratio, as adjusted, increased 4.2 points to 66.4, reflecting higher
property and specialty severe losses. The second quarter 2014
acquisition ratio decreased 0.9 points to 15.4, primarily due to
lower premium taxes and guaranty fund and other assessments which
were partially offset by an increase in commission rates due to
change in business mix. The general operating expense ratio
decreased 0.5 points to 12.3, primarily due to a higher premium
earned base as the dollar amount of general operating expenses was
essentially flat compared to the prior year quarter.
CONSUMER INSURANCE UNDERWRITING RESULTS
Three Months Ended June 30, ($ in millions)
2014 2013 Change Net
premiums written
$ 3,407 $ 3,390 1
% Net premiums earned
3,253 3,255 - Underwriting
income (loss)
$ 68 $ (1) NM
% Underwriting ratios: Loss ratio
55.8 58.9 (3.1) pts
Acquisition ratio
25.9 25.9 - General operating expense
ratio
16.3 15.3 1.0
Combined ratio
98.0
100.1 (2.1) Accident year loss ratio,
as adjusted
55.7 60.2 (4.5) Accident year combined ratio, as
adjusted
97.9 101.4 (3.5)
pts
The Consumer Insurance combined ratio decreased 2.1 points to
98.0 due to lower accident year losses, partially offset by lower
net prior year favorable loss reserve development. The accident
year loss ratio, as adjusted, decreased 4.5 points to 55.7. The
accident year loss ratio, as adjusted, reflects rate increases and
improved loss experience in the Japan automobile business, and rate
actions and coverage changes in the U.S. warranty business. The
general operating expense ratio increased by 1.0 point to 16.3,
primarily as a result of higher infrastructure costs related to the
ongoing integration of AIG Property Casualty’s Japanese
entities.
AIG LIFE AND RETIREMENT
Three Months Ended June 30, ($ in millions)
2014 2013 Change Premiums
and deposits
$ 7,360 $ 6,765 9 %
Net investment income
2,561
2,637 (3) Pre-tax operating income: Retail
684 670 2 Institutional
496
481 3 Total pre-tax operating income
1,180 1,151 3
Assets under management
$ 332,812
$ 293,665 13 %
AIG Life and Retirement reported quarterly pre-tax operating
income of $1.2 billion in the second quarter of 2014, reflecting
consistent, strong performance across AIG Life and Retirement’s
diversified businesses, with higher pre-tax operating income in
both the Retail and Institutional operating segments compared to
the same period in the prior year. These results reflected higher
fee income from growth in assets under management, partially offset
by lower investment income, primarily due to strong returns on
alternative investments in the prior-year period. AIG Life and
Retirement continued to benefit from disciplined pricing of new
business, active management of renewal crediting rates for interest
rate-sensitive business and the run-off of older business with
relatively high crediting rates, which together have partially
offset the pressure on investment yields in the sustained low
interest rate environment.
AIG Life and Retirement’s net investment income of $2.6 billion
in the second quarter of 2014 was 3 percent lower than the
prior-year quarter, largely due to a $184 million decrease in
income from alternative investments, including hedge funds, which
had strong returns in the second quarter of 2013. In addition, base
portfolio yield declined to 5.17 percent from 5.35 percent in the
second quarter of 2013. The decrease in base yield was due to
strong results from commercial mortgage loans and structured
securities in the prior-year period, as well as the effect of the
low interest rate environment on new money yields, including the
impact of reinvesting proceeds from investment sales made during
2013 to utilize capital loss carry forwards. Base spreads for the
Fixed Annuities and Group Retirement product lines decreased
compared to the second quarter of 2013 due to the impact of lower
base yields, which were partially offset by active crediting rate
management and the run-off of older business with relatively high
crediting rates.
AIG Life and Retirement generated $7.4 billion of premiums and
deposits across its diversified product portfolio, up 9 percent
from the second quarter of 2013. The growth was led by continued
robust sales in the Retirement Income Solutions product line of
$2.6 billion, a 15 percent increase over the second quarter of
2013, driven by consumer demand for retirement products with
guaranteed income features. Fixed Annuities product line premiums
and deposits increased to $1.1 billion for the quarter, up
significantly from $355 million in the second quarter of 2013,
reflecting market interest rates which, while remaining at
historically low levels, have increased since the second quarter of
2013.
Assets under management grew 13 percent to $332.8 billion,
including net flows of $6.3 billion over the last 12 months driven
by the strong demand for Retirement Income Solutions and retail
mutual fund products, as well as appreciation in invested assets,
mutual funds and variable account values due to lower interest
rates and favorable equity markets. Continued growth in AIG’s
stable value wrap business also generated an increase of $12.1
billion in assets under management from the prior-year period.
The Retail operating segment reported quarterly pre-tax
operating income of $684 million. The Retail segment has benefited
from strong sales and net flows of variable annuities, which
together with favorable equity markets have increased variable
annuity account values, driving higher fee income. Fixed Annuities
sales continued to improve despite the sustained low interest rate
environment. Disciplined pricing, crediting rate management and the
run-off of older business with relatively high crediting rates have
mitigated the impact of declining base investment yields on spreads
in the Fixed Annuities business. Retail net investment income
declined slightly, primarily due to strong alternative investment
income from hedge funds in the prior-year period.
The Institutional operating segment reported quarterly pre-tax
operating income of $496 million. Improved results reflected higher
fee income in Group Retirement, largely driven by growth in assets
under management from equity market appreciation. Institutional net
investment income decreased primarily due to strong alternative
investment income from hedge funds in the prior-year period,
partially offset by higher call income.
In the second quarter of 2014, AIG Life and Retirement
distributed $886 million of cash dividends and loan repayments to
AIG Parent.
MORTGAGE GUARANTY
Three Months Ended June 30, ($ in millions)
2014 2013 Change Domestic
first-lien new insurance written
$ 11,057 $
13,817 (20) % Net premiums written
249 275 (9)
Net premiums earned
226 208 9 Underwriting income
177
40 343 Net investment income
33
33 - Pre-tax operating income
$
210 $ 73 188 %
United Guaranty Corporation (UGC) reported pre-tax operating
income of $210 million for the second quarter of 2014, compared to
pre-tax operating income of $73 million in the prior-year quarter.
Current quarter results reflect increased net premiums earned and
lower incurred losses due to $89 million in favorable prior year
reserve development. First lien favorable prior year development of
$79 million was driven by updated assumptions for overturn rates on
previously denied claims related to a settlement with a mortgage
lender.
Net premiums written decreased 9 percent to $249 million.
Domestic first-lien new insurance written decreased 20 percent to
$11.1 billion in principal of loans insured, driven by declining
mortgage originations from refinancing activity. Quality remained
high with an average FICO score of 750, and an average
loan-to-value of 92 percent on new business.
OTHER OPERATIONS
AIG’s Other Operations (excluding Mortgage Guaranty) reported a
second quarter 2014 pre-tax operating loss of $11 million compared
to pre-tax operating income of $125 million in the prior-year
second quarter. This decline in part reflects the results from the
DIB driven by lower asset appreciation and a decrease in gains
realized upon unwinding certain positions. Partially offsetting
these declines was an improvement in Global Capital Markets pre-tax
operating income due to gains realized upon unwinding certain
positions, earnings from AIG’s equity investment in AerCap and
lower interest expense resulting from debt capital management
activities.
Conference Call
AIG will host a conference call tomorrow, Tuesday, August 5,
2014, at 8:00 a.m. EDT to review these results. The call is open to
the public and can be accessed via a live listen-only webcast at
www.aig.com. A replay will be available after the call at the same
location.
# # #
Additional supplementary financial data is available in the
Investor Information section at www.aig.com.
The conference call (including the conference call presentation
material), the earnings release and the financial supplement may
include projections, goals, assumptions and statements that may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These
projections, goals, assumptions and statements are not historical
facts but instead represent only AIG’s belief regarding future
events, many of which, by their nature, are inherently uncertain
and outside AIG’s control. These projections, goals, assumptions
and statements include statements preceded by, followed by or
including words such as “believe,” “anticipate,” “expect,”
“intend,” “plan,” “view,” “target” or “estimate.” These
projections, goals, assumptions and statements may address, among
other things: AIG’s exposures to subprime mortgages, monoline
insurers, the residential and commercial real estate markets, state
and municipal bond issuers, and sovereign bond issuers; AIG’s
exposure to European governments and European financial
institutions; AIG’s strategy for risk management; AIG’s generation
of deployable capital; AIG’s return on equity and earnings per
share; AIG’s strategies to grow net investment income, efficiently
manage capital and reduce expenses; AIG’s strategies for customer
retention, growth, product development, market position, financial
results and reserves; and the revenues and combined ratios of AIG’s
subsidiaries. It is possible that AIG’s actual results and
financial condition will differ, possibly materially, from the
results and financial condition indicated in these projections,
goals, assumptions and statements. Factors that could cause AIG’s
actual results to differ, possibly materially, from those in the
specific projections, goals, assumptions and statements include:
changes in market conditions; the occurrence of catastrophic
events, both natural and man-made; significant legal proceedings;
the timing and applicable requirements of any new regulatory
framework to which AIG is subject as a non-bank systemically
important financial institution and as a global systemically
important insurer; concentrations in AIG’s investment portfolios;
actions by credit rating agencies; judgments concerning casualty
insurance underwriting and insurance liabilities; judgments
concerning the recognition of deferred tax assets; and such other
factors discussed in Part I, Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(MD&A) in AIG’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2014, Part I, Item 2. MD&A in AIG’s
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2014, and Part I, Item 1A. Risk Factors and Part II, Item 7.
MD&A in AIG’s Annual Report on Form 10-K for the year ended
December 31, 2013. AIG is not under any obligation (and expressly
disclaims any obligation) to update or alter any projections,
goals, assumptions, or other statements, whether written or oral,
that may be made from time to time, whether as a result of new
information, future events or otherwise.
# # #
Comment on Regulation G
Throughout this press release, including the financial
highlights, AIG presents its financial condition and results of
operations in the way it believes will be most meaningful,
representative and transparent. Some of the measurements AIG uses
are “non-GAAP financial measures” under Securities and Exchange
Commission rules and regulations. GAAP is the acronym for
“accounting principles generally accepted in the United States.”
The non-GAAP financial measures AIG presents may not be comparable
to similarly named measures reported by other companies. The
reconciliations of such measures to the most comparable GAAP
measures in accordance with Regulation G are included within the
relevant tables or in the Second Quarter 2014 Financial Supplement
available in the Investor Information section of AIG’s website,
www.aig.com.
Book Value Per Common Share Excluding Accumulated Other
Comprehensive Income (Loss) (AOCI) is used to show the amount of
AIG’s net worth on a per-share basis. AIG believes Book Value Per
Common Share Excluding AOCI is useful to investors because it
eliminates the effect of non-cash items that can fluctuate
significantly from period to period, including changes in fair
value of AIG’s available for sale securities portfolio and foreign
currency translation adjustments. Book Value Per Common Share
Excluding AOCI is derived by dividing Total AIG shareholders’
equity, excluding AOCI, by Total common shares outstanding.
AIG uses the following operating performance measures because it
believes they enhance understanding of the underlying profitability
of continuing operations and trends of AIG and its business
segments. AIG believes they also allow for more meaningful
comparisons with AIG’s insurance competitors.
After-tax operating income (loss) attributable to AIG is derived
by excluding the following items from net income (loss)
attributable to AIG: income (loss) from discontinued operations,
income (loss) from divested businesses, (including gain on the sale
of ILFC and certain post-acquisition costs incurred by AerCap in
connection with its acquisition of ILFC and related tax effects),
legacy tax adjustments primarily related to certain changes in
uncertain tax positions and other tax adjustments, legal reserves
(settlements) related to “legacy crisis matters,” deferred income
tax valuation allowance (releases) charges, changes in fair value
of AIG Life and Retirement fixed maturity securities designated to
hedge living benefit liabilities (net of interest expense), changes
in benefit reserves and deferred policy acquisition costs (DAC),
value of business acquired (VOBA), and sales inducement assets
(SIA) related to net realized capital gains (losses), AIG Property
Casualty other (income) expense-net, (gain) loss on extinguishment
of debt, net realized capital (gains) losses and non-qualifying
derivative hedging activities, excluding net realized capital
(gains) losses. “Legacy crisis matters” include favorable and
unfavorable settlements related to events leading up to and
resulting from AIG’s September 2008 liquidity crisis and legal fees
incurred by AIG as the plaintiff in connection with such legal
matters. See page 12 for the reconciliation of Net income
attributable to AIG to After-tax operating income attributable to
AIG.
AIG Property Casualty pre-tax operating income (loss) includes
both underwriting income (loss) and net investment income, but
excludes net realized capital (gains) losses, other (income)
expense-net, and legal settlements related to legacy crisis matters
described above. Underwriting income (loss) is derived by reducing
net premiums earned by claims and claims adjustment expenses
incurred, acquisition expenses and general operating expenses.
AIG Property Casualty, along with most property and casualty
insurance companies, uses the loss ratio, the expense ratio and the
combined ratio as measures of underwriting performance. These
ratios are relative measurements that describe, for every $100 of
net premiums earned, the amount of claims and claims adjustment
expense, and the amount of other underwriting expenses that would
be incurred. A combined ratio of less than 100 indicates
underwriting income and a combined ratio of over 100 indicates an
underwriting loss. The underwriting environment varies across
countries and products, as does the degree of litigation activity,
all of which affect such ratios. In addition, investment returns,
local taxes, cost of capital, regulation, product type and
competition can have an effect on pricing and consequently on
profitability as reflected in underwriting income and associated
ratios.
Both the AIG Property Casualty Accident year loss ratio, as
adjusted, and the AIG Property Casualty combined ratio, as
adjusted, exclude catastrophe losses and related reinstatement
premiums, prior-year development, net of premium adjustments, and
the impact of reserve discounting. Catastrophe losses are generally
weather or seismic events having a net impact on AIG Property
Casualty in excess of $10 million each.
AIG Life and Retirement pre-tax operating income (loss) is
derived by excluding the following items from pre-tax income
(loss): legal settlements related to legacy crisis matters
described above, changes in fair values of fixed maturity
securities designated to hedge living benefit liabilities (net of
interest expense), net realized capital (gains) losses, and changes
in benefit reserves and DAC, VOBA and SIA related to net realized
capital gains (losses).
AIG Life and Retirement premiums and deposits includes direct
and assumed amounts received on traditional life insurance
policies, group benefit policies and deposits on life-contingent
payout annuities, as well as deposits received on universal life,
investment-type annuity contracts and mutual funds.
Other Operations pre-tax operating income (loss) is derived by
excluding the following items from pre-tax income (loss): certain
legal reserves (settlements) related to legacy crisis matters
described above, (gain) loss on extinguishment of debt, net
realized capital (gains) losses, changes in benefit reserves and
DAC, VOBA and SIA related to net realized capital gains (losses),
income (loss) from divested businesses, including Aircraft Leasing,
and net (gain) loss on sale of divested businesses (including gain
on the sale of ILFC and certain post-acquisition costs incurred by
AerCap in connection with its acquisition of ILFC and our share of
AerCap’s income taxes).
Results from discontinued operations are excluded from all of
these measures.
# # #
American International Group, Inc. (AIG) is a leading
international insurance organization serving customers in more than
130 countries and jurisdictions. AIG companies serve commercial,
institutional, and individual customers through one of the most
extensive worldwide property-casualty networks of any insurer. In
addition, AIG companies are leading providers of life insurance and
retirement services in the United States. AIG common stock is
listed on the New York Stock Exchange and the Tokyo Stock
Exchange.
Additional information about AIG can be found at www.aig.com |
YouTube: www.youtube.com/aig |Twitter: @AIGInsurance| LinkedIn:
http://www.linkedin.com/company/aig |
AIG is the marketing name for the worldwide property-casualty,
life and retirement, and general insurance operations of American
International Group, Inc. For additional information, please visit
our website at www.aig.com. All products and services are written
or provided by subsidiaries or affiliates of American International
Group, Inc. Products or services may not be available in all
countries, and coverage is subject to actual policy language.
Non-insurance products and services may be provided by independent
third parties. Certain property-casualty coverages may be provided
by a surplus lines insurer. Surplus lines insurers do not generally
participate in state guaranty funds, and insureds are therefore not
protected by such funds.
American International Group, Inc. Financial
Highlights* (in millions, except share data)
Three Months Ended June 30, Six Months
Ended June 30, % Inc. %
Inc. 2014 2013 (Dec.)
2014 2013 (Dec.)
AIG Property Casualty Operations: Net premiums written
$ 9,213
$ 9,263 (0.5 ) %
$
17,547
$ 17,700 (0.9 ) % Net premiums earned
8,531 8,347 2.2 16,761 16,905 (0.9 ) Claims and claims adjustment
expenses incurred 5,511 5,679 (3.0 ) 11,032 11,092 (0.5 )
Acquisition expenses 1,654 1,671 (1.0 ) 3,293 3,359 (2.0 ) General
operating expenses 1,265 1,220 3.7 2,432 2,445
(0.5 ) Underwriting income (loss) 101 (223 ) NM 4 9 (55.6 )
Net investment income 1,254
1,309 (4.2 ) 2,510
2,634 (4.7 ) Pre-tax operating income
1,355 1,086 24.8
2,514 2,643
(4.9 ) Net realized capital gains 127 109 16.5 269
163 65.0 Legal settlements - 3 NM 8 3 166.7 Other income (expense)
- net 8 7 14.3 8 10 (20.0 )
Pre-tax
income $ 1,490
$ 1,205 23.7
$ 2,799
$ 2,819 (0.7 )
Loss ratio
64.6 68.0 65.8 65.6 Acquisition ratio 19.4 20.0 19.6 19.9 General
operating expense ratio 14.8 14.6 14.5 14.5
Combined ratio 98.8 102.6
99.9
100.0
AIG Life and Retirement
Operations: Premiums
$ 700
$ 649 7.9
$
1,297
$ 1,269 2.2 Policy fees 701 623 12.5 1,393 1,238 12.5
Net investment income 2,561 2,637 (2.9 ) 5,378 5,514 (2.5 ) Other
income 498 419 18.9 958 812 18.0 Total
revenues 4,460 4,328 3.0 9,026 8,833 2.2 Benefits and expenses
3,280 3,177 3.2
6,429 6,288
2.2 Pre-tax operating income
1,180 1,151 2.5
2,597 2,545 2.0
Legal settlements 12 359 (96.7 ) 42 467 (91.0 )
Changes in fair value of fixed maturity
securities designated to hedge living benefit liabilities, net of
interest expense
54 (69 ) NM 130 (98 ) NM
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital losses
(41 ) (1,152 ) 96.4 (11 ) (1,211 ) 99.1 Net realized capital gains
(losses) 44 1,430 (96.9 ) (277 ) 1,586 NM
Pre-tax income $ 1,249
$ 1,719
(27.3 )
$ 2,481
$ 3,289 (24.6 )
Other operations, pre-tax operating income 199
198 0.5 194
78 148.7 Legal
reserves (505 ) (14 ) NM (529 ) (25 ) NM Legal settlements - 46 NM
(12 ) 48 NM Loss on extinguishment of debt (34 ) (38 ) 10.5 (272 )
(378 ) 28.0
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized gains (losses)
(1 ) - NM (13 ) - NM Aircraft Leasing - 18 NM 17 61 (72.1 ) Net
gain (loss) on sale of divested businesses 2,146 (47 ) NM 2,150 (47
) NM Net realized capital gains (losses) (120 ) 88 NM (195 )
133 NM
Pre-tax income (loss) 1,685 251 NM 1,340 (130
) NM Consolidation and elimination adjustments related to
pre-tax operating income 2 26 (92.3 ) 37 53 (30.2 )
Consolidation and elimination adjustments
related to non-operating income (loss), including net realized
capital gains (losses)
54 (36 ) NM 96 9 NM
Income from continuing
operations before income tax expense 4,480 3,165 41.5 6,753
6,040 11.8 Income tax expense 1,474 425 246.8 2,088
1,142 82.8
Income from continuing operations
3,006 2,740 9.7 4,665 4,898 (4.8 )
Income (loss) from discontinued
operations, net of income tax expense
30 18 66.7 (17 ) 91 NM
Net income 3,036
2,758 10.1 4,648 4,989 (6.8 )
Less: Net income (loss) from continuing
operations attributable to noncontrolling interests
(37 ) 27 (34 ) 52 NM
Net income attributable to
AIG $ 3,073
$ 2,731 12.5 %
$
4,682
$ 4,937 (5.2 ) %
See accompanying notes on the following
page.
Financial Highlights
-continued Three Months Ended June 30, Six
Months Ended June 30, % Inc. % Inc. 2014
2013 (Dec.)
2014 2013 (Dec.) Net income
attributable to AIG $ 3,073 $ 2,731 12.5
%
$ 4,682 $ 4,937 (5.2 ) %
Adjustments to arrive at after-tax
operating income attributable to AIG (amounts are net of
tax):
(Income) loss from discontinued operations (30 ) (18 ) (66.7 ) 17
(91 ) NM Income from divested businesses, including gain on sale of
ILFC (1,399 ) 16 NM (1,411 ) (4 ) NM Uncertain tax positions and
other tax adjustments 39 64 (39.1 ) 11 690 (98.4 ) Legal reserves
(settlements) related to legacy crisis matters 321 (257 ) NM 319
(321 ) NM Deferred income tax valuation allowance releases (75 )
(752 ) 90.0 (140 ) (1,538 ) 90.9
Changes in fair value of AIG Life and
Retirement fixed maturity securities designated to hedge living
benefit liabilities, net of interest expense
(35 ) 45 NM (84 ) 64 NM
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital gains (losses)
28 835 (96.6 ) 16 889 (98.2 ) Loss on extinguishment of debt 22 25
(12.0 ) 177 246 (28.0 ) Net realized capital (gains) losses (111 )
(1,034 ) 89.3 27 (1,235 ) NM
After-tax operating income
attributable to AIG $ 1,833 $ 1,655 10.8 $ 3,614
$ 3,637 (0.6 )
Income (loss) per common
share: Basic Income from continuing operations $
2.11 $ 1.84 14.7 $ 3.24 $ 3.28 (1.2 ) Income (loss) from
discontinued operations 0.02 0.01 100.0 (0.01 ) 0.06
NM
Net income attributable to AIG $ 2.13 $
1.85 15.1 $ 3.23 $ 3.34 (3.3 )
Diluted Income from continuing operations $ 2.08 $ 1.83 13.7
$ 3.20 $ 3.27 (2.1 ) Income (loss) from discontinued operations
0.02 0.01 100.0 (0.01 ) 0.06 NM
Net income
attributable to AIG $ 2.10 $ 1.84 14.1 $ 3.19
$ 3.33 (4.2 )
After-tax operating income
attributable to AIG per diluted share $ 1.25 $ 1.12 11.6
%
$ 2.46 $ 2.46 -
Weighted average shares
outstanding: Basic 1,442.4 1,476.5 1,450.8 1,476.5 Diluted
1,464.7 1,482.2 1,468.4 1,479.5
Book value per common
share (a) $ 75.71 $ 66.02 14.7
Book value per common share excluding
accumulated other comprehensive income (b)
$ 67.65 $ 61.25 10.4 %
Return on equity (c)
11.6
%
11.1
%
9.0
%
10.0
%
Return on equity, excluding AOCI (d) 12.8
%
12.3
%
9.8
%
11.2
%
Return on equity - after-tax operating income, excluding AOCI
(e) 7.7
%
7.4
%
7.6
%
8.4
%
Financial highlights - notes *
Including reconciliation in accordance with Regulation G. (a)
Represents total AIG shareholders' equity divided by common shares
outstanding. (b) Represents total AIG shareholders' equity,
excluding AOCI divided by common shares outstanding. (c) Computed
as Annualized net income (loss) attributable to AIG divided by
average AIG shareholders' equity. Equity includes deferred tax
assets. (d) Computed as Annualized net income (loss) attributable
to AIG divided by average AIG shareholders' equity, excluding AOCI.
Equity includes deferred tax assets. (e) Computed as Annualized
after-tax operating income attributable to AIG divided by average
AIG shareholders' equity, excluding AOCI. Equity includes deferred
tax assets.
American International Group, Inc.Investors:Liz Werner,
212-770-7074elizabeth.werner@aig.comorMedia:Jon Diat,
212-770-3505jon.diat@aig.comorMedia:Molly Binenfeld,
917-297-4374molly.binenfeld@aig.com
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