Impacts from COVID-19 Remain
Manageable
Continued Improvement in General Insurance
Accident Year Underwriting Profitability, Adjusted for Catastrophe
Losses (CATs)
Sale of Fortitude Group Holdings LLC
(Fortitude) De-risks Balance Sheet and Sharpens Focus on Core
Businesses; Transaction Accounting Reflected in GAAP
Results
Strong Financial and Capital Flexibility;
$10.7 billion in Parent Liquidity at June 30, 2020; $71.68 of Book
Value per Common Share, an increase of 3.4% from March 31,
2020
- General Insurance reported $674 million of pre-tax CATs, net of
reinsurance, or 11.9 combined ratio points, which included $458
million of estimated COVID-19 losses, $126 million of civil unrest
related losses and $90 million of natural CATs resulting in a
General Insurance combined ratio of 106.0, in the second quarter of
2020.
- The General Insurance accident year combined ratio, as
adjusted*, was 94.9, a 120 bps improvement from the prior year
quarter, driven by improved Commercial Lines performance and
continued expense discipline.
- Life and Retirement reported adjusted pre-tax income (APTI) of
$881 million, a decrease of $168 million compared to the prior year
quarter driven by private equity losses, continued spread
compression and elevated mortality related to COVID-19. Adjusted
return on attributed common equity (Adjusted ROCE) – Life and
Retirement* for the second quarter was 13.2%.
- On June 2, 2020, AIG completed the sale of a 76.6% stake in
Fortitude for $2.2 billion of proceeds, significantly improving
AIG’s risk profile and reducing exposure to long-tail runoff
liabilities and related interest rate risk.
- Net loss attributable to AIG common shareholders was $7.9
billion, or $9.15 per common share, for the second quarter of 2020,
compared to income of $1.1 billion, or $1.24 per diluted common
share in the prior year quarter. The loss was primarily driven by a
$6.7 billion after-tax loss from the sale and deconsolidation of
Fortitude and $1.8 billion of after-tax net realized capital losses
primarily related to mark-to-market losses from variable annuity
and interest rate hedges including the impact of AIG’s non-economic
non-performance risk adjustment, per GAAP, on the fair value of
AIG’s associated liabilities. The after-tax reduction to total AIG
shareholders’ equity resulting from the sale and deconsolidation of
Fortitude was $4.3 billion, or $2.5 billion on an Adjusted common
shareholders’ equity* basis.
- Adjusted after-tax income attributable to AIG common
shareholders (AATI)* was $571 million, or $0.66 per diluted common
share, for the second quarter of 2020, compared to $1.3 billion, or
$1.43 per diluted common share in the prior year quarter. The
decrease was primarily due to higher CATs and lower net investment
income including private equity losses which are generally recorded
on a one-quarter lag.
* Refers to financial measure not calculated in accordance with
generally accepted accounting principles (non-GAAP); definitions of
non-GAAP measures and reconciliations to their closest GAAP
measures can be found in this news release under the heading
Comment on Regulation G and Non-GAAP Financial Measures.
American International Group, Inc. (NYSE: AIG) today reported
financial results for the quarter ended June 30, 2020.
Brian Duperreault, AIG’s Chief Executive Officer, said: “We are
effectively navigating the current complex environment due to the
strong foundation we built over the last three years. While
unprecedented and on-going, COVID-19 remains an earnings, not a
capital, event for AIG. We also increased our financial flexibility
ending the second quarter with over $10 billion in liquidity.
“Our core businesses performed well in the second quarter. In
General Insurance, the underlying underwriting profitability
improvement was driven by our focus on portfolio remediation and
expense discipline. Life and Retirement benefited from its
diversification and agility, and continues to meet client needs
despite an uncertain economic environment.
“We also executed two important transactions in the second
quarter that significantly enhanced our risk profile and helped to
position our core businesses for growth. The sale of our majority
stake in Fortitude Holdings de-risks our balance sheet and reduces
our exposure to long-tail runoff liabilities and interest rate
risk. Our Personal Insurance high net worth portfolio benefited
from the formation of Syndicate 2019 and new quota share
reinsurance agreements, which will enable us to unlock the
strategic value and growth opportunities of this business through a
new, innovative capital model.
“I am proud of the many ways we are managing through this
challenging period in time. Our colleagues continue to show
strength and resiliency as we remain focused on supporting our
clients, each other and our communities. I remain confident that
AIG is well-positioned for the future as we make progress toward
becoming a top-performing company and leading insurance
franchise.”
FINANCIAL SUMMARY
Three Months Ended June
30,
($ in millions, except per common share
amounts)
2020
2019
Net income (loss) attributable to AIG
common shareholders
$
(7,936)
$
1,102
Net income (loss) per diluted share
attributable to AIG common shareholders (a)
$
(9.15)
$
1.24
Weighted average common shares outstanding
- diluted (a)
867.0
888.3
Adjusted pre-tax income (loss):
General Insurance
$
175
$
980
Life and Retirement
881
1,049
Other Operations
(510)
(471)
Legacy
257
119
Total
$
803
$
1,677
Adjusted after-tax income attributable to
AIG common shareholders
$
571
$
1,272
Adjusted after-tax income per diluted
share attributable to AIG common shareholders
$
0.66
$
1.43
Return on common equity
NM
7.1
%
Return on tangible common equity*
NM
7.8
%
Adjusted return on common equity*
4.6
%
10.4
%
Adjusted return on tangible common
equity*
5.1
%
11.7
%
Adjusted return on attributed common
equity - Core*
3.5
%
11.6
%
Common shares outstanding
861.4
869.9
Book value per common share
$
71.68
$
73.63
Tangible book value per common share*
65.94
67.47
Book value per common share, excluding
AOCI adjusted for the cumulative unrealized
gains and losses related to Fortitude Re’s
Funds Withheld Assets*
65.93
67.90
Adjusted book value per common share
55.90
56.89
Adjusted tangible book value per common
share*
50.16
50.72
General Insurance Combined ratio
106.0
97.8
General Insurance Accident year combined
ratio, as adjusted
94.9
96.1
Adjusted return on attributed common
equity - Life and Retirement
13.2
%
17.3
%
(a) For periods reporting a loss, basic average common shares
outstanding are used to calculate net income (loss) per diluted
share attributable to AIG common shareholders. Diluted shares
represent basic shares for the three-month period ended June 30,
2020 because we reported a net loss attributable to AIG common
shareholders from continuing operations in that period.
All comparisons are against the second quarter of 2019, unless
otherwise indicated. Refer to the AIG Second Quarter 2020 Financial
Supplement, which is posted on AIG's website in the Investors
section, for further information.
SECOND QUARTER 2020 HIGHLIGHTS
General Insurance – Second quarter APTI of $175 million was
comprised of an underwriting loss of $343 million and net
investment income of $518 million. The underwriting loss included
$674 million of CATs, net of reinsurance, reflecting $458 million
of estimated COVID-19 losses, $126 million of civil unrest related
losses and $90 million of natural CATs compared to $174 million of
CATs, net of reinsurance, in the prior year quarter. Favorable net
prior year loss reserve development, net of reinsurance, totaled
$74 million, and was primarily due to $53 million of amortization
from the Adverse Development Cover (ADC).
The General Insurance combined ratio was 106.0, including 11.9
points of CATs and reinstatement premiums, of which 8.2 points
related to COVID-19 losses. Commercial Lines in both North America
and International continued to show strong improvement due to
underwriting and reinsurance actions taken to improve business mix,
loss performance, and rate adequacy. The accident year combined
ratio, as adjusted, was 94.9, comprised of a 61.5 accident year
loss ratio, as adjusted* and an expense ratio of 33.4. The accident
year combined ratio, as adjusted, reflected a change in Personal
Insurance business mix driven by a series of new quota share
reinsurance agreements including participation by our newly formed
Syndicate 2019, a Lloyd’s Syndicate managed by Talbot, to reinsure
risks related to AIG’s Private Client Group and the impact of
COVID-19 on the Travel business. General Insurance general
operating expenses (GOE) decreased by 9% to $766 million compared
to the prior year quarter.
Life and Retirement – Second quarter APTI was $881 million
compared to $1.0 billion in the prior year quarter. The decrease
reflected private equity losses, continued spread compression and
elevated mortality due to COVID-19, partially offset by higher
other yield enhancements investment income and lower deferred
policy acquisition costs (DAC) amortization and Variable Annuities
reserves resulting from higher equity markets in the second
quarter. Net flows were negative for the quarter and unfavorable to
the prior year driven by lower Fixed and Index Annuity sales.
Adjusted ROCE – Life and Retirement for the second quarter of 2020
was 13.2%.
Other Operations – Second quarter adjusted pre-tax loss (APTL)
was $510 million compared to $471 million in the prior year
quarter. The increase in pre-tax loss was primarily due to lower
net investment income on consolidated investments and increased
interest expense related to $4.1 billion of notes issued by AIG
Parent during the quarter.
Legacy – Fortitude – On June 2, 2020, AIG completed the sale of
a 76.6% ownership interest in Fortitude for approximately $2.2
billion, resulting in The Carlyle Group, Inc. (Carlyle) and T&D
United Capital Co., Ltd owning 96.5% of Fortitude and AIG retaining
a 3.5% ownership interest. AIG established Fortitude Reinsurance
Ltd. (Fortitude Re), a wholly owned subsidiary of Fortitude, in
2018 in connection with a series of affiliated reinsurance
transactions related to AIG’s Legacy Portfolio and has accounted
for Fortitude as part of AIG’s Legacy segment. As of June 30, 2020,
approximately $30.5 billion of reserves from AIG’s Legacy Life and
Retirement Run-Off Lines and approximately $4.1 billion of reserves
from AIG’s Legacy General Insurance Run-Off Lines, related to
business written by multiple wholly-owned AIG subsidiaries, had
been ceded to Fortitude Re under these reinsurance transactions.
Fortitude Re reinsures the majority of AIG’s Legacy portfolio
making it one of AIG’s largest reinsurance counterparties. As these
reinsurance transactions are structured as modified coinsurance and
loss portfolio transfers with funds withheld, AIG continues to
reflect the invested assets supporting Fortitude Re’s obligations
in AIG’s financial statements. As a result of the sale, AIG updated
its Non-GAAP measures this quarter to adjust for the modified
coinsurance and funds withheld assets, as the associated investment
income is owed to Fortitude under the reinsurance agreements.
Resulting from the sale of the majority interest in and
deconsolidation of Fortitude, AIG recorded an after-tax reduction
to total AIG shareholders’ equity of $4.3 billion. The
corresponding reduction to Adjusted common shareholders’ equity
which excludes accumulated other comprehensive income (AOCI),
adjusted for the cumulative unrealized gains and losses related to
Fortitude Re’s funds withheld assets, and deferred tax assets
(DTA), was $2.5 billion. The impact to AIG shareholders’ equity is
primarily due to a $6.7 billion after-tax loss partially offset by
a $2.4 billion increase in AOCI due to the release of shadow
adjustments primarily related to future policy benefits. The $6.7
billion after-tax loss is comprised of (i) a $2.7 billion loss
related to the write-off of prepaid insurance assets and DAC upon
deconsolidation of Fortitude and (ii) $4.0 billion related to the
loss on the sale primarily as a result of increases in Fortitude’s
GAAP equity principally related to mark-to-market movements since
December 31, 2018. The transaction did not negatively impact the
statutory capital of AIG’s insurance subsidiaries.
Legacy Portfolio Results – Second quarter APTI was $257 million
compared to APTI of $119 million in the prior year quarter; through
the date of closing of the Fortitude transaction, both of these
amounts are reduced in AATI for AIG due to Carlyle’s 19.9% minority
interest in Fortitude. The change was primarily due to an increase
in net investment income. In addition, the current quarter includes
two months of Fortitude APTI compared to three months in the prior
year quarter.
Net Investment Income – Total consolidated net investment income
was $3.4 billion in the second quarter of 2020 compared to $3.7
billion in the prior year quarter. Net investment income on an APTI
basis* decreased approximately $537 million to $3.2 billion in the
second quarter of 2020. The decrease reflected private equity
losses of $276 million compared to private equity income of $238
million in the prior year quarter which included a large IPO gain
from a private equity holding. As the Fortitude sale closed on June
2, 2020, net investment income on an APTI basis included $378
million related to two months of investment income on Fortitude
assets compared to $498 million in the prior year quarter.
Liquidity and Capital – As of June 30, 2020, AIG Parent
liquidity stood at approximately $10.7 billion. In May, AIG Parent
issued three tranches of senior notes in an aggregate principal
amount of $4.1 billion. In June, AIG Parent repaid the $1.3 billion
that it had borrowed in March 2020 under its $4.5 billion
committed, revolving syndicated credit facility.
Also, in June 2020, AIG Parent made a prepayment of
approximately $548 million to the U.S. Treasury in connection with
proposed tax settlement agreements that were previously announced
and related to the disallowance of foreign tax credits associated
with cross border financing transactions. AIG currently expects to
make, as early as the fourth quarter of 2020, additional payments
on this settlement of approximately $1.2 billion dependent upon the
final calculation of accrued interest.
Book Value per Common Share – As of June 30, 2020, book value
per common share was $71.68 compared to $73.63 at June 30, 2019,
primarily driven by a net loss attributable to the sale and
deconsolidation of Fortitude, partially offset by net unrealized
capital gains. Adjusted book value per common share, which excludes
AOCI, adjusted for the cumulative unrealized gains and losses
related to Fortitude Re’s funds withheld assets, and DTA, decreased
to $55.90 compared to $56.89 at June 30, 2019.
Adjusted tangible book value per common share, which is Adjusted
book value per common share excluding Goodwill, Value of Business
Acquired, Value of Distribution Channel Acquired and Other
Intangible Assets was $50.16 compared to $50.72 at June 30,
2019.
GENERAL INSURANCE
Three Months Ended June
30,
($ in millions)
2020
2019
Change
Total General Insurance
Gross premiums written
$
8,474
$
8,654
(2)
%
Net premiums written
$
5,549
$
6,581
(16)
Underwriting income (loss)
$
(343)
$
147
NM
Adjusted pre-tax income
$
175
$
980
(82)
Underwriting ratios:
Loss ratio
72.6
63.0
9.6
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(11.9)
(2.6)
(9.3)
Prior year development
0.8
0.9
(0.1)
Accident year loss ratio, as adjusted
61.5
61.3
0.2
Expense ratio
33.4
34.8
(1.4)
Combined ratio
106.0
97.8
8.2
Accident year combined ratio, as
adjusted
94.9
96.1
(1.2)
General Insurance - North America
Three Months Ended June
30,
($ in millions)
2020
2019
Change
North America
Net premiums written
$
2,347
$
3,307
(29)
%
Commercial Lines
2,497
2,364
6
Personal Insurance
(150)
943
NM
Underwriting income (loss)
$
(419)
$
(5)
NM
Commercial Lines
(385)
(36)
NM
Personal Insurance
(34)
31
NM
Adjusted pre-tax income
$
5
$
718
(99)
Underwriting
ratios:
North America
Loss ratio
87.9
69.2
18.7
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(19.6)
(5.0)
(14.6)
Prior year development
1.2
1.7
(0.5)
Accident year loss ratio, as adjusted
69.5
65.9
3.6
Expense ratio
27.8
30.9
(3.1)
Combined ratio
115.7
100.1
15.6
Accident year combined ratio, as
adjusted
97.3
96.8
0.5
North America Commercial Lines
Loss ratio
91.8
74.8
17.0
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(22.6)
(5.4)
(17.2)
Prior year development
1.6
3.1
(1.5)
Accident year loss ratio, as adjusted
70.8
72.5
(1.7)
Expense ratio
25.2
26.7
(1.5)
Combined ratio
117.0
101.5
15.5
Accident year combined ratio, as
adjusted
96.0
99.2
(3.2)
North America Personal
Insurance
Loss ratio
65.6
53.0
12.6
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(2.6)
(3.9)
1.3
Prior year development
(1.3)
(2.4)
1.1
Accident year loss ratio, as adjusted
61.7
46.7
15.0
Expense ratio
43.1
43.4
(0.3)
Combined ratio
108.7
96.4
12.3
Accident year combined ratio, as
adjusted
104.8
90.1
14.7
General Insurance North America – Commentary
- Net premiums written decreased by 29% to $2.3 billion. Net
premiums written in Personal Insurance decreased by $1.1 billion
primarily as a result of $725 million in cessions pursuant to a
series of new quota share reinsurance agreements including
participation by our newly formed Syndicate 2019, a Lloyd’s
Syndicate managed by Talbot, to reinsure risks related to AIG’s
Private Client Group and the impact of COVID-19 on the Travel
business. This was partially offset by 6% growth in our Commercial
business driven by improved rate and retention in our Core lines
including Retail Property, Lexington and AIG Re.
- Pre-tax underwriting loss of $419 million included $519 million
of CATs, net of reinsurance, of which $364 million related to
COVID-19, $81 million related to civil unrest and $74 million
related to natural CATs. The North America combined ratio was
115.7, compared to 100.1 in the prior year quarter, reflecting 19.6
points of CATs and reinstatement premiums of which 13.7 points
related to COVID-19. The accident year combined ratio, as adjusted,
was 97.3 compared to 96.8 in the prior year quarter.
- The North America Commercial Lines accident year combined
ratio, as adjusted, was 96.0, a 3.2 point improvement compared to
the prior year quarter driven by improved mix of business,
significant rate increases, benefits from underwriting actions in
2019 and improvement in the expense ratio due to changes in the
business mix.
- The North America Personal Insurance accident year combined
ratio, as adjusted, increased 14.7 points to 104.8 compared to the
prior year quarter. The increase in the accident year combined
ratio, as adjusted, was in part driven by the impact of the
reduction of net premiums earned on the GOE ratio. In addition, the
change in business mix resulting from lower Travel business due to
COVID-19 and the cessions under the series of new quota share
reinsurance agreements, including participation by our newly formed
Syndicate 2019, resulted in a higher accident year loss ratio, as
adjusted, offset in part by a lower acquisition ratio.
- Favorable net prior year loss reserve development was $39
million, with favorable net prior year loss reserve development of
$46 million for North America Commercial Lines partially offset by
unfavorable net prior year loss reserve development of $7 million
for North America Personal Insurance. North America Commercial
Lines favorable net prior loss reserve development included $53
million of amortization from the ADC compared to $58 million in the
prior year quarter.
General Insurance - International
Three Months Ended June
30,
($ in millions)
2020
2019
Change
International
Net premiums written
$
3,202
$
3,274
(2)
%
Commercial Lines
1,575
1,516
4
Personal Insurance
1,627
1,758
(7)
Underwriting income (loss)
$
76
$
152
(50)
Commercial Lines
(13)
51
NM
Personal Insurance
89
101
(12)
Adjusted pre-tax income
$
170
$
262
(35)
Underwriting
ratios:
International
Loss ratio
59.5
56.9
2.6
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(5.4)
(0.1)
(5.3)
Prior year development
0.6
0.1
0.5
Accident year loss ratio, as adjusted
54.7
56.9
(2.2)
Expense ratio
38.1
38.6
(0.5)
Combined ratio
97.6
95.5
2.1
Accident year combined ratio, as
adjusted
92.8
95.5
(2.7)
International Commercial Lines
Loss ratio
66.3
61.5
4.8
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(11.3)
(0.3)
(11.0)
Prior year development
2.4
0.4
2.0
Accident year loss ratio, as adjusted
57.4
61.6
(4.2)
Expense ratio
34.5
35.3
(0.8)
Combined ratio
100.8
96.8
4.0
Accident year combined ratio, as
adjusted
91.9
96.9
(5.0)
International Personal
Insurance
Loss ratio
52.9
52.9
-
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
0.4
-
0.4
Prior year development
(1.2)
(0.1)
(1.1)
Accident year loss ratio, as adjusted
52.1
52.8
(0.7)
Expense ratio
41.4
41.6
(0.2)
Combined ratio
94.3
94.5
(0.2)
Accident year combined ratio, as
adjusted
93.5
94.4
(0.9)
General Insurance International – Commentary
- Net premiums written decreased 2% on a reported basis and 1% on
a constant dollar basis. International Commercial’s net premiums
written increased by 7% on a constant dollar basis driven by strong
rate improvement and higher retention across most commercial lines.
This was offset by the decline in net premiums written in Personal
Insurance, in part as a result of the impact of COVID-19 on Travel
and other lines of business.
- Pre-tax underwriting income of $76 million included $155
million of CATs, net of reinsurance, of which $94 million related
to COVID-19 and $45 million related to civil unrest. The
International combined ratio was 97.6, compared to 95.5 in the
prior year quarter, reflecting 5.4 points of CATs and reinstatement
premiums of which 3.4 points related to COVID-19. The accident year
combined ratio, as adjusted, was 92.8 compared to 95.5 in the prior
year quarter, reflecting improvements in both Commercial Lines and
Personal Insurance.
- The International Commercial Lines accident year combined
ratio, as adjusted, was 91.9, a 5.0 point improvement driven by
premium rate increases, benefits from underwriting action,
portfolio optimization and ongoing expense discipline.
- The International Personal Insurance accident year combined
ratio, as adjusted, improved by 0.9 points to 93.5, reflecting
lower attritional losses in Japan and Asia Pacific Personal
Auto.
- Favorable net prior year loss reserve development was $35
million, with $46 million of favorable net prior year loss reserve
development in International Commercial Lines, partially offset by
$11 million of unfavorable net prior year loss reserve development
in International Personal Insurance.
LIFE AND RETIREMENT
Three Months Ended June
30,
($ in millions)
2020
2019
Change
Life and Retirement
Premiums & fees
$
2,297
$
1,333
72
%
Net investment income
2,040
2,270
(10)
Adjusted revenues
4,549
3,828
19
Benefits, losses and expenses
3,668
2,779
32
Adjusted pre-tax income
881
1,049
(16)
Premiums and deposits
5,664
7,212
(21)
Individual Retirement
Premiums & fees
$
243
$
221
10
%
Net investment income
957
1,094
(13)
Adjusted revenues
1,333
1,466
(9)
Benefits, losses and expenses
783
878
(11)
Adjusted pre-tax income
550
588
(6)
Premiums and deposits
1,794
3,865
(54)
Net flows
(1,504)
(306)
(392)
Group Retirement
Premiums & fees
$
103
$
111
(7)
%
Net investment income
541
618
(12)
Adjusted revenues
712
790
(10)
Benefits, losses and expenses
498
497
-
Adjusted pre-tax income
214
293
(27)
Premiums and deposits
1,670
2,047
(18)
Net flows
(243)
(174)
(40)
Life Insurance
Premiums & fees
$
822
$
806
2
%
Net investment income
280
335
(16)
Adjusted revenues
1,113
1,154
(4)
Benefits, losses and expenses
1,122
1,068
5
Adjusted pre-tax income (loss)
(9)
86
NM
Premiums and deposits
1,071
1,032
4
Institutional Markets
Premiums & fees
$
1,129
$
195
479
%
Net investment income
262
223
17
Adjusted revenues
1,391
418
233
Benefits, losses and expenses
1,265
336
276
Adjusted pre-tax income
126
82
54
Premiums and deposits
1,129
268
321
Life and Retirement – Commentary
- Life and Retirement reported APTI of $881 million compared to
$1.0 billion in the prior year quarter. The decrease reflected
private equity losses generally reported on a one-quarter lag,
continued spread compression and elevated mortality due to
COVID-19, partially offset by higher other yield enhancements
investment income and lower DAC amortization and Variable Annuities
reserves resulting from higher equity markets in the second quarter
of 2020.
- Premiums were $1.6 billion primarily due to two large Pension
Risk Transfer transactions, compared to $598 million in the prior
year quarter. Premiums and deposits decreased to $5.7 billion
compared to $7.2 billion in the prior year quarter primarily due to
lower Fixed Annuities, Index Annuities and Group Retirement
deposits in the second quarter of 2020 driven by broad industry
sales disruptions caused by COVID-19 and the lower interest rate
environment, partially offset by an increase in Institutional
Markets activity. Net flows continued to be negative.
- Individual Retirement reported APTI of $550 million compared to
$588 million in the prior year quarter. APTI decreased primarily
due to private equity losses, lower yield enhancements investment
driven by losses on securities for which the fair value option was
elected, and lower call and tender income, partially offset by
lower Variable Annuity DAC/Sales Inducement amortization and
reserves due to the higher equity markets in the second quarter of
2020. Total net flows were negative in the quarter and unfavorable
compared to the prior year period, driven by lower Fixed and Index
Annuities sales.
- Group Retirement reported APTI of $214 million compared to $293
million in the prior year quarter. The decrease in APTI was driven
by private equity losses and lower gains on securities for which
the fair value option was elected, partially offset by higher other
yield enhancements investment income. Net flows remained negative
for the quarter and unfavorable compared to the prior year quarter,
primarily due to decreased deposits, partially offset by lower
surrenders.
- Life Insurance reported APTL of $9 million compared to APTI of
$86 million in the prior year quarter primarily due to private
equity losses, lower gains on bond calls and elevated mortality due
to COVID-19.
- Institutional Markets APTI of $126 million increased from $82
million in the prior year quarter due to higher other yield
enhancements investment income and higher base investment income
driven by asset growth, partially offset by private equity losses.
Two large Pension Risk Transfer reinsurance deals were closed in
the quarter.
CONFERENCE CALL
AIG will host a conference call tomorrow, Tuesday, August 4,
2020 at 8:00 a.m. ET to review these results. The call is open to
the public and can be accessed via a live listen-only webcast in
the Investors section of www.aig.com. A replay will be available
after the call at the same location.
Additional supplementary financial data is available in the
Investors section at www.aig.com.
The conference call (including the financial results
presentation material), the earnings release and the financial
supplement may include, and officers and representatives of AIG may
from time to time make and discuss, 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 a 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 “will,” “believe,” “anticipate,”
“expect,” “intend,” “plan,” “focused on achieving,” “view,”
“target,” “goal” or “estimate.” These projections, goals,
assumptions and statements may relate to future actions,
prospective services or products, future performance or results of
current and anticipated services or products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings,
anticipated organizational, business or regulatory changes, the
effect of catastrophes and macroeconomic events, such as COVID-19,
anticipated dispositions, monetization and/or acquisitions of
businesses or assets, or successful integration of acquired
businesses, management succession and retention plans, exposure to
risk, trends in operations and financial results.
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:
- the adverse impact of COVID-19, including with respect to AIG’s
business, financial condition and results of operations;
- changes in market and industry conditions, including the
significant global economic downturn, general market declines,
prolonged economic recovery and disruptions to AIG’s operations
driven by COVID-19 and responses thereto, including new or changed
governmental policy and regulatory actions;
- the occurrence of catastrophic events, both natural and
man-made, including COVID-19, pandemics, civil unrest and the
effects of climate change;
- AIG’s ability to effectively execute on AIG 200 operational
programs designed to achieve underwriting excellence, modernization
of AIG’s operating infrastructure, enhanced user and customer
experiences and unification of AIG;
- the impact of potential information technology, cybersecurity
or data security breaches, including as a result of cyber-attacks
or security vulnerabilities, the likelihood of which may increase
due to extended remote business operations as a result of
COVID-19;
- disruptions in the availability of AIG’s electronic data
systems or those of third parties;
- the effectiveness of our risk management policies and
procedures, including with respect to our business continuity and
disaster recovery plans;
- changes in judgments concerning potential cost-saving
opportunities;
- concentrations in AIG’s investment portfolios;
- changes to the valuation of AIG’s investments;
- actions by credit rating agencies;
- changes in judgments concerning insurance underwriting and
insurance liabilities;
- the effectiveness of strategies to recruit and retain key
personnel and to implement effective succession plans;
- the requirements, which may change from time to time, of the
global regulatory framework to which AIG is subject;
- significant legal, regulatory or governmental proceedings;
- AIG’s ability to successfully manage Legacy Portfolios;
- AIG’s ability to successfully dispose of, monetize and/or
acquire businesses or assets or successfully integrate acquired
businesses;
- changes in judgments concerning the recognition of deferred tax
assets and the impairment of goodwill; and
- such other factors discussed in:
– Part I, Item 2. MD&A and Part II, Item
1A. Risk Factors of the Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2020 (which will be filed with the
Securities and Exchange Commission); – Part I, Item 2. MD&A of
the Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2020; and – Part I, Item 1A. Risk Factors and Part II,
Item 7. MD&A of the 2019 Annual Report.
COVID-19 is adversely affecting, and is expected to continue to
adversely affect, our business, financial condition and results of
operations, and its ultimate impact will depend on future
developments that are uncertain and cannot be predicted, including
the scope, severity and duration of the crisis and actions taken by
governmental and regulatory authorities in response thereto. Even
after the crisis subsides, it is possible that the U.S. and other
major economies will experience a prolonged recession, in which
event our businesses, results of operations and financial condition
could be materially and adversely affected. Statements about the
effects of COVID-19 on our business, financial condition and
results of operations may constitute forward-looking statements and
are subject to the risk that the actual impacts may differ,
possibly materially, from what is reflected in those
forward-looking statements due to factors and future developments
that are uncertain, unpredictable and in many cases beyond our
control, including the scope and duration of the COVID-19 and
actions taken by governmental and regulatory authorities in
response to mitigate its impact.
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 AND NON-GAAP FINANCIAL
MEASURES
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 and
representative of its business results. Some of the measurements
AIG uses are “Non-GAAP financial measures” under Securities and
Exchange Commission rules and regulations. GAAP is the acronym for
generally accepted accounting principles in the United States. The
non-GAAP financial measures AIG presents are listed below and 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 attached to this news release
or in the Second Quarter 2020 Financial Supplement available in the
Investors section of AIG’s website, www.aig.com.
Book Value per Common Share, Excluding Accumulated Other
Comprehensive Income (AOCI) adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets and Book Value per Common Share, Excluding AOCI
adjusted for the cumulative unrealized gains and losses related to
Fortitude Re’s Funds Withheld Assets and Deferred Tax Assets (DTA)
(Adjusted Book Value per Common Share) are used to show the
amount of AIG’s net worth on a per-common share basis after
eliminating items that can fluctuate significantly from period to
period including changes in fair value of AIG’s available for sale
securities portfolio, foreign currency translation adjustments, and
U.S. tax attribute deferred tax assets. These measures also
eliminate the asymmetrical impact resulting from changes in fair
value of AIG’s available for sale securities portfolio wherein
there is largely no offsetting impact for certain related insurance
liabilities. In addition, AIG adjusts for the cumulative unrealized
gains and losses related to Fortitude Re’s Funds Withheld Assets
since these fair value movements are economically transferred to
Fortitude Re. AIG excludes deferred tax assets representing U.S.
tax attributes related to net operating loss carryforwards and
foreign tax credits as they have not yet been utilized. Amounts for
interim periods are estimates based on projections of full-year
attribute utilization. As net operating loss carryforwards and
foreign tax credits are utilized, the portion of the DTA utilized
is included in these book value per common share metrics. Book
value per common share, excluding AOCI adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets, is derived by dividing Total AIG common
shareholders’ equity, excluding AOCI adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets, by total common shares outstanding. Adjusted Book
Value per Common Share is derived by dividing Total AIG common
shareholders’ equity, excluding AOCI adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets and DTA (Adjusted Common Shareholders’
Equity), by total common shares outstanding.
Book Value per Common Share, Excluding Goodwill, Value of
Business Acquired (VOBA), Value of Distribution Channel Acquired
(VODA) and Other Intangible Assets (Tangible Book Value per Common
Share) and Tangible Book Value per Common Share, Excluding AOCI
adjusted for the cumulative unrealized gains and losses related to
Fortitude Re’s Funds Withheld Assets and Deferred Tax Assets (DTA)
(Adjusted Tangible Book Value per Common Share) are used to
provide more accurate measure of the realizable value of
shareholder on a per-common share basis. Tangible Book Value per
Common Share is derived by dividing Total AIG common shareholders’
equity, excluding Goodwill, VOBA, VODA and Other intangible assets,
by total common shares outstanding (Tangible Book Value per Common
Share). Adjusted Tangible Book Value per Common Share is derived by
dividing Total AIG common shareholders’ equity, excluding
intangible assets, AOCI adjusted for the cumulative unrealized
gains and losses related to Fortitude Re’s Funds Withheld Assets,
and DTA (Adjusted Tangible Common Shareholders’ Equity), by
total common shares outstanding.
AIG Return on Common Equity – Adjusted After-tax Income
Excluding AOCI adjusted for the cumulative unrealized gains and
losses related to Fortitude Re’s Funds Withheld Assets and DTA
(Adjusted Return on Common Equity) is used to show the rate of
return on common shareholders’ equity. AIG believes this measure is
useful to investors because it eliminates items that can fluctuate
significantly from period to period, including changes in fair
value of AIG’s available for sale securities portfolio, foreign
currency translation adjustments and U.S. tax attribute deferred
tax assets. This measure also eliminates the asymmetrical impact
resulting from changes in fair value of AIG’s available for sale
securities portfolio wherein there is largely no offsetting impact
for certain related insurance liabilities. In addition, AIG adjusts
for the cumulative unrealized gains and losses related to Fortitude
Re’s Funds Withheld Assets since these fair value movements are
economically transferred to Fortitude Re. AIG excludes deferred tax
assets representing U.S. tax attributes related to net operating
loss carryforwards and foreign tax credits as they have not yet
been utilized. Amounts for interim periods are estimates based on
projections of full-year attribute utilization. As net operating
loss carryforwards and foreign tax credits are utilized, the
portion of the DTA utilized is included in Adjusted Return on
Common Equity. Adjusted Return on Common Equity is derived by
dividing actual or annualized adjusted after-tax income
attributable to AIG common shareholders by average Adjusted Common
Shareholders’ Equity.
AIG Return on Common Equity, Excluding Goodwill, VOBA, VODA
and Other Intangible assets (Return on Tangible Common Equity) and
Return on Tangible Common Equity – Adjusted After-tax Income,
Excluding Goodwill, VOBA, VODA and Other Intangible assets, AOCI
adjusted for the cumulative unrealized gains and losses related to
Fortitude Re’s Funds Withheld Assets, and DTA (Adjusted Return on
Tangible Common Equity) is used to provide the rate of return
on tangible common shareholder’s equity, which is a more accurate
measure of realizable shareholder value. AIG excludes Goodwill,
VOBA, VODA and Other intangible assets from AIG common
shareholders’ equity to derive tangible common shareholders’ equity
(Tangible Common Shareholders’ Equity). Return on Tangible Common
Equity is derived by dividing actual or annualized after-tax income
attributable to AIG common shareholders by average Tangible Common
Shareholders’ Equity. AIG further excludes AOCI adjusted for the
cumulative unrealized gains and losses related to Fortitude Re’s
Funds Withheld Assets and DTA in Adjusted Tangible Common Equity.
Adjusted Return on Tangible Common Equity is derived by dividing
actual or annualized adjusted after-tax income attributable to AIG
common shareholders by average Adjusted Tangible Common
Shareholders’ Equity.
Core and Life and Retirement Adjusted Attributed Common
Equity is an attribution of total AIG Adjusted Common
Shareholders’ Equity to these segments based on AIG’s internal
capital model, which incorporates the segments’ respective risk
profiles. Adjusted attributed common equity represents AIG’s best
estimates based on current facts and circumstances and will change
over time.
Core and Life and Retirement Return on Common Equity –
Adjusted After-tax Income (Adjusted Return on Attributed Common
Equity) is used to show the rate of return on Adjusted
Attributed Common Equity. Adjusted Return on Attributed Common
Equity is derived by dividing actual or annualized Adjusted
After-tax Income by Average Adjusted Attributed Common Equity.
Adjusted After-tax Income Attributable to Core and Life and
Retirement is derived by subtracting attributed interest
expense, income tax expense and attributed dividends on preferred
stock from adjusted pre-tax income. Attributed debt and the related
interest expense and dividends on preferred stock are calculated
based on AIG’s internal capital model. Tax expense or benefit is
calculated based on an internal attribution methodology that
considers among other things the taxing jurisdiction in which the
segments conduct business, as well as the deductibility of expenses
in those jurisdictions.
Adjusted Revenues exclude Net realized capital gains
(losses), income from non-operating litigation settlements
(included in Other income for GAAP purposes) and changes in fair
value of securities used to hedge guaranteed living benefits
(included in Net investment income for GAAP purposes). Adjusted
revenues is a GAAP measure for AIG’s operating segments.
AIG uses the following operating performance measures because
AIG believes they enhance the understanding of the underlying
profitability of continuing operations and trends of AIG’s business
segments. AIG believes they also allow for more meaningful
comparisons with AIG’s insurance competitors. When AIG uses these
measures, reconciliations to the most comparable GAAP measure are
provided on a consolidated basis.
Adjusted Pre-tax Income (APTI) is derived by excluding
the items set forth below from income from continuing operations
before income tax. This definition is consistent across AIG’s
segments. These items generally fall into one or more of the
following broad categories: legacy matters having no relevance to
AIG’s current businesses or operating performance; adjustments to
enhance transparency to the underlying economics of transactions;
and measures that AIG believes to be common to the industry. APTI
is a GAAP measure for AIG’s segments. Excluded items include the
following:
- changes in fair value of securities used to hedge guaranteed
living benefits;
- 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 and
losses;
- changes in the fair value of equity securities;
- net investment income on Fortitude Re funds withheld assets
post deconsolidation of Fortitude Re;
- following deconsolidation of Fortitude Re, net realized capital
gains and losses on Fortitude Re funds withheld assets held by AIG
in support of Fortitude Re’s reinsurance obligations to AIG
(Fortitude Re funds withheld assets);
- loss (gain) on extinguishment of debt;
- all net realized capital gains and losses except earned income
(periodic settlements and changes in settlement accruals) on
derivative instruments used for non-qualifying (economic) hedging
or for asset replication. Earned income on such economic hedges is
reclassified from net realized capital gains and losses to specific
APTI line items based on the economic risk being hedged (e.g. net
investment income and interest credited to policyholder account
balances);
- income or loss from discontinued operations;
- net loss reserve discount benefit (charge);
- pension expense related to a one-time lump sum payment to
former employees;
- income and loss from divested businesses;
- non-operating litigation reserves and settlements;
- restructuring and other costs related to initiatives designed
to reduce operating expenses, improve efficiency and simplify AIG’s
organization;
- the portion of favorable or unfavorable prior year reserve
development for which AIG has ceded the risk under retroactive
reinsurance agreements and related changes in amortization of the
deferred gain;
- integration and transaction costs associated with acquired
businesses;
- losses from the impairment of goodwill; and
- non-recurring costs associated with the implementation of
non-ordinary course legal or regulatory changes or changes to
accounting principles.
Adjusted After-tax Income attributable to AIG common
shareholders (AATI) is derived by excluding the tax effected
APTI adjustments described above, dividends on preferred stock, and
the following tax items from net income attributable to AIG:
- deferred income tax valuation allowance releases and
charges;
- changes in uncertain tax positions and other tax items related
to legacy matters having no relevance to AIG’s current businesses
or operating performance; and
- net tax charge related to the enactment of the Tax Cuts and
Jobs Act (Tax Act);
and by excluding the net realized capital gains (losses) and
other charges from noncontrolling interests.
See page 23 for the reconciliation of Net income attributable to
AIG to Adjusted After-tax Income Attributable to AIG.
Ratios: AIG, 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 losses and loss adjustment
expenses (which for General Insurance excludes net loss reserve
discount), 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. AIG’s ratios are calculated using the relevant
segment information calculated under GAAP, and thus may not be
comparable to similar ratios calculated for regulatory reporting
purposes. 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.
Accident year loss and combined ratios, as adjusted: both
the accident year loss and combined ratios, as adjusted, exclude
catastrophe losses and related reinstatement premiums, prior year
development, net of premium adjustments, and the impact of reserve
discounting. Natural catastrophe losses are generally weather or
seismic events having a net impact on AIG in excess of $10 million
each and man-made catastrophe losses, such as terrorism and civil
disorders that exceed the $10 million threshold. AIG believes that
as adjusted ratios are meaningful measures of AIG’s underwriting
results on an ongoing basis as they exclude catastrophes and the
impact of reserve discounting which are outside of management’s
control. AIG also excludes prior year development to provide
transparency related to current accident year results.
Underwriting ratios are
computed as follows:
a)
Loss ratio = Loss and loss adjustment expenses incurred ÷ Net
premiums earned (NPE)
b)
Acquisition ratio = Total acquisition expenses ÷ NPE
c)
General operating expense ratio = General operating expenses ÷ NPE
d)
Expense ratio = Acquisition ratio + General operating expense ratio
e)
Combined ratio = Loss ratio + Expense ratio
f)
Catastrophe losses (CATs) and reinstatement premiums = [Loss and
loss adjustment expenses incurred – (CATs)] ÷ [NPE +/(-) CYRIPs] –
Loss ratio
g)
Accident year loss ratio, as adjusted (AYLR) = [Loss and loss
adjustment expenses incurred – CATs – PYD] ÷ [NPE +/(-)
Reinstatement premiums related to catastrophes (CYRIPs) +/(-) RIPs
related to prior year catastrophes (PYRIPs) + (Additional) returned
premium related to PYD on loss sensitive business ((AP)RP) +
Adjustment for ceded premiums under reinsurance contracts related
to prior accident years]
h)
Accident year combined ratio, as adjusted = AYLR + Expense ratio
i)
Prior year development net of (additional) return premium related
to PYD on loss sensitive business = [Loss and loss adjustment
expenses incurred – CATs – PYD] ÷ [NPE +/(-) CYRIPs +/(-) PYRIPs +
(AP)RP] – Loss ratio – CAT ratio
Premiums and deposits: includes direct and assumed
amounts received and earned on traditional life insurance policies,
group benefit policies and life‑contingent payout annuities, as
well as deposits received on universal life, investment‑type
annuity contracts, Federal Home Loan Bank (FHLB) funding agreements
and mutual funds.
Results from discontinued operations are excluded from all of
these measures.
American International Group, Inc. (AIG) is a leading global
insurance organization. AIG member companies provide a wide range
of property casualty insurance, life insurance, retirement
solutions, and other financial services to customers in more than
80 countries and jurisdictions. These diverse offerings include
products and services that help businesses and individuals protect
their assets, manage risks and provide for retirement security. AIG
common stock is listed on the New York Stock Exchange.
Additional information about AIG can be found at www.aig.com |
YouTube: www.youtube.com/aig | Twitter: @AIGinsurance
www.twitter.com/AIGinsurance | LinkedIn:
www.linkedin.com/company/aig. These references with additional
information about AIG have been provided as a convenience, and the
information contained on such websites is not incorporated by
reference into this press release.
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 jurisdictions, and coverage is subject to
underwriting requirements and 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.
Selected Financial Data and
Non-GAAP Reconciliation
($ in millions, except per
common share data)
Reconciliations of Adjusted Pre-tax and
After-tax Income
Three Months Ended June
30,
2020
2019
Noncontrolling
Noncontrolling
Pre-tax
Tax Effect
Interests(e)
After-tax
Pre-tax
Tax Effect
Interests(e)
After-tax
Pre-tax income (loss)/net income
(loss), including noncontrolling interests
$
(9,661)
$
(1,896)
$
-
$
(7,766)
$
1,837
$
446
$
-
$
1,390
Noncontrolling interests
-
-
(162)
(162)
-
-
(281)
(281)
Pre-tax income (loss)/net income (loss)
attributable to AIG
(9,661)
(1,896)
(162)
(7,928)
1,837
446
(281)
1,109
Dividends on preferred stock
8
7
Net income (loss) attributable to AIG
common shareholders
(7,936)
1,102
Adjustments:
Changes in uncertain tax positions and
other tax adjustments(a)
-
(206)
-
206
-
(27)
-
27
Deferred income tax valuation allowance
(releases) charges(b)
-
183
-
(183)
-
(7)
-
7
Changes in fair value of securities used
to hedge guaranteed living benefits
(16)
(4)
-
(12)
(75)
(16)
-
(59)
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital gains (losses)
(255)
(53)
-
(202)
73
16
-
57
Changes in the fair value of equity
securities
(56)
(12)
-
(44)
22
5
-
17
Loss on extinguishment of debt
-
-
-
-
15
4
-
11
Net investment income on Fortitude Re
funds withheld assets(c)
(116)
(24)
-
(92)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld assets(c)
(96)
(20)
-
(76)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld embedded derivative(c)
837
176
-
661
-
-
-
-
Net realized capital (gains) losses(d)
1,619
369
-
1,250
(351)
(86)
-
(265)
Loss from discontinued operations
-
-
-
1
-
-
-
1
Loss from divested businesses
8,412
1,657
-
6,755
1
-
-
1
Non-operating litigation reserves and
settlements
-
-
-
-
-
(1)
-
1
Favorable prior year development and
relate amortization changes ceded under retroactive reinsurance
agreements
(33)
(7)
-
(26)
(125)
(27)
-
(98)
Net loss reserve discount charge
16
3
-
13
212
45
-
167
Integration and transaction costs
associated with acquired businesses
4
1
-
3
6
1
-
5
Restructuring and other costs
134
28
-
106
60
13
-
47
Non-recurring costs related to regulatory
or accounting changes
14
3
-
11
2
-
-
2
Noncontrolling interests primarily related
to net realized capital gains (losses) of Fortitude Holdings'
standalone results(e)
-
-
136
136
-
-
249
249
Adjusted pre-tax income/Adjusted
after-tax income attributable to AIG common shareholders
$
803
$
198
$
(26)
$
571
$
1,677
$
366
$
(32)
$
1,272
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share data)
Reconciliations of Adjusted Pre-tax and
After-tax Income (continued)
Six Months Ended June
30,
2020
2019
Noncontrolling
Noncontrolling
Pre-tax
Tax Effect
Interests(e)
After-tax
Pre-tax
Tax Effect
Interests(e)
After-tax
Pre-tax income (loss)/net income
(loss), including noncontrolling interests
$
(7,103)
$
(992)
$
-
$
(6,112)
$
2,991
$
663
$
-
$
2,327
Noncontrolling interests
-
-
(67)
(67)
-
-
(564)
(564)
Pre-tax income (loss)/net income (loss)
attributable to AIG
(7,103)
(992)
(67)
(6,179)
2,991
663
(564)
1,763
Dividends on preferred stock
15
7
Net income (loss) attributable to AIG
common shareholders
(6,194)
1,756
Adjustments:
Changes in uncertain tax positions and
other tax adjustments(a)
-
(211)
-
211
-
(15)
-
15
Deferred income tax valuation allowance
(releases) charges(b)
-
(100)
-
100
-
31
-
(31)
Changes in fair value of securities used
to hedge
guaranteed living benefits
(9)
(2)
-
(7)
(171)
(36)
-
(135)
Changes in benefit reserves and DAC, VOBA
and
SIA related to net realized capital gains
(losses)
283
60
-
223
(26)
(5)
-
(21)
Changes in the fair value of equity
securities
135
28
-
107
(57)
(12)
-
(45)
Loss on extinguishment of debt
17
4
-
13
13
3
-
10
Net investment income on Fortitude Re
funds withheld assets(c)
(116)
(24)
-
(92)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld assets(c)
(96)
(20)
-
(76)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld embedded derivative(c)
837
176
-
661
-
-
-
-
Net realized capital (gains) losses(d)
(1,883)
(398)
-
(1,485)
123
23
-
100
Loss from discontinued operations
-
-
-
1
-
-
-
1
(Income) loss from divested businesses
8,628
1,702
-
6,926
(5)
(1)
-
(4)
Non-operating litigation reserves and
settlements
(6)
(1)
-
(5)
1
-
-
1
Favorable prior year development and
related amortization changes ceded under retroactive reinsurance
agreements
(41)
(9)
-
(32)
(152)
(32)
-
(120)
Net loss reserve discount charge
72
15
-
57
685
144
-
541
Integration and transaction costs
associated with acquired businesses
6
1
-
5
13
3
-
10
Restructuring and other costs
224
47
-
177
107
23
-
84
Non-recurring costs related to regulatory
or accounting changes
27
6
-
21
2
-
-
2
Noncontrolling interests primarily related
to net realized capital
gains (losses) of Fortitude Holdings'
standalone results(e)
-
-
59
59
-
-
496
496
Adjusted pre-tax income/Adjusted
after-tax income attributable to AIG common shareholders
$
975
$
282
$
(8)
$
670
$
3,524
$
789
$
(68)
$
2,660
(a) Includes the write-down of net
operating loss deferred tax assets in certain foreign
jurisdictions, which is offset by valuation allowance release.
(b) Six months ended June 30, 2020
includes valuation allowance established against a portion of
foreign tax credit and net operating loss carryforwards of AIG’s
U.S. federal consolidated income tax group, as well as net
valuation allowance release in certain foreign jurisdictions.
(c) Represents activity subsequent to the
deconsolidation of Fortitude Re on June 2, 2020.
(d) Includes all net realized capital
gains and losses except earned income (periodic settlements and
changes in settlement accruals) on derivative instruments used for
non-qualifying (economic) hedging or for asset replication and net
realized gains and losses on Fortitude Re funds withheld
assets.
(e) Noncontrolling interests was primarily
due to the 19.9 percent investment in Fortitude Group Holdings, LLC
(Fortitude Holdings) by an affiliate of The Carlyle Group L.P.
(Carlyle), which occurred in the fourth quarter of 2018. Carlyle
was allocated 19.9 percent of Fortitude Holdings’ standalone
financial results through the June 2, 2020 closing date of the
Majority Interest Fortitude Sale. Fortitude Holdings’ results were
mostly eliminated in AIG’s consolidated income from continuing
operations given that its results arose from intercompany
transactions. Noncontrolling interests was calculated based on the
standalone financial results of Fortitude Holdings. The most
significant component of Fortitude Holdings’ standalone results was
the change in fair value of the embedded derivatives which changes
with movements in interest rates and credit spreads, and which was
recorded in net realized capital gains and losses of Fortitude
Holdings. In accordance with AIG's adjusted after-tax income
definition, realized capital gains and losses are excluded from
noncontrolling interests. Subsequent to the Majority Interest
Fortitude Sale, AIG’s owns 3.5 percent of Fortitude Holdings and no
longer consolidates Fortitude Holdings in its financial statements
as of such date. The minority interest in Fortitude is carried at
cost within AIG’s consolidated investments, which was $100 million
as of June 30, 2020.
Summary of Key Financial
Metrics
Three Months Ended June
30,
Six Months Ended June
30,
Income (loss) per
common share:
2020
2019
% Inc. (Dec.)
2020
2019
% Inc. (Dec.)
Basic
Income (loss) from continuing
operations
$
(9.15)
$
1.26
NM
%
$
(7.11)
$
2.00
NM
%
Income from discontinued operations
-
-
NM
-
-
NM
Net income (loss) attributable to AIG
common shareholders
$
(9.15)
$
1.26
NM
$
(7.11)
$
2.00
NM
Diluted
Income (loss) from continuing
operations
$
(9.15)
$
1.24
NM
$
(7.11)
$
1.99
NM
Income from discontinued operations
-
-
NM
-
-
NM
Net income (loss) attributable to AIG
common shareholders
$
(9.15)
$
1.24
NM
$
(7.11)
$
1.99
NM
Adjusted after-tax income attributable
to AIG common shareholders per diluted share (a)
$
0.66
$
1.43
(53.8)
%
$
0.77
$
3.01
(74.4)
%
Weighted average shares
outstanding:
Basic
867.0
876.4
870.6
875.9
Diluted (a)
867.0
888.3
870.6
882.9
(a) For the three- and six-month periods ended June 30, 2020,
because we reported net losses attributable to AIG common
shareholders, all common stock equivalents are anti-dilutive and
are therefore excluded from the calculation of diluted shares and
diluted per share amounts. However, because we reported adjusted
after-tax income attributable to AIG common shareholders, the
calculation of adjusted after-tax income per diluted share
attributable to AIG common shareholders includes 3,226,882 dilutive
shares and 3,939,732 dilutive shares for the three- and six-month
periods ended June 30, 2020, respectively.
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share data)
Reconciliation of Book Value per Common
Share
As of period
end:
June 30, 2020
March 31, 2020
June 30, 2019
Total AIG shareholders' equity
$
62,234
$
60,173
$
64,539
Less: Preferred equity
485
485
485
Total AIG common shareholders' equity
(a)
61,749
59,688
64,054
Less: Accumulated other comprehensive
income (AOCI)
9,169
(994)
4,991
Add: Cumulative unrealized gains and
losses related to Fortitude Re’s Funds
Withheld Assets
4,215
-
-
Total AIG common shareholders' equity,
excluding AOCI adjusted for the cumulative
unrealized gains and losses related to
Fortitude Re’s Funds Withheld Assets (b)
56,795
60,682
59,063
Less: Deferred tax assets (DTA)*
8,643
8,535
9,577
Total adjusted AIG common shareholders'
equity (c)
$
48,152
$
52,147
$
49,486
Less: Intangible assets:
Goodwill
3,983
3,989
4,104
Value of business acquired
121
297
369
Value of distribution channel acquired
517
526
555
Other intangibles
323
329
337
Total intangible assets
4,944
5,141
5,365
Total AIG common shareholders' equity less
intangible assets (d)
56,805
54,547
58,689
Total adjusted tangible common
shareholders' equity (e)
$
43,208
$
47,006
$
44,121
Total common shares outstanding
(f)
861.4
861.3
869.9
June 30,
March 31,
% Inc.
June 30,
% Inc.
As of period
end:
2020
2020
(Dec.)
2019
(Dec.)
Book value per common share (a÷f)
$
71.68
$
69.30
3.4
%
$
73.63
(2.6)
%
Book value per common share, excluding
AOCI adjusted for the cumulative unrealized gains and losses
related to Fortitude Re’s Funds Withheld Assets (b÷f)
65.93
70.45
(6.4)
67.90
(2.9)
Adjusted book value per common share
(c÷f)
55.90
60.55
(7.7)
56.89
(1.7)
Tangible book value per common share
(d÷f)
65.94
63.33
4.1
67.47
(2.3)
Adjusted tangible book value per common
share (e÷f)
50.16
54.58
(8.1)
50.72
(1.1)
Reconciliation of Return On Common
Equity
Three Months Ended
June 30, 2020
June 30, 2019
Actual or Annualized net income
attributable to AIG common shareholders (g)
$
(31,744)
$
4,408
Actual or Annualized adjusted after-tax
income attributable to AIG common shareholders (h)
$
2,284
$
5,088
Average AIG common shareholders' equity
(i)
$
60,719
$
62,178
Less: Average intangible assets
5,043
5,397
Average AIG tangible common shareholders'
equity (j)
$
55,676
$
56,781
Average AIG common shareholders'
equity
$
60,719
$
62,178
Less: Average AOCI
4,088
3,560
Add: Average cumulative unrealized gains
and losses related to Fortitude Re’s Funds Withheld Assets
2,108
-
Less: Average DTA*
8,589
9,752
Average adjusted common shareholders'
equity (k)
50,150
48,866
Less: Average intangible assets
5,043
5,397
Average adjusted tangible common
shareholders' equity (m)
$
45,107
$
43,469
ROCE (g÷i)
NM
7.1
%
Adjusted return on common equity (h÷k)
4.6
%
10.4
%
Return on tangible common equity (g÷j)
NM
7.8
%
Adjusted return on tangible common equity
(h÷m)
5.1
%
11.7
%
* Represents deferred tax assets only
related to U.S. net operating loss and foreign tax credit
carryforwards on a U.S. GAAP basis and excludes other balance sheet
deferred tax assets and liabilities.
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share amounts)
Reconciliations of Life and Retirement
Adjusted Return on Common Equity
Three Months Ended
June 30,
2020
2019
Adjusted pre-tax income
$
881
$
1,049
Interest expense on attributed financial
debt
71
44
Adjusted pre-tax income including
attributed interest expense
810
1,005
Income tax expense
160
201
Adjusted after-tax income
650
804
Dividends declared on preferred stock
3
3
Adjusted after-tax income attributable
to common shareholders
$
647
$
801
Ending adjusted attributed common
equity
$
19,506
$
18,820
Average adjusted attributed common
equity
$
19,584
$
18,550
Adjusted return on attributed common
equity
13.2
%
17.3
%
Reconciliations of Core Adjusted Return
on Common Equity
Three Months Ended
June 30,
2020
2019
Adjusted pre-tax income
$
546
$
1,558
Interest expense on attributed financial
debt
-
-
Adjusted pre-tax income including
attributed interest expense
546
1,558
Income tax expense
143
340
Adjusted after-tax income
403
1,218
Dividends declared on preferred stock
7
7
Adjusted after-tax income attributable
to common shareholders
$
396
$
1,211
Ending adjusted attributed common
equity
$
46,133
$
42,694
Average adjusted attributed common
equity
$
45,219
$
41,746
Adjusted return on attributed common
equity
3.5
%
11.6
%
Net Premiums Written - Change in
Constant Dollar
Three Months Ended June 30,
2020
General
Insurance
International
International -
Commercial
Foreign exchange effect on worldwide
premiums:
Change in net premiums written
Increase (decrease) in original
currency
(0.9)%
6.7%
Foreign exchange effect
(1.3)
(2.8)
Increase (decrease) as reported in U.S.
dollars
(2.2)%
3.9%
Reconciliation of Net Investment
Income
Three Months Ended
June 30,
2020
2019
Net investment income per Consolidated
Statements of Operations
$
3,366
$
3,745
Changes in fair value of
securities used to hedge guaranteed living benefits
(14)
(84)
Changes in the fair value of
equity securities
(56)
22
Net investment income on
Fortitude Re funds withheld assets
(116)
-
Net realized capital gains
related to economic hedges and other
18
52
Total Net investment income - APTI
Basis
$
3,198
$
3,735
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share amounts)
Reconciliations of Premiums and
Deposits
Three Months Ended
June 30,
2020
2019
Individual
Retirement:
Premiums
$
38
$
16
Deposits
1,759
3,852
Other
(3)
(3)
Total premiums and deposits
$
1,794
$
3,865
Group
Retirement:
Premiums
$
3
$
5
Deposits
1,667
2,042
Other
-
-
Total premiums and deposits
$
1,670
$
2,047
Life
Insurance:
Premiums
$
447
$
425
Deposits
420
413
Other
204
194
Total premiums and deposits
$
1,071
$
1,032
Institutional
Markets:
Premiums
$
1,089
$
152
Deposits
33
108
Other
7
8
Total premiums and deposits
$
1,129
$
268
Total Life and
Retirement:
Premiums
$
1,577
$
598
Deposits
3,879
6,415
Other
208
199
Total premiums and deposits
$
5,664
$
7,212
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200803005725/en/
Sabra Purtill (Investors): sabra.purtill@aig.com Shelley Singh
(Investors): shelley.singh@aig.com Claire Talcott (Media):
claire.talcott@aig.com
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