- Book value per share grew 13 percent
from year-end 2013 to $77.69
- Fourth quarter 2014 net income included
an after-tax loss on extinguishment of debt of $824 million, or
$0.58 per diluted share, associated with liability management
activities
- Fourth quarter 2014 after-tax operating
income of $1.4 billion, or $0.97 per diluted share
- Fourth quarter 2014 after-tax operating
income reflected reductions in workers’ compensation discount and
total adverse prior year reserve development of $562 million
after-tax, or $0.40 per diluted share
- Approximately $1.5 billion in share
repurchases during the fourth quarter of 2014, and $4.9 billion for
full year 2014
- On February 12, 2015, AIG’s Board of
Directors authorized the repurchase of additional shares of AIG
Common Stock with an aggregate purchase price of up to $2.5 billion
and declared a quarterly dividend of $0.125 per share
- Further strengthened the financial
flexibility of AIG Parent with distributions from its insurance
companies totaling $13.2 billion, consisting of $9.4 billion of
dividend and loan repayments in 2014, $1 billion of net tax
payments in 2014, plus $2.8 billion of dividend and loan repayments
in January 2015
American International Group, Inc. (NYSE:AIG) today reported net
income attributable to AIG of $655 million, or $0.46 per diluted
share, for the quarter ended December 31, 2014, compared to $2.0
billion, or $1.34 per diluted share, for the fourth quarter of
2013. Full year 2014 net income attributable to AIG was $7.5
billion, or $5.20 per diluted share, compared with $9.1 billion, or
$6.13 per diluted share, for full year 2013. Reported net income
included an after-tax loss on extinguishment of debt of $824
million, or $0.58 per diluted share, associated with liability
management activities during the fourth quarter of 2014.
After-tax operating income was $1.4 billion, or $0.97 per
diluted share, for the fourth quarter of 2014, compared to $1.7
billion, or $1.13 per diluted share, in the prior-year quarter.
After-tax operating income for full year 2014 was $6.6 billion, or
$4.58 per diluted share, compared to $6.7 billion, or $4.49 per
diluted share, for full year 2013. Operating results in the fourth
quarter of 2014 reflected a pre-tax reduction in workers’
compensation discount of $568 million, as well as total adverse
prior year reserve development, net of premium adjustments, of $297
million before taxes. In addition, the Life operating segment
recorded a pre-tax charge of $104 million in the fourth quarter of
2014 to increase reserves for incurred but not reported death
claims, which reflected continuing efforts to identify deceased
policyholders where a valid death claim has not been filed,
pursuant to the resolution of a multi-state audit and market
conduct examination. These items are further discussed in the
segment results that follow.
“Our fourth quarter results showed progress on expense control,
ongoing investments in our businesses, and our commitment to
balance sheet management,” said Peter D. Hancock, AIG President and
Chief Executive Officer. “AIG’s diversified and balanced business
mix allowed for stable total insurance profits. Our strong balance
sheet and continued profitability contributed to positive capital
management in the fourth quarter, in the form of common stock and
debt repurchases. We continued to optimize our funding profile by
replacing high-cost legacy debt with new issuances at lower
interest rates. Book value per share excluding AOCI and DTA
increased 12 percent compared to year-end 2013. Our continued focus
on managing our balance sheet to reflect our improved risk profile,
combined with continued insurance company dividends, has
contributed to the Board’s approval of an additional $2.5 billion
share buyback authorization.
“Looking back on 2014, it was a year of transition and
transformation, as we took important steps toward our goal of
becoming the world’s most valued insurer,” Mr. Hancock continued.
“Our focus on value benefits our customers and our shareholders,
and leverages our global scale to achieve the right balance between
growth, profitability, and risk. We began several value-based
initiatives in 2014 and will continue these efforts in
2015. We remain committed to streamlining our operations and
reducing our cost structure. Beginning this quarter, we are
providing more information and detail in our disclosures on
expenses and investments, which we’ll discuss further on tomorrow’s
earnings call.
“As of this quarter, our businesses are now reported in two
segments: Commercial Insurance and Consumer Insurance,” Mr. Hancock
said. “This segmentation reinforces our focus on the ultimate
client group being served, not the product being delivered, and
we’ve made acquisitions and investments along these lines. We
acquired Ageas Protect late last year and agreed to acquire Laya
Healthcare last month. During 2014, we made substantial progress on
the merger integration of Fuji Fire and Marine and AIU in Japan;
there is still work to be done and the integration remains on
track. We have invested in risk engineering capabilities that
deliver greater value to our customers, and we have implemented our
fully integrated OneClaim© system in 20 countries, which is used by
6,500 examiners across our Consumer and Commercial segments. We are
committed to improving our technology infrastructure to better
serve our customers, as well as providing holistic insurance
solutions that create value today and encourage confidence in the
future.”
CAPITAL AND LIQUIDITY
- AIG shareholders’ equity totaled $106.9
billion at December 31, 2014.
- In the fourth quarter of 2014, AIG
issued an additional $750 million of its 4.500% Notes due 2044
($1.5 billion aggregate principal amount of which were originally
issued in July 2014). For full year 2014, AIG issued approximately
$3.3 billion of senior unsecured debt. Additionally, in January
2015, AIG issued $2.0 billion of senior unsecured debt ($1.2
billion aggregate principal amount of 3.875% Notes due 2035 and
$800 million aggregate principal amount of 4.375% Notes due
2055).
- In the fourth quarter of 2014, AIG
repurchased approximately $2.8 billion notional of high coupon AIG
hybrid and senior notes for an aggregate purchase price of $3.7
billion. For full year 2014, AIG repurchased $5.0 billion
notional of high coupon AIG hybrid and senior notes for an
aggregate purchase price of $6.5 billion. These 2014 AIG liability
management activities, which do not include Direct Investment book
(DIB) liability management, will result in annual interest savings
of approximately $249 million per year. The economic value
captured by these 2014 full year liability management activities
totaled roughly $550 million.
- In the fourth quarter of 2014, AIG
repurchased or redeemed approximately $2.5 billion notional amount
of DIB debt for an aggregate purchase price of $3.0 billion, using
cash allocated to the DIB. For full year 2014, total
repurchased or redeemed DIB debt was approximately $7.5 billion
notional for an aggregate purchase price of $8.4 billion.
- In the fourth quarter of 2014, AIG
repurchased 27.9 million shares of AIG Common Stock. This included
3.9 million shares received in October 2014 upon the settlement of
an accelerated share repurchase agreement executed in the third
quarter of 2014, as well as the initial delivery of approximately
9.2 million shares pursuant to an accelerated share repurchase
agreement executed in December 2014 (which settled in January 2015
with the delivery to AIG of approximately 3.5 million additional
shares).
- AIG Parent liquidity sources decreased
to $14.3 billion at year-end 2014, which included $9.8 billion of
cash, short-term investments, and unencumbered fixed maturity
securities, from $17.6 billion at year-end 2013, which included
$13.1 billion of cash, short-term investments, and unencumbered
fixed maturity securities.
AFTER-TAX OPERATING INCOME
In the fourth quarter of 2014, AIG completed its previously
announced reorganization and modified its presentation of results
to reflect its new operating structure. The new operating structure
includes two reportable segments, Commercial Insurance and Consumer
Insurance, and a Corporate and Other category. The Corporate and
Other category consists of businesses and items not allocated to
AIG’s reportable segments. Prior to the fourth quarter of 2014, AIG
reported its results through two reportable segments, AIG Property
Casualty and AIG Life and Retirement.
Three Months Ended
Full-Year Ended December 31,
December 31, ($ in millions)
2014 2013 2014 2013 Pre-tax
operating income Insurance Operations Commercial Insurance Property
Casualty $ 935 $ 734 $ 4,248 $ 4,095 Mortgage Guaranty 171 48 592
205 Institutional Markets 118
191 670 680 Total
Commercial Insurance 1,224 973 5,510 4,980 Consumer Insurance
Retirement 722 957 3,495 3,490 Life 80 215 580 806 Personal
Insurance 121 (9 )
399 268 Total Consumer Insurance
923 1,163
4,474 4,564 Total Insurance Operations 2,147
2,136 9,984 9,544 Corporate and Other (357 ) 296 (388 ) (319 )
Consolidations, eliminations and other adjustments
(50 ) 48 (22 ) 165
Pre-tax operating income 1,740 2,480 9,574 9,390 Income tax
expense (369 ) (810 ) (2,959 ) (2,703 ) Net income (loss)
attributable to noncontrolling interests
- (4 ) 15 (37 )
After-tax operating income $ 1,371 $ 1,666 $ 6,630 $ 6,650
After-tax operating income per diluted common share $ 0.97 $
1.13 $ 4.58 $ 4.49
Effective tax rate on Pre-tax operating
income 21.2 % 32.7 %
30.9 % 28.8 %
All operating segment comparisons that follow are to the fourth
quarter of 2013 unless otherwise noted.
COMMERCIAL INSURANCE
Pre-tax operating income increased to $1.2 billion in the fourth
quarter of 2014 from $973 million in the prior-year quarter,
primarily due to improved underwriting results from Property
Casualty and Mortgage Guaranty, partially offset by lower net
investment income from Property Casualty and Institutional
Markets.
PROPERTY CASUALTY
Three Months Ended December
31, ($ in millions)
2014
2013 Change Net premiums written $ 4,692 $
4,851 (3 ) % Net premiums earned 5,207 5,305 (2 ) Underwriting loss
(173 ) (460 ) 62 Net investment income
1,108 1,194 (7 ) Pre-tax operating
income $ 935 $ 734 27 %
Underwriting ratios: Loss ratio 75.0 78.1 (3.1 ) pts Acquisition
ratio 16.0 16.0 - General operating expense ratio
12.4 14.6 (2.2 ) Combined
ratio 103.4 108.7
(5.3 ) pts Accident year loss ratio, as adjusted 65.9 67.5 (1.6 )
Accident year combined ratio, as adjusted 94.3 98.1 (3.8 ) pts
Catastrophe-related losses $ 35 $ 188 Severe losses 66 260 Prior
year loss reserve development unfavorable, net of reinsurance and
premium adjustments 227 48 Net reserve discount charge
229 322
Property Casualty’s increase in pre-tax operating income is
attributable to improved underwriting results, partially offset by
lower net investment income. The combined ratio decreased 5.3
points to 103.4 in the fourth quarter of 2014 due to a lower loss
ratio and a decrease in the general operating expense ratio. The
loss ratio decreased 3.1 points to 75.0 in the fourth quarter of
2014, primarily due to lower catastrophe losses and lower discount
expense for workers’ compensation reserves, partially offset by
higher net adverse prior year loss reserve development compared to
the prior-year quarter.
Catastrophe losses were $35 million in the fourth quarter of
2014, compared to $188 million in the fourth quarter of 2013. Net
unfavorable prior year loss reserve development, including return
premiums, was $227 million, primarily attributable to Environmental
and Financial lines businesses, compared to $48 million, net of
additional premiums, for the fourth quarter of 2013. In the fourth
quarter 2014, net reserve discount expense decreased by $93 million
to $229 million, primarily due to the update to the discount rates
used on workers’ compensation reserves, the annual updates of AIG’s
exposure to workers’ compensation claims, including assumptions
about payout patterns, medical inflation, and AIG’s efforts to
contain claims costs.
The fourth quarter 2014 accident year loss ratio, as adjusted,
decreased due to a decline in severe losses and lower current
accident year losses in Financial lines, partially offset by an
increase in the frequency of non-severe losses, particularly in
Property and Specialty. The acquisition ratio remained unchanged,
reflecting a continuing business mix shift to more profitable lines
of business that have higher commission rates, offset by higher
ceding commission on new quota share reinsurance contracts. The
general operating expense ratio decreased 2.2 points to 12.4,
primarily due to efficiencies from organizational realignment
initiatives, partially offset by increased technology-related
expenses.
Reported fourth quarter 2014 net premiums written decreased 3
percent compared to the prior-year quarter. Excluding the effects
of foreign exchange and return premiums on loss-sensitive business,
net premiums written declined 1 percent compared to the prior-year
quarter. This decrease was primarily due to lower retention of
renewal business and decreased new business reflecting continued
discipline in U.S. Casualty, largely offset by new business growth
in Financial lines and Property.
MORTGAGE GUARANTY
Three Months Ended December
31, ($ in millions)
2014
2013 Change Net premiums written $ 273 $ 255 7 % Net
premiums earned 238 203 17 Underwriting income 136 15 NM Net
investment income 35 33 6
Pre-tax operating income $ 171
$ 48 256 % Underwriting ratios: Loss ratio 20.6 63.1
(42.5 ) pts Acquisition ratio 7.1 9.9 (2.8 ) General operating
expense ratio 15.1 19.7
(4.6 ) Combined ratio 42.8
92.7 (49.9 ) Accident year loss ratio, as
adjusted 33.2 50.7 (17.5 ) Accident year combined ratio, as
adjusted 55.4 80.3 (24.9 ) pts Prior year loss reserve development
(favorable)/unfavorable $ (30 ) $ 25 NM % New insurance written
11,023 10,859 2
Mortgage Guaranty’s pre-tax operating income increased to $171
million for the fourth quarter of 2014, compared to pre-tax
operating income of $48 million in the prior-year quarter,
resulting from decreased losses and loss adjustment expenses
incurred, an increase in first-lien premiums earned, and a
litigation settlement related to second-lien mortgages. The
improvement in loss ratio reflected $30 million of favorable prior
year loss reserve development compared to adverse prior year loss
reserve development of $25 million for the same period in 2013,
lower new delinquencies, and an increased cure rate. The decrease
in the acquisition ratio was primarily due to the reduction in
expenses of sales support activities, and the decline in the
general operating expense ratio was primarily due to an increase in
first-lien net premiums earned, primarily due to higher
persistency.
Net premiums written increased 7 percent to $273 million
compared to the prior-year quarter. Domestic first-lien new
insurance written remained constant at $10.7 billion in principal
of loans insured. New business written during the fourth quarter of
2014 had an average FICO score of 750 and an average loan-to-value
ratio of 92 percent.
INSTITUTIONAL MARKETS
Three Months Ended December
31, ($ in millions)
2014
2013 Change Operating revenues: Premiums $ 64 $ 123
(48 ) % Policy fees 49 29 69 Net investment income
435 550 (21 ) Total operating revenues
548 702 (22 ) Benefits
and expenses 430 511 (16 )
Pre-tax operating income $ 118 $ 191
(38 ) % Premiums and deposits 615
294 NM
Institutional Markets pre-tax operating income decreased to $118
million, primarily due to lower returns on alternative investments
compared to the prior-year quarter. The decrease in net investment
income was partially offset by higher fee income driven by growth
in assets under management, primarily from the stable value wrap
business. The increase in premiums and deposits compared to the
prior-year quarter was primarily driven by a $450 million
guaranteed investment contract issued in the fourth quarter of
2014.
CONSUMER INSURANCE
Consumer Insurance pre-tax operating income decreased to $923
million in the fourth quarter of 2014 compared to $1.2 billion in
the prior-year quarter, which reflected lower net investment
income, primarily from lower returns on alternative investments,
and additional Life reserves, as discussed below. These items were
partially offset by favorable performance from the businesses in
the fourth quarter of 2014 compared to the prior-year quarter,
which included effective crediting rate management that partially
offset lower base yields; growth in policy fees and assets under
management, primarily from strong sales of variable and index
annuities in Retirement; and higher underwriting income in Personal
Insurance, primarily from improved loss experience and lower
general operating expenses.
RETIREMENT
Three Months Ended December
31, ($ in millions)
2014
2013 Change Operating revenues: Premiums $ 66 $ 68 (3
) % Policy fees 259 231 12 Net investment income 1,581 1,771 (11 )
Other income 511 467 9
Total operating revenues 2,417
2,537 (5 ) Benefits and expenses
1,695 1,580 7 Pre-tax operating income
$ 722 $ 957 (25 ) % Premiums and deposits
6,003 6,742 (11 )
Retirement pre-tax operating income of $722 million for the
fourth quarter of 2014 decreased from $957 million in the
prior-year quarter, primarily due to favorable equity market
performance in the fourth quarter of 2013 that impacted alternative
investment income, future policy benefits, and related amortization
of deferred policy acquisition costs. Declines in base investment
yield compared to the prior-year quarter, due to reinvestment at
rates below the weighted average yield of the overall portfolio,
were partially offset by effective spread management achieved
through disciplined new business pricing and management of renewal
crediting rates.
Policy fees grew over the prior-year quarter on continued growth
in assets under management, driven by strong sales of variable and
index annuities in Retirement Income Solutions and separate account
investment performance, partially offset by net outflows in Fixed
Annuities and Group Retirement, which have been affected by the low
interest rate environment and the loss of certain large group
plans. Other income includes advisory fees, which also increased
over the prior-year quarter from growth in assets under
management.
Premiums and deposits decreased, primarily due to a decline in
Retail Mutual Fund sales compared to the fourth quarter of 2013,
partially offset by an 8 percent sales growth in Retirement Income
Solutions, principally from index annuities.
LIFE
Three Months Ended December
31, ($ in millions)
2014
2013 Change Operating revenues: Premiums $ 675 $ 665
2 % Policy Fees 365 345 6 Net investment income
536 586 (9 ) Total operating revenues
1,576 1,596 (1 ) Benefits
and expenses 1,496 1,381 8
Pre-tax operating income $ 80 $
215 (63 ) % Premiums and deposits 1,249 1,233 1 Gross life
insurance in force, end of period $ 1,000,703
$ 916,599 9 %
Life pre-tax operating income of $80 million decreased compared
to the prior-year quarter, primarily due to a charge of
approximately $104 million in the fourth quarter of 2014 to
increase reserves for incurred but not reported death claims, which
reflected continuing efforts to identify deceased insureds and
their beneficiaries where a valid claim has not been filed
primarily in a legacy block of small face amount policies, pursuant
to the resolution of a previously disclosed multi-state audit and
market conduct examination. The decrease in pre-tax operating
income also reflected lower net investment income compared to the
fourth quarter of 2013, primarily from lower hedge fund alternative
investment returns, as well as lower base yield from reinvestment
at rates below the weighted average yield of the overall
portfolio.
On December 31, 2014, AIG acquired Ageas Protect Limited, a
leading provider of life protection products in the United
Kingdom.
PERSONAL INSURANCE
Three Months Ended December
31, ($ in millions)
2014
2013 Change Net premiums written $ 2,866 $
2,962 (3 ) % Net premiums earned 2,926 3,069 (5 ) Underwriting
income (loss) 39 (132 ) NM Net investment income
82 123 (33 ) Pre-tax
operating income (loss) $ 121 $ (9 ) NM
% Underwriting ratios: Loss ratio 51.2 57.8 (6.6 ) pts
Acquisition ratio 28.7 26.0 2.7 General operating expense ratio
18.8 20.5 (1.7 )
Combined ratio 98.7
104.3 (5.6 ) Accident year loss ratio, as
adjusted 52.1 58.2 (6.1 ) Accident year combined ratio, as adjusted
99.6 104.7 (5.1 ) pts Catastrophe-related losses $ 8 $ 20 Severe
losses 13 17 Prior year loss reserve development (favorable)
unfavorable, net of reinsurance and premium adjustments
(35 ) (30 )
Personal Insurance pre-tax operating income increased to $121
million from the prior-year quarter due to improved underwriting
results, partially offset by lower net investment income. The
combined ratio decreased 5.6 points to 98.7 due to improvements in
the loss ratio and general operating expense ratio, partially
offset by an increase in the acquisition ratio.
The loss ratio decreased 6.6 points to 51.2, and the accident
year loss ratio, as adjusted, decreased 6.1 points to 52.1,
reflecting improvements across all lines of business. Further,
lower catastrophe losses and higher favorable prior year loss
reserve development also contributed to the lower loss ratio.
Improvement in the accident year loss ratio, as adjusted, for
the U.S. warranty service programs business was largely offset by
an increase in the related profit sharing arrangement, which
contributed to the increase in the acquisition ratio. The general
operating expense ratio decreased 1.7 points, primarily due to
efficiencies from organizational realignment initiatives, partially
offset by increased technology-related expenses.
Excluding the effects of foreign exchange, fourth quarter 2014
net premiums written increased 2 percent from the prior-year
quarter. Personal Insurance continues to benefit from growth in the
automobile and property lines of business, which was partially
offset by declines in certain classes of the Accident and Health
business, due to the focus on maintaining underwriting
discipline.
CORPORATE AND OTHER
Three Months Ended December
31, ($ in millions)
2014
2013 Change Pre-tax operating income (loss): Direct
Investment book $ 174 $ 418 (58 ) % Global Capital Markets 27 194
(86 ) Runoff insurance lines (422 ) 369 NM Other businesses 119 125
(5 ) AIG Parent and Other: Equity in pre-tax operating earnings of
AerCap 185 - NM Fair value of PICC Group shares 67 - NM Corporate
expenses, net (236 ) (218 ) 8 Severance expense - (265 ) NM
Interest expense (271 )
(328 ) (17 ) Total AIG Parent and Other (255 ) (811 ) (69 )
Consolidation and elimination -
1 NM Pre-tax operating income
(loss) $ (357 ) $ 296 NM
%
DIB pre-tax operating income decreased in the fourth quarter of
2014 compared to the prior-year quarter, driven by lower asset
appreciation and declines in net credit valuation adjustments on
assets and liabilities for which the fair value option was elected,
partially offset by lower interest expense on borrowing resulting
from redemptions and repurchases of DIB debt in 2014.
Global Capital Markets pre-tax operating income decreased in the
fourth quarter of 2014 compared to the prior-year quarter, due to
declines in unrealized market valuation gains related to the super
senior credit default swap (CDS) portfolio, and declines in net
credit valuation adjustments on derivative assets and
liabilities.
Runoff insurance lines pre-tax operating income decreased in the
fourth quarter of 2014 compared to the prior-year quarter,
primarily due to a discount charge due to the decline in the
discount rate consistent with the movement of the forward U.S.
Treasury curve during 2014, as well as accelerated reductions of
loss reserves in the Excess Workers’ Compensation class of business
due to commutations of assumed reinsurance and individual claim
settlements during 2014.
Interest expense declined in the fourth quarter of 2014 compared
to the prior-year quarter due to ongoing liability management
activities.
CONFERENCE CALL
AIG will host a conference call tomorrow, Friday, February 13,
2015, 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 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, sovereign bond issuers, the energy
sector and currency exchange rates; 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 nonbank 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 Reports on Form 10-Q for the quarterly periods
ended September 30, 2014, June 30, 2014 and March 31, 2014, 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 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, 2014
(which will be filed with the Securities and Exchange Commission).
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 and
representative of our 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
“accounting principles generally accepted in the United States of
America.” 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 Fourth Quarter 2014 Financial Supplement
available in the Investor Information section of AIG’s website,
www.aig.com.
Book Value Per Share Excluding Accumulated Other Comprehensive
Income (AOCI) and Book Value Per Share Excluding AOCI and DTA
(Deferred Tax Assets) are used to show the amount of AIG's net
worth on a per-share basis. AIG believes these measures are useful
to investors because they eliminate 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, foreign currency translation adjustments and U.S. tax
attribute deferred tax assets. Book Value Per Share Excluding AOCI
is derived by dividing Total AIG shareholders' equity, excluding
AOCI, by Total common shares outstanding. Book Value Per Share
Excluding AOCI and DTA is derived by dividing Total AIG
shareholders' equity, excluding AOCI and DTA, by Total common
shares outstanding.
AIG uses the following operating performance measures because it
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.
After-tax operating income attributable to AIG is derived by
excluding the following items from net income attributable to AIG:
income or loss from discontinued operations; income and loss from
divested businesses (including gain on the sale of International
Lease Finance Corporation (ILFC) and certain post-acquisition
transaction expenses incurred by AerCap Holdings N.V. (AerCap) in
connection with its acquisition of ILFC and the difference between
expensing AerCap’s maintenance rights assets over the remaining
lease term as compared to the remaining economic life of the
related aircraft and related tax effects); legacy tax adjustments
primarily related to certain changes in uncertain tax positions and
other tax adjustments; legal reserves and settlements related to
“legacy crisis matters”; deferred income tax valuation allowance
releases and charges; changes in fair value of 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
and losses; other income and expense — net, related to Corporate
and Other runoff insurance lines; loss on extinguishment of debt;
net realized capital gains and losses; and non-qualifying
derivative hedging activities, excluding net realized capital gains
and 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 as the plaintiff in connection with such legal matters.
See page 15 for the reconciliation of Net income attributable to
AIG to After-tax operating income attributable to AIG.
AIG uses the following operating performance measures within its
Commercial Insurance and Consumer Insurance reportable segments as
well as Corporate and Other.
Commercial Insurance: Property Casualty and Mortgage Guaranty;
Consumer Insurance: Personal Insurance
Pre-tax operating income: includes both underwriting income and
loss and net investment income, but excludes net realized capital
gains and losses, other income and expense — net, and legal
settlements related to legacy crisis matters described above.
Underwriting income and loss is derived by reducing net premiums
earned by losses and loss adjustment expenses incurred, acquisition
expenses and general operating expenses.
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, 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.
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. Catastrophe losses are generally weather or seismic
events having a net impact in excess of $10 million each.
Commercial Insurance: Institutional Markets; Consumer Insurance:
Retirement and Life
Pre-tax operating income is derived by excluding the following
items from pre-tax income: 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 and losses;
and changes in benefit reserves and DAC, VOBA and SIA related to
net realized capital gains and losses.
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 and mutual funds.
Corporate and Other
Pre-tax operating income and loss is derived by excluding the
following items from pre-tax income and loss: certain legal
reserves and settlements related to legacy crisis matters described
above; loss on extinguishment of debt; net realized capital gains
and losses; changes in benefit reserves and DAC, VOBA and SIA
related to net realized capital gains and losses; income and loss
from divested businesses, including Aircraft Leasing; and net gain
or loss on sale of divested businesses (including gain on the sale
of ILFC and certain post-acquisition transaction expenses incurred
by AerCap in connection with its acquisition of ILFC and the
difference between expensing AerCap’s maintenance rights assets
over the remaining lease term as compared to the remaining economic
life of the related aircraft and AIG’s 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 global
insurance organization serving customers in more than 100 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: @AIG_LatestNews | 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. Selected
Financial Data and Non-GAAP Reconciliation
($ in millions, except per share
data)
Three Months Ended December 31,
Twelve Months Ended December 31, % Inc. % Inc.
2014 2013 (Dec.)
2014 2013 (Dec.)
Reconciliations
of Pre-tax and After-tax Operating Income:
Pre-tax income from continuing operations $ 729 $ 2,150
(66.1) % $ 10,501 $ 9,368 12.1 %
Adjustments to arrive at
Pre-tax operating income: Changes in fair value of fixed
maturity securities designated to hedge living benefit liabilities,
net of interest expense (98) 33 NM (260) 161 NM Changes in benefit
reserves and DAC, VOBA and SIA related to net realized capital
gains (losses) 127 112 13.4 217 1,608 (86.5) Other (income) expense
- net - 72 NM - 72 NM Loss on extinguishment of debt 1,268 192 NM
2,282 651 250.5 Net realized capital (gains) losses (193) 346 NM
(739) (1,939) 61.9 (Income) loss from divested businesses,
including gain on sale of ILFC 20 190 (89.5) (2,169) 177 NM Legal
settlements related to legacy crisis matters (113) (634) 82.2 (804)
(1,152) 30.2 Legal reserves related to legacy crisis matters - 19
NM 546 444 23.0
Pre-tax operating income $ 1,740 $ 2,480
(29.8) $ 9,574 $ 9,390 2.0
Net income attributable to
AIG $ 655 $ 1,978 (66.9) $ 7,529 $ 9,085 (17.1)
Adjustments
to arrive at after-tax operating income (amounts are net of
tax): Uncertain tax positions and other tax adjustments 73 65
12.3 59 791 (92.5) Deferred income tax valuation allowance releases
(20) (540) 96.3 (181) (3,237) 94.4 Changes in fair value of fixed
maturity securities designated to hedge living benefit liabilities,
net of interest expense (64) 22 NM (169) 105 NM Changes in benefit
reserves and DAC, VOBA and SIA related to net realized capital
gains (losses) 82 74 10.8 141 1,148 (87.7) Other (income) expense -
net - 47 NM - 47 NM Loss on extinguishment of debt 824 125 NM 1,483
423 250.6 Net realized capital (gains) losses (105) 208 NM (470)
(1,285) 63.4 (Income) loss from discontinued operations 35 (11) NM
50 (84) NM (Income) loss from divested businesses, including gain
on sale of ILFC (9) 97 NM (1,462) 117 NM Legal settlements related
to legacy crisis matters (100) (399) 74.9 (350) (460) 23.9
After-tax operating income attributable to AIG $ 1,371 $
1,666 (17.7) $ 6,630 $ 6,650 (0.3)
Income (loss) per
common share:
Basic Income from continuing operations $ 0.50 $ 1.34 (62.7)
$ 5.31 $ 6.11 (13.1) Income (loss) from discontinued operations
(0.03) 0.01 NM (0.04) 0.05 NM
Net income attributable to AIG
$ 0.47 $ 1.35 (65.2) $ 5.27 $ 6.16 (14.4)
Diluted
Income from continuing operations $ 0.49 $ 1.33 (63.2) $ 5.24 $
6.08 (13.8) Income (loss) from discontinued operations (0.03) 0.01
NM (0.04) 0.05 NM
Net income attributable to AIG $ 0.46 $
1.34 (65.7) $ 5.20 $ 6.13 (15.2)
After-tax operating income
attributable to AIG per diluted share $ 0.97 $ 1.13 (14.2) % $
4.58 $ 4.49 2.0
Weighted average shares outstanding:
Basic 1,391.8 1,468.7 1,428.0 1,474.2 Diluted 1,412.2 1,480.7
1,447.6 1,481.2
Return on equity (a) 2.4 % 7.9 % 7.1
% 9.2 %
Return on equity - after-tax operating income, excluding
AOCI (b) 5.7 % 7.2 % 6.9 % 7.4 %
Return on equity -
after-tax operating income, excluding AOCI and DTA (c) 6.8 %
8.8 % 8.4 % 9.3 %
As of period
end:
Book value per common share (d) $ 77.69 $ 68.62 13.2
Book
value per common share excluding accumulated other
comprehensive income (e) $ 69.98 $ 64.28 8.9
Book value
per common share excluding accumulated other comprehensive
income and DTA (f) $ 58.23 $ 52.12 11.7 %
Total
common shares outstanding 1,375.9 1,464.1
Financial
highlights - notes
(a)
Computed as Annualized net income (loss)
attributable to AIG divided by average AIG shareholders' equity.
Equity includes DTA.
(b)
Computed as Annualized after-tax operating
income attributable to AIG divided by average AIG shareholders'
equity, excluding AOCI. Equity includes DTA.
(c)
Computed as Annualized after-tax operating
income attributable to AIG divided by average AIG shareholders'
equity, excluding AOCI and DTA.
(d)
Represents total AIG shareholders' equity
divided by common shares outstanding.
(e)
Represents total AIG shareholders' equity,
excluding AOCI, divided by common shares outstanding.
(f)
Represents total AIG shareholders' equity,
excluding AOCI and DTA, divided by common shares outstanding.
American International Group, Inc.Investors:Liz Werner,
212-770-7074elizabeth.werner@aig.comorFernando Melon,
212-770-4630fernando.melon@aig.comorMedia:Jennifer Hendricks
Sullivan, 212-770-3141jennifer.sullivan@aig.com
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